Suppliers Trim Trade Spending

supermarketnews.com DATAPOINTS SUPPLIERS TRIM TRADE SPENDING Manufacturers have decreased their trade-promotion spending key findings of the study was that manufacturers expect with retailers as both a percentage of their sales and as a percentage of their overall marketing budgets, according to the 2012 Trade Promotion Industry Benchmarking Study from to focus on digital marketing, a shift to shopper marketing, Kantar Retail. Traditional trade spending accounted for 44% of manufacturers' total marketing spend in 2011, compared with 56% in 2009, the study revealed. As a percent of sales, trade spending is now about 15.9%, lower than any time since 1999, when it totaled 14% of sales. One of the to better align and integrate trade spending with shopper marketing activities. In the next three years, they expect closer measurement of trade promotion and a shift toward a pay-for-performance model. Retailers, meanwhile, continue to move toward more EDLP and hybrid pricing models with less emphasis on promotion. SOURCE: Kantar Retail Trends in Retailer Pricing Strategies Use of Trade Funds ilijid- 35% (for food and beverage products) 33% CURRENT 28% IN 3 YEARS 24% Go to retailer bottom line 21% 17% 13% 16% 9% 8% 5% Cover retail Passed through to shopper promotion costs EDLP HIGH-LOW HYBRID: EDLP ON HYBRID:DILUTED KVI* HYBRID: MATCH HIGH-LOW* AND SWITCH*** 19% 66% * EDLP for known value items, high-low for rest ** More EDLP, fewer discounted items *** EDLP for widely available SKUS, higher prices for unique products 88% Traditional Trade Spending Declines of retailers say digital trade promotion is an area of growing importance of trade funds will go toward merchandising display in 3 years (up from 21% now) (% of total marketing spend): 2009: 56% 2011: 44% Retailer Allocation of Trade Funds "Trade promotion as a share of marketing expenses is lower than any other year in the Slotting Other 6% 14% past decade." – KANTAR RETAIL Merchandising display 14% Trade Spending Down (average trade spending as a % of gross manufacturer sales) Feature ads 33% 17.4% 17.0% 16.4% Temporary price reductions 16.4% 16.3% 15.9% 32% 2001 2003 2005 2007 2009 2011 Building collaborations Manufacturers 85% Top Retailers Using Trade Promotions (% of manufacturers ranking in top 3) Role of Trade Promotions between retailers and Retailers 75% manufacturers (% who agree) Manufacturers 85% Drive short-term sales lift Retailers 80% 49% Wal-Mart 41% Kroger 37% Target 19% Publix 16% Meijer 15% H-E-B 14% Safeway