Posted by Tom Tipps
Foodservice manufacturers spend a total of about $3 billion each year in support of their trade relationships with foodservice distributors and restaurant operators.
For most manufacturers, their total trade spend is the second largest item on their income statement . . . second only to COGS.
Since many elements of COGS present control challenges (e.g., labor, fuel, ingredients, utilities), manufacturers are starting to focus on their huge trade-spend investment - both in terms of reducing overall costs and in improving ROI. In this uncertain economy, one would expect this level of scrutiny in an area that, quite frankly, has had little transparency in the past.
One of the initial questions deals with the benchmarking of trade-spend performance with other foodservice manufacturers. Since Answers Systems Inc. provides trade-spend solutions to so many food manufacturers, we thought we would offer the following rolled-up statistics for benchmarking purposes:
- 60% - the amount of total volume shipped into distribution carrying some type of trade deal offered to foodservice distributors or operators – generally billed-back to the manufacturer by distributor and operator claimants
- 15% - of total sales invested in actual trade-spend (12% hard costs; 3.2% soft cost)
- 18% - the average discount rate expressed as a % of product sales price
- 28% - of all trade claims are overstated and over-paid
- 15% - of total dollars claims are invalid (i.e., $30 million in claims X 15% = $4.5 million invalid claims
- 2 - 3 times – manufacturer trade-spend equals 2 – 3 times total investment in their sales organization
- 200 – 800% - the range of ROI’s manufacturers can achieve by implementing an effective trade management solution
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foodservice,
manufacturers,
restaurant operators