There’s been a lot of dialogue around the topic of trade-spend management in the Foodservice industry; but, in all honesty I’m not sure the industry has ever really agreed on the definition of “Trade” Spending.
From my perspective Foodservice trade spending involves incentives paid by manufacturers directly to their operator and distributor trading partners…to motivate those trading partners to purchase, sell or promote the manufacturers products/brands to the restaurant’s patrons. So, it’s trade-spend is definitely a B2B incentive offering.
Trade incentives paid to restaurant operators are intended to entice them to purchase and/or promote the manufacturer's products to their patrons. Examples might be monetary incentives paid via rebate coupons, in-store server promotions and any other monies paid by the manufacturer to the Foodservice operators.
Trade incentives are offered to distributors to motivate them to sell the manufacture's products to their local/street operators. These incentives could take the form of agency fees (earned income), trade show allowances and the various forms of local market promotions…all of which are focused on building the local “street” business.
These definitions are important because manufactures want visibility into the profitability of their contracted operator business and the local street business. And in order to develop this financial analysis, they must be able to sort their spending into these two categories (contracted and street).
For example, let’s say a Manufacturer’s sales rep has paid $25,000 to fund a distributor’s market share initiatives with local independent restaurants. Someone is going to ask that sales rep how the program worked; i.e., “what was our return on that investment you recommended?” Without knowing the incremental volume developed and the amount of money spent, there is no way to report the results.
In an environment where Foodservice trade spend cost are spiraling out of control, executive management will have a lot of questions as to the efficiency of those $millions we spend. Long term survival will depend on our ability to answer those questions.