If you are in CPG, you can’t go a day here without seeing posts from innumerable brands about the ‘challenges’ of working with distributors, from OI payments to significant deductions. And, yes, I come from the brand side of the business, working close to 20 years for Minute Maid dealing with these same challenges.
However, let’s take a second and look at a simple scenario from the other side. Essentially, a distributor’s main function is to transport grocery products from a manufacturer to a retail store, no? And they are paid by the retailer to do this.
They do this via trucks; trucks use diesel fuel. Now consider the price of diesel fuel over the last few years (price per gallon in rough numbers):
2H 2020: under $2.50
4Q 2021: about $3.70
4Q 2022: over $5.00
4Q 2023: about $4.30
That’s from 45% higher to double over 3 years – rather significant.
While I’d contend that well over 85% of their deductions are legitimate (either promotions offered, or charges listed in their agreements) one can understand their need to make ends meet as well.
There are challenges all through the CPG process here – a recommendation might be to get your trade promotion set – from process to analysis to needed revisions. We love doing it, we’re really good at it & can assist in a hurry; give us a call!