How startups and challenger brands can navigate supermarket trade investment requests

It all depends. Selling in the supermarkets is complex and costly. So how do you navigate the options?

“Getting a listing is the easy bit. The hard part is keeping the product on the shelf,” says Ged Futter, owner of GSCOP training consultancy The Retail Mind and a former Asda buyer.

“Good brands”, big and small, he says, will have driven the customer into the store (or to the website) to make a purchase. “So if you’ve done that hard work, you’re not relying on changing someone’s mind [at the point of purchase], where they’re being bombarded with other options.”

But point of purchase is still crucial and all the more so as so-called ‘retail media’ becomes more sophisticated. And it doesn’t come cheap. As The Grocer reported last week, some of the sums are eye-watering. One supplier was asked by Waitrose for £20k for their products to feature in a single Instagram post. Another was asked to fork out £50k to host a branded free-standing display unit at the retailer.

And while the two suppliers refused to pay up – dismissing these requests as “exorbitant” and “absolutely ridiculous” – a third told The Grocer the power imbalance between them and the retailers made them feel under pressure to “pay whatever [the retailers] were asking”.

Mutually beneficial

It’s also a quandary because, while “nobody would outwardly admit” it, says one senior industry source, “promotional spend” of one sort or another is “essential as, without marketing support, the product won’t sell. So, whilst it’s a revenue stream for retailers, there’s a mutual benefit”.

The key is knowing when to say no and what you can afford. As a rule of thumb, the industry source advises suppliers spend no more than 10%-15% of their forecast sales with a retailer on marketing.

The fact some startups and challenger brands overspend often comes down to naivety, as they “don’t know what’s normal”, the source adds.

Futter also stresses the importance of understanding the return on investment. Suppliers should never pay for promotions or media activity “just because a buyer wants you to”.

“Buyers are trained within an inch of their life, so don’t be surprised when they try and negotiate to get more than you can afford,” he says.

Ultimately, “it’s up to the supplier to say no,” Futter adds. “If you can’t say no to a buyer, you will go bust.”

Moral obligation

For Thea Alexander, co-founder of YF (formerly Young Foodies), retailers have an “obligation to ensure suppliers are sufficiently informed” and should not knowingly take advantage of inexperienced startups.

The power is “so firmly with retailers” there is an onus on them to spend time and money to ensure each supplier is “capable and trained” and not mislead them into spending more than they can afford, she says.

In the case of Waitrose, a spokeswoman says it has a “long history of championing small suppliers and, while participation in promotions is entirely voluntary, we tailor our approach to support individual businesses”. Indeed, its rate card is specially tiered depending on the size of the business, with cheaper prices for some trade investment.

It also recently followed other latest supermarkets in bolstering its support for startups, promoting buyer Oliver Chadwyck-Healy to the newly-created role of branded innovation manager earlier this month.

Supermarkets getting cuter

Futter believes supermarkets “have got cuter about how they’re supporting startups”, noting that incubator schemes such as Sainsbury’s Future Brands and Co-op’s The Apiary can act as a stepping stone into grocery for startups, with retailers even prepared to promote interesting new brands in featured displays in some cases without asking for investment – “particularly if they can secure an exclusive agreement for any length of time”.

Futter says startups should be under no illusions about where responsibilities lie, however.

“As a buyer it’s not my job to market your brand. That’s your job. My job is all about hitting my numbers. But I can help you if it’s in my interest. Without strong promotions delivering incremental sales I will miss my sales and profits, which is not a good career move for a buyer. So I cannot afford to give space to a brand that doesn’t deliver an uplift for us both.”