A llegations of unreasonable retrospective pricing by Asda and Tesco have brought trade promotion practices back into the spotlight, yet fear of reprisals means suppliers are unlikely to complain publicly.

A new survey from Grant Thornton shows how impotent suppliers feel. It found 52% of suppliers believe the Supermarkets Code of Practice - introduced to redress the balance of power between supermarkets and suppliers - is unenforceable. Nineteen per cent believe the code is too vague and loosely worded and another 19% complain it makes no provision for minimum required contract terms.

So if the code can't help, what can suppliers do to protect themselves against unreasonable demands from retailers and make trade investment work for them?

There are more than 100 different trade investment mechanisms used by retailers but confusion surrounds how they are agreed. Clearly, it's hard to argue with a retail customer, especially if you're small or own label and delisting is a real threat. Indeed, some suppliers have reported getting involved in auctions at the end of a contract. Others have been promised their main rival will be delisted if they offer a cheaper price.

"There has been an erosion in confidence among suppliers, who are leaving it to the retailers to make the decisions," says Aidan Bocci, chief executive of Commercial Advantage Consulting.

But there are steps that can be taken to escape the trade investment trap. First, suppliers need a clear understanding of which mechanisms should be used and when, he says.

Suppliers should only agree to promotions that have a clear and demonstrable value to the brand and business. So, if they want to drive awareness, they offer a discount, if they want to drive category growth, they should look for a bogof.

Suppliers need to ensure trade investment delivers against their objectives as well as the retailers', he says. "Successful companies look at trade investment from a brand objective and then blend in their customers' needs."

Many retailers are actually looking for guidance from suppliers, who should have the confidence to make their own demands, he says.

"There are always going to be conflicts with what a brand owner wants and what a customer wants from trade investment but it doesn't mean the retailer should always get its way," he argues. "Suppliers that are looking to achieve better terms can also be good for their customers - there is mutual benefit and it should be talked about. They need to be able to build trust by demonstrating that their alternative approach will benefit the customer."

Suggesting a poorly performing SKU is delisted before the buyer spots there is an issue or investing to develop an area of expertise beyond the normal parameters of the relationship in areas such as shelf-ready packaging would help, says Bocci. "Buyers like suppliers who can say 'no', as long as an alternative has been thought of."

However, suppliers need to be wary that they don't lose control. Discounting can be a poisoned chalice, warns one former frozen food manufacturer boss.

"We used bogofs quite selectively at first but then we started doing more and more to retain volume and keep up with our competitors. Retailers used bogofs extensively in frozen. It almost destroyed the brand."

It's vital to think long-term, he says. "You must think of trade promotions as a capital investment and forecast volume during promotions, volume fade after and any additional cost, such as extra shift to meet demand. It must have a lasting benefit."

The more controversial trade investment mechanisms can be avoided by suppliers being much more selective over which retailers they choose to deal with, says Duncan Swift, head of Grant Thornton food and agribusiness.

The tactic was used by Tyrrells, which told Tesco to stop listing its products. "If you are starting a new food business my advice would be to choose your customers carefully. We have seen a lot of suppliers that are doing this and being careful about who they do business with," he says.

Ultimately, the best way to ensure trade investment works is to have strong brand loyalty, says Bocci: "Trade investment isn't about promotions or listing fees, it's about building brands."

If you can maintain a strong brand you are far less exposed to the problems that trade investment can bring. But that's a big if.n

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