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What role should rebate programs play in how convenience store retailers stock their shelves? The age-old question has reared its head once again in the wake of media coverage of Hershey's Top Performer Program. And, as always, the answer depends on who you talk to.
The multi-tiered Hershey program in c-stores financially rewards retailers for carrying a certain number of SKUs and use of in-store displays. The more SKUs retailers carry, and the more shippers and countertop merchandisers they accept into their stores, the higher the rebate. It's a pretty simple formula and one that has led to big confectionery sales in the industry, but the company's high profile and presence in the convenience industry made this the most talked-about trade program since Philip Morris's Retail Leaders program a few years back.
What is it about manufacturer trade programs that gets everyone in the industry, from suppliers to retailers, all worked up? It's the great debate: Some retailers argue these rebate programs can be too restrictive, dictating to retailers what products they must carry, while others say these programs are valuable and work as long as they are based on retailer performance and product movement.
In this month's cover story "Rebate Debate," Barb Francella takes a hard look at the rebate issue, as retailers and manufacturers share the good, the bad and the ugly — and in many cases, retailers have experienced all three of the above.
As Plaid Pantries' director of marketing Tim Cote told us, "The programs won't work for everyone, but it is the retailer's choice. Our vendor partners need us to sell product. Clean-floor policies, everyday low pricing, pure category management is fine for the retailer, but it needs to be tempered with an understanding of your vendor partner's needs — which is simply profitable volume.
"Why is Wal-Mart partnering with its vendors? It isn't about pretty stores. It is volume, and they are rewarded for it, as they should be. This is our chance to be rewarded for our ability to drive a manufacturers' volume."
And in response to those retailers who feel like they've been hogtied by manufacturers in the past, some companies are now acknowledging former heavy-handed tactics and say they are looking to better partner with c-store operators and address their concerns.
"We can only succeed if c-stores do well," said Dana Bolden, a spokesperson for Philip Morris USA, which took a lot of heat from retailers and competitors for its original Retail Leaders program. "We look at trade funds as an opportunity for us to provide an incentive for c-stores to partner with us. We want to be a partner, and not a manufacturer dictating to a c-store what they should or shouldn't be doing. That has been one of the learning experiences for us over the last year — communicate more and listen to feedback. We think we've grown in that regard."
For trade programs to work, establishing a partnership is the key. Executing that is the challenge.