There will always be unsaleables — products that are taken out of distribution because of damage, expiration or discontinuation. But will there always be a conflict between retailers and manufacturers over retailers' compensation for these products?

As food retailers and manufacturers convene this week for their annual Joint Industry Unsaleables Management Conference in Lake Las Vegas, Nev., the payments issue continues to raise hackles among retailers, who argue that they are not receiving enough payment for unsaleables from manufacturers that have adopted so-called adjustable-rate policies or swell allowances.

The adjustable-rate approach, adopted by a growing number of manufacturers in recent years, employs advance payments aimed at covering unsaleables costs. This contrasts with the alternative approach, first described in the 1990 Joint Industry Report (JIR), that pays retailers based on an examination of unsaleables collected after the fact at retail reclamation centers.

The discord continues, despite the creation of a new industry report intended to address the payment issue. Released in November 2005, the report, “Improving Unsaleables Management Business Practices — Joint Industry Recommendations,” laid out steps manufacturers need to take to establish more equitable adjustable rates that more retailers will deem acceptable.

For example, it suggests that manufacturers collect “statistically sound data” throughout the supply chain and share with retailers non-confidential details regarding the development of the adjustable rates. The report also asks retailers to give manufacturers unfettered access to stores, warehouses and reclamation centers.

So far, the new report has apparently not had its intended impact. At least, that's the sentiment expressed in a letter sent out in January to members of the Food Marketing Institute and the Grocery Manufacturers Association by Ed Crenshaw, president of Publix Super Markets, and Richard Wolford, chief executive of Del Monte Foods. Crenshaw and Wolford are chairmen, respectively, of the FMI Industry Relations Committee and the GMA Industry Affairs Council.

“It is clear,” said the letter, “that the [Joint Industry Recommendations] document is not being used and the [unsaleables] problem is being ignored. This is a situation that cannot stand.”

While declining to suggest a specific course of action, Crenshaw and Wolford urged “the leadership of every company to review the report and to include a discussion of the ideas in your meetings with trading partners.”

At the Unsaleables Conference this week, one session will be devoted to a discussion of the Joint Industry Recommendations. Participating companies include Food Lion, Winn-Dixie Stores, Kellogg's, Nestlé USA and Nestlé Purina PetCare.

Winn-Dixie's representative at the session, Gary Regina, the Jacksonville, Fla.-based chain's supply chain manager, also expressed disappointment in the industry's progress in implementing the Joint Industry Recommendations. “We had hoped to see many of the current adjustable [rate] policies amended to reflect the guidelines presented in the report, which has not happen as of yet,” he told SN in an email communication.