Latest Trading Partner Relations Reveal Carrot and Stick

The most recent feedback from retailers and suppliers indicates evidence of improved trade partnerships, but also cause for concern.

The word “collaboration” has increasingly been used to describe interactions, painting a positive picture of these dealings. Is that upbeat impression justified?

Shedding light on that topic was the recent Reinventing CPG & Retail Summit held in Orlando by Information Resources Inc. That event, covered for SN by associate editor Carol Angrisani, provided a snapshot of where things stand.

Most encouraging was the level of innovation brought to industry initiatives. Food Lion's chief operating officer, Cathy Green, outlined a new program that offers supplier partners two tiers: Standard and Gold. Each requires certain levels of collaboration and sharing of data. This seems like a progressive step toward building a formal structure around industry collaboration, rather than letting it develop by the seat of the pants.

In another case of innovation, Amazon.com has developed a program called “Amazon Vine,” in which the online retailer enables its top customer reviewers to rate products in advance of their release. Unilever recently partnered on this program before the release of its Degree Clinical Protection deodorant.

It's also a positive that partners are getting better at outlining exactly what they seek from relationships. For instance, Kroger's vice president of customer loyalty, Ken Fenyo, told the IRI forum that the retailer wants CPG insights to help improve parts of the store, including snacks and beauty care.

We're even learning in which forms retailers want their information. Jim Smits, Supervalu's fresh foods merchandising group vice president, said distributors prefer that suppliers streamline information. “Rather than a 60-page document filled with insights, they're coming with a two-page executive summary,” he said of many suppliers.

A lingering concern about vendor-retailer relationships is that some roadblocks to progress haven't changed. IRI, in soliciting feedback from trading partners, was told some retailers still don't want to share strategic information with suppliers, while some manufacturers still fail to understand a retailer's customers or show little interest in overall category building.

All of which brings us to the penalty for not partnering, which is exclusion from the tremendous upside of successful programs. That penalty is perhaps most graphically outlined in the case of Ahold USA. Two of Ahold's chains, Stop & Shop and Giant Food Stores, are engaged in a Value Improvement Program to lower prices and inventory levels while discontinuing certain SKUs. The chains are promising growth to vendors that remain, but they intend to eliminate others. “The threat of discontinuing SKUs is an enormously powerful point of leverage with vendors,” said Lawrence Benjamin, president and chief operating officer of the U.S. operations, who likened the process to “our own sort of reality show where somebody has to get off the island.”

You can accuse Ahold of playing rough, but not of failing to speak candidly. No one wants to get thrown off the island in today's marketplace. It's no longer a question of whether trading partners need to work more closely and strategically, but rather how to make that happen.