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Who foots bill for discounts?

Europe Intelligence Wire

| February 08, 2008 | COPYRIGHT 2008 Financial Times Ltd. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan.  All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)Copyright

(From Off Licence News)

Q I saw Harveys Bristol Cream reduced to AGBP3 over Christmas - cheaper than I can buy it. How can this kind of discounting be sustained and who is paying for it: the supplier or the retailer? A Discounting is a controversial area and promotions are rarely discussed in the open. Suppliers will point out that it's the retailer's job to set the price; retailers will, in turn, expect favourable terms in return for promotional slots that will achieve big volume increases for suppliers. They will tell suppliers that this volume uplift will compensate for the reduced pro fit margin.

The question of who pays is complex because the transaction will potentially be clouded by all kinds of payments and invoices. In many cases, the negotiations will specifically be about a certain promotion and it will be clear that the supplier is effectively paying for it. In other cases, suppliers are caught unawares by deep discounting.

Very few big brand owners want to see their products caught up in a price war at Christmas because of the bad feeling and retaliation this stirs up among a particular retailer's competitors.

But it is the big brands, which have worked hard to build a consumer franchise, which are most prone to footfall-driving discounts. Major retailers may decide to slash the ...

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