Monday, August 26, 2013

Do CPGs Play Favorites Where Big Chains Are Involved?

Among the list of complaints we've heard with some regularity over the years from retailers is that consumer packaged goods (CPG) manufacturers give preferential treatment to the very largest chains, Walmart being mentioned most frequently when it comes to distribution, promotions, pricing, etc.

Forget about Robinson-Patman or any statement about how CPGs conduct business, retailers have said. If a product is on allocation, somehow Walmart, Target, Kroger and the like have full shelves where others have holes. If a new product is being introduced, it finds its way to the big guys' shelves ahead of smaller chains and independents. Some new products are "in test" for extended periods at the biggest chains before being offered to smaller rivals. All of this chafes at retailers who allege, somewhat fatalistically, that CPGs favor the companies who need it the least. 

Adding to this perception that there are two sets of rules was a recent misstatement by a Walmart spokesperson that Hostess had supplied the chain with Twinkies to go on sale a couple of days ahead of the planned July launch date that the manufacturer, Hostess Brands LLC, had set for all retail stores.

The Walmart spokesperson, Veronica Marshall, later provided a clarification, which said the retailer received Twinkies with exclusive packaging that marked the item as the "First Batch" of the yellow snack cake with vanilla icing inside. The decision to begin selling Twinkies early was an action Walmart took independently of Hostess. 

The manufacturer issued a statement, claiming it "has not, and is not, giving any particular retailer exclusivity or preference to have products first and is making a great effort to fulfill orders equally and timely to everyone."

Discussion Questions: 

Do large retail chains receive preferential treatment from CPG manufacturers compared to smaller rivals? If yes, does something need to be done about it? What would that be?

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