In order to
obtain space at the supermarkets to display products, manufacturers have to
satisfy a lot of claims of supermarkets: they have to offer high discount
rates, pay different kinds of fees and run sale promotion programs.

The nameless fees

A general director
of a cosmetics company said that he has become too tired, not because of the
competition with rivals, but also because of the claims made by supermarkets.

Different
supermarkets require different discount rates, but all of them require high
discount rates which must be increasing steadily every year. When manufacturers
want to raise the sale prices to offset the higher input material price
increases, they also have to increase the offered discount rates for retailers.

Besides the
kinds of fees clearly stipulated in the contracts, such as the transportation
fee, sale fee, supermarkets also regularly require manufacturers to “give
support” by giving money to carry out supermarket activities. “Retailers would
require us to “contribute money” any time when they need money to build more
stores, celebrate establishment day anniversaries, or launch sales promotion
campaigns,” he said.

Also, in
order to obtain good spaces at supermarkets for their products, manufacturers
have to pay other kinds of fees, including the “new brand development fee”,
about 5-10 million dong per product.

A manager
of a seafood company said that in general, the expenses and the discount rates
the company has to pay to supermarkets account for 7-15 percent of the
production costs.

Thai Quoc
Huy, Director of Thao Huong private enterprise, specializing in making sugar,
said that the required overly high discount rates make him unable to bring
products to other supermarkets, except a supermarket which has been selling
Thao Huong’s products for the last three years.

Huy said
that a supermarket required the discount rate of 15 percent, with which small
manufacturers won’t make profits.

Besides
this, according to Huy, it is very difficult to adjust the sale prices of the
products put on sale at supermarkets. In general, the requirements by
manufacturers to raise sale prices would be accepted by supermarkets after 1-2
months since the day manufacturers inform about that.

“In many
cases, manufacturers incurred losses just because they had to wait for the nod
from supermarkets,” he complained.

A director
of garment company said that every time when the electricity and water prices
increased, supermarket would immediately ask manufacturers to increase the
discount rates.

Manufacturers
say they now have to compete fiercely with the products with supermarket
brands. The seafood company’s director said his company could not put its
products on sale at a supermarket for the last eight months because the
supermarket says it needs to reserve spaces for the products of its own.

What to do?

Manufacturers
have admitted that they have to satisfy all the requirements set by retailers
in order to develop their brands. They well understand that once products hit
supermarket shelves, the products would be the choices of customers.

Huy also
said that since his sugar products are on sale at the supermarket, the products
have become more popular.

The general
director of the cosmetics company said the sale at supermarkets just bring 10
percent of the total turnover, and that in the time to come, the company will
still focus on distributing products at traditional markets and groceries.
However, it will be not easy to do that, because supermarkets regularly run
sale promotion campaigns to lure consumers.

Le Thi
Thanh Lam, Deputy General Director of Saigon Food, which has 63 percent of
total turnover coming from supermarkets, also said that every negotiation with
supermarket about the distribution of products is really a “battle of wits”
which aims to obtain interests.

Source: TBKTSG