A ‘Google’ search for the phrase ‘Manufacturer Rebates in Food Distribution’ yields close to 900,000 results.
Deals, Rebates, Billbacks, Promotions, shelters or chargebacks, are just some terms that you will hear in the Food Distribution Industry, they are an integral part of this business. When Deals and Rebate programs are tracked and managed well, they can prove to be a huge revenue and profit generator.
Here’s an example; A Food Distributor buys from a redistributor, like DOT Foods, or straight from the manufacturer. There are deals which are funded by the manufacturer, even if the purchase is not made directly through them.
In a bid to recover millions of lost revenue dollars and reduce overpayments, reduce program management and operational costs and to accelerate growth, manufacturers are also getting very creative in their offerings. Guaranteed cost billbacks are programs where the distributors cost is guaranteed by the redistributor or manufacturer. Any cost above this guaranteed cost is billed back to the redistributor or manufacturer to be funded by them. This long-standing program uses this method to penetrate new markets or accelerate growth. However, in recent times, food distributors are running into a newer program where the billback is calculated as a difference between the manufacturers wholesale list price of the product and the price at which the redistributor sells the product.
Here’s a scenario:
- The manufacturer has a wholesale list price for soup at $30.00/CS.
- As a distributor, you buy the product from DOT (the redistributor) at $20.00/ CS, and
- Sell it to Sodexho at $25.00/ CS.
The manufacturer funds the billback and only allows you to bill back to their wholesale list price, and not what you purchased the product for via the redistributor. The system will now allow you to key in the manufacturer wholesale list price ($30.00) on the deal and compute the billback of $5.00 ($30.00- $25.00).
If your price to Sodexho changes to say $28.00, the Billback is now $2.00.
If you are tracking this in spreadsheets today, because your Deal Management system cannot help you correctly and efficiently track it, please reach out to us at AFS to help you!