Producers complain the doors to supermarkets too narrow

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.- TBKTSG

Tags: vietnam retail industry, Vietnam retail market, Vietnam supermarkets