Each quarter, the FMCG Institute conducts a ‘deep dive’ project on a topic chosen by its members, globally. In this paper we examine the context, issues and emerging challenges facing manufacturers as they engage with their major customers in the retail sector.

There were four main parts to this project. We studied the top 40 retailers in the FMCG world, examining the question “how important is collaboration and di eren a onto their success?”. We interviewed several global Sales executives to gain their perspectives on the changing nature of key account management. And, we conducted a detailed capability benchmarking study with a cross-section of member companies to evaluate their current readiness to engage successfully with major customer.

In a final step, the findings from these investigations were presented to and scrutinised by our members in a series of forums and their input incorporated into this paper. In the following report, we draw attention to five critical conclusions:

1. There is a strong case for retailers to become more collaborative with manufacturers. However, evidence suggests that, in these tough times, manufacturer conservatism about risk may be contributing to retailer aggression, which has increased anyway because many are struggling. The challenge of creating growth initiatives will always belong to manufacturers. Where they fail to do so, a downward spiral into defensive behaviour on both sides seems inevitable;
    
2. Almost all companies have positive rhetoric about customer responsiveness. But most fail to carry this through to execution. Engagement with customers is still largely one-dimensional, both in terms of the efforts to understand customer needs and in leaving Sales to do the work needed to tailor programs to them;
    
3. Companies say they take a team approach to engagement, but many leave their front-line negotiators to carry the risk alone. This leaves companies vulnerable to concerted customer demands and almost certainly will lead to medium-term erosion of terms as risk-averse KAMs surrender ground to solve short-term issues;
    
4. All companies say they want to be category leaders but many are not investing sufficiently in their influencing strategies to ‘stay in the game’. Retailers have become increasingly self-sufficient in making assortment and pricing decisions. Category submissions, which were once the mainstay for influencing customer decisions, have diminished in importance;
    
5. We know from our separate trade spend benchmarking work and from regular forum discussions that the impact of promotional activity is in steady decline. Yet most companies say that their trade spend decisions are often based on cycling last year’s activity. This is a common trap, of course, reinforced by tactical demands from customers and by the risk-aversion of KAMs. Lack of cross-functional involvement in these trading decisions and lack of systematic audit of results adds to the instituonalised nature of wasted trade funds.