The Trade Spend Game

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When you see something on sale at a grocery store (e.g., 2 for $5, $1 off, etc.), the brand pays for the discount, and most of the time, the retailer is just passing the savings on to you.

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The industry refers to this as trade spend or trade promotion. Consumer-packaged goods (CPG) brands bake trade spend into their cost structure for free fills, display fees, sale markdowns, coupons, circulars, and digital ads.

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CPG brands worldwide typically invest 20% of their revenue annually in trade spend. Best-in-class trade spend optimization can return more than 5x ROI, but brands often lose money on these promotions.

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Clearly, there is a huge opportunity ($150 billion U.S. market annually) to optimize trade spend.

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Some CPG brands are starting to leverage AI to translate consumer-related data into insights that increase prediction accuracy and optimization times on their trade spend. Anecdotal evidence shows this can unlock more than a 10% increase in brand sales.

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AI & trade spend, the growth of private label brands, and smaller stores are some of the significant trends shaping the future of the grocery industry.