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Factors Affecting the Allocation of Trade Promotions in the U.S. Food Distribution System

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  • Miguel I. Gómez
  • Laoura M. Maratou
  • David R. Just

Abstract

Although many have proposed theories explaining trade promotion (TP) behavior by manufacturers, lack of data has prevented empirical assessment. We employ survey data to explore the effect of manufacturer and retailer bargaining power on the allocation of TPs in the U.S. food sector. The survey respondents consist of retailers controlling 40% of retail sales in U.S. supermarkets. Retailer bargaining power increases the allocation of funds to off-invoice TPs through higher share of private label and retailer size. Manufacturer bargaining power decreases the allocation of funds to off-invoice TPs by establishing formal policies of negotiation.

Suggested Citation

  • Miguel I. Gómez & Laoura M. Maratou & David R. Just, 2007. "Factors Affecting the Allocation of Trade Promotions in the U.S. Food Distribution System," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 29(1), pages 119-140.
    • Handle: RePEc:oup:revage:v:29:y:2007:i:1:p:119-140.
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    File URL: http://hdl.handle.net/10.1111/j.1467-9353.2006.00333.x
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    1. Stephen F. Hamilton, 2003. "Slotting Allowances as a Facilitating Practice by Food Processors in Wholesale Grocery Markets: Profitability and Welfare Effects," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(4), pages 797-813.
    2. Linda M. Young & Jill E. Hobbs, 2002. "Vertical Linkages in Agri-Food Supply Chains: Changing Roles for Producers, Commodity Groups, and Government Policy," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 24(2), pages 428-441.
    3. Cotterill, Ronald W, 1986. "Market Power in the Retail Food Industry: Evidence from Vermont," The Review of Economics and Statistics, MIT Press, vol. 68(3), pages 379-386, August.
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    Cited by:

    1. Jie Wu & Zhixin Chen & Xiang Ji, 2020. "Sustainable trade promotion decisions under demand disruption in manufacturer-retailer supply chains," Annals of Operations Research, Springer, vol. 290(1), pages 115-143, July.
    2. Gomez, Miguel I. & Rao, Vithala R. & Yuan, Hong, 2008. "Effects of Horizontal and Vertical Market Power on Trade Promotion Budget and Allocation in the US Supermarket Industry: An Experimental and Empirical Analysis," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6247, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    3. Sandra Mottner & Steven H. Smith & T. J. Olney, 2011. "Trade Promotions and Suppliers' Market Power," American Journal of Economics and Business Administration, Science Publications, vol. 3(3), pages 460-472, September.
    4. Amelie A. Hecht & Crystal L. Perez & Michele Polascek & Anne N. Thorndike & Rebecca L. Franckle & Alyssa J. Moran, 2020. "Influence of Food and Beverage Companies on Retailer Marketing Strategies and Consumer Behavior," IJERPH, MDPI, vol. 17(20), pages 1-34, October.

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