Trade promotion is the money a manufacturer spends on its retail customers rather than on shoppers: discounts, allowances and fees paid to supermarkets, wholesalers and distributors in return for buying stock, giving it shelf space, featuring it in circulars or cutting its shelf price for a set period. It exists because in consumer packaged goods (CPG) the retailer controls the last metre between product and buyer: only the retailer can put a box of cereal on an end-of-aisle display or take a dollar off at the till.

How the money moves

Mechanics differ mainly in what they reward: sell-in, the manufacturer's sales to the retailer, or sell-through, the retailer's sales to shoppers.

  • Off-invoice allowances deduct a fixed amount from the list price of every case bought during a deal window. They reward sell-in, and the retailer decides how much of the saving reaches the shelf.
  • Scan-based allowances pay per unit sold to shoppers during the promotion, verified by point-of-sale scanner data. They reward sell-through.
  • Temporary price reductions (TPRs) are the shelf-price cuts those allowances fund.
  • Feature and display fees buy a slot in the retailer's printed or digital circular, or a secondary location such as an endcap or floor stand.
  • Slotting fees are one-off payments to list a new product. Federal Trade Commission (FTC) case studies published on November 14, 2003 put the cost of a national launch at a little under $1 million to more than $2 million, according to Supermarket News.
  • Co-operative (co-op) advertising and market development funds (MDF) accrue as a percentage of purchases and are reimbursed when the retailer runs advertising or events featuring the brand.

A hypothetical example shows the arithmetic. A cereal maker earns $1.00 of margin per box and normally sells 10,000 boxes a week through a chain. It offers a scan allowance of 75 cents for two weeks; the chain cuts the shelf price from $3.99 to $2.99 and adds an endcap. Sales rise to 25,000 a week. Without the deal, 20,000 boxes would have earned $20,000. With it, 50,000 boxes earn 25 cents each, or $12,500. The event more than doubled volume and lost $7,500, before counting purchases pulled forward from later weeks.

Manufacturers' key account and revenue growth management teams plan the promotional calendar, accrue funds and settle the deductions retailers take from invoices. On the retailer side, buyers and category managers negotiate the money as part of the annual joint business plan, alongside listings, shelf space and supply terms. Gartner tracks a software market for trade promotion management and optimisation (TPM and TPO), listing 61 products from vendors including SAP, Oracle, Accenture and Vividly.

Strategy&, the PwC consultancy, wrote in March 2017 that US CPG trade spending exceeded $200 billion a year, consumed about 20% of gross sales and was typically the second-largest cost after the goods themselves. In its 2016 benchmarking study, 63% of executives called their trade spending unsustainable and only 19% had reduced it as a share of sales over the previous two years. These are consultancy estimates, not audited totals. In US accounting, most of this money is deducted from revenue as consideration paid to a customer under ASC 606 rather than booked as marketing expense.

Origin and evolution

The Robinson-Patman Act, signed on June 19, 1936 amid political pressure from independent grocers over chain stores such as A&P, amended the Clayton Act. Its sections 2(d) and 2(e) require a seller offering promotional allowances or services to make them available on "proportionally equal terms" to all competing customers. The FTC first published guidance on those sections in 1969, after the Supreme Court's 1968 decision in FTC v. Fred Meyer, and revised these Fred Meyer Guides in 1990 and in 2014, when online retailers were added.

Scanner checkouts, spreading through US supermarkets after 1974, made scan-based deals verifiable, and trade spending grew through the 1980s. In the March-April 1990 issue of the Harvard Business Review, Robert Buzzell, John Quelch and Walter Salmon described trade promotion as a "costly bargain", documenting how retailers bought heavily during deal periods and diverted cheap stock to other regions.

Procter & Gamble attempted the most famous retreat in the early 1990s, cutting trade deals and coupons under a "value pricing" policy. A study of the change by Kusum Ailawadi, Donald Lehmann and Scott Neslin, published in the Journal of Marketing in 2001, found that deals and coupons had driven penetration and that the net effect of reducing them was a fall in P&G's market share.

Regulators later turned to supplier payments. The UK Groceries Supply Code of Practice (GSCOP) took effect on February 4, 2010, and a Groceries Code Adjudicator was created in 2013 to enforce it. The European Union's Unfair Trading Practices Directive, adopted on April 17, 2019, placed supplier payments for promotion, advertising, marketing and listing on a "grey list": lawful only if agreed clearly and unambiguously in advance.

Why trade promotion matters for marketers

Retail media grew up inside trade budgets. Retail media has historically been funded from trade and shopper marketing money negotiated alongside supplier terms, which is why endemic brands dominate it. So is a sponsored listing new advertising or a relabelled allowance?

A paper from IAB Europe and Mediasense, published on March 12, 2026, explained that under international accounting standards supplier receipts are presumed to reduce the purchase price of goods, so retail media is netted against cost of goods sold unless it sits in a separate contract, is sold at fair value and is not tied to the retailer's own pricing.

Who pays is unsettled. At an IAB Australia summit in July 2025, a panellist from Endeavour Group warned against shifting existing trade dollars between buckets in favour of new investment. IAB Ireland's December 2025 report described brand, shopper, trade and digital budgets as separate pools that create coordination problems. The line decides who owns the money and which metric judges it, echoing the debate over working media.

Measuring a promotion

Promotion measurement starts with a baseline: modelled sales without the event, built from non-promotional weeks and adjusted for seasonality, price and distribution. Promotional lift is actual volume minus baseline. A post-event analysis then subtracts cannibalisation of the brand's other products, the post-promotion dip caused by shoppers stocking up, and the cost of funds, before adding any halo to related items.

That is a different exercise from advertising sales lift, which compares exposed and unexposed shoppers, and it is one reason trade and media teams struggle to share a scorecard. A report from ISM and Catalyst Media Consulting, covered in April 2026, found that CPG companies treat in-store investment as one category governed by trade and shopper budgets, judged by matched-market dollar and unit lift. An IAB paper co-written with Instacart argued the same month that marketing mix models can absorb always-on retail media into the baseline. Promotional baselines face the mirror problem: a brand on deal half the year has little clean history.

Limitations, criticisms and disputes

Profitability is the oldest complaint. A Nielsen analysis of 39 million US promotional events covering $555 billion of retail sales found that almost three-quarters did not break even, according to FoodNavigator in October 2014. Nielsen also sells promotion analytics.

Forward buying and diversion let retailers stock up at deal prices and sell later at full price, or move goods to stores the deal did not cover. Pass-through is partial when retailers keep part of an allowance. Frequent deals teach shoppers to wait, a promotion dependency that erodes reference prices, while pantry loading shifts purchases in time rather than creating them.

Power is the other dispute. Slotting fees can price small suppliers out of shelves, and GSCOP paragraph 12 bars UK retailers from demanding payment for better positioning except in connection with promotions. In January 2016 the adjudicator found Tesco in serious breach of the code over delayed payments. Own brands strengthen retailers' hand: private label reached 38.5% of grocery value in 17 European markets in 2024, according to PLMA and NielsenIQ data.

US enforcement is contested. The FTC sued Southern Glazer's Wine and Spirits on December 12, 2024, alleging that volume discounts and scan rebates went to large chains but not independents; a court denied the company's motion to dismiss on April 17, 2025. A separate complaint against PepsiCo over preferential terms for Walmart, filed in January 2025, was dropped on May 22, 2025.

Not the same as

Consumer promotion targets shoppers directly through coupons, rebates and loyalty offers. PPC Land's explainer on promotion covers the time-limited offers platforms display beside a price.

Co-op advertising is one component of trade spend, reimbursing retailer advertising that features a brand.

Retail media advertising is media the retailer sells on its sites, apps and screens. It is frequently paid for from trade budgets, but it is an advertising product with impressions and auctions. See commerce media for the wider category.

Sales promotion is the umbrella term covering both trade and consumer promotion.

Recent developments

Incremental, a retail media measurement company, said in a June 15, 2026 white paper that 70% of retail media spending is incremental to annual trade budgets, with most funded by brand and media budgets. IAB Australia found in July 2026 that 56% of buyers keep trade and media budgets separate. At the same summit, Metcash's Mark Lollback warned that judging retail media only on incrementality makes it look like a trading lever. On October 1, 2026, IAB and Grocery TV research excluded trade promotions from its definition of in-store retail media and found that organisations where trade or shopper marketing owns in-store media tend to underuse it.

Timeline

  • June 19, 1936: Robinson-Patman Act signed, including sections 2(d) and 2(e) on promotional allowances and services
  • 1968: US Supreme Court decides FTC v. Fred Meyer
  • 1969: FTC publishes its first guides on advertising allowances and merchandising payments
  • 1974: Scanner checkouts begin to spread through US supermarkets
  • March-April 1990: Buzzell, Quelch and Salmon publish "The costly bargain of trade promotion" in the Harvard Business Review
  • 1990: FTC revises the Fred Meyer Guides
  • Early 1990s: Procter & Gamble introduces value pricing and reduces trade deals
  • 2001: Ailawadi, Lehmann and Neslin publish their study of P&G's value pricing in the Journal of Marketing
  • November 14, 2003: FTC publishes slotting allowance case studies in five grocery categories
  • February 4, 2010: UK Groceries Supply Code of Practice takes effect
  • 2013: UK Groceries Code Adjudicator established
  • October 2014: Nielsen analysis finds almost three-quarters of US CPG promotions do not break even
  • November 10, 2014: Revised Fred Meyer Guides take effect, covering online retailers
  • January 2016: Groceries Code Adjudicator publishes its Tesco investigation findings
  • March 2017: Strategy& estimates US CPG trade spending at more than $200 billion a year
  • April 17, 2019: EU adopts the Unfair Trading Practices Directive
  • December 12, 2024: FTC sues Southern Glazer's under the Robinson-Patman Act
  • January 2025: FTC sues PepsiCo under the Robinson-Patman Act
  • April 17, 2025: Court denies Southern Glazer's motion to dismiss
  • May 22, 2025: FTC drops the PepsiCo case
  • March 12, 2026: IAB Europe and Mediasense publish guidance on accounting for retail media as supplier receipts
  • June 15, 2026: Incremental reports 70% of retail media spending is incremental to trade budgets
  • July 7, 2026: IAB Australia reports 56% of buyers keep trade and media budgets separate
  • October 1, 2026: IAB and Grocery TV publish in-store retail media research excluding trade promotions

Summary

Who: CPG manufacturers fund trade promotion through key account and revenue growth management teams; supermarkets, wholesalers and distributors receive it through buyers and category managers; software vendors such as SAP, Oracle and Accenture plan and settle it; the FTC, the UK Groceries Code Adjudicator and EU national authorities regulate parts of it.

What: Payments and discounts from manufacturers to retailers, including off-invoice and scan-based allowances, temporary price reductions, feature and display fees, slotting fees, co-op advertising and market development funds, mostly booked as a reduction of revenue.

When: Regulated in the US since the Robinson-Patman Act of June 1936, expanded with scanner data from the 1970s, criticised from 1990 onwards, and since the 2010s increasingly blended with retail media budgets.

Where: Inside supplier-retailer negotiations and joint business plans, on supermarket shelves, endcaps and circulars, and increasingly on retailers' websites, apps and in-store screens.

Why: Retailers control shelf space, price and display at the point of purchase. Trade promotion buys that control, though forward buying, partial pass-through, pantry loading and weak profitability make it one of the most disputed lines in a CPG budget.