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Dealing with Manufacturer Wholesale List Price Rebates

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A Google search for “manufacturer rebates in food distribution” yields close to 900,000 results. Deals, rebates, billbacks, promotions, shelters, and chargebacks are important wholesale list price rebate terms in the food distribution industry because they are an integral part of this business. When deals and rebate programs are tracked and managed properly, they’re a huge revenue and profit generator.

Here’s an example: A food distributor buys from a redistributor, like DOT Foods, or straight from the manufacturer, the manufacturer will fund deals, even if the purchase is not made directly through them. But in order to recover millions of lost revenue, reduce overpayments, program management and operational costs, and accelerate growth, these offerings are creative. For example, they offer guaranteed cost billbacks, which are programs where the distributor’s cost is guaranteed by the redistributor or manufacturer. Any cost above this guaranteed cost is billed back to the redistributor or manufacturer to be funded by them. This long-standing program uses this method to penetrate new markets or accelerate growth. However, recently, food distributors run into new programs where billbacks are calculated as a difference between the manufacturer’s wholesale list price and the redistributor price.

That scenario might play out like this:

  • The manufacturer has a wholesale list price for soup at $30 per CS.
  • As a distributor, you buy the product from DOT (the redistributor) at $20/CS, and
  • Sell it to Sodexho at $25/CS.

The manufacturer funds the billback and only allows you to bill back to their wholesale list price, and not what you purchased the product for via the redistributor. The system will now allow you to key in the manufacturer wholesale list price ($30) on the deal and compute the billback of $5 ($30 – $25). If your price to Sodexho changes to say $28, the Billback is now $2.

If you are tracking rebates in spreadsheets because your deal management system cannot correctly and efficiently track them, it’s time to evaluate the effectiveness of your ERP system.