Years ago, the power balance between manufacturers (suppliers) and retailers was skewed towards the former, but with consolidation in retail and the formation of large players like Tesco & Walmart, the power balance favours retail currently.
Imbalance driven by low fragmentation in the sector
In the UK, the large grocers/supermarket chains (Tesco, Sainsbury’s, Morrisons and Asda) had ~67% market share in 2021 according to a survey by Kantar Worldpanel. This collective share is a key driver of the imbalance.

The power dynamic has been shifting since the 2007-08 financial crisis, which saw the rise of discounters and launch of private label brands by the grocers. In 2020/21, the landscape changed yet again, driven by the acceleration in online sales and in sales through on-demand grocery delivery companies. However the change has not been significant enough to balance the two sides.
Zero sum game: Retailer margins or FMCG company margins?
The large grocers and FMCG companies have effectively locked themselves into a zero sum game.
Grocers have been charging their suppliers (FMCG companies) listing fees and slotting fees to ensure they deliver margin growth, while at the same time promoting and selling own label brands (significantly cheaper) alongside their suppliers’ branded products.

This has led to large FMCG companies boycotting certain grocers, which in turn has lost the companies large swathes of their market.
Not surprisingly, the result is a win-lose situation with any moves by either side impacting the other negatively.
While this strategy has previously enabled the grocers to source brands at low costs and provide consumers with a wide range of SKUs at competitive prices, the reliance of FMCG brands on overseas suppliers and of the grocers on just in time ordering to keep costs low, has given rise to unprecedented levels of stock outs in stores, with everyone, including consumers ‘losing’ in this game.
Data as the new battleground

More recently, data has emerged as a key battleground for both players. Retailers these days have a wealth of data around sales, which they currently do not share on a realtime basis with their suppliers. This is usually because sharing data is not part of the retailer’s company culture and they fear a rebalancing of power.
As communication between retailers and suppliers is usually very transactional, even point of sale data for each of the SKUs that the supplier sells the retailer is not shared.
However, the Walmart/P & G collaboration that was launched in 1988 is evidence that data transforms this relationship from a perceived zero sum game into a win-win situation. The collaboration was instrumental in growing the retail sales of P & G brands at Walmart from what was $350 million in value in 1986 to $10 billion in 2017 (interview with Tom Muccio, the ‘father’ of this collaboration, on valuecreator.com). This has also resulted in a better and closer relationship between the two giants.

Why is this important now?
Sharing the latest retail data on sales and inventory levels helps suppliers/FMCG companies plan for sales much better, which in turn drives their plan for raw materials and production runs, leading to accurate stocking at warehouses.
This then ensures that any purchase orders placed by retailers are fulfilled in their entirety, eliminating stock outs at retailer warehouses. This collaborative approach can lead to the slow demise of the current supply chain crisis that has gripped the world since 2020.
Collaborations between retailers and suppliers can ensure that the retailer is always in stock, ensuring a win-win situation for all – FMCG companies, supermarkets, their employees and consumers.