How to anticipate and avoid being delisted by your distributors

While inflation encourages consumers to buy the cheapest products - and sometimes private labels - many suppliers worry about being partially or totally delisted from major supermarket shelves due to a lack of price agreements at the end of annual negotiations.

‍But while the price level is often the pain point that pits suppliers against retailers, other causes can be behind a delisting. Like all small or medium brands present in large-scale distribution, you must anticipate these situations, which could have serious consequences on the future of your business.

Delisting in Large-Scale Retail: The Basics

Delisting in large-scale retail is the decision by a retail banner, a central buying office, or a point of sale to stop selling one or more products of a brand. Delisting is qualified as partial when it applies to a single product reference only, and total if the entire brand (in other words, all products) is excluded from the assortment of the retail chain or store concerned.

‍Delisting by a retailer can have significant repercussions for brands, generally leading to a major drop in turnover. This decision can be motivated by unsatisfactory sales performance or result from a commercial disagreement, often related to the purchase price negotiated between the manufacturer and the distributor.

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Abusive Delisting

Article L.442-6 of the Commercial Code regulates abusive delisting by prohibiting the unjustified termination of established commercial relations. It specifically prohibits "Obtaining or attempting to obtain, under the threat of a sudden break" total or partial "commercial relations, prices, payment terms, sales terms or commercial cooperation conditions clearly derogatory to the general terms of sale."

Retailers have thus become much more cautious about delisting their suppliers and comply with a reasonable notice obligation proportional to the history of the commercial relationship, designed to allow the supplier to prepare its conversion. Failure to comply with this clause can result in equivalent financial reparation decided by the judge. In the case of a private label, this period is doubled. Finally, a significant drop in ordered volumes can be interpreted by the judge as an act of delisting, even if the products have not completely left the shelves of the retail banner.

In practice, brands are generally hesitant to take legal action, as the hope of financial compensation rarely carries enough weight compared to restoring the collaboration.

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Annual Negotiations and Price Wars

Despite the legal framework described above, delisting remains a massive point of leverage available to distributors during annual negotiations. The shortening of deadlines since the Bruno Le Maire Law further increases the pressure on brands. Inflation thus pushes distributors to put national and international brands under pressure to get the best prices. We notably remember Système U which had delisted Procter & Gamble in 2023. In 2024, it is Pepsico's delisting from Carrefour shelves that is creating quite a stir.

But disagreement on prices, although central in times of inflation, is not the only phenomenon behind delisting.

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The Causes of Delisting in Large-Scale Retail

In reality, there are many reasons why your brand may risk losing its positions on the shelves of large and medium supermarkets.

Sales performances deemed too weak will generally be penalized by your business partners: if a product or brand does not sell well enough, the retail chain may choose to delist it to free up shelf space for more profitable products. And with good reason, shelf space is not infinite in a market where the number of brands is growing every year. 

In this competitive logic, innovation and market trends are crucial: if a product or brand does not evolve as fast as consumer expectations, the retailer could decide to remove it to make room for products more in line with current demands.

Less common, quality issues can also work against you: product recalls, recurring consumer complaints, or manufacturing defects tarnish your brand image, but also that of your distributor. The distributor will defend its reputation in all cases. We can notably refer to Buitoni pizzas, or on a smaller scale, Findus lasagnas.

‍Finally, the range strategy of retail chains carries significant weight in the choice of suppliers to source: distributors indeed adapt their product assortment to respond as exhaustively as possible to their market, to seasonal changes, but also to stand out from the competition. Delisting can be part of a strategy aimed at renewing the offer and attracting new customers. 

Note that these reasons are often interconnected, and the decision to delist a product or brand is generally the result of an overall evaluation taking several factors into account.

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Who Decides on Delisting?

In the case of an independent network, the decision to delist a product often rests on discussions between the retail company and each store owner. The latter indeed enjoy relative autonomy in choosing the products to list in their stores, but they must also respect corporate guidelines. 

In an integrated network, where the points of sale are directly managed by the brand, the delisting decision generally comes from the company's headquarters. Directives are then issued by general management or the teams responsible for purchasing and assortment management.

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Anticipating the Market and Defending Your Shelf Space

Although the frequency of negotiations suggests that everything plays out over a limited period, the efforts required by your brand to avoid being delisted must be permanent. 

It is thus possible to group them into different strategic areas: 

• Sales Performance Tracking: stay attentive to performance indicators such as sales, inventory turnover, and profitability. If a product shows signs of underperformance, react quickly by contacting department managers or buyers, try to understand the reasons, and take corrective action if necessary. Checkout data is essential for analyzing performance by point of sale; 

• Product Quality: ensure you perfectly control the manufacturing process to avoid any quality issues that could lead to returns from dissatisfied customers;

• Alignment with Consumer Expectations: stay connected to consumer needs and expectations. This involves active monitoring of your sector but also of retail in general. Adapt your products to keep pace with market trends;

• Communication with the Retail Chain: your area managers must maintain proactive communication with department heads. Share information about promotions, new product ranges, and be transparent about marketing plans. Develop collaboration in a trade marketing logic. Encourage your contacts to give you their feedback on your products' performance and your strategy in their stores; 

• Innovation: boldness and differentiation often pay off in retail supermarkets, and store owners generally appreciate brands that help bring novelty to their shelves. This is also an excellent way to defend your share of shelves against private labels;

• Adaptability to Retail Chain Requirements: be ready to adapt to changes in the retailer's policies and strategies. This may include price adjustments or other modifications in line with the retailer's guidelines. However, keep the fundamentals of sales in mind: never make a concession without obtaining one from the buyer in return. In short, stay flexible, without letting yourself be taken advantage of;

• Data Analysis: use data analysis tools to regularly evaluate the performance of your products. Opt for an in-store data collection app to accelerate the recovery of field information. Identify trends, understand consumer buying behavior, and adjust your strategy accordingly.

Anticipating and avoiding delisting situations requires a lot of resources from brands present in large-scale retail: vision, audacity, flexibility... Management alone will often find it difficult to have a global view of the commercial relationship and the market. Thus, a steering committee, a strategy task force, or any working group can help develop and monitor the steps mentioned above. A single goal: make your brand perform too well for your distributor to ever consider excluding it from its shelves.

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Indicators to Track to Prevent Delisting

To anticipate and prevent the risk of your products being delisted in large-scale retail, it is essential to closely monitor certain key performance indicators (KPIs). Here are the main ones to consider:

Numeric Distribution (ND - Presence)

Numeric distribution, in the context of presence, measures the percentage of your references actually present on the shelves compared to the assortment agreed upon with the brand. Low presence indicates that some of your products are absent from the shelves, which can lead to a drop in sales and increase the risk of delisting.

To learn more, we invite you to read our full article on numeric distribution.

Numeric Distribution (ND - Reach)

This indicator reflects the presence of your products in target points of sale. High numeric distribution ensures better visibility and accessibility of your products to consumers.

To read more on the subject, we invite you to read our full article on numeric distribution reach.

Inventory Turnover Rate

The turnover rate indicates how often your products are sold and replenished in-store. A low turnover rate can signal insufficient demand, making your products susceptible to being delisted.

Out-of-Stock Rate

This indicator measures how often your products are out of stock. Frequent stockouts can frustrate customers and prompt distributors to consider removing your products.

Return and Customer Dissatisfaction Rate

A high rate of returns or customer complaints regarding your products can alert distributors to the quality or suitability of your offer, thereby increasing the risk of delisting.‍

Relative Market Share

Comparing your products' performance with that of your competitors in the same category helps evaluate your positioning. A declining market share can signal a loss of attractiveness to consumers.

Repeat Purchase Rate

A good product must build consumer loyalty. A low repeat purchase rate means that customers try but do not repeat their purchase, which can alert distributors.

To track this, you can monitor your checkout sales data.

Adoption Rate

When a new product is listed, it must quickly achieve a certain level of turnover. A low adoption rate may prompt distributors to eliminate it from their assortment.

By regularly monitoring these indicators, you will be able to quickly detect weak signals and implement corrective actions to maintain your products' presence in large-scale retail.

Visiting At-Risk Stores

Once these KPIs have been identified and monitored, integrating them into a sales CRM allows you to transform this data into concrete actions in the field.

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Thanks to filtered views and alerts, you can prioritize your visits and optimize your time in stores. For example, if you consider a risk of delisting to be proven when the numeric distribution falls below 40%, you can create a specific filter in your CRM to spot "at-risk stores" in the blink of an eye. Once this criterion is defined, it becomes easy to plan emergency visits to these points of sale in order to understand the source of the problem, discuss with the department managers, and implement corrective actions before it is too late.

This proactive approach strengthens your in-store presence and secures your listing in the long term.