Listing and Purchasing Practices in Supermarkets: A Guide for Brands

As soon as French manufacturers want to mass-market their products to individuals, large-scale retail emerges as an essential channel.

But discovering this universe is no easy task: between purchasing strategies that have undergone intense upheavals since the 90s, legislation that constantly attempts to balance power between distributors and suppliers, and a price war that continuously impacts the commercial relationship, understanding the mechanics of listing in large supermarkets (GMS) can feel like a real obstacle course.

To make your job easier, Sidely summarizes here the main themes you need to understand before you start prospecting retail chains:

1. How purchasing works in large-scale retail;

2. Listing agreements;

3. The principles of commercial cooperation;

4. Negotiation and power dynamics between suppliers and retail chains;

5. The evolution of laws and practices to the present day.

The organization of purchasing in large-scale retail

For a company (the supplier) to have its products listed on supermarket shelves, it must sign a contract with the retail chain concerned (the distributor). Points of sale generally benefit from a centralized ordering structure, but we can distinguish two cases: purchasing center and listing center.

Purchasing center

The purchasing center plays the role of wholesaler by buying products at negotiated rates to then supply its network. This is a fairly widespread model in the franchise universe. The center then buys the products from selected suppliers and resells them at preferential prices to its members. It generates revenue by applying a margin on the resale of products (like a wholesaler), or in the form of a service invoiced to them (like an intermediary).

Listing center

The other model, more common in the large-scale retail sector, consists of a framework agreement concluded between a retail chain and a supplier, leading to purchase orders governed by this contract, and established subsequently between the points of sale and the supplier in question.

In this case, stores are not obliged to source from the supplier listed in the chain's catalog. It all depends on the latitude of each point of sale regarding assortment. In this instance, integrated and independent stores may have divergent practices, with greater centralization among the former.

The listing center commits to promoting orders by communicating offers to members. As for the supplier, it delivers the goods in accordance with the clauses of the framework agreement and the orders, informs the center of any changes concerning products or rates, and pays the commissions and rebates due to members.

Here, the center can generate revenue in various ways: listing commission, percentage of sales achieved through the chain, year-end rebates (RFA), etc. The chain provides its members with up-to-date information on products, prices, and promotional offers.

Listing agreements

The commercial relationship between the supplier and the distributor is formalized by signing a written contract.

Listing contract in large-scale retail

The listing contract constitutes an agreement by which a supplier obtains the entry of its products into a chain's catalog, and defines the terms of market access (listing, commercial conditions, etc.). It follows commercial negotiations between the two parties.

There is no predefined listing contract template, but it must include the identity of the parties, the terms of sale (price, discounts, delivery methods), the duration of the contract (fixed or indefinite), and specific clauses (e.g., termination, payment terms for commissions, etc.). In large-scale retail, a standard contract (usually annual) is designed and written by the chain.

When the points of sale are integrated, the framework listing contract signed between the supplier and the center allows the points of sale to issue purchase orders directly.

On the other hand, in a network of independent stores (franchisees or cooperatives), this framework distribution contract is supplemented by tripartite application contracts, signed between the supplier, the center, and each point of sale. These contracts govern local commitments and subsequently allow the issuance of purchase orders.

💡 The listing agreement does not constitute a commitment to buy, but simply allows the chain's stores to order the supplier's products under the established conditions. Purchase orders, on the other hand, constitute individual sales contracts.

As long as the supplier is not listed by the center, it is impossible for them to sell their products to any store of the chain. This rule ensures the consistency of the chain's offering throughout the territory. In some cases, it is possible to be listed at the local level, including with local centers, a purchasing process better suited to specific cases, such as distribution in French overseas territories.

📚 Legally speaking, the term “distribution agreement” can concern a horizontal relationship (between several suppliers or between several distributors at the same level) or a vertical one (between suppliers and distributors).

Single agreement (Convention unique)

Furthermore, since the EGAlim law came into force, a single agreement aims to formalize the general terms of sale (CGVs) annually between supplier and distributor, in order to regulate commercial relations to prevent imbalances between the parties, guaranteeing transparency, non-discrimination, and the regulation of discounts, rebates, and services.

This is a written contract that must include:​

• The terms of sale: price, discounts, rebates, etc.;

• Commercial cooperation services: promotional campaigns, product displays, etc.;

• Other agreed obligations: logistics, inventory management, etc.​

Each element must be detailed (this is the “line-by-line” principle discussed below).​

The agreement is concluded for a duration of one, two, or three years. It must be signed before March 1st of the current year, unless the commercial relationship begins during the year (the agreement must then be signed within two months following the start of marketing the products or services).​

Failure to comply with the obligations written in the single agreement can lead to civil and criminal penalties.​ Also, the Ministry of Economy and Finance specifies that “the single agreement can correspond to a single document or to a set formed by a framework contract and application contracts.”

For complete information on the single agreement, refer to the economie.gouv.fr website and to articles L. 441-3 et seq. of the French Commercial Code.

The main principles of commercial cooperation

Distributors have always sought to buy at the best price, and this trend has intensified with what is commonly known as the price war (see final section).

When suppliers reach the floor price below which they can no longer go, retail chains activate other levers: they sell various services, such as advertising or promotional campaigns (in-store displays, flyers, endcaps, etc.). This is called commercial cooperation, a practice now regulated by the Commercial Code and the Directorate-General for Competition, Consumer Affairs and Prevention of Fraud (DGCCRF) to ensure transparency and fairness in these relationships.

Some of these services allow costs to be transferred to the supplier, such as making them responsible for stocking their products on shelves. In any case, the goal of the chains is to increase their margin. Historically, some of these services were considered purely artificial and intended to increase profitability in a roundabout way.

Furthermore, lobbying by retail chains long advocated for an essentialization of commercial cooperation under the guise of “global service for remuneration,” while manufacturers, on their side, sought to have every service listed line by line in the contracts. The latter won their case, as the law now obliges distributors to detail in annual agreements the services that fall within the scope of commercial cooperation.

As a general rule, distributors will therefore attempt to maximize the actions that will be charged to the manufacturer, such as stocking, signage, financing display furniture, or commercial events. And the supplier will have to pay to obtain strategic positions in the chain's stores. Many factors come into play: area, aisle, shelf level, number of facings, or endcaps, etc.

💡 If negotiations fail, Egalim III provides an experimental mechanism allowing the supplier to terminate the contract without penalty, or to refer the matter to a mediator, with an adapted schedule (dates relative to turnover).

Negotiation and power dynamics between suppliers and distributors

While the balance of power generally tilts in favor of distributors, suppliers have certain options to optimize their listing strategy.

Listing strategy of manufacturers

On the suppliers' side, price reductions are therefore often agreed to in exchange for better product exposure, considering that good sales performance will increase profits through scale effects, despite a lower initial unit price.

Playing chains against each other

Manufacturers who are received by several buyers perform a comparison of the offers they receive. Unless they have to dismiss proposals that are too unprofitable, agreements can be reached with multiple partners. As for national brands, they enjoy strong enough popularity with the general public to carry weight in negotiations and not skip any distribution channel. This is the principle of intensive distribution.

Furthermore, the distributor's market share - and its future projections - in the brand's aisle is an important signal for the supplier; growth ambition could lead to a more generous price reduction. If on the contrary, the chain is losing momentum in the relevant product category and foresees no improvement, the manufacturer will remain cautious about the terms to approve.

Competition on the shelves

Finally, shelf positions alone are not enough to boost sales, and the supplier, in addition to the conditions offered to them, will seek to know the advantages granted to their competitors. Indeed, since shelf space is limited, a distributor must make choices regarding listing, particularly on the number of suppliers, and designate those who will benefit from the spaces that generate the most sales.

This obvious fact also dictates the strategy of suppliers who, aware that they cannot win on all fronts, will often grant more favorable rates to the chain that provides them with the best visibility. The goal is generally to block the channel by successfully obtaining the best positions before their competitors. In other words - and although it is not an absolute rule - it is in the suppliers' interest to sign as quickly as possible, and especially before the others.

The threat of delisting

On the retail chains' side, the ultimate weapon is, of course, delisting. This can be partial, total, and sometimes permanent. A manufacturer who has bet everything on a single distributor then exposes themselves to a significant risk of bankruptcy.

This is why the contract will allow the supplier to lock in conditions for a year (unless a clause provides for their revision). The agreement therefore prevents, except in extreme cases, delisting during the year.

Unfortunately for manufacturers, things are not that simple.

Indeed, while the EGAlim II law made price increases by suppliers during the contract possible (under conditions), distributors have a real arsenal of punitive actions in response to these unilateral changes.

For example, they can reduce the assortment, slow down shelf restocking, move products to cold zones, cancel promotions, and in the most extreme cases, stop receiving category managers during their store visits. The same escalation is to be feared if the chain discovers lower retail prices in other channels (for example in e-commerce).

For brands, this state of affairs leads to a well-known issue: the obligation to physically visit each point of sale to check the assortment, merchandising, or quite simply… the listing. Monitoring compliance with agreements can therefore require significant resources in the field.

Conversely, it is rare for a supplier to stop delivering to a distributor to express their opposition. Only some national or international brands have enough power to brandish this threat. For most manufacturers, halting collaboration indeed leads to a perilous financial situation, with unsold goods in warehouses and revenue losses that quickly become abyssal, because a distributor is not easily replaced, and certainly not at a moment's notice!

To avoid these disastrous situations, the supplier therefore ensures that distribution agreements describe with the greatest clarity the legal notices relating to commercial cooperation, such as the nature of the services rendered, the dates and durations of the benefits, or their remuneration.

Historical evolution of purchasing practices and the law

Since the 90s, French and European legislation has sought to rebalance commercial relations between distributors and suppliers.

Legislative developments impacting supermarket listing agreements since 1990

Thus, several texts have aimed to limit abuse of dominant position, regulate contractual practices, guarantee the transparency of negotiations, but also ensure fairer remuneration for farmers.

Of course, laws have not always had the intended effects, and each development has given rise to new abuses.

The table below offers a non-exhaustive summary of the measures that have come into force over the past thirty years, and the effects that followed them.

Price war and concentration of purchasing

At the end of the 2000s, the economic crisis and inflation heavily impacted the purchasing power of the French. The following decade was marked by a general change in strategy (at the initiative of the Casino group) by large-scale retail players in France, commonly called the price war.

This phenomenon is still active today, and suppliers are under very strong pressure from retail chains. Also, with the legislator having tried to balance the power dynamics (see EGAlim above), buyers have redesigned their sourcing model to maintain their purchasing power at the best price.

Two main trends have been at work for five years: the grouping of listing structures between different chains, and purchasing management operated from other European Union countries.

Grouping of inter-chain purchases

Thus, while the price war seems to be the rule in the large-scale retail sector, annual negotiations are paradoxically marked by an astonishing collaboration between chains, which seek through this lever to mass-market their purchasing power on a national scale. We are indeed observing an unprecedented concentration of purchasing centers, with French giants partnering to carry even more weight against national brands.

Note that alliances are not always long-lasting. Que Choisir (1) indicates that “In the space of two years, Envergure, which grouped Carrefour and U, disappeared, while Aura (Auchan, Intermarché, and Casino) appeared, and Carrefour and U are now going it alone.” Furthermore, still according to Que Choisir (2), pooled purchasing centers are also used for sourcing private label products (MDD).

European purchasing centers

The creation of these mega structures also takes place at the European Union level; platforms dedicated to international purchasing have been set up with the aim of negotiating the listing of fast-moving consumer goods. These super purchasing centers are designed to make international giants like Nestlé, Danone, or Coca Cola bend.

Thus, Carrefour now buys from its subsidiary Eureka based in Spain, Leclerc from Eurelec in Belgium, and Aura from Everest in the Netherlands.

Que Choisir also informs us that associated services (promotions, slotting fees, advertising), now gathered under the banner of “entry fees,” are also formalized via contracts concluded abroad (Switzerland, Belgium).

For distribution behemoths, these supranational centers aim of course to increase purchasing power, but also - and above all - to bypass French law. As we have seen, EGAlim authorizes price revisions during the contract to fairly remunerate agricultural producers. By operating from abroad, distributors circumvent this rule. 50% of the products present on French supermarket shelves would be affected.

For their part, the chains defend themselves, arguing in particular that their interlocutors are themselves international suppliers. To their credit, it should be specified that products sold only in France are not affected, nor are agreements relating to private label products (MDD).

Be that as it may, this situation does not concern the European Commission much, because this purchasing power promotes low prices in stores. To the great dismay of supporters of the EGAlim law.

In summary

The organization of purchasing in large-scale retail generally follows two models: either a purchasing center buys to supply its points of sale, or a listing center sets up a framework agreement so that the network's points of sale can buy under the best conditions.

This second model is the most common in large-scale retail; suppliers must then try to maximize their interests when drafting these agreements. The legislator now obliges the signing of single agreements which must detail the commercial cooperation benefits, services concluded between the parties in addition to price negotiations.

Despite successive laws that have tried to balance the commercial relationship, the balance of power is generally in favor of the retail chain, which can threaten suppliers with delisting. Suppliers, however, have negotiation strategies that can prove successful, and mainly aim to increase their visibility with at least one partner chain.

Finally, time will tell what happens to the pooled - and even internationalized - practices of distributors, never short of ideas to maintain their purchasing power against French companies, especially in a context of price competition in stores.

You should now have a clearer vision of what listing your products in large-scale retail implies. And if you have already signed with one or more chains, all that's left is to boost your performance with the Sidely CRM!