At a time when inflation is encouraging consumers to buy the cheapest products - and sometimes private label - many suppliers are worried that they will be partially or totally delisted from supermarket shelves, due to a lack of agreement on prices at the end of annual negotiations.
But while pricing is often the point of pain between suppliers and distributors, there are other causes for delisting. Like all small and medium-sized brands present in the retail sector, you need to anticipate these situations, which could have serious consequences for the future of your company.
Dereferencing in supermarket distribution is the decision by a retailer, central purchasing body or point of sale to stop selling one or more brand products. Dereferencing is said to be partial when it applies to a product reference only, and total if the entire brand (in other words, all the products) is excluded from the assortment of the chain or store concerned.
Discontinuation by a retailer can have significant repercussions for brands, generally leading to a substantial drop in sales. This decision may be motivated by unsatisfactory sales performance, or be the result of a commercial disagreement, often linked to the purchase price negotiated between the manufacturer and the distributor.
Article L.442-6 of the French Commercial Code provides a framework for abusive dereferencing, prohibiting the unjustified termination of established commercial relationships. In particular, it is forbidden to "obtain or attempt to obtain, under the threat of a "total or partial" brutal breach of commercial relations, prices, payment deadlines, terms of sale or conditions of commercial cooperation that are manifestly at variance with the general terms of sale".
Retailers have thus become much more cautious about delisting their suppliers, and comply with a reasonable notice obligation proportionate to the history of the commercial relationship, and designed to allow the supplier to prepare for conversion. Failure to comply with this clause may give rise to equivalent financial compensation decided by the judge. In the case of a private label, this period is doubled. Finally, a significant drop in order volumes may be interpreted by the judge as an act of delisting, even if the products have not completely left the retailer's shelves.
In practice, brands are generally reluctant to take legal action, as the hope of financial compensation is rarely worth the effort of restoring collaboration.
Despite the legal framework described above, dereferencing remains a massive lever of persuasion available to retailers during the annual negotiation period. The shortening of deadlines since the Bruno Le Maire Law has further increased the pressure on brands. Inflation is pushing retailers to put national and international brands under pressure to obtain the best prices. For example, Système U dereferenced Procter & Gamble in 2023. In 2024, it was Pepsico's delisting from Carrefour shelves that caused a stir.
But price disagreement, while central in times of inflation, is not the only phenomenon behind delisting.
In reality, there are many reasons why your brand may risk losing its position on the shelves of large and medium-sized retailers.
If a product or brand isn't selling well enough, the retailer may decide to delist it to free up shelf space for more profitable products. And with good reason: in a market where the number of brands is growing every year, shelves cannot be stretched.
In this competitive logic, innovation and market trends are crucial: if a product or brand is not evolving as quickly as consumer expectations, the retailer may decide to withdraw it to make way for products more in tune with current demands.
More rare, quality problems can also work against you: product recalls, recurrent consumer complaints or manufacturing defects tarnish not only your brand image, but also that of your distributor. In any case, your distributor will defend its reputation. Examples include Buitoni pizzas, or on a lesser scale, Findus lasagne.
Last but not least, retailers' product range strategies play a major role in the choice of suppliers to source: they adapt their product assortment to respond as comprehensively as possible to market and seasonal changes, but also to stand out from the competition. Dereferencing can be part of a strategy to renew the offer and attract new customers.
It should be noted that these reasons are often interconnected, and the decision to discontinue a product or brand is generally the result of an overall assessment that takes several factors into account.
In the case of a network of independent retailers, the decision to discontinue a product is often based on discussions between the brand and each store owner. Store owners have relative autonomy in choosing which products to stock in their stores, but they must also respect the brand's guidelines.
In an integrated network, where sales outlets are directly managed by the brand, the decision to delist generally comes from the company's head office. Directives are issued by general management or the teams responsible for purchasing and assortment management.
Although the periodicity of negotiations suggests that everything is played out over a short period of time, your brand's efforts to avoid being delisted must be ongoing.
They can be grouped into strategic positions:
Anticipating and avoiding dereferencing situations requires a great deal of resources from brands present in supermarkets: vision, audacity, flexibility... Management alone will often find it difficult to have a global view of the commercial relationship and the market. A management committee, a strategy task force or any other working group can help to develop and follow up the above-mentioned avenues. A single objective: to make your brand too successful for your distributor to consider excluding it from its shelves.
