Missing in action

Delisting products is a common form of punishment by retailers unhappy with one of their manufacturers.

Over the 40 years I've been associated with the grocery industry, I have seen any number of incidents of products being delisted. I’m not talking about delisting because of the lack of sales (there’s no point keeping a product on shelves if nobody wants to buy it). No, I’m talking about retailers delisting products because of a conflict with the manufacturer. Delisting is a punishment for something a manufacturer has done, or not done, that has annoyed the retailer.

I recall a number of major delistings over the years, such as one about 20 years ago when Loblaw delisted all Green Giant products. I can’t recall how long it lasted, but, of course, Green Giant eventually returned to Loblaw shelves. The recent delisting of French’s ketchup doesn’t count because Loblaw immediately reinstated the condiment after a major outcry by shoppers. But the original delisting was said to be because French’s ketchup harmed sales of President’s Choice ketchup. Another example: Supermarket chain Jumbo, in the Netherlands, recently stopped carrying all Heineken products and went so far as to encourage customers to switch to another brand of beer.

Such conflicts are apparently becoming more common according to a new report from the University of Leuven in Belgium. It notes that in 2010, Costco in the U.S. stopped stocking Coca-Cola for weeks due to a dispute over pricing. And in 2013, the U.K.’s largest retailer, Tesco, delisted dozens of items produced by Princes, a major British food maker.

So who wins in delistings? Who loses? Leuven researchers tried to find out by examining a real-life case study in which a big retailer (unnamed in the report) delisted all of a major manufacturer’s products across more than 20 brands in 60 product categories. Although the delisting harmed both sides, the impact was greater on the retailer. The manufacturer’s brand share across delisted categories fell an average of 4.33%. But the retailer’s category share went down 8.75%. That’s because customers were more loyal to the brand than the retailer. The report, “The Clash of the Titans”, was published in the Journal of Marketing and authored by Sara Van der Maelen.

“Retailers and manufacturers should think twice before sticking to their guns in negotiations,” the report concluded. “Taking products off the shelves can have major consequences for both parties involved. Sales figures suffer most when the conflict delisting involves products that typically appear on consumers’ shopping lists. As consumers have planned these purchases before going to the store, they will miss the product more. The impact is much smaller in the case of impulse purchases.”

The study shows that retailers have a stronger negotiation position when the conflict pertains to a category of which the retailer already carries a large assortment. But when manufacturers have a strong brand, they can count on shoppers to switch stores to buy the brand. The study also found that once delisted items returned to shelves, sales for retailer and manufacturer returned to normal.

Since this study came from Europe, I imagine the delisting it looked at was European. However, since European retailers are under the same pressures as Canadian ones, I suspect the findings would be emulated here in Canada. I wonder whether Canadian retailers are aware of the impact on sales every time they delist a product? With retail sales being hit twice as hard as the delisted manufacturers’ sales, it might be time to rethink delisting as a form of retaliation.

This ad will auto-close in 10 seconds