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Food Retail – proposal to eliminate retro bonuses

 
04.06.2015

According to Kommersant, the Ministry of Industry and Trade has proposed eliminating retro bonuses from producers to retailers. The initiative has been submitted for a second reading and requires a one-year transition period, according to state officials.

We note that the amendments to the retail law which have already passed the first reading assume a material decline in retro bonuses, from 10% at present to 3%, and generally lower days in accounts payable for various categories. As the proposed threshold already concerns only a small amount of sales and marketing tools, eliminating it would make procurement terms more transparent across the food retail sector in Russia with the key focus on suppliers’ prices. The negotiating process is also to become more straightforward and provide a stronger possibility for large chains to avoid material losses in commercial terms. We expect the draft law to see further proposals and amendments, and highlight that the outlook on how it will be implemented is still vague.

Marina Kolbina, Nikolay Kovalev
VTB Capital analysts

Tags:
food retail

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