What Is Trade Spend?

Trade spend is the money a consumer packaged goods (CPG) manufacturer invests to promote and sell its products through retail and distribution partners. This includes promotional discounts, in-store displays, circular features, merchandising, slotting fees, distributor incentives, and co-op advertising.

According to Strategy& (PwC), trade spending in the U.S. exceeds $200 billion annually, consumes roughly 20% of gross sales for most CPG companies, and is typically the second-largest line item on the P&L behind cost of goods sold.

Why Trade Spend Matters for CPG Brands

Trade spend is how brands activate at retail. It funds the weekly circular feature, the end-cap display during key seasons, the “buy one get one free” promotion that drives trial, and the custom merchandising that makes your brand stand out on shelf. Without trade spend, products rely on passive shelf presence and hope shoppers notice them.

For emerging CPG brands, trade spend is also one of the most effective awareness and trial drivers. Retail distribution is the number one awareness builder for smaller brands, and trade spend is what activates that distribution. End-caps and in-store demos don’t just drive short-term lifts—they put your brand in front of new shoppers and create product trial that digital ads struggle to match.

Many founders over-index on consumer marketing (social, digital ads, influencers, content) and underinvest in trade. For early-stage retail brands, trade spend should be a significant share of the marketing budget, because that’s where revenue is actually generated.

How Trade Spend Works: Off-Premise vs. On-Premise

Trade spend looks different depending on whether you sell off-premise (retail stores) or on-premise (venues where products are consumed on-site).

Off-Premise Trade Spend

Off-premise includes grocery, convenience, mass retailers (e.g., Walmart, Target), and club stores (e.g., Costco, Sam’s Club). Common trade tactics include:

Circular and feature advertising. Paying to be featured in a retailer’s weekly circular, flyer, or digital ad to drive traffic and category interest during a promotion window.

End-cap and display placements. Funding premium placement outside the regular shelf position—end-caps, shippers, or front-of-store displays—to boost visibility and drive large sales lifts during promotions.

Temporary price reductions (TPRs). Short-term price discounts at the shelf, often paired with features or displays. The brand funds the margin hit to drive trial and volume.

Cross-promotional activities. Joint offers with complementary brands (e.g., bundle discounts or multi-brand deals) executed at retailers where both brands have distribution.

Custom merchandising and signage. Investment in shelf talkers, wobblers, permanent fixtures, and creative point-of-sale (POS) materials that elevate shelf presence.

Slotting fees. Upfront payments to secure shelf space for new items. While sometimes budgeted separately, they are fundamentally a trade investment.

On-Premise Trade Spend

On-premise includes restaurants, bars, hotels, stadiums, and other venues where products are consumed on-site. Tactics focus on influence and visibility inside the account:

Staff training. Educating bartenders, servers, and staff on the product and how to recommend it—critical in categories where staff influence drives trial.

Point-of-sale materials. Branded coasters, tap handles, signs, menu inserts, and other POS items that keep the brand visible and top-of-mind.

Equipment and fixtures. Providing branded glassware, fridges, display cases, or other equipment that ensures visibility and availability.

Trade Spend and Distributors

Most scaling CPG brands sell through distributors, and a portion of trade spend is used to motivate and enable that network.

A common structure is a per-case marketing fund: both the brand and distributor contribute a set amount per case sold into a shared pool, which is then used for local activation. Allocation decisions may be distributor-led for smaller brands, and more collaborative for larger ones.

Distributor incentives can include sales contests, cash bonuses, gift cards, branded merchandise, or other rewards for reps who open new accounts or hit volume targets. Well-designed incentives can generate outsized results by leveraging the distributor’s existing relationships and sales force.

The Biggest Mistakes Brands Make With Trade Spend

1. Not Recognizing Trade Spend as Its Own Category

Some brands reach meaningful retail scale without a defined trade budget, strategy, or tracking. They focus on consumer-facing marketing while neglecting the investments that actually move product at the point of purchase.

2. Losing Visibility Into Where Dollars Go

Larger brands often struggle with visibility and control. Without good data and governance, trade allocation can be driven more by individual sales reps than by strategy. Analyses frequently reveal inconsistent discounting patterns across accounts and regions, leading to margin leakage and uneven performance.

3. Confusing Measurability With Effectiveness

As retail media networks have grown, brands have shifted trade dollars into digital retail ads because attribution is cleaner. But a measurable ROAS doesn’t automatically mean those dollars outperform in-store demos, end-caps, or distributor incentives. Physical activation and trial may be harder to attribute precisely, yet they are foundational to long-term retail success.

Trade Spend as a Percentage of Revenue

Industry benchmarks for CPG trade spend typically range from 10–20% of revenue, with many companies spending up to 20% on promotions. The right level depends on category dynamics, competition, growth stage, and retail strategy.

Rather than fixating on a single benchmark, emerging brands should ensure trade spend is a major, intentional part of the marketing budget if retail growth is the goal.

Trade rate is the key discipline metric:

Trade rate = Total trade spend ÷ Gross revenue

Tracking trade rate monthly and quarterly helps you see whether trade is scaling appropriately or creeping up as you add accounts and promotions.

MorningAI helps CPG brands make every marketing dollar count, from trade activation to consumer marketing.