The client was facing profitability issues with both key accounts and independent clients, primarily due to inefficiencies in trade terms management and excessive gross-to-net spending. The key challenges identified were:

• Misaligned discount allocation: High levels of discounts were not necessarily directed toward accounts where investment was most needed or effective.

• Unconditional discounts dominance: A large portion of the discounts provided were not linked to any commercial counterpart or expected return.

• Weak conditionality enforcement: Even when discounts were designed to be conditional, they were often poorly tracked and rarely enforced.

Objective: Conduct a comprehensive review of trade terms across key and independent clients to uncover optimization opportunities and redesign the trade terms structure for improved commercial impact and profitability.

1. Trade terms diagnostic

• Performed a full audit of existing discount agreements, categorizing them into four key types:

  • Unconditional discounts.

  • Discounts with apparent conditionality (conditions not enforced).

  • Pay-for-activity discounts (e.g., visibility, distribution).

  • Pay-for-performance discounts (e.g., volume targets, ROI-linked).

• Assessed overall spend effectiveness and alignment with strategic priorities.

2. Value-based discount assessment

• Evaluated discount levels by client to identify:

  • Over-invested accounts where trade expenditure was inefficient.

  • Under-invested clients where targeted incentives could unlock growth.

3. Design of new trade terms model

• Developed a “to-be” discount structure with key principles:

  • Shifted towards conditional discounts with measurable returns.

  • Rationalized unconditional spend (“pay better, not necessarily less”).

  • Linked discounts to specific commercial counterparts and KPIs.

4. Implementation roadmap

• Created a practical, phased rollout plan including:

  • Commercial playbooks and negotiation toolkits.

  • Client-specific value stories to support renegotiation.

  • Systems and control mechanisms to track and enforce conditionality.

• Significant increase in the share of conditional discounts, directly tied to performance metrics and compliance.

• Introduction of controls and governance tools to monitor and enforce discount conditionality.

• Development of compelling commercial narratives to support internal alignment and external negotiations.

• Full profitability turnaround in several key accounts.

• 90% increase in EBIT, driven by more efficient investment in trade terms and greater return on commercial spend.