Negotiation Free · self-study ~60 min

Annual Trade Negotiation Closing the Deal

One week after their first annual negotiation meeting, Alex Vance and Sam Brooks meet again to finish the agreement. Their teams have shared key documents: the term sheet, different volume options, and a draft promo calendar.

 Level

What you’ll be able to do

Dialogue

Beginner version

Alex Vance
Sam Brooks, hello! I am happy to see you. Thank you for coming quickly. This time of year is very busy.
Sam Brooks
Yes, I know. It is important to keep going. We finished our checks inside the company. I have some feedback. Some parts are good. Some parts are hard.
Alex Vance
OK, that is normal. But first, did you get all the documents? I mean the new price paper and the extra pages: the plan for promotions, the goals, and the list of five products by area.
Sam Brooks
Yes, we got everything. The papers are clear and easy to read. My team liked it. You sent many parts, not just prices. But small things are important. Our committees look at small things.
Alex Vance
Good. Let's do this in order. First, we say what we both agree on. Second, we say what is not decided. Third, we choose what to do next and who does it. Is that OK?
Sam Brooks
Yes, that is fine. We agree on three things. One: we want a new agreement for one year with better rules. Two: we want fewer promotions, but bigger ones, if we can sell the same amount. Three: we like your idea about premium products. That helps us keep good prices.
Alex Vance
Good. We also agree on the direction. But some things are not decided. For us, these are: the 3% price rise, the money we give back at the end, the targets, and how deep the distribution goes. We also need to say what 'good execution' means. It cannot just be words.
Sam Brooks
Yes. Let's talk about price first. It changes everything. Inside our company, people say: do not accept a price rise. They want to see that our profit is safe. And they want it in writing. Very clear. No questions.
Alex Vance
I understand. I am also very clear. The 3% price rise must happen. We can talk about when and how. Maybe some products are different. But we cannot remove the price rise. That is not possible this year.
Sam Brooks
That is the problem. Some managers want a different rule for middle products. They think customers will go to other shops. They also think other companies will not raise prices. Then we lose customers.
Alex Vance
I thought about that. I have two things to say. First, we watch other companies too. Some say no price rise, but they spend more money in trade. So the price rise is hidden. Second, yes, middle products are hard. But I do not want exceptions. I want to give you more money at the back end for those products. But you must sell more and do the work. This keeps shop prices OK and prices stay correct in the market.
Sam Brooks
OK. Then let's talk about the money at the back end. In your paper, you say we keep the same back-end money if we sell 4% more main products. And we get more if we sell more than that. I understand. But in two places, it is not enough. Shops there push hard. They need help now, not at the end of the year.
Alex Vance
When you say 'help now,' what do you mean? Do you mean cheaper prices at the front? Or do you mean money back every three months?
Sam Brooks
Money back every three months is better. Cheaper front prices are hard to control. They go everywhere and hurt our profit rules. But money back every three months can work if we have clear goals.
Alex Vance
That is a good idea. We can move some of the money from the end of the year to every three months. But we need clear goals. We need to check the results. And I want to be careful. If we pay faster, you must also do the work. If not, we take a money risk.
Sam Brooks
I see. What do you want to do?
Alex Vance
Let's make two parts. Part one: a base amount, paid every three months. But only if that three-month period reaches a small goal, like 3% more than last year, checked by sell-in numbers. Part two: a bigger bonus, paid at the end of the year, if we reach 4% more and do the execution work. So you get some help in the year, but it is not automatic.
Sam Brooks
That is better. But my money team will ask: we accept a price rise and the money back is not sure. Where is the safe profit?
Alex Vance
The safe profit comes from two things. First, part one is possible if you work well. Second, we check the numbers together every month. We do not wait for problems. We fix them early. We want you to work with us, not just wait and hope.
Sam Brooks
OK. Then we need to say what 'execution goals' means. Simple words. You said things like: how many shops sell it, how visible it is, if it is on the menu, and if staff are trained. Some are easy to check. Others are hard to check in many countries.
Alex Vance
That is true. Let's put the goals in two groups. Group one: easy goals. Group two: harder goals. Easy goals: how many of the five products are in shops by area, how much stock is there so shops do not run out, and how many new shops start each three months. Harder goals are about quality. We can check with simple forms and visits. But they do not stop the money unless something is very wrong.
Sam Brooks
Good. If the money back is linked to easy goals, it is simpler for us inside. Now, the five main products. Your list is good. But some countries want only four. They say the fifth product is for too few people.
Alex Vance
Which product?
Sam Brooks
The new product, the special limited one.
Alex Vance
I thought so. This is what I think. I do not need it in every place. I want it in places where premium is real. So the new product can be a choice by country. But if a country says yes, it must do the work. I want real action in shops. A listing with no action is bad. That is worse than not listing.
Sam Brooks
So you say yes to choice, but you want strong rules if a country says yes.
Alex Vance
Yes. A choice, but a serious one. If you do it, do it well.
Sam Brooks
That helps. Now, about getting products into more shops. You want more shops to sell your products in important areas. You will help with training and give money. We say yes to the idea. But we need clear goals for local teams. 'More shops' is not enough.
Alex Vance
I agree. Let's be clear. For each important area, we say: this is how many shops now, this is the goal, and these are the steps every three months. We give help: training days, people to visit shops, and money for shop materials.
Sam Brooks
Good. But I have a hard question. What if you do not do what you promise? Other companies promised help and then stopped in the middle of the year.
Alex Vance
That is a fair question. We can write a rule for both sides. If we do not give the help we promised, like training days or shop visits, then some of your goals become easier for that time. Both sides have rules and results. That is real sharing of risk.
Sam Brooks
That is very helpful for us inside. It shows the agreement is fair for both.
Alex Vance
Yes. Now, about removing some products. Last week we said we want less complexity. We want to remove two products that do not sell much. We will help you sell the last ones and we suggest better products to replace them.
Sam Brooks
We looked at that. It is good to have fewer products. It is simpler. But some countries do not want to remove them. They worry some customers will be unhappy.
Alex Vance
I understand. But let's think simply. Products that do not sell much and cost a lot to manage are a problem. We can do this change well. We tell customers clearly, give time to sell the last stock, and suggest a replacement with a similar taste or price.
Sam Brooks
That is possible. But I worry about having enough products. If you remove products and push more sales to fewer products, can you always have stock? No stock on a top product is a big problem.
Alex Vance
Yes, I agree. That is why I want to put supply rules in the agreement. If you give us good plans with enough time and the numbers are close to correct, we will give you stock first. But if your plans change a lot, we cannot promise the same. It is sharing the risk again.
Sam Brooks
So you want us to plan better.
Alex Vance
I want us to work better together. Planning is not just office work. It helps shops have stock, helps sell more, and saves money on fast deliveries. Those costs hurt both of us.
Sam Brooks
I can say that inside our company. Now, about when the price rise starts. Some places want to wait one more month for shop talks.
Alex Vance
We can talk about time. What do they want exactly?
Sam Brooks
They want to start on March 1st, not February 1st, in two places. Other places start on February 1st.
Alex Vance
I can think about that. But there must be something in return. Maybe they sell more in the second three months. Or they reach shop goals faster. If there is nothing in return, it is just a late start and nothing more.
Sam Brooks
That is fair. Here is an idea. Those places get one extra month. But they must reach the shop goal for the second three months one month early. And they must do two key promotions fully and correctly.
Alex Vance
That is the kind of trade I can say yes to. If it is written clearly, I can show it to my team inside.
Sam Brooks
Good. Let's say what we agreed. We say yes to the 3% price rise. Two places can start one month late, but only with shop and promotion promises. We change the money back to every three months plus a bonus at the end of the year. Easy goals decide the money. Harder goals help us learn. The new product is a choice by country, but must be done well if chosen. And we remove some products with a clear plan to help.
Alex Vance
Yes, that is all correct. I want to talk about one more thing: how we check the agreement. A good paper is not enough. If we do not check it, things go wrong. Then next year we have the same problems, and we are more unhappy.
Sam Brooks
I agree. How do you want to do it?
Alex Vance
I want a big meeting every three months for all of Europe. And I want a smaller talk every month between your country teams and my team for important areas. In the big meeting, we look at results, profit, shops, and future promotions. In the small talks, we look at daily problems: shop materials, training days, which shops to visit, and if rules are followed.
Sam Brooks
That is more than we do with some other companies. But for this plan, I think it is right.
Alex Vance
It is only too much if the meetings have no results. If we have a clear list, clear decisions, and clear actions, the meetings are fast. That is better than fixing problems all the time.
Sam Brooks
Good point. I think we are nearly done. What do you need from me before we sign?
Alex Vance
Two things. First, I need the final sales numbers by area in writing. Then I can set the money-back levels. Second, I need agreement on the rules for what both sides must do.
Sam Brooks
I can do both. I will send the sales numbers by the end of tomorrow. On the rules, our legal team may change some words. But the main idea should be OK.
Alex Vance
If legal changes words, that is fine. But the rule must still work in real life. If it becomes only a nice sentence, then the risk sharing is not real.
Sam Brooks
I understand. And from you, when can you say yes inside your company?
Alex Vance
If I get your numbers tomorrow and the paper is correct, I can get the yes inside in two days. After that, we just sign papers.
Sam Brooks
Good. The topics are hard. But I like how you work. You are clear on the important things. But you look for answers. That helps me say yes inside my company.
Alex Vance
Thank you, Sam Brooks. I am clear because the market needs rules. But I am open on how we do things because our work together is important. If we both work well, we both win. Not just more sales, but good profit.
Sam Brooks
Let's finish it then. I do my part on numbers and legal. We want to sign this week.
Alex Vance
Perfect. After we sign, let's set the first small meeting for the first three months. Then we start well and do not wait for problems.
Sam Brooks
Yes. Let's put it in the calendar now.
Alex Vance
Great. We agree on everything. Thank you, Sam Brooks. We talk tomorrow.
Sam Brooks
Thank you, Alex Vance. Talk soon.

Intermediate version

Alex Vance
Sam Brooks, great to see you again. I really appreciate you making time so quickly. At this point in the year, a single week feels like it disappears fast.
Sam Brooks
Absolutely. We both know it's important to keep things moving. We've finished our internal review and I have feedback ready, some of it positive, but there are also some challenging points to work through.
Alex Vance
That's expected. Before we get into the harder topics, could you confirm you received everything? I mean the updated term sheet plus the supporting documents: the promotional calendar, the performance KPIs, and the five priority SKUs per region.
Sam Brooks
Yes, everything arrived and it was well organised. My team was pleased that you sent a full proposal rather than just a pricing letter. That said, I should mention that our internal approval process tends to focus closely on the details.
Alex Vance
Good to know. I'd suggest we follow a clear structure. First, we cover the areas where we already agree. Then we identify what's still open. And finally, we agree on next steps and decide who is responsible for each one. Does that work?
Sam Brooks
Yes, that works. In general, we agree on three things. One, we want a new annual contract with stronger standards and better monitoring. Two, we accept fewer but more impactful promotions, as long as overall volume is protected. Three, we support the focus on premium execution because it helps us defend our margins.
Alex Vance
Agreed on all three. On our side, we share that direction. However, several points are still open. For us, these include the 3% list price increase, the back-end structure, rebates, targets, and conditions, and the distribution commitments. We also need to define what 'execution standards' actually means in practice, not just as a concept.
Sam Brooks
Exactly. Let's begin with price since it affects everything downstream. Internally, there's strong resistance to accepting a list price increase unless we can clearly demonstrate that net margin is protected, and 'clearly' means documented, measurable, and verifiable.
Alex Vance
I appreciate the directness, and I'll be equally direct. The 3% is a firm requirement for us. We can discuss how it's applied, the timing, whether it comes in stages, or if certain SKUs are handled differently, but removing the list price increase entirely is not an option this year.
Sam Brooks
That's where the tension lies. Several country managers are asking for exceptions on mid-range SKUs. Their concern is that customers may switch to cheaper alternatives, and that competitors will hold their prices to take advantage.
Alex Vance
I anticipated this. Two things worth noting. First, we track competitors closely, and some who appear to hold list prices are actually increasing trade spend behind the scenes, so it's not always as simple as it looks. Second, rather than granting exceptions, I'd prefer to protect your net margin through targeted back-end support on those SKUs, linked to volume and execution performance. That approach keeps shelf prices more competitive without undermining market price integrity.
Sam Brooks
That's a useful framing. Then we need to discuss the rebate structure. Your proposal keeps the current back-end rebate if we deliver 4% volume growth on the core range, with additional support above that. The logic is sound, but in two markets, it isn't sufficient. Retailers there are applying significant pressure and need support sooner rather than at year-end.
Alex Vance
When you say they need support sooner, are you thinking about front-end price reductions, or would quarterly rebates with faster payback be more useful?
Sam Brooks
Quarterly rebates would work much better for us. Front-end discounts are hard to manage, they tend to spread and become a baseline, which undermines margin discipline. Quarterly back-end payments would be workable if they're linked to measurable targets.
Alex Vance
That's reasonable. We could restructure part of the annual back-end rebate into quarterly payments. However, we'd need clear KPIs and a reliable way to verify performance. I also want to be transparent, faster payment means we take on more cash-flow risk, so we'd need the same level of commitment and consistency on your side.
Sam Brooks
Understood. What structure would you propose?
Alex Vance
I'd suggest a two-layer approach. The first layer is a base rebate paid quarterly, but only when the quarter meets a minimum threshold, say, 3% growth versus the previous year based on sell-in data. The second layer is a performance bonus paid at year-end if we hit the full-year 4% target and meet the execution scorecard criteria. It provides in-year support, but it's conditional, not guaranteed.
Sam Brooks
That's closer to what we need. But my finance team will still ask: if we accept a price increase and the rebates are conditional, where's the reliable net protection?
Alex Vance
The net protection comes from two sources. The first layer is genuinely achievable with disciplined execution. And we'll set up a regular joint review rhythm so we can catch issues early and make adjustments before they become bigger problems. We're not asking you to take it on faith, we're asking you to manage it actively with us. That's what turns a transaction into a real partnership.
Sam Brooks
OK, that's clear. We also need to simplify the execution scorecard. You've proposed KPIs covering numeric distribution, visibility, menu placement, and training completion. Some are straightforward to measure, but others are more difficult to track consistently across multiple countries.
Alex Vance
That's a fair challenge. I'd propose splitting the KPIs into two categories. The first is hard KPIs, things that are easy to quantify, such as numeric distribution for the five priority SKUs by region, minimum stock levels to prevent out-of-stocks, and the number of outlets activated per quarter. The second is soft KPIs, which focus more on execution quality and can be assessed through field checks and sampling. Soft KPIs would inform the review but wouldn't affect rebate payback unless there's a serious, recurring problem.
Sam Brooks
That approach works. Tying payback primarily to hard KPIs reduces internal friction. Now, regarding the five strategic SKUs, the selection is strong, but some countries are only comfortable committing to four. They feel the fifth is too niche for their market.
Alex Vance
Which SKU are they concerned about?
Sam Brooks
The innovation SKU, the new limited-edition product.
Alex Vance
That's what I expected. My position is this: I'm not asking for universal distribution. I want targeted listings where there's a genuine premium opportunity. So the innovation SKU can be optional by market. But if a market chooses to list it, there must be a real activation commitment, minimum visibility standards and agreed support activities. A listing with no action behind it is actually worse than not listing at all.
Sam Brooks
So you're open to flexibility in the listing, but you want clear obligations if a market opts in.
Alex Vance
Exactly. Optional, but with accountability. If a market commits, it commits fully.
Sam Brooks
That will make things easier internally. Now on distribution depth, you're asking for improved numeric distribution in priority regions, supported by your training and incentive programmes. We agree with the direction, but local teams need concrete targets they can actually own. 'Improve distribution' on its own is too vague to act on.
Alex Vance
Agreed. Let's make it specific. For each priority region, we'll define the current distribution baseline for core SKUs, set a clear target, and establish quarterly milestones. In return, we commit to defined resources, a specific number of training sessions, brand ambassador days, and a confirmed POS budget.
Sam Brooks
Good. But I need to ask a difficult question. What happens if your resources don't come through? We've had situations with other suppliers where ambassador programmes were cut partway through the year.
Alex Vance
That's a legitimate concern. We can include a mutual service-level clause. If we fail to deliver on our agreed commitments, training days, ambassador visits, POS materials, then certain performance conditions on your side are relaxed for that period. It's genuine risk-sharing, with consequences for both parties.
Sam Brooks
That would be very useful to show internally. It demonstrates that the agreement is balanced and fair in both directions.
Alex Vance
Exactly. Now, on the topic of SKU rationalisation. As we discussed last week, reducing complexity benefits both sides. We're proposing to delist two low-performing SKUs across your network, and we'd support that with a sell-off plan and a clear transition to stronger alternatives.
Sam Brooks
We've looked at this. From an operations perspective, simplification is appealing. However, some countries are reluctant because they're worried about negative reactions from a small but loyal customer base.
Alex Vance
I understand that concern, but let's look at it practically. Low-volume SKUs with high operational costs create what I'd call a complexity tax, we're paying to maintain them for sentimental reasons. We can manage the transition professionally: clear communication, a proper sell-off window, and a replacement product with a comparable taste profile or price point.
Sam Brooks
That sounds manageable. But I'm also concerned about supply continuity. If volume consolidates onto fewer SKUs, can you reliably guarantee stock? An out-of-stock situation on a key product damages trust very quickly.
Alex Vance
Absolutely, and that's exactly why I want supply discipline written into the agreement. If you provide rolling forecasts within an agreed lead time and accuracy range, we commit to prioritising your supply. But if forecasts are unreliable or change frequently, we can't guarantee the same service level. Again, shared accountability on both sides.
Sam Brooks
So essentially you're asking us to improve our planning processes.
Alex Vance
I'm asking us to be better partners in planning. Forecasting isn't just an administrative task, it's a commercial tool. Better forecasting improves shelf availability, supports sell-out, and cuts emergency logistics costs that hurt both our margins.
Sam Brooks
I can communicate that message internally. Now, on the timing of the list price increase, some markets want to push it back by a month to manage their retailer conversations more effectively.
Alex Vance
We can discuss timing. What specifically are they requesting?
Sam Brooks
They'd like the increase to take effect on March 1st rather than February 1st in two markets. All other markets would still move on February 1st.
Alex Vance
I can consider that, but only if there's something in return. It could be a stronger volume commitment in Q2, or an accelerated distribution milestone. Without a trade-off, it's just a delay with no benefit for us.
Sam Brooks
That's reasonable. Here's a possible trade. Those two markets get the one-month delay. In exchange, they commit to hitting the Q2 distribution target one month ahead of schedule, and they agree to execute two key activations with full compliance.
Alex Vance
That's exactly the kind of conditional concession I can work with. If it's clearly documented, I can take it to my internal team for approval.
Sam Brooks
Good. Let me summarise where we've landed. We accept the 3% list price increase. Two markets may delay by one month, subject to distribution and activation commitments. We restructure rebates into quarterly base payments plus a year-end growth bonus tied to full-year performance and execution. Hard KPIs drive payback; soft KPIs are used for guidance. The innovation SKU is optional by market but requires genuine activation if listed. And we proceed with rationalisation, supported by a clear transition plan.
Alex Vance
That's an accurate summary. I'd like to add one final topic: governance. Even the best agreement will fall apart without proper follow-through. If we don't have a clear review process, we'll find ourselves in the same position next year, probably with more frustration on both sides.
Sam Brooks
Agreed. What governance structure would you recommend?
Alex Vance
I'd propose a quarterly business review at the European level, plus monthly check-ins between your country leads and my field activation lead for the priority regions. The quarterly reviews cover the big picture: performance against targets, margin, distribution depth, and upcoming activations. The monthly sessions focus on operational issues, POS delivery, training scheduling, outlet selection, and compliance tracking.
Sam Brooks
That's more intensive than what we have with some other suppliers. But given the complexity of this plan, I think it makes sense.
Alex Vance
It only feels heavy if the meetings don't produce results. If we keep a tight agenda, make clear decisions, and assign actions every time, the process becomes much lighter than constantly managing crises after they've happened.
Sam Brooks
Fair point. I think we're close to the finish line. What do you need from me before we can move to signing?
Alex Vance
Two things. First, written confirmation of the final volume commitment ranges by market so I can lock in the rebate thresholds. Second, agreement on the mutual service-level clause, what we each commit to deliver.
Sam Brooks
I can provide both. I'll send the consolidated volume ranges by end of day tomorrow. On the service-level clause, our legal team may adjust some of the language, but the substance should be acceptable.
Alex Vance
Adjustments to the wording are fine, as long as the operational consequences remain real and enforceable. If it becomes purely symbolic, the risk-sharing element loses its value.
Sam Brooks
Understood. And when can you confirm internal sign-off on your side?
Alex Vance
If I receive your confirmation tomorrow and the term sheet is finalised, I should be able to get internal approval within forty-eight hours. After that, it's mainly a matter of paperwork.
Sam Brooks
That's great. Despite the complexity of the topics, I appreciate your approach, you hold firm on the key principles but stay solution-focused. That makes it easier for me to build the case internally.
Alex Vance
Thank you, Sam Brooks. I hold firm on principles because the market requires discipline. But I stay flexible on the mechanisms because the partnership genuinely matters. If we execute this well, both sides will benefit, not just in volume, but in sustainable profitability.
Sam Brooks
Then let's close it out. I'll handle the volume figures and legal review on my side, and we're aiming to sign this week.
Alex Vance
Perfect. Once we sign, I'd suggest we immediately schedule the first Q1 operational check-in. That way we start with momentum rather than waiting for an issue to arise.
Sam Brooks
Agreed. Let's get that in the calendar now.
Alex Vance
Excellent. Then we're fully aligned. Thanks again, Sam Brooks, I'll speak to you tomorrow.
Sam Brooks
Thanks, Alex Vance. Speak soon.

Advanced version

Alex Vance
Sam Brooks, it’s a pleasure to see you again. I appreciate you making the time to reconnect so promptly. At this time of year, a week can feel like a month.
Sam Brooks
I completely understand. I agree we should maintain momentum and not let things stall. We’ve completed our internal reviews, and I have some feedback-some of it quite constructive, but some more demanding.
Alex Vance
That’s to be expected. Before we tackle the more challenging points, could you confirm receipt of everything? I’m referring to the revised term sheet and the annexes: the promotional calendar, the execution KPIs, and the five-SKU focus list by region.
Sam Brooks
Yes, we’ve received it all. The package is clear and well-structured. My team appreciated that you didn’t just send a price letter, but a comprehensive proposal with multiple components. However, I must note that small details matter, and our approval committees often focus heavily on them.
Alex Vance
Understood. Let’s approach this systematically. First, we’ll outline what we agree on broadly. Second, we’ll identify what remains open. Third, we’ll agree on next steps and assign ownership for each action. Does that work for you?
Sam Brooks
Yes, that’s fine. Broadly, we agree on three key points. First, we want a new annual agreement with stricter rules and better follow-up. Second, we accept fewer promotions, but stronger ones, provided we can maintain volume. Third, we appreciate your focus on premium execution, as that’s where we can protect value.
Alex Vance
That’s good. On our side, we also agree on the direction. However, some points remain open. For me, these are: the 3% list price increase, the back-end structure-rebates, targets, and conditions-and the distribution depth commitments. We also need to define “execution standards” in concrete terms. Otherwise, it remains just a slogan.
Sam Brooks
Exactly. Let’s start with price, as it impacts everything else. Internally, we face strong pressure to reject list price increases unless we see clear protection for net margin. And by “clear,” I mean written, measurable, and verifiable. No grey areas.
Alex Vance
I understand. And I want to be equally clear. We have a firm directive on the 3%. We can discuss how we apply it-timing, steps, or SKU exceptions-but the concept of a list price increase is non-negotiable for us this year.
Sam Brooks
That’s the tricky part. Some country managers are requesting exceptions for mid-range SKUs. They believe customers will switch. They’re also concerned that competitors will maintain their prices and try to gain market share.
Alex Vance
I anticipated that. I have two points. First, we also monitor competitors. Some may keep list prices on paper but quietly increase trade spending. So “no increase” is sometimes just a message, not the reality. Second, yes, mid-range customers are price-sensitive. But instead of exceptions, I propose something else. We protect your net margin with targeted back-end support on those SKUs, but it must be tied to volume and execution. This keeps shelf prices more manageable and protects price integrity in the market.
Sam Brooks
Okay. Then we need to discuss rebates. In your term sheet, you mentioned we keep the current back-end rebate if we achieve +4% volume growth on the core range, with additional support if we exceed that. I understand the logic. But in two markets, it’s not enough. Retailers are pushing hard. Those markets want help now, not just at year-end.
Alex Vance
When you say “help now,” what do you mean? Do you mean front-end discounts, or quarterly rebates with faster payback?
Sam Brooks
Quarterly rebates are preferable for us. Front-end discounts are difficult to control. They can spread across the market and become normalized, which damages our margin discipline. But quarterly back-end rebates could work if they’re tied to clear performance metrics.
Alex Vance
That makes sense. We can shift part of the annual back-end rebate into quarterly payments. However, we need clear KPIs and a transparent way to verify results. I also want to be cautious. If we pay faster, we need the same level of discipline on your end. Otherwise, we take on cash-flow risk without certainty.
Sam Brooks
I see. What do you propose?
Alex Vance
Let’s build two layers. Layer one is a base rebate, paid quarterly, but only if the quarter reaches a minimum run rate-for example, +3% versus last year, measured in sell-in. Layer two is a growth bonus, paid at year-end if we hit the full-year +4% and the execution scorecard targets. This provides some support during the year, but it’s not automatic.
Sam Brooks
That’s closer to what we need. But my finance team will still ask: “Why do we accept a list increase and also have conditional rebates? Where’s the guaranteed net protection?”
Alex Vance
The net protection comes from two things. First, layer one is achievable if execution is disciplined. Second, we’ll establish a joint tracking rhythm, so we monitor the numbers and adjust early. We’re not asking you to hope; we’re asking you to commit and manage this with us. That’s the difference between a one-time negotiation and a real partnership with governance.
Sam Brooks
Okay. Then we need to define the “execution scorecard” simply. You proposed KPIs like numeric distribution, visibility compliance, menu placement, and training completion. Some are measurable, but others are harder to track across many countries.
Alex Vance
That’s fair. Let’s separate the KPIs into two groups. Group one: “hard KPIs.” Group two: “soft KPIs.” Hard KPIs are easy to measure-for example, numeric distribution for the five key SKUs by region, minimum stock availability to avoid out-of-stocks, and the number of outlets activated each quarter. Soft KPIs are more about quality, like execution quality. We can track them with checklists and samples. But they shouldn’t block payback unless there’s a major issue.
Sam Brooks
That works for me. If payback is mainly tied to hard KPIs, we reduce internal stress. Now, about the five strategic SKUs. Your list is strong, but some countries want only four. They say the fifth SKU is too niche.
Alex Vance
Which SKU do they mean?
Sam Brooks
The innovation SKU, the new limited release.
Alex Vance
I expected that. Here’s my view. I’m not asking for a full listing everywhere. I want targeted launches where the premium opportunity is real. We can make the innovation SKU optional by market. But if a market chooses it, then the market must commit to minimum visibility and activation. I don’t want a paper listing with no action. That’s worse than not listing at all.
Sam Brooks
So you accept flexibility, but you want strict rules if it’s listed.
Alex Vance
Exactly. Optional, but serious. If you choose to do it, then do it properly.
Sam Brooks
That will help. Now, distribution depth. You asked for more numeric distribution in priority regions, supported by your training and incentives. We agree in principle, but we need clear commitments that local teams can own. “Increase distribution” is too vague.
Alex Vance
I agree. Let’s make it concrete. For each priority region, we’ll set a baseline distribution level on the core SKUs, then a target, and add milestones by quarter. In return, we commit to clear resources: a number of training sessions, brand ambassador days, and a POS budget.
Sam Brooks
That’s good. But I’ll ask a tough question. What if your resources don’t materialize? We’ve seen other suppliers promise ambassador programs and then cut them mid-year.
Alex Vance
Fair point. We can add a mutual service-level clause. If we don’t deliver the agreed support-training days, ambassador presence, POS materials-then some conditions on your side can be relaxed for that period. This is real risk-sharing. Both sides must have responsibility and consequences.
Sam Brooks
That would be very helpful internally. It shows the agreement is balanced.
Alex Vance
Yes. Now, about underperforming SKUs and rationalization. Last week, we agreed we should reduce complexity. Our team proposes delisting two low-rotation SKUs across your network. We’d also provide a sell-off plan and a substitution suggestion into stronger SKUs.
Sam Brooks
We reviewed that. From an operational perspective, simplification is attractive. But some countries resist because they fear complaints from a small group of loyal customers.
Alex Vance
I understand. But we should be practical. Low rotation plus high operational cost means we pay a “complexity cost” for emotional reasons. We can manage the change professionally. We can communicate clearly, provide a sell-off window, and propose a replacement that maintains a similar taste profile or price point.
Sam Brooks
That sounds possible. But I worry about supply and forecasting. If you delist and push volume into fewer SKUs, can you guarantee availability? An out-of-stock on a hero SKU can destroy trust quickly.
Alex Vance
Absolutely. That’s why I want to include supply discipline in the agreement. We can set an allocation logic based on forecast accuracy. If you provide rolling forecasts with a defined lead time and within an agreed error margin, we commit to prioritizing supply. But if forecasts are inconsistent, we can’t guarantee the same service level. Again, it’s risk-sharing.
Sam Brooks
So you’re asking us to plan better.
Alex Vance
I’m asking us to work as better partners. Forecasting isn’t just admin work. It’s a commercial tool. It protects availability, helps sell-out, and reduces emergency logistics costs. Those costs can erode margin for both of us.
Sam Brooks
I can support that message. Now, about the timing of the list price increase. Some markets want to delay it by one month to manage retailer negotiations.
Alex Vance
We can discuss timing. What exactly do they want?
Sam Brooks
They want it effective from March 1st instead of February 1st in two markets. Other markets would stay on February 1st.
Alex Vance
I can consider that, but only with a trade-off. We need a compensating mechanism. It could be a higher volume run rate in Q2, or a commitment on distribution milestones. If there’s no trade-off, it’s just a delay and nothing more.
Sam Brooks
That’s fair. Here’s a trade idea. Those markets get the one-month delay. In exchange, they commit to reaching the Q2 distribution target one month earlier. And they commit to implementing two key activations with full compliance.
Alex Vance
That’s the kind of conditional concession I can accept. If it’s written clearly, I can take it to my internal team.
Sam Brooks
Good. So let’s summarize. We accept the 3% list price increase. Two markets may get a one-month delay, but only with distribution and activation commitments. We change rebates into quarterly base tranches plus a year-end growth bonus, tied to full-year growth and execution. We use hard KPIs for payback, and soft KPIs mainly for guidance. The innovation SKU is optional by market, but if chosen, it must have real activation. And we move forward with rationalization, with a clear transition plan.
Alex Vance
That summary is correct. I want to add one more topic: governance. We can have a perfect term sheet, but if we don’t follow it, execution will drift. Then next year, we’ll have the same conversation again, and we’ll be more frustrated.
Sam Brooks
I agree. What governance model do you propose?
Alex Vance
I propose a quarterly business review at the European level. And I propose monthly touchpoints between your country leads and my field activation lead for the priority regions. In quarterly reviews, we look at big topics: performance vs. targets, margin, distribution depth, and the next activations. In monthly touchpoints, we look at operational blockers: POS delivery, training dates, outlet selection, and compliance.
Sam Brooks
That’s heavier than what we do with some suppliers. But I agree that for this plan, it makes sense.
Alex Vance
It’s only heavy if it creates meetings with no results. If we stay disciplined-clear agenda, clear decisions, clear actions-it becomes lighter than constant firefighting.
Sam Brooks
Good point. I think we’re close now. What do you need from me to move to signature?
Alex Vance
Two things. First, written confirmation of the final volume commitment ranges by market, so I can lock the rebate thresholds. Second, alignment on the service-level clause for mutual commitments-what we deliver, and what you deliver.
Sam Brooks
I can provide both. I’ll send the consolidated volume ranges by end of day tomorrow. On the service-level clause, our legal team may soften the wording, but the main idea should be accepted.
Alex Vance
If legal softens the wording, it’s okay, as long as the operational consequence stays real. If it becomes only symbolic, then the risk-sharing loses credibility.
Sam Brooks
Understood. And from your side, when can you confirm internal approval?
Alex Vance
If I receive your confirmation tomorrow, and if the term sheet is clean, I can secure internal sign-off within forty-eight hours. After that, it’s mainly paperwork.
Sam Brooks
Good. Even though the topics are tough, I appreciate how you manage this: firm on principles, but focused on solutions. It helps me defend it internally.
Alex Vance
Thank you, Sam Brooks. I’m firm because the market needs discipline. But I’m flexible on mechanisms because the partnership is important. If we execute well, both sides will win in a profitable way, not just in volume.
Sam Brooks
Then let’s close it. I’ll do my part on volumes and legal, and we aim to sign this week.
Alex Vance
Perfect. And after we sign, I suggest we immediately schedule the first Q1 operational touchpoint. That way we start with momentum and don’t wait for problems.
Sam Brooks
Agreed. Let’s put it in the diary now.
Alex Vance
Great. Then we’re aligned. Thank you again, Sam Brooks. Speak tomorrow.
Sam Brooks
Thanks, Alex Vance. Talk soon.

Check your understanding

1. What specific documents did Alex Vance ask Sam Brooks to confirm receipt of?

Show answer
Alex Vance asked Sam Brooks to confirm receipt of the revised term sheet and the annexes, which included the promotional calendar, the execution KPIs, and the five-SKU focus list by region.

2. What are the three key points that Sam Brooks and Alex Vance broadly agreed on?

Show answer
They agreed on: 1) a new annual agreement with stricter rules and better follow-up, 2) fewer but stronger promotions to maintain volume, and 3) a focus on premium execution to protect value.

3. What is Alex Vance's stance on the 3% list price increase?

Show answer
Alex Vance states that the concept of a list price increase is non-negotiable for them this year, although they can discuss timing, steps, or SKU exceptions.

4. How does Alex Vance propose to protect net margin for mid-range SKUs instead of granting price exceptions?

Show answer
Alex Vance proposes protecting net margin with targeted back-end support on those SKUs, tied to volume and execution, to keep shelf prices manageable and protect price integrity.

5. What is the structure of the proposed rebate system that Alex Vance suggests?

Show answer
Alex Vance proposes two layers: a base rebate paid quarterly if a minimum run rate (e.g. +3%) is reached, and a growth bonus paid at year-end if full-year +4% growth and execution scorecard targets are met.

Grammar practice (mixed)

Tenses

At this time of year, a week ____ like a month.

Show answer & why
feels · 💡 The sentence describes a general truth or habitual situation, requiring the present simple tense.
Prepositionsself-check

We’ve completed our internal reviews, and I have some feedback-some of it quite constructive, but some more demanding ____ the challenging points.

Show answer & why
before · 💡 The context indicates a sequence of actions: tackling challenging points comes after reviewing feedback. 'Before' correctly sets this temporal relationship.
Conjunctions

My team appreciated that you didn’t just send a price letter, ____ a comprehensive proposal with multiple components.

Show answer & why
but · 💡 The sentence contrasts a simple action (price letter) with a more comprehensive one. 'But' is the correct conjunction to show this contrast.
Prepositionsself-check

However, I must note that small details matter, and our approval committees often focus heavily ____ them.

Show answer & why
on · 💡 The phrasal verb 'focus on' is the standard collocation when directing attention toward specific items or details.
Verb forms

We’ve completed our internal reviews, and I ____ some feedback-some of it quite constructive, but some more demanding.

Show answer & why
have · 💡 The modal 'have' indicates possession of information or feedback, fitting the context of sharing internal review results.
Conditionalsself-check

____ we can maintain volume, we accept fewer promotions, but stronger ones.

Show answer & why
Provided that · 💡 'Provided that' introduces a condition that must be met for the main clause to be valid, fitting the business context of conditional agreement.

Discussion (practise speaking)

How can a company balance the need for strict price increases with the risk of losing market share to competitors who keep prices low?

🤔 Think about a time you had to defend a price increase to a client or manager.

Show sample answer
  • Companies can use back-end support like rebates to protect margins without changing shelf prices.
  • They can monitor competitor trade spending, which might be hidden.
  • They can focus on premium execution to protect brand value.

Ask Phil: Practise explaining the logic behind a list price increase to a skeptical buyer.

What are the risks and benefits of tying financial incentives to 'hard' versus 'soft' KPIs in a partnership?

🤔 Consider how your own team measures success: do you focus on numbers or quality?

Show sample answer
  • Hard KPIs like distribution numbers are easy to measure and verify.
  • Soft KPIs like execution quality are harder to track but important for brand image.
  • Mixing them can reduce stress while still aiming for quality.

Ask Phil: Practise negotiating the definition of a KPI with a partner who wants more flexibility.

How should a business handle the internal pressure to reject changes that seem to increase complexity or cost?

🤔 Reflect on a change you resisted at work and what would have made it easier to accept.

Show sample answer
  • They can propose a phased approach or trade-offs to make changes acceptable.
  • They can use data to show how simplification actually saves money long-term.
  • They can involve finance teams early to address margin concerns.

Ask Phil: Practise defending a new policy to a team that is worried about extra work.

Why is a formal governance model, like quarterly reviews, important for long-term business partnerships?

🤔 Think about how often you review goals with your team or clients.

Show sample answer
  • It prevents execution from drifting away from the original agreement.
  • It allows for early adjustments before problems become major.
  • It ensures both sides remain accountable for their commitments.

Ask Phil: Practise proposing a quarterly review schedule to a partner who prefers informal check-ins.

Vocabulary

term sheet
reveal definition A document outlining the key terms of a business deal before a final contract is signed. “Before we tackle the more challenging points, could you confirm receipt of everything? I’m referring to the revised term sheet and the annexes: the promotional calendar, the execution KPIs, and the five-SKU focus list by region.”
↗
execution KPIs
reveal definition Key performance indicators that measure how well a plan or strategy is being carried out. “Before we tackle the more challenging points, could you confirm receipt of everything? I’m referring to the revised term sheet and the annexes: the promotional calendar, the execution KPIs, and the five-SKU focus list by region.”
↗
list price increase
reveal definition A formal rise in the official selling price of a product. “For me, these are: the 3% list price increase, the back-end structure-rebates, targets, and conditions-and the distribution depth commitments.”
↗
back-end rebate
reveal definition A financial reward paid after a sale, based on meeting specific targets. “In your term sheet, you mentioned we keep the current back-end rebate if we achieve +4% volume growth on the core range, with additional support if we exceed that.”
↗
net margin
reveal definition The actual profit remaining after all costs and discounts are accounted for. “Internally, we face strong pressure to reject list price increases unless we see clear protection for net margin.”
↗
distribution depth
reveal definition The extent to which products are available across different retail locations or channels. “Now, about distribution depth. You asked for more numeric distribution in priority regions, supported by your training and incentives.”
↗
service-level clause
reveal definition A contract section that defines the specific standards and consequences for delivering agreed-upon services. “We can add a mutual service-level clause. If we don’t deliver the agreed support-training days, ambassador presence, POS materials-then some conditions on your side can be relaxed for that period.”
↗
rationalization
reveal definition The process of simplifying a product range by removing less profitable or complex items. “Now, about underperforming SKUs and rationalization. Last week, we agreed we should reduce complexity. Our team proposes delisting two low-rotation SKUs across your network.”
↗

Key phrases (useful expressions from the dialogue)

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