Trade Spend Benchmarks: How Much Are CPG Companies Really Spending?

The Scale of Trade Spend in CPG

Trade promotion is the second-largest line item for most CPG companies, trailing only cost of goods sold. Industry estimates from the Promotion Optimization Institute, Nielsen, and published CPG earnings reports put average trade spend at 11-27% of gross revenue, varying significantly by category, channel, and company size.

To put that in perspective: a $100M revenue CPG brand may be investing $15-25M annually in trade promotions. For a $500M brand, that figure can exceed $100M. It's an enormous investment, and one of the few truly controllable costs on the P&L.

Trade promotion is the single largest controllable cost for most CPG companies - yet the majority can't tell you which half of that spend is working.

Benchmarks by Category

Trade spend rates vary substantially by category. Higher-velocity, more competitive categories tend to carry higher trade spend rates. These are approximate ranges based on industry data:

Note: These are industry estimates from POI, Nielsen/IRI, and published CPG earnings. Actual figures vary by company, retailer mix, and brand positioning.

Spending More Isn't the Problem

The most common question CPG leaders ask about trade spend is "are we spending too much?" But that's the wrong question. The real issue isn't the level of spend - it's the level of visibility.

According to the POI 2024 State of the Industry Report, 70% of CPG organizations can't effectively evaluate their promotions. That means the majority of brands are allocating tens of millions of dollars with limited understanding of what they're getting in return.

A company spending 20% of revenue on trade but measuring every dollar may well outperform a company spending 15% blindly. The differentiator isn't spend level - it's spend intelligence. Knowing which promotions generate positive ROI and which destroy margin is the foundation of trade promotion optimization.

How to Benchmark Your Own Trade Spend

Before you can optimize, you need to understand where you stand. Here's a practical framework for benchmarking your trade investment:

1. Calculate trade spend as a percentage of gross revenue - Use gross revenue (before trade deductions), not net. This gives you the true rate that's comparable to industry benchmarks.
2. Break it down by customer - Your top 5 customers likely account for 60-80% of total trade spend. Understanding the rate by customer reveals which relationships are most trade-intensive.
3. Compare ROI across customers, not just spend levels - A customer with a 25% trade spend rate but strong promotional ROI may be a better investment than a customer at 15% with poor returns. Promotion-level ROI analysis makes this comparison possible.
4. Look at trade spend as a percentage of gross margin - This is the metric that matters most. If trade spend is consuming 40% of your gross margin at a particular customer, that's a fundamentally different conversation than if it's consuming 20%. This is where margin intelligence becomes critical.

At Strata CPG, we help brands build this complete benchmarking view automatically from their existing data. No ERP integration needed - just your billing data, trade accruals, and product costs.

Want to benchmark your trade spend? Let's talk about building a complete picture of your trade investment.