Food Industry Glossary

Here is a comprehensive list of frequently used terms in the food industry.

Understanding these terms is essential for anyone who wants to work in the food industry or communicate with industry professionals.

In addition to the definitions we have provided, we’ve included some examples of how these terms are used in the industry.

By familiarizing yourself with these terms and their meanings, you’ll be better equipped to navigate the complex world of food production and distribution.

Accrual – This term refers to program funds. A certain percentage of the landed wholesale cost of a product is accrued to different categories of program funds.

Action alley – This is a Walmart term that refers to the main walkways in their stores that lead from the front to the back. These walkways are wider to accommodate pallet-sized displays along the aisle.

Annual volume rebate (AVR) – This is one of the typical components of program funds. It is recommended that you budget a total of four percent for AVR, but when you’re starting out, you may only plan to spend one or two percent. You set the AVR amount payable based on a corporate customer’s total purchasing dollar volume with you. When a customer hits the next threshold, you always pay the new AVR percentage back to dollar one. The AVR can be used as an enticement to gain additional listings, as they will contribute to that customer’s total volume of business with you.

Banner – A banner is the name on the front of a grocery store, such as Safeway, Real Canadian Superstore, or Sobeys.

Bill of lading (BOL) – A BOL is a paper record that must accompany any shipment from a food producer or manufacturer when they’re shipping to a warehouse or retail grocery store.

Black label refers to a private label brand positioned at the high end of the price and quality spectrum. The quality may be represented as higher, but the focus may also be on exotic, unique, or niche flavours. An example would be the President’s Choice brand owned by Loblaw. This brand appears in the Real Canadian Superstore and in the Loblaw-bannered stores in Eastern Canada but not as much in a banner such as No Frills.

Bunk end – This is another term for an end-of-aisle display.

Category – This is a grouping of goods. A corporate grocery chain will have a category manager for various categories of goods (for example: meat, bakery, breakfast, and condiments).

Central billing allowance – This is another potential component of program funds payable to a corporate chain. The logic for paying this fee is that the vendor saves money by dropping one load of product at the customer’s central warehouse, and the customer breaks bulk and distributes your product to its stores for you.

Channel partners – Channel partners are the people and organizations that assist you in getting your product into the hands of consumers. This may include retail grocery chains, independent retail grocers, independent wholesalers, distribution centers, food brokers, sales agents, sales representatives, store service staff, and product demonstrators. Food brokers, sales agents, sales representatives, store service staff, and product demonstrators work for a food manufacturer to represent its interests. The other channel partners are customers of the food manufacturer.

CHEP – A CHEP is a pallet that is owned by a company called CHEP. A CHEP pallet is usually light blue in colour. It is made of wood and is rented by the vendor rather than being purchased.

Clip strip – A clip strip is a merchandising method that consists of a 24-inch strip of flexible plastic moulded with hangers for approximately 12 units of product. It is ideal for products that are small and packaged in a bag and that have a hole on the top of the bag, to allow the product to attach to a clip strip. Products are usually shipped already attached to the clip strips so they can simply be hung up and are ready to go. If the product does not have a hole on the top of the package, plastic hanging tabs can adhere to the top of the package. An alternative form of the clip strip is metal with alligator clips, but these are more costly and not conducive to including with each product order.

Co-operative advertising allowance – This is one of the programs you will be asked to contribute to if you wish to have your product listed with a corporate retail chain. This has nothing to do with the Co-op grocery stores. Typically, 2.5 percent of the landed cost of goods will be allocated to the cooperative advertising allowance fund. The fund accumulates, and once a suitable amount for purchasing an ad is reached, the category manager runs an ad for your product in the store’s flyer. You can also purchase ads outright by writing a check or authorizing your retailer to debit your account.

Demo – An in-store product demonstration where a person gives consumers samples of a product, potential serving suggestions and tips, selling features and benefits of the product, and information about current promotions for the item. Demonstrations are intended to help introduce a new item to the market.

Direct to store door (DSD) – This occurs when a food manufacturer or its intermediary delivers to a retail grocery store directly, rather than delivering its product to that retailer’s wholesale distributor.

Distribution centre (DC) – A corporate retail chain typically uses a distribution centre as another term for a wholesale distributor. Strictly speaking, a distribution centre does not usually stock any items or only stocks certain items, and all other items are received and immediately routed and shipped to retail stores.

Distribution channel or channel of distribution – A distribution channel is the chain of businesses or intermediaries through which a good or service passes until it reaches the consumer. A distribution channel can include retailers, wholesalers, distributors, and even the Internet.

End cap – This is also another term for an end-of-aisle display.

End display – An end display is a product display in a retail grocery store that is positioned at the end of an aisle. End-of-aisle displays usually feature a large display of only one or very few products, providing a visually impressive presentation for the consumer. Consumers typically take notice of end displays and assume that if a product is on an end display, then it is also being offered at a discount, but that isn’t always the case.

Every day low (EDL) – Pronounced by its letters E.D.L., this refers to a retail pricing strategy where prices are set, so they are competitive on a daily basis, and sales promotions are not usually offered to consumers. This contrasts with a high/low pricing strategy, where the regular everyday price is average to high, and price features are occasionally offered to drive incremental volume.

Every day low price (EDLP) – This is the same as EDL and is pronounced as its letters E.D.L.P. This also contrasts with the high/low pricing strategy.

Face-up – Face-up refers to the process of pulling the stock forward to the front of the shelf so the display looks nicer, the stock is easier for consumers to see and easier for consumers to reach.

Facing – Facing refers to the amount of frontage each individual product gets across the shelf. An item that is not very popular and does not sell very much stock daily may only receive one facing on a shelf. A very popular item that is in high demand may receive five facings across the shelf. If there are three flavours of this item and each flavour receives five facings each, this product line would have a total of 15 facings.

Food broker – A food broker is an independent intermediary who works on behalf of a food manufacturer to represent that manufacturer to the industry. This representation may include making calls to corporate retail chain head offices, to wholesale distributors, and to individual retail stores, as decided by the manufacturer. A food broker typically represents several different product lines and several manufacturers and is paid based on performance, receiving a percentage commission on gross product sales value to all customers within a particular geographical area. Food brokers are not considered employees of the food manufacturers, so the manufacturers do not incur any responsibility for employee benefits or other related costs.

Freight allowance – A freight allowance occurs when a new item listing sheet allows a vendor to offer a retailer a discount for picking up at the vendor’s dock or for purchasing certain quantities or weights of product.

Front end – The front end is part of the retail grocery store where consumers take their carts or baskets and pay for everything they’ve selected. It is always located at the front end of the store, hence its name.

Grocery channel – This is the typical way in which food products are moved from producers and manufacturers to consumers, which ultimately includes retail grocery stores. It can also include corporate distribution centers and warehouses.

Gross dollars – This refers to the gross margin multiplied by the retail selling price.

Gross margin – This is the retail profit margin, expressed as a percentage of retail selling price or total retail sales, calculated as: (Retail price – Landed Cost) ÷ Retail Price

Gross profit – This also refers to the gross margin multiplied by the retail selling price.

Guaranteed sale – A guaranteed sale is when a product manufacturer provides a grocery retailer with an assurance that the retailer will not incur any losses on the manufacturer’s product by taking back any product that does not sell within the product’s code date and also provides the retailer with a full refund for the cost of that product or with a replacement item. This is of particular concern for a grocery retailer for products with a short shelf life or code date. Normally, the manufacturer’s product becomes the property of the retailer. With guaranteed sale, the manufacturer agrees to take back any of its products that don’t sell by the code date or usually within a day or two of the code date. The retailer is then provided a full refund for the cost of that product, eliminating any risk for the retailer.

High/low pricing strategy – This is a strategy where the regular everyday price is average to high, and price features are occasionally offered to drive incremental volume. This contrasts with EDL or EDLP strategies.

Hot shot – A hot shot is a dedicated delivery that is not part of a trucking company’s regular service route or schedule. It is a custom delivery to the customer’s specifications with respect to route and timing and is usually provided at a premium price.

House brand – This is a private label. It refers to the retail grocery chain that owns the private label brand.

Independent retail grocer – This is a grocery store that is independently owned but usually purchases from an independent wholesaler or the independent wholesale division of a corporate distributor. An independent retail grocer may choose to only purchase its goods through its wholesaler or wholesalers, or it may choose to buy direct from suppliers. Many independent retail grocers are part of a buying and advertising group, and they may share a banner name with other independent retailers. For example, Family Foods, Thrifty Foods, and Super A are independently owned but are members of an advertising group. Other independent retail grocers may operate using their own unique banner name, such as DeLuca’s or Vita Health.

Independent wholesaler – This is a wholesale distributor that is not affiliated with a significant grocery banner. Examples include Pratt’s Wholesale, World Wise Distributors, Fresh Option, and DeLuca’s. These wholesalers sell to independent retailers or to local retail chains such as FoodFare or Vita Health.

Inside monies – This term is the same as program funds.

Interline – The process of moving goods by using more than one trucking company. The trucking company you contract to move your product from your dock may not serve the destination, or vice versa, so the trucking company you hire will engage another trucking firm to serve your needs.

Intermediary – An intermediary is an agent or distributor who works on behalf of a food manufacturer.

Landed cost is the total cost of a food product, including the cost of the goods themselves, freight, brokerage, fuel surcharge, customs fees, and wholesale up-charges. It also includes the cost of moving the product from one point in the supply chain to another. The landed cost will vary depending on how far up the supply chain the product is moving. For example, the landed cost of moving a product to a retail store will be higher than the landed cost of moving it to a wholesale distributor.

Less than truck load (LTL) allows you to ship as little as one or a few cases or one pallet full of product, with other products included in the trailer.

Listing Fee – Most retail chains charge a one-time listing allowance fee for each new stock keeping unit they list. This fee is associated with the retailers’ cost of adding new items to their planogram and with the administrative process of setting up new items in their computer system. The fee may be based on a formal schedule of listing fees or the retailer may simply ask you what you have to offer. A listing fee is a one-time fee corporate retail chains charge to food product manufacturers for each product they decide to list. These fees vary by retailer and are usually negotiable.

The manufacturer’s temporary reduction (MTR) usually refers to a minor cost reduction from the manufacturer to the retailer, allowing the retailer to slightly reduce the retail price for two weeks to one month, which is a longer period of time than the usual one-week advertising cycle used for weekly price feature promotions.

A marketing or positioning matrix visually represents all the products in a category, with the horizontal or X axis showing the price and the vertical or Y axis showing another meaningful measurement for differentiating one product from another. The quadrant on the upper right-hand side of the chart represents premium price and most unique or highest quality.

Mark-up is an amount added to the cost to determine a retail price, but this method is not usually used in the grocery sector due to the lack of established mark-up benchmarks. National brand refers to a name or logo of a product that has been established and familiar in the minds of consumers, which allows the company to charge a premium price.

A niche is a small subset of a market, usually requiring higher cost of production or ingredient costs, and thus allowing a food manufacturer to charge a premium price.

An off shelf display usually refers to an extra display of product over and above the regular display space a product has on a shelf, which often gains more attention from consumers than displays on grocery shelves.

Program monies are fees that must be paid to a corporate retail chain over and above the margin they make at store level. These are paid to the corporate office via cheque or debit note.

A pallet is a wood frame on which a producer’s or food manufacturer’s cases of products are stacked, allowing a bundle of cases to be easily loaded and unloaded from transport trailers and moved around a grocer’s warehouse.

The perimeter department is usually located around the edges or perimeter of the store, consisting of departments such as floral, bakery, meat, produce, deli, and fish.

A planogram is a drawing of a section that indicates where each product is to be placed on the shelf and how many facings each product will have. This technique is commonly used by grocery chains, but is less common in independent grocery stores.

The point of purchase/point of sale (POP/POS) refers to in-store promotional materials designed to influence consumer purchase decisions at the moment and location they are making their selection.

Positioning refers to how each food product fits into its specific category, typically a function of price and some other attribute of the product, such as quality, flavour, or uniqueness.

Private label (PL) is a brand that is owned by a retail grocery chain, allowing the brand to be used under a variety of different store banners.

A product demonstrator is a person who works for a food manufacturer to provide retail consumers with samples of the manufacturer’s product, so they can try it before they buy it.

Retail grocery chain is a chain of grocery stores owned by a corporation or a co-operative association, where buying decisions are typically made centrally at a head office by a category manager.

A sales agent is an intermediary that works on behalf of a food manufacturer to represent that manufacturer to the industry, while a sales representative is an intermediary who works for a particular food manufacturer to represent that manufacturer to the industry.

A sell sheet is an information sheet about a producer’s or manufacturer’s food product that a salesperson would use when making a product presentation to a retail store.

Shrink refers to losses due to spoilage, breakage, mispricing, and theft, which is most common for departments dealing with fresh product that has a short shelf life.

A side kick is a merchandising unit that is mounted next to the front of an end display.

A skid is another name for a pallet.

A SPIFF is a sales incentive offered to a sales representative to promote a vendor’s product to the industry.

A tonnage is the number of units of an item sold at retail, while turns refer to the number of times a product sells and must be restocked during the year.

The trade refers to the wholesale customers for a food product, including the individuals and the organizations they represent, such as brokers, agents, distributors, warehouses, and retail grocery stores.

A universal product code (UPC) is the 12-digit bar code that every product sold at retail must possess so that each product can be scanned through a store’s bar code reader.

An up-charge is the fee a wholesale distributor adds to the food manufacturer’s wholesale selling price, which is added to the manufacturer’s landed wholesale selling price to cover operating expenses for the wholesale distributor and generate some profit.

Velocity is the number of units of an item sold at a retail store during a particular period of time.

A vendor is the term used by the industry to refer to food manufacturers.

White label refers to a private label brand that is positioned at the low end of the price and quality spectrum.

A wholesale distributor is a company that buys food products from manufacturers by the case, stores them, and ships them to retail customers. They can be affiliated with a corporate retail chain, an independent buying group, or a co-operative buying group. They may also sell mainly or exclusively to independently-owned retail stores.

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