Trade Terms Anatomy: The Complete FMCG Manufacturer-to-Retailer Taxonomy

A commercial contract looks like one big number, trade spend, until you learn to read it. Every line item inside it can be placed on the same map, and the map has five levels.

The scaffold

1. Anchor: which accounting fact does the money move? There are three, and they are fixed. Gross Sales (list price), Net Invoice Value (the invoice price, the retailer's buying price), and Net Sales (the pocket price, what you actually keep).
2. Zone: which side of the invoice does it sit on? On‑invoice money comes off before the invoice prints. Off‑invoice money settles later, by rebate or credit note.
3. Family: what does the money buy? This is the heart of the map, and there are six purposes plus a governed Other.
4. Term: which negotiable line item is it? A growth rebate, a prompt‑payment discount, a display allowance.
5. Variant: which sub‑tactic? A sell‑in versus a sell‑out promo allowance, a laddered payment‑day step.

The two levels that matter most answer different questions

Zone and Family pull in different directions. Zone is about placement: where the money sits relative to the invoice. Family is about purpose: what behavior, if any, the money is buying. Neither one decides the other. A price event can be funded on‑invoice or off‑invoice. A structural discount almost always prints on the invoice, but nothing forces it to. So placement is a tag you attach to a line item, and the family it belongs to does not decide it. Getting this straight is what stops the single commonest classification error: reading "off‑invoice" as if it meant "conditional".

The whole map exists to explain one number: how much of your list price survives to net sales.

Where: Net Sales = the pocket price you keep after every deduction, and List Price = your published gross price before any trade terms.

Read the other way, the gross‑to‑net rate is simply the sum of every family's spend as a share of list price:

Where: Σ = the sum across all six families plus the governed Other.

The health bands

The rate on its own is the first of three reads. These bands hold across every Trade Terms surface:

The line

A household‑care manufacturer pays a major grocer 2% of list price for keeping the full range on shelf at 90% availability, settled each quarter against audit data. Read it down the five levels.

The five reads

• Anchor: it moves Net Sales, since it settles after the invoice. It does not touch the invoice price.
• Zone: off‑invoice. It is paid by quarterly credit note, not deducted at buy‑in.
• Family: Performance. The money buys a delivered outcome, range held and on shelf, not a price event and not a cost‑to‑serve behavior.
• Term: an assortment and availability allowance.
• Variant: audit‑verified, quarterly‑settled, distribution‑depth version.

Why the read matters

Once it is filed as Performance and conditional, three things follow. You can withhold it when the 90% availability is not met. You can measure whether the range actually drove sales. And you can tell it apart from a Promotional display fee, which funds an event, or a Structural discount, which buys nothing you can check. File the same 2% as "just another rebate" and all three levers disappear.

The fastest way to see that placement and purpose are independent is to lay the six families against the two zones and mark where each one typically lands.

Where each family typically sits

How to read the matrix

The word typical is doing real work. These are leans, not rules. A Promotional allowance can be invoiced at buy‑in (on‑invoice) or settled on proof of sale (off‑invoice), and it is still Promotional either way. The one near‑lock is Partnership, which is a payment for data or a joint plan rather than a per‑unit price adjustment, so there is no invoice line it could sit on.

The one line to hold

Purpose names the family. Placement is a separate tag. When you classify a line item, ask what it buys first, then note where it sits. Never let the second question answer the first.