Participating in promotional programs at KeHE can help move your products off retailer shelves, but it can also move money (perhaps more money than you expect) away from your margins.
That’s because in addition to deducting the promotional cost difference from your invoice (a deduction that is typically agreed upon in advance), KeHE charges administrative fees that can take suppliers by surprise. In other words, the programs involve both direct retailer promotion deductions and distributor processing fees.
Making margins even more complicated, these programs add another layer of opportunity for information to get accidentally muddled, leading to erroneous deductions and fees. The best defense against being surprised or losing more revenue than you should is to know what to expect.
In this article, you will learn about:
Two types of direct retailer promotion deductions, manufacturer chargebacks (MCBs) and extra performance (EP).
The distributor processing fees attached to these programs.
KeHE’s Administrative Allowance Program (AAP) for new and small suppliers that covers fees for MCBs, EP, and more.
The benefits of partnering with SPS Commerce for electronic data interchange (EDI).
KeHE Promotional Programs
Manufacturer Chargebacks (MCBs) at KeHE
Definition
Manufacturer chargebacks (MCBs) are discounts KeHE provides its retailer partners that get passed back to the supplier.
Example
In practice, MCBs look like KeHE offering product discounts (e.g., 25% off, BOGO) to a retail partner and then deducting those discounts from the supplier’s payment.
What To Expect: Deductions and Fees
The KeHE Supplier Policies and Procedures guide notes that “MCB funding will be aggregated at each KeHE supplier level DC combination and charged back to the supplier on a bi-weekly schedule.”
In addition to this direct retailer deduction, Suppliers need to be prepared for KeHE’s processing fee: 8% of the MCB amount (quantity sold x MCB amount x 8%). The minimum fee per DC is $65, processed bi-weekly.
Extra Performance (EP) Promotions at KeHE
Definition
KeHE defines extra performance (EP) as “promotional and other funding amounts that are processed by KeHE on behalf of the supplier and retailer.” EPs are requested by retailers
Examples
The following are all examples of EP promotions:
Scans
Advertising, such as featuring a supplier’s product in a retailer’s print or online ads
In-store demos, such as sampling
Placement (Per KeHE, this describes when the first case of a product is offered at a discount, typically 50–100% off, to incentivize retailers to place a supplier’s product on the shelf and to help cover the cost of removing another item from the shelf.)
Coupons
Slotting
What To Expect: Deductions and Fees
According to the KeHE Supplier Policies and Procedures guide, suppliers are responsible for all EP costs. KeHE passes these costs through to suppliers along with an administrative fee.
KeHE describes itself as the “processing agent" for EP transactions between retailers and suppliers, noting that it processes more than one million of them a year. To help pay for the systems and dedicated team members this requires, KeHE charges an 8% fee calculated from the invoice submitted by the retailer. The minimum fee is $35, and the maximum is $700. Each fee is assessed on a per-invoice basis.
Avoid Erroneous Promotional Deductions and Fees
Honest mistakes happen. An MCB that’s only supposed to run for one month may erroneously get applied to a second month. Or the wrong product may receive a discount. It’s important to check your remittance details for each payment and compare them with your promotional agreements.
If you find grounds for a dispute, follow this guide to disputing in K-Solve.
KeHE’s Administrative Allowance Program (AAP)
In 2024, KeHE launched a new, opt-in initiative called the Administrative Allowance Program (AAP). With a goal of improving both the ease and cost of gaining distribution, KeHE allows suppliers to pay a flat 2% invoice allowance that covers five common administrative fees:
Lumper fees
New item setup fees
MCB fees
EP fees
DC new item intro allowances
According to a program overview, the 2% flat rate can reduce product launch costs by 66%. Moreover, KeHE notes that “consolidating the fees into a simplified allowance will make it easier [for suppliers] to forecast spend at the time of launch.”
Which Suppliers Qualify for AAP at KeHE?
Suppliers must be both new and small to be eligible for AAP. More specifically, brand-new suppliers must be within their first year of partnering with KeHE and below $500,000 in supplier costs received (SCR). Existing suppliers can also qualify if they are within their first six months of partnering with KeHE and below $250,000 in SCR.
Suppliers accepted into AAP automatically graduate out of the program at one year with KeHE or when they reach $500,000 in SCR.
How Can Suppliers Request To Join AAP?
Brand-New Suppliers
During onboarding, select “Yes” for “Request to join AAP” within CONNECT Supplier® on the General tab. This will prompt the supplier manager to evaluate your request.
If you aren’t digitally onboarded, or if your General tab is already complete, reach out to your supplier manager directly. If you aren’t sure who your supplier manager is, reach out to your category manager instead.
Existing Suppliers
Talk to your supplier manager to determine whether or not you are eligible.
Note: DIVERSE Trade®, CARE Trade®, and ELEVATE® suppliers are all eligible for AAP as well.
EDI Integration for AAP Suppliers
As KeHE’s preferred EDI provider, SPS Commerce offers more EDI capabilities to AAP suppliers that are also SPS customers, including:
Supplier invoice payment registration to apply allowance.
Purchase orders with AAP allowance (both PDF and EDI).
The ability to receive EDI invoice with AAP allowance via SPS portal.
CONNECT Business Intelligence® (BI) reporting capabilities.
An SPS supplier EDI portal to support AAP allowance.
If a supplier is using its own EDI solution instead of SPS, it must coordinate testing between SPS and its preferred EDI provider to ensure it can:
Process the AAP allowance.
Accurately reflect the allowance on all KeHE invoices regardless of submission type (e.g., email, EDI).
Related Reading: KeHE EDI Requirements for Suppliers: What Documents You Need and When to Send Them
