What is Corporate Barter? While most people know what barter in its simplest sense is – the exchange of one product or service for some other product or service – not as many are familiar with corporate barter.
Barter itself has probably been around since the dawn of mankind – a Cro-Magnon good at cultivating grain who traded part of his crop for a basket constructed by an expert early weaver. Or, Peter Minuit exchanging $24 worth of beads and trinkets in 1626 to purchase what is now Manhattan.
Retail barter exchanges today allow small businesses and individuals to trade products and services with each other, with the exchange receiving a transaction fee for acting as a clearinghouse.
By comparison, corporate barter transactions can involve millions of dollars worth of goods or services, and are primarily conducted on behalf of large companies—in many cases, publicly traded companies. The corporate barter company helps companies use their under- or non-performing assets (obsolete or excess inventory, under-utilized plant capacity, unwanted real estate, etc.) to finance all or part of the cost of products or services (e.g., advertising) they need.
For example, a company that wants to sell its excess inventory … whether it’s tuna fish or lipstick … relies on the corporate barter company to purchase the inventory with trade credits and subsequently fulfill the credits by providing needed products and services. A corporate barter company buys and sells for its own account, acting as a principal in the barter transaction, taking title to the goods and being obligated to fulfill the trade credits it issues. One of the most famous international barter transactions was PepsiCo’s marketing of Pepsi-Cola in the U.S.S.R. in exchange for Russian vodka, which ultimately became one of the best selling brands in the U.S. under the name Stolichnaya.
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