Backroom deals shut small brands out of supermarkets

Tuesday, 04 October, 2016

An investigative report commissioned by the Center for Science in the Public Interest (CSPI) has uncovered the secret deals that determine product placement — and consumer choice — in US supermarkets.

‘Rigged: Supermarket Shelves for Sale’ found that fees for shelf placement and retention and ‘category captain’ arrangements are undermining consumer choice and locking smaller players out of supermarket chains.

Slotting fees

Investigative journalist Gary Rivlin, who was commissioned by CSPI to prepare the report, said few industry insiders would speak on the record about slotting fees. “You’re talking about a deep, dark secret of the retail world,” said former supermarket executive Mark Heckman. Retailers, he said, “don’t want one brand to know what the other is paying”. One insider at a condiment company said his company typically pays between US$5000 and $20,000 per item.

CSPI Deputy Director of Nutrition Policy Jessica Almy says supermarkets sell the most prominent shelf space to the highest bidder. “That has the effect of squeezing out the little guy and ensuring that some products — especially name-brand sodas, chips and candies — are displayed at multiple locations all over the store, while other foods are relegated to a single shelf,” she said.

Pay-to-stay fees

The report found that once a manufacturer has paid the price of admission, there’s no guarantee its products will stay. Pay-to-stay fees can take the form of cash payments or trade discounts, such as coupons or ‘buy one, get one free’ promotions.

The most valuable real estate in the store is at the checkout aisle — the “beachfront property”, in the words of one anonymous broker — that is sold by the inch. Rivlin was told of deals in which manufacturers paid a single chain more than US$500,000 to place its product by all of the chain’s registers for a few months. A company might have to pay up to about US$5 million to place one chocolate bar in all the stores of the 50 biggest supermarket chains.

Other prominent locations in stores, such as endcaps — the displays at the end of an aisle — also command high prices from retailers.

Category captains

Supermarkets assign one of the major manufacturers of a given category of food to serve as ‘category captains’, who create documents known as planograms to dictate where their — and their competitors’ — products go on shelves.

“It’s hard to imagine a more unfair practice than giving the biggest food manufacturers the right to decide where its competitors sit on the shelf,” said Almy.

Consumer health impact

Supermarket placement fees determine the selection of products available to consumers and how they are presented, influencing which foods and beverages consumers buy and eat. The report recommends the adoption of ‘healthy checkout’ ordinances to ensure that that prime location is not used to undermine customers’ health, and that retailers voluntarily reserve all or a percentage of prominent placements for healthful products.

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