The war for shelf space: report from the front. In the battle of the bulge, grocery stores collect fat fees for stocking new products
When Ben & Jerry's Homemade Inc. wanted to introduce its super-premium ice cream in the West, the small Vermont company had to learn to play by the rules. Before grocers would put a new product on their shelves, they expected the manufacturer to pay an admission charge. ``It became evident to us that we were not going to get any shelf space at all unless we were to help with the start-up costs,'' says Ben & Jerry's spokesman, David Barash.
As manufacturers of grocery products from soda pop to dog food are finding, some of the hottest real estate in the country these days is on retailers' shelves. The number of new products jostling for space in supermarkets and convenience stores has been increasing at a staggering rate. Last year stores carried 10,182 new items - more than double the number five years ago, according to Gorman's New Product News.
Grocery buyers, who may have 200 or more products pitched to their stores in a month, are charging premium prices to stock new items - $15,000 to $40,000 in some regions. It can cost manufacturers $2 million to $3 million in ``slotting'' fees to introduce a product in stores across the nation, says Bob Schmitz, managing director of Summa Group, a consulting subsidiary of A.C. Nielsen Company.
``It's the street side of the capitalistic system,'' says Keith Jones, a vice-president of the Summa Group. ``While these kinds of payments may seem distasteful, they're part of the grease that makes ours the finest distribution system in the world.''
He thinks the fees are unlikely to be challenged in court. ``I'd be hard pressed to say there's anything that violates the Robinson-Patman Act [which regulates trade within the grocery industry] as long as manufacturers offer these types of incentives equally to all retailers with whom they do business.''
Ronald Bloch, an antitrust lawyer with the law firm of McDermott, Will & Emery in Washington, D.C., says a good case can be made for the illegality of slotting allowances. But he, too, doubts they will be tested in court.