FDBuyer: Menu Fees, ‘Over Easy’
A long-time Harris Teeter executive, Mr. Harris is a former chairman of the National Frozen & Refrigerated Foods Association and a member of the Refrigerated Foods Hall of Fame. Through a special arrangement, presented here for discussion is a summary of his current article from Frozen & Dairy Buyer magazine.
My introduction to merchandising money was back in the late ’70s when I asked a manufacturer to pay $200 for an item. I really didn’t want to add the item and almost fainted when he said "okay." Today, allowances are often more than 1,000 percent of that.
It took me a long time in my career to convince myself that there was only one bucket of money that manufacturers have to spend with you. I believe your company should have the flexibility to choose how they want to spend the money.
I also always felt that if you are going to charge merchandising fees, then a three-tiered program would be appropriate. Why should a case of yogurt be the same as a case of cheese? A tiered program would give you more promotions on the lower-cost lines and drive sales, in my opinion.
But it’s an unfortunate fact of life that merchandising fees prevent a lot of great items from small and start-up companies from ever getting on the shelf. I remember years ago when a manufacturer came in and his first words were, "I cannot pay your merchandising fees."
Well, I took the time to review his items and they were unique. I took the line anyway and a few years later he came back in with a check. He said to me "Mr. Harris, thanks for believing in my items — here are the merchandising fees I owe your company." You know who you are, so I thank you!
Ad fees can also be a problem. I believe retailers should make sure the items being promoted deserve an ad. If they don’t, I believe money from that manufacturer bucket is being wasted. All manufacturers love seeing their items in print no matter what the volume is. I think some of them wallpaper their offices with circulars! But some retailers may be spending twice the case cost on an ad, when an analysis of movement shows it’s not a good spend.
I’ll say only one thing about scan fees: How many more promotions could retailers have if they eliminated these?
On the other hand, I confess that I’ve always been a fan of "error fees." You would not believe the errors I’ve seen from both brokers and direct sales forces on their paperwork. These charges should not come out of the "money bucket" but from the broker or manufacturer. They need to take the extra time to proof their work. Likewise, I think that costs for UPC, pack and size changes should come from the manufacturer’s money and not the retailer’s.
Discussion Questions: What are the benefits and drawbacks of merchandising fees for both vendors and grocers? Which types of programs work well and which ones don’t?