Image: Kroger
Kroger Co. is drawing controversy with a plan to move away from relying on "category captains," such as Anheuser-Busch InBev and Diageo, to guide how wine, liquor, and beer are organized in stores. Instead, alcohol companies will be asked to pay a privately held distributor to make those shelf decisions.
The grocer wants to reset shelves on a more regular basis than the once or twice a year it currently does to better capitalize on hot items and trends. More consistency in resets across stores is also desired.
The plan has to be approved by the Alcohol and Tobacco Tax and Trade Bureau as well as state laws.
According to The Wall Street Journal, the major manufacturers, who previously funded their own analysis, as well as smaller vendors are balking at paying quarterly fees. Trade associations representing liquor, wine and beer and several alcohol-distributor groups united in sending letters to federal regulators last month arguing that such payments violates laws designed to prevent alcohol products from being over-aggressively promoted.
A surprise is that smaller vendors appear to be supporting the "category captain" system despite complaints that larger companies give better placement to their own brands over competitors. Captains also select point-of-sale marketing and, in some cases, retail prices.
Paul Gatza, director of the Brewers Association, which represents craft brewers, called Kroger's proposal a "pay-to-play" system. If Kroger's proposal is approved, "What stops every other grocer from doing the same thing? Then it costs a lot of money to get on the shelves."
Kroger insisted that payments would be voluntary to cover the estimated $12 million in annual costs being paid to the privately-held distributor, Southern Wine & Spirits.
Keith Dailey, Kroger's spokesman, added that assortments would benefit from "unbiased plans that are customer- and data-driven," citing a successful similar shift in its dry goods department more than four years ago.
"What does this look like?" asked Mr. Dailey in a Fortune interview. "It's more local craft brews, more regional wines, more innovative new products across the entire adult beverage spectrum."