Slotting Fees Retard Differentiation

Jul 22, 2003

By George Anderson

Differentiation, the buzz word du jour in grocery retailing, is being hampered
by the supermarket industry’s reliance on slotting allowances, according to
KPMG’s Consumer Markets Insider.

Industry insiders and analysts, including Bruce Barren, chief executive officer
and president of EMC/Hanover, don’t see grocers giving up slotting fees or specialty
food manufacturers paying them even if they had the funds to do so. The resulting
Catch-22 situation may only be resolved, according to Barren, if large food
manufacturers that can afford the fees acquire the smaller specialty food companies.

Moderator’s Comment: Have slotting fees become a serious
competitive disadvantage? What needs to be done to fix the supermarket industry’s
procurement practices?

Is there a 12-step program for grocers? We’re certainly
not the first to suggest it, but perhaps the industry should go to a consignment
model. Manufacturers ship product to stores, which pay only after sales are
made. Grocers’ financial risk due to product failure is reduced and manufacturers
can put dollars to marketing efforts that drive sales more effectively.

Anderson – Moderator

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