The hidden war over grocery shelf space

The hidden war over grocery shelf space


This is the grocery ice cream aisle. And this is a witness hiding behind a screen
to protect their identity and their business. The two are connected. This is a frost-covered door to a world of
delicious treats, and this is John Kerry in September 1999,
listening to a witness whose voice is scrambled to preserve their anonymity. “It’s not about the product.” Really weird voice-scrambling here, by the
way. There is a war going on in the aisles of grocery
stores. A lot of grocery shelf space is bought by
companies selling you stuff, long before you see it while you’re shopping. It can cost as much as $5 million dollars
to get your candy bar near the checkout in a bunch of grocery stores. And even if you know about these so-called
slotting fees, the arguments for and against them might surprise you. Slotting fees say something about the hidden
transactions that let buyers and sellers work together — and occasionally fear each other,
too. Imagine you’re a new ice cream maker and
you want to sell delicious Generic Ice Cream, the ice cream with delicious generic bits. You can’t just start selling your ice cream. If you want to be in a major grocer, you have
to pay. Journalist Gary Rivlin recently wrote about
the slotting fee economy in a report for the Center for Science in the Public Interest. His story of a real ice cream brand called
“Clemmys” is a guide to what might happen to your Generic Ice Cream brand. To get Generic Ice Cream inside a freezer
door, you’d have to pay $30,000 to get in 350 stores — and that’s at a discount. Once you got in, sometimes you’d have to
pay up to stay on the shelf. And you’re competing against giants like
Nestlé and Unilever. Rivlin reports they control basically 90 percent
of the freezer doors because they’d already paid up. For giants like them, a $30,000 fee isn’t
a lot — for you, however, it might be a major cost. Even then, paying for your Generic Ice Cream
to get on the shelves wouldn’t necessarily give you control — instead, category captains,
the big guys who pay the most, draft where every item goes, which can determine how well
things sell. Drawings like these, called planograms, help
stores keep things organized. See, Generic Soda goes here, Generic Energy
here. But they also help retailers sell space. Each spot comes at a cost. The same is true of most of what you see in
the candy, cookie, chip, and soda aisles. To writers like Rivlin, it’s no better than
a bribe. Soda and candy pays up, and consumers have
limited choice. Your delicious Generic Ice Cream never hits
the shelves. The Bureau of Alcohol, Tobacco, and Firearms
banned stuff like this for alcohol in 1995. And if you’re a regular reader of Frozen
& Refrigerated Buyer, you’ll know vendors are constantly fighting against these slotting
fees. So why are vendors resigned that slotting
fees are here to stay? Imagine you’re the grocery selling that
Generic Ice Cream. There are a lot of reasons for slotting fees. There’s have so much shelf space to sell
from, and food makers — like Generic — throw too many products at them. Slotting fees help the store prioritize. Mary Sullivan wrote early studies defending
slotting fees. See this chart? It shows how many new products that manufacturers
came up with in the 80s, thanks to technological advances like scanners that made it easier
to spin off products. Retailers needed to cut through the glut. Some argue that slotting fees hel the store
prioritize. And as this chart from the Federal Trade Commission
shows, slotting fees are typically higher where space is scarcer, like the ice cream
aisle or the candy bar aisle near the checkout. The purple ice cream here in this chart is
clustered at the higher end of the slotting fee scale. The FTC and other academics have found that
for retailers, slotting fees don’t just cull the offerings, but they also help them
see that a manufacturer is willing to put their money where their mouth is. If you threw $30,000 into a slotting fee for
Generic Cookies and Cream, it might signal to the retailer that you’re able to guess,
thanks to market research and other testing, that the product will succeed. The retailer might then decide it’s worth
a try, which is important, since 80% of new products fail. The argument’s that slotting fees don’t
just offset the costs of adding new products to the system, but they also show if a manufacturer
thinks a product is a winner. It’s a conundrum – the closer you look,
the more supermarkets seem rigged, but at the same time, the more the rigging makes
sense. The only thing that’s certain is that behind
those freezer doors, and behind that screen, there is a war going on. The Food Marketing Institute, which represents
grocers, told me that Rivlin’s article “seriously mischaracterized the legitimate food industry
practice of slotting fees.” Meanwhile, Rivlin and advocates like him want
the FTC to look at slotting fees again. Each retailer has their own strategy — A
Walmart spokesperson told me they don’t charge slotting fees because they believe
it raises prices. Whole Foods reportedly has a similar stance,
preferring free trials of goods to cash. Both sides have solutions: sellers would rather
retailers opt for more test stores to give products a chance, instead of demanding high
slotting fees . And grocers, well, they say slotting fees
are necessary to “recoup the labor, spacing and shelving costs entailed in marketing new
product lines.” They also push in store brands to take more
control — think Trader Joe’s or your grocery’s branded soda — and that makes space scarcer
for manufacturers. Only a few things are certain – your grocery
aisle, where you see happy cereal boxes and yummy ice cream — is oddly tense. Hide behind a screen tense, because large
groceries have the ability to keep your product off the shelves with just a snap of their
fingers. Selling your Generic Ice Cream is a lot more
complicated — and controversial — than you might have realized. And maybe, now, buying it is too. Slotting fees are ultimately a form of negotiation,
and even if you don’t pay them, you still might be making compromises. You could sell your Generic Ice Cream in Trader
Joe’s, but if you do, you might have to sign a strict non-disclosure agreement, promising
not to reveal that it’s your ice cream Trader Joe’s is selling under their own brand.

100 Comments on "The hidden war over grocery shelf space"


  1. They spend millions of $$$ to get their candy, or whatever, next to the checkout, and yet charge such high prices for those items that I, and many others, 1) don't purchase them, and 2) come, over time, to associate those products with over pricing. Foolish.

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  2. And if you look at those manufactors many of them are owned by the same people. Slotting fees are completely unneeded, I work in a grocery store, and it costs a fraction of a few cents per store to stock it, BUT when the store orders too much then there is a issue. Also it is almost always easy to find out which icecream is the store brands just like everything else, packaging and where the food comes from tells A LOT about the products. If it comes from the same packaging just different label, if the case it comes in is exactly the same as a name brand, if all the products come from the same place. A lot of the name brands even come from the same food factories, there is a hidden war behind where exactly things come from because the name brands have even outsourced and often just rebuy product and repackage it. IE most vegtable oil, conola oil, corn, and mixed variants come from canada from the same exact food factory, you are spending money based off name brand. It isn't a war against the giants, its a war against the little guy and all the grocery stores work together to snuff them out as well.

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  3. I used to shop Safeway. There were certain items that I could only get there, in particular a house brand diet Grapefruit soda. It was always nearly or completely sold out. You would think that if they were selling out they would stock more. Not so. There were dozens of rows of Coca Cola, more than any possible demand. This would seem to defy capitalism until you realize that Coca Cola was paying Safeway to devote a certain amount of shelf space for Coke but they received no payment for the space in which they stocked their own brand. Safeway finally stopped stocking their own brand of Grapefruit soda entirely and I switched to another, closer, supermarket since there was no longer anything at Safeway that I couldn't get elsewhere (and usually at a lower price).

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  4. I know this VERY well. I work in a gas station (that includes cigarettes of course), and whenever they have to make changes to the cigarette shelves and which goes where, they have to contact EVERY company we have connected to EVERY BRAND of EVERY CIGARETTE we stock. And if one brand is moved and they don’t like where they or their competitors are, they’ll take their brand out of our store without hesitating. Even if a representative comes in from Marlboro and messes with a Winston cigarette rack and changes it, Winston is likely to remove their brand and name from our station completely. Pretty wild

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  5. A shop can't sell every product. Imagine everyone makes his own soda and now want's to sell it. Having too many products from one kind, might not be good for all products. For example with cola, you find the mayor brands, generic cola from the shop brand and probably some popular/trending cola but not every cola. It makes sense that money can give you a slot but it should be possible to get the product into a store, without paying extra. The problem is that it might happen that they copy your product and don't take yours. In germany that happend. I can't find the video but it happend in 2 ways. Once someone asked a big brand to pack their product and they copied it, after declining to pack the product. An other time they send a product to a store and they copied it later, with minor changes. New products should have a fair chance to get approved and getting a chance in a store, without the help of bigger companies.

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  6. 👎🏼 Your misuse of the term Generic is Condescending to the millions of Independent Brand creators who serve consumers with smart options that counter the Generic styles, production and tired marketing that your Corporate Major Label Brands which many shoppers consider are boring, white noise or generic.

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  7. Looks like all the shots you got were at a Giant/Martin's supermarket? At least thats the tag /signage style

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  8. Huh, so you have to pay to sell your product…I would have thought the store bought lots of food at a discount and simply turned around and sold it to you.

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  9. This is all bull… I've worked at a major grocery store for a long time and we would face product (put it in the shelves) at a whim. Whatever we had, we would split equally among the shelves.

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  10. I didn’t realize, but I’m not surprised. Now it makes sense why my favorite small brands don’t seem to last in big stores, but I can find them at bigger cities or specialty stores for 3x the price. I don’t believe Walmart doesn’t do slotting fees…Walmart is the worst for not carrying anything but the big brands.

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  11. I feel like brands competing for slots can be summarized with that picture of the three Spider-Man’s pointing at each other

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  12. Speaking as someone who works in retail in Africa, I can confirm that this is pretty accurate. Great video, Vox. This content is the reason why I'm glad to be a subscriber.

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  13. Sometimes I "accidentally" put a bottom shelf item on an eye-level shelf.

    Come and sue me, Nestle.

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  14. Guys, you’d be surprised by how brands and supermarkets get you to buy by taking advantage of your subconscious habits.

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  15. They should increment the price, you never know if the small dog is going to become big and surpass the other bigger players. Start with a small fee and as time goes on they can renew the space for a higher price until they reach the cap. This way the small dog gets a chance and people get change, and they don't get totally screwed.

    This isn't war, its capitalism.

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  16. So um out of all the stores I. The U.S why use the one most popular in the smallest state Rhode Island

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  17. Generic ice cream.
    It certainly is a type of ice cream.
    You can eat this using your mouth.

    Best part of the video.

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  18. With these topics I always wonder how this compares to how things are done internationally (read: In the country I come from)

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  19. My local store will put things on the shelf that the customers ask for. You write it down on a piece of paper and put your name and number and they call you when it's in.

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  20. I work in the FMCG industry in India, and this happens even here. Even in corner stores, premium shelf-space is sold for a price.

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  21. It is a controversial issue, no doubt, but perhaps there's some compromise? For example, supermarkets have a section devoted to new products, on the deal they get a cut if one of the new products does really well?

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  22. hate to break this to vox, you don't need grocery stores to sell icecream, just need a refrigerated warehouse, a website, amazon, and refrigerated delivery trucks that delivers locally, then expand out as your profits grows for as long as you can deliver it properly

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  23. There's also psychology of this. The "eye-level" shelves are more expensive than those at the very top or bottom because they are the first one to be seen by buyers.

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  24. M&M vs. Skittles
    Mcdonald vs. Jollibee
    Vox vs. Buzzfeed
    Generic ice cream vs. Normal ice cream

    the war is real

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  25. How do we know you haven't taken fees for taking generic ice cream as an example for your video?

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  26. I wonder though… I recently started using InstaCart after a shoulder injury. Through the app, you can easily view hundreds of products. I wonder if things like InstaCart become more main stream, could grocery stores then change the way they showcase food to make it better for these companies and less expensive…?

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  27. This is called a barrier to entry, it exists in many industries. It’s why most new companies close before they reach their second year.

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  28. just wait for it, the all American ethnic brand incognito in the "Specialty" aisle savaging undercutting the national brands but still only adopted by those who appreciate the savings.

    Reply

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