The Court of Appeal directed the legal question in this scope to the Supreme Court which in its resolution of 18 November 2015 under file ref. No III CZP 73/15 stated that monetary bonuses that are dependent on the turnover in the form of the volume-related discount should not be qualified up front as a prohibited slotting fee. Slotting Fees Slotting fees are food industry manufacturers' payments to retailers to induce a retailer to shelve the product. The use of these fees is found throughout the food retailing industry and is considered standard practice. In addition, the practice is spreading to other retail industries (such as bookstores). Slotting fee definition is - a fee charged by a vendor in exchange for carrying a manufacturer's product —called also slotting allowance. Negotiating on Retail Slotting Fees. Retailers charge their suppliers slotting fees to secure a place on their shelves. If you're in the process of getting your first product into a major store, you'll need to be ready to negotiate these fees when you agree on pricing. Big retailers can be quite ruthless when. Retailers are able to charge slotting allowances and get away with it because. A manufacturer of fruit juice has to pay retailers a fee if they want to get their new product onto the retailer's shelves. This is an example of a(n) allowance.
Shelf space is a hot commodity, and CPG companies often incur substantial costs to get their products in-store, secure premium placement, and run promotions. It's critical that CPGs get the standard of execution they pay for. More importantly, they must be able to accurately evaluate if the rewards, in terms of incremental sales, outweigh these costs.
An insider's guide to retail shelf space fees
The ever-growing portfolio of brands and high competition for shelf space allows retailers to command considerable shelf space fees. There have been numerous arguments about whether the fees charged actually enhance space allocation efficiency or encourage backroom deals between stores and manufacturers that promote monopoly. But as it stands today, these are the broad types of costs incurred by manufacturers:
- Slotting/listing fees: Slotting fees (or listing fee) is the amount of money a manufacturer pays a retailer to appear on the shelves. This transaction typically takes place after a range review process once the retailer is convinced about a product's potential to generates sales and profit. Slotting fees average $1500 per store per SKU. If you consider that a range review may introduce 7-12 new SKUs, listing these products in a 1000-store retail chain nationwide has a huge impact on a CPG's bottom line. Note that simply paying slotting fees won't drive sales if you don't ensure shelf availability at all times.
- Pay-to-stay fees: These fees are paid by CPGs during category reviews in the form of discounts or free cases of products to the retailer. Typically, it is offered to ensure that SKUs that have been flagged for removal from shelf, stay. This may mean that the manufacturer needs to reactivate their shopper marketing activities to spur purchase decisions at shelf.
- Display placement: Stores also charge significant fees for seasonal features and the promotional displays that appear at the end of aisles. A manufacturer may pay $350 – 500 per display per store. The fee varies depending on the product, e.g. higher for specialty, or choice of secondary placement, e.g. placing crackers far away from the snacks category (perhaps closer to beverages). The main aim of this is to introduce the brand to new shoppers. So, the ROI of this fee is diluted if regular shoppers purchase the brand, or if the product was bought at the home shelf.
Here's an explanation of the finance of promotion and slotting in frozen foods, courtesy Kevin Janiga, President of Winsights Marketing.
Combine these fees with auditing and data costs, and you get a sense of the what the manufacturer pays to be in a retailer.
Measuring ROI to justify spend on shelf space costs
In order to achieve the right return on investment (ROI) on these costs, CPGs must ensure that they get the space they paid for – and that this space is actually maximizing sales, and that shelving principles are property executed in store.
A short-to-midterm evaluation cycle analyzing various micro and macro drivers of sales performance is necessary for companies looking to measure return on shelf related costs:
- Short-term ROI evaluation (one to four weeks): This focuses on secondary placements and promotional sites, with CPGs tasked with carefully monitoring on-shelf availability of their products and promotion compliance.
- Medium-term ROI evaluation (six to 12-month window): The focus here shifts primarily to the regular stock location in store. The goal is to understand the cost of lost sales due to shelf gaps, how much incremental income the listing fee has generated, and if competitors have eaten into your brand sales.
Trustworthy shelf data: The main hurdle to ROI measurement
But all too often, many CPG companies don't get the right distribution on new items at key accounts. In terms of display compliance and shelf placement, there is little objective data available to manufacturers to truly know which retailer is executing well, and who isn't.
With relevant and accurate data, CPGs can quickly learn if the cost of doing business with a specific retailer will return sufficient sales growth.
Slotting Fees Definition
In the next blog, we'll find out how CPGs can use granular, store and SKU-level in-store execution data as powerful evidence to enrich ongoing conversations with retailers, allowing your sales team to successfully negotiate space allocation, product placement and associated fees.
1(1) Industry members may give, loan, or sell alcoholic beverage product displays to vendors, for use on a vendor's licensed premises, to include wine racks, bins, barrels, casks, shelving, or similar product display items which are separated from a vendor's ordinary shelves and used primarily to hold and display factory sealed products of the provider for sale to customers at room temperature or cold. Such displays shall not have, or be used to provide, a secondary function, other than advertising, which would function to provide equipment, including refrigeration; furniture; or other fixtures.
93(2) Industry members may transport, install, assemble and disassemble their own product displays on a vendor's licensed premises. Industry members may require the vendor to purchase a minimum amount of the product advertised on the display in a quantity necessary for the completion of the display.
The Court of Appeal directed the legal question in this scope to the Supreme Court which in its resolution of 18 November 2015 under file ref. No III CZP 73/15 stated that monetary bonuses that are dependent on the turnover in the form of the volume-related discount should not be qualified up front as a prohibited slotting fee. Slotting Fees Slotting fees are food industry manufacturers' payments to retailers to induce a retailer to shelve the product. The use of these fees is found throughout the food retailing industry and is considered standard practice. In addition, the practice is spreading to other retail industries (such as bookstores). Slotting fee definition is - a fee charged by a vendor in exchange for carrying a manufacturer's product —called also slotting allowance. Negotiating on Retail Slotting Fees. Retailers charge their suppliers slotting fees to secure a place on their shelves. If you're in the process of getting your first product into a major store, you'll need to be ready to negotiate these fees when you agree on pricing. Big retailers can be quite ruthless when. Retailers are able to charge slotting allowances and get away with it because. A manufacturer of fruit juice has to pay retailers a fee if they want to get their new product onto the retailer's shelves. This is an example of a(n) allowance.
Shelf space is a hot commodity, and CPG companies often incur substantial costs to get their products in-store, secure premium placement, and run promotions. It's critical that CPGs get the standard of execution they pay for. More importantly, they must be able to accurately evaluate if the rewards, in terms of incremental sales, outweigh these costs.
An insider's guide to retail shelf space fees
The ever-growing portfolio of brands and high competition for shelf space allows retailers to command considerable shelf space fees. There have been numerous arguments about whether the fees charged actually enhance space allocation efficiency or encourage backroom deals between stores and manufacturers that promote monopoly. But as it stands today, these are the broad types of costs incurred by manufacturers:
- Slotting/listing fees: Slotting fees (or listing fee) is the amount of money a manufacturer pays a retailer to appear on the shelves. This transaction typically takes place after a range review process once the retailer is convinced about a product's potential to generates sales and profit. Slotting fees average $1500 per store per SKU. If you consider that a range review may introduce 7-12 new SKUs, listing these products in a 1000-store retail chain nationwide has a huge impact on a CPG's bottom line. Note that simply paying slotting fees won't drive sales if you don't ensure shelf availability at all times.
- Pay-to-stay fees: These fees are paid by CPGs during category reviews in the form of discounts or free cases of products to the retailer. Typically, it is offered to ensure that SKUs that have been flagged for removal from shelf, stay. This may mean that the manufacturer needs to reactivate their shopper marketing activities to spur purchase decisions at shelf.
- Display placement: Stores also charge significant fees for seasonal features and the promotional displays that appear at the end of aisles. A manufacturer may pay $350 – 500 per display per store. The fee varies depending on the product, e.g. higher for specialty, or choice of secondary placement, e.g. placing crackers far away from the snacks category (perhaps closer to beverages). The main aim of this is to introduce the brand to new shoppers. So, the ROI of this fee is diluted if regular shoppers purchase the brand, or if the product was bought at the home shelf.
Here's an explanation of the finance of promotion and slotting in frozen foods, courtesy Kevin Janiga, President of Winsights Marketing.
Combine these fees with auditing and data costs, and you get a sense of the what the manufacturer pays to be in a retailer.
Measuring ROI to justify spend on shelf space costs
In order to achieve the right return on investment (ROI) on these costs, CPGs must ensure that they get the space they paid for – and that this space is actually maximizing sales, and that shelving principles are property executed in store.
A short-to-midterm evaluation cycle analyzing various micro and macro drivers of sales performance is necessary for companies looking to measure return on shelf related costs:
- Short-term ROI evaluation (one to four weeks): This focuses on secondary placements and promotional sites, with CPGs tasked with carefully monitoring on-shelf availability of their products and promotion compliance.
- Medium-term ROI evaluation (six to 12-month window): The focus here shifts primarily to the regular stock location in store. The goal is to understand the cost of lost sales due to shelf gaps, how much incremental income the listing fee has generated, and if competitors have eaten into your brand sales.
Trustworthy shelf data: The main hurdle to ROI measurement
But all too often, many CPG companies don't get the right distribution on new items at key accounts. In terms of display compliance and shelf placement, there is little objective data available to manufacturers to truly know which retailer is executing well, and who isn't.
With relevant and accurate data, CPGs can quickly learn if the cost of doing business with a specific retailer will return sufficient sales growth.
Slotting Fees Definition
In the next blog, we'll find out how CPGs can use granular, store and SKU-level in-store execution data as powerful evidence to enrich ongoing conversations with retailers, allowing your sales team to successfully negotiate space allocation, product placement and associated fees.
1(1) Industry members may give, loan, or sell alcoholic beverage product displays to vendors, for use on a vendor's licensed premises, to include wine racks, bins, barrels, casks, shelving, or similar product display items which are separated from a vendor's ordinary shelves and used primarily to hold and display factory sealed products of the provider for sale to customers at room temperature or cold. Such displays shall not have, or be used to provide, a secondary function, other than advertising, which would function to provide equipment, including refrigeration; furniture; or other fixtures.
93(2) Industry members may transport, install, assemble and disassemble their own product displays on a vendor's licensed premises. Industry members may require the vendor to purchase a minimum amount of the product advertised on the display in a quantity necessary for the completion of the display.
139(3) The value of any product display, excluding transportation, installation, and disassembly costs, shall not exceed $300 per brand, and the total value of all product displays at any one time on any one vendor's licensed premises shall not exceed $300 per brand. Industry members shall not pool or combine dollar limitations in order to provide a vendor a product display valued in excess of $300 per brand.
207(4) The product display shall bear product or industry member information that is conspicuous and permanently inscribed or securely affixed to the product display. The vendor's name, business name, website address, logo, and address may be part of the product display. Occasion 650 dr.
248(5) Payments of slotting fees for alcoholic beverages shall not be made to vendors. A slotting fee is defined as any form of assistance given by an industry member to a vendor to purchase or rent additional, particular, favorable, or dedicated display, shelf, cooler, storage or warehouse space for alcoholic beverages.
299Rulemaking Authority 301561.11, 302561.42 FS.304Law Implemented 306561.08, 307561.42 FS.309History–New 9-15-10.
Rulemaking Events:
Related Statutes:
Advantages Of Slotting Fees
Related Notices (11)
