Slotting Fees and Category Management in Grocery Stores

While I was reading the book Grocery Story by Jon Steinman, I learned about slotting fees and category management in grocery stores. In particular, I am kind of shocked by how subtly anti-competitive these practices are. For more information on these practices, there is an Antitrust Analysis of Slotting Allowances and Category Management Contracts slideshow at the US Justice Department's website.

In short, I think of slotting fees as the money that manufacturers pay to appear in grocery store shelves. I kind of find this practice to be a little anti-competitive, because it raises the monetary hurdle that it takes for new producers or small-scale producers to sell their goods to the general permies.

And Category Management is how products on grocery store shelves are stocked and organized. The thing I find irksome about category management is that the categories are being managed, not by the grocery store, but usually by the lead manufacturers in that market section. So, what this could entail is a larger manufacturer preventing smaller manufacturers from appearing on grocery store shelves or being displayed in prominent locations.

I like how The Anti-Competitive Effects and Antitrust Implications of Category Management and Category Captains of Consumer Products by Leo S. Carameli Jr. describes this situation:

Category Management is a business practice by which a retailer plans its strategy on a product-category level rather than on a brand-by-brand basis. Products are grouped into commonly understood categories such as toothpaste, shampoo, or more broadly, hair care.One main objective of Category Management is to assess consumer demand at the category level and stock store shelves in a way that best reflects that demand. Once the Category Manager determine swho shops at the targeted retailer and what products those consumers wish to purchase, they can design the category appropriately....

Large supermarket chains successfully pass Category Management responsibilities along to manufacturers by appointing 'Category Captains'...

This arrangement often results in business relationships conducive to opportunistic behavior by the Category Captain. For instance,in almost every potential Category Captain arrangement the chosenmanufacturer performs Category Management tasks not only for itsown brands, but for those of competing manufacturers as well.