Slotting, and other "food industry" practices

[jhlurie]

from the Language of the food industry topic, user rickster says:

The biggest problem for getting new products on the shelf is a "slotting allowance". Basically, the store argues that putting a new product on the shelf means that another one will get kicked off. Your new product has a higher risk of delivering profits to the store than current products already on the shelf, so the store demands an upfront fee to put your product on the shelf. This gets very expensive for a small manufacturer. It's especially expensive in the frozen case where space is very constrained.

In the sampling at whole foods topic I shot off my own mouth a bit:

what exactly are the other benefits of sampling to them? I know it isn't to help decide who gets better shelf space, because the requirement for slotting fees (another deep dark supermarket topic worthy of eG discussion--I've heard slotting described as "organized extortion") makes sure that isn't possible. Are these sampled products simply ones which have already been slotted into a great display and this is a value added service of that to the food broker? Or are the samplings indepedant of anything like that (as far as you know, I mean)?

This seemed a bit much for the "sampling at whole foods" topic, so I've broken it out to a new topic.

I've read stuff in the past few years about slotting, and I've heard it called everything from "a simple management practice" to "organized extortion". Most recently I read Paul Newman's dopey book about his food line, where he has quite a bit of fun mocking the practice and posing as some great rebel (it's nonsense because if anyone can overcome the slotting practice, it would certainly be a huge celebrity who could deliver a combination of fame and notoriety in trade).

I'd really like to hear from some industry insiders on this--both defenses of it and if you are brave, exposés. How do food brokers REALLY work? What exactly are those slotting fees paying for? Who truly pays for the deals that are cut when products go on huge sales--the manufacturer, the broker, the supermarket, or all three?

If we want to discuss or debate definitions of specific food industry terms, the Language of the food industry topic is still hanging around. But I'd like to dig a bit and hear some actual stories and explorations of the issues behind those practices here, if anyone wants to actually step up.

[jackal10]

The same thing is done in most retail industries: white goods, brown goods etc.

It can take several million (choose your currency) in fees, staff training and paid advertising to persuade a chain to take your products.

Even then all they will do is put some on the shelf. If they don't sell fast immediately (even with bribing the staff with sales bonuses at your expense to push them) they will send them back.

Trying to get things into the supermarkets directly is not a good policy. Better to establish a market, for example via web sales and direct sales first, then you are in a much stronger position to negotiate terms. If you demonstrate a market, then they will come and ask you...

Edited January 19, 2004 by jackal10 (log)

[Moopheus]

The same thing is done in most retail industries: white goods, brown goods etc.

In the book business it's called "cooperative advertising". In the office we referred to it as "bribery".

[JPW]

In the bartending business I used to call it "free booze"

[JPW]

In yesterday's WashPost

Shelfing

[Fat Guy]

I'm not sure I understand how any of these practices are tantamount to extortion or bribery. Both terms of course imply illegality. In addition, extortion implies force or intimidation, while bribery implies that the person being bribed is a government official or someone else is a position of public trust. I'm not sure it's reasonable or even sane to expect supermarkets to behave in any manner other than that which allows them to maximize profit within the boundaries of the law.

A supermarket shelf is simply a piece of real estate with a certain value. Slotting fees are one of the ways in which this real estate is bargained for. It's also a way of allocating risk: it puts the manufacturer in the position of betting on the success of a product, rather than the retailer. This can be an effective gatekeeping mechanism.

As Jack says, though, slotting fees are not universal. If a product has a strong and ready market, the retailer isn't going to be self-destructive: the product will be stocked.

[Toliver]

Well, it's not good for the consumer in that it limits our choices. And then I'm also sure the cost of the slotting fee is passed onto the consumer, too (the companies aren't going to just eat the cost, are they? no pun intended).

So that's lose-lose for the consumer.

It's also interesting to note that bargain grocery stores (FoodMaxx, Food4Less, etc) seem to offer less product choices when compared to mid-to-upscale grocery stores (Albertson's, Save Mart, etc). Does this mean slotting fees tend to be more prevalent in middle to upper class grocery stores?

[jhlurie]

That great purveyor of wisdom, Paul Newman (can you sense the sarcasm? ) seems to think that food brokers aren't even necessary. Remember, they get a cut too. He seems to think that a manufacturer should be able to get a store manager on the phone and dicker with him directly.

[Mayhaw Man]

Slotting fees are the reason that, if you have reason to notice such things, you will find floor displays in your local grocery store dominated by Coke for half of the year and Pepsi for the other half.

When we were trying to get Abita Root Beer on the shelf (we were bumbling amateurs, admittedly) the fees were one of the first stumbling blocks. In the Winn Dixie chain we ended up, oddly enough, by the paper towels (first place I look for weird root beer ). The reason for this is that the only reason we were in the chain in the first place was consumer demand at the store manager level (the real power in many chains). So many people had requested it in New Orleans area stores that the managers had to put in the request. Thankfully it kind of snowballed from there and we ended up in most of the other chain stores, including Wal Mart (they called us, which was apparently a good thing because getting stuff in those stores is very, very difficult) which led both the root beer and the beer lines into the Sam's Wholesale chain and they eventually became our top retailer in the area.

You would be stunned to see what a company like a dog food concern is willing to lay out to get good shelfspace. It involves (usually) a straight up payment to the retail chain, an under the table payment to the store manager, and an ongoing support system of small favors that borders on the rediculous. Nice trips for store execs, small gifts regularly for store managers, etc.

Beer companies (as opposed to liquor and wine companies) are prohibited by Federal Laws (most of which came into exitstance at the repeal of the Evil and Ill Fated Volstead Act) to pay anything for shelf space. These laws were put into existance to stave off any one brewer buying all of the space and shutting out other brewers. Clearly this has been a total failure, as Anheuser Busch has half the market or better (depending on who is doing the counting). This has been achieved by an insidious system of bribery and strong arm tactics that are now considered to be just "the way the beer business works". (Incidentally, I am not fingering A.B. All companies, large and small, that can afford to engage in these practices do. I am not implying that I have never been involved in this because I have. Participate or look at a bunch of old beer in the warehouse. Period). Lots of coop advertising, tons of incredibly expensive point of sale material (most of you probably don't realize that even a simple neon sign, bought in large numbers, often costs over a hundred bucks and really nice ones often run 2 or 3 times that price.

There is a fair amount of "sure we can drop off a keg for the next crawfish boil at your house, we'll just leave it in the cooler at the store" and other small favors involving product.

Many times I have been involved in shelf sets where we were working with photographs of sample sets (these sets, of course, neatly paid for by a large brewer who is getting premium space). Each row and inch of space is allotted and must be filled exactly as ordered. I cannot tell you how many times that I have come into a store to face shelving (pull old product to the front and rotate, etc.) and found my space invaded or the beer removed completely. I would have to go find the store manager (who may have been involved in the removal in the first place) and he would, in turn, have to find the shelving diagram and then I would have to reset. Knowing full well that by the time I got out of the parking lot that there was a pretty good chance the shelves would be changed back.

Incidentally-by law here in Louisiana and in most other states as well- beer must be paid for at the time of delivery. No charging. Cash (many times it is cash, even in large chains), or a good check (two bad ones and you lose your license in LA) at the time of delivery. No credit. This is a great thing if you are a small struggling brewery, but not so great if you are a big brewery trying to build a gazillion case display that looks like the Titanic or a well built young woman (they would if they could ). This cash sales law keeps most stores from just loading up on whatever some company foists on them cheap and levels the playing field a little bit-at least they are buying what they think will move in quantities that more or less make sense.

I know from experience that some types of products pay tons to get on shelves. Breakfast cereal is one of the things that always stuns people when they see the price. Well, those are big boxes and they take up alot of room. When you are looking for the Raisin Bran (ever notice the colors on various types of cereal run similarly from maufacturer to manufacturer?) people will generally grab the first one they see if they are not particularly price concious and the cereal with the most footage on the shelf is going to be that cereal that you grab.

Anyway I could go on for weeks but just remember this, groceries do not operate on very large markup. The labor is relatively high in a grocery store and many of the things that get you into the store in the first place are loss leaders (things sold cheap or below cost to attract you). Cheap milk, eggs, beer (there is a minimum markup on beer in most states, it cannot be sold at a loss), etc. are only there in hopes that you will stop off and buy some stuff in the pharmacy and some paper products (they make a ton of money on toilet paper and paper towels-that's why they are so cheap at the wholesale places). Slotting fees are one of the major profit centers for the chains and it is not going to change anytime soon.

[Fat Guy]

How many products are in the average suburban US supermarket? 10 or 20 thousand? More? I hardly think lack of choice is a problem. Even in narrow categories like ketchup there might be half a dozen brands in a given market, in all sorts of packaging configurations.

Supermarkets are most likely already carrying as many products as they're ever going to carry. So the question is how to decide which to carry. On the most straightforward level, they should carry the products customers want, aka the products customers will buy. But finding out what customers will buy requires risk: a product that is currently selling needs to sacrifice shelf space to a new product. Slotting fees for new products don't fundamentally change the calculus; as far as I can tell what they do is shift some of the risk to the manufacturer.

[Mayhaw Man]

Supermarkets are most likely already carrying as many products as they're ever going to carry. So the question is how to decide which to carry. On the most straightforward level, they should carry the products customers want, aka the products customers will buy. But finding out what customers will buy requires risk: a product that is currently selling needs to sacrifice shelf space to a new product. Slotting fees for new products don't fundamentally change the calculus; as far as I can tell what they do is shift some of the risk to the manufacturer.

I agree and I think that you barely touched on a point that might cheer up some of those that are shocked and dismayed . Consumer demand can get a product on the shelf and the higher up the food scale gourmetwise the product is, the better a chance you have of getting it.

For example, lets say there is some difficult to obtain canned tomato brand that store A does not have, but store B does. If just a few people are willing to aske the manager for it, "Excuse me o' powerful manager sir, I really want some El Buono Tomatoes and you don't seem to have them. I know that store B does and I can get them there, but your store is so much more convenient. Could you get them for me?". This may seem like a simple thing, but shoppers rarely talk to these guys (they spend all of their time talking to district product supervisors bringing the bribes) except to ask where the risotto is and they are thrilled to seem like they have some stroke, so they often will go out of their way to get something in, especially if you look like you might go over and buy some paper towels and pharmacy gear while you are at it. Asking the manager works and it helps to circumvent the payola system and if it is a cool small brand you are looking for, you might make somebody really happy back at El Buono Tomatoes,Inc.

[ronnie_suburban]

That great purveyor of wisdom, Paul Newman (can you sense the sarcasm? ) seems to think that food brokers aren't even necessary.  Remember, they get a cut too.  He seems to think that a manufacturer should be able to get a store manager on the phone and dicker with him directly.

In many cases manufacturers find that it's cheaper to outsource. True, brokers add an extra layer of cost for the consumer but a manufacturer need only pay a percentage to a brokerage company to greatly reduce the costs associated with an internal sales force. On top of that, broker commissions are almost always volume-based so the costs shrink if volume does. Someone has to sell the products to the retail outlets and there will be costs for that regardless of who handles it. I'm not saying I necessarily believe in the validity of the 'broker culture' only that a reasonable argument can be made for its financial sensibility.

Of course the idea of a manufacturer communicating directly with a store manager is a warm and fuzzy notion, but not a very practical one in the current landscape.

=R=

[Toliver]

How many products are in the average suburban US supermarket? 10 or 20 thousand? More? I hardly think lack of choice is a problem.

Of course, it's about choice. How many cable channels do you have and yet how many suck?

So what if there's 20,000 items in the grocery store? If they don't carry more than two brands of pasta, what kind of choice is that for me? The FoodMaxx in my low income neighborhood carries only one brand of non-dairy creamer. What about root beer? I hope you like Mug Root Beer because that's the only name brand of root beer they carry. Are you looking for Pickapeppa Hot Sauce? You're not going to find it in FoodMaxx. Butter lettuce? Not at FoodMaxx. Eggland brand eggs? Not at FoodMaxx. What about something simple like jumbo sized eggs? Nope. The only eggs they carry are the dozen large sized and the eighteen pack of large sized. You want Brie? "I'm sorry sir, she only works on the weekends."

Quantity does not necessarily equal choice.

But this is beside the point. Quantity, given this subject matter, does imply that there's a heckuva lot of more slotting happening at stores that offer more brands or styles of a product to their customers when compared to stores that offer less. But what about when a company owns both kinds of stores, an upscale store and a bargain store (like Ralph's/Food4Less, SaveMart/FoodMaxx, etc)? How do they determine slotting fees for one store but not the other, or does the slotting fee guarantee placement in both chains? Do slotting fees also help to explain why prices are higher in the upscale store but not in the bargain store since there must be slotting fees in the upscale store but not in the bargain store? Why does Stove Stuffing cost twenty-five cents more in SaveMart than it does in FoodMaxx? Slotting fees could explain the difference.

[jhlurie]

That great purveyor of wisdom, Paul Newman (can you sense the sarcasm? ) seems to think that food brokers aren't even necessary.  Remember, they get a cut too.  He seems to think that a manufacturer should be able to get a store manager on the phone and dicker with him directly.

In many cases manufacturers find that it's cheaper to outsource. True, brokers add an extra layer of cost for the consumer but a manufacturer need only pay a percentage to a brokerage company to greatly reduce the costs associated with an internal sales force. On top of that, broker commissions are almost always volume-based so the costs shrink if volume does. Someone has to sell the products to the retail outlets and there will be costs for that regardless of who handles it. I'm not saying I necessarily believe in the validity of the 'broker culture' only that a reasonable argument can be made for its financial sensibility.

Of course the idea of a manufacturer communicating directly with a store manager is a warm and fuzzy notion, but not a very practical one in the current landscape.

=R=

Yes, but don't some chains have a rule that they will ONLY deal with brokers--and on occasion only a specific list of brokers who have er... purchased that consideration?

[Fat Guy]

The FoodMaxx in my low income neighborhood carries only one brand of non-dairy creamer.

That's because the FoodMaxx in your low income neighborhood sucks. Supermarkets in low income neighborhoods tend to suck for a variety of reasons, but blaming it on slotting fees would be a new one on me.

[Holly Moore]

It has probably changed some now, but in the '70's I was a merchandiser for a discount supermarket chain. At that point our bottom line profit came from the terms (2% net 10) that we received from the manufacturers. The stores, themselves, were breakeven.

At that time I don't think placement fees in terms of cash were dominant. But advantageous pricing and and advertising allowances for good product placement was.

The limited shelf space keeps many a small and/or new manufacturer out of the major chains. Among the most coniving people in the business world are the store level employees of the manufacturers who delivered product and stocked their product on the shelves.

A bit of an aside. I took that position (Director of Prepared Foods) upon leaving McDonald's. I was surprised that, because my cost of shortening got lumped in with the chains overall P&G purchases/pricing, and my cost for ground beef was worked into the overall meat purchases, I could often purchase items of equal or better quality at significantly lower prices than paid by McD's company stores.

[Fat Guy]

To distinguish between a few things here:

- If a broker/distributor/wholesaler/manufacturer hands a supermarket's purchasing manager $5,000 in a brown paper bag in order to get that manager to place an order for an inferior product that will sell less and make less profit for the store, that's bribery and it is and should be a crime.

- If that same broker/distributor/wholesaler/manufacturer offers $5,000 as an incentive payment to the store in order to get the store to carry a product, it's simply a bargaining chip. It's not like the store is going to be willing to lose $6,000 in profit to get the $5,000. It's just part of the package that the vendor negotiates with the retailer. These arrangements are often a combination of the price of the product itself, incentive payments of various kinds, and bonus payments for meeting certain sales goals. This is how business is done; I can't see what some folks are getting all worked up about.

- If a manufacturer offers incentive payments or lower prices (two sides of the same coin) at a loss in order to undercut a new competitor's product, that's a whole different species of problem that touches on the antitrust laws. That sort of thing is hard to regulate, but is certainly destructive to the competitive environment.

[ronnie_suburban]

jhlurie wrote:

Yes, but don't some chains have a rule that they will ONLY deal with brokers--and on occasion only a specific list of brokers who have er... purchased that consideration?

Absolutely. And it's a 'rich get richer' configuration IMO. I also think that, in spite of the volume of choices available at most 'super' markets, the diversity of those choices is narrower; specifically because of the way business is done. The chance of a high-quality, entrepreneurial product hitting the shelves in that venue is significantly reduced via the SOP. Also, I cannot really say how much autonomy/discretion is given to Store Managers. I'm sure it varies by chain, region and other factors.

I realized lately, after the fact more or less, than I actively do everything I can to avoid doing my main food shopping at the big chain stores. Every effort I make in discovering new places to shop for food is done with the idea that 'this place will have better choices' or 'that market has the best bread around." I live in the Chicago area and one of our major chains, Dominicks (recently purchased by Safeway) has deteriorated into a void. I think this has been a catalyst, especially of late, in my focusing on alternative suppliers.

I do like the convenience of the 'majors' and there are clearly times and circumstances when their existance is beneficial but when looking for the best stuff, supermarkets are the last place I look and I've made that adjustment without consciously deciding to do so. I do feel like the most potentially interesting items are 'frozen out' of the mainstream.

=R=

Edited January 20, 2004 by ronnie_suburban (log)

[Mayhaw Man]

The chance of a high-quality, entrepreneurial product hitting the shelves in that venue is significantly reduced via the SOP. Also, I cannot really say how much autonomy/discretion is given to Store Managers. I'm sure it varies by chain, region and other factors.

R=

I have found (remember, my experience is in beer and soft drinks-which may not be the norm-but the soft drink business makes the beer business look friendly by comparison) that the store managers actually do have some say-even in Wal Mart. If that were not the case our local Wal Mart would NEVER have stocked any of our products, much less root beer. As a brewery we were self distributed (note to self-never self distribute again ) and had what amounted to zero sophistication when it came to marketing in chain stores. We had a good product and a bunch of willing friends, however, and they were kind enough to fill out request forms, ask managers, and just generally make a nuisance of themselves until the manager mad whatever effort was needed to get us in.

In some cases the manager was all it took. In others it was a trip to the home office of Winn Dixie or Delchamps and sitting in a room with a bunch of other goobs waiting your turn (in the case of Delchamps for 4 days for a 4 minute meeting when we were told, " You're in. Here are your codes. You could have called and we would have mailed them to you"). Lying motherfuckers. We called about a million times and could never get anybody on the phone. They went out of business here and good riddance to them. I hope that big shot beer buyer has been reduced to stocking shelves in ghetto zippy mart.

The point of this diatribe is that we got on the shelves with expensive, weird beer in a very conservative market by just bothering them enough. We did not bribe (much, the occasional keg-but nothing out of hand) and there was never any cash changing hands. No plane tickets for winning a "contest" that never existed and certainly no free product for the store. Hell, we were losing money hand over fist for the first couple of years, how could we just give the stuff away. I think this will work for some things, but not for others. So it is my opinion that in most chains the manager has some say so about local demand.

[ronnie_suburban]

The point of this diatribe is that we got on the shelves with expensive, weird beer in a very conservative market by just bothering them enough. We did not bribe (much, the occasional keg-but nothing out of hand) and there was never any cash changing hands. No plane tickets for winning a "contest" that never existed and certainly no free product for the store. Hell, we were losing money hand over fist for the first couple of years, how could we just give the stuff away. I think this will work for some things, but not for others. So it is my opinion that in most chains the manager has some say so about local demand.

That's actually quite encouraging Brooks. In your case, it sounds like the slotting fees were paid the old-fashioned way; in blood, sweat and tears.

=R=

[ExtraMSG]

I know product placement and getting items on the shelves matters, but it seems to be getting too much importance here. Few people in the overall scheme of things will purchase a gourmet BBQ sauce, soda, or pasta. They'll either buy what's on sale or cheapest or what they've seen the ads for.

I'd be interested to know what percentage of gourmet/specialty items in a supermarket actually get purchased. It may show that supermarkets are actually doing quite a favor to these companies as it is and possibly their only real benefit from stocking them is in showing that they do have variety.

I know. I'm being cynical.

[project]

Fat Guy:

"How many products are in the average suburban US supermarket? 10 or 20 thousand? More? I hardly think lack of choice is a problem. Even in narrow categories like ketchup there might be half a dozen brands in a given market, in all sorts of packaging configurations.

Supermarkets are most likely already carrying as many products as they're ever going to carry. So the question is how to decide which to carry. On the most straightforward level, they should carry the products customers want, aka the products customers will buy. But finding out what customers will buy requires risk: a product that is currently selling needs to sacrifice shelf space to a new product. Slotting fees for new products don't fundamentally change the calculus; as far as I can tell what they do is shift some of the risk to the manufacturer."

I concluded long ago that this argument doesn't hold: I do most of my grocery shopping at Sam's Club.

One thing about black pepper corns, powdered Cayenne pepper, bay leaves, dried parsley, sliced American cheese, wheat bread, yellow mustard, catsup, pickles, chocolate sauce, pizza cheese, pepperoni, etc. at Sam's Club: Typically they have only one type of one brand in one size -- quite large. That's what I buy. If it's no good, then I bring it back and tell them, and they give me my money back. I've come to place a decent level of trust in what they put on the shelves; I'm willing to buy brands I've never heard of before simply because Sam's has it on their shelves. So, it isn't a dozen brands and two dozen total different tiny bottles of catsup. Instead, catsup's catsup, and that's it. Period.

What negotiations go on in Arkansas, I don't know, but my guess is that if Hunt's gets the catsup order, then they provided one darned good price and for a few months ship many 18 wheel truckloads of the stuff; else, Heinz or someone else gets the order.

I do get the impression that at times some manufacturers cut some really good deals just to get their products in front of the customers of Sam's hoping that these customers will buy the same product in the usual grocery stores later.

My impression is that Sam's in effect throttles the usual grocery store 'survival of the fittest' battle for shelf space and, thus, greatly reduces the cost per ounce to me.

I believe I see some good opportunities for both modest manufacturers and for me: Sam's does carry some luxury goods. Okay, suppose some manufacturer of some really high end Maryland crab cakes does have enough productive capacity for a Sam's order. Then, to sell, that manufacturer doesn't need a big ad campaign or visits to hundreds of grocery stores or food brokers. Instead, the manufacturer just needs to make one stop in Arkansas, with a darned good product at a darned good price. Darned efficient.

In my last trip to Sam's, I bought a huge bag of grapefruit. I don't have a clue about the vendor, but the grapefruit are terrific. I've eaten about two a day and have made a good dent in the whole bag.

Part of the savings is that Sam's stocks the shelves with fork lift trucks, and that has to be MUCH more efficient than handling all the little bottles one at a time, turning each bottle to face the front, stacking them neatly, etc.

The usual grocery store competition results in lots of little bottles of catsup at high prices per ounce instead of one big bottle at much less per ounce.

I'm reminded of the ecology of African dung beetles: These are about the most fearsome looking things in the animal kingdom! Some huge fraction of the food energy must go to all the armor plate and sharp horns, all to do battle with competitive dung beetles. But, if all one wanted was dung beetle meat, then the armor plate and horns would be wasteful. That shelf space competition in grocery stores is an ecology something like those dung beetles, and the result for me is a much higher price per ounce for catsup. That's why Sam's gets nearly all of my business, and the stores with two dozen tiny expensive little bottles of stuff don't.

[Fat Guy]

I'm a major Costco consumer, and will buy any product there that I can provided it's something I can consume before it will rot (I'm facing a mountain of grapefruits myself right now, and I'm not sure I'm going to succeed). But Costco doesn't cover nearly all my grocery needs. Maybe 40%. I also get about 40% of my groceries from stores like Fairway and Stew Leonard's, which are also limited inventory stores -- but not warehouse stores. And I get about 20% of my groceries at supermarkets, because there are some products that only the supermarkets have and because the supermarkets sometimes have great sale prices.

That being said, two things come to mind: 1) In all the dozens of articles I've read about warehouse stores, I've never heard lack-of-slotting-fees cited as a reason for low prices (and I can't imagine it would make a difference given that the warehouse stores already push their suppliers to the narrowest possible margins); and 2) Supermarket prices in the US are on the whole amazingly low; just ask anybody in any other Western industrialized nation.

[Mayhaw Man]

I believe I see some good opportunities for both modest manufacturers and for me: Sam's does carry some luxury goods. Okay, suppose some manufacturer of some really high end Maryland crab cakes does have enough productive capacity for a Sam's order. Then, to sell, that manufacturer doesn't need a big ad campaign or visits to hundreds of grocery stores or food brokers. Instead, the manufacturer just needs to make one stop in Arkansas, with a darned good product at a darned good price. Darned efficient.

I believe that if you will look carefully at the brands in Sam's (and to a lesser degree Wal Mart) you will see that no matter the name on the label, ultimately the products generally come from major maufacturers.

In your mind you may envision a guy with a good product stopping off and knocking on the door of the buyer for his product, but in reality it is one of the most complex sales a salesguy will ever make.

There has been a building boom going on in the Fayetteville/Springdale area for the last ten years. The building boom is wholly related to Wal Mart/Sam's and the employees who have been moved to Northwest Arkansas specifically to deal with this giant retailer. Many companies have set up shop complete with little sections of Wal Mart in order to facilitate shelf sets in an environment outside of the Wal Mart Stores themselves. The catalyst for this setup is related to the Wal Mart Culture. Employees (particularly management) are instructed to drop whatever they are doing and help a customer who looks like he needs it. THis causes in store meetings to be long drawn out affairs, as the buyers are constantly stopping and helping out wayward customers. Many manufacturers have found that it is more efficient to just set up a fake store involving thier products and the area where they would be found. Rubbermaid, for example, has a pretty much full scale WalMart due to the fact that they have products in every department.

Wal Mart's purchasing practice are to some degree, take it or leave it deals. You give them a price and them they tell you what you are willing to pay. Take it or leave it. Virtually everyone takes it as the volume of a single sale can be so high that even pennies per product (or less) can be worth it.

Everyone knows that they are the largest retailer in the the history of the world. So how would you feel if you were Ralston Purina (for a good example). 10 years ago WalMArt was their biggest customer. Now Wal Mart is both their biggest customer and their biggest competitor, as Old Roy Brand Dog food is now the world's largest seller. The same goes for just about any product that Wal Mart has chosen to manufacture (or more accurately-sub contract).

Now all that being said, I do not consider this to be a bad thing. People want to save money and Wal Mart generally gives them the opportunity to do that. The fact that I generally choose to shop elsewhere most of the time has more to do with the fact that I don't like to spend a bunch of time in lines and find that with careful shopping I can do about as well at many local retailers. I do shop there, just not that often. There are some things that are so much less (and at the same quality) that one would have to pretty much not care about money to go in there (recently a cell phone car charger fill into this catagory). I do like Sam's, but I have a family and buying in bulk suits my needs very well. Sam's also has things that I buy a lot of (like cheese) in large quantity and a pretty good selection of decent quality product.

But don't ever think that one stop will do it to get your product on the shelf. It is much, much more involved than that.

[foodie52]

I work at Central Market in Austin, Texas. It is probably the best grocery store in the USA, in terms of fresh product and choice ( check out the website, centralmarket.com). I work in the Specialty Foods department. Our 7 aisles of specialty foods has about 150,000 products, including 125 olive oils.I am the product and customer service expert.

We carry lots of local lines of product: Hudson's on the Bend, One World, Austin Slow Burn, Texas Texas, Stubbs, Hell of a Relish, Alberto's, New Caanan Farms, Fischer and Wieser, Bee Cave Honeys.....

We carry lots of American products and lots of European: our out-of-state products mostly come in through brokers. The brokers ( Tree of Life, Gourmet Awards, European Imports, to name the largests) present new product to our procurement team on a monthly basis. Once the product is tasted and compared, and once it is determined that it will contribute to our mix, it is ordered.

When the product arrives, we get the opportunity to place it on the shelf. It will usually get one skew per flavor. ( As in a line of bbq sauces)The vendor then has the option to pay for demos. (Sometimes I will do a demo if I think the product will sell: the product I use in the demo is credited out to the vendor.) The fee is minimal, in my opinion. If the demo is successful after a period of time, that product will be in demand ( case in point, Soy Vay Teriyaki Sauce) and it gets a side stack....maybe even an endcap.

Local vendors who rep their own product reap what they sow. I don't care how wonderful their stuff is, if they don't offer it to be sampled, it won't sell. The aggressive vendors are welcomed in our store. We love to have their product sampled, and are happy to give them prime real estate on the shelf, if they have earned it. There will be anywhere from 4 to 8 vendors sampling on weekends.

Basically, our goals are the same....to sell product!!