Kroger recently announced a plan to develop a “Planogram Center of Excellence” in which beverage alcohol category management for the company would be managed by Southern Wine & Spirits and funded by suppliers and wholesalers. The first concern for brewers is whether paying for category management of this type is legal. The second is what it means for market access, as one can assume that beverage alcohol suppliers with fewer resources could be squeezed out of this important grocery chain if they can’t afford to or choose not to participate .
Here’s a little history as to why this plan may not fly with regulators. Back in 1994 the U.S. Tax and Trade Bureau (TTB), then part of the Bureau of Alcohol, Tobacco and Firearms, went through rule making on slotting fees for beverage alcohol eventually ruling against the practice. The Institute for Brewing Studies, a predecessor to your current Brewers Association professional division, issued a “Brewers Alert” raising the objections to slotting fees of:
- They will discriminate against small breweries, many of which cannot absorb the extra operating expense;
- They create an unnecessary barrier to entry in the marketplace for new companies and for existing companies that wish to expand into packaged beer distribution;
- They will hurt competition in the marketplace and drastically reduce consumer choice;
- They do not reduce consumer prices; rather the fees go into the retailer’s pocket;
- They cannot be written off directly, but must be amortized over a period of years; and
- Beer is already highly regulated. The rules on marketing beer, including those that prohibit abusive marketing practices and commercial bribery, have been operative for 60 years and have served the industry and consumer well.
In an effort to make regulators aware of this new anti-competitive threat, the Brewers Association participated along with the American Beverage Licensees, The National Association of Beverage Importers, the National Beer Wholesalers Association, The Presidents’ Forum of the Distilled Spirits Industry and WineAmerica in drafting a letter to Treasury Secretary Lew to raise questions as to whether the payment to a large wine and spirits wholesaler is contrary to the Federal Alcohol Administration Act.
You can read the letter sent to Secretary Lew here.