Blue Cloud Slotting fees and the so what
Blue Cloud’s entrance into the liquor space has caused upheaval amongst the three-tier system traditionalist. Amongst their many concerns is the issue of slotting fees.
Slotting fees are illegal in the liquor space. A slotting fee constitutes a payment to the retailer for the placement of a supplier’s products on a shelf or tap handle. It is a way for a supplier to get onto the shelf at the expense of their competitor by paying their way on. Specifically, it is used for earning premium shelf space.
Blue Cloud, which is owned by PepsiCo, is licensing its trademark to product that will be manufactured by Boston Beer Co.
The fear amongst the three-tier traditionalist is not that Blue Cloud could buy its way onto the shelf with liquor slotting fees for products they distribute, but that it could use other products it manufacturers to enhance their position.
PepsiCo owns the Frito-Lay brands and as a regular business practice, chip companies pay slotting fees to retailers to get their product top shelf placement. The rules of liquor don’t apply to pretzels and chips.
And that is what the concern is for the three-tier traditionalist, a company that can use products outside of liquor to enhance its chances of getting premium placement on the shelf. And I say so what.
Under tied-house provisions slotting fees for chips is generally not govern by these rules, so if Blue Cloud is working closely with PepsiCo’s food division, Blue Cloud is doing nothing wrong, if it benefits from the food division utilizing slotting fees in a legal way. As long as they are not comingling alcohol products in their slotting fee arrangement, then I don’t see anything wrong done by Blue Cloud. And if sales of alcohol are not tied to the slotting fees arrangements for chips, then there should not be an issue.
The other argument is they could use their chips to enhance their shelve space and provide them an advantage over other distributors.
But this is a free market and nothing prohibits Southern or Breakthru and other big wholesalers from purchasing another chip maker and utilizing those goods to make their portfolios more attractive.
As long as Blue Cloud obeys the laws and does not apply slotting fees to liquor, then they have not broken any rules but are using their leverage and business savvy to their benefit. Utilizing your market strengths against your competitors, that is just good business sense!
The arguments against this concept, I say so what!