slotting fee

Slotting fees have been getting increasing attention from other regulators as well.

But in supermarkets, manufacturers face another formidable obstacle: the slotting fee.

But the accounting board said that slotting fees were simply the next logical step in an effort to elucidate companies' financial standing.

Vendors charge that slotting fees are a move by the grocery industry to profit at their suppliers' expense.

With the rise in promotional costs and slotting fees, manufacturers nowadays can easily spend $100,000 or more to unveil a new product.

In addition to slotting fees, retailers may also charge promotional, advertising and stocking fees.

Unlike many other retailers, Wal-Mart does not charge a slotting fee to suppliers for their products to appear in the store.

Wal-Mart, she said, doesn't accept any "slotting fees," the money demanded by most supermarket chains in exchange for a prominent place on the shelves.

"We don't use slotting fees as a criterion for putting products on the shelves," said Mr. Meyers of Larry's.

Mr. Gioiella added that some supermarket chains charge six-figure "slotting fees" to allow businesses to place a product on their shelves.

Most supermarket chains, for example, make a chunk of their revenue from "slotting fees," which are the rents that food distributors pay them for shelf space.

Their prices are too high, production is too limited and they cannot afford the slotting fees that chains often charge to put a new product on the shelves.

In addition, companies will have to revise old financial statements, in the process, offering a glimpse into how much they have spent on slotting fees in the past.

Although it refuses to disclose sales or discuss slotting fees, the company, which is based in Irwindale, Calif., is recognized as the largest manufacturer of health foods.

At the same time, retailers are charging more for shelf space for new products, and those higher slotting fees now come directly out of earnings, instead of price rises.

To cope with an influx of new products, supermarkets for the last five years or so have charged slotting fees for the risks of stocking particularly unproven goods.

Blue Bell says it refuses to pay slotting fees and thus receives little or sometimes no shelf space in Kansas City area supermarkets, where it has no strong ties.

Some companies argue that slotting fees are unethical as they create a barrier to entry for smaller businesses that do not have the cash flow to compete with large companies.

Most smaller candy businesses can't afford the high slotting fee it takes to get their products placed on supermarket shelves, which explains why Snickers and M&M's dominate checkout lines.

Regulators at the Federal Trade Commission have long looked askance at slotting fees, which they say may abridge competition by preventing small companies without deep pockets from getting their products into stores.

To ease their concerns, he did away with an unpopular accounting practice - amortizing slotting fees paid to supermarkets over the life of contracts - that many felt had the effect of exaggerating earnings.

Yet for those that have not, shifting around what could amount to millions of dollars will probably prompt a partial, if not outright, disclosure of what they spend on slotting fees, the accounting board says.

Come the first quarter of 2002, companies will have to deduct the amount they pay in slotting fees from their revenue, as opposed to including it as a marketing expense as has been done in the past.

A slotting fee, slotting allowance, pay-to-stay, or fixed trade spending is a fee charged to produce companies or manufacturers by supermarket distributors (retailers) in order to have their product placed on their shelves.

"Some stores have certain expectations," Mr. Barnhill said, referring to the under-the-table but perfectly legal practice of charging "slotting fees" - payments grocery stores demand from companies to stock their products or to display them more prominently.