Kroger Drops Plan to Charge Alcohol Suppliers for Shelf Display
May 03 2016 - 4:10PM
Dow Jones News
Kroger Co. has dropped a controversial plan to charge alcohol
suppliers for how it organizes beer, wine and liquor on store
shelves.
Instead, it will pay a third-party provider to manage display
space for alcohol beverage brands at more than 2,600 Kroger stores
across 29 states.
The change comes less than three months after the Alcohol and
Tobacco Tax and Trade Bureau, which regulates the industry,
clarified its rules and threw the legality of Kroger's initial plan
into doubt.
Initially, Kroger wanted the alcohol industry to pay quarterly
fees based, in part, on volume to Southern Wine & Spirits,
which would handle shelf planning for the supermarket chain.
However, prohibition-era laws designed to discourage aggressive
marketing of alcohol ban manufacturers from giving retailers
anything of value.
The Kroger plan met fierce opposition from alcohol producers who
worried the fees would be illegal and costly. Craft brewers also
expressed concerns that it would create a pay-to-play system that
favored larger producers who could spend more on displays.
"Clearly [Kroger] recognized there were problems with their
original plan," said Frank Coleman, a spokesman with the Distilled
Spirits Council, which is reviewing Kroger's letter to the industry
association and alcohol producers like Diageo PLC.
In addition to dropping the fees it had planned to charge
alcohol producers, Kroger said it would hire P.L. Marketing to help
design shelving plans for alcohol brands. Kroger spokesman Keith
Dailey said the Alcohol and Tobacco Tax and Trade Bureau's
guideline clarifications meant the company couldn't work with
Southern Wine & Spirits because doing so could violate U.S.
alcohol distribution rules.
Southern declined to comment.
Kroger isn't abandoning all of its plans, however. It will go
ahead l with its plan to overhaul the system used for decades to
organize beer, wine and liquor brands on shelves. Currently, the
supermarket chain taps alcohol producers such as Anheuser-Busch
InBev NV and Constellation Brands Inc. to be "category captains,"
dispensing advice and influence about how much shelf space and
prominence to give brands ranging from Budweiser to Robert
Mondavi.
Mr. Dailey said Kroger believes P.L. Marketing will be able to
help it rearrange store shelves more frequently and in a more
neutral manner to reflect changing consumer tastes by adding
fast-moving, new craft brands such as Founders Brewing Co.'s All
Day IPA or seasonally adjusting the wine aisle to emphasize
Cabernet Sauvignon over Pinot Noir.
Kroger currently makes those changes inconsistently across its
stores. "We have a tremendous opportunity to grow sales by
improving the customer experience and speed to market," said Mr.
Dailey
The beer industry was encouraged by Kroger's change. MillerCoors
Chief Customer Officer Dan Werth said it would help Kroger update
its beer aisles to more accurately reflect the "flood of innovation
and churn of brands."
Brewers Association Director Paul Gatza, who represents craft
brewers, praised Kroger's decision to eliminate the fees it
previously planned. Now, he said brewers should be able to earn
space based on factors such as sales.
Write to Tripp Mickle at Tripp.Mickle@wsj.com
(END) Dow Jones Newswires
May 03, 2016 15:55 ET (19:55 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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