Marcie and others:
I recently wrote a small essay -- 8 pages -- on the impacts of retailer
dominance on small scale and sustainable farmers and retailers. It's not
really completely ready for widespread release, but I'm willing to share it
with anybody on these two lists who would like a copy. We are working to
integrate the retailer side of the issue into the food chain clusters that
we identified in our report to the National Farmers Union, published last
February. You can access that report at www.foodcircles.missouri.edu The
retailing report you need to request directly from me.
Marcie Rosenzweig wrote:
> I was appalled when I read this story in the Sacramento Bee. I sent the
> following note to the USDA's Small Farm Committee. This sort of greedy
> thing tends to start in California first. Do you know what's happening
> in your town?
> >Date: Wed, 09 Feb 2000 09:39:58 -0800
> >From: Marcie Rosenzweig <email@example.com>
> >Reply-To: firstname.lastname@example.org
> >MIME-Version: 1.0
> >To: email@example.com
> >CC: firstname.lastname@example.org
> >Subject: Produce slotting fees negative impact on family farms
> >This is, in my opinion, a time-critical issue for small farms. With
> >consolidation of the grocery industry, private industry policies like
> >this have a direct and immensely negative impact on small farms.
> >Slotting fees have been a huge barrier to small-scale value added
> >products but this - going after produce directly - can wipe out an
> >entire industry.
> >Marcie A. Rosenzweig
> >'Slotting fee' irks produce suppliers: Ralphs wants payment for use of
> shelf space
> > By Cathleen Ferraro
> > Bee Staff Writer
> > (Published Feb. 5, 2000)
> >It's been a tough five years for produce suppliers, watching grocery
> merger after merger erode whatever negotiating power they had with
> > But a recent letter from Compton-based Ralphs Grocery Co. was enough
> to make some growers think about giving up.
> > The correspondence laid out a tough choice for hundreds of produce
> suppliers: Cough up cash in the form of "slotting fees" -- the grocery
> industry's legal practice of requiring upfront payment for shelf space
> -- or provide free fruits and vegetables to help pay for a new Ralphs
> warehouse in Stockton.
> > Slotting fees -- ranging from $5,000 to $50,000 annually depending
> on the chain and the product -- are common in other parts of the grocery
> industry. By some accounts, they provide the industry with more than
> half of its profits.
> > But they are rare in the fruit and vegetable business. Small growers
> say they can't afford the fees and won't be able to compete with big
> growers who can fork over thousands to get a prime "seat" in the produce
> > Slotting fees aren't necessarily good for shoppers either, who
> usually end up paying for them, consumer advocates say.
> > "The advantage clearly goes to companies who can afford to pay more,
> and it may have the impact of reducing varieties available to
> consumers," said Bert Foer, president of the American Anti-Trust
> Institute, a Washington, D.C.-based public interest group. "We think a
> slotting allowance can be more like a bribe than a careful analysis of
> what should be on the shelf."
> > A Ralphs official would not comment on the letter, saying it was a
> private matter between the giant supermarket chain, which operates 439
> stores in California, and its supplier customers.
> > Supermarkets have been charging for shelf space for decades, but
> until now, the practice has been mostly limited to suppliers of packaged
> goods, such as potato chips and laundry detergent.
> > Retailers have justified the practice by saying a manufacturer
> should bear some of the risk of trying out new products. Supermarkets
> also struggle regularly with the thicket of companies wanting to get
> their goods displayed.
> > "They end up saying, 'If you really believe in your product, help us
> sell it,' " explained Robert Vosburgh, fresh market editor at
> Supermarket News, a New York-based trade magazine.
> > Three trends have dovetailed to give Ralphs and other large chains
> unprecedented clout -- supermarket consolidation, advances in product
> tracking technology and the rising visibility of the produce section.
> > Today, six big chains -- Kroger Co., Wal-Mart Supercenters,
> Albertson's, Safeway, Supervalu and Ahold Co. USA (a subsidiary of the
> Dutch grocery giant Royal Ahold NV) -- control nearly half of the
> nation's grocery sales.
> > Increasingly, supermarkets have been able to pinpoint the value of
> their shelf space and charge slotting fees accordingly through UPC bar
> codes -- the ubiquitous black and white strips that track sales and
> profits -- stamped on non-produce packaged goods.
> > Until recently, supermarkets haven't been able to put a bar code on,
> say, an avocado, one hurdle that has shielded produce suppliers from
> slotting fees. But that's changing, too.
> > "Produce has become more identifiable with PLUs, or price lookup
> codes, so retailers can now track sales," said Roberta Cook,
> agricultural economics professor at the University of California, Davis.
> > Produce, too, has changed. Now consumers can buy packaged precut
> baby carrots and fresh fruit salads, along with several choices of mixed
> > "You could probably tie the rise of these produce slotting fees to
> the arrival of bagged salads," Supermarket News' Vosburgh said.
> > Sheer growth also has made grocery story produce departments hard to
> ignore: 10 years ago, the typical produce department carried about 200
> items. Now it's more like 600.
> > All of this would seem to be good news for growers, but they say the
> shrinking number of grocery chains consolidates power in the hands of a
> few chains that are happy to exercise their newfound market power.
> > "The entire fresh tomato industry in California lost $40 million to
> $60 million last year because there are so few retailers and so many
> shippers who have no leverage in setting price in the last three to four
> years," said Ed Beckman, president of the California Tomato Commission.
> > Last year, three tomato shippers statewide closed down, putting
> roughly 700 people out of work. The emergence of slotting fees has been
> the final straw for many tomato growers already struggling.
> > "A lot of them see slotting fees as paying for the so-called
> privilege to sell their tomatoes at a loss," Beckman said.
> > Of the more than a dozen fruit and vegetable growers contacted by
> The Bee, none would comment on the slotting fee trend, fearing
> supermarket retaliation.
> > "It's so easy to be blackballed and then everything gets shut down
> for a producer," said Western Growers Association spokeswoman Heather
> Flower. "It's just way too risky to talk about slotting fees."
> > In a letter to Ralphs' executives, the association urged the chain
> to refund the "unconscionable fee."
> > One local produce distributor speculated that slotting fees won't
> fly in the long run.
> > "A farmer may pay a slotting fee for the season and in one day
> Mother Nature wipes out his entire crop," said Michael Marks, marketing
> director at JC Produce, a wholesale distributor in West Sacramento.
> > Many tomato growers already are refusing to pay the fees, the state
> Tomato Commission reported, choosing instead to sell to smaller chains.
> > No major grocery chain would comment on slotting charges. But
> several sources said Raley's and Wal-Mart do not now demand
> pay-for-space fees from its produce suppliers.
> > The upfront cash practice has drawn the attention of the U.S.
> Department of Agriculture, the General Accounting Office and the Federal
> Trade Commission.
> > "There's still a lot of confusion about what a slotting fee is and
> what it isn't," said Mark Denbaly, chief of the food markets branch at
> the USDA. "Most businesses have one individual experience or observation
> with slotting and have no idea how pervasive it is or the magnitude.
> That's part of what we're trying to understand."
> > Problems? Suggestions?
> <http://www.sacbee.com/about_us/sacbeemail.html>Let us hear from you.
> > Copyright © The Sacramento Bee
> Marcie A. Rosenzweig
> Full Circle Organic Farm
> Auburn, CA
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