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  • Writer's pictureeconomictribune

Food Fight

Updated: Sep 4, 2021

Yash Dewan

BSc Economics, UCL

If I say ‘battle for space’, most people will probably think of Palestine, Kashmir or maybe even the tube. Grocery stores, on the other hand, are rather unlikely to come to mind. However, one of the costliest and grossly underreported territorial disputes takes place, not in the Middle East or the Indian subcontinent, but on the food-laden aisles of our local supermarkets.

The layout of a supermarket is scarcely ever questioned by the everyday shopper as people don’t think about the placement of an item so much as its availability. Even the few of us who do wonder often assume that retailers randomly assort items along a shelf according to their category: biscuits, sauces, etc. The truth, however, is rarely pure and never simple. There is a hidden war being fought in the grocery section over every inch of shelf-space, and at the centre of it lies the economic concept of placement fees.

First, let us go over some basic definitions. Say you are the CEO of ‘A-maize-ing Foods Co.’, a small firm that produces corn products such as nachos, cereals and the like. The placement fees is the money you pay a retailer, such as a supermarket chain, for the placement of a product anywhere in the store[1]. The retailer could charge you from $50,000 to over $2 million[2] for every product you want displayed across their numerous stores! The exact charge, however, depends on multiple factors such as the number of outlets owned and the location you want your products displayed.

Regardless, we can already see that this is a huge cost to bear for a small firm such as yours. The payments don’t end there. Now, say your team has developed a brand new product called ‘Naughty Nachos’. In order to launch ‘Naughty Nachos’ into the market, retailers will charge you an additional one-time instalment known as the slotting fee[3]. Payments such as these often act as barriers to enter a market and heavily influence market power along with the availability and choice of products. The purpose and relevance of slotting fees is an extremely contentious topic with ample arguments from both sides. Before we delve into analysis, let us first understand their history.

The introduction of slotting fees in the mid 1980’s marked a paradigm shift in the food industry.[4] Before its introduction, the industry landscape was unevenly tilted in favour of manufacturers. They could introduce new goods without having to pay their retailers and ceaselessly bombarded supermarkets with items, neither having done any consumer research nor having any idea of the expense born by retailers when products didn’t perform. In 2003, the Federal Trade Commission noted that close to 80 to 90 percent of new products fail[5] and each failed product meant retailers had to clear warehouses, reallocate shelf space and redo logistics.

The slotting fee was introduced by the company ShopRite to tackle these issues. ShopRite saw that charging manufacturers for the introduction of each new commodity added accountability into the system. With the slotting fee in place, launching products required a much larger investment than ever before. Manufacturers could no longer pursue their ‘hit-and-miss’ strategy when it came to food as the opportunity cost of a failed product was a lot more expensive to bear.

How expensive, you ask? With per item charges often touching a million dollars, the most recent estimates suggests that slotting fees cost companies over 16 billion dollars in the year 2000 alone![6] To draw a basic analogy, the fees acted as a valve which decreased the constant flow of products retailers were having to accommodate and thus, reduced the pressure on them. But that is not all it did. It also acted as a way for retailers to gauge the confidence manufacturers had in the products they were launching. If you as CEO are willing to bear an additional expense to launch ‘Naughty Nachos’ into the market, it indicates that you are optimistic about the success of your product. Further, the fees incentivised firms to undertake market research. An unsuccessful food product had never been harder to digest.

The arguments elucidated above are the ones most often made by advocates of the slotting fee. While it did promote better products and easy allocation of shelf space, the fee also terraformed the landscape of the food industry in favour of the retailers. They possessed the key to the doors of the food markets and were now charging the manufacturers who wanted to use it. This gave them enormous power to dictate the terms of the deal, making it easy for them to demand payments that far surpassed the cost of storing and distributing new products.

Along with creating the possibility for exploitation, slotting fees also acts as a major hinderance to competition. It is easy for manufacturing giants such as PepsiCo. and Kellogg to afford heavy fees but it is the small, often innovative, firms that suffer the most. It becomes particularly difficult for new firms to introduce products that challenge the dominant suppliers as the slotting fees is simply unaffordable. Established firms often harness these policies to their advantage. In a Federal Trade Commission report on slotting fees, it was reported that larger firms were willingly ‘paying large amounts of money’ to maintain a high fees and ‘keep everyone else out’ of shelves or worse, never let them on.[7]

It does not end there, however: If slotting fees hinder competition, consider its partner in crime, the display fee. The idea of a display fee evolved from the slotting fee and entails the payments manufacturers make to occupy ‘premium’ spots with interesting esoteric names such as endcaps (ends of aisles), shippers (cardboard displays), etc.[8] Advancements in consumer psychology have allowed retailers to identify the most lucrative real estate in a store and charge the appropriate display fees. It is fascinating and no doubt scary how nuanced an understanding retailers have of the average shopper’s behaviour. They know that customers usually steer their carts counter-clockwise, select items from their left side and that the endcaps are high traffic zones.[9] Once again, it is the large food suppliers who have the resources to purchase these spots and further increase their revenues.

This market power is further monopolized due to retailers endorsing the idea of a ‘category captain’. The firm which pays the highest display fee in a particular category (ice cream, biscuits, etc.) is the one who, in a dreadful twist of irony, ‘earns’ the title of the captain. These firms are allowed to design the planograms for their respective categories, thus being able to dictate precisely which products go where.

Research suggests that approximately 55 percent of sales in a grocery store are unplanned impulse purchases and these are crucial for the profitability model of items such as soda and crisps. Frito Lay, for example, makes a much higher profit on the 90p packet of Doritos that shoppers buy impulsively while waiting to pay as compared to the 2 pound packet displayed in the aisle.[10] Supermarkets are able to get away with mark ups of over 40% above wholesale on items sold by the cash register![11] (Be careful) In such an environment, if large firms possess the mandate to allocate space and place competitors on lower shelves or behind their own products, completely out of sight, they can practically push them out of business.

Unsurprisingly, when Food and Water Watch examined 100 types of grocery products they found that on average, top firms owned 63.3% of the sales and in a third of the categories (32) four or fewer companies owned at least 75% of the sales.[12] Ideas such as the slotting fee and category captains have not only reduced competition, but also limited choice. Shoppers continue choosing the same, processed products advertised by giants such as Nestle while small, innovative firms such as Clemmy’s, often providing healthier, tastier alternatives are driven to bankruptcy. Clemmy’s vs Nestle was an infamous case in the United States depicting the unfairness of the slotting and display fees in the food industry. [13]

The primary reason why this ongoing war has remained hidden from the average consumer is because of the illusion of competition created when large companies sell under multiple brand names. Take Cadbury, Milka and Toblerone for example - brands which we assume independently compete to provide us the most toothsome chocolate are in reality owned by the same company: Mondelez International. Biscuit brands such as Ritz crackers, TUC and Oreo are all owned by Mondelez too! (Surprised? I was…)

While many in the food industry view the slotting fee as a necessary evil, there are alternative methods that are coming into the limelight. Some of them include basing the fees on forecasted sales, making a fixed amount of consumer research mandatory or launching products in a small proportion of the stores to analyse the prospects of success. These alternatives could give smaller firms a much better chance to compete against established manufacturers.

Food is something we purchase regularly. The story of the journey products make from manufacturers to retailers has taught us about placement fees and category captains, consumer psyche and even industry jargon like ‘shippers’. Most importantly, it has taught us that solutions can become problems if not updated according to the needs of today. The slotting fee was introduced as a way to help retailers allocate space and improve food products but it grew into a tool which fed the process of monopolisation in the industry. As striving economists and, more importantly, habitual consumers, it is crucial for us to understand the intricate processes which lie underneath the seemingly mundane. I hope that this article has introduced you to some of these processes and that your visits to the local TESCO and Sainsbury’s are never the same.


[1] Rivlin, Gary. “RIGGED - Center for Science in the Public Interest.”, Sept. 2016, report_0.pdf. [2] Slotting Allowances in the Retail Grocery Industry. Federal Trade Commission, Nov. 2003, [3] Rivlin, Gary. “RIGGED - Center for Science in the Public Interest.”, Sept. 2016, report_0.pdf. [4] Edwards, Phil. “The Hidden War over Grocery Shelf Space.” Vox, Vox, 22 Nov. 2016, [5] Slotting Allowances in the Retail Grocery Industry. Federal Trade Commission, Nov. 2003, [6] “Grocery Goliaths.” Food & Water Watch, 21 Oct. 2015, [7] Slotting Allowances in the Retail Grocery Industry. Federal Trade Commission, Nov. 2003, [8] Rivlin, Gary. “RIGGED - Center for Science in the Public Interest.”, Sept. 2016, report_0.pdf.

[9] Moss, Michael. “Nudged to the Produce Aisle by a Look in the Mirror.” The New York Times, The New York Times, 27 Aug. 2013,

[10] “Grocery Goliaths.” Food & Water Watch, 21 Oct. 2015,

[11] Rivlin, Gary. “RIGGED - Center for Science in the Public Interest.”, Sept. 2016, report_0.pdf. [12] “Grocery Goliaths.” Food & Water Watch, 21 Oct. 2015, [13] Watson, Elaine. “Bad News for Clemmy's in 'David vs Goliath' Unfair Competition Lawsuit against Nestlé USA.” Foodnavigator, William Reed Business Media Ltd., 2 June 2015,

Other sources:

“Groceries Supply Code of Practice.” GOV.UK,

“Online Magazine - Frozen & Refrigerated Buyer.”,


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