Slotting Allowances as a Facilitating Practice by Food Processors in Wholesale Grocery Markets: Profitability and Welfare Effects

Hamilton, Stephen F.
November 2003
American Journal of Agricultural Economics;Nov2003, Vol. 85 Issue 4, p797
Academic Journal
Slotting allowances, which are lump-sum transfers paid by food manufacturers to grocery retailers in return for various retail concessions, are becoming increasingly common in wholesale grocery markets. This article extends the literature on slotting allowances by considering two features that previously have been ignored: the role of food processors in determining these pricing arrangements, and the effect of slotting allowances on the size and distribution of economic surplus. Slotting allowances motivated by food processors increase procurement quantities and farm prices, and this raises farm surplus, increases total producer surplus, and improves consumer welfare in the food system.


Related Articles

  • Shelf-Help? Barlas, Stephen // Entrepreneur;Oct2002, Vol. 30 Issue 10, p28 

    Reports on the U.S. Federal Trade Commission's rejection of a petition for changes in slotting allowances companies pay groceries for prime shelf placement. Impact of the decision on small manufacturers.

  • Nothing but net/net. Genuardi, Mike // Progressive Grocer;9/1/2005, Vol. 84 Issue 12, p76 

    The article offers observation on net/net pricing in the U.S. grocery business. It explains the concept of net/net pricing. It recalls an experience with net/net pricing in the produce department. It discusses the problem associated with slotting fees.

  • Notes From Orlando. Feig, Barry // Frozen Food Age;Nov2002, Vol. 51 Issue 4, p18 

    Focuses on the attitude of supermarkets toward slotting allowances, based on conversations among frozen food managers during the 'Frozen Food Age' Workshop held in Orlando, Florida in October 2002. Implication on product introduction; Impact on small retailers; Other market trends in frozen...

  • Too Clever by Half? Feig, Barry // Frozen Food Age;Jan2003, Vol. 51 Issue 6, p20 

    Comments that Kraft Foods Incorporated's payment policy that surfaced in late November 2002 indicates that slotting is getting a second look. Total slotting spending by major manufacturers; Successful chains that are not charging slotting fees.

  • Small companies protest slotting allowances.  // Marketing News;1/16/89, Vol. 23 Issue 2, p2 

    The article focuses on the complaints raised by small manufacturers concerning slotting allowances being charged by grocery companies for shelf space in their stores in the U.S. Small companies claim that slotting allowances stifle new products, limit their ability to expand and cost consumers...

  • INTRODUCTION INCENTIVES. Gallagher, Julie // SN: Supermarket News;10/23/2006, Vol. 54 Issue 43, p65 

    The article reports that manufacturers are incentivizing retailers to expedite new product introductions with financial rewards. The proliferation of new products is changing the shape of slotting fees. Unlike traditional slotting fees, paid to compensate retailers for the risk assumed for...

  • PLUGGED IN. Rivkin, Jill // Private Label Buyer;Jul2007, Vol. 21 Issue 7, p11 

    The article presents excerpts of news and issues, online discussions, and instant polls related to the retail industry from RetailWire.com. It is noted that an article in "The Financial Times" has a number of critical observations to make of the U.S. grocery business including the author's...

  • Manufacturers fighting back with alternative retail outlets. Schlossberg, Howard // Marketing News;8/3/1992, Vol. 26 Issue 16, p9 

    The article focuses on the move of manufacturers to establish deals with retail outlets as a way to compensate for the loss of their promotional margins at grocery stores due to slotting allowances and forward buying. The relation of manufacturers with clubs put supermarkets at a disadvantageous...

  • Wal-Mart tops list for new food lines. Thompson, Stephanie // Advertising Age;4/29/2002, Vol. 73 Issue 17, p4 

    Reports that many food marketers test new product lines at Wal-Mart Stores. Sales of Wal-Mart's grocery departments; Lack of slotting fees at Wal-Mart for new products; How slotting fees can negate profits on new products.


Read the Article


Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics