Slotting fees are charges that supermarkets and chain stores impose on manufacturers for carrying their products. This practice emerged in the US in the late 1970s and is widespread, especially among large chains. Slotting fees help stores expand and make a profit, but they can limit product diversity and harm small companies. Some food activists argue that they harm both consumers and producers by limiting consumer choice.
A slotting fee is a fee that a supermarket or chain store charges manufacturers for transporting their products. You might be surprised to learn about slotting fees, as it seems a little strange to pay for the privilege of having your product featured in supermarket stores, but they are actually a huge source of revenue for many supermarkets and chains, despite attempts to regulation in many parts of the world.
This practice emerged in the United States in the late 1970s, and while it’s not an industry standard, it is widespread, especially among very large chains. Essentially, these stores charge a fee for carrying new products; products that are already on the shelf may also have slotting costs assessed. The slotting fee for a brand new product is sometimes called the “product introduction fee”. Stores can also institute a ‘pay and stay’ policy when they change hands, meaning manufacturers will be required to pay a slot fee if they want their products to stay on shelf.
From a food industry point of view, slotting fees are extremely affordable. They act as insurance against new products failing, ensuring that stores make a reasonable profit on them and justifying the allocation of warehouse space. Slotting fees also help stores expand and can aid in decisions about what types of products to carry where. For plum spots like log caps, companies can pay extremely high slotting fees; in some cases, stores actually make more money from the slotting fee than from product sales.
Manufacturers, of course, think very differently about slotting fees. Small companies typically cannot afford to pay slot fees, making it difficult for them to gain product exposure, as they can only supply stock to smaller chains or individually owned stores that don’t charge slot fees. Some manufacturers have banded together to lobby against such fees to stock products, arguing they are unfair to small companies.
Food historians believe that slotting fees have dramatically changed the American supermarket landscape by reducing the diversity of products available to consumers. The American food market is heavily dominated by a small group of large players who can afford slotting fees and complex distribution systems, leaving out the smaller companies. Some food activists have also spoken out against the slotting fare concept, arguing that it harms both consumers and producers by limiting consumers’ freedom of choice.
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