Kroger drops controversial alcohol payment plan
Cincinnati Business Courier
By Steve Watkins, Staff Reporter
May 5, 2016
Kroger Co. is dropping a controversial plan to change the way alcohol companies get their products onto its store shelves, and the change will give more business to a local retail consultant.
Instead of using a new system it proposed early this year that would have involved alcohol companies paying a firm that plans Kroger’s adult beverage shelf space, Cincinnati-based Kroger is switching gears and will pay an outside company itself to manage alcohol display space.
Kroger, the nation’s largest operator of traditional supermarkets, said early this year it would contract with Miami-based distributor Southern Wine & Spirits to decide which beer and wine get sold in its stores and where those products are displayed. It planned to have beer, wine and spirits vendors pay Southern Wine & Spirits for its planning services.
But many national adult beverage trade groups, including the Distilled Spirits Council, the Wine Institute and the Brewers Association, opposed the plan and complained to federal regulators. The Brewers Association’sPaul Gatza told me he considered the plan to be essentially a pay-to-play program that would squeeze out smaller craft brewers who can’t afford to pay for display space.
Federal laws prohibit alcohol companies from giving retailers anything of value, including cash, for placement in stores. The federal Alcohol and Tobacco Tax and Trade Bureau earlier this year came out with clarifications of its guidelines that indicate Kroger’s plan with Southern Wine & Spirits could break federal alcohol distribution rules.
That prompted Kroger to drop the plan with Southern Wine & Spirits. Instead, it is contracting with Newport-based P.L. Marketing, a consultant that has worked with Kroger for years on store merchandising and consumer product marketing.
P.L. Marketing will help Kroger develop plans for its beer, wine and spirits displays. Kroger wants to make its displays more consistent across its stores and change them frequently to keep up with trends in new products. It has 5,400 different display plans now that it uses in various stores and resets displays only once or twice a year. Kroger has 2,778 stores in 35 states and the District of Columbia.
The plan to have P.L. Marketing determine displays is a change from Kroger’s previous system. It had been using large alcohol companies, such as Anheuser-Busch InBev, to give input on how to display alcohol and which products should get the most prominent spaces.
Kroger told its alcohol industry partners in a letter Monday that it will use P.L. Marketing, which manages its shelf space in the rest of the “center store,” to manage the alcohol display space, Kroger spokesmanKeith Dailey said. Rather than asking vendors to pay for the display management service, Kroger is paying for the service itself.
“We believe this new approach will help us meet our goals of simplicity, consistency and better execution across the entire adult beverage department while complying with the (Alcohol and Tobacco Tax and Trade Bureau’s) ruling,” Dailey said.
Kroger’s plan for the change in its alcohol display system stays the same, Dailey said. It aims to improve the customer shopping experience, set up an independent analytics team and improve its speed to market with innovative new products.
“While our adult beverage business is performing well, we know we have a tremendous opportunity to grow sales at an even faster pace,” Dailey said.