1. Is it fair for retailers to charge manufacturers to get onto store shelves? Discuss both points of view on this issue.
2. Go to www.ftc.gov/opa/2003/11/slottingallowance.shtm to read the FTC’s report on slotting fees. What did you learn from this report and what is the FTC’s position on slotting fees?
If not for a stroke of luck, consumers might never have enjoyed some of the best tortilla products sold in retail stores—the Tamxico and Wrap-Itz brands. In 2008, La Bonita Ole, maker of these brands (www.tamxicos.com), was named “Tortilla Manufacturer of the Year” by Snack & Wholesale Bakery magazine and one of the “100 Best Packaged Foods for Women” by Women’s Health magazine. But back in 1992, founder Tammy Young couldn’t afford the slotting fees required to get her brands into large retail stores or to get good shelf placement in available stores. The stroke of luck came when a high school friend’s wealthy husband become her benefactor in 1996. Now, with both brands available in major retail stores in the eastern United States—10 stockkeeping units (SKUs) of Tamxico and 12 SKUs of Wrap-Itz—La Bonita Ole is a $20 million a year company. Slotting fees, also called slotting allowances, are fees that retailers charge manufacturers to get onto retail shelves. In their early days, small manufacturers such as La Bonita Ole usually couldn’t ante up these fees, which average $10,000 per chain for each new product according to the Federal Trade Commission. Big consumer goods makers report total slotting fees in the $1 million to $2 million range per new brand. Tammy was lucky—she had a wealthy friend who helped her get started. But you have to wonder how many small manufacturers of outstanding products are denied entry into retail stores.