Grocery anti-competitive practices exposed?
The Business of Food
by Jennifer Barney
Grocery Anti-Competitive Practices Exposed?
3-min read
Are you tired of waiting for POs from your distributors or retailers? Do you have unexplained out-of-stocks at the store level, but plenty of inventory at distributor warehouses? Are you pulling your hair out over mysterious charge-backs on invoices? Read on.
Nine big name distributors, retailers and branded suppliers have until mid-January to comply with an investigation by the Federal Trade Commission (FTC) into their supply chain and trade promotion practices. The companies are Walmart Inc., Amazon.com, Inc., Kroger Co., C&S Wholesale Grocers, Inc., Associated Wholesale Grocers, Inc., McLane Co, Inc. Procter & Gamble Co., Tyson Foods, Inc., and Kraft Heinz Co.
The concern is that supply chain disruptions, while real and constraining, are being used as a red herring by the industry to hide anti-competitive business practices.
Part of the investigation requests that supplier-distributor-retailer contracts be provided, ordering practices disclosed, as well as the total amount of payments made for trade promotions by suppliers to distributors and retailers.
This isn’t the first time the FTC has launched an investigation on the grocery industry. In 2003, a study was conducted on the business reasons and fairness of slotting fees paid by suppliers to retailers. That study said that the relationship between supplier and retailer was “too complex” to draw any anti-competitive conclusion. It said that slotting payments were not broken out from other promotional dollars in the historical data. How convenient.
This new investigation, almost 20 years later, is wider in scope and may or may not reveal shady conduct. I don’t know. But I do know this: those that are in the business of taking possession of consumer goods and reselling them have had their world turned upside down with shortages due to Covid, and it’s not getting much better.
When it comes to ordering, here’s what Wade Yenny, Director of Grocery at Jimbo’s has to say: “When your folks at store level are ordering, they have priorities and deadlines with the bigger distributors (like UNFI and KeHE). Those orders are going to take priority over smaller distributors and/or direct orders. So, while we certainly do some direct business, it’s harder operationally to justify in that if a store order writer runs out of time, it’s more than likely going to be the smaller distributors and/or direct business orders that get missed.”
And when it comes to making a decision on which brands to bring in, Mr. Yenny continues, “ I might love what a brand is doing, their product(s), etc…but at the end of the day if I can’t count on CONSISTENTLY being able to get additional product when I need it, I might make a hard decision to go with another brand(s) that is more reliable in supplying my stores.”
It does the world no good to have empty grocery shelves or e-comm out-of-stocks.
If you are a small brand, the more that you can demonstrate a solid supply chain and ability to fulfill orders (read: plenty of inventory) the better for you in this environment. And I want to believe, the better for quelling bad-actor suspicions.
But if you feel you’ve proven you’re solid, and you are still experiencing woes, perhaps now someone will listen. Although UNFI and KeHE are not part of this investigation, the FTC should be urged to look into these distributor charge-backs (deduction) practices and long list of complaints.
If you have something to say in this matter, the FTC is soliciting voluntary comments from companies and consumers regarding views on how the supply chain issues are affecting competition in consumer goods markets. They can be reached here.
All my best,
Jennifer
I'd love to hear from you - get in touch at jennifer@3rdandbroadway.com