Disruptive Views

Rethinking Category Captains

In the US, the large grocery retailer, Kroger with 2,600 stores in 29 states is making changes to the way in which it buys and merchandises beer, wine and spirits.

The are planning to do away with a decades-old system in which the biggest alcohol producers were asked to be category captains providing advice on how much shelf-space to allocate, position on shelf, suggested retails, etc.  These large producers such as Anheuser-Busch and Diageo are not happy with the proposed change.

Kroger’s plan is to give this category captain responsibility to a privately held distributor, Southern Wine & Spirits.  Kroger is also asking producers to pay Southern Wines for the merchandising services and not them directly.  A spokesman for Southern said the fees would be voluntary and are designed to offset the estimated $12 million it would cost annually to provide shelf-planning services for Kroger.   They indicated that manufacturers who don’t pay into the program wouldn’t be adversely affected.

The liquor, wine and beer industry prefer the existing system in which they have more direct say in retailer stores.  Associations representing the producers are questioning the legality of Kroger’s plan.  What might sound to familiar and close to home, they are citing prohibition-era laws that ban alcohol manufacturers from giving retailers anything of value to keep them from marketing too aggressively.  Ontario has recently seen laws and regulations change from the prohibition era – one would think laws and regulations from 80 years ago should be reviewed for context in retail today and should have been reviewed decades ago.