Kroger Back-Peddles on CatMan Program

FILED MAY 2, 2016

Dear Client:

After regulatory and industry pushback, Kroger has jettisoned its plan to allow Southern Wine & Spirits to set their bev-alc shelf sets and charge suppliers and distributors "voluntarily" to pay for it, something both the feds and several states have viewed askance of "tied-house" laws which ensure the independence of retailers.

IN THEIR OWN WORDS. Kroger said their plan created:

"broad industry discussion and awareness [ya think?] around what have become standard industry practices. In response, the Alcohol and Tobacco Tax and Trade Bureau (TTB) provided certainty around the issues of who can be involved, and to what extent they can be involved, in the production and execution of adult beverage shelf schematics for retailers. The rulings now provide clarity to previously confusing guidance around supplier and distributor involvement in retailers' shelf planning and product resetting processes. As a reminder, we have not implemented any new schematic or reset programs at this point."

As a result of the TTB's clarification (and a few states saying the plan was illegal), Kroger is making two key changes:

"Rather than appoint a supplier or distributor to manage our planogram program for adult beverages, we will hire a non-licensed, third-party planogram provider from outside the adult beverage industry. Private Label Marketing, or PLM, will provide this service as they do for the rest of our center store categories.
"Instead of asking participating vendors to voluntarily pay for the service, we will pay for it ourselves.

Kroger continues: "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 TTB's ruling. We said from the beginning of this discussion that we would reevaluate the structure of our program if we needed to. While the structure of our program will be different, our objectives remain exactly the same: To improve the overall shopping experience for our customers by presenting the right products in the right stores, merchandised in the right way. By establishing a single, non-licensed third party entity to write planograms, we'll ensure simplicity and consistency across many stores and better execution of sales plans.

"..... To improve speed to market - especially for innovative new products. Instead of only adjusting our sets once or twice a year, we plan to reset them regularly or seasonally, where legally permitted. Our store reset process will be the same as past practices. Regional wines and local craft beer will be the biggest beneficiary of this because they are the hottest product in most markets.

"While our Adult Beverage business is performing well, we know we have a tremendous opportunity to grow our sales, (Kroger and supplier partners), at an even faster pace in the Beer, Wine, and Spirits categories!"

PL Marketing, who will provide this service, has only one client: Kroger. It's unclear at press time who owns PL Marketing (if not Kroger itself?). Developing….

Your thoughts?

Until tomorrow, Harry

"It took me fifteen years to discover that I had no talent for writing, but I couldn't give it up because by that time I was too famous." - Robert Benchley

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