National slotting fees can run from $1-$2 million per SKU, so avoiding them is 'money in the bank.' How can consumer product manufacturers achieve significant new distribution and sales without paying slotting allowances? Would your company benefit? Here are five different (and proven) techniques for avoiding costly slotting fees.
Method 1: Control Brand?�A�A�
When you offer a brand to a retail chain for their exclusive use it's called a Control Brand. The brand becomes the chain's own brand, you don't 'own' it - the chain does, so you don't have to pay slotting. The advantage to the chain is that you've done all the work (and paid all the bills) to create the brand, and then handed them a ready-made product line. The advantage to you is future profits from new sales volume with minimal promotion costs. You also earn a different relationship with your buyer/customer: you're more of a partner, not simply a sales person.
Example: Steakhouse Breads at Delhaize -- A company that creates fine artisan breads developed a line of 8 oz. dinner table bread loaves they named, steakhouse breads.™ To enhance the 'steakhouse' concept and exhibit their breads at the point of sale, they created a floor display for placement next to the supermarkets' refrigerated meat cases. The bread label features a 'steakhouse' motif -- large enough to catch the shopper's eye but still shows the gorgeous patina of the artisan bread. They sold the concept to the Delhaize Group and achieved immediate distribution in Hannaford, Food Lion, Bloom, Bottom Dollar, Harveys and Sweetbay stores.
Advantages of a control brand for the retailer are significant:
An exclusive, ready-made product line that features state-of-the-art national brand-quality package design,
No development time, packaging investment or inventory makes it hassle-free, and
Best of all, they 'own' the new brand exclusively in their marketing area.
An advantage to the manufacturer: They have the opportunity to sell the concept to supermarket chains in different regions, with no additional development costs.
Method 2: Upscale Private Label
In today's marketplace, it's common practice for retailers to offer their 'own brands.' Many do this with three price and quality tiers: 1) Low price or entry level, 2) good quality with prices lower than national brands, and 3) upscale quality, equal to or better than national brands.
For example, Target uses three brand levels: 1) Up and Up, 2) Market Pantry, and 3) Archer Farms. The opportunity for the manufacturer is to match its products quality level with one of the chain's strategic price levels. Then offer the products to the chain, explaining how they fit within their 3-tier strategy. Using this method provides another way to avoid slotting fees by participating in Upscale Private Label.
Example: Offer Products that Enhance the Private Label Brand?�A�A� -- Another client that creates innovative and exotic desserts for hotels and white tablecloth restaurants offered Target the opportunity to upgrade and expand its line of Archer Farms frozen desserts. The patisserie's design firm created packages for eight of their incredible products and developed a computer-simulated door of a frozen desserts section in Target. It added a 'wow factor' to the successful buyer presentation.
Method 3: Restaurant Brand Co-Packing
A growing trend in the consumer packaged goods (CPG) food business, especially in club stores, is to use restaurant brand names in product lines. There are terrific advantages for all parties involved:
The restaurant gets to extend its franchise into retail,
The retailer has little risk by taking on a proven brand equity with a popular name, and
The manufacturer gains significant incremental sales.
The surest way to capitalize on this trend as a manufacturer is to identify restaurant brands already in the market and sell the restaurant chain your product as a potential menu item (through foodservice). Once it's on the menu, make the pitch for your product to join the brand's retail line or approach the brand's retail marketing/product development team to present your product as a logical extension of the brand product line. Demonstrate how it's a natural fit with the restaurant's offerings.
Example: UnoA� Foods -- Uno Foods has for several years offered its Uno brand at retail. To move beyond their original deep-dish pizza, appetizers and entrees (served in Uno restaurants) are now being offered on store shelves, most recently at BJ's. The packaging clearly demonstrates the advantage of extending a restaurant brand into retail.
Method 4: No Frills Private Label
'No frills' is what we traditionally think of as private label. The name of the retail chain is typically the brand name and the items in the line tend to be the fastest selling flavors, sizes and types. The packaging is attractive, but nothing fancy. The primary advantage to the manufacturer is volume, pure and simple. If your production facility needs a kick-start to get up to speed or to reach efficiency, providing a product for the 'no frills' private label business is an option. What you want to avoid is offering a unique recipe that can undercut your brand value when it shows up as a lower priced private label. To optimize the private label opportunity, you may want to create a formula just for private label.
Example: Volume-ize with The No-Frills Store Brand -- Market Basket, headquartered in Tewksbury, MA, is one of the most successful supermarket chains in the country. Their incredible store traffic is testament to their ability to deliver the best value proposition - a perfect balance between product quality and price. Market Basket is their signature brand, featured on hundreds of products in nearly every food category.
Method 5: Co-Branding
Co-Branding was more commonplace in supermarkets and club stores than it is today. Retailers partner with well-known national brands to enhance the quality perception of their private brand.
Example: Co-branding with a Signature Brand -- The best example of co-branding in our region is Costco's Kirkland Signature™ brand. Much like leading national brand marketers, Costco builds Kirkland Signature brand equity as the Costco quality standard. However, Costco still co-brands where the national brand adds a level of assurance to the Kirkland Signature brand. Kirkland Signature™ is a trademark owned by Costco Wholesale Corporation.
Clearly there is a wide array of actions the manufacturer can take to avoid slotting allowances. Beyond that, many of these actions comprise strategies you can use to advance your business.