CHICAGO -- Manufacturers that put pressure on their salespeople to achieve 100% distribution in a market are to blame for the skyrocketing slotting allowances imposed by some retailers, according to Evan Schlessinger, general manager of the business unit for new products at Bumble Bee Seafoods.
Schlessinger spoke at a conference here titled "Retail Shelf Success: Launching New Food and Beverage Products," hosted by The Marketing Institute, a division of the Institute for International Research, New York.
"The biggest mistake we make with our sales force is demanding: 100% ACV [all commodities volume] or it's your job. Then the sales guy will pay anything [to make a sale]," he said. Retail buyers have been heard to brag about how much they were able to extract from salespeople in slotting allowances, Schlessinger said.
"It happens more with a direct sales force because they don't know," he said. "Brokers are a little more savvy. We are all chicken. We are afraid to stand up and say no."
When Bumble Bee was told that three major retail customers in Miami wanted $100,000 to put a new product on the shelf, Schlessinger gave his brokers $100,000 but told them to offer only $50,000 to the retailers.
Schlessinger described the slotting allowances vs. percentage of all commodities volume in one market, Denver, to show there may be a disparity in what a retailer demands for the distribution he can provide.
In Denver, King Soopers has a $3,500 slotting allowance and controls 38% ACV; Safeway wants $1,500 in slotting fees and has 27% ACV; Albertson's wants $3,750 and has 12% ACV; Supervalu wants $1,000 and has 10% ACV; City Market wants $1,000 and has 8% ACV; and Nash Finch wants $500 and has 2% ACV, he said.
"Slotting is negotiable based on the strength of your product and the amount of advertising and promotional support provided. When you make a call, [the retailer] is selling you. They have rotogravure programs, television and radio ads. Everything is negotiable," Schlessinger said.
If a retailer asks too high a slotting allowance, the manufacturer can consider not selling the product to him and let him see how successful it is in the other stores in the area, Schlessinger said.
"I am a big fan of the broker sales force," he said. "Too often I have asked someone from the direct sales force for a buyer's name and he didn't know it. Brokers know. It seems harder to motivate a direct sales force. With brokers, dangle money and they will do just about anything for you."
Big brands and big ideas start from small ones, Schlessinger said.
"We are working in a leaner environment. You have to trust your gut. Technology is changing so fast. We have to shorten our thinking. It takes 100 ideas to have a successful product," he said. It really pays to be first if you are able to create a truly new product, he said. "We should try things, experiment. Minimize market research, but don't avoid it," Schlessinger said.
