Kroger Proposes A Distributor Oversee Brand Placement (Updated with TTB Response)

2.18.2016

by Michael Kaiser

Last week we reported on a proposal by the retailer Kroger that would have allowed a distributor to oversee brand placement (see Kroger Proposes A Distributor Oversee Brand Placement). WineAmerica and our other alcohol industry partners had some serious concerns with this proposal, and we made our concerns known last fall in a letter to TTB and the Treasury Department. The TTB has issued a ruling on shelf schematics and plans in relation to tied house laws. The ruling appears to imply that the Kroger proposal would violate certain tied house provisions of the Federal Alcohol Administration Act. There are five specific items that TTB has stated would be in violation of tied house rules:

(1) Assuming, in whole or in part, a retailer’s purchasing or pricing decisions, or shelf stocking decisions involving a competitor’s products.

(2) Receiving and analyzing, on behalf of the retailer, confidential and/or proprietary competitor information.

(3) Furnishing to the retailer items of value, including market data from third party vendors.

(4) Providing follow-up services to monitor and revise the schematics where such activity involves an agent or representative of the industry member communicating (on behalf of the retailer) with the retailer’s stores, vendors, representatives, wholesalers, and suppliers concerning daily operational matters (such as store resets, add and delete item lists, advertisements and promotions).

(5) Furnishing a retailer with human resources to perform merchandising or other functions, with the exception of stocking, rotation or pricing services of the industry member’s own product, as permitted in § 6.99(a) of the TTB regulations.

If the TTB deems that any of these practices have been enacted by a supplier, they are subject to investigation by TTB. Of note in the Kroger/Southern example is item number 3. Under the Kroger proposal, producers would have to pay the supplier/distributor to have their products placed on Kroger shelves. This would clearly be an “item of value” from a producer to a supplier and in turn, with this proposal, a retailer.  However, producers and suppliers will now have to be careful with the information shared moving forward.

WineAmerica appreciates the quick response from TTB on this subject and we look forward to working with them on this issue in the future. To read their entire ruling, please go here.

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Questions? Contact to Michael Kaiser, Director of Public Affairs, mkaiser@wineamerica.org.

WineAmerica is the national voice the American wine industry. Based in Washington, D.C., WineAmerica represents wineries in 43 states and leads a coalition of state and regional wine and grape associations.  As an industry leader, WineAmerica encourages the dynamic growth and development of American wineries and winegrowing through the advancement and advocacy of sound public policy.

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