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TTB Takes Aim At Kroger-SWS Shelf Display Partnership

February 12, 2016

Leading U.S. supermarket chain Kroger’s recent plan to tap Southern Wine & Spirits to oversee its shelf displays has been thrown into doubt by a TTB ruling issued at the behest of a number of industry groups.

The Kroger-SWS partnership calls for Southern to manage its shelf displays and receive compensation from suppliers on a voluntary basis. Kroger says the plan will allow for faster shelf-changes as consumer preferences rapidly shift. But some suppliers fear the move will bring higher costs and a lessening of control over their retail strategies.

Yesterday the TTB sought to clarify its position on the issue within the context of the federal government so-called “tied-house” laws. “The act by an industry member of providing a retailer with a recommended shelf plan or shelf schematic for distilled spirits, wine, or malt beverages … is not an inducement within the meaning of the FAA Act’s “Tied-house” prohibition, ” the agency began. But it added that “additional services or items of value … may constitute a prohibited inducement, and depending on the circumstances, may be deemed to place retailer independence at risk … Some industry members are providing schematics as well as additional services that far exceed (allowed practices).” That last sentence was seen as referring to the Kroger-SWS plan.

Such prohibited “additional services” would include: assuming a retailer’s purchasing or pricing decisions, or shelf-stocking decisions involving a competitor’s products; receiving or analyzing on behalf of a retailer confidential or proprietary competitor information; furnishing to the retailer items of value including market data from third-party vendors; providing follow-up services to monitor and revise the schematic when it involves communicating with other parties on the retailer’s behalf concerning daily operational matters; and furnishing a retailer with human resources to perform merchandising or other functions with the exception of stocking, rotation or pricing of the industry member’s own product. Southern Wine & Spirits declined comment, while Kroger hadn’t responded to an inquiry at press time.

The Wine & Spirits Wholesalers of America (WSWA) told SND it is still reviewing the ruling. The National Beer Wholesalers Association, however, warned in a statement, “The TTB’s directive makes clear that certain aspects of proposed programs at retail exceed the intent of the exceptions allowed for by federal law. Beer distributors should not participate in any unauthorized activity that could jeopardize their federal wholesaler permits.” We’ll have more on this story as it develops.

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