American Greetings’ Slotting Fees: The $1 Billion Question

Discussion
Nov 04, 2002
George Anderson

By George Anderson


A report on Barron’s web site claims that American Greetings has slotting fee deals that exceed its book value. The estimated slotting-fee contracts bind the greeting card manufacturer to nearly $1 billion in retailer payments.


The company has been less than forthcoming in detailing the amortization of the slotting fees leading investors to wonder about its true valuation. Statements attributed to top executives at American Greetings gives the impression that the company does not have a very good handle on the matter, either.


Robert Ryder, chief financial officer, American Greetings said that the average contract period for slotting fees has not changed. The company’s chief executive officer, Morry Weiss said that contract periods are now longer than before.


Moderator’s Comment: As a whole, do retailers lose
more consumers and sales from product/space decisions based on slotting fees
than they make from those agreements?


All the industry talk (from retailers and manufacturers
alike) about category management in “party centers” has been just that, talk.
Deep manufacturer pockets always win in the end or, in this case, at the beginning.
[George
Anderson – Moderator
]

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