Slotting Fees Still Needed to Fire-Up Salsa Sales
Forbes reports that Stephen Bowling’s Valley of Mexico fire-roasted salsa has come a long way in seven years from its humble beginnings peddled from the back seat of his car. Today his salsa occupies 2,000 stores across the Northeast and Southeast. He produces 30,000 cases a year, of which he must still hand over complimentary cases for new stores’ grand openings. Instead of cash payments, Bowling pays for “free fill,” or the costs the chains incur buying cases from his distributors in exchange for a few feet on the bottom shelf. However, he has managed a tiny profit on $3 million in sales last year.
By year-end, Bowling hopes to expand with Sweet-Peño jalapeño slices and a line of breads in stores. It will cost him up to $100,000 for slotting fees. He will also have to enlarge his operation from a one-man show that outsources everything, spelling bank debt and more years of potential losses.
Bowling began his endeavor in 1993 by researching salsa recipes, consulting Mexican chefs, giving taste tests to patient friends and family before perfecting the brew. But convincing stores to stock the $4 jars was difficult. He promised prompt delivery, in-store demos and free samples, giving away some 30 percent of his initial 400 cases to grocers. In the first year, Bowling lost $6,000 on sales of $9,000.
Then while on an installation job, he met and plied the wife of a supermarket distributor with jars of salsa. Through Mutual Biscuit’s close ties to Stop & Shop, the grocery chain waived slotting fees, accepted Valley of Mexico in 80 or so stores in Connecticut and insisted that Bowling show up at the stores to hawk free samples.
He did enough business in 1995 to afford two radio commercials for $3,000. A two-minute spiel by Don “Buzzard Neck” Imus on WFAN-AM, NY, turned into a ten-minute riff on how Bowling couldn’t even afford serious airtime. The commercial helped generate buzz. That year, Valley fans contacted Shaw’s and Piggly Wiggly, demanding the supermarkets stock the salsa.
Moderator Comment: Should charging slotting fees be
ended? What would be the ideal trading process that fairly addresses the needs
of retailers, wholesalers and manufacturers?
There are many good arguments for the need of slotting
fees. Wholesalers, in particular, would have a tough time without up front dollars.
That said, there is also ample evidence that the space going to the highest
bidder system reduces a store’s ability to drive sales and create a point of
difference in the minds of consumers. [George
Anderson – Moderator]