Slotting Fees for Organic Retail Products: Evidence from a Survey of U.S. Food Retailers

This paper investigates the prevalence of slotting fees in organic packaged and prepared products, and identifies the factors that influence the relative size of slotting fees. Based on a 2009 survey of U.S. food retailers, we find that 31 percent of surveyed retailers accept slotting fees for organic packaged and prepared products. Previous literature on slotting fees provides arguments for two rationales, one focused on the role slotting fees play in establishing an efficient allocation of shelf space for new products and the other focused on how slotting fees can be used strategically to price discriminate or otherwise increase rents to parties with more bargaining power. Using an ordered logit regression of the relative magnitude of slotting fees on retailer characteristics, we estimate coefficients that are mostly consistent with the economic efficiency rationale, with a few being consistent with the market power/strategic behavior rationale. More specifically, we find that the magnitude of slotting fees for organic products, relative to their non-organic counterparts, depends on a number of retailer characteristics, including the number of stores in the retailer’s chain, a retailer’s total sales, and the size of its organic marketing budget.

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 Record created 2017-04-01, last modified 2019-08-26

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