I know that the grocery chains ( Safeway, Kroger) are paid by
manufacturers/ wholesalers for shelf space, display space, etc. I need
some general info of how pricing is set and hopefully some specific
number examples. Wine, spirits, beverages would be preferable.

Hi jmanly,

I used to work for a large, Midwestern grocery store chain.  Here is
how things are generally done:

First of all, most retailers charge a "slotting allowance" to stock a
new product at all.  These run up to $25,000 per item per store, and
may also include a quantity of free product, such as a case or two per
store, to provide an initial supply.

Display space is obtained in two ways, primarily.  Some companies,
like Coca-Cola, Pepsi, and Frito-Lay, pay an annual fee of $1 million
or more for a permanent end cap or rack separate from their primary
shelf space in each store.  A certain quantity of additional
promotional displays of product per year, typically around major
holidays, may also be included whereby the vendor can place pallets of
product in each store's primary display area.

The other way to get display space is to offer the retailer a
temporary "deal," whereby the cost to the retailer of the product is
significantly reduced so that the retailer can promote it as a sale
price.  Depending on the type of deal and the popularity of the
product, the product may be displayed as an aisle stack, on an end
cap, as a shipper, stacked on a pallet, or stacked in the store's
primary display area.  The more promotionally sensitive the product,
the more display space it will get for a given deal simply because the
store has to make more available to the consumer to satisfy demand
without having to continuously restock or be out of stock.

Alcoholic beverages are a special case in that they are treated
differently by each state.  In Ohio at least, slotting allowances were
illegal, and stores had to pay cash on delivery for alcoholic
beverages.  Based on the following article, the illegality of slotting
allowances also appears to be true for California.

http://csf.colorado.edu/archive/2000/food_security/msg00148.html
Los Angeles Times, January 29, 2000
"But slotting is legal, except on alcoholic beverages."

The Los Angeles Times article has a lot of information regarding the
types and amounts of slotting fees charged in the Southern California
market as of January 2000.  These strike me as being fairly typical.

Here is another article discussing "slotting allowances":

http://www.nfraweb.org/government_relations/ftc.html
by Michael R. McLeod, 
McLeod, Watkinson & Miller
National Frozen & Refrigerated Foods Association Government
Representative

"The slotting fee cost varies depending on numerous factors, such as
whether the supplier has a proven track record, whether consumer
testing has been carried out, whether the product is carried by
competitors in the same market, and whether the supplier has a
well-thought-out advertising program. The amount can be as small as
several hundred dollars to have a product introduced in a single store
to many thousands of dollars for a chain-wide promotion.

The supermarket sector argues that the overall cost to the industry is
unknown because the fees are not commonly broken out in contracts
between trading partners. However, some economists have estimated that
slotting fees can be up to $25,000 per item per store, which can
translate to $3 million for a nationwide chain. Economists have
estimated that slotting fees account for up to $9 billion in annual
promotional expenditures, and thus represent about 16% of all new
product introduction costs."

I hope this information is helpful to you.

Wonko

Excellent answer. I knew the fees were high but not that high. Wonko,
would you please e-mail me at jmanly@cox.net. I have a project I am
working on and would like to get your perspective as an ex-grocer.
Thank you