The letter from Ralphs Grocery Co. to its fruit and vegetable suppliers began cordially enough. The implication was that if they didn't, there would be no space on the chains' shelves for their goods. Ralphs' letter is one demonstration of a dramatic escalation in the grocery industry's demands for so-called slotting fees, which food companies pay to get supermarket shelf space for new products.
Mergers have sharply consolidated supermarket ownership in recent years.
Regulators are watching with concern. Three federal investigations into slotting practices are underway, but fear prevents many food makers from coming forward. Retailers have so intimidated suppliers that witnesses at a recent Senate hearing on slotting wore hoods to conceal their identities. Like Hollywood accounting, the economics of slotting and grocery pricing are shrouded in mystery, fueling the debate on the system's ultimate effect on consumers. Critics also say slotting results in less variety on store shelves.