Frito-Lay Investigations : 05/31/1996b: Memorandum: Telephone Interview

Memorandum

[REDACTED TEXT (b7D)]

products each year, the slotting fees cover the cost of setting up the products into the system and help cover losses if the products should fail. [REDACTED TEXT (b7D)]

Frito-Lay typically offered $400 per square foot for shelf space when Eagle left the market. [REDACTED TEXT (b4), (b7D)] explained that the up-front fee guarantees a profit and helps mitigate any costs of the product's failure. The customer will make one to two percent gross revenue up-front, which is a very important part of their overall revenues. Slotting fees for new items may be approximately [REDACTED TEXT (b4), (b7D)] for an up-front fee.

Exclusivity

He explains that they have had some experience of retailers discussing exclusivity. [REDACTED TEXT (b7D)]

It would be problematic if they were to lose one store because each store has a unique customer set. They seek wide availability for their products by media advertising. Each individual outlet is essential to their success. [REDACTED TEXT (b7D)] He states that they would not be able to survive in the club stores alone, if they were pushed out of grocery stores. There has been a recent consolidation of American grocery retailers. Thirty-five stores in the country do approximately 60-70 percent of the business. If you add Kmart and Wal-Mart, they make up 85-90 percent of the business. He says in the DC/Baltimore area, Wal-Mart, Kmart, Giant, and Safeway do 80 percent of all retail business.

When they discussing markets, they consider both regional and national markets. They are able to get their information from [REDACTED TEXT (b7D)] which has established a standardized measure for geographic regions. He says most of the grocery stores use the same tools.

We also spoke with [REDACTED TEXT (b7D)] Technical Brand Manager [REDACTED TEXT (b7D)] She interfaces with the category teams for the [REDACTED TEXT (b7D)]