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Frito-Lay Investigations : 06/21/1996: Memorandum

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Memorandum U.S. Department of Justice Seal

Subject: [REDACTED TEXT (b7D)] Date: June 21, 1996

To: Frito Files From: Jill Ptacek

On June 17,1996,1 spoke to [REDACTED TEXT (b7D)] called to complain about the hardships faced by some of the products he brokers due to retailers charging for shelf space. He only complained about the stores' actions--he did not make any complaints about Frito's marketing practices.

A food broker takes products made by manufacturers and tries to get them placed in retail outlets. Once a store agrees to carry the product, the manufacturer makes delivery of the product to the stores if the item is a warehouse product, or distributors selected by the manufacturer get the product to the store using DSD. Brokers usually represent companies that are too small to effectively market and distribute their product to stores. The broker is the interface with the retailer and is involved in negotiating shelf fees for space for the products (the manufacturer bears this cost). In return, the broker makes 5% on each sale--brokers do not take title to the product.

[REDACTED TEXT (b7D)] indicated that shelf fees are becoming more and more prevalent-- to the disadvantage of small manufacturers, such as his clients. In most instances [REDACTED TEXT (b7D)] must pay a store an slotting fee to get a product into stores; however this is no guarantee that the store will subsequently pull the product.


[REDACTED TEXT (b4), (b7D)] related two incidents to me. He said that last year the [REDACTED TEXT (b4), (b7D)] asked [REDACTED TEXT (b4), (b7D)] one of [REDACTED TEXT (b4), (b7D)] customer, to pay [REDACTED TEXT (b4), (b7D)] for two feet of space in all of their stores. [REDACTED TEXT (b4), (b7D)] paid. However, at the end of the year as [REDACTED TEXT (b4), (b7D)] had not seen any increase in their sales, they told [REDACTED TEXT (b4), (b7D)] they would not pay the fee. They lost the account.

[REDACTED TEXT (b4), (b7D)] also represents [REDACTED TEXT (b4), (b7D)] which sells quality whole coffee beans. They have two principle competitors --one is owned by [REDACTED TEXT (b4), (b7D)] the other by [REDACTED TEXT (b4), (b7D)] has been in [REDACTED TEXT (b4), (b7D)] stores for about a year. This year [REDACTED TEXT (b4), (b7D)] sent [REDACTED TEXT (b4), (b7D)] a questionnaire asking how much they were going to pay for shelf space, promotions, ad space, in store demonstrations, etc. [REDACTED TEXT (b4), (b7D)] says that they will not be able to beat whatever [REDACTED TEXT (b4), (b7D)] offers and as most grocery stores carry only carry one brand of dispenser coffee beans, their inability to match will probably cause them to exit the store.

So/So #11557size>

Updated June 25, 2015