January 10, 2005

The Don’ts and Do’s of Supplier Merchandising Alcohol Beverages

Michael Brill Newman

As is well known to the industry in California and other states, suppliers of alcohol beverages (i.e., manufacturers or wholesalers) are generally restricted by “tied-house” laws from providing things of value and services to retailers. Most states, by statute or regulation, or sometimes by policy interpretation, provide for exceptions for certain advertising items or merchandising or shelf management activities.

California prohibits a supplier from furnishing a service to a retailer unless there is an express exception provided by the legislature in the ABC Act. In other words, unless a statute, in this case §25503.2 of the Act, allows for a particular merchandising service, it is illegal.

What services may or may not suppliers provide in California to retail stores? Suppliers may rotate or move their own products from one shelf to another shelf. Suppliers may dust or clean their products on the shelves but may not clean the shelves themselves. Suppliers may take inventory of their own products. Generally, unless its beer, suppliers may not stock shelves or “cold boxes.” However, suppliers may stock floor displays of their own products. Wine and spirits suppliers may, under legislation enacted in 1999 in response to one ABC crackdown on illegal supplier activity, stock or restock shelves for the introduction of new products, a store “reset” of existing products, or the setting or arranging of a new store.

Wine and spirits suppliers may not price-mark their own or other products placed on shelves but may price-mark bottles on floor displays. A supplier may stock, stack, or arrange its products in a retailer’s storeroom provided the products of other suppliers are not disturbed. Suppliers may furnish schematics or “plan-o-grams” but only for the type of alcohol beverage products they supply (i.e., beer, wine and/or distilled spirits).

Violations of the ABC Act by suppliers providing illegal services and retailers inducing or accepting such services can result in license suspensions or significant fines. The California ABC continues to be proactive in investigating and disciplining licensees not complying with these restrictions. It is advisable that both suppliers and retailers make a concerted effort to understand the laws regarding merchandising.

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