Category captains
Categories are determinants in the food business. And "category captains", the vendors that supermarkets choose to help manage each category in the store, increasingly wield power. This growing might is becoming a major antitrust concern, Not only are the supermarkets controlling whetehr your product gets on the shelf, but also, perhaps, your biggest competitor.
An article by Albert Foer for the American Antitrust Institute ("The Category Captain and the Consolidating Food industry", 2001) explores this problem. The article deals with the "major restructuring" of the food industry, and wonders whether the US antitrust authority, the FTC, is flexible enough to deal with the changing reality.
One of Foer's examples was the attempted merger of the Heinz and Beechnut companies. As he writes:
The three players in the jarred baby food industry are Gerber (by far the dominant firm), Heinz, and Beechnut. Gerber is on the shelf in 90% of American supermarkets. Generally, there is only one other brand along with Gerber…Heinz and Beechnut are locked in battle at the wholesale level to gain (and maintain) the position as the number two brand of retail shelves.
The merger was eventually knocked down, and one of the key issues was the problem of access to shelf space. But the FTC near the same time allowed Nestle and Ralston Purina to combine, even though it made for a major concentration in the pet food industry. Foer believes that the antitrust authority needs to examine "the dynamics of shelf space acquisition."
In other words, it's not just bigness that determines a loss of market competition; it's also a question of access. When a company becomes a category captain, it becomes a gatekeeper, a dominator of a market segment, no matter whether it has a 30%, 40%, or 70% share.
From the supplier's perspective, being designated a category captain is economically valuable and suppliers compete for this position even though it entails substantial expense. Category captains have access (often in advance) to information, including pricing and promotional plans, about all the products in the category, so that they can develop comprehensive plans (including shelf-allocation planograms, pricing, and promotions) for the retailer. This gives them enormous knowledge about their direct and potential competitors.
A category captain who holds that position at many retailers has the opportunity to serve as a "hub," facilitating collusion among the retailers. Such a category captain can also coordinate oligopolistic price leadership among its rivals because of its special access to competitors' marketing plans. Further, it can provide advice that is intended to disadvantage its rivals. Since a retailer is not obligated to take the advice it is offered, the influence of a category captain is difficult to quantify and therefore uncongenial to current modes of antitrust analysis.
