May 4, 2023
Blue Cloud by its simple presence is sending tremors through the liquor establishment. Nothing demonstrates this more than the rush of legislation to attack them directly.
In Illinois, my state of expertise, two bills seem inspired by this new Blue Cloud phenomenon.
SB2433 deals mainly with non-alcohol merchandise being involved in the sale of alcohol. The fear of traditional liquor wholesalers is that Blue Cloud Distributing, a branch of Pepsi, could utilize its chips portfolio, Frito Lay, to enhance liquor sales and play a chip that liquor wholesalers do not maintain.
Their biggest fear revolves around slotting fees. In the liquor industry slotting fees are illegal, a slotting fee is when a liquor manufacturer or distributor pays a retailer a fee to get on the tap handle or for better product placement on the shelf.
Unlike the liquor world, slotting fees are legal in the chips world, so it is legal to pay retailers to obtain optimal shelf space. With Frito Lay having great resources, they can pay their way onto many grocery shelves.
What disturbs the big wholesaler contingent is that through slotting fees via chips, Pepsi could utilize Frito Lay to make great in roads for alcohol brands it distributes, such as Hard Mountain Dew.
The language of the proposed legislation reads:
“Notwithstanding any provision of this Section to the contrary, the bona fide producer or vendor of non-alcoholic merchandise shall not provide something of value to a retailer for sale of non-alcoholic merchandise if the of-value item or items are a subterfuge for providing something of value for the sale of alcoholic liquor. The State Commission shall have the authority to examine records of a manufacturer class license holder, non-resident dealer, foreign importer, importing distributor, or distributor, or any parent or subsidiary thereof, for the purpose of examining all of-value transactions between such entity and a retailer.”
Now keep in mind there are already prohibitions in statute that prohibits the use of non-alcoholic merchandise to push alcohol sales, but that does not seem to matter when Blue Cloud is involved.
The legislation does not seem to be moving and may be that is because this legislation hits to close to home.
It is common knowledge that some major distributors own a large soft drink portfolio, some maintain bottle water in their portfolio, and other popular non-alcoholic items.
So, it seems in the chase to go after Blue Cloud, the legislation may have the potential to trip up other big distributors.
Another piece of legislation HB 2502 deals with where a store can display alcopops, which is essentially a flavored beverage. 235 ILCS 5/6-35
Under the alcopop law, it provides the place where alcopops can’t be advertised or displayed, which includes at children’s athletic events or using cartoons to market the product.
The legislation adds that a retailer can’t display alcopops immediately adjacent to soft drinks, water, fruit juices, and snack foods.
I think there is not a person I know that wants alcohol marketed to young children or teens.
Interestingly, all other prohibitions pertained to outside marketing, but for the first time the state is proposing to come to the retailer’s floor.
But why the legislation now, was there not an issue before Blue Cloud came? Or has Blue Cloud all the sudden made people aware that alcohol may be outside its space at an end cap of another area. Again, we should make things safe as possible, but with the suddenness of the legislation following Blue Cloud’s rise, it makes it seem that interest groups became involved to play the safe card to inhibit their powerful rival.
Blue Cloud is changing the game, I haven’t seen any entity enter the distribution tier that frightens the establishment more than them. But beware as striking Blue Cloud may cost big wholesalers a piece of the themselves.