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Category Captainship Practices in the Retail Industry

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Retail Supply Chain Management

Part of the book series: International Series in Operations Research & Management Science ((ISOR,volume 223))

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Abstract

This chapter explores the consequences of a recent trend in consumer goods retailing wherein a retailer cedes partial control of category management decisions such as assortment and/or pricing to one of the category’s leading manufacturers (usually referred to as the captain). This process is formally referred to as Category Captainship and has been used extensively in retailing for the past decade. There are reported success stories about category captainship, but also a growing debate about its potential for anti-competitive practices by category captains. The goal of this chapter is to provide an overview of the existing research on category captainship, and identify research directions that would improve our understanding of its impact.

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Notes

  1. 1.

    While there are many cases under investigation due to claims of category captainship misconduct, one publicly known and well-documented case is the United States Tobacco Co. vs. Conwood Co. case. United States Tobacco Co. (UST), the biggest company in the smokeless-tobacco category, was recently ordered to pay a $1.05 billion antitrust award to Conwood, the second biggest competitor in the category (Greenberger 2003). Conwood had sued UST, the category captain, and had claimed that UST used its position as category captain to exclude competition and provide an advantage to its own brands. The court ruled that UST’s practices resulted in unlawful monopolization, harming competition, and consequently, the consumers. Similarly, many other captainship arrangements in the tortillas, cranberries, and carbonated soft drinks categories are being investigated for potential category captainship misconduct (Desrochers et al. 2003).

  2. 2.

    This type of linear demand system has been widely used in marketing (e.g., McGuire and Staelin 1983; Choi 1991) and economics (e.g., Vives 1999). These demand functions can be derived from an underlying consumer utility model where consumers maximize their utility.

  3. 3.

    Villas-Boas (1998) considers a manufacturer’s product line design in a setting where products are sold through an intermediary (i.e., retailer) and the intermediary does the ultimate targeting of products. Aydin and Hausman (2009) study the use of slotting fees by a manufacturer to coordinate the retailer’s assortment decision in a setting where the manufacturer sells multiple products through a single retailer.

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Authors and Affiliations

  1. Owen Graduate School of Management, Vanderbilt University, 401 21st Avenue South, Nashville, TN, 37203, USA

    Mümin Kurtuluş

  2. College of Management, Georgia Institute of Technology, 800 West Peachtree Street NW, Atlanta, GA, 30308-0520, USA

    L. Beril Toktay

Authors
  1. Mümin Kurtuluş
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  2. L. Beril Toktay
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Correspondence to Mümin Kurtuluş .

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Editors and Affiliations

  1. Department of Operations and Management and Information Systems, Leavey School of Business, Santa Clara University, Santa Clara, California, USA

    Narendra Agrawal

  2. Department of Operations and Management and Information Systems, Leavey School of Business, Santa Clara University, Santa Clara, California, USA

    Stephen A. Smith

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Kurtuluş, M., Toktay, L.B. (2015). Category Captainship Practices in the Retail Industry. In: Agrawal, N., Smith, S. (eds) Retail Supply Chain Management. International Series in Operations Research & Management Science, vol 223. Springer, Boston, MA. https://doi.org/10.1007/978-1-4899-7562-1_7

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