Food Wholesaling and Retailing

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Food Wholesaling and Retailing

• AGBU 430
• Chapter 6

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The Food Wholesale-Retail Network
Production Area Assembly Markets
Wholesalers Import/
Agents, Chain-store Merchant
Exporters Brokers Warehouses Wholesalers
Retailers Food stores
Foodservice
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Food Wholesaling

• Wholesalers do not sell directly to consumers
• 10 of food bill
• Retailer cant search out all deals with
  producers and processors

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Large Food Wholesaling Firms

• SuperValue, Inc. (MN)
• Fleming Cos. Inc. (OK)
• McLane Co, Inc. (TX)

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Types of Wholesalers

• Merchant wholesalers buy, sell, and store
  grocery products and perform numerous other
  marketing functions
• Full service wide variety of services
• Limited function
• General line handle a wide variety
• Specialty line handle selective line

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Types of Wholesalers cont

• Brokers do not take title, but perform sales
  related marketing functions for a commission
• Manufacturers Sales Branch perform storage,
  selling, transportation, and intelligence
  marketing functions

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Wholesaling Trends

• Importance of volume
• Average size growing
• Market concentration growing
• Technology
• Globalization
• Threatened by retailers performing their
  functions

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Food Retailing

• Food Retailing directly services consumers at
  the end of the marketing chain
• Largest retail sector in economy (25)
• 11 of DI spent on food
• Employ 80 of food marketing system
• Approx. 50 food expenditure in foodstores and
  the other half in food service est.
• Food service outpacing foodstore sales

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Food Retailers

• Krogers
• Albertsons
• Wal-Mart
• Costco
• Sams Club
• HEB

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Trends in Food Retailing

• Inc. in food items in store
• Inc. in annual sales
• Small margins
• Rise of chainstore group of 11 or more
  supermarkets (2 m annual sales, self-service,
  dairy, meat, product, dry grocery)

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Chainstore vs. Supermarket

• Chainstore
• efficiency
• Supermarket
• Add utility
• Consumer-driven

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USDA defined foodstore formats

• Conventional supermarket
• Superstores
• Warehouse foodstores
• Hypermarket
• Wholesale club
• Gourmet foodstore
• Convenience store

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U.S. Retail Food Sales
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Grocery FormatLife Cycle
Traditional Supermarket Discounters
Convenience stores Combo stores Freezer centers
Variety stores Small independent Butchers Home
Delivery
Tele-shopping
Internet shopping
Innovative
Decline
Growth
Maturity
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How 100 Is Spent In the Supermarket
Non edibles 9.4
Meat, Seafood 15.4
Misc. Grocery 16.1
Dairy 9.1
Deli 3.5
Fruits, Vegs. 10.6
Health, Beauty 4.1
Bakery Prods 4.9
Beverages 9.8
Dinners 4.9
Frozen Foods 6.6
Snacks 5.5
SOURCE Progressive Grocerss 67th Annual Report
of the Grocery Industry, April 1999. Reprinted
with permission.
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The Wheel of Retailing
Low Prices, Low Services
Reduce Services, Lower Costs
Add Services, Raise Costs
High Prices, High Services
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Retail Pricing

• Market Basket Pricing
• Different stores have different prices on each
  item (e.g. meat, produce, dairy)
• Overall marketbasket price is similar for
  comparable stores
• Variable Price Merchandising
• Frequent price specials to get consumers
  attention
• Every day low prices no specials

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Competition AmongFood Stores

• Location, Convenience
• Size, Assortment, Variety
• Prices (Individual items, Marketbasket)
• Quality (fresh products, brands)
• Services
• Store Loyalty Programs
• Atmosphere (Friendly, Clean, etc.)
• Rapid Shopping, Short Checkouts

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The Foodservice Sector(Food Away From Home)

• Approx. 50 of Retail Food Sales, Growing
• ½ of all restaurants fail
• Fast Food, Restaurants, Hotels, Drinking Places,
  Vending, Supermarkets
• Schools, Offices, Hospitals, Military
• High Convenience, Labor Intensive
• A Form of Entertainment
• Small Farmers Share