Wholesale, Retail, and

1
Chapter 15

• Wholesale, Retail, and
• Food Service Marketing

2
Definitions

• Chain 11 or more stores under one ownership
• Independent one or as many as 10 stores under
  one ownership
• Affiliate independent retailer associated with a
  wholesaler
• Voluntary affiliate
• Cooperative affiliate

3
Geography of Distributionfor W-Rs

• Generally organized around larger metropolitan
  areas
• 53 distribution areas cover the U.S.
• Typical area served by 10 or fewer chains and
  affiliate groups
• Economies of scale and vertical integration help
  competitive advantage

4
Private Label (Store)Brands

• Private label products give retailer higher
  margins and consumers lower prices
• Private brands still less popular
• Possible consumer fears about quality
• Consumer loyalty to national brand
• Higher price on national brand may connote higher
  quality
• Retailers believe private brands can develop
  consumer loyalty to store

5
Retail Market Structure

• Retail structure concentrated at local level
• Consumers tend to shop for food within three
  miles of home
• In most MAs, a few chains have over half of
  market
• Entry by new stores not easy

6
Competing for Customers

• New formats
• Growth of convenience stores
• Growth of superstores
• Growth of combination stores
• Location, merchandising, atmosphere
• Non-price competition
• New services, better service
• (continued)

7
Competing for Customers(continued)

• Promotion
• Advertising helps create stores image
• In-store promotions often paid for by company
  providing product slotting fees charged
• Promotional devices less popular today
• Pricing
• Variable price merchandising (VPM)
• Price specializing
• Everyday low pricing (ELP)

8
Whats In Stores
9
Food Service Industry

• Public eating places
• Restaurants, fast-food, bars, amusement venues,
  clubs
• Institutional food sector
• Referred to as HRI (hotels, restaurants,
  institutions)
• Schools, colleges, military service, hospitals,
  prisons, etc.
• Food service industry has steadily eroded market
  share of food retailers

10
Franchising

• Franchise (owner of trade name and concept)
  licenses franchisees to operate under name and
  format
• Franchisees typically pay royalty fees
• Multi-unit franchisees growing more popular

11
Food Serviceand Procurement

• Institutional middlemen
• Principal supplier of food service industry
• Processors use brokers to sell to middlemen
• Meat purveyors buy carcassas and fabricate cuts,
  ground beef
• Procurement by large buyers
• Larger buyers and fast-food chains have organized
  procurement systems
• Have expertise and buying power to set tight
  specs and use competitive bids

12
Class Exercise

• Visit the restaurant assigned to you and then
  prepare a report that includes the following
  information
• Marketing style
• Atmosphere
• Clientele
• Food types served
• Pricing
• Ask manager how restaurant is supplied, how
  procurement decisions are made.