Download US Food Wholesaling - Livestock Economics

EconS 451: Lecture #3
U.S. Food Wholesaling
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Understand common terms/definitions in the Food Wholesaling
Industry.
Understand the distribution of activities by type of wholesaler, product
type and customer.
Evaluate changes in industry concentration relative to profitability
changes in the wholesaling industry.
Understand why direct-store delivery businesses (manufacturers) are
typically concentrated in a specific product type.
Describe why the growth in Warehouse clubs has been so strong over
the last ten years and where the future growth in these types of
businesses is likely to occur.
Source: U.S. Food Marketing System, 2002, ERS-USDA
Wholesaling Definitions
Source: U.S. Food Marketing System, 2002, ERS-USDA
Wholesaling Definitions
Source: U.S. Food Marketing System, 2002, ERS-USDA
U.S. Food Wholesaling /
Distribution of Wholesaling Services
Merchants
• Buy and resale food from many
manufactures and then
assemble/repackage to area
retailers or food service
establishments.
MSBO
• Sales people who work for the
manufacturer.
Agents and Brokers
• Buy and sale goods owned by
other simply on commission.
Source: U.S. Food Marketing System, 2002, ERS-USDA
U.S. Food Wholesaling /
Distribution by Product Type
General Line Wholesalers
• Dry groceries
• Perishable food
• Non-food products
Specialty Wholesalers
• Dairy, Poultry, Meat, Fresh
fruits/vegetables.
Miscellaneous Wholesalers
• Coffee
• Baked goods
• Canned goods
• Soft drinks
Source: U.S. Food Marketing System, 2002, ERS-USDA
U.S. Food Wholesaling /
Distribution by Customer Type
Growth in Non-Traditional
Wholesaler / Retailer
Relationship
• Third Party Wholesalers (38%)
• Supervalu, Fleming, Nash Finch
• Direct Store Delivery
Manufacturers (28%)
• Coca-Cola, Dreyer Ice Cream,
Frito Lay.
• Self-Distributing Retailers (34%)
• Kroger, Albertsons, Wal-Mart,
Safeway
Source: U.S. Food Marketing System, 2002, ERS-USDA
Concentration in Wholesaling
Source: U.S. Food Marketing System, 2002, ERS-USDA
Profitability in Wholesaling
Source: U.S. Food Marketing System, 2002, ERS-USDA
Sales of Top Grocery Wholesalers
Source: U.S. Food Marketing System, 2002, ERS-USDA
Two Giants Take
Divergent Approaches:
• Supervalue
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10th largest supermarket retailer
Strives to increase retail acquisitions
Focus on supply chain logistics to lower costs
Seeks to gain market power through increasing retail supermarket
chains
• http://www.supervalu.com
• Fleming
• Bankruptcy reorganization
• Re-organized as Core-Mark
• Core-Mark International
Source: U.S. Food Marketing System, 2002, ERS-USDA
Sales of Top Food Service Distributors
Source: U.S. Food Marketing System, 2002, ERS-USDA
Acquisition by Type of Firm
Source: U.S. Food Marketing System, 2002, ERS-USDA
Growth of Warehouse Clubs
Source: U.S. Food Marketing System, 2002, ERS-USDA
Summary!
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Be able to explain and describe the different wholesale sector terms and
components.
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Understand the relationship between manufacturing, wholesaling, distribution
channels and food retail and how these types of businesses are connected.
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Explain the changes in industry concentration occurring in the wholesale industry,
by product type.
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Be able to describe the anomaly that occurred in the mid-1990’s related to grossmargins in the wholesaling industry and concentration.
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Describe the two different marketing strategies that the two dominant broadline
wholesalers Supervalu and Fleming – Core Mark are pursuing and early results of
these efforts.
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Understand the value of EDI, ECR, EFR and other real-time information systems to
the efficient wholesaling operations.
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Be able to describe the conditions leading up to the growth in Wholesale clubs.
Source: U.S. Food Marketing System, 2002, ERS-USDA
Sales of Top Grocery Wholesalers
Source: U.S. Food Marketing System, 2002, ERS-USDA
Two Giants Take
Divergent Approaches:
• Supervalue
•
•
•
•
10th largest supermarket retailer
Strives to increase retail acquisitions
Focus on supply chain logistics to lower costs
Seeks to gain market power through increasing retail supermarket
chains
• http://www.supervalu.com
• Fleming
• Bankruptcy reorganization
• Re-organized as Core-Mark
• Core-Mark International
Source: U.S. Food Marketing System, 2002, ERS-USDA