1. The New Dynamics of Produce Buying & Selling The 2001 Becker Forum February 12, 2001 Research Conducted by Food Industry Management Program at Cornell University Wen-fei Uva Dept. of Applied Economics and Management Cornell University Modified by Georgia Agriculture Education Curriculum Office

2. RetailIndustry Structure... …fewer buyers??

3. Supermarket Structure % of total sales Sales of Top 8 Chains as a % of Total Grocery Sales

4. Top Line Kroger (28.2) Fred Meyer (14.9) 43.1 Albertson’s (16.0) American Stores (19.7) 35.7 Buttrey (0.4) Sessells (0.2) Safeway (23.7) Dominicks (2.3) 26.5 Carr Gottstein (0.5) Ahold (14.3) Giant Food (4.2) 18.5 Recent deals AcquirerAcquiredCombined value $B

5. Supermarket Structure Percent of sales Top 10 Firms as % of Total Sales...by country Percent of total sales

6. Wal-Mart Sales,1989-2001

7. Wal-Mart Stores, 1999

8. Source: Bill Bishop, Kraft Extrapolations * Projected * Food Manufacturer Sales Top 20 Customers

9. DepartmentProfile

10. Top Line  Produce departments are growing at a faster rate than supermarkets:  sales  space  SKUs  Compression of SKUs currently-- intensifying in the future department profile MOREPRODUCE=GREATERPROFITS

11. Produce Sales percent of total store sales

12. Department Size square feet  Average increase from 1994 - 2004  46% small firms  40% mid-size firms  29% large firms

13. SKUs *McLaughlin & Perosio (1994)

14. Top Line  Buyers more focused on supply side-- negotiations, procurement & logistics, NOT demand side-- merchandising and consumers the buying process

15. Produce Buyers number of buyers per firm Responsibilities Responsibilities 4 4 supplier interaction 4 4 order entry 4 4 price changes 4 4 invoice problems 4 4 store level assistance

16. Sources Over Time percent of produce purchases

17. Sources by Firm Size percent of produce purchases

18. “Spot Buying” percent of produce purchases

19. Contracts

20. SupplierProfile

21. Concentration importance of retailers’ top 10 suppliers

22. Top Line Sales of Top 10 & Top 20 WA State Apple Shippers percent of total sales

23. Produce Suppliers “Average” firm 219 suppliers today BUT decreasing to 208 by 2004

24. Preferred Supplier Attributes  Top Five Attributes  delivers consistent quality  consistent on-time delivery  price protection on rising markets  offers PLUs/UPC coding  large supply to fill majority of stores Year-round product availability not very impt very impt

25. Technology

26. Electronic Technology percent of produce purchases using

27. Bottom Line  Expand control  consolidate horizontally  integrate vertically  Develop new products  hybrids, niches, packaging  Undertake demand expansion programs  Adopt cost reducing technologies  Develop new distribution systems Grower/Shipper Strategic Responses