1. Food Wholesaling, Retailing and Food Service Changing food manufacturing and distribution – market channels Integration and concentration Growth in food service Information technology Walmart Product introduction

2. Top Food Processors, Million Dollars of Sales, 1998 1Philip Morris31,416 2PepsiCo, Inc.22,348 3Coca-Cola Company18,813 4ConAgra, Inc.17,928 5IBP, Inc.12,849 6Sara Lee Corp.10,832 7Anheuser-Busch9,239 8H.J. Heinz Company9,209 9Nabisco, Inc.8,400 10Bestfoods8,374 11Tyson Foods, Inc.7,414

3. Food processing Increasing concentration, e.g. Phillip Morris (Kraft, General Foods, Oscar Mayer, Miller Brewing) buying Nabisco General Mills buying Pillsbury Cargill acquiring Continental Grain Tyson buying IBP Smithfield getting into beef Sara Lee-Earth Grains Unilever – Ben and Jerry’s

4. Wholesaling: Added value services Approximately 10% of food dollar in 1993 Wholesalers add place, time, and possession utility to food Assembly, dis-aggregating, delivery Transactions and risk-bearing functions

5. Leading Wholesalers, 2001 FirmSales $B SuperValue20.9 Fleming15.6 C&S Wholesale Grocers8.5 Wakefern Food Corp5.9 Giant Eagle4.5

6. Wholesaling trends Concentration Driven by competitive pressures Integration: Forward and backward Retailers and processors doing their own wholesaling Technological advancements Information flow and management

7. Types of food wholesalers Merchant wholesaler Largest, but declining Buy, store, sell and other marketing functions Important for small independent stores Manufacturers’ sales division Fastest growing Extension of processor Agents and brokers Smallest share and declining Do not take title, work on commission

8. Retail Grocery Wholesalers Value-added service to smaller retailers Assembly, disaggregate, reassemble Integration Larger stores can deal direct Retailers into wholesaling Walmart, Kroger Wholesalers into retailing SuperValu, Flemming

9. Food Service Wholesalers Value-added service Assembly, disaggregate, reassemble Menu planning R&D Quality control (branded products) Largest players Sysco $22.6 Billion (Leopold, IBQSN) US Food Service $17.7 Billion Performance Food Group $3.2 Billion

10. Food retailing Largest retail sector in US Grocery and food service Food accounts for 25% of retail sales Employs 80% of food system workers Trend to concentration and integration Inflation-adjusted sales are flat Growth by market share Economies of scale Information Bargaining power

12. US Supermarkets, 2000 Sales $B 1 The Kroger Company/Fred Meyer 49.0 2 Albertson's, Inc./American Stores, Inc 31.5 3 Safeway Stores, Inc 28.5 4 Wal-Mart Supercenters 22.9 5 Ahold, USA 21.8 6 Publix Supermarkets 14.7 7 Winn-Dixie Stores 13.7 8 Delhaize America 12.7

13. Club Stores Grocery Sales $Billion 19952000 Costco17.931.9 Sam's19.826.4 Total39.963.2

16. Concentration concerns Growing national market share Moderate increases in average combined shares in cities indicating no substantial lessening of competition for consumers Increased market power concerns by sellers Slotting fees paid to get market access

17. Growth of Foodservice 46% of total food sales Growth of fast food 1996 first time that more that half restaurant meals eaten off premise. Home meal replacement: HMR Supermarket response to food service

20. Top U.S. Resturants 2000 SalesChg 99-00 MillionPercent 1McDonald's20,4156.5 2Tricon14,5000.0 3Diageo8,620-1.2 4Wendy's5,8377.4 5Darden3,8269.7 1) McDonalds, Boston Market, Donatos Pizza, Chipotles Mexican Grill 2) Taco Bell, Pizza Hut, KFC 3) Burger King, Haagen-Dazs 4) Wendy's, Tim Horton 5) Bahama Breeze, Olive Garden, Red Lobster, Smokey Bones

21. Food Service Trends Pushing growth Rising incomes Demand for convenience Smaller households Limiting growth Aging population

22. Food Service Strategies Nontraditional locations McDonalds at Walmart Fast food at gas stations More variety Choice of bread at Subway McDonalds is largest US beef retailer, but less than half of McDonalds menu is beef items

23. New Products Supermarket carries 30,000 Over 16,000 introduced in 2000 Seller pay “slotting allowance” Buyers reject 60% Information technology allows better targeting

25. Product Proliferation Strategy to control shelf space Movement away this strategy Still control space Reduce the number of items Issue for industry: how to meet consumer demand for varied products (organics, labeled non-GMO, animal friendly, etc.) Ex. UK retailers

26. Emerging Retailing Developments Efficiency of supply chain Walmart Growth of foodservice Expansion of private labels New consumer issues

27. Information Technology Trading partners work closely together to eliminate excess costs from the supply chain and efficiently serve the consumer. A system based on time-phased replenishment of products based on consumer demand that allows the manufacturer to be proactive and more directly respond to consumer purchase behavior. Efficient Consumer Response (ECR) Efficient Foodservice Response (EFR) Collaborative Planning, Forecasting and Replenishment

28. Adoption of UPC Bar Code Started in 1972 Now used to track inventory, order products automatically, and report purchases by time Beginning to use data collected 50% of all retailers offer frequent shopper programs Ways to reduce costs and increase sales Walmart going to RFID

29. Rise of Wal-Mart Has built business on knowing what consumers buy when and asking vendors to replenish shelves in a timely manner Largest retailer in the world Largest food retailer in the US 90 million customers per week EDLP strategy in food sales Low fixed margin Nearly infinite growth

30. Efficient Consumer Response Wal-Mart model Retailer & vendor share information Electronic Data Interchange Collaborative planning, forecasting and replenishment Scan-based trading, vendor is paid for what is sold when it is sold

31. Expansion of Private Labels Previously a cheaper product Battle for “brand equity” House brand Wholesale brand Packer brand Farmer brand New premium quality Wal-mart, KMart 16% of sales, 20% of volume

32. Merril Lynch, The Food Industry, 2000

33. Private Label Users American Heavy Users: Income: $20-40,000 Age:35-44 Household Size: +5 Education: High School European: In U.K. Over 50% Private Label Merrill Lynch: The Food Industry, 2000

34. New Consumer Issues Natural Laura’s Lean http://www.laurasleanbeef.com/?source=gotohttp://www.laurasleanbeef.com/?source=goto Coleman’s Natural Meats http://www.colemanmeats.com/ Organic foods http://www.ers.usda.gov/publications/agoutlook/apr2000/ao270d.pdf Welfare friendly Niman Ranch http://www.nimanranch.com/ Farmer-friendly Good Natured Family Farms http://www.goodnatured.net/http://www.goodnatured.net/ Environmentally-friendly