1. Food Wholesaling & Distribution AG BM 102

2. Introduction Economics of Transportation require an intermediary between processing and retailing Too many products, too many stores – 37 pizza shops in State College according to phone book The efficiency of this stage is a key to retailing success – WalMart is the model

3. Food Stores Chain Stores – Weis Independents – IGA Convenience Stores WalMart

4. Restaurants and Food Service Sysco McDonald’s Hoss’s

5. The food service distribution sector is highly fragmented... Broad-based Food Service Distribution (2000) Player Market Share (%) Sysco12 Food Service USA8 Performance Food Group3 Gordon Food Service2 Others75 100 … and includes hundreds of specialized smaller meat distributors. Source: Industry Interviews, Food in Canada

6. Economics of Transportation Full truck with one origin and one destination has very low cost Each stop adds costs Driver time a big expense – time limits Try to get full loads to warehouse and full loads to stores Works for supermarkets – not for other stores

7. Distribution Economics Build loads at warehouse – minimize deliveries to stores Deliveries take driver time – also time at store Warehouse has room for inventory – store doesn’t Non perishable stuff can be stored

8. Traditional View Buy items on sale – 6 month’s of Pork n’ Beans Store in warehouse until needed Only perishable products are not storable

9. Modern View Warehouse is a transshipment point Warehouse in Mexico City – only one day’s inventory WalMart Efficient Consumer Response – Buyer and seller work together to minimize inventories – everyday low prices or specials don’t require immediate delivery

10. System’s Approach Distributor and Vendor work together to minimize costs & share savings Transportation is used efficiently, but total cost is measure of effectiveness Includes inventory costs, handling costs, product deterioration, etc.

11. Slotting Fees & Promotional Allowances A new product may involve a $25,000 payment to get it on computer Plus 10 free cases per store Cooperative ad with retailer and products sold at discount If product doesn’t sell enough after 3 months it is dropped

12. Concluding Comments Wholesalers and distributors an important link in system Efficiency requires their existence Practices evolving with systems approach Generally very efficient