U.S. Food Wholesaling

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U.S. Food Wholesaling

• EconS 451 Lecture 3

• 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.

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Wholesaling Definitions
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Wholesaling Definitions
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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.

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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

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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

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Concentration in Wholesaling
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Profitability in Wholesaling
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Sales of Top Grocery Wholesalers
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Two Giants TakeDivergent 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

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Sales of Top Food Service Distributors
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Acquisition by Type of Firm
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Growth of Warehouse Clubs
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Summary!

• Be able to explain and describe the different
  wholesale sector terms and components.
• Understand the relationship between
  manufacturing, wholesaling, distribution channels
  and food retail and how these types of businesses
  are connected.
• Explain the changes in industry concentration
  occurring in the wholesale industry, by product
  type.
• Be able to describe the anomaly that occurred in
  the mid-1990s related to gross-margins in the
  wholesaling industry and concentration.
• 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.
• Understand the value of EDI, ECR, EFR and other
  real-time information systems to the efficient
  wholesaling operations.
• Be able to describe the conditions leading up to
  the growth in Wholesale clubs.

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Sales of Top Grocery Wholesalers
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Two Giants TakeDivergent 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