University of California College of Agriculture Agricultural Experiment Station Berkeley, California California Thompson Seedless Grapes: Marketing Channels and Farm-to-Retail Margins, 19^8 by Jerry Foytik Results of a Study Conducted by the California Agricultural Experiment Station in Cooperation with the United States Department of Agriculture, Bureau of Agricultural Economics, and the California Farm Bureau Federation June 1951 Contribution from the Giannini Foundation of Agricultural Economics Mimeographed Report . No. -ll£ LIBRARY ™ ■ »'J OF AGRKXILTUK* DAVIS WW u i Table of Contents Page Introduction ... ..... 1 Channels of Distribution ...... 3 Dealer Types 3 Geographic Movement 6 Farra-to-Retail Margins 6 Main Cost Components 10 Retail Margins 13 Preretail Margins 13 Acknowledgments 17 Appendix A. Procedures Used 18 The Store Sample 18 Data Collection 20 Weighting System 20 Distribution Channels 21 Marketing Costs 23 Appendix B. Definition of Terms 26 Geographic Areas 26 Dealer Types 27 Store Types 28 ■Mi f r ii I California Thompson Seedless Grapes: Marketing Channels and Farm-to-Retail Margins, 19U8 by Jerry FoytikV Int roduction This report describes the distribution channels utilized and the marketing margins incurred in moving fresh Thompson Seedless grapes from producing areas to the housewife. It relates to one phase of a larger study undertaken in 19hQ jointly by the California Farm Bureau Federation, the United States Department of Agriculture, Bureau of Agricultural Economics, and the California Agricul- tural Experiment Station. The over-all investigation was made in an endeavor to provide a basis for suggesting possible improvements in the marketing of fresh fruits and vegetables produced and consumed within California. Although drying is the major outlet for Thompson Seedless grapes, substan- tial quantities are utilized for fresh consumption within the state. The amount so used constitutes an important portion of the total supply of California-grown fresh fruits and vegetables sold locally. As in the case of the other fresh fruits and vegetables, a variety of marketing methods are employed in moving these grapes from the producer to the ultimate consumer. The information presented is based upon material collected on visits to selected retail stores made during the period August-October, Visitations were confined to independent and local chain stores located within the portion of California west of the Sierra Nevada Mountains. Thus, retail stores located in Alpine, Mono, and Inyo counties and restaurants, farmers' roadside stands, and national chain stores were excluded from the study. A sample of 66 stores in the more densely populated and accessible areas of the state was visited six times — once each half month in August, September, and October. During early September, a single visit was made to 117 stores located in the relatively remote regions. In about two-thirds of the visits, grapes were sold and satisfactory data could be obtained. Thus, a total of 3kO usable field interview schedules was secured — 2U6 for northern California and 9h for southern California — representing a volume of 5,500 lugs. The basic procedure for establishing the facts regarding the movement of supplies and distribution costs consisted of following each lot of grapes from the retail store back to the original producer. At each point in the distribu- tive system prices and sources of supplies were noted. In addition, the retail proprietor or store manager was asked: "How many pounds were thrown away last week due to waste and spoilage?" and "What amount was sold last week?" The answers to these questions supplied information on spoilage loss and the weight to be attached to each store in the computation of certain weighted averages. 1/ Assistant Professor of Agricultural Economics and Assistant Agricultural Economist in the Experiment Station and on the Giannini Foundation, Davis. bra: vson&rfD -fix^e iirfl • •s-sacstt} •&&*Ibs £ *, w o u CD 05 5 o as ->°Truckers (1) 2 Truck- Jobbers (U) (Note: All numbers expressed as percent of total volume sold at retail) TABLE 1 Retailers 1 Source of Fresh Thompson Seedless Grapes, by Dealer Types,—' California, August-October, 1948 Wholesalers in Retail store location^/ Producers and ■oackers Truckers and truck- iobbers Large cities Small cities 1 3 4 per cent of all dealer types ■ 1 1 — — Southern California T fi T 1 cr p r* i fa p s Small cities All cities 2.0 0.0 1.3 3.4 8.9 5.3 94.6 89.0 92.7 0.0 2.1 0.7 Central Valley Large cities Small cities All cities 28.3 48.3 44.7 2.6 9.8 8.5 69.1 31.3 38.1 0.0 10.6 8.7 Coastal Northern California 0.0 97.5 0.0 Large cities 2.5 Small cities All cities 2.3 2.4 27.1 10.4 45.3 77.5 25.3 9.7 Cali fornia Large cities | Small cities j All cities 3.7 16.5 9.3 2.2 14.1 7.5 94.1 58.3 78.3 0.0 11.1 4.9 a/ Classification of persons from whom retailers purchased their supplies. b/ See figure 2 for geographic distribution of survey cities and Appendix B for definition ~~ of city size. 6. retailers. In summary, about 30 per cent of the grapes sold by small city re- tailers and 5 per cent of the volume handled by retailers in large cities comes from producers, packers, truckers, and truck-jobbers. About 95 and 70 per cent of the grapes sold in large cities and small cities, respectively, move from wholesale markets to retail stores. The bulk of the grapes sold in small cities — especially in southern California — coming from whole- sale markets are obtained from large city wholesalers. That is, there is a defi- nite tendency for retailers in small cities to supplement grapes obtained directly from producing areas by supplies from wholesalers located in the larger cities. Small city wholesalers account for 2, 10, and 25 per cent, respectively, of re- tail sales in the small cities of southern California, the Central Valley, and coastal northern California. Geographic Movement . — The production of Thompson Seedless grapes in Cali- fornia is largely limited to San Joaquin Valley, especially the southern counties. In 19h$ about $6 per cent of the total bearing acreage was located in Fresno County alone, another 2h per cent was in the adjoining counties of Tulare and Madera. Other counties of the San Joaquin Valley account for almost all of the remaining 20 per cent of bearing acreage. The acreage in Riverside and Imperial counties (2.6 per cent of the state total) produces grapes marketed early in the season. These bearing acreage data for 19U8 are summarized, on a county basis, in table 2. Figure 2 shows the geographic distribution of survey cities and producing areas. This information is relevant to our discussion of the geographic move- ment of supplies for fresh sales to each of the three major subdivisions of the state . As a consequence of this localization in production, the general geographic movement of supplies sold at retail within the state is from south San Joaquin Valley to metropolitan Los Angeles and metropolitan San Francisco. Actually, an important question requiring elaboration is: "How do supplies reach retailers?' That is, there needs to be some indication as to the relative importance of the different dealer types from whom retailers obtain their supplies and of the vari- ous producing areas from which grapes are secured. Since variations in retailers' sources arise from differences in the geo- graphic location of stores, the summary presented in table 3 shows the data for various retail store locations. These data reveal a definite tendency for Thompson Seedless grapes from the southern portion of the San Joaquin Valley to move to retailers in southern California and for supplies produced some 100 miles further north to be sold in retail stores of northern California. Farm-to-Retail Margins The producer, the retailer, and each intervening dealer handling Thompson Seedless grapes receive a portion of the final price paid by the housewife. Certain physical losses due to waste and spoilage are incurred during the process of moving supplies from producing areas to consuming markets. Both of these as- pects of the distributive problem are to be considered briefly here. In this description the term "margin" refers to the difference between the price paid by a handler (delivered to his premises) and the price received by f a. * ** - ir. t -•-« ' i fat TABLE 2 Bearing Acreage of Thompson Seedless Grapes by Counties, California, I9I18 7. 1,000 acres County Fresno Tulare Madera Kern Merced Stanislaus Kings San Joaquin Other northern California Riverside Imperial Other southern California California 101.3 29.8 13.1 11. h 9.9 6.7 2.1 .6 .5 .6 .1 180.2 Source: Unpublished data furnished (May, 1951) by the California Crop and Livestock Reporting Service. a in FIGURE 2 Geographic Distribution of Survey Cities and Producing ^reas • Large cities with stores in intensive sample x Small cities with stores in intensive sample o All cities with stores in extensive sample San Francisco Los Aigeles Note 1: The two dashed lines separate the state into three major areas which were established for purposes of data collection. Note 2; The counties labelled are those with significant bearing acreage in ±9kB (see table 2). TABLE 3 Retailers'. Source of Fresh Thompson Seedless Grapes, by Producing Areas ,V California, August-October , 1948 - - ! b/ Retail store location—' Southern California Kern, Kings, and Tulare counties Fresno and Madera counties Other ! northern California 1 2 g 4 per cent of all producing areas Southern California Large cities Small cities i All cities 4.1 1.4 3.2 68.3 82.4 73.2 27.6 16.2 23.6 0.0 0.0 0.0 \ Central Valley Large cities Small cities | All cities 1.6 0.0 0.3 3.1 15.5 13.3 71.3 34.7 41.3 24.0 49.8 45.1 | Coastal northern California \ Large cities Small cities All cities 0.0 0.0 0.0 1.9 7.7 4.1 95.4 89.7 93.2 2.7 2.6 2.7 California Large cities Small cities i All cities 2.6 0.6 L 1,7 41.8 40.3 41.2 53.3 42.1 48.3 2.3 17.0 8.8 a/ Classification of areas producing the grapes ultimately sold at retail. b/ See figure 2 for geographic distribution of survey cities and Appendix B for definition of city size. 10. the same handler (f.o.b. his premises). If the handler performs the transporta- tion function, an estimate for the cost is deducted. Thus, "margin" refers to the charges made rather than the sum of expenses incurred for labor, rent, de- preciation, etc. Main Cost Componen ts. — California consumers paid an average price of 10.6 cents per pound for Thompson Seedless grapes purchased at retail during the survey period. Approximately one- third of the consumer's dollar was accounted for by the retailer's margin — to reimburse the retailer's expenses and to com- pensate for spoilage occurring within the distributive channel. Another third covered all other distributive charges incurred in packing, transporting, and wholesaling. The final third was returned to growers to cover their production and harvesting costs. The average lug leaving the farm contained 27*2 pounds of fruit, including 2lu7 pounds sold to consumers and 2.5 pounds unmerchantable at retail because of spoilage loss. The quantity not sold due to waste and spoilage included both the amount thrown away while unpacking and additional grapes subsequently spoiled or damaged in the store. In other words, from a lug bought by the average re- tailer only 2U.7 pounds were sold to consumers for $2.62, i.e., at approximately 10.6 cents per pound. The spoilage loss is shown as a part of the retailer's margin. Almost half of the preretail distribution margin consists of charges for "packing and container." This item includes the cost of the container, hauling to the packing shed, cost of packing — whether performed by packers or by growers — and net profits for packers. About 30 per cent was accounted for by the "whole- saling margin," which includes all charges, fees, commissions, and net profits by dealers between packers and retailer. "Transportation" — less than 2f> per cent of the preretail marketing charges — is considered as a separate item regardless of who performed the function. "Farm price" is the residual obtained by subtracting the retail and preretail margins from the price charged consumers. It is specified at the farm gate in order to include the amount received by growers for harvested but unpacked grapes. When field packing was performed, however, the packing costs were included within the farm price. The distribution of consumers' expenditures among these cost categories is shown in table h» Total costs incurred in moving one lug of grapes through the entire distributive channel from the producer to the housewife are prorated be- tween actual sales (90.7 per cent of the original lug) and the quantities not sold due to spoilage. In the last column appears the percentage distribution of costs. These figures correspond to the "per cent of the consumer's dollar" as this terra is used by the U. S. Bureau of Agricultural Economics. This information is portrayed in a somewhat different way by figure 3« Three blocks (proportional to the percentage distribution of the retail price) on the left indicate the major recipients of the consumer's expenditure ($2.62) for a lug of grapes leaving the farm. The physical division of these 27.2 pounds of fruit between the housewife and the garbage can is shown on the right. One bunch of grapes must be discarded by the retailer for every ten he sells to his customers. ua, ma > ■ • ; J TABLE 4 Main Cost Components for Fresh Thompson Seedless Grapes, California, August-October, 1948 Item Costs for 24.7 pounds sold at retail (90.7 per cent of the original lug) Costs for 2.5 pounds not sold due to spoilage^/ (9.3 t)er cent of lug) Total costs (27.2 pounds leaving the farm and 24.7 pounds sold at retail) Percentage distribution of costs for 27.2 pounds leaving the farm T 2 3 A dollars per lug (of 27 pounds) leaving the farm per cent : Farm price (at farm gate) .834 .086 .92 35.1 ' Packing and container ! Transportation 1 TVholesaling margin Preretail margin .354 .172 .218 .744 .036 .018 .022 .076 .39 .19 .24 .82 14.9 7.2 9.2 31.3 | Retail margin .798 .082 .88 33.6 ! Total 2.376 .244 2.62 100.0 ! Retail price (cents per pound)2^ 10.6 a/ Physical losses through waste and spoilage. b/ Includes harvesting costs but excludes packing cost unless performed in the field. c/ Retail price to the consumer: Total cost (§2.62) divided by volume of sales (24.7 pounds). FIGURE 3 distribution of Total Retail Value of Fresh Thompson Seedless Grapes California, August — October 19^8 FARM RECEIPTS For each lu g the grower receives $.92 PRE-RETAIL MARGIN For packaging, transporting and wholesaling $.82 RETAIL MARGIN To cover costs and spoilage $.88 Total retail value per lug $2.62 From the average lug 90,1% goes to consumer 9.3$ goes to garbage can 2.5 lbs. entering the retail store are, or become, unsalable (r M' due to spoilage WJ 2h.7 lbs. entering the retail store are sold at 10.6 cents per lb. (for a total value of $2.62) 13. Retail Margins . — As might be expected, there is considerable variation among stores with respect to their spoilage, retail margin, and consumer price. Ap- pendix table A-3 presents these data for the survey stores classified according to geographic location, store size, and store type. Comparable data for selected larger store groupings are summarized in table Variations in these factors can be partly, but only partly, explained by difference in the location, size, and type of stores considered. Fluctuations in retail prices are related di- rectly to variations in retail margins and less closely to differences in spoil- age losses. Spoilage is about one-third greater in large than in small cities. There is also some tendency for these losses to be slightly higher in large stores, in cash-carry stores, and in northern California. More pronounced differences exist in retail prices and margins. The most noticeable difference is the considerable lower price and margin prevailing at cash-carry stores. The average retail price and retail margin were also smaller, though to a lesser extent, for stores in large cities than for those located in small towns and rural areas. In addition, the price charged by large stores, generally, was less than at small stores, al- though their retail margins were not appreciably less — indicating that the pur- chase price is somewhat higher for small stores. In the large metropolitan centers of San Francisco, Los Angeles, and San Diego consumer prices, retail margins, and spoilage losses were considerably lower at cash-carry stores than at stores offering credit or delivery services. There did not, however, seem to be significant differences between large and small stores nor between grocery and fruit-vegetable stores located within these metropolitan areas. Outside of the metropolitan centers, differences appear to arise from size of store rather than from whether credit or delivery services are offered. Retail prices and spoilage were much higher for large fruit and vegetable stores than for large grocery and small stores located in the three large cities of the Central Valley (Sacramento, Stockton, and Fresno). In these cities re- tail prices, retail margins, and spoilage losses were somewhat lower at cash- carry stores; these differences were less pronounced than in the metropolitan centers. For rural areas and small towns, no consistent differences in prices, mar- gins, or spoilage between cash-carry and credit-delivery or large and small stores were observable. Geographic location of the city appears to be the main factor accounting for variations. Prices, margins, and spoilage losses are lower in small cities of southern California than in small cities of northern Califor- nia. Preretail Margins. — The spread between the farm price and the price paid by retailers consists of the wholesaling margin, transportation charges, and packing and container costs. The relative importance of these three segments of the preretail marketing margin has already been indicated. But it may be well to supplement the preceding summary information with additional detail for the three sets of data used in deriving the figures shown in table 2. Wholesaling margins of wholesalers, truck-jobbers, and truckers are shown in table 6. The average margin was 22.6 cents per lug for wholesalers, 2h»S cents for truck- jobbers, and 39.6 cents for truckers. Possibly the most striking fact revealed by these figures is the considerable variation in the wholesaler's margin. Within the metropolitan centers of San Francisco, Los Angeles, and San 4 C 'X^iiii^.J A ■ - - : - ' TABLE 5 Spoilage Loss, Retail Price, and Retail Margin on Fresh Thompson Seedless Grapes Sold at Retail, by Selected Store Groupings, California, August-October, 1948 Average Average Retail margin Store typo and areaJV Store Volume j reported£/ spoilage retail Average^/ As per cent visits^/ loss d 7 orioe of price*/ 1 1 | 1 1 5 6 number lugs per cent cents per pound per cent All Store Types _ California 340 5,459 9.3 10.6 3.6 34 Southern California 94 2,302 9.0 10.3 3.0 29 Northern California 246 3,157 9.6 10.9 4.2 38 By Store Types (All California) Credit-delivery stores 152 1,370 8.8 12.1 4.9 40 Cash-carry stores 188 4,089 9.3 10.2 3.4 33 Large stores 221 4,675 9.4 10.3 3.5 34 Small stores 119 784 9.1 11.0 3.7 33 Stores in large cities 181 3,904 10.5 10.3 3.2 31 Stores in small cities Metropolitan Los Angeles and San FranciscoS/ 159 1,555 ft o 7.8 11.0 4.0 36 Credit-delivery stores 44 727 10.3 13.0 5.4 42 Cash-carry stores 99 2,912 9.6 9.4 2.8 30 Sacra:nento, Stockton, and Fresno Large fruit and vegetable stores 7 61 16.5 14.2 3.9 27 Large grocery and small stores 31 184 9.8 9.9 3.2 32 Small Cities (All Store Types) Southern California 34 364 7.0 10.2 3.5 35 Northern California 125 891 8.3 11.5 4.3 37 a/ See Appendix B for definitions of store types and areas. Number of usable field schedules collected on separate visits to retail stores (excluding reports with inadequate data and visits which indicated that no grapes were sold) . c/ Quantity sold during the "last week" (i.e., the week prior to the date of fieldman's visit), d/ Proportion of grapes thrown away during the week due to waste or spoilage. e/ Difference between the retail selling price and the retailer's purchase price. ^1 f/ Computed from unrounded data and may differ from column 5 divided by column 4. " g/ Including San Bernardino, San Diego, and San Jose. Note: See appendix table A-3 for data on original store groupings. ■ -it' i . it ■.. " »■ I— % o TABLE 6 15. Wholesaling Margin^ for Fresh Thompson Seedless Grapes, by Dealer Types and Areas, California, August-October, 1948 Dealer type and area Margin j (per lug of | ' 27.2 pounds) ! Wholesaler Metropolitan Los Angeles ; San Bernardino and San Diego | Metropolitan San Francisco and San Jose Sacramento, Stockton and Fresno I Small cities | All California | Truck- Jobber ' Southern California ■ Northern California I All California I Trucker ' Southern California Northern California All California a/ Includes all charges, comuiissions, and brokerage fees, except transportation charges. When transportation was performed by the dealer himself, an estimate of the cost is deducted. TABLE 7 Packing and Container Costs^ for Fresh Thompson Seedless Grapes, California, August-October, 1948 Producing area San Francisco Bay Northern San Joaquin Valley Southern San Joaquin Valley Southern California Gr owers Grower- shippers P ackers cents per lug (of 27.2 pounds) 10.0 25.0 40.7 42.8 34.2 41.0 All California 33.3 42.3 36.2 a/ Excludes harvesting costs and costs for field packing. Management income (net profit) is included for packers but excluded for growers and grower-shippers. ■ ' i ! ' 16. Diego, the difference between the wholesaler's selling and purchase price is only half as large as in other portions of the state. Table 7 summarizes the packing and container costs for Thompson Seedless grapes, whether incurred by growers and grower-shippers or by separate packers. It will be noted that these costs are somewhat less for packers than for pro- ducers. These data exclude harvesting and field packing costs. Cost incurred for transportation services averaged l8»° cents per lug for the state as a whole. Such charges were considerably higher in southern Cali- fornia than north of the Tehachapi Mountains — 23«1 compared to lh*h cents. IT. Acknowledgments An investigation of this type, based as it is on detailed analysis of hundreds of field interviews, requires the cooperation of many persons and groups. The author's indebtedness to those who helped in one way or another in this study is much greater than the brief summary nature of the report is likely to convey. Alex Johnson of the California Farm Bureau Federation, Wendell Calhoun and D. B. DeLoach of the United States Bureau of Agricultural Economics, and Harry R. Wellman and Sidney S. Hoos of the California Agricultural Experiment Station helped immensely by their interest in the scope of the over-all in- vestigation, general assistance in formulating plans, and helpful criticism throughout the study. During its earlier phase, in 19U8-1°50, the analytical phases of the project were under the supervision of Walter D. Fisher. He assumed respon- sibility for editing the interview schedules, preparing the statistical tabu- lations and summaries, and developing suitable analytical methods. A great deal of the exploratory work for this report was completed by Dr. Fisher. H. Fisk Phelps, Willard F. Williams, Robert V. Enochian, and George A. Jackson, Jr., all jointly employed by the Bureau of Agricultural Economics and the California Experiment Station, and Eldon Dye, Ralph Rush, and Irwin Rust of the California Farm Bureau were responsible for establishing and maintaining contacts with the trade and for collecting and editing the num- erous statistical data. Mr. Williams was responsible for directing the field work of this investigation. The compilation of many of the original data and the voluminous subsequent calculations and tabulations were performed largely by Dorothy Eaton, Mary Gouyon and Bemice Pfanner of the California Agricultural Experiment Station. Finally, this study would have been impossible without the active coopera- tion of retail store managers, produce dealers, packers, and producers throughout California who generously furnished the detailed information requested on prices and sources of supply. Appendix A 18.-- PROCEDURSS USED The Store Sample . — To obtain reliable information on channels of distribution and marketing costs, the sample of retail stores to be chosen was subjected to various controls — distribution of California population, income distribution within cities, store size, and type of store. In selecting the individual stores to be included particular attention x«;as given to two considerations. It was de- sired to represent the entire geographic area of the state, exclusive of Alpine, Mono, and Inyo counties. This meant that stores located reasonably near main highways were chosen as a means of effectively utilizing the available time of the fieldmen doing the actual interviewing. In passing it should be noted that cities near major highways besides being conveniently located tend to be larger and, therefore, that more stores from such towns normally would be included in the sample. Secondly, the sample had to be limited to stores from which the re- quired data would be given voluntarily and quickly because such information had to be secured directly from the store proprietor or manager. Actually, very few of the stores contacted refused cooperation. Furthermore, since distributive channels were to be determined and described, certain sampling rates were deliberately introduced. For example, remote geo- graphic areas, including mostly small stores, were included, even though certain time periods were overrepresented by this procedure. Yet, in this way, additional information was secured on channels of distribution that probably are not func- tions of time. Limitation of time and personnel precluded collection of data in remote and sparseljr settled areas of the state as frequently as in the more ac- cessible areas. It was also felt that more effort should be spent in obtaining information on sources of supply and channels of distribution for retail stores in sparsely settled areas because there is likely to be a wider range of types of channels used in these regions. Accordingly, two sets of retail stores were used. One, called the intensive sample, covered a smaller area and was visited twice a month. The other, de- signated the extensive sample, covered a wider area and was visited once every six weeks. Figure 2 shows the geographic distribution of the 101 survey cities segregated into three groups (southern California, coastal northern California, and Central Valley region) for vrhich separate interview routes were established. The cities and the number of retail stores included in the intensive and extensive samples of each of these three areas are listed separately in table A-l. These localities are arranged in the approximate order in which the successive stores were visited by the field representative in making his periodic visits. A total of 66 retail stores in 22 cities was included in the intensive sample. Of these, 20 were located in metropolitan San Francisco, 11 in metro- politan Los Angeles, 19 in other large cities (with populations in excess of 50,000 inhabitants), and 16 in small cities. The extensive sample of 79 cities contained 117 retail stores. Only $ of these stores were in large cities (Bur- bank and Glendale). Stores located in Alpine, Mono, and Inyo counties and all farmers' roadside stands and restaurants were excluded. In addition, it was decided to not gather information from stores belonging to national chain store systems. Members of local chain store organizations, however, were included in the study. TABLE A-l Number and Location of the Sample Retail Stores 19. Number Number Number Area and city stores P.rea and city stores Area and city stores Intensive Sample (visited twice each month) lj'J U L 11 vd-i-11 Ul XIX cx Central Valley San Francisco Bay Area T.n ^ An trpl p XjW > J i\ 1 1 1. o X- *Z \~i 7 Sacramento 5 San Francisco i n Pa- PisHpn?) 2 Roseville 2 Oakland cr UUllg XJ V> 0.^11 2 Placerville 2 Berkeley C P SflTif^ Ana Stockton 3 Palo Alto p San Bernardino i Tracy 1 San Jose 2 Riverside Oakdale 1 Total ~2l Escondido Modesto 2 San Diego 3 Merced 2 Total 20 Fresno It Grand total 66 Total 2? (for 22 cities) Extensive Sample (visited once in September) juu ufi^ i ii uaiii.iui ilia 5^a^ .Troponin 1 1 ptt LJ&J.1 11 Uu^UJ.11 Vdi l"jr i 1 ucu ui cxj- u'jao v Ventura nio Vista X San Martin X Oxnard 1 Walnut Grove 1 Gilroy X Santa Paula 1 Gait 1 Hollister p San Fernando 2 San Andreas 1 Santa Cruz 0 DU.I D3J1K o oonor a "I X VV aLoOnvl 11c ■J J3 Glendale 3 Turlock 1 Salinas 2 Banning 1 Gustine 1 Seaside X Corona 1 Los Ranos 1 Monterey 1 x TP! ^ 1 n n tp J i X. o XilvJ X ~ jL Mq rlpTQ iVlCXLJ O X CI 2 C\ P T*TT1P~1 UOX X. X Fallbrook 1 Coalinga 1 Gonzales 1 Oceanside 1 Reedley 2 King City 1 X Ramona 1 Dinuba 2 Paso Robles p J acumba 1 Visalia 3 Atascadero 2 El Centro 2 Exeter 1 Santa Margarita 1 DI dWXtJ.y p JjJ.IlU.Ocljr X L>CU4 LUli. ULlPj. U 2 Indio 2 Port ervi lie 2 Arroyo Grande 1 Total 2h Avenal 1 Santa Maria 2 Wasco 1 Lompoc 2 Taft 2 Total 29 Bakersfield 3 Total 29 Sacramento Valley North Coast Fairfield 1 I San Rafael 2 Winters 1 Petaluina 1 Woodland 2 Santa Rosa 2 Auburn 1 Ukiah 2 Grass Valley 1 Lakeport 1 Marysville 2 Calistoga 1 Williams 1 Napa 2 Willows 1 Vallejo 2 Oroville 1 Concord T X Chi co 2 Live more 1 Orland 1 Total 15 Corning 1 Red Bluff 2 Redding 2 117 Dunsmuir 1 Grand total Total 20 (for 79 cities) 20. On the basis of supplemental information collected, each store was classified according to its geographic location, volume of sales, and type in order to permit a determination of whether significant differences in prices, margins, and spoilage exist for different subgroups. Store size was determined according to sales of all fresh fruits and vegetables during 191*8, Stores with sales of fresh fruits and vegetables in excess of $25,000 were classed as large stores j small stores included those with a lesser volume of sales. In addition, information was gathered on store type (in accordance with the definitions listed in Appendix B). Each es- tablishment was classed as an (l) independent or a (local) chain store, (2) a fruit and vegetable or a grocery store, and (3) a credit-delivery or a cash-carry store. Data Collectio n. — Four fieldmen devoted full time to gathering the data needed for this study. On each visit to a retail store the field representative secured (for each fresh commodity included in the study)i/ information on: (l) the volume of last week's sales, (2) last week's loss due to waste and spoilage, (3) the purchase and selling price of the produce being displayed, and (It) the source of the store's supplies. The data supplied on last week's sales and loss were used to determine the spoilage factor and the relative weights to be attached to each store in the computation of weighted averages. Information on prices and sources of supply was utilized for determining gross margins of retailers and dealers and for indicating channels of distribution. Retailers specified dealers from whom current supplies of fresh fruits and vegetables were secured. These dealers were interviewed to obtain information on their own prices and sources of supply. Suppliers of the first dealers were then contacted to ascertain their prices and sources. This same procedure was repeated until the grower source was reached or until sources were traced back as far as possible. In the majority of cases the original source in the producing area could be ascertained. By following the movement of each lot of supplies from the retail store back to the original producer, it was possible to double check the prices reported at the various points of the distributive system and to consider prices for individual lots. Where identity of the individual lot could not be retained, prices were obtained for the commodity, of a similar quality, handled on the same day as that on ttfhich the lot in question was handled. Not much substitution of this type was necessary except where dealers made mistakes in recalling their sources of supply. Thus, margins (the differences between selling and purchase prices) could be de- termined direct^ for individual transactions without using average market prices. Weighting System . — The individual schedules provided the mass of information from which inferences were to be drawn regarding marketing channels and margins prevailing for California-produced fresh fruits and vegetables sold within the state. It was desired to show this information by geographic location, city size, store size, and store type. For this purpose the data from individual schedules were combined into average prices, average margins, average spoilage losses, etc., in two ways. The initial step consisted of summarizing the data for all visits within each subgroup (e.g., large grocery stores in metropolitan San Francisco) using "last week's" sales as weights. In merging the original groups into larger groups (e.g., all retail stores in northern California), the weights used were es- timated retail sales of all fresh fruits and vegetables during 19bB — given in table A-2. 1/ The commodities included were fresh asparagus, cantaloupes, carrots, celery, grapes, lettuce, oranges, peaches, pears, potatoes, and tomatoes. 21. The latter weights were secured on the basis of the distribution of California population in 191*8 (as estimated by the U.S. Bureau of the Census) and on the dis- tribution of sales of fresh fruits and vegetables anon g different store sizes and store types as obtained from the 1939 census of retail trade. This determination was made in the following way: 1. Sales of fresh fruits and vegetables for the various geographic areas and certain store types (sec Appendix B) in 1939 were con- verted to a per-capita basis. 2. The estimated 19i|0 population for California was distributed among these areas according to the 19U7 population distribution. 3. Dollar sales in 19^8 were determined using the above information and assuming that retail prices in California increased during the decade (l939-19h8) in the same ratio as United States prices, that per-capita physical consumption remained unchanged, and that 1939 percentage distributions by store size and store type were applicable to 19l|8." The percentage xreights determined in this manner are shown in table A-2. It is estimated that in 19h8 total California retail sales of fresh fruits and vege- tables (exclusive of the area east of the Sierra Nevada Mountains) are distributed almost equally between northern and southern California (1*8,7 vs. £l.3 per cent). In southern California 6£ per cent of total sales occur in large cities and 35 per cent in small cities compared to 1*6 and 5U per cent, respectively, in the northern portion of the state. A slightly larger volume of fresh fruits and vege- tables is sold in small stores than in large stores located in the small cities of the state. In the large cities, especially in southern California, however, a considerably smaller total volume of sales occurred in small stores. Distribution Channels . — Three factors were expected to affect the source from which a retailer will secure his supplies, Accordingly, the sample stores were classified into 23' groups based on size of stores as measured by 191*8 sales of fresh fruits and vegetables, the size of the city in which the store operates, and the geographic area where it is located. For each category an estimate was made of the proportion of retailer's supplies coming from different sources (dealer or geographic). This estimate was obtained by recording the source of supply for the lot found in the retail store sampled on the day of the interview and weighting this source by last week's sales. It is believed that no significant error is introduced by this procedure, which assumes that there is no significant variation in the sources used by a retailer over the period of one week even though a considerable change may occur over longer periods of time. Channel percentages leading to each dealer type (e.g., wholesaler or truck-jobber) i.e., for stages preceding the retail level, were obtained in a similar manner. This procedure was followed backwards in the marketing process until the original producer sources were encountered. These data provide information for showing the relative volume of the com- modity ultimately sold at retail which was handled by different dealer types. Average percentages for southern California and northern California were computed using the weights specified in table A-2. The resulting composite figures were used in preparing the charts on marketing channels shown in figure 1 of the text. Table 3 indicates the relative importance of the various producing areas in TABLE A- 2 Estimated Distribution— 'of Fresh Fruits and Vegetables Sold at Retail, California, 1948 Large stores^/ b/ City size and area— Large Ci ties Metropolitan Los Angeles San Bernardino and San Diego Total Small Citi es Imperial and Ccachella valleys Balance of southern California Total All Citie s Large Cities Metropolitan San Francisco and San Jose Sacramento Stockton and Fresno Total Small Citi es North Coast San Francisco Bay area (less 2 counties)d/ Santa Clara, San Benito, Santa Cruz, and Monterey counties San Luis Obispo and Santa Barbara counties North Sacramento Valley South Sacramento Valley North San Joaquin Valley South San Joaquin Valley Total All Cities 34.1 21.7 55.8 5.8 3.7 9.5 17.2 22.7 39.9 25.4 65.3 .5 .5 1.0 15.8 17.9 33.7 16.3 18.4 34.7 ! 56.2 43.8 100*0 Grocery 1 Fruit and vegetable All L cent of sales in southern Californiac Small stores^/ per cent of sales in northern California > 8.6 2.3 10.9 13.6 22.2 17.1 39.3 2.8 .6 2.9 3.6 [ 3.7 14.2 25.1 20.7 45.8 - 3.1 3.6 6.7 4.2 4.6 8.8 3.3 3.8 7.1 .9 1.0 1.9 2.8 3.2 6.0 2.7 3.1 5.8 3.1 3.5 6.6 5.3 6.0 11.3 25.4 " 28.8 54.2 1 50.5" 49.5 100.0 1 a/ Based on distribution of California population in 1948 (as reported by the U. S. Bureau of the Census) and on distribu- tion of California retail sales of fresh fruits and vegetables among different types and sizes of stores (as reported by the 1939 retail census of distribution), b/ See Appendix B for definitions of areas and of store types. c/ It is estimated that 51.3 per cent of total sales were in southern California and 48.7 per cent in northern California, d/ Excluding Santa Clara and San Benito counties. ro ro. 23. supplying retail stores in large and small cities of the three major California regions. Marketi ng Costs . — In classifying the sample stores into subgroups for pur- poses of deriving marketing costs, a different grouping from that adopted for determining distribution channels was used. Larger geographic areas were estab*- lished. The number of subgroups was increased, however, by making a further breakdown of large stores into grocery stores and fruit and vegetable stores and by classifying each store as an independent or a chain store and according to whether or not it offered some credit or delivery service. Average retail prices, average retail margins, and average spoilage losses for the various subgroups vrere determined by combining the data obtained from the several individual store interview schedules for each category using "last week's" sales as weights. Table A-3 presents these results for all the groups together with the number of store visits and the volume reported. Data are also given for all store types in California, southern California, and northern Cali- fornia. These data are summarized for broader store groupings in table 5 of the text. Where larger categories of stores were established by merging the data for the original groups, the percentage weights listed in table A-2 were used. The gross margin for each dealer was taken to be the difference between his selling price (f .o.b. his premises) and his purchase price (delivered to his premises). Where the dealer performed the transportation himself, a deduction for the estimated amount of the transportation cost was made. In addition, any brokerage fees paid were considered to be part of the wholesaler's margin. This procedure was followed in order to secure comparability as between wholesalers who employed independent brokers and those who employed their own salesmen. Estimates of packing and container charges were obtained through personal interviews with growers, grower-shippers, and packers whose names vrere given in the tracing-back process previously described. "Farm production" is considered to include all costs up to the point where the commodity is brought to the farm gate or packing house door in a prepacked condition. Marketing costs are those expenses incurred after this point. Harvesting costs, therefore, are considered to be one item of production costs. Where picking was performed by the party doing the packing, an estimate for picking costs was made. From these data it is possible to estimate the main cost components incurred in moving fresh produce from the grower to the consumer. This information is shown in text table k and figure 3* Tables 6 and 7 of the text summarize data on the wholesaling margin and on packing and container costs. TABLE A- 3 Spoilage Loss, Retail Price and Retail Margin on Fresh Thompson Seedless Grapes Sold at Retail, by Store Type and Area, California, August-October, 1948 Store type and area-.' 1 a/ All Store Types California Southern California Northern California Metropolitan Los Angeles, San Be r nardino, and Sa n D iego Credit or delivery Cash and carry Large — grocery Large—fruit and vegetable Small — all types Metropolitan San Francisco and San Jose Credit or delivery Cash and carry Large — grocery Large — fruit and vegetable Small — all types Sacramento , S tockton, and Fresno Credit or delivery ™ Cash and carry Large — grocery Large — fruit and vegetable Small — all types Sma A 1 _ Cities — Southern Cali fornia Credit or delivery Cash and carry- Large Small Store . visits*-"/ number 340 94 246 22 38 31 14 15 22 61 18 46 19 13 25 9 7 32 9 25 20 14 Volume reported£/ 2 lugs 5,459 2,302 3,157 270 1,368 968 607 63 457 1,544 567 1,271 163 59 206 73 81 111 45 619 439 225 Average spoilage lossd/ per cent 9.3 9.0 9.6 11.4 9.5 8.8 12.3 9.3 8.3 9.8 6.9 9.7 14.9 10.8 12.9 8.7 16.6 10.4 11.8 6.8 7.4 6.6 Average retail price " 27 Retail margin Average^/ / As per cent of price£/ cents per pound 10.6 10.3 10.9 13.7 8.9 10.6 8.0 12.3 11.9 10.2 9.5 11.2 9.9 12.7 10.8 9.3 14.2 10.3 11.5 10.7 11,6 9.0 3.6 3.0 4.2 5.2 2.0 2.6 2.4 3.1 5.8 4.2 3.7 5.0 3.8 4.4 3.1 2.8 3.9 3.4 3.2 5.5 3.5 3.5 per cent 34. 29 38 38 23 25 30 25 49 41 39 45 38 35 29 30 27 28 33 30 39 (Continued on next page. Table A- 3 continued. Store type and areaf/ Small Cities — North a nd Centra l Coast Credit or delivery * Cash and carry Large — North Coast Large — Central Coast Small — North Coast Small — Central Coast Small Cities — Sacramento and San Joaquin Valleys Credit or delivery- Cash and carry Large — Sacramento Valley Large — San Joaquin Valley Small — Sacramento Valley Small — San Joaquin Valley Independent Credit-Delivery Stores Southern California North and Central Coast Sacramento and San Joaquin valleys Independent Cash-Carry Stores Southern California North and Central Coast Sacramento and San Joaquin valleys Local Chain Stores Southern California North and Central Coast Sacramento and San Joaquin valleys Store visits^/ Y [Average Volume I spoilage reported£/ j lossfy '"Average retail price jRetair margin Average©/ — ■ — i ■ As per cent of pricef/ 2 3 4 5 6 number lugs per cent cents per pound per cent 41 352 7.7 11.0 3.7 34 18 162 8.8 12.2 5.4 44 8 70 10.4 11.2 4 B 40 28 291 7.8 11.2 4.2 37 4 PP, CO ii i 11.1 3.8 34 19 125 7.0 11.9 4.2 35 45 187 6.9 13*2 4.7 39 21 190 9.2 9.8 3.5 35 19 192 5.9 10.4 3.9 37 21 116 12.3 11.1 4.2 38 13 33 6.1 14.6 5.4 37 16 36 6.3 10.7 4.2 39 r> 1 31 311 11.5 13.4 5.0 37 61 790 8.0 11.5 4.9 55 234 7.9 12.3 4.6 37 53 1,453 9.1 9.4 2.5 27 73 1,525 10.3 10.5 4.4 41 44 380 11.5 10.3 3.3 32 10 538 7.2 9.5 2.4 25 •7 i 200 4.5 9.5 3.6 38 5 28 5.9 11.1 4.3 39 o./ t See Appendix B for definitions of store types* and areas. E/ Number of usable field schedules collected on separate visits to retail stores (excluding reports with inadequate data and visits which indicated that no grapes were sold). £/, Quantity sold during the "last week" (i.e., the week prior to the date of fioldman's visit), d/ Proportion of grapes throivn away during the week due to waste or spoilage, e/ The difference between the retail selling price and the retailer's purchase price, f/ Computed from unrounded figures and may differ from column 5 divided by column 4 . ro v-n. 26 Appendix B DEFINITION OF TERMS Two metropolitan areas are set up to include the cities of Los Angeles and San Francisco with their surrounding environments. The portion of California east of the Sierra Nevada Mountains (Alpine, Mono, and Inyo counties) was ex- cluded from the study. The remainder of the state is divided into two major regions — southern California and northern California — by the Tehachapi Mountains Northern California is further subdivided into seven areas « An arbitrary distinction is drawn between grower-shippers and growers. A "dealer" is defined so as to exclude retailers, producers, brokers, and common carriers. Four dealer categories are established — packers, wholesalers, truckers, and truck-jobbers. Retail stores are classified according to volume of fresh fruits and vege- tables sold, line of commodities handled, kind of business organization, and whether credit and delivery services are offered. The precise definitions adopted for this study are listed below under three classifications. Geographic Areas Metropolitan Los Angeles ; The cities of Los Angeles, Pasadena, Burbank, Glendale, Santa Monica, and Long Beach. Metropolitan San Franc isco; The cities of San Francisco, Oakland, Berkeley, Ricliiiiond, and Aiamella. Large Cities ; Cities with £0,000 or more inhabitants in I9I48. Small Cities ; Cities with less than 50,000 inhabitants in 19^8. Southe rn Cali fornia ; The portion of California lying south of the Tehachapi Mountains and~east of Santa Barbara County, but including the city of Santa Barbara and immediate environments — that is, including the seven counties of Ventura, Los Angeles, San Bernardino, Riverside, Orange, San Diego, and Imperial, and the city of Santa Barbara and its immediate environments. Northern California ; The portion of California lying north of the Tehachapi Mountains and west of Ventura County, but excluding the counties of Alpine, Mono, and Inyo and the city of Santa Barbara and immediate environments — that is, all of the state lying outside the area defined as southern California, except the counties of Alpine, Mono, and Inyo which are ex- cluded from the study. Northern California includes two subregions; coastal northern California (Central Coast, North Coast and San Francisco Bay area) and the Central Valley (Sacramento Valley and San Joaquin Valley). Central C oast; The four counties of Santa Cruz, Monterey, San Luis Obispo, and Santa~E!arbara, but excluding the city of Santa Barbara and immediate en- vironments. North Coast ; The eight counties of Marin, Sonoma, Napa, Lake, Mendocino, Trinity, Humboldt, and Del Norte. . lie: San Francisco Bay Area ; The six counties of San Francisco, San Mateo, San 27. Benito, Santa Clara, Alameda, and Contra Costa, and the city of Vallejo. South Sacramento Valley ; The five counties of Solano (excluding the city of Vallejo), Yolo, Sacramento, El Dorado, and Placer. North Sacramento Valley ; The thirteen counties north of south Sacramento Valley and east of North Coast. South San Joaquin Valley ; The five counties of Kern, Kings, Tulare, Fresno, and Madera. North San Joaquin Valley ; The seven counties of Merced, Stanislaus, San Joaquin, Mariposa, Tuolumne, Calaveras, and Amador. Dealer Types Grower ; A producer who is actually engaged in growing operations on land (either owned or rented) where the commodity is produced and who does not operate a permanent packing shed. He may pack produce by means of temporary facili- ties. Grower-Association ; A cooperation association established for the purpose of marketing or processing fresh fruits and vegetables produced by grower members. (A group of growers working together in harvesting and marketing a crop and jointly sharing in the receipts is considered a grower-association even though a formal association has not been legally established. As a guide, the field work was conducted subject to the rule that the informal group must include at least ten producer members before it was classed as a grower-association. ) Grower-Shipper ; A producer who also operates a permanent packing shed and who grows more than 50 per cent of the produce packed in this shed. (Usually a grower-shipper is a large producer.) Reta iler ; A person whose principal business is to sell to individual consumers, but excluding any producer who sells directly to consumers, except where such producer has an established retail outlet which is his major business. Broker: An agent who does not have title to or physical control of the produce, but who negotiates sales and receives a brokerage or commission fee. Dealer ; A person whose principal business is to buy produce on his own account or to receive produce on consignment and to sell it to others, except in- dividual consumers. (This is a general term intended to include packers, wholesalers, truckers, and truck- jobbers and to exclude retailers and producers, and also brokers and common carriers who do not take title to produce ) Packer ; A dealer who assembles, packs, processes, loads, and/or ships produce, the major portion of such produce being bought from growers or handled for their account, (Usually, he operates a permanent packing shed. If a party grows more than 5>0 per cent of the produce packed, he is classified as a Grower, Grower-Association, or Grower-Shipper and not as a Packer.) 28. Wholesaler ; A dealer whose principal business is to receive produce, store it, and resell it to others at an established place of business. (He may buy- either from growers or other dealers and may sell either to retailers or other dealers. He may perform delivery service but must have an established place of business. If a dealer has no such facilities, he is classified as a Truck-Jobber. ) Truck- Jobber ; A dealer who buys primarily from wholesalers, carries a wide variety of items per truckload, and sells only to retailers at their door. He may have storage facilities but does not sell on established premises. Usually a regular truck route is followed. Trucker: A dealer whose principal business is to buy produce in producing areas, transport it, and resell it either to retailers or other dealers. He han- dles only a few items per truckload. (He may operate a fleet of trucks. If a party does not buy the produce outright or take it on consignment, he is not considered a dealer but as a person hired to perform transportation services.) Store Types Large Store ; A retail store with sales of fresh fruits and vegetables amounting to over $25,000 during 19U8. Small Store ; A retail store with sales of fresh fruits and vegetables amounting to $25,000 or less during 1?U8. Fruit and Vegetable Store ; A retail store whose principal business is to sell produce. (It may be a fruit and vegetable stand or store, or a leased de- partment in a supermarket. The classification is according to management and operation and not building.) Grocery Sto re; Any other retail store handling fruits and vegetables. Local Chain Store ; A single store unit of a group of retail stores, local to the area, centrally owned, and with some degree of centralized control of operation. (Stores of national chain systems are excluded. ) Independent Store ; A retail store which is controlled by its own individual ownership or management rather than from without. (This designation refers to retail stores which are not units of national or local chain store systems. ) Credit-Delivery Store : A retail store offering credit and/or delivery services to its customers in connection with the sale of goods. • Cash-Carry Store ; A retail store offering neither credit nor delivery services to its customers.