1. Source: U.S. Food Marketing System, 2002, ERS-USDA 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.

2. Source: U.S. Food Marketing System, 2002, ERS-USDA Wholesaling Definitions

3. Source: U.S. Food Marketing System, 2002, ERS-USDA Wholesaling Definitions

4. Source: U.S. Food Marketing System, 2002, ERS-USDA 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.

5. Source: U.S. Food Marketing System, 2002, ERS-USDA 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

6. Source: U.S. Food Marketing System, 2002, ERS-USDA 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

7. Source: U.S. Food Marketing System, 2002, ERS-USDA Concentration in Wholesaling

8. Source: U.S. Food Marketing System, 2002, ERS-USDA Profitability in Wholesaling

9. Source: U.S. Food Marketing System, 2002, ERS-USDA Sales of Top Grocery Wholesalers

10. Source: U.S. Food Marketing System, 2002, ERS-USDA Two Giants Take Divergent Approaches: Supervalue 10 th 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

11. Source: U.S. Food Marketing System, 2002, ERS-USDA Sales of Top Food Service Distributors

12. Source: U.S. Food Marketing System, 2002, ERS-USDA Acquisition by Type of Firm

13. Source: U.S. Food Marketing System, 2002, ERS-USDA Growth of Warehouse Clubs

14. Source: U.S. Food Marketing System, 2002, ERS-USDA 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-1990’s 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.

15. Source: U.S. Food Marketing System, 2002, ERS-USDA Sales of Top Grocery Wholesalers

16. Source: U.S. Food Marketing System, 2002, ERS-USDA Two Giants Take Divergent Approaches: Supervalue 10 th 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