Chapter 15 Wholesale, Retail, and Food Service Marketing

Definitions  Chain: 11 or more stores under one ownership  Independent: one or as many as 10 stores under one ownership  Affiliate: independent retailer associated with a wholesaler –Voluntary affiliate –Cooperative affiliate

Geography of Distribution for W-Rs  Generally organized around larger metropolitan areas  53 distribution areas cover the U.S.  Typical area served by 10 or fewer chains and affiliate groups  Economies of scale and vertical integration help competitive advantage

Private Label (Store) Brands  Private label products give retailer higher margins and consumers lower prices  Private brands still less popular –Possible consumer fears about quality –Consumer loyalty to national brand –Higher price on national brand may connote higher quality  Retailers believe private brands can develop consumer loyalty to store

Retail Market Structure  Retail structure concentrated at local level  Consumers tend to shop for food within three miles of home  In most MAs, a few chains have over half of market  Entry by new stores not easy

Competing for Customers  New formats –Growth of convenience stores –Growth of superstores –Growth of combination stores  Location, merchandising, atmosphere –Non-price competition –New services, better service (continued)

Competing for Customers (continued)  Promotion –Advertising helps create store’s image –In-store promotions often paid for by company providing product; slotting fees charged –Promotional devices less popular today  Pricing –Variable price merchandising (VPM) –Price specializing –Everyday low pricing (ELP)

What’s In Stores

Food Service Industry  Public eating places –Restaurants, fast-food, bars, amusement venues, clubs  Institutional food sector –Referred to as HRI (hotels, restaurants, institutions) –Schools, colleges, military service, hospitals, prisons, etc.  Food service industry has steadily eroded market share of food retailers

Franchising  Franchise (owner of trade name and concept) licenses franchisees to operate under name and format  Franchisees typically pay royalty fees  Multi-unit franchisees growing more popular

Food Service and Procurement  Institutional middlemen –Principal supplier of food service industry –Processors use brokers to sell to middlemen –Meat purveyors buy carcassas and fabricate cuts, ground beef  Procurement by large buyers –Larger buyers and fast-food chains have organized procurement systems –Have expertise and buying power to set tight specs and use competitive bids

Class Exercise  Visit the restaurant assigned to you and then prepare a report that includes the following information: –Marketing style –Atmosphere –Clientele –Food types served –Pricing  Ask manager how restaurant is supplied, how procurement decisions are made.