Ag Marketing Test 2

• The ultimate task of the food marketing system is to deliver the food utilities that consumers desire
• match right form of a product at the right place and time to a particular buyer

• Physiological needs
• Social conditions
• Economic factors

• the way each society develops common patterns of dealing with food
• govern how food is acquired, prepared and eaten

• 1. No two societies have identical foodways
• 2. Standardized foodways result in similar and stable food preferences and eating paterns within a society
• 3. Foodways defining "how to eat" add social significance to the diet and are taught to succeeding generations
• 4. Foodways adapt to socioeconomic changes such as urbanization, education, income, technology and changing lifestyles

The nutritional contributions to health and survival

Status, religion, aesthetics and lifestyles

• economic values of foods
• availability of foods
• consumers knowledge and information about foods
• physiological values of foods
• sociopsychological values of foods

• Farm products, but also time, form space and possesion utilities
• even the store where the food is purchased is considered part of the product bundle

• Share of consumers income spent on food, from 24 percent to 10 percent
• That's because income increased even more than food expenditures

• 1. increased population and quantities of food eaten
• 2. rising food prices
• 3. consumer preferences for more expensive foods and marketing services

• limits profit prospects for farmers and food marketing firms
• intensifies competition among commodities and firms
• encourages food firms to diversify into more rapidly growing products
• provides an incentive for food firms to attempt to increase their sales overseas

• the study of populations
• how many people, where they live, how they live

the supermarket (it's a suburban product)

It's usally more economical to service highly concentrated populations than scattered consumers

• food spending per capita decreases, it's an example of economies of scale
• smaller families typically spend more per capita for food, eat away from home more often and purchase more food marketing services than larger families

Population and income growth

Needs, along with the ability and willingness to satisfy those needs with income

income elasticity

• quantity rises with income
• livestock goods

• quantity falls as income rises
• Ramen noodles

• It's generally lower
• income elasticity of farm products are generally lower than the income elasticity of the utilities added in the marketing process

Food marketing services

food expenditures do not normally increase as rapidly as income, so the ratio of food spending to income falls with rising income

• consumers don't buy more pounds of food, they upgrade
• consumers share of income spent on food declines
• broadened product bundle of attributes most valued by consumers (quality, variety, convenience, service)
• increase the value of consumers' time and expand the demand for convenience foods with built-in maid service

a product that reduces the amount of time, effort or additional ingredients required of the consumers in preparing food

• About 40 percent
• these are things like fresh meats, produce, milk, eggs

• More than 90 percent
• less than 40 percent of milk, fruits and vegetables are processed

• foods which are believed to provide medical or health benefits, beyond the general health benefits of any foods
• sometimes called farmaceuticals
• vitamin-fortified, low-fat, diet, low-cholesterol

• adding vitamins
• altering products - low-fat, low-cholesterol, low-sodium, sugar-free, leaner meats
• changed ingredients - turkey dogs
• organic food production

• Consumers need to be educated about the product and benefits
• New quality standards may be needed
• Consumer deception and fraud are possibilities

• 48 percent
• increased income, working spouses and changed lifestyles all contributed to the rise in away from home demand

• restaurants
• school, factor and hospital cafeterias
• hotel and motel eating places
• government foodservice operations and military feeding establishments

• Prices tend to be more stable and there is a higher ratio of marketing-services-to-food in the foodservice industry
• Restaurants, 45-65 percent of consumers prices represent nonfood costs of service and profits
• Supermarkets, about 80 percent of prices represent food costs

About 2 percent

food wholesaling and retailing

Provide consumers with the right foods, at the right time and at the right place, at a profit

How marketing agencies change in response to new demands and competitive conditions

• food production areas
• they assemble large lots of product from diverse producers and prep the products for shipment on to processors or wholesalers (located in cities)

About 10 percent

• Food wholesalers
• Market success is largely determined by how efficiently they provide products and services to their suppliers and retail customers

To efficiently assemble various products in reasonable quantities from the shipping point firms and processors and sell themin smaller quantities to retailers

• buy, sell and store grocery products and perform numerous marketing functions
• about 75 percent of food wholesalers are merchant - they account for 69 percent of wholesale food sales

inventory control, pricing, financial management and analysis, merchandising and advertising support, private brand label programs, credit and financing of new stores and store site selection

• Independent wholesalers aligned with independent retailers (voluntary or cooperative groups)
• many responded by concentrating sales efforts on restaurant and institutional foodservice operations

do not sell to foodstores but specialize in supplying products and services to restaurants, fast-food outlets, airlines and foodservice institutions

• retailers today, but they orginally sold in large lots to other businesses
• require membership, sell in multipacks or large containers

• extensions of food processing firms' marketing activities to the wholesale level
• owned and operated by the food manufacturers, they perform the storage, selling, transport and intelligence marketing functions

• perform a wide variety of sales-related marketing activities for their clients
• they handle a number of noncompetitive lines and increasingly provide more merchandising services for their clients
• smaller food manufacturers usually use these

• Average size is increasing.
• Emphasizes the importance of volume for efficient wholesaling
• Lots of mergers in the 1980s

It's doubled between 1977 and 1992 (22 percent to 44 percent)

• food wholesalers
• computerization, mechanization, electronic ordering and billing and stable energy and labor costs are all contributors to rising productivity, lower costs and generally satisfactory profits in food wholesaling

• True
• There are Dutch, Canadian, German and Japanese food wholesalers operating in the US
• The US is investing in Canada, Mexico and Latin America

• food retailing
• it's the most expensive segment of the food marketing system
• food expenditures account for about 1/4 of total retail sales

• False
• they employ more than 80 percent

on the end - they directly service the final customer

More than 18,000

advertising and point of purchase material

• Foodstore (supermarkets, superettes, convenience stores, specialized foodstores)
• Foodservice sales (commercial, such as fast food, restaurants, cafeterias, caterers and noncommercial, such as education, hospitals, day care)

• 11 or more related grocery stores
• don't need to be supermarkets

• best defined as full-line, departmentalized, cash and carry, self-service foodstore
• $2 to $3 million in annual sales (1980s $) and 10 to 40,000 square feet of space
• emphasizes self-serice and features dairy, meat, produce and dry grocery departments
• supermarkets accounted for 72 percent of total grocery store sales in 1996

• True
• fast-food firms have experienced the most dramatic growth

• food retailing, wholesaling and often processing activities
• chainstores grew out of a quest for operational efficiences through large-scale buying and selling (as well as a drive for competitive market advantage among food retailers)

The 1920s  - by 1929ish, many chains peaked, number of stores-wise

• retailer-owned cooperative wholesalers
• wholesaler-sponsored voluntary retail chains

• national and regional grocery wholesaling and retailing operations that are centrally managed
• A&P, Kroger, American Stores, Winn-Dixie, Safeway

• independently owned grocery stores affiliated with food wholesaling operations
• SuperValu Red Owl IGA

not related in any formal way to a wholesaling operation

market-oriented and consumer-driven

• suburbia
• shopping centers
• rising consumer incomes
• greater mobility thanks to cars
• home freezer facilities
• mass-media advertising
• increase in new product development

foodstores and drugstores under one roof

• range up to 60,000 square feet, handle a wide range of general merchandise
• service departments such as bakeries, delicatessans, cheese shops
• emphasize low prices

smaller foodstore, handling only about 500 nonperishable grocery products at deep price discounts

• eliminate services and frills and make a strong low-price appeal
• products often displayed in their shipping cartons
• shoppers may mark their own prices, bag their own purchases and even supply their own grocery bags

super warehouse store ranging up to 200,000 square feet and providing one-stope purchases of groceries, sporting goods, auto supplies, housewares

• customers are members
• deep discounts on large volume purchases

premium-quality, exotic foods and brands

small, neighborhood foodstore featuring long hours, quick service and a narrow assortment of fast-moving staple and impulse items

• difference between what retailers pay for food and what they sell it for
• the "cost" of performing the food retail marketing functions
• includes operating costs and net profits

• the wheel of retailing
• retailers alternate between an emphasis on low service/low prices and high service/high prices in attracting customers

retailers alternate between an emphasis on low-service/low-prices and high-service/high-prices

through pricing and promotional policies, food retailers can influence consumer demand, farm prices and the movement of farm products

• retail food prices are a form of promotion
• food retailers are multiproduct sellers with discretion on how they price each item and they set prices to differentiate their stores from those of competitors
• they're influenced more by consumer demand and competitive objectives of grocers

• each food product is priced as a component of a total mix of foods (and nonfoods) offered by the store
• this gives the retailer considerable latitude in pricing any one food

• retailers use temporary, selective price cuts to differentiate their stores and attract customers
• loss leader and weekend specials
• another retail pricing strategy that reduce dependence of retail prices on farm or wholesale prices

a strategy of many newer foodstores such as warehouse clubs, discount stores and superstores

it may place downward price pressures on all suppliers in the food chain, from wholesalers to farmers

• size, power and strategic position
• they're making many of the major market decisions about quantity, quality and services provided by the entire food industry

menus, store design

• price/value
• convenient locations
• quality of food and presentation
• menu specialization or diversity
• differentiated image
• promotions - games, coupons
• drive through windows

True

• The ability to comptet in world markets
• competition in world markets stimulates American farmers to increase their efficiency and output

• the difference between the value of exports and imports
• it's a measure of the country's ability to pay for its imports with exports and can influence the value of the dollar in world markets

• The U.S. has an agricultural trade surplus, which helps to offset the total trade deficit to some extent.
• The ag surplus averaged $19 billion in the 1990-1999 period.

• It lies in the economies of producing commodities that are (relatively speaking) best suited to a country's resource endowment
• resources include land, labor, climate, management skills and other factors affecting the cost of production

by encouraging the shift of resources to their most efficient uses

there are economic gains when, under free trade, nations produce and export those commodities that they can produce relatively most efficiently by virtue of their resource endowment and import those commodities that other nations can produce more efficiently

trading comparative advantage products for comparative disadvantage products

• they have a smaller share of natural resource cost and a larger share of marketing costs in their final value than traditional crops.
• unprocessed foods (eggs, fresh fruits, veg, nuts); semi-processed foods (meat, flours, oils) and processed foods (processed meat, dairy, bakery products and prepared foods)

bulk commodities - grain, oilseeds

• these are imports that aren't directly competitive with domestic production
• bananas, cocoa beans, tea, coffee, spices

• compete directly with domestically produced food products and are increasing relative to complementary ag products
• meat products, furits and veg, wool, dairy products, oilseed products

Canada and Mexico