Food Marketing System in the U.S.: Recommended Readings

Overview Food and Beverage Manufacturing Food Wholesaling Food Retailing Food Service Price Spreads New Product Introductions Recommended Readings Recommended Data Related Links Glossary

U.S. Food Marketing System

• Structural Change
• Vertical Coordination in the Pork and Poultry Industries
• Other Articles and Research Reports

Structural Change

Five reports address structural change and emerging trade practices in produce markets:

• Understanding the Dynamics of Produce Markets: Consumption and Consolidation Grow—describes changing produce markets and market channels, per capita consumption and retail sales trends (including value-added produce), and retail consolidation trends between 1987 and 1997.
  
  
• U.S. Fresh Fruit and Vegetable Marketing: Emerging Trade Practices, Trends, and Issues—presents the results of interviews with produce grower-shippers and retail produce buyers. Two case studies provide additional analysis of the produce items selected for analysis:
  • The U.S. Grapefruit Market
  • Recent Changes in Marketing and Trade Practices in the U.S. Lettuce and Fresh-Cut Industries.
    
    
• Competition in Fresh Produce Markets: An Empirical Analysis of Channel Performance—Timothy Richards and Paul Patterson, Arizona State University, tested for retail market power for Washington Red Delicious apples, California fresh grapes, California fresh oranges, and Florida fresh grapefruit.
  
  
• Grocery Retailer Behavior in the Procurement and Sale of Perishable Fresh Produce Commodities—Richard Sexton and others at the University of California-Davis examined supermarket retailers' pricing behavior for iceberg lettuce shipped from California and Arizona, mature-green tomatoes shipped from Florida and California, vine-ripe tomatoes shipped from California, and iceberg-blend fresh salads for 20 retailer supermarkets in 6 markets in 2003.
  
  
• U.S. Fresh Produce Markets: Marketing Channels, Trade Practices, and Retail Pricing Behavior—provides a synthesis of the first two ERS reports and two additional empirical studies of supplier-to-consumer price margins by researchers at the University of California-Davis and Arizona State University.

Several summary articles of project reports have also been published:

• Lettuce: In and Out of the Bag
• Evolving Market Channels Reveal Dynamic U.S. Produce Industry
• Changing Dynamics in Produce Marketing.

Structural Change in the Meat, Poultry, Dairy, and Grain Processing Industries—From 1972 to 1992, consolidation and structural change in meat packing, meat processing, poultry slaughter and processing, cheese products, fluid milk, flour milling, corn milling, feed, and soybean processing transformed each industry. Plant size and output per employee rose sharply in all industries, suggesting that technological change was the major driving force. Communities and workers were affected as the number of plants declined by about one-third and the number of employees needed to staff the remaining plants dropped by more than 100,000 (20 percent) in eight industries. The number of plants in poultry slaughter and processing also dropped, but additional jobs were created.

Structural Change in U.S. Chicken and Turkey Slaughter—Due to substantial scale economies in poultry slaughter, the share of production held by plants with more than 400 employees rose from less than 30 percent in 1972 to more than 80 percent by 1992. Further consolidation may be limited by environmental concerns associated with poultry production.

Consolidation in U.S. Meatpacking—Today, the four largest firms handle 80 percent of all cattle slaughter. This report summarizes changes in concentration in meatpacking and identifies scale economies, price competition, and slow demand growth as important causes.

Vertical Coordination in the Pork and Poultry Industries

Vertical Coordination of Marketing Systems: Lessons From the Poultry, Egg, and Pork Industries—The report examines the role of contracts and vertical integration in reducing transaction costs. The report further explores benefits from new methods of vertical coordination and the implications for future research.

Vertical Coordination in the Pork and Broiler Industries: Implications for Pork and Chicken Products—New methods of organizing production in the broiler industries led to lower costs, more production, lower retail prices, and more uniform quality. Similar developments have occurred in the pork industry, where a need for more quality improvement may lead to further vertical coordination.

Other Articles and Research Reports

The Impact of Big-Box Stores on Retail Food Prices and the CPI—This report focuses on retail food market dynamics and how they affect food price variation across store formats. Since the current CPI for food does not fully take into account the lower price option of nontraditional retailers, a gap exists between price changes as measured using scanner data versus the CPI estimate, even for the relatively low food inflation period of 1998-2003. This study estimates that the CPI for dairy products overstates food price change by 0.5 to 2.5 percentage points per year for dairy, eggs, and butter/margarine.

Let’s Eat Out: Americans Weigh Taste, Convenience, and Nutrition—Whether eating out or buying carryout, Americans are consuming more and more of their calories from full-service and fast-food restaurants. Analysis of a survey of U.S. consumers indicates that respondents want convenience and an enjoyable dining experience, but the desire for healthy food also plays a role.

How Low Has the Farm Share of Retail Food Prices Really Fallen?—Farmers are capturing more of the consumer's food dollar than previously estimated. Based on updated baskets of food representing what American households bought for at-home consumption between 1999 and 2003, this report estimates farm contribution of retail food prices for two major commodity groups—fresh fruits and vegetables.

From Supply Push to Demand Pull: Agribusiness Strategies for Today’s Consumers—This feature article in ERS’s magazine, Amber Waves, looks at the evolution of agribusiness.

Food Manufacturing Productivity and Its Economic Implications—The gross-output multifactor productivity index for U.S. food manufacturing grew 0.19 percent per year between 1975 and 1997. Although productivity growth for food manufacturing has been relatively low, output has grown 1.88 percent annually over the last two decades. Indeed, the expansion of combined factor inputs encouraged food manufacturing output. For a short summary of the report, see the related ERS Research Brief.

Taxing Snack Foods: What to Expect for Diet and Tax Revenues—This Current Issues in Economics of Food Markets edition examines the potential impact of excise taxes on snack foods. Such taxes have been proposed by health policy advocates as a possible way to address the growing prevalence of obesity and overweight in the United States. Using scanner data, the study found that relatively low tax rates of 1 cent per pound and 1 percent of value would not appreciably alter consumption—and, thus, have little effect on diet quality—but would generate $40-$100 million in tax revenues.