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Monopoly in the Meat Case?

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Mike

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Monopoly in the meat case? Some fear smaller packers may be losing the space race in the retail market.



Illinois Beef Association Executive Director Maralee Johnson said producers are concerned about the amount of retail case space controlled by nationally branded meat companies vs. smaller or regional processors and “how much competition they can keep out by the amount they can control.”



Food manufacturers and wholesalers often pay major chains for prime display space -- some retailers charge five-digit "slotting allowances" to stock new products. Johnson fears retail consolidation and a move to branded, case-ready meat could threaten opportunities for producers to enter the retail market.



University of Nebraska ag economist Azzeddine Azzam suggests major packers could gain market power while “elbowing out” rivals through higher retail marketing costs.



If a smaller firm cannot successfully bid for space, it can be forced from a market, said Azzam, who referred to the impact slotting has had on the potato chip and bakery sectors.



The jury is still out on whether slotting allowances feed anti-competitive practices or actually generate greater competition in the retail market.

Azzam sees evidence of both.



“It’s a very important issue, long-term, for producers,” Johnson said. “If we can’t sell the end product, whether it’s beef or pork, and can’t get shelf space to do things differently, we can’t add value through the (market) stream.”



The battle for dominance in the meat case crosses even species lines: Azzam noted beef, pork, and chicken compete with each other for case space and market share.



Poultry giant Tyson’s acquisition of IBP and its beef and pork market clout offers the company the potential to “buy out the shelf space” for all three product lines, he said, noting IBP “really competed with Tyson when it came to consumer demand.”



When Tyson bought IBP, “that competition pretty much disappeared,” Azzam said.



Azzam sees three major options to help producers and smaller packers maintain retail visibility. “Vertical coordination” between packers and producers allows them to control product quality and supply “from the feedlot all the way to retail” and to build their own brand recognition.



An increasingly “differentiated” food market, where Latino and Asian produce sections are emerging and consumers are seeking “organic” vegetables and antibiotic-free meat, offers niche marketers new and segregated retail slots.



Meat marketers also can set up shop on the Internet. Cyberspace technology and express shipping capabilities have helped web-based companies such as Omaha Steaks and the startup LoneStarSteaks.com to bypass slotting issues.



“I don’t think the beef industry has yet to realize the potential of the Internet,” Azzam said. “I think the Internet, by having this direct contact with consumers, is going to be fantastic.”
 

RobertMac

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Heeeellllllooooo Is there anybody out there??????????????????
How long have I been saying this? Packer concentration and retail concentration are cutting off the producer's ability to be the first to get their hands on the consumer's dollars....and that is the ONLY way you can control your own destiny!!! :???:
 

Mike

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RobertMac said:
Heeeellllllooooo Is there anybody out there??????????????????
How long have I been saying this? Packer concentration and retail concentration are cutting off the producer's ability to be the first to get their hands on the consumer's dollars....and that is the ONLY way you can control your own destiny!!! :???:

I am wondering where all the packer-backing fascists are too?

After all, Mussolini defined fascism as being a right-wing ideology in opposition to socialism.
 

Jason

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What's to argue about?

You post an article that states retailers are charging money to get spaces on their shelves.

To afford the cost of buying space, a supplier would have to be big enough to fill the space at enough profit to cover the cost.

Does it leave the little guy out? Probably but why should the little guy be able to short circuit a retail chain making a garanteed profit for space?

The little guy is not banned from buying space, he likely hasn't got the volume to cover the cost.

Consumers are starting to buy beef in branded products much as they buy their favorite brand of soap, cereal, bread, etc. If the consumer tries a brand of beef product and doesn't like it...they will know which product to avoid.
 

Mike

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Poultry giant Tyson’s acquisition of IBP and its beef and pork market clout offers the company the potential to “buy out the shelf space” for all three product lines, he said, noting IBP “really competed with Tyson when it came to consumer demand.”
When Tyson bought IBP, “that competition pretty much disappeared,” Azzam said.

OK, so you are saying that every beef packer should get into the poultry and pork processing business so that he can play beef against the others?

The FTC should have seen this coming before they approved Tyson's buying of IBP. They turn down other mergers that eliminate competition, why not this one?

The producer is the loser here, plain as the nose on your face.
 

Jason

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The article said the fee was only for the main display, not all space.

If a retailer has no sales for beef they will stop selling it anyway. This isn't being forced on consumers as a buy chicken instead of beef.

This is a front and center hey notice me new product here display. To judge if it is good or bad before it has a chance to get reactions is foolish.

Beef products can be put in that prime space. If a beef processing company outbids a chicken processor for the display they will get it. I don't see the big scary monster in this. It's a new idea that might fail, or might work out. Time will tell.

The only thing as beef producers we want to see is new beef products coming to market so consumers get what they are asking for. Convience, consistancy, and they will become loyal customers.
 

Mike

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FTC SPICES UP DEBATE OVER SLOTTING FEES AND THE ROBINSON-PATMAN ACT WITH ITS MCCORMICK ACTION

by
Robert A. Skitol

The Federal Trade Commission contributed importantly to the longrunning debate over slotting fee practices in the grocery industry with last week's release of a Robinson-Patman Act complaint and consent order against McCormick & Company. This conclusion to a major four-year investigation is best seen as a thoughtful beginning to the evolution of a sound and measured antitrust response to slotting fee abuses plaguing the grocery industry and now spreading into other industries. It also could be a step toward making Robinson-Patman law more compatible with today's mainstream (post-Chicago) antitrust policy regime.

The McCormick Case

McCormick has long dominated the spice and seasonings product category. In the early 1990s, its only national full-line rival, Burns Philip Food Inc., commenced a price war that ended in its exit from the market, considerable damage to smaller regional rivals as well and consequent enhancement of McCormick's dominance. McCormick's choice of weapons in that war is the basis for the FTC's action.

As alleged in the complaint, McCormick entered into both written and unwritten agreements with customers that provided "up front 'slotting'-type payments" and assorted other allowances and discounts off list prices. These agreements "commonly included provisions that, much as is sometimes seen with slotting allowances, restrict the ability of customers to deal in the products of competing spice suppliers." Such provisions "typically demand that the customer allocate the large majority of the space devoted to spice products -- in some cases 90% of all shelf space devoted to [spices] -- to McCormick."

As further alleged, in at least five instances the payments and other allowances given by McCormick for these agreements were substantially greater for some customers than for other competing customers. The richer terms to "favored purchasers" were not justified by either "a good faith attempt to meet the equally low price of a competitor" or by "cost savings associated with doing business with the favored" party. In each instance, "the disfavored purchaser had few, if any, alternative sources from which to purchase comparable goods" on terms "equivalent to those McCormick provided to the favored purchaser." Finally, as alleged, the effect of these instances of discrimination "has been or may be substantially to lessen competition in the line or lines of commerce in which favored and disfavored purchasers are engaged, or to injure, destroy or prevent competition between favored and disfavored purchasers" in violation of Section 2(a) of the RP Act.

The consent order prohibits McCormick from selling its products to any purchaser at a net price higher than it charges the purchaser's competitors, except when permitted by the RP Act. There is no other constraint on McCormick's continued employment of shelf-space schemes of the sort described in the complaint. This may explain McCormick's own public characterization of the order as requiring "some adjustments to our internal record-keeping" and its assurance that "these changes will have no impact on our relationship with our customers or on the way in which we go to market." According to FTC Bureau Director Richard Parker, however, the order "sends a strong message to dominant sellers that the Commission will not tolerate price discrimination where buyers have little choice but to do business with the discriminating company."
 

Sandhusker

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Jason, "The only thing as beef producers we want to see is new beef products coming to market so consumers get what they are asking for. Convience, consistancy, and they will become loyal customers."

How are customers even going to be given the choice, let alone buy anything other than the big boy's product when small and new outfits can't outbid them for the shelving space? How can a consumer buy what they can't see?

This slotting fee concept is a bunch of crap to the consumer. Those funds paid to grocers have to some from somewhere, and you can bet the outfit writing the check pumps somebody else for the money. Slotting fees have become another weapon for might to make right and the consumer loses out on loss of selection. Competition for the consumer's dollar is less and the conusmer takes another hit.
 

mrj

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Sandhusker said:
Jason, "The only thing as beef producers we want to see is new beef products coming to market so consumers get what they are asking for. Convience, consistancy, and they will become loyal customers."

How are customers even going to be given the choice, let alone buy anything other than the big boy's product when small and new outfits can't outbid them for the shelving space? How can a consumer buy what they can't see?

This slotting fee concept is a bunch of crap to the consumer. Those funds paid to grocers have to some from somewhere, and you can bet the outfit writing the check pumps somebody else for the money. Slotting fees have become another weapon for might to make right and the consumer loses out on loss of selection. Competition for the consumer's dollar is less and the conusmer takes another hit.

Sandhusker, from what I've heard over several years past, is that slotting fees have been a fact of life for many, many years in at least the major supermarkets. I haven't heard any consumer complaints about it, have you?

While I don't necessarily like or approve of it, it seems to be a fact of life and working to find ways to deal with and improve the situation when and where possible seems reasonable.

Sure have gotten a lot of new consumer friendly products into consumers hands doing whatever NCBA Federation division has done to accomplish that factor, in spite of the slotting problem.

My daughter in the Omaha area really appreciates it when she can have a great beef dinner on the table in minutes on especially busy evenings resulting from two parents with demanding jobs and two kids with a range of church, school, music and community service activities going full speed.

I'm sure there are millions of families like them across the nation who care little about the details of slotting fees, but want those convenient, nutritious, and tasty heat and eat beef entrees.

Do any of the rest of you have any solutions to offer........other than breaking up the big packers and retailers.......because that sure isn't going to happen real soon, IMO.

MRJ
 

Mike

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MRJ wrote:
Do any of the rest of you have any solutions to offer........other than breaking up the big packers and retailers.......because that sure isn't going to happen real soon, IMO.

Just making them play by the rules should be enough.

Try reading the Robinson-Patman Act. Much of this slotting business is illegal!
 

Econ101

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Just another market power play, just as rkaiser pointed out in his Cargill hotel deal.

The packer backers can't see the problem. It doesn't exist to them. The cheapest way to sell suits them just fine, no matter the underlying strategy they don't care to see.

They are probably fooled by all the magical tricks of illusion that SH talks about.
 

Jason

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McCormac spices got caught for paying different fees for similar slots to different stores. Looks like the rules are being enforced.

RKaiser got underbid for a similar product. Nothing unusual there.

Small branded products might have to use new marketing methods like the internet. I'm sure you've heard about that little marvel.

As long as the playing field is level and slot fees are monitored, it is just another business reality.
 

RobertMac

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Sec. Johannes spoke the thinking of the major packers...the price of beef is too high.

Where are the dollars coming from to bring down that price?
As SH said...all added cost(or price reductions) will come out of the producer's pocket.

Now ask and honestly answer yourself...are you a low cost producer? worldwide?
 

Sandhusker

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MRJ said:
Sandhusker said:
Jason, "The only thing as beef producers we want to see is new beef products coming to market so consumers get what they are asking for. Convience, consistancy, and they will become loyal customers."

How are customers even going to be given the choice, let alone buy anything other than the big boy's product when small and new outfits can't outbid them for the shelving space? How can a consumer buy what they can't see?

This slotting fee concept is a bunch of crap to the consumer. Those funds paid to grocers have to some from somewhere, and you can bet the outfit writing the check pumps somebody else for the money. Slotting fees have become another weapon for might to make right and the consumer loses out on loss of selection. Competition for the consumer's dollar is less and the conusmer takes another hit.

Sandhusker, from what I've heard over several years past, is that slotting fees have been a fact of life for many, many years in at least the major supermarkets. I haven't heard any consumer complaints about it, have you?

While I don't necessarily like or approve of it, it seems to be a fact of life and working to find ways to deal with and improve the situation when and where possible seems reasonable.

Sure have gotten a lot of new consumer friendly products into consumers hands doing whatever NCBA Federation division has done to accomplish that factor, in spite of the slotting problem.

My daughter in the Omaha area really appreciates it when she can have a great beef dinner on the table in minutes on especially busy evenings resulting from two parents with demanding jobs and two kids with a range of church, school, music and community service activities going full speed.

I'm sure there are millions of families like them across the nation who care little about the details of slotting fees, but want those convenient, nutritious, and tasty heat and eat beef entrees.

Do any of the rest of you have any solutions to offer........other than breaking up the big packers and retailers.......because that sure isn't going to happen real soon, IMO.

MRJ

I'd be willing to lay down a tidy sum that the main reason there hasn't been much feedback from consumers on slotting fees is because most consumers are totally unaware of them.

How do slotting fees benefit the consumer? I can think of absolutely nothing. I can, however, think of ways they are detrimental. Just remember a little rule of business - money is not created nor destroyed, it is merely transferred. We know it is being transferred directly to the retailers, where is it being transferred from? Is it benefical to the end transferee? Is this the best means to transfer the wealth?

I won't comment much on you patting the NCBA on the back for what the checkoff has paid for....

I'm not advocating breaking up anybody - just lay down some common sense rules and then ENFORCE them.
 

Econ101

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RobertMac said:
Sec. Johannes spoke the thinking of the major packers...the price of beef is too high.

Where are the dollars coming from to bring down that price?
As SH said...all added cost(or price reductions) will come out of the producer's pocket.

Now ask and honestly answer yourself...are you a low cost producer? worldwide?

Where was he when they were too low? Markets find their equilibrium. The subsidies and market power plays always distort them.

Maybe Johannes believes in free markets only when it suits packer/agribusiness interests. A little biased if you ask me. Even Jason would oppose this alluded intervention in the "free market".

Look what happened when we broke up the baby bells. The telephone industry might not have the same powerhouses (A T &T ) but it sure is thriving.
 

Big Muddy rancher

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Sandhusker is their any rules disallowing larger banks from offering better interest rates on loans or savings to garner more customers. Possibly trying to discourage other banks from coming to town?
 

Sandhusker

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Big Muddy rancher said:
Sandhusker is their any rules disallowing larger banks from offering better interest rates on loans or savings to garner more customers. Possibly trying to discourage other banks from coming to town?

No there isn't. There are rules on acquisitions of banks. If you are already in a market, you can't buy out your competition if it gives you over so much of the market. I don't know the specifics, but I do know that law exists.
 

mwj

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Sandhusker said:
Big Muddy rancher said:
Sandhusker is their any rules disallowing larger banks from offering better interest rates on loans or savings to garner more customers. Possibly trying to discourage other banks from coming to town?

No there isn't. There are rules on acquisitions of banks. If you are already in a market, you can't buy out your competition if it gives you over so much of the market. I don't know the specifics, but I do know that law exists.

I am very surprised :shock: that you would not have easy access to the specifics if you work in the buisness!
 

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Heeeellllllooooo Is there anybody out there??????????????????
How long have I been saying this? Packer concentration and retail concentration are cutting off the producer's ability to be the first to get their hands on the consumer's dollars....and that is the ONLY way you can control your own destiny!!! RobertMac Quotes,

Samething Happened Before Guys and Gals.Here is the guts laid out on this,you get to a point in retail where you are limited and there is no more marketing space (hook space) (shelf space like what Mc Cormick pulled in spices)left for the new comer on the scene.What happens is that a NEW STORE pops up and specializes in just ONE THING.
Lets take flowers for instances.How many stores do you see that just deal in FTC trade flowers anymore,Not many,But now you have small shops dealing in everything that pertains to flowers for every ocasion.

I can see thru this meat racket as Their is a group wholesaler that has no stocking fee that puts everybody's meat in one sale site or building and under cuts everybody like CostCo's,Walmart ,Public's,Kroger'sand so forth.Now the Customer has a reason to go there as all brands have space and the customer can buy the whole range of product from organaic,natural,goat,pheasant,venison,and baby beef and lamb and it might not have any imports unless their tested for CJD,BSE,and Avain FLU.

It could upset the apple cart like New flower shops.Their are some new shops that only handle Produce and they are catching on fast,and the customer can build a relationship with the OWNER.What happens is History repeats itself.
 

Econ101

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PORKER said:
Heeeellllllooooo Is there anybody out there??????????????????
How long have I been saying this? Packer concentration and retail concentration are cutting off the producer's ability to be the first to get their hands on the consumer's dollars....and that is the ONLY way you can control your own destiny!!! RobertMac Quotes,

Samething Happened Before Guys and Gals.Here is the guts laid out on this,you get to a point in retail where you are limited and there is no more marketing space (hook space) (shelf space like what Mc Cormick pulled in spices)left for the new comer on the scene.What happens is that a NEW STORE pops up and specializes in just ONE THING.
Lets take flowers for instances.How many stores do you see that just deal in FTC trade flowers anymore,Not many,But now you have small shops dealing in everything that pertains to flowers for every ocasion.

I can see thru this meat racket as Their is a group wholesaler that has no stocking fee that puts everybody's meat in one sale site or building and under cuts everybody like CostCo's,Walmart ,Public's,Kroger'sand so forth.Now the Customer has a reason to go there as all brands have space and the customer can buy the whole range of product from organaic,natural,goat,pheasant,venison,and baby beef and lamb and it might not have any imports unless their tested for CJD,BSE,and Avain FLU.

It could upset the apple cart like New flower shops.Their are some new shops that only handle Produce and they are catching on fast,and the customer can build a relationship with the OWNER.What happens is History repeats itself.

You are exactly right, Porker.
 

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