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Dramatic Change in the Supermarket Sector During the Past Decade Rise of the Walmart “Super Center”Club Rapid Merger of Supermarket Chains in the Late 1990’s Concentration of Buying Power in Supermarkets Consolidation of the Regional Class I and II Dairy Processing Firms Concentration of Class III IV Processors 精品文档 FOOD SERVICE (Products) Bulk fluid Cheeses Bulk Class II Individual serving package Specialty products NMP/WMP/BMP ESL fluid products 精品文档 FOOD SERVICE CATEGORY SEGMENTS Approximate Segments $ Vol. Bil Percent Restaurants Bars 75 bil 51% Fast food Full service Cafeteria/Buffet Bars Retail hosts 12 9% Travel leisure 10 7% Business institute 12 8% Education institute 10 7% Health care/service 6 4% All other 15 10% $140 bil 精品文档 LONG TERM TRENDS IN FOOD SERVICE INDUSTRY Consolidation of large number fragmented firms Development of low cost supply chains Partnering with low labor cost manufacturers with unique products to meet needs Food safety important Manufacturer assurance about production (e.g., GMO, Growth Hormones, Micro Organisms) Product safety Product wholesomeness 精品文档 * * * Dairy Marketing Dr. Roger Ginder Econ 338 Fall 2009 Lecture # 7 精品文档 Po P1 Qo Q1 Supply Price $/# Quantity # of milk Relatively Inelastic Supply 精品文档 Po P1 Qo Q1 Supply Price $/# Quantity # of milk Relatively Elastic Supply 精品文档 Shifts in the Supply Curve If we relax the assumption that all else is equal the supply curve can shift For example assume that the cost of feed to all producers increases Producers will reduce the amount of milk they are willing to produce for any given price The supply curve will shift upward and to the left 精品文档 P1 Q1 So Price Quantity Do S1 Po Qo Factors that can shift supply: 1. New technology 2. Changes in input costs 3. Raw material or resource availability 4. Legal or government program constraints on production 精品文档 DEMAND MAJOR PRODUCTS PER CAPITA CONSUMPTION PRODUCTION REG
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