-‘ a.“ 1.. ’. -.‘ @LINE To DUPLICATE ORDER MADEIRUMSA with mm R£MOU~ mmr ol A STUDY OF THE PRCFITz’xBILITY OF FROZEN FOOD DEPARTMENTS By Ralph Joseph Mdtysiak A THESIS Submitted to Dr. Edward M. Bartlet in martial fulfillment of the requirements for the degree of I~1ASTER OF BUSINESS EDI-III'EISTLLXTION 1960 ~{MESS ACKNOWLEDGEMENTS The writer wishes to eXpress his appreciation to the Fisher Brothers Company for their help in making this study possible. Thanks is due to Dr. Edward M. Barnet, whose penetrat- ing questions and helpful advice were a constant source of inspiration to me. Recognition is also due the many companies and individ- uals who have contributed information for this thesis. I wish to give Special thanks to my wife, Jean, whose patience, cooperation and typing ability made this thesis a reality. TABLE OF CONTENTS LIST OF TABLES O O O O C O O O O I O O O O O O O O O O O O O O O O O O O O O O C O O C O O C O 0 iii LIST OF FIGUES O O O O O O O C O O O O O O O O O O O O O O O C O O O O O O O O O O O O O O O C 1v INTRODUCTION. 0 O O O O O O O O C O O O O O O O O O O O O O O O O O O O I 0 O O O O O O O O I O O 1 Chapter I. HISTORY OF FROZEN FOODSOOOOOOOOOOIOOOOI00...... 4 Man's Early‘Ways Technological Development Growth of Frozen Food Industry Effects of Our Changing Economy 11. BACKGROWD OF TI‘iE STUDY .oeeoOeoeoeeoeeeooeoeee 1-4 General Operational Area Specific Operational Area Rating of the Chain In The Cleveland MetrOpolitan Area Some Factors To Be Considered In Comparison Studies III. A STUDY OF THE OPERATION OF EIGHT SELECTED mom FOOD DEPA1{nEIH‘SOOOOOO......O...‘.0... 19 Analysis of Frozen Food Sales To Total and Departmental Sales Relationship of Percentage of Store Selling Area To Percentage of Sales Cost of Operations and Profits Resulting Relationship of Area Income To Frozen Food Sales and Profit Relationship of Age Group to Sales and Profits Racial and Nationality Factors Affecting Frozen Food Sales and Profit RelationShip of Five Top Selling Items to Sales Conclusions Reached in Study IV. CREATING GREATER PROFITS IN FROZEN FOOD.,,,,,,, 44 Advertising Promotion Display PrOper Handling Distribution Costs Manufacturer's Label vs. Distributor's Label Maintenance Costs Future Trends Chapter v": 80mm AND CONCLUSIONS....................... BIBLIOGRAPFIYOOQeeoeeeoeoeoeeeeeoeoo'eeoeeeoeoeeeeoeooo P. Page 78 87 Ho Table II. III. IV. VI. VII. XI. LIST OF TABLES Value of-All Frozen Foods at Retail.......... The Cleveland Market For Frozen Food-1959.... Comparison of Dollar Frozen Food Sales to Total and Departmental Sales for a FOUI‘ ‘Jeek Peri-Odo...OOOOOOOOOIOOOOOIOOOOO Comparison of Percentage of Departmental Sales ‘to TOtal 88138..ooeeeeeeooeoeeeeoeeeo Percentage of Store Selling Space to Percentage of Department Sales............. COmparison of Square Feet of Departmental Selling Space to Dollars Returned.......... Relationship of Various Measurements of Frozen Food Sales Efficiency............... Operating Results For Four week Period....... Income Levels of Shoppers Trading the Eight StoreSOOOCOOOOO.....OOOCOCOOO00...... Age Levels of Customers Shopping the Eight Stores.‘......OOCOOOOOOOOOOCO00...... Top Selling Frozen Food Items in Stores StudiedOOOOOO0......OOOOCOOOOOOOOOOOOO0.... He HO P. Page 16 19 2O 24 26 28 31 36 37 42 LIST OF FIGURES F3. cure Page 1. Food Chain Frozen Food Sales Record. . . . . . . . . . 8 2. Frozen Fo Od Sales are Climbing Towards the Ten Per Cent Level..................... 9 3. Diagram of American Stores' Frozen Food LayoutOOCOCOO......OOOOCCOCOOOOOOOOOO...... 54 IN'l‘RO DI I (3 TI ON The frozen food industry has been growing at a rapid pace. It has reached a point now where approximately a nickel of every food dollar is spent for frozen food. It has moved from a struggling infant business to one of adolescence which seems to see maturity in the not too distant future. Seventyb one per cent of the retail frozen food business is being done by the corporate chain food store. The growth of frozen foods, while being strong, has not reached the anticipated ten per cent Of total food sales predicted a few years back. Everyone has a different opinion as to why the sales have not reached this ten per cent figure. These reasons range from lack of interest by the consumer to lack of profits for the retailer. The retailer has been bombarded by a constant barrage of new products being introduced daily. He is confused by this saturation of new products to a point where he doesn't know which product to keep and which to let go. Compounding this dilemma of a superabundance of items with a shortage of display space is the high cost of expansion. As various studies have shown, a greater amount of frozen food diaplay case is not a guarantee of greater sales and profits. In addition to the high initial costs, the retailer must consider the increased Operating and maintenance costs. He must also consider the effects of the economic area he Operates in, the social classes he caters to, and also the factor of whether he could utilize the Space occupied by frozen food to a greater advantage, both volume and profit wise, with ‘another line. The purpose of this paper is to try to gain an in- sight into some bf the problems presented to the retailer by a study of the profitability of a frozen food department. .A study was made of eight stores of a midwestern chain whose performance was judged typical of the company's operation. The study was made for a four week period dur- ing which the Operating performance of the eight frozen food departments were recorded. A comparison between the individual stores was drawn and analyzed in relation to dollar contribution of the grocery, meat, produce and frozen food departments to total store sales. This comparison and analysis was carried through to percentage of total store sales, dollars per square foot of selling area and dollars per lineal foot of display and selling area. In order to gain some insight into whether the frozen food department was a profitable Operation, the Operating eXpenses of the individual frozen food departments were tabulated and the net profit figures obtained. These fig- ures helped determine the answer as to whether frozen foods were economically feasible to handle in these eight stores. A comparitive study was then attempted to determine the relationship, if any, of the social, economic, environ- mental and age factors upon the individual store Operations. The study was used as a basis for the section of the paper devoted to the analysis of increasing sales and pro- fits by the innovation of new product lines, rearrangement of present stocks, location of selling space, pricing and merchandising. The paper has been subject to some limitations. No attempt was made tO compare gross profits of the other departments with the frozen food department. There also was not any attempt made to compare the manner in which items were on display in relation to their sales. Whether these limitations have any adverse affect on the results is not known. Here is one group of stores analyzed, the results of which, it is hOped, will prove of value in the retailing of frozen foods. The results are by no means meant either to ’ encourage or discourage any retailer from attempting to sell_ frozen foods. The findings are merely offered as a guide. It is up to the individual retailer to experiment in his own situation. However, the issues raised may aid him.in being aware of the issues. The material used in this report came from personal Observation, published periodicals, books, government docu- ments and correspondence with people in the frozen food industry. CHAPTER I HISTORY OF FROZEN FOODS MAN'S EARLY WAYS Historically, it is believed that man began freezing flesh foods as he moved from sub-trOpical zones into glacial zones and temperate zones which became frigid in winter. There is even historical evidence that the Egyptian Pharaohs were fond of frozen desserts.1 - It is less than a 100 years ago that slow freezing by artificial means came into being. About 1865 fish and poultry were slow frozen. In 1880, some freezing of meats was done and in 1905, small fruits for remanufacture were frozen.2 In 1929, the commercial quick freezing of fruits and vegetables actually began. TECHNOLOGICAL.DEVELOPMENT The quick freezing process was developed by an en- terprising Gloucester, Massachusetts man.named Clarence Birdseye. He did not invent quick freezing, but did develop a system for the rapid freezing of perishable foods in pack- ages by pressing them between two refrigerated metal belts. 1Robert A. Froman, "Ice Cream.-- Sundae, Monday and All ways", Colliers, June 9, 1951, p. 18. 2Clifford F. Evers, "Frozen Food Industry", Industrial and EngineeringChemistry, 40:2251-53. December, 1948. The scientific principles underlying this method had long been.known but never applied to fast freeze. Quick freezing preserves the tOp qualities of a product because-of the Speed of heat removal, whereas slow freezing is uncertain and un- controlled and quality deterioration often results. Clarence Birdseye received his big idea in 1915, while on a hunting and fishing trip in Labrador. He noticed that fish frozen in the minus 30 to 40 degrees fahrenheit weather were as tasty as the fresh product when thawed and cooked months later.3 Upon returning, Birdseye began to do research and experiments with the artificial freezing of foods. In 1923, he developed plans for a belt froster. Borrowing on his life insurance, Birdseye went into business. In 1924, he estab- lished the General Seafoods Corporation, unearthed three backers who staked him to $60,000 and set up shop in Glou- cester for more experimental work. By 1926, the belt froster plans had grown into a 20 ton quick freezing machine. ; Birdseye began shipping bulky packs of frozen fish to the Midwest and kept on experimenting with fruits, berries and vegetables. Business was bad though, it was necessary to ”educate the public to the advantages of frozen foods. Frozen food was synonymous to cold storage food whose flavor was so bad that the customers would not buy it. 3Quick Frozen Foods, General Foods Corporation, New York, 1959. p. 2. In June, 1929, Clarence Birdseye was able to sell the patents and assets of his immature company to the Postum Company who recognized the potential of this infant industry. On March 6, 1930, in Springfield, Massachusetts, quick- frozen food was Offered to America in retail stores for the first time. Behind a tumultuous 40 week advertising campaign, Birdseye launched 27 different products in 18 stores. They sold 80,000 packages that year; 800,000 in 1931 and 1,200,000 in 1932.4 GROWTH OF THE FROZEN FOOD INDUSTRY By 1934, the five year old Birdseye business was frozen deep in red ink and deeply bogged down by a distribution pro- blem. The first step in correcting this situation was a.cut in retail prices to deveIOp a greater volume sales and still maintain a profitable Operation. This price cut proved to be the answer and the company began to move into the black. It was not until 1940, at which time the country began to move out of the economic doldrums, that the Birdseye Com- pany began to push for national distribution. Helping to bolster the sales of frozen foods was the fact that shortly thereafter no less than 24 per cent of the homemakers had become defense workers. In the quest for shortcuts the age of convenience foods was born. 4 . Ibid, This era was not one of complete success, due to the fact that it gave birth to many unscrupulous fly-by-night Operators who saw in frosted foods a chance to make a quick dollar. The war effort helped the frozen industry to grow in still another way. Frozen foods in their paper cartons were a natural to save many tons of steel for other vital needs. The industry grew from an output of 325 million pounds in 1939 to that of over 4 billion pounds in 1958. TABLE I VALUE OF ALL FR ZEN FOODS AT RETAIL* 1942 $162,000,000 1950 ' $ 500,000,000 1943 178,000,000 1951 700,000,000 1944 197,000,000 1952 875,000,000 1945 257,000,000 1953 1,200,000,000 1946 524,000,000 1954 1,450,000,000 1947 245,000,000 1955 1,700,000,000 1948 292,000,000 1956 2,106,000,000 1949 575,000,000 1957 2,362,000,000 195800. o o eoeeoz’320,000 I000 *Includes all sales of frozen vegetables, fruits, concen- trates, poultry, seafoods, meats and prepared foods projected at retail prices. Source: Quick Frozen Foods, March, 1959, p. 150. The sale of frozen foods through retail outlets con- sisted of 70 per cent of these values of frozen foods. Of this 70 per cent, approximately 71 per cent of the sales, were made through chain outlets. FIGURE 1 $ FOOD CHAIR FROZEN FOOD SALES RECORD in 1950--1958 millions ‘ J I 1,000 800 .______. ~600 400 20 Stor Sale 1. % .21% 25% 3.1% 34.8% 4.3% 46% 44% 46% _ "51 '2 '5 '54 '5 ’56 '57 '8 '9 Source: Chain Store Agg, April, 1959, p. 161. EFFECTS OF OUR CHANGING ECONOMY There are many socio-economic factors which have re- sulted in the growing popularity of frozen foods. ‘While the growth of frozen foods has not hit the predicted ten per cent of retail food store sales, they have continued to grow at an ever increasing rate. FIGURE 2 FROZEN FOOD SALES ARE C'LDIBING TOYLKRDS THE 10% LEVEL , 10% - / 9% I / 8% 5% /, _ / 4% ' /, 3% // /, a ,/ 1% / f/ / '47 '48 '50 '52 '54 '56 '58 '60 '62 '64 '66 '68 Black dots show percentage of total food store sales represented by frozen food sales. 10 The average consumption of frozen foods by individuals today is around 28 pounds per year, which is better than 0.5 pounds per week for every man, woman, and child in the country.5 This growth in the consumption of frozen food can be attributed to changing socio-economic conditions. One of the changes in our country has been the in- creased number of women being employed in the United States. Frozen foods' growth began at the inception of women.in defense jobs. Now that the emergency is over there still is a working force of women which encompasses a third of the total national working force. Most women are looking for easier and faster ways to do their culinary chores. It is estimated that frozen foods of all types can reduce the cooking time of the homemaker from six hours to ninety minutes. Another factor in the growth and popularity of frozen foods is one which can be said to be a natural growth. This factor is our exploding population. It is estimated that the pOpulation of the country will increase from 180 million to 214 million by 1970 if the birth rate remains constant. The young adult group (from 21 to 24 years of age) decreased in the past decade but in the 1960's it will increase by 53 per cent. New households will be formed resulting in a 5Lawrence Martin, "Growth Factors For Frozen Foods in the 1960's", Frozen Food Field, April, 1960, p. 12. _. 11 still larger potential for frozen foods. Table II shows the increase in the number of households from.1947 to 1956 and the projected numbers from.1960 to 1975. An increase in our gross national product will also bring increased demands for frozen foods. As our standard of living and take-home pay has grown so has the demand for frozen foods. The increased demand has been especially growing for the convenience foods, those with "built-in maid service". This demand has closely paralleled the rising gross national product. There has been a steady increase of the pOpulation into metrOpolitan areas with emphasis on the growing subur- ban pOpulation. These suburbs have been growing in the past decade about 1 1/3 times as fast as the central cities. This move to "suburbia" resulted in fewer shopping trips and the desire to purchase on this trip enough perishable foods to last at least a week. With the advent of the two car family and the building of shopping centers into outlying sections this pattern of once a week shOpping is beginning to change. In the 1959 Unpont study of consumer shopping habits it was found that the average shOpper now visits the supermarket three times each week, with four or five visit- ing a supermarket at least twice a week and more than half going three or four times a week. The move to metropolitan areas from rural areas has contributed to frozen food growth by the fact that more people an— 12 Who live in.urban areas consume frozen food than those living in rural areas.6 The development of mechanical refrigeration for home use has helped increase the sale of frozen foods. An early study of families owning refrigerators showed that families owning refrigerators with frozen food compartments bought as much frozen fruits and vegetables as families owning freez- ers.7 This early survey would seem to indicate that those families possessing home freezers tended to process fresh food for their home freezers rather than to purchase come mercially processed foods. With the advent of lower prices and more competitive selling of commercially processed fro- zen focd this phenomena, it can be assumed, will change. At present, it is estimated that there are 7,700,000 home freez- ers in use and 1/2 of the population now live in homes where home freezers are in use. It is estimated also that 93 per cent of the families in the United States possess some form of mechanical refrigeration equipment.8 6Robert B. Reese, Family Purchases of Selected Frozen Finits and vegetables, Agriculture Marketing ServiCes, United States Department of Agriculture, Market Research Report No. 317(Washington:Govermnent Printing Office, 1959), p. 4. 7United States Department of Agriculture, Purchases of Frozen and Canned Food by Urban Families as Réiatedito e Refrigeration Facilities, AgriculturefiMarketing Service, Market Research Report No. 60. 8Norbert L. Chaplicki, A.Second Look at Frozen Meats, Address given at U.A.F.C, Management Clinic in Chicago, Illinois, February 20, 1956. 13 The educational level of the United States has also been a factor in the growth of frozen foods.- A survey of frozen food consumers indicated that their educational level was much higher that non-users. It is estimated that 50 per cent of all Americans today are users of frozen food. It can be assumed by these preliminary findings that as the educational level increases so will the amount of frozen food consumed. By 1970, school enrollment will reach 57,500,000 and the population 25 years old and over will have a high school education or better. The average el- ucation at present is the seventh grade.9 The rising educational level along with the deveIOp- ment of chains and supermarkets has helped to eliminate the social barrier which once separated the rich from.the work- er's families. The former have learned to be more tolerant and they now all shop the same stores, as the wide variety in the markets allows them to supplement their diets at will.10 This tolerance and reduction of social and racial barriers has opened up many new markets for frozen foods. 9Lawrence martin, op. cit, lo"How American Buying Habits Change", Monthly Labor Review, February, 1959, p. 25. CHAPTER II BACKGROUND OF THE STUDY GEI'TE RAL OPERATIONAL AREA There is a need for an analysis of the general Oper- ational area in which the eight supermarkets used in this study are located. There are various socio-economic and environmental factors which will affect the Operations of the stores used and these factors in turn affect any com- paritive analysis of the results. The eight supermarkets used for this study are members of a large food chain Operating in the Horht Central region of the United States. The United States Department of Agriculture through.various studies and research projects has indicated that this region ranks second in frozen food consumption in the United States.1 A key factor in the greater quantities of frozen food consumed in this area no doubt stems from the fact that within this area lies most of the greatest industrial might of the nation. This re- sults in higher incomes, more working women and, therefore, as previously indicated, a larger market for frozen food. Also, in this area are more urban families and a greater concentration of pOpulation. This factor also was indicated in previous surveys as being contributory to greater frozen food sales. 1United States Department of Agriculture, Family Pur- chases of Selected Frozen Fruits and Vegetables, Agriculture Marketing serVIce, Ebrket‘ResearCh ReportFNo.*3l7, p. 4. 15 SPECIFIC OPERATIONAL AREA The eight stores used in this study were located in the Cleveland, Ohio metropolitan area. The city of Cleveland has a pOpulation of 1,758,100. The family effective buying income is $7,333. This ranks the city eleventh.nationally both in population and family effective buying income. Cleveland's frozen food sales in 1959 amounted to $25,809,000 which gives it a rank nationally of ninth. The rank can be traced to the previously mentioned factors of high income rank, concentrated population, high degree of urbanization and the highly industrialized area with its correspondingly higher wages. The stores used were judged as typical of the company's Operations and were located in various areas to give a cross section of the operating areas of the chain as a whole. They were not the best stores and they were also not the poorest stores in frozen food sales. RATING OF THE CHAIN IN THE CLEVELAND METROPOLITAN AREA The chain from which the stores being studied were selected Operated 36.2 per cent of the corporate chain self-service food stores in the Cleveland metropolitan area.2 With this percentage of stores, the chain did 25 per cent of the total food business in the Cleveland area. 2Where And How TO Sell in the Greater Cleveland Market, Market Research Department, Cleveland Plain Dealer, Cleveland, Ohio, 1958. 16 .A survey conducted by the Cleveland Press in 1958 indicated that there was almost an even break of consumer preference for shopping this chain's stores by both the upper and lower economic halves of the pOpulation.3 The survey also indicated that the greatest reason for shopping the stores was convenience of location. This was also the greatest single factor in the preference of all the other chain food stores operating in this area. TABLE II THE CLEVELAND MARKET FOR FROZEN FOOD - 1959 Total Food Sales $614,502,000 Food Sales Rank 11 Total Frozen Food Sales $25,809,000 Frozen Food Sales Rank ‘9 % Total Frozen Food to Total Food Dollars 4.2 Total Frozen Food Sales per Capita Consumption 14.68 lbs. ( in ) per 1,000 ca ita Frozen Fruits and vegetables Consumed $5,678 $3.23 Frozen juices consumed 5,059 2.85 Frozen Prepared Foods Consumed 7,304 4.15 Frozen Meats and Poultry Consumed 5,006 2.85 Frozen Seafoods Consumed 2,762 1.57 % Total Frozen Sales by leading chains 64.9% Source: Quick Frozen Foods, March, 1960 315th Cleveland Home Inventory, The Cleveland Press, Cleveland , Ohio , 1958. 17 SOME FACTORS TO BE CONSIDERED IN COMPARISON STUDIES The value Of any study and its results lies in the ability of using the results obtained as a basis for compar- ing one's own Operation to competitive Operations. In order to help facilitate this and provide a basis for comparisons, a survey was done of competitive food chains' frozen food departments. A survey was made of nine chains, including the one being studied, as to which department was held accountable for Operation of the frozen food department. Seven of the chains Operated vegetables and ice cream under the grocery department. One of the reSpondents had the vegetables under the produce department. Eight had the frozen packaged meats displayed, stocked and rung up by the meat departments. The company, under observation in this study has the complete frozen food department under the jurisdiction of the meat department. The figures presented in the study will be governed by this characteristic. Another factor to be considered in evaluating these figures is that all frozen food sales quoted include ice cream.sa1es. There are various schools of thought which would exclude ice cream.sales from frozen food sales. It is my contention that inasmuch as they require the same handling facilities it is much easier to use the common storage and stocking facilities of the frozen food depart- ment. This would appear, in my Opinion, to reduce costs Of 18 operation by the exclusion of duplicate facilities and effort. The exact savings thus induced could be the subject of another study. The chain, at the time of the study, did not possess any label of its own on juices, fruits, vegetables, fish, meat products and prepared food items. The total frozen food sales consisted Of 85 per cent manufacturer's label and 15 per cent packer's label. They did sell ice cream under the company label, offer- ing a complete ice cream line. Under the manufacturer's label a premium line of ice cream was Offered. It was not a nationally advertised brand of ice cream. CHAPTER III A_ STUDY OF THE OPERATION OF EIGHT SELECTED FROZEN FOOD DEl‘z‘xR’I‘lflSNTS ANALYSIS OF FROZ'CEN FOOD SALES TO TOTAL AITD DEPA R'I'I'EIE‘AL SALES The operating results of the eight supermarkets being studied were gathered in a four week period of February and biarch, 1960. The time was chosen to obtain a period during t-zhich operational figures and sales would be typical of the store's average frozen food business. It was a period un- affected by unusual holiday business, special promotions, t-Jhich might throw the averages out of line and tempered by the beginning of the Lenten season which normally results in a decrease in some food sales. This period would. tend to balance meat and grocery sales and to catch produce in a season which was (good but not peak in sales. It also allowed for the seasonal fluctuation of ice cream sales. TABLE III COIiPthISON 01" DOLLAR FROZEN FOOD SALES TO TOTAL AND DEPAR’I‘IIIENTAL SALES FOR A FOUR WEEK PERIOD. §l€2§g Total glides Grocery Meat Produce Frozen Food ‘3 $56,793 :5 90,629 $34,782 $17,672 $6,855 0 100,629 56,661 26,398 9,664 3,928 D 115,216 64,645 27 ,350 12,079 5,581 B 156,192 90,596 36,328 15,208 7,030 F 215,702 122,418 52,812 22,404 9,034 G 158,789 94,255 36,447 15,425 6,381 H 196,465 109,996 51,696 19,957 7,408 \ 128,214 76,597 28,595 12,116 4,954 20 TABLE IV COMPARISON OF PERCENTAGE OF DEP:“R'IT§.~‘£I:'I‘2\.L SALES TO TOTAL SALES % % % % Store Grocery Meat Produce Frozen Foods A 57.9 26.5 11.2 4.4 B 56.3 30.1 9.6 4.0 C 56.9 28.0 10.4 4.7 D 58.0 27.8 9.7 4.5 E 56.7 28.8 10.3 4.2 F 59.4 27.8 9.7 4.1 G 55.9 30.2 10.1 3.8 H 59.7 26.2 10.2 3.9 Average 57.6 28.1 10.2 4.2 The analysis of the percentage of total sales figures of the eight frozen food departments reveals that the average percentage of frozen food sales is 4.2 per cent. This per- centage of total sales figure is below the national average of 4.7 per cent1 by .5 per cent. In talking with the mer- chandiser of frozen foods for the chain he expressed the Opinion that this percentage figure may reflect some unusual condition as the company estimated their percentage of fro- ZQ‘D. food sales to be closer to 5 per cent. This would indicate a deviation of .8 per cent. This would still in- diCate a good Operation percentage wise as Chain Store Age m<31€§a1zine reported that in a study of the frozen food oper- ations in 1959 of 25 chains, frozen food sales varied in the I“3-13orti'ng chains from 2.1 to 10 per cent of total food \ S 1"The True Look of the Super Market Imhmtry, 1959", 4233 Market Merchandising, 142.37, 1960, p. 78. 2]. sales.2. This variation is one of the widest of any commodity in the store and indicates that the potential market is still larger than has been tOpped by the chains to date. Taking these remarks as a keynote it is possible to assume that while these eight markets are doing an accept- able amount of frozen food business there lies in these markets a heretofore untapped potential. Frozen foods are products in Ui‘iCh there is the greatest notenti al for the individual departnent manager to display his own initiative and merchandising techniques in boosting the sales of this department. The Dupont survey revealed tha t of frozen food purchases 83.4 per cent were in store decisions. This is eight out of ten frozen food purchases.:5 A further analysis of these percentage fig 1res does not reveal any great correlation between produce and frozen food sales. That is, there were not any stores finch had high frozen food sales and exceptionally low produce sales or vice-verse that might indicate a preference of one for ‘ the other. Some correlation was thought to exist as frozen vegetables and frozen juices are the best sellers in most frOzen food departments. Store A, which had the highest percentage of produce sales to total sales ranked third in frozen food sales. \ A 2"The Untapped Frozen Food Market", Chain Store Age: ' Dri1,1960, p. 138. b 3Instant Mon_y, The American Institute of Food Distri- ution,_L Inc., New York, 1960, p. 25. 22 Store C, which ranked the highest in frozen food sales, ranked second in produce sales. The conclusion reached on the basis of performance of these eight stores in this limited study is that the two departments rather than competing with each other complementfieach other. There seemed to be very little variance between the . grocery sales and frozen food and produce sales which might indicate a preference of canned goods over fresh or frozen. Of course, it must be realized that although total grocery sales plus frozens and produce remain relatively constant, We do not know enough about the breakdown of grocery sales themselves (dairy, bakery, soaps, canned goods, etc.) to be able to state definitely that canned versus frozen items are in any predictable relationship. There was some anticipation of a definite correlation bettveen the highest meat department sales and higher frozen f°°d sales. The basis for this anticipation was based on the fact that in this chain the majority of frozen food de- DaT~"1‘:tnen1~:s are located in space Opposite the meat department. The implications being that high traffic in the meat depart- ment would draw customers to the frozen foods department. The reasons stated for this location is that it facilitates Stocking of frozen foods by meat department personnel who handle the frozen food operation. It also was reasoned that the homemaker, in choosing»; her main course of meat, was able to ' . . ‘ sllpplement 1t Wlth frozen vegetables and desserts to com- 23 plete her meal in the same general buying area. Store G, with the highest percentage of meat sales, ranked lowest in frozen food sales. In direct contrast, Store H, which ranked lowest in percentage of meat sales, also ranked low in frozen food sales. . There does not appear to be any correlation between high meat sales and high frozen food sales except in the cas‘e of the lowest performer. At this point it would be ’ unfair to make any rash conclusions on performance until other factors affecting it have been considered, ngLATIOI‘ISI-IIP OF PERCENTAGE OF STORE SELLING AREA TO The next area to be considered in determining the profitability of a frozen food department is to determine the mercentage of store selling Space occupied by the de- Partment in relation to that occupied by the other depart- ments. The purpose of this comparison is to determine whether the frozen food department is producing; sales com- DaI‘able to other departments in the store. It sets up the queStion as to whether in some stores the space allocation Should be reduced or in others it should be increased. The analysis of Table V indicates that in relation to the amount of total store selling Space, the meat department 1‘ e~1~:1-‘13:"r1s the best percentage of store sales. In the eight 8 O O O O O O tores studied it 1S interesting to note that in an average TABLE V PERCENTAGE OF STORE SELLING SPACE TO EHIKNRE.A ‘75 of Sales ‘70 of Selling ESGNCHKE B ‘73 of Sales $5 of Selling EYIWDIEE C ‘73 of Sales 73 of Selling EORE % of Sales % o f Se lling: srraraezr: Z? of Sales 1‘0 of Selling suxariE:I: ’° 0 Sales % 055 Selling SVFtIans G 7oRe~§ales 7° of Se llinr; EVTTJEHE'H mes 7° 0 ° of Selling PERCENTAGE OF DEPARTMENT SALES Space Space Space Space Space Space Space Space GROCERIES MEAT 24 FROZEN PRODUCE FOOD 57.9 68.9 56.9 69.0 58.0 65.0 56.7 66.0 59.4 68.0 55.9 69.1 59.7 66.0 26.5 13.6 30.1 15.0 27.8 l6.0 28.8 14.0 27.8 15.0 30.3 13.2 26.2 14.0 11.2 8.6 9.6 12.0 10.4 10.0 10.0 10.3 11.0 11.0 10.1 12.7 10.2 13.0 4.4 9.0 \O-L‘ o 0 ON ::::=::: 25 of 14 per cent of total store selling space this department did 28.1 per cent of the total store business. Groceries, ‘in contrast, while doing 57.6 per cent of the total store business, needed 67.3 per cent of the total store selling area. The producedepartment did close to the amount of business for which it had floor Space. It averaged 10.1 per cent of total sales in 10.8 per cent of the total store selling area. The frozen food department occupied 7.5 per cent of the total store selling area and did only 4.2 per cent of the business. This performance would indicate that in relation to the other departments frozen foods were not contributing their share of sales in relation to Space .. occupied. The immediate reaction to this is perhaps the SDace is not being utilized properly and could be used more advantageously in another way. 7 Here again, it is not in- tended to jmnp to any premature conclusions until all the evidence has been carefully weighed and analyzed. The analysis of Table VI, which comraares the dollar I‘etllr‘hed to the square feet of Space occupied by the depart- ments bring forth a conclusion that in some instances frozen food sales compared favorably with the sales of other de- partments in the stores. It was revealed that in stores B, C, G and H, frozen food sales per square foot'of Selling Space were very near that of grocery sales. The significance of this revelation c.» . . . in only be hinted at as there is not enough ev1dence to I“-i|‘l’l§‘. -I’E" will.-- Ipl. I.‘l‘ . 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The dollars per square foot of produce in stores B and G is very close to that of frozen foods. Three of these four stores also have the lowest total square feet of selling area. This hints at several possibilities. The first possibility being that perhaps the stores with the lowest dollars per square foot have not matured to their eXpected return per square foot of selling Space and those with the highest return have reached their best Operational level. The other possibility exists that perhaps some of [the stores were built larger than necessary in relation to the market it serves. The stores having the smallest amount of frozen food selling area appear to have the best dollar return per square foot. The question arises at this point as to whether an eXpanSion of frozen food selling space in these stores would result in a pr0portionate increase in frozen food sales. It also raises a question as to whether a reduction of selling area in the.stor~~ with the poorest performance records would leave sales at the present level or whether , they would decline more by such a move. If an affirmative answer could be given to the first two questions it would appear to be beneficial to the chain as a.whole to reallocate the departmental selling area to fit the needs of the individ- Iual Operational area. Both sales and profits would likely be upgraded. One indication at this point is that a larger - selling area for frozen foods is not a guarantee of greater 28 sales. There are other factors which influence the rate of sales of frozen foods which will be investigated later in the paper. TABLE VII RELATIONSHIP OF VARIOUS MEASUREMENTS OF - FROZEN FOOD SALES EFFICIENCY $ Per Lineal Foot of Display Case . Store _*A AI B CE” ‘D ' E’ C" ‘F 7? 11 95721 95780 9976476741 102760 104767 112724 98746 Lineal Feet of Selling Space for Frozen Food Store 1A ’B '9“ “D ‘E ‘F G 'fg 72 7:1 56 '92 '68 '61 '56 56 $ Per Square Foot of Selling Space Store A 13. 9. 15 7.3. E 5? FE! 7.39 8.73 9.07 6.25 8.56 10.37 11.88 7.62 Square Feet of Selling Space VJPfi _T_¢__ .fgr_ Store_r g:________ ~ .A B C D E F G H 9‘28 4‘50 61's 1,1123 1,035 613 633 630 % of Selling Space Occupied Store .4 .P: If If E E. 9. E 9 6 7 9 9 6.5 6 7 29 Table VII is intended to indicate that the measurement of a frozen food department's efficiency in regard to dollars per lineal foot and dollars per square foot, in this case, are roughly parallel. As dollars per lineal foot went up so also has the dollars per square foot in proportion. In re- lation to the other stores, Store E did show a greater dollar per lineal foot increase than the dollars per square foot in proportion. The reason for this cannot be accounted for. Perhaps the answer lies in the actual operation of this department. Possibly better utilization of Space was rea- lized for some facet of the store traffic pattern was cap- italized on. COST OF OPERATIONS AED PROFITS RESULTING The relationship of dollar sales and floor space occupied of the frozen food department to the other depart- ‘ments in the store has been investigated. It is necessary in any evaluation of performance to compare the costs of operations and the profits resulting. The study of the operrmions of the eight frozen food departments is presented .at this time. No attempt has been made to compare the costs (If operations and profits of the frozen food department to tfluat of the other departments in the store. The main thought is in: establish the profitability of the frozen food depart- ment. Every company has its own method of charging eXpenses 30 to the various departments. The charges made to these eight stores are governed by the company's accounting pro- cedures. It was very difficult to obtain some costs of operations on a per store basis. Some of the figures avail- able were charges to that particular department as percent- age of sales. The results obtained are governed by this condition. Wages applied to the department were actual wages utilized by the frozen food department and were thusly charged. It is the author's opinion that such allocation of costs act in various instances as a penalty to the superior performer, as he is being charged in proportion to the amount of sales he has the ability to conjure. The argument in retaliation would be that perhaps some of the inefficient operators were faced by outside influences over which they didn't have any control and could not reduce their costs below a certain.minimum figure. . Table VIII shows a breakdown of expenses of the eight frozen food departments and the resulting profits of each Operation. It can be noted that all eight departments operated very profitably. The average net profit before taxes of all eight departments was 7.9 per cent of sales, after taxes, a net profit of 3.8 per cent is indicated. Chains of this size as a whole had a net profit after .31 ..cospcmaou room cowouu use “.4 m.m s.m 6m.ms~a ms.~ama ~s.uomm ms.ma~s o.mMfla am.aama n.m m.» m.» n:.mmma om.ma6w ma.wmmm 6H _ Wm ma.moo.a «m was 6N.maaqa ec.mowa wmome NNoHMM1. moomwfl a6.ama aa.mmm ac.maa ms.soa 6H.a mm.maa 6m.as 66. a6 as.mm eq.a mm.o No.3 ms.m :6.ma as.6 66.6nmm oh.sasa 66.6mms mrm am 06a.aa was.aa Wao.w mmw a mmw m Hamnma smohms emo.sa a 1 -m mafia o» pmmamco Loam: new pamb ea om.msma n.~ anoommw Hm.mgmw H:.msa am.moa Nn.ooa mo.wm 6a.: mm.m oo.mmmm memoo pokes cw padeQCM Q_mH ”mm $3.”. .mmoe a as: mwgesh H I, 4" madam e6 a sewage p62 ufiwoum acz nexus Hunopou doamm mo scooped umMOAm moxdu Chouom aHMOhm dance menopause Hmamcom m acom Assam no» amam suscsms mcwm3 mcmcopxm Samoan smote wmflocmzouoz mo umoo .mmfimw coon canoes .32 .ouc .mmcoaxm opmpnuamwcasvm qmzwmwuao>om mm ouoam one am hapoonwp tongues“ no: moan-dam Ham oud.mmm:onuo aoopwncfi :H copaaucwm .oao .auwweoa «coaumaooueou mm roam shown on» as zApooawt ooaasocw namesake woeao Ham one momcomko Hayseed ca pmoaaocum «on.p:oov HHH> mqm¢h 33 taxes in 1958 of 1.41 per cent of sales.4 This would in- dicate that these eight stores' frozen food departments are Operating 2.39 per cent better profit wise that the stor as a whole. While there aren't anyi figures available to :huiicate what percentage of total dollar profit the frozen ikxad departments in these stores contribute, it would be safe to assume that it is at least in relation to the other den artments ' contributions. The individual stores' performances, profit wise, showed very little variation, the majority operating close to an eight per cent net profit before taxes figure. The Store with the highest dollar volume of sales did not pro- duce the highest percentage of profit to sales, in fact, store B with the lowest dollar volume of sale presented the largest percentage of profit to sales of the eight stores. Store. E, with the highest dollar sales lay in the medium range of percentage of sales profit but contributed the STE-atest dollar profit of all stores. This would seem to indicate that percentage of sales profits are not always the chief determinant of dollars contributed to total pro- _fltS- It is necessary to also have volume of sales to main- tain high dollar profits. (Wilbert 13. England, Operating Results of Food Chains 1 31.1958 Harvard Business School, Bureau of Business Research, OS1301—1,IIassac.1ussett8. p. 4. Edward M. Barnet writes, "A small appliance dealer with operating eXpenses of 28 per cent of sales is-assured a 33 1/3 markup on the retail list of a nine dollar fair traded electric fan --- what is not guaranteed is his total dollar return. If he sells 12 dozen fans in one year, his gross margin is $432.00 (144-x $3). But if a nearby dis- count house sells 240 dozen fans at $7.50 each (20 per cent markup on retail) it has $4,320 in gross margin (assuming the same $6 unit cost) a dollar intake, ten times greater! Even more dramatic is the difference in gross return on investment --— the traditional retailer carries an average inventory of three dozen of these electric fans and he turns his investment of $324 (at retail) four times a year. With a margin of 33 1/3 per cent times turnover of four his gross return on investment is 133 1/3 per cent-- our discounter turns over an average stock of 12 dozen fans ($1,080 sales worth) 20 times a year, his gross return on investment is 400 per cent -- not counting possible savings arising from quantity discount."5 The meaning and importance of the preceeding passage has been indicated by the perfonmance figures studied. It also indicates that here is an area upon which very little consideration has been given in this study, that of return on investment. The study was limited by lack of information 5Malcom P. McNair and Eleanor C. may, "Pricing for Profit", Harvard Business Review, May-June, 1957, p. 111. 35 as to inventories carried and turnover. For the chain as a whole, it is estimated that turnover in frozen food is nearly twice in every four week period. The importance of this can be visualized in that the faster the turnover of capitol in- vested, the greater return on capitol invested. Also shown in an analysis of Table VII is the fact that store G which was one of the larger volume stores had the lowest profit percentage of all stores. Based on only percentage of sales this would seem to indicate that various factors were at play in this lower profit figure. A.look at the expense figures shows wages to be the chief variable, seemingly indicative that there is improper utilization of labor in this department. This Can be taken to mean that proper utilization of labor in the frozen food department can result in increased profitability. RELATIONSHIP OF AREA.INCOME TO FROZEN FOOD SALES AND PROFIT The chain as a whole had its stores fairly uniformly distributed throughout the various economic areas, although the largest single area encompassed was the higher income or "A" area of $5,000 to $10,000 and over income areas. The eight stores used were divided among the various income groups. Actually, the trading areas of the stores tend to overlap the various income groups and in some it is hard to define accurately the actual group purchasing frozen foods unless a personal survey was taken. As was stated earlier, 36 the supermarkets have tended to break down social barriers and the shoppers in any one store may consist of a "melting- pot" of various income levels. A breakdown as close as possible will be presented in an attempt to determine some relationship between the sales and income levels. TABLE IX INCOME LEVELS OF SHOPPERS TRADING THE EIGHT STORES Store ' Income Levels A. $2,000 to $10,000 and over B $3,000 to $10,000 and over C $2,000 to $5,000 and over D $5,000 to $10,000 and over E $2,000‘to $7,000 and over F O to 3,000 and over G $3,000 to $10,000 and over H $2,000 to $7,000 and over In analyzing the sales figures of the individual stores it is found that the store with the highest dollar sales figures, Store E, lay in the medium.two to seven thousand dollar income group. It also lay in.the medium area of percentage of frozen food sales to total store sales. Store B, which had the lowest dollar sales of frozen foods lay in the medium to high income bracket. It also had one of the lower percentage of frozen food sales to total sales figures of the group. It also had one of the lowest gross profits of the stores in the study. This would seem to indicate-greater sales of the lower profit items and Specials in this store. Store F, in the lowest income area, is in direct con- trast for it has the highest gross profit of the stores in the study. Net profit wise it is also one of the best performers and in relation to percentage of total sales it is close to the average. In total dollars contributed to net profit it is only surpassed by the highest volume store E. The significence of this store‘s performance will be brought out later by another factor which influences sales and profitability. RELATIONSHIP OF.AGE GROUP TO SALES AND PROFITS An attempt was made to bring together many factors to see the relationships, if any, between them and sales and profits of the stores studied. A breakdown of the various ages of the customers shopping the stores was made. The results are enumerated in Table X. TABLE‘X AGE LEVELS OF CUSTOMERS SHOPPING THE EIGHT STORES % Youn % Middle Age % Old Store (18-35 (35-55) (60 & over) 35 5O 5 B 45 5O 5 C 40 55 5 D 60 35 5 E 45 45 10 F 45 45 ' 10 G 50 35 5 II 40 45 15 38 Not in any store in the study was there a predominance of shoppers of 60 and over. Stores A and H did have a pre- dominance of the shOpping group ranging from 35 to 60 and over. Store A with a widely varied income group shOpping the stores was better than average in percentage of frozen food sales to total sales, while Store H in the low to medium income group was one of the lowest performers in this way. In gross profit both stores were exactly the same with difference only in net profit firmre whi ch only indicates the actual store's ability to keep costs of Operations down. A possible assumption at this point would be that people of this age group trnd to buy similar pro- ducts, Stores D and G are predominantly the younger age groups. Store D, which lies in the higher income group, is one of the best performers in relation to department Sales to total sales. Store G, in contrast, whi eh lies in a lower income level group, is the poorest performer of the grOUp in this respect. This would seem to indicate that of these stores studied the younger people with the higher J~ncc31'aes tend to purchase more frozen for-d than those With lower incomes. In reSpect to gross profit performance, they are alike, indicating that the difference lies only in the amount purchased. I haven't used actual dollar sales f' , . o Lf‘iilres because I believe that by uSing percentage of sales 39 figures a more accurate indication of sales can be obtained. It also allows for the individual stores actual performance as a whole. Store C, which has the greatest proportion of the middle age group, was the top performer in percentage of sales to total sales group. This would seem.te indicate this age group has a strong preference for frozen foods. As far as income level is concerned, these people were of the 1oW’medium.income level ($2,000 to $5,500). It was in relation to gross profit, the same as the previous two stores looked at, indicating again a general trend in these eight stores of shOppers purchasing similar products. Stores B and E, which have the lowest gross profit figures of the eight stores fall in the area of being in an age group of very little variation. It is almost an even _ split between the young (18-35) and middle (35-55) age groups. Yet their income levels are more varied, B lying in.a higher income group than B. They both are similar in percentage of sales to total sales. From these figures, one can assume that this group, while buying frozen foods, tend to look for the bargains and purchase the lower profit items. The reason for this lies, perhaps, in an idea that as families grow larger and older the amount of money spent for other neces- sities becomes larger and the tendencv is to reduce the a- mount spent for food by purchasing the bargains. There is not any evidence to prove this statement; it is merely the Opinion of the writer. 40 The other stores in the study merely follow the trend of the preceding stores in relation to age levels of the shoppers. RACIAL AND NATIONALITY FACTORS AFFECTING FROZEN FOOD m J It was intended to attempt to establish a relationship between sales of frozen foods and nationality groups and also racial differences. In only two of the stores was there even a small amount of foreign born populations trading at the store. Stores A and E both had these small populations and it is impossible to say that there could be any relation- ship established by such a small sample. The majority of the eight stores had predominantly white shoppers. Only in Store F was there a large amount of negro shoppers. .At this store over 50 per cent of the people shopping were negro. This store's customers were also in the lowest income bracket of the eight, yet this store had ~the highest gross profit percentage of all eight stores. It did not have the largest percentage of department sales to total store sales but it was only .1 per cent below the average. In total dollar profit, as was indicated before, it is only surpassed by the highest volume store in the study. This would indicate that the negro pOpulation, even with low incomes, tend to buy the higher profit items in the frozen food department. 41 An idea of this market is brought out by Frank Campbell, one of the country's top frozen food salesmen and represent- atives. Campbell says, "The greatest potential market in the frozen food industry is the country's vast negro popu- lation". The reasons for this he states are:6 l) The Negro never has been offered the Opportunity to display his buying power of frozen food since negro pOpulations are in low economic areas and there are few supermarkets in proportion to popu- lation in these outlying areas of the Clty. 2) The Negro possesses fetish for name brand products. This is a result of the old days when shoddy goods was given them so they abhor all buy name brands. It also gives them ego satisfaction. 3) The Negro spends more than the white family in the store. He eats more at home because of the limited access to good restaurants, etc. There is more social eating in the home. RELATIONSHIP OF FIVE TOP SELLING ITEMS TO SALES A list of the top five selling items in each store was obtained. It was interesting to note that in all cases the largest selling item was frozen orange juice with lemonade in most cases running as second choice. The next items were divided up between french fries, strawberries, fish and peas. Table XI shows the ranking of the items in each store. Comparing the tOp selling items in these eight stores ‘with the top selling items of the chain as a whole it was found that they were closely related. The top five items 6"The Negro Market for Frozen Food", Quick Frozen Food, April, 1960, p. 106. 42 of the chain were orange juice, lemonade, french fries, meat pies and peas. It is interesting to note that meat pies were absent from the tOp five items of all the eight‘stores in the study. The significance of this cannot be established. TABLE XI TOP SELLING FROZEN FOOD ITEI-iS IN STORES STUDIED STORE K B C D T T G H Orange Juice I I T I I I I I Lemonade 2 2 2 2 - 2 2 3 2 French Fries 3 5 5 3 3 3 2 3 Peas 4 3 3 4 4 5 4 4 Cooked Fish 5 - - - - - - - Fish - - - - - 4 5 - Strawberries - 4 4 5 5 - - 5 CONCLUSIONS REACHED IN THE STUDY The conclusions reached in the study were that frozen foods in these eight' stores was a profitable Operation and in comparison to the total Operation of the retail food chain store it is more profitable. Profits from store to store varied due to variations in the efficiency of each store's individual operation. Some were more efficiently Operated than others. Variations also occurred from economic area, age and racial differences. One of the greatest influences was that of the negro customer who was shown to be a somewhat undeveloped potential frozen ‘0 43 food customer. The study also showed the need of better merchandising techniques on the part of the individual Operator to compen- sate for the variations in sales made by the influencing factors. A need is shown for the development of sales that ' are more in line with other departmental percentages of sales as a whole. The frozen food departments are operating below the national average in terms of percentage of sales but above in net profits. By increasing the volume it can be assumed that this particular operation will be one of the greatest contributors to company profits. It also revealed that in planning any new operation considerable investigation should be done as to the market for frozen foods in the area of Operation. The planning of store space allocations should allow room for contraction and expansion of the department to allow for the most pro- fitable operation. The reason for this can be seen in the high cost of installation and operation of a frozen food department. In order to allow for good profits in relation to the investment a balance must be struck. Each individual operation presents a very different problem and no set rule can be used for the designing of an operation. CHAPTER IV CREATING GREATI'JR PROFITS IN FROZEN FOOD The preceeding chapter was composed of a study of the profitability of the frozen food departments in one group of stores. The reSults received were good, but it is be- lieved that an even greater volume of sales lay still un- tapped. It is necessary to remember that there is a limit to the profitable use of any merchandising, advertising or space allocations used in the creation of a new volume of sales. Knowing when the peak point has been reached is difficult to perceive and more difficult to admit. It is the purpose of this chapter to look into some of the problems and some of the solutions suggested in obtain- ing greater profits for a frozen food department. We did .see in.the preceeding study that there are numerous factors ‘which.influence the Operation of a frozen food department. If we were dealing with robots, these factors wouldn't present any problem, but we are dealing with human beings and their emotional, social and environmental make-up. These behavioral patterns are constantly changing and with these changes come a change in the wants and needs of the individ- 'ual. To meet these demands a dynamic program of merchandis- ing is needed at all times. 45 ADVERTISING The use of consumer advertising in frozen foods has been on the most part limited to manufacturer advertising of their products. What has been done in this area has ac- complished much in the education of the consumer on the merits of frozen products, buy the actual advertising of frozen foods in the weekly newspaper and at a local level has seemed to be below par. In observing the ads of the various food chains over a period of months, it was diffi- cult in most instances to find the frozen food items adver- tised. For the most part they were relegated to small, un- observed boxes in the least read section of the ad. The reason for this minor use of advertising of frozen foods probably stems from the fact that the Dupont survey shows that almost 83 per cent of frozen food buying decisions are made in the store.- These statements are not meant to in- dicate that some good local advertising has not been done by many chains for frozen food sales, but it does indicate that there is a great area still open in the use of frozen items in advertising. . The actual value of advertising has been very hard to measure. In many surveys used to measure the effectiveness Of advertising the results obtained were contrary to the ex- pected results. The major use of food advertising seems to be based on the ability of the advertised items to draw the customer into the store. In the face of rising competition this seems to be a'logical reason. The conclusion to be reached on the basis of this reasoning is that frozen foods as a whole have not been enough of a drawing card to bring customers into the store. There are exceptions to this rule, one is ice cream, which has been used as a "football" to draw shoppers. Of course, the high appeal of ice cream to all ages and income groups must be remembered in using it as a criterion. In 1958, each American consumed 18.8 quarts of ice cream and supermarkets sold 48 per cent of the ice cream consumed.1 Crawford's Stores of Los Angeles, California, have made good use of advertising in frozen food sales. They have used two page ads offering case and dollar-lot pro- 'motion prices. Not only was the sale a success in the amount of frozen food sold, but it also increased over-all store volume and most important it was profitable.2 Much could be done by advertising in the way of edu- cating the consumer in the use of frozen meats. It is known that frozen meats were "the grand flop" of the frozen food industry. The reasons were various: poor quality and high prices being in the forefront with consumer ignorance follow- ing closely. In a field which offers the retailer the means 1Ice Cream Review, August, 1958, p. 12. 2"Crawfords Feature Case Lots",Qgick Frozen Foods, AU‘OJJ-St, 1959’ p. 25. 47 to greater profits, the education of the consumer through advertising should be looked into. Surveys show that the consumer is not immune to frozen.meat for she does buy meat and freeze it at home, but she does resist the already packaged meats.3 Therefore, it would seem to indicate that an educational program.with advertising leading the way could do much to help gain acceptance of this product. Indicated in the study was the great negro market for frozen foods. His buying role is bound to increase even further according to a report submitted by Vice-Presi- dent Nixon to President Eisenhower as Committee Chairman of the President's Committee on Government Contracts. He sub- 'mitted.that "Our nonawhite pOpulation increased more rapidly 4 between 1940 and 1950 than our white population. The former increased 22 per cent and the latter 14 per cent." "Employers who will still be looking for male, white ‘under'age 45 workers will be in trouble in the next decade. These.sought for types of workers simply will not be avail- able in the numbers required -- the Committee will, there- fore, emphasize the integration of minority groups into the white collar positions. "4 3Quarterly Bulletin, Michigan Agricultural Experiment Station, Michigan State University, East Lansing, Michigan, May, 1959. 4"The Negro Market For Frozen Foods", Quick Frozen Foods, April, 1960, p. 109. 48 With the increasing numbers of negroes moving into the white collar positions, the need by this group for con- venience foods such as frozen products will increase and represent a constantly growing market. Ebony Magazine, which occupies a position in the Negro magazine field comparable to that of Life gives a summary of the scope of this market:5 1) In the United States, there are almost five million Negro households, representing more than 17 million people. Almost 75 per cent of these households are concentrated in cities of 50,000 or more, with the bulk in cities of 250,000 and over. 2) 0f the two million Negro families living in cities of 250,000 and over, a third spends $28.35 per family per year for frozen veget- ables, or.$l9 million. 3) 0f the 1,237,500 Negro households in cities between 50,000 and 250,000 in population, 45,000 spend $28.00 per family per year for frozen vegetables or $12,600,000. 4) In summary, three-fourths of all Negro families are located in cities where one- third to 36 per cent of these families are spending $28.00 or more per family per year for frozen vegetables, aggregating $31.6 million per year. Because of the percentage of working wives in the negro community is greater than that of the white, the lflnegro has become an increasingly important factor in the sale of frozen prepared foods. 51bid. 49 The significance of this market can be seen and it can be opened by the use of advertising direct and toward it through publications widely read by the negro population. A Safeway store in California boosted its sales of frozen food to 12 per cent of sales by increasing cabinet space and advertising in newspapers to attract the trade to its enlarged frozen food section. The Big Apple Chain in Georgia boasted a 50 per cent increase in frozen food sales the week they ran a full page advertisement built around frozen foods.6 Strong and continuous frozen food advertising benefits the retailer three ways:7 1) It increases sales for the advertised brands. 2) It increases sales for private label brands. 3) It increases sales for all brands by creating new cabinet traffic. PROMOTION The area of promotion goes hand in hand with adver- ‘tising. Advertising incites the desire for a product and promotion pushes and urges the consumer on to purchase the 1yroduct. Any good large promotional device begins with the advertising idea. The chief purpose of promotion and ad- vertising is to sell‘more goods and thereby, create greater profits. It is also the purpose of promotion to introduce 6Qiick Frozen Foods, April, 1960, p. 76. 7Frosted Food Field, May, 1960, p. 5. 50 new products, new packages and to create new demand for old products. Examples of the promotion of various products would be the seasonal promotion of products such as fish during the Lenten season,’juices during the summer season. In addition, there are many special promotions used such as the promotion of Chinese foods by the use of the Hawaiian luau theme. The manufacturer usually offers special ad- 'vertising and display materials in order to gain maximum benefits from the promotion. Other national promotions may offer premiums to stimulate the sale of their products. The manager of a frozen food department is not neces- sarily limited to national or company promotions. He may, by the use of his own ingenuity and imagination, create promotions of his own to suit his marketing area. .Part- ieularly favorable to this type of promotion is that of combination promotions, that is the selling of related items. It is possible by the use of such promotional ven- utures either to combine two top profit items for greater profits or one IOW'prOfit with a high profit item to balance out the profits, thereby gaining greater over-all profit. Particularly suited to such promotional activity is ice cream. Ice cream can be promoted with waffles as an extra special dessert combination. It can be promoted with frozen.pies as a "pie ’n ice cream” promotion. Using the type of fruit pie in season will result in good profits, also. 51 Ice cream can be featured with cantaloupes when in season, and with frozen strawberries in any season. A.special pro- motion with bananas can be very good. Utilizing the season of warm weather and.low banana prices a good "banana-Split" campaign can be waged. With this can be featured the dishes for them to be constructed in, the nuts and fruits for gar- niSh, and the whipped cream for tOpping. This could be a store-wide profit maker. During the holiday season the special types ice cream.and novelties can be promoted with emphasis on the easily prepared and novel desserts to be had during this particularly busy season for the homemaker. u Ice cream was used as an illustration for promotional activity. The same principles can be used with other frozen products. The idea being to appeal to that sector of a humands desires that is most in.need. Without it, most any promotion.will not be of much value. The wise and imagin- ative promoter is the one whose end result shows the greatest increase in sales, profit, and repeat sales. An example of such promotion are the Crawford stores in Los Angeles, whose promotions have continually'shown ex- traordinary results. In their 1958 frozen food sales, by promotion of ice cream they were able to increase ice cream sales by 46 per cent over the previous year's sale for the same period.8 8"Crawford's Freezerama Sets Fourth Frozen Food Sales Record", Progressive Grocer, December, 1958, p. 57. 52 22am Display may be called the third phase of any success- ful operation to increase sales and profits. The other phases being advertising and promotion. The overall results are surely caused by the successful integration of these three forces. Display may be divided into two categories: (a) the regular display, that is, merchandise in their allotted slots, or (b) Special displays, usually consisting of mer- , chandise in areas other than its customary places. Both types of displays 'serve a purpose in the production of sales and profits. The use of both categories are important in determining the volume of sales and profits. The regular display of frozen food is confronted by the need for the most efficient utilization of all the cab- inet space. The reason being that the items in the limited' amount of cabinet Space are constantly being beset by an on- slaught of new items clamoring for the use of the already overcrowded space in the cabinets. It is not possible to set up a standard procedure for the display of frozen foods for each individual operation must be tailored to fit the needs of its environment. To begin with, the frozen food department layout must be designed to pull the shoppers through the entire depart- ment. One. method used by Acme stores is to design the item layout so that no matter which direction the customer approaches , m1 3.’@;*J=fl-é:fi;m;wfiv_ -: ~ ~ , *- '7 53 the department she is met by a popular top-volume frozen item. Once the shopper is in the aisle, Acme attempts to draw her down the aisle, the idea being that once she is halfway down the aisle she will continue the rest of the way. This is done by spotting other top pOpularity items in the center of the case. As seasonal shifts in tastes affect which items will draw customers through the depart- ment, the items filling the star roles will also change.9 Figure III illustrates the operational set up of such a plan. In another eXperiment on the diaplay of frozen food conducted in Azzolina's Food Circus Super Market in Middle- town, New Jersey, it was found that by simply reallocating display space a 23 per cent increase in overall sales was realized.10 The amazing part of this was that no additional labor was assigned to the department or was there any extra ‘promotional emphasis applied in weekly store ads. It was ‘basically a matter of working out a more realistic allocation of display spaces to individual items; one that more closely jparelleled the relative movement of each item in the inven- 'toryu The basis for determining just how'much space an item 9"Freezer Layout is Designed to Draw Traffic From All IIirections", Chain Store Agg, March, 1959, p. 123. 10George E. Kline, "Reallocation.of Display Space Results in 23% Increase in Frozen Food Sales", Progressive Chuncer, April, 1959, p. 74. 54 FIGURE III DIAGRAM'OF mm»: STORES FROZEN FOOD LAYOUT Ie 71’ 4 ‘fi 1 COFFEE, TEA, HEALTH & BEAUTY AIDS l l | a : : rom'ro' seam: mics: A ._3: "Em *— B a)?!” : : E 2 i I TRAFFIC TRAFFIC FROM F ROM ME AT CHECKOUT DEPARTI‘ENT I: . | : : : ”PREPARED FROZEN 'qgaflgfl (:'e%umnxw fL""l>""','ouuRy I I. a ll L4, 1. CAIINED MILK HOUSEHOLD SUPPLIES A.- Fruits, baked goods, - C - Pet food, unprepared casseroles and soups. fish. B - Vegetables-asparagus, D - Meat pies, prepared squash, spinach, broc- entrees, poultry pies, coli, Brussels Sprouts, breaded uncooked meats cauliflower, corn, etc. and poultry pieces. Source: Chain Store Age, March, 1959. 55 should be allocated was its average weekly unit sales as revealed by the initial four-week sales audit. During this time period a detailed diagram of the department display was drawn up and the unit capacity per facing of each item was determined: In working out the space allocation plan it was the intention to plan it to require as little restocking as possible throughout the week and ultimately result in fewer stockouts. Consideration was given in working out the plan to obtaining color contrast. The result being a ribbon effect which tends to provide a contrast to help distinguish one item.from another. Placing of products was also considered in relation to traffic flow in order to create the maximum :hnpulse and related items sales possible.- The main point to be gained from the preceeding illus- ‘tration is that better space management seems to produce better sales and profits and with a minimum of costs to the operator. It is an area to be considered in the display of frozen foods. A survey conducted by New York University on frozen foods departments revealed that in half the stores surveyed between one-fifth and two-fifths of the available space was wasted. The reasons for this waste were concluded to stem from lack of efficient housekeeping and merchandising by store frozen food men and lack of sufficient supervision which permits this condition to happen.11 The implication being that there is a need for better operation of the de- partments to insure greater sales and profits. Stemming from the wasted space problem comes the significance of the proper utilization of space available. By proper utilization of space, stockouts are reduced and space is conserved to be utilized for greater sales and profits. Damaged and soiled packages can be considered as wasted Space because the consumer will not purchase these packages and they also detract from the rest of the stock. Chain Store Age sponsored a survey to check two phases of the proper utilization of space. The two phases were to check if foods displayed were in top condition and appear- ance and to see if stocking practices indicated sufficient concernafor prOper refrigeration needs. In.the stores sur- 'veyed, damaged and soiled packages were found in 55 per cent of the major departments and the number of packages in the 34 stores ranged from 2 to 22. The total number of damaged -packages on display in the 34 stores was 73.12 Judging :Erom.this performance an indication is that the stores sur- -veyed were carefully policed in this regard. The other phase 11"Available ,Space Not Fully Used". Chain Store Axe: August, 1959, p. 114. 12"Greater Efficiency In Use of Cabinet Space Needed", Egiain Storg Age, September, 1959, p. 156. 57 of the operation was that of checking each department to see which stores had packages piled above the frost line. The importance of this lies in the fact that packages stored above the frost line thaw out and the customer purchasing these packages is not receiving quality. In addition to becoming a dissatisfied customer she most likely will not return to shOp. This results in loss of sales and profits in addition to raising the costs of the operation of refriger- ation equipment. Any obstruction in the air movement of the cases tends to lower their efficiency and increases 'their Operational time. It also is a major cause of pre- vmature breakdowns. The findings in the stores surveyed revealed that 73 per cent (44 out of 62) were displaying items above the in- dicated load limit. The total number of packages above the frost line was 3,595.13 The second category of display to be touched is the special display. The term Special display can cover a mul- 'titude of variations from a dump display to a Special "super- chxper" display. The special diSplay is so commonpplace in today's supermarket that its value is often overlooked. In etirecent audit of Special diSplays sales of 360 grocery items cu1 734 displays in five supermarkets, it was found that an axnerege grocery item sells 652 per cent better than from a Ibid= 58 normal shelf poSition.14 From the retailer's point of view there are ten Obvious good reasons for special diSplays:15 1) They sell more merchandise 2) They create a low price impression 3) They help to balance inventories 4) They strengthen advertising 5) They add excitement to a store 6) They break shopping monotony 7) They create impulse sales 8) They highlight new products 9) They help reduce stockouts on weekly ad features 10) They offer shoppers suggestions on what to serve The special display need not be merely a price reduced item. It is beneficial to mix them up with non-reduced re- lated items which tend to balance the profits. The display need not be a gigantic one to be successful. While the huge ones are exciting it is necessary to realize that some of the smaller displays may be just as productive in merchan- dise movement. The effectiveness of the small display lies in.its ability to remind the customer of what they want or 'need. Remember, that nearly 83 per cent of frozen food pur- cihases are made on in-the-store decisions. The survey, While only being of grocery items, tends to stress the importance of these special dis plays. The gyrinciples utilized can be used just as effectively in fro- zen food merchandising. 14George E. Kline, "How to Build More Profits Into kaur Special Diaplay Program”, Progressive Grocer, January, 1960, p. 49. fl 15Ibid. 59 The easiest of these displays to be used in frozen food merchandising is the dump display. It creates an ex- ception to the neatly stocked packages and cans by breaking the monotony of the visual pattern. By doing so it catches the Shopper's eye and possibly results in an impulse sale. The use of a homemade crayon Sign may be the eye catcher in such a display which results in an extra sale. It turns an ordinary diSplay into an eye catching Special display. The biggest problem.facing the retailer in creating special displays has been the need for maintaining low temperatures. The answer seems to lay in the on-the-spot Inerchandiser. With this merchandiser, the frozen foods may be merchandised and displayed anywhere there is an electrical outlet. It is possible to utilize it with related items as the cantaloupe, bananas and ice cream.promotion. The profits resulting should be excellent if utilized properly. Here again, the need of using the equipment efficiently is stressed. .A promotion or diSplay is only as good as its placement. 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