FQGD RETAILENG
[N ECONOMIC DEVELOPMENT:

PLEERTO RECO, W50 - WM

Thesis fen- {ho Degree. of pin. D.
MICHIGAN STATE UNIVERSFTY
John Reed Wish
1967

LIBRARY

IHFSIS

Michigan State
University

 

This is to certify that the

thesis entitled

FOOD RETAILING IN ECONOMIC DEVELOPMENT:
PUERTO RICO I950 - 1965

presented by
JOHN REED WISH

has been accepted towards fulfillment
of the requirements for

_P_h-_.D_-_ degree in mines:
Administration

////////

Major professor

Date duh/11,1967

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ABSTRACT

FOOD RETAILING IN ECONOMIC DEVELOPMENT:
pUERTo RICO, 1950 - 1965

BY

John Reed Wish

In the world as a whole, food supplies have not
kept pace with population growth. While much effort has
been devoted to production problems, little attention has
been given to distribution. This thesis represents a por—
tion of a United States Agency for International Deve10p—
ment sponsored project to study the changes in food dis-
tribution and how those changes affected the economic
development of Puerto Rico.

The specific goals of the research were: (1) to
describe accurately what happened in food retailing from
1950 — 1965; (2) to investigate and eXplain the process
by which change occurred in the Puerto Rican food retail-
ing sector; and (3) to understand better the variables
correlated with innovativeness.

Three different approaches were used. First, a
historical description of retailing changes and the po—

litical and social factors behind them were compiled from

John Reed Wish

secondary sources. Second, from survey data of 1950 and
1965, from censuses of business for the period 1949 through
1963, and from informal interviews, a picture of the eco-
nomics of change was drawn. Finally, social-psychological
survey data was used to determine the explanations for in—
novativeness and to understand those which brought about
the changes.

Some major findings of the research were:

1. In the sense of Rostow's national market, there
was greater "national market" over the years
studied. Only 44 per cent of the food consump-
tion passed through retail food stores in 1949,
as compared to 63 per cent in 1963.

2. While the precursors to change were many, the
man who smoothed the way more than any other was
the powerful politician and first—elected gover-
nor of Puerto Rico, Luis Munoz—Marin. He pub—
licly and privately committed himself and his
party to a broad program of social reform.

3. Average gross margins of supermarkets in 1964
were 17.8 per cent, as compared to food store
average gross margins of 23.1 per cent in 1949.

In addition, it was found that basic foods like
rice, beans, and dried cod were priced lower in
the supermarkets than in the more traditional

stores in 1966.

John Reed Wish

During the years considered, several efficiencies
were introduced and, contrary to the expectations
of many, total employment in food retailing in-
creased rather than decreased.

The methods used in this thesis do not permit one
to ascertain precisely the contribution of food
retailing to the economic development of Puerto
Rico. Still, it seems safe to conclude that food
retailing has made a contribution through lower
retailing margins, relatively lower prices, more
employment, better diets, and lowered risks for
the farmer.

Factor analysis suggested that the "ideal type"
who introduced these changes in food retailing
was young and well—educated, used mass media ex-
tensively to glean new ideas, knew of government
programs that might help him, had a knowledge of
prices in other areas, traveled more than average,

but did not consider himself a Puerto Rican.

FOOD RETAILING
IN ECONOMIC DEVELOPMENT:

PUERTO RICO, 1950 — 1965

by

John Reed Wish

A THESIS
Submitted to
Michigan State University

in partial fulfillment of the requirements
for the degree of

DOCTOR OF PHILOSOPHY

Department of Marketing and
Transportation Administration

1967

FOREWORD

This thesis is one of several Ph. D. disserta-
tions to come out of two research projects sponsored by
the United States Agency for International Development.

The co-directors of the first study, the Latin American
Food Marketing Study, of which this thesis is a part, are
Dr. Charles C. Slater, Professor of Marketing; Dr. Harold M.
Riley, Professor of Agricultural Economics; and Dr. R.
Vincent Farace, Associate Professor of Communication.

Dr. James Shaffer: of Agricultural Economics and Dr. Herman
Koenig of Electrical Engineering served as consultants from
Michigan State University. The second research project is
the Latin American Market Planning Center under the direc-
tion of Dr. Charles C. Slater.

The first phase of the Latin American Food Market-
ing Study took place from June 1965 through June 1966 in
Puerto Rico.1 An interdisciplinary team of researchers
from Michigan State University, the university of Puerto
Rico, and the Puerto Rican Department of Commerce partici-
pated in that effort. Mr. Kelly Harrison, a doctoral

1See Appendix A for a history of the project.

ii

candidate in Agricultural Economics, and the author were
with the project from its inception.

One of the strengths of this interagency project

was that it combined the talents of Continentals and Puerto
Ricans. Two Puerto Rican Department of Commerce employees,
Mr. José Santiago and Mrs. Idalia Rodriguez, were assigned
to the project full time, and the latter was engaged at the
time in research for her master's thesis. In addition,
three Puerto Rican graduate students worked part-time on
the project and intended writing their theses as a part of
the research. The general tOpics of the theses written by
others are listed below.

José Gonzalez Casillas, ‘"The Marketing of Selected
Starchy Vegetables in Puerto Rico" (M.S. candidate,
Department of Economics, College of Agriculture at
Mayaguez, Puerto Rico).

Luis Davis ‘"La Diferencia en Margines de Precios
de una Seleccion de productos agricolas" (M.S. candidate,
Department of Economics, University of Puerto Rico).

Kelly Harrison, "Agricultural Marketing Coordination
and its Role in Agricultural DevelOpment in Puerto Rico,"
(Ph.D. Candidate, Department of Agricultural Economics,
Michigan State University, 1966).

Idalia Rodriguez, ‘"An Analysis of Changes in Con-
sumer Demand for Food and Food ShOpping Habits, Puerto

Rico, 1950-65" (M.S. candidate, Department of Economics,
University of Puerto Rico).

Perfecto Santana, :"Analysis Comparativo de los
Cargos de Transportacion y la Estructura Geografica de
Precios para un Grupo Seleccionado de Productos Alimen-
ticios en Puerto Rico, 1950-65" (M.S. candidate, Depart-
ment of Economics, University of Puerto Rico).

‘ To be completed around September 1967.

iii

The first public airing of some of the project
views was given by Dr. Charles C. Slater at the American
Marketing Association Meetings in September 1965. Then,
in June 1966, a three-day conference was held in San Juan
to discuss preliminary findings with local businessmen,
government officials, representatives of the United States
Agency for International Development, and officials of cer-
tain Latin American governments. A limited number of sum-
maries have been published.1

At Michigan State University, East Lansing, the
Communication Department, the Computer Services Branch, and
the Agricultural Economics Department gave the project pri-
mary support on data processing. Since May 1966, Dr. Vincent
Farace of the Communication Department has been, in addition
to his other responsibilities with the project, in charge of

data processing and analysis.

 

1Robert W. Nason (ed.), The Role of Food Marketing
in the Economic Development of Puerto Rico. Summary of the
semifiar held June 8-11, 1966, San Juan, Puerto Rico.

iv

ACKNOWLEDGMENTS

The research, analysis, and writing for this thesis
was done while the author was employed as a research assist-
and in the Department of Marketing and the Latin American
Studies Center of Michigan State University. Drs. Charles C.
Slater, Harold M. Riley, and R. Vincent Farace, the co-
directors of the research project sponsored by the United
States Agency for International Development, of which this
thesis is a part, contributed many of the ideas and con-
cepts develOped herein. One of the great advantages to the
author was the continual exchange of ideas that took place
between the co—directors and other faculty members, such as
Dr. James D. Shaffer, Dr. Herman Koenig, Jose Santiago,
Idalia Rodriguez, and Kelly Harrison.

Throughout the develOpment of this thesis, the
author was fortunate to have the guidance and interest of
his committee, who were at times geographically distant.
While Drs. Slater and Riley were on the scene in Puerto
Rico for over six of the twelve months of field work, the
other thesis committee members gave freely of their time
from distant locations. Dr. Everett Rogers of the Depart-

ment of Communication took time from his own research

efforts to help, read, and constructively criticize. Dr.
Donald Taylor of the Department of Marketing was able to
comment in detail and suggest better organization even
though he was working both in Recife, Brazil, and at the
Michigan State University campus. The comments and crit-
icisms from each of the committee members helped improve
the analysis and clarify the final presentation of the
dissertation.

There were others who contributed as much. In
Puerto Rico, there was the assistance of more than 100
food retailers who were willing to be interviewed. There
were the many conversations with Mr. William P. Roach, the
head buyer of Grand Union Supermarkets, and Mr. Modesto
Ortiz, the general manager of the Cooperative Federation.
Mr. Harold TOppel, Mr. George Topel, Mr. Milton Toppel, and
Mr. Max Seplowin of Pueblo Supermarkets were also most help—
ful in providing background material. Mr. Lee Slusher,
general manager of Bargain Town Supermarkets and a relative
newcomer to Puerto Rico, provided the view of a recently
arrived entrepreneur.

In Puerto Rican government offices, there was al-
ways a willing sense of c00peration. Mr. Don Lemons, con—
sultant in the Department of Commerce and formerly a direc-
tor of Fomento's food marketing program, was especially
helpful because of his first-hand knowledge of the govern-

ment and private industry programs. The Agricultural

vi

Experiment Station loaned the use of its IBM facilities as
well as gave us access to the economists who were most in-
timately concerned with the improvements of food marketing.
The Agricultural Extension Service was involved in consumer
marketing programs and help to cooperatives, and we were
given access to their files, information, and knowledge.
Here, Mrs. Judith Frias was especially helpful.

At the University of Puerto Rico campus, our main
contact was the Social Science Research Center. The direc-
tor, Dr. Rafael de Jesus—Toro, washelpful and encouraging
in all phases of our work. His administrative assistant,
Miss Carmen H. LOpez, was of particularly great help in re—
trieving research memorandums from the 1949—53 Galbraith
and Holton study.

Even with all the help in Puerto Rico, the thesis
would have been much more difficult to do had it not been
for willing help on the Michigan State University campus.
Most of the analysis took place during the summer of 1966.
During that time, the author had considerable help from the
personnel of the Latin American Study Center, whose director,
Dr. Garland Wood, had been the campus coordinator. Miss Pat
Moyer helped greatly in data research. Dr. Vincent Farace
and his graduate assistant, David Lindley of the Department
of Communication, were of great assistance in planning and

executing the data processing.

vii

Last, but not least, I wish to acknowledge the
part played by my wife, Marianne, who helped in the edit-
ing and encouraged me at all times, and our three young

children, who showed great patience during this period of

stress.

viii

FOREWORD

TABLE OF CONTENTS

AcmowLB DGMENTS O C O O O O O O O O O O C O O O O 0

LIST OF TABLES O O O O O O O O O O O O O O O O O O 0

CHAPTER

I. MARKETING AND DEVELOPMENT (A

II.

REVIEW OF LITERATURE) . . . . . . . o o o

IntrOduc tion 0 O O O O O O O O O O O O O 0
Contributions from Economic Theory . . . .

The ClaSSiCal SChOOl o a o o o o o o o
The Neo-Classical School . . . . . . .
Schumpeter' s Disharmonious Growth .
Keynes and Post-Keynesian Contributions
Pragmatic Suggestions for

Rapid Deve10pment. . . . . . . . . . .

Marketing in DevelOpment

Food Marketing in Development . . . . .
The Latin American Food Marketing Study.

Innovations and Social Change . . . . . .
A Theory of Social Change. . . . . . . .
Diffusion of Innovations . . . . . . . .

The Centrality of Exchange . . . . . . .

Review of Literature Summary . . . . . . .
Plan of the Thesis . . . . . . . . . . .

RESEARCH METHODOLOGY . . . . . . . . . . . .

Scope and Purpose of the Study . . . . . .
The setting 0 O O O O O O O O O O O O 0

Core Objectives . . . . . . . . . . . . .

ix

Page

ii

xiv

NH

KO 01mph)

l3

l6
19

20
20
23
26

27
28

30

30
30

32

Chapter Page
II. Continued

Method of Analysis . . . . . . . . . . . . 34
AnaIYSiS o o o o o o o o o o o o o o o o o 34
Hypotheses to be Tested . . . . . . . . 36
The Surveys 0 O O O O O O O O O O O O O 38
Summary . . . . . . . . . . . . . . . . . 39
III. FOOD RETAILING, 1950 - 1965 . . . . . . . . 40
Introduction . . . . . . . . . . . . . . . 40
Early Political Influences . . . . . . . . 42
Political Background . . . . . . . . . . 46
First Attempts to Change Foo Retailing. 55
Recommended Marketing Reforms
in the Early Fifties . . . . . . . . . 56
The Galbraith and Holton Report . . . . 59
Other Reports . . . . . . . . . . . . . 63
Summary of Early Studies . . . . . . . . 67
Government Organization for Change . . . . 68
The Food Commission . . . . . . . . . . 68
Fomento O O O O O O O O O O O O O O O 0 70
Department of Ag iculture .
and Commerce . . . . . . . . . . . 71
Department of Commerce . . . . . . . . . 72
The Commercial DevelOpment Company . . . 73
Changes that Occurred in Food Retailing. . 74
Significant Changes . . . . . . . . . . 75
Cooperative Stores . . . . . . . . . . . 79
Independent Stores, Incorporated . . . . 80

Interaction Between Changes in Food

Retailing and the Government . . . . 82
Planning Board Regulations . . . . . . 82
The Department of Agriculture . . . . . 84
Mti-TrUSt Laws 0 o o o o o o o o o o o 85
Co-Op Laws . . . . . . . . . . . . . . . 87

Resulting Additional Investment
in Food Retailing ... . . . . . . . . 89

Chapter

III. Continued Page
Summary . . . . . . . . . . . . . . . . . . 90
IV. THE ECONOMICS OF IMPROVED FOOD DISTRIBUTION . 93
Introduction . . . . . . . . . . . . . . . 93
The Changing Consumer . . . . . . . . . . . 94
Income Change . . . . . . . . . . . . . . 94
Population Change . . . . . . . . . . . . 97
Consumption Change . . . . . . . . . . . 99
Free Food Program . . . . . . . . . . . . 103
Diet Changes . . . . . . . . . . . . . . 104
Shopping Habits o o o o o o o o o o o o o 105
Increase in Ownership of Consumer
Durables O O O O O O O O O 0 O O O O O 106
The Relative Importance of Three
Types of Retail Stores . . . . . . . . 107
Lack of Importance of Maids . . . . . . . 109
CO-Op MemberShip o o o o o o o o o o o o 110
Sense of Community . . . . . . . . . . . 111
Use of Information about Food . . . . . . 111
Measurement and Evaluation of Changes
in Food Retailing . . . . . . . . . 112
Introduction . . . . . . . . . . . . . . 112
Changing Costs of Operation . . . . . . . 113
Procurement Problems . . . . . . . . . . 123
Size of Stores . . . . . . . . . . . . . 124
Trend Toward Cash . . . . . . . . . . . . 126
Differences in Retail Prices . . . . . . 126
Supplemental Survey . . . . . . . . . . . 132
Employment EffECtS o o o o o o o o o o o 134
Conclusion . . . . . . . . . . . . . . . 137
Some Methodological Considerations . . . . 139
survey 0 O O O O O O O O O O O O O O O O 140
summary 0 o o o o o o o o o o o o o o o o o 14]-
Conclusions . . . . . . . . . . . . . . . . 143

V. INNOVATIVE BEHAVIOR AMONG FOOD
RETAILERS IN PUERTO RICO . . . . . . . . . 144

Introduction . . . . . . . . . . . . . . . 144
Innovations in Marketing . . . . . . . . 147
Innovation as a Condition for Growt . . 148

MGthOdOlOgY o o o o o o o o o o o o o o o o 149

xi

Chapter Page
V. Continued

Limitations of Diffusion Research . . . . 150
scales 0 O O O O O O O O O O O O O O O O O 152

The Innovativeness Scale . . . . . . . . . . 152

Innovation Index #1 . . . . . . . . . . . 154
Innovation Index #2 . . . . . . . . . . . 154
Innovation Index #3 . . . . . . . . . . . 155
Innovation Index #4 . . . . . . . . . . . 155
Innovation Index #5 . . . . . . . . . . 155
Results of Hypothesis Testing . . . . . . 156
The Expert Vs. the Owner . . . . . . . . . 156
Conclusion . . . . . . . . . . . . . . . . 158
Prediction of Innovativeness . . . . . . . 159

Some Zero Order Correlations . . . . . . . . 163

Hypotheses to be Tested . . . . . ... . 163
Bi- Variate Hypotheses Not Showing

Significant Differences . . . . . . 163
Bi— Variate Hypotheses that Were Accepted . 168

Multiple Correlation . . . . . . . . . . . . 169
Hypothesized Relationships . . . . . . . . 169
Using Zero Order Correlations as

Indicators for Multiple Correlations. . 172

Factor Analysis . . . . . . . . . . . . . . 174

Introduction . . . . . . . . . . . . . . . 174
Technique of Factor Analysis . . . . . . . 175
An Example 0 o o o o o o o o o 'o o o o o o 176
ConCIUSion O O O O O O O O O O O O O O O O 185
summary 0 O O O O O O O O O O O O O O O O O 187

conClUSions O O C O O O O C O O O O O O O O 188
VI. CONCLUSIONS AND SUGGESTIONS . . . . . . o . . 189

IntrOdUCtion O O O O O O O O O O O O O O O O 189

Broad Issues Considered . . . . . . . . . . 189
The "National Market". . . . . . . . . . .L 189
Measuring Improvements in Exchange . . . Zg/l94
Changes in Food Distribution . . . . . . . 196
Contribution to Economic Development . . . 198

xii

Chapter Page
VI. Continued

Correlates of the Innovative Process . . . 198
The Innovation Indices . . . . . . . . . . 200
Facts Concerning Food Consumption . . . . 201

Policy Recommendations . . . . . . . . . . . 202

Some Suggestions for Puerto Rico . . . . . 202
Applicability of the Puerto Rican

Experience 0 o o o o o o o o o o o o o 206
On Bringing about Reform . . . . . . . . . 207
A Paradigm . . . . . . . . . . . . . . . . 208
summary 0 O O O O O O O O O O O O O O O O 210

Further Research Needs . . . . . . . . . . . 212

APPENDIX A. A HISTORY OF THE LATIN AMERICAN
FOOD MARKETING STUDY . . . . . . . . . 213

APPENDIX B. SAMPLING PROCESS . . .p. . . . . . . . . 221
APPENDIX C. QUESTIONNAIRES . . . . . . . . . . . . . 227

APPENDIX D. PREVIOUS STUDIES USING
MULTIPLE CORRELATION . . . . . . . . . 288

APPENDIX E. FACTOR ANALYSIS . . . . . o . . . . . . 295

BIBLIOGRAPHY O O O O O O O O O O O O O O O O O O O O O 3 O l

xiii

LIST OF TABLES

Page

Recommended Per Capita Food Consumption
in Puerto Rico as Compared with Actual
Per Capita Consumption, 1940-41 . . . . . . 45

Gross and Net Margins and Operating Expense
Ratios for Retail Food Stores, by Sales
Class, 1949, Puerto Rico . . . . . . . . . 64

Income Distribution of Spending Units,
Puerto Rico (1949 and 1959) . . . . . . . . 95

Comparisons of Current $ Incomes, Median
Family Incomes, United States, Mississippi,
and Puerto Rico, 1949 and 1959 . . . . . . 95

Family Income Before Taxes, 1964, by Income
Classes, San Juan and Mayaguez . . . . . . 96

Crude Birth Rate and POpulation growth,
1940, 1950’ and 1960 Q Q Q Q O O O O O O O 98

Selected Age Distribution of Puerto Rican
and United States Populations in 1940,
1950, and 1960 o o o o o o o o o o o o o o 100

Consumption Patterns, United States and
Puerto Rico, 1950 and 1963—64 . . . . . . . 101

Index of Per Capita Consumption of
Selected Foods, 1940—1960 . . . . . . . . . 102

Percent of Families Owning Cars,
Refrigerators, and Freezers, San Juan
and Mayaguez Standard MetrOpolitan
Statistical Areas, 1965-66 . . . . . . . . 106

Per Cent of Families Buying and Average

Amounts Spent at the Plaza, Colmado,
and Supermarket, 1965 . . . . . . . . . . . 108

xiv

Table Page

4-10. Per Cent of Families in Four Income Groups
Buying Their Food at Supermarkets in San
Juan and Mayaguez SMSA, 1965-66 . . . . . . 109

4—11. Significant Persons in the Purchase and
Preparation of Food in San Juan and
Mayaguez, SMSA, 1965-66 . . . . . . . . . . 110

4-12. Positive Reaction to Newspaper Information
about Food, 1965-66 . . . . . . . . . . . . 112

4-13. Dollar Sales of Establishments in the
Sample of Labor Department Survey of
Food Retailers, Puerto Rico and Zone 1 . . 114

4-14. Average Profit as a Per Cent of Sales, of
Supermarkets and Food Stores in Puerto
Rico, Various Years . . . . . . . . . . . . 116

4—15. Sales and Cost of Goods Sold by Pueblo
Supermarkets, Fiscal Year Ending
January 31, Various Years . . . . . . . . . 118

4—16. Annual Sales per Employee in Grocery
Stores, 1948-49 and 1963, as Indicated
by the U. S. Census of Business . . . . . . 119

4-17. Average Sales (Dollars) Per Store, Per
Employee, and Per Customer, Puerto
RICO, 1950 and 1965-66 . o g o g o g g g g 121

4—18. Average Annual Inventory Turnover and
Average Sales Per Man Hour, Puerto Rico,
1950 and 1965-66 . . . . . . . . . . . . . 122

4-19. Average Annual Dollar Sales of Food Stores
and Eating and Drinking Places, Puerto
Rico, San Juan SMSA, and Mayaguez SMSA . . 125

4-20. Trend toward Cash Sales in Food Stores,
Eating, and Drinking Places, 1954,
1958, 1963 O O O O O O O O O O O O O O O O 127

4-21. Price Comparisons on Basic Foods, Super-

markets and Small Stores, San Juan,
Puerto Rico, May 1966 . . . . . . . . . . . 129

XV

Table Page
4-22. Per Cent of Food Consumed that is
Purchased in the Retail System Food
Stores and Eating and Drinking Places,
Various Years, 1949—1963, Puerto Rico . . . 136

5- 1. Zero Order Correlations Between the
Various Innovation Indices (N = 91) . . . . 156

5— 2. Perceived Applicability and Use of Each
of the Nine Innovations . . . . . . . . . . 157

5- 3. Zero Order Correlation Relationships with
Two Measures of Innovativeness . . . . . . 164

5- 4. Statistically Important Variables . . . . . . 171
5- 5. Multiple Correlations with Independent
Variables with High Zero Order

Coefficients with Innovativeness . . . . . 173

5- 6. Factor Loadings for the Five Innovation
Indices O O O O O O O O O O O O O O O O O O 177

5- 7. Large Modern Firm, Factor 1 . . . . . . . . . 179
5- 8. Modern Businessman, Factor 2 . . . . . . . . 180

5- 9. Variables Associated with the Older Firm
that Is Not Growing, Factor 3 . . . . . . . 182

5-10. Transitional Manager, Factor 4 . . . . . . . 183
5-11. The Traditional Manager, Factor 5 . . . . . . 185
5-12. Modern Independent Businessman, Factor 6. . . 186
B- 1. Characteristics of Firms in the Sample. . . . 224

B- 2. Year of Establishment and Per Cent of
Interviews Completed . . . . . . . . . . . 225

B- 3. Per Cent Adopting Various Innovations . . . . 226

D- 1. Studies on the Diffusion of Innovations
which Utilized Multiple Correlation . . . . 290

E- 1. Six Factor Solution of 87 Key Variables,

Food Retailer's Survey, Mayaguez and San
Juan, Puerto Rico, 1965-66 (N=91) . . . . . 296

xvi

CHAPTER I

MARKETING AND DEVELOPMENT

(A REVIEW OF LITERATURE)

Introduction
There is evidence to suggest that, as the wealthier

nations become even wealthier on a per capita income basis,
the poorer nations become even more impoverished in that
respect. L. J. Zimmerman suggests that "the past hundred
years have shown a relative impoverishment of the poorest
part of the world,"1 and "our findings lead to the conclu—
sion that a hundred years ago the distribution of the world
income was much more equal than it is today."2

There is also growing attention being paid to the
lower rate of growth of food supply as compared with popu-
lation growth. The relative importance of food and food
prices is emphasized by the fact that low—income families

making up a dominant prOportion of the urban pOpulation

spend from 45 to 75 per cent of their disposable incomes

1L. J. Zimmerman, Poor Lands, Rich Lands: The

gfidening Gap (New York: Random House, 19657, p. 38.

2Ibid., p. 40.

on food. Hence, market reforms which bring about changes

in the availability and price of food could have a substan-
tial effect on the welfare of consumers and on their poten-
tial productivity as workers. In addition, it seems reason-
able to expect that marketing improvements which provide
more dependable market outlets and more stable prices would
encourage an expansion in farm production and the commer-
cial sale of an increasing marketable surplus over and

above subsistence needs. This would lead to expanded eco—
nomic activity in food processing and distribution and
would contribute to economic growth and political stability.
This chapter includes a review of the generally accepted

theory of economic development.
Contributions from Economic Theory

The Classical School

Adam Smith suggested that development could be
best accomplished through increased specialization. He
points out that greater division of labor and specializa-
tion lead (1) "to an increase in dexterity among workers,
(2) to a reduction in the time necessary to produce com—
modities, and (3) to the invention of better machines and

equipment."3

fl..—

3Gerald M. Meir and Robert E. Baldwin, Economic

Develo ment Theor Histor Polic (New York: John—Wiley
and Sons, Inc., 15375, p. EI.

The impetus toward this specialization was what
Smith called "the natural tendency of men to truck, barter,
and exchange one thing for another."4 According to Smith,
accelerated development could come about only as capital-
ists were willing to save and invest in new and improved
methods of production. The investment of capitalists thus
provided jobs for the surplus workers from the agricultural
sector.

Parsimony, and not industry, is the immediate

cause of the increase of capital. Industry,

indeed, provides the subject which parsimony

accumulates.. But whatever industry might ac-
quire, if parsimony did not save ang store up,

the capital would never be greater.

In addition, Smith warns that the size of the market
may limit the division of labor and thereby slow the accu-
mulation of capital and economic development.

Economists, following in the steps of Adam Smith,
remembered part of his ideas and devoted much attention to
the subject of capital accumulation. .But it would seem that
the attention of these deve10pmental experts turned away

from the "tendency to truck and barter" and centered on the

loftier concerns"of'capital accumulation and the general

 

v—w v —v . —v at w. —v- "-

" 4Adam Smith, An In uir into the Nature and Causes
of the Wealth of Nations, ea. anIn Cannan (New YorE: Tfie
Modern EISrary, Random House, 1937), p. 13.

SIbid., II, ch. 3.

benefits of parsimony, particularly among the poor. It
seems worthwhile, consequently, to review some of the writ-
ings which touch upon "exchange" in general and the role of
exchange or marketing in food as a contributing factor to

development.

The Neo-Classical School

With the exception of Adam Smith, whose contribu-
tions to the ideas of developmental economics have been
commented upon, the classical economists were, for the most
part, concerned with accumulation of capital. Subsequently,
in the late 19th century, Alfred Marshall and others who
came to be known as neo-classicists modified the classical
description of the process of capital accumulation by re-
defining the role of investors and savers. Contrary to the
classical model, savers and investors did not necessarily
have to be the same people. The capital market was the in-
stitutional arrangement which facilitated the flow of sav—
ings into productive investment.

Under the neo-classical model, economic development
was viewed as a gradual harmonious process whereby all
groups eventually reaped the benefits of growth. Marshall's
concept of "external" economies illustrates the ways in

which investments by one entrepreneur may benefit others.

Schumpeter's Disharmonious Growth

In his book, The Theory of Economic Development,
J. A. Schumpeter rejected the classical and neo-classical
belief that economic growth is a gradual harmonious pro-
Cess. He argued that real economic advances come in leaps
and spurts as a result of great innovations. Consequently,
he placed a great deal of emphasis on the entrepreneur as
the central figure in the development process.

He is the innovator, the one who undertakes new
combinations of the factors of production. In-
novations may occur in the following forms: (1)
the introduction of a new good; (2) the use of a
new method of production; (3) the opening of a
new market; (4) the conquest of a new source of
raw material supply; and (5) the reorganization
of any industry.

Schumpeter argued that economic develOpment oc-
curred in an environment where businessmen could not, with
certainty, evaluate the risk nor readily compare the rate
of return to the interest rate in order to make riskless
investment decisions by weighing rate of return against the
cost of capital. In Schumpeter's world, "a high degree of
risk and uncertainty exist."7

The entrepreneur, then, is the particular type of

individual who is willing to operate in an uncertain envi-

ronment and make innovations succeszul{'“ t iS‘this kind

6.
%Meir and Baldwin, 22, cit., p. 87.
Ibid., p. 87.
Schumpeter is never clear about the origins of the

innovator. It is suggested in this thesis that the colli-
sions between cultures also brings about innovation.

of environment which leads Schumpeter to conclude that
great spurts of development are centered around, and ig—
nited by, significant economic innovations.

Schumpeter recognized the importance of capital
accumulation in the development process, but he did not
feel that the neo—classical theory of capital accumula-
tion was appropriate in a real world of high risk and dis-
harmonious growth.

While some of his ideas have been supplanted by
later economists, Schumpeter's emphasis on the entrepreneur
as the agent of economic growth continues to receive a
great deal of attention. The measurement and prediction
of factors associated with innovativeness (i.e., the types
of persons who become entrepreneurs) will be discussed in

later chapters of this thesis.

Keynes and Post-Keynesian Contributions

In 1936, John Maynard Keynes published a book which
stimulated a revolution in the economics of income and em-
ployment. His work was aimed at explaining the causes and
remedies for the great economic depression which gripped
the developed world.

Keynes pointed out that unemployment and economic
stagnation could be an equilibrium condition in a capital-
istic economy. This was caused by two factors: (1) The
investor's perception of the relationship between the cost

of capital and the probable return on investment makes him

unwilling to provide sufficient productive investments (i.e.,
perceived risk is too great); (2) The demand for money for
liquidity purposes at a low interest rate is such that peOple
would rather hold cash balances than purchase securities at
a low return (i.e., perceived return is too low). Hence,
there will be a lack of investment capital which prevents
full employment. A continuation of the low propensity to
invest would lead to idle plant capacity, greater unemploy—
ment and low consumption. Therefore, a lack of effective
demand was postulated as the main factor preventing full em—
ployment. Keynes argued that one way to alleviate the prob-
lem was through heavy government spending and deficit fi-
nancing. Such spending would provide additional employment
and foster confidence in the economic future, which would
encourage private investment. This would lead to greater
employment and greater income through the multiplier effect.
Most developmental economists argue that even though
Keynes' analysis has considerable appeal and utility in de-
veloped nations, his solution is not directly applicable in
the less developed economies. They argue that even though
low income, low employment, and low investment are the same
conditions postulated by Keynes, his remedies do not apply
to developing nations because "unemployment, though exten—
sive, is usually confined to unskilled workers. In addition,
excess capacity prevails only in particular industries and

sectors. Because of shortages and bottlenecks elsewhere,

deficit financing is most likely to result in a rise in the
price level without any increase in real output."8 Some
economists are now saying that at least parts of the Keynes-
ian analysis can and should be used to a much greater extent
in diagnosing and treating the development problems of the
poor nations.

Post-Keynesian analysis is generally an extension of
Keynes' teaching. The two main proponents are Ensey Domar
and R. F. Harrod. Those two economists, working separately,
devised similar economic growth models based on Keynesian
analysis. Their major contribution was in viewing capital
accumulation in a dual role. Investment generates income and
it also increases the productive capacity of the economy by
increasing its capital stock. Harrod and Domar were, there-
fore, concerned with determining the conditions required for
smooth growth in real income. Their growth model was de-
signed for the more develOped economies but has been widely
used for forecasting growth rates and determining saving
rates for income.growth targets in developing nations. While
it depends heavily upon Keynes' theories, it is much more
oriented to investment than to Keynes' ideas of the impor—

tance of demand.

 

8Robert E. Baldwin, Economic Development and Growth
(New York: John Wiley and Sons, Inc., 1966), p. 42.

 

Pragmatic Suggestions for
Rap1 Development

Although some of the economists discussed earlier

 

argued that lack of effective demand was not an issue of
developing nations, Lauchlin Currie suggests that it is.

He implies that developing nations, under the influence of
economic development theorists, have placed too much empha-
sis on GNP growth rates, production, and investment. As a
result, consumption has lost its place as the goal of pro—
duction. He therefore suggests a development plan which
would place primary emphasis on increased consumption, par—
ticularly of the low income under—employed. He stressed the
value of economic theory in his plan and is especially con—
vinced that the Keynesian analysis of the lack of effective
demand is useful. Basically, his argument is that economic
efficiency considerations and traditional develOpment theory
are necessary but not sufficient to break through the vicious
circle of poverty in developing nations. The approach must
also include considerations in income distribution, or as he
prefers, "relative consumption gains arising from income re—
distribution."

Currie has suggested that those countries interested
in economic develOpment should reformulate their deve10pment
objectives, taking into consideration the importance of in—
come distribution, as well as aggregate gross income. He

defines his objectives as:

10

A program designed to assure the elements of a

minimum tolerable standard of living for, say,

the poorer half of the pOpulation in terms of

the basic necessities of food, clothing, hous—

ing, health, primary education, miscellaneous

goods, and amusements.
He argues that most Latin American nations fit in with the
type of stagnation analysis that was applicable to Western
Europe and the United States in the thirties, the Keynesian
analysis of lack of effective demand, and unused capacity.
He cites the example of the great increases in output in
World War II when all resources were bent toward common
goals as being quite a revelation. With little or no im-
mediate addition to capital, output increased in the United
States from $186 billion in 1938 to over $320 billion in
1944.10The increase in output came from intensive use of
existing facilities and labor.

Further, Currie argues that the experiences of
EurOpean recovery after the Second World War have useful
lessons for developing nations. He is very much concerned
about the lack of effective demand and the distribution of
income, mainly in the cities. He argues that if the level
of living for the poorest peOple in the cities is improved,
great numbers will be better off. He determines that the

birth rates of city dwellers appear to be lower than birth

rates of the rural pOpulation. He agrees with many other

 

9Lauchlin Currie, Acceleratin Develppment - The
Necessity and the Means (New YErETC McGraw-HiIl Book Company,
1966), p. 20.

101bid., p. 81.

ll

observers that there is a pOpulation surplus in the rural
areas. He makes the further point, though, that one way to
slow down the population explosion is to get more peOple out
of the rural areas and into the city. When this happens, he
implies that the people left in the rural areas will be bet—
ter off.

Currie contends that agricultural incomes are too
low and that there is competition between the mechanized,
efficient farmer and the marginal subsistence farmer.11 He
continues that once the elements of agricultural technology
have been mastered and there are no support prices or dump-
ing, the growth of agricultural output will depend upon the
growth of effective demand, regardless of the resources
poured into agriculture.

Since most of the people still live in rural areas,
Currie claims his interest is in achieving some minimum
standard of consumption or well-being for the masses, "though
not necessarily concerned with improving its welfare where
it now happens to be engaged in what it is now doing."13 In
essence, he is promoting a mobilization of the nation's
total resources, economic and human, for a domestic war to

eliminate poverty.

 

11Currie, Op. Cit., p. 33.

12Ibid., p. 38.

13Ibid., p. 22.

12

Walt Rostow also is concerned with increasing well-
being. He makes a specific point of the fact that develOp—
ment cannot proceed unless the great numbers of peOple who
are not now in the money economy (mainly rural peasants)
are brought into it. For example, if 50 per cent of the
population has no money and no way of earning it, and if
only 10 or 20 per cent of the remainder can assert their
demand for goods, the market is much smaller and distorted
than it appears at first sight. Getting more people into
the money economy through more effective exchange linkages
between urban and rural areas is what Rostow calls the cre—

ation of the "national market."l4

Thus, Rostow is among the
few economists who have made a point of emphasizing Smith's
early recognition of the "natural tendency to truck and
barter." To Rostow, the phrase "national market" connotes
an interlocking exchange of products between the urban and
rural sectors within or between regions of a country.
Admittedly, Currie does not use the phrase which
Rostow coined, but they are both concerned with raising the
level of living, and Rostow would agree with Currie's con-

tention that for many countries, particularly those in

Latin America, "the problem is at least capable of solutions,"15

 

14W. W. Rostow, "The Concept of the National Market
and its Economic Growth Implications," Proceedings of the 1965
Fall Conference of the American Marketing Association (Cfiicago,
1965?, p. 18.

15Currie, Op. cit., p. 31.

13

and "is a problem of the gap between the rich and poor
parts of the develOping nations themselves."16
Rostow further suggests that "the operational task
of development in many parts of the world over the next
decade or so may be to break down these structural dis-
tortions, to produce a self—reinforcing agricultural and
industrial expansion, and to create truly national markets

within these countries."17 Rostow is concerned with the

results of better national markets.

Marketing in Develgpment
Even if it is desirable to create a "national mar-
ket," how is it accomplished? Rostow suggests that one way
is by widening domestic markets through the production of
low-cost consumer items. This would be paid for by farm
production that is sold to buyers from the burgeoning urban
areas. Rostow believes that each of us desires enough to
eat, some degree of mobility, and the possibility of pri-
vacy. Yet, Elizabeth Hoyt has noted that:
One can look through whole shelves of books on the
economics of underdevelOped areas without finding
reference to the importance of incentive through

deve10pment of wants or the importance of market?
as a means by which this incentive can be given. 8

 

16W. W. Rostow, View from the Seventh Floor (New York,
Harper and Row, 1964), p. I35.

l7Ibid., p. 135.

18Elizabeth Hoyt, "Impact of a Money Economy on Con-
sumption Patterns" (The Annals of the American Academy, #305,
1956), p. 20.

14

Her comment was written before the recent expression of
concern for the "national market." Rostow, in a speech
before the American Marketing Association, suggests that
"there are (assuming roads and minimum basic education)
four necessary and sufficient conditions" for the creation
of the "national market:"

1. The farmer must receive a reliable and fair
price for his product;

2. Credit must be available at reasonable rates;

3. There must be technical assistance that is
relevant to local conditions; and

4. Reasonable prices for inputs for farm and
family, such as seed, fertilizers, farm
tools, and consumer goods.

Rostow continues that when these conditions are met,
development accelerates and food production increases.19
In 1958, Peter Drucker noted:

The essential aspect of an underdeveloped economy and
the factor, the absence of which keeps it underdevel-
Oped, is the ability to organize economic efforts and
energies....to convert a self—limiting, static system
into creative, self-generating organic growth.

Drucker goes on to state that marketing improvements are the

ones which will start the self—generating organic growth.

The Opposite Opinion has been expressed by Kenneth Myers,

 

19W. W. Rostow, "The Concept of a National Market and
its Economic Growth, Implications, in Marketing and Economic
Development," p. 11.

20Peter F. Drucker, "Marketing and Economic Develop-
ment," Journal of Marketing 22(3) 1958, 255.

15

who notes that a historical study of United States devel-
Opment indicates, "the role of marketing was adaptive."21
0n the other hand, Moyer and Hollander22 agree that

further research is needed before any definitive conclu-
sions can be made concerning the measureable role of mar-
keting in the rate of economic development. Moyer accepts
the traditional definition of marketing as:

the performance of business activities directed

toward, and incident to, the flow of goods and

services from producer to consumer or user.

He adds that it is also:

an organizing function which integrates and thus
reduces risks of production and consumption.

Moyer's monograph summarizes the findings of the
few empirical studies that have been conducted throughout
the world. As a result of his review, he concludes that
it is possible for persons and institutions in marketing
to perform functions which might contribute to the devel-

Opment process. However, there have been some specific

 

21Kenneth H. Myers, "Marketing's Role in the Economy,"
Proceedings of the Winter Conference of the American Market-
ing Association, December 1963.

22Stanley C. Hollander, "Retailing Cause or Effect?"
Proceedings of the Winter Conference, American Marketing
Association, December 1962, p. 223.

23Reed Moyer, Marketing in Economic Development,
International Business OCcasionéI Paper KI, Graduate School
of Business Administration, Michigan State University, 1965.

16.

contributions made in the critical area of food marketing
and economic develOpment which shed a bit more light on

the issues.

Food Marketing in Development

 

It is difficult to over-emphasize the importance of
food in a develOping economy because of the high percentage
of total income spent for this necessary group of commodities.
Throughout most of Latin America, rapid pOpulation expansion
and urbanization are placing increasing pressures on food
supplies.24 Inadequate production and/or poor management of
food inventories have frequently contributed to inflationary
price spirals.

As mentioned above, marketing reforms, as part of an
overall strategy for attaining more rapid economic growth,
might have strategic importance. But, at present, relatively
little is known about how to develOp improved food marketing
systems in countries in the early stages of develOpment. The
proceedings of the agricultural marketing seminars sponsored

by USAID in Jamaica (1959) and in Brazil (1962) are evidence

 

24The State of Food and Agriculture, 1962, Food and
AgriculturaI OrgafiIzation of‘the United Nations (Rome). See
also Food Balances for Twenty—four Countries of the Western
Hemispfiére, 1959-61, UnIted States Department of Agriculture
ERS Foreign 86, 1964.

17

of the general lack of knowledge about marketing conditions
and the means for improving markets in Latin American coun-

tries.25

Stephen Enke in his book, Economics for Development,
says:
Food comes first. Only after a country has satisfied
its essential food requirements, unless it has some-
thing to export, can it start prggucing anything but
the most necessary manufactures.

Robert Stevens has concentrated on a slightly differ-
ent problem associated with food production in developing
nations. He examines income elasticities of demand for food
in several develOping nations. He notes the rate of pOpula-
tion growth and points to the necessity for increasing food
production in order to keep pace and provide a surplus for
develOpment. He carries the analysis further to examine some
of the possible effects of a rapid increase in the demand
for food as development gets under way in an economy with
high rates of pOpulation growth. Stevens finds relatively

high income elasticities in the nations studied. His esti-

mates place income elasticities of between 0.4 to 0.6 for

 

5Development of Agricultural Marketing and COOpera-
tives in LaEIn America and Caribbean, Report of a seminar
held 5E Kingston, Jamaica, November 2-13, 1959, International
Cooperation Administration. See also MarketinggpStorage and
Processin of Agricultural Products, Report of a semInar held
at Rio de 3ane1ro, Brazil, 1962, sponsored by the Government
of Brazil and the U. S. Agency for International Development.

26

Stephen Enke, Economics for Develgpment (Englewood
Cliffs, New Jersey: Prentice HaIl,’I9637, pp. 26-27.

 

 

18

net total food consumption with the higher figure "more
likely at low per capita income levels."27

Stevens suggests that such a high income elasticity,
coupled with the rapid rural to urban pOpulation shift and
rising incomes which prevail in early stages of development,
could place a great deal of pressure on the food marketing
systems of developing nations. This pressure could cause
inflationary food prices.

George Mehren cites further positive support for an
emphasis of food and food processing activities as centers
for economic development. Yet, he notes that many areas
are not using the known technologies and procedures which
have proven profitable.28

Possibly the earliest study which could be inter-
preted as being concerned with the role of food marketing
in economic develOpment was the Galbraith and Holton study

Marketing Efficiency in Puerto Rico.29

In 1949-1950, the
Puerto Rican food retailing system was "atomistic" and one

in which price competition was not practiced since merchants

 

27Robert D. Stevens, ElasticiEypof Food Consumption
Associated with Changes in Income in Developing_Countries.
Foreign Agriculture Economic Report #23 (Washington, D. C.,
U. S. Department of Agriculture, 1965), p. iv.

28George Mehren, "Marketing Organization and Economic
Development," Journal of Farm Economics 41(5) December 1959,
1307.

 

29John K. Galbraith and Richard Holton, Marketing

Efficiency in Puerto Rico (Cambridge: Harvard University
Press, 1954).

19

thought their demand curve was relatively inelastic.

Credit was extensive at all levels of the food distribu-
tion system. To the extent that margins could be reduced
through efficiencies, the poorest consumers would not need
to spend as much money on food and thus could use it to

buy other consumer goods. As a result of modeling a sys-
tem of food distribution, Galbraith and Holton recommended
certain policy changes. Most of their recommendations were
implemented over the next few years by the Puerto Rican

government and private individuals.

The Latin American Food Marketing Stugy
As mentioned in the Foreword, this thesis is a
part of the Latin American Food Marketing Study, which
has five specific objectives. Dr. Charles Slater clearly
laid out these objectives in a speech in September 1965:
1. To measure and analyze the changes that have
taken place in the food marketing system serv—
ing the San Juan and Mayaguez areas of Puerto
Rico over the past fifteen years;
2. To describe and analyze the food marketing sys-
tem of a second major market area, such as a
city in Latin America;
3. To identify critical marketing problems and to
evaluate alternative means of improving the

marketing system;

4. To develop research methodologies useful in
appraising marketing problems;

20

5. To draw inferences and formulate hypotheses

concerning the role of food marketing in coun-

tries 8n the early stages of economic develop-

ment.3

In addition, Dr. Slater acknowledged the usefulness
of the Galbraith and Holton report and other statistical
information, which would serve as a benchmark against which
one could measure the food marketing system as it existed
in 1965. Slater further outlined some fundamental prOposi-
tions. He hypothesized that economic growth can be fostered
by reduced or more stable food prices, increased velocity of
capital can make the same amount of money do more work when
risks are lowered through better market integration, and

new market entrants may reduce margins and enhance counter-

. . 31
va111ng power.

Innovations and Social Change
In many of the studies cited above, it is suggested
that economic development cannot take place unless 2222
peOple change. This section is primarily devoted to iden-
tifying reports of research into how such change is brought

about.

A Theopy of Social Change
E, E. Hagan, an economist, was troubled by what he

perceived to be the inadequacies of the explanations contained

30Charles C. Slater, "The Role of Food Marketing in

Latin American Economic Development," Proceedings of the
1965 Fall Conference of the American Marketing Association
(Chicago, 1965), pp. 31-32.

31Ibid., p. 34.

21

in various economic theories of development. His experi-
ence in Burma led him to 10ok for a better explanation of
the growth process. Early in the book, On the Theory of
Social Chapge, he spells out his dissatisfaction with the
capital accumulation approaches of some previous economists.
They all assume that the central problem in growth
is capital formation and they all assume that suf-
ficient technological creativity to carry forward
economic growth is present in all societies. Now it
is clear beyond any question that technological cre-
ativity is responsible for a far greater share of in-
crease in productivity than is capital formation.

One could suggest that Hagen has chosen to follow
some of the ideas laid out by Schumpeter. Along with
Schumpeter, he believed that change starts when a person
becomes dissatisfied with society and wants to reform it.
This person, the innovator,33 is Open to new phenomena,
and he believes previously unnoticed aspects of the world
are meaningful and knowable. "He trusts his evaluations
of the world. The prospect of resolving a problem there-

fore attracts him." Anxiety is common and creates a

"gnawing feeling that the (innovator) is not doing enough,

 

32Everett E. Hagen, On the Theogy of Social Change
(Homewood, Illinois: Dorsey Press, Inc., I962), p. 49.

33The person who organizes "reality into relation-
ships embodying new mental or aesthetic concepts. And fur-
ther innovation involves two steps: Arriving at a new
mental conception and converting it into material form."
Ibid., p. 86.

22

or well enough. Repeatedly, they escape from their anxi-
ety temporarily by creative achievement."34
In order for the innovator to reveal himself, Hagen
feels it is necessary for a disturbing event to occur. After
it does, respect from "significant others" is withdrawn, and
the group, of which the would-be innovator is a member, finds
himself without the desired amount of status. When there is
withdrawal of respect, there are several avenues Open to the
individual or the group of which he is a part, "he may be-
come ritualistic, retreatist, innovational or rebellious."35

It is evident that many of the seeds of Hagen's

ideas are in H. G. Barnett's landmark book, Innovation:

 

The Basis of Cultural Change.36 Barnett suggests that the
innovators are the dissident, the dissenters, the indif—
ferent (those to whom customs are not important), the dis—
affected (those who have experienced major crises), or the
resentful. While they both say that one finds innovators
among these groups, neither one of these authors explains

why some and not all among these groups become innovators.

 

343232;; P9 86. In the theme popularized by

Festinger, the innovator has lowered his cognative dis-
sonance.

35Ibid., p. 198.

36H. G. Barnett, Innovation: The Basis of Cul—

tural Change (New_York: McGraw Hill, 1953).

23

That very important next step of locating which individ-
uals or which type of individuals are most likely to create
the change or be the innovators, has been discussed rather
extensively in the sociological specialty of the study of
diffusion of innovations. One of the foremost authorities
in this field, Everett M. Rogers, has devoted ten years of
research to the study of innovations and the peOple involved

with them. His 1962 book, Diffusion of Innovations, is

 

primarily a summary of the findings of various studies,
combined with insights and suggestions both for change

agents and further research.

Diffusion of Innovations

Most of the studies cited by Rogers come from in-
terviews with farmers. In a 1966 Bibliography, Rogers cites
708 empirical reports of innovation studies. Only 25 of
these studies concern marketing or general economics. Still,
many of the ideas gleaned from the agricultural respondents
should provide some insight in marketing institutions. For
instance, Rogers talks of innovators as deviants. He notes
that, almost by definition, the innovator is a deviant from
the society in which he lives. However, deviation is a
matter of degree and is related to the social system toward
which one has reference. Rogers talks of predicting inno-
vativeness as one would predict such things as academic

success, juvenile delinquency, and so on. One method which

24

seems to have some promise is multiple correlation. Rogers
notes that ten studies have used multiple correlation methods
for predicting innovativeness. These ten studies explain
between 17 and 56 per cent of the variance in innovativeness
on the basis of independent variables considered. All of
the studies in which more than 30 per cent of the variance
was explained have some combination of economic and socio-
logical variables.37

Rogers admits that much of the research reported in
his book tends toward "raw empiricism." While admitting to
the necessity for empiricism, he does attempt to build a
theoretical base for the diffusion and adoption of innova—
tions. He suggests that adOption depends upon antecedents
having to do with the individual's identity of himself
within his social system, as well as the perceptions of
that individual in his environment. Within these antece-
dents, Rogers suggests that information sources bombard the
individual and make it possible for him to learn more about
innovation. These perceptions of the individual, on the
other hand, are primarily of external characteristics, such
as the norms of the society, economic constraints, incen—
tives, and the characteristics of the institutional arrange-

ments. On the basis of this evaluation, the individual de-

cides whether or not to adOpt the innovation.

 

37E. M. Rogers, Diffusion of Innovations (New York:
The Free Press, 1962), TaBle lO-l, p. 288.

25

A pertinent question is, "Why all the concern about
innovation?" Zimmerman says that a willingness to accept
innovations is a precondition to economic progress.38 Also,
in a most interesting and useful review of economic theories
of innovation by the U. S. Department of Agriculture, Agri-

cultural Markets in Chapge, the following summary appears:

 

Most economic writers agree that innovations are im-
portant to both supply and demand. They are cost-
saving if they raise output with a given input. They
will not be adopted, however, unless the expected re-
duction of costs justifies them, that is, there is a
chance for greater profits.39
Furthermore, Robert W. Solow, an economist, put to empirical
test some of the theories of develOpment. He noted that
capital formation explains little of the increased output
in the United States.40 Thus, he agrees with E. E. Hagen
Jho, as a result of his research in other nations, concluded
that capital formation was not sufficient. Technical prog-
ress, i.e., innovations, accounted for more of the increased
output per man hour. Even among economists there is growing

acceptance that variables other than capital formation are

important in explaining the growth process.41

 

38L. J. Zimmerman, op. cit., p. 157.

39Marketing Economic Division, U.S. Department of
Agriculture, Agricultgral Markets in Change, Agricultural
Economic Report—395, EconomiE Research Service (Washington,
D. C., July 1966), p. 31.

40Robert M. Solow, "Technical Change and the Aggre-
gate Production Function," Review of Economics and Statis-
tics, 39 (August 1957), 312.

41Benton F. Massell, "Capital Formation and Techno—
logical Change in United States Manufacturing," Review of
Economics and Statistics, XLII (2) (May 1960), 182.

 

 

26

The Centrality of Exchange

A broader view of what Rostow calls "the national
market" (one that moves beyond rural-urban linkages in
general and beyond food in particular) has been fostered
by Cyril Belshaw, an anthropologist. He urges that ex-
change is crucial to economic development because it is
the basis of all society. Furthermore, he asserts that
anthrOpological data indicate: (1) most societies are
achievement oriented, (2) there is enterprise, (3) there
is investment and (4) there is maximization. The task of
modernization is to harness the above principles to new in-
stitutional complexes and to put them to work in an altered
context.42 His basic position of economic development is
that there must be alteration in the system of exchange.
Relationships in exchange must expand and become more complex.

But alteration of institutions or of the persons who
participate in those institutions is not simply a mechanical
process. If relationships expand and become more complex,
new ways must be introduced. Some peOple have called these
new ways innovations. Thus, we find an anthropologist who
has related the social scientists' interests in innovation
to those of the economists in develOpment. Belshaw gives
the reader a first approximation of the importance of ex-

change in develOpment.

 

42Cyril S. Belshaw, Traditional Exchange and Modern

Markets (New York: Prentice Hall, 1965), p. I10.

27

Review of Literature Summary

Classical and neo-classical economists appropriately
have concerned themselves with the results of specialization
as a necessary aspect of economic growth. Beginning with
Schumpeter and Keynes, there appears to be a growing aware-
ness of causes of economic development in terms of innova-
tion in relation to technical change. In addition, Keynes
considered the changes in effective demand. With the not-
able exception of Rostow, there seem to be few economists
who are concerned with the institutions and instruments of
exchange as causative factors in economic growth. Even
among those who have studied marketing, there is a diver-
sity of Opinion as to the possibility of marketing institu-
tions or the process of exchange playing a leading role in
economic development.

On the other hand, the social process, within which
the process of exchange is considered by various academi-
cians, leads to the study of the role of innovation. Such
investigations of innovation complement the economists'
studies of institutions and specialization in terms of bet-
ter understandings of development.

However, it is evident that not enough attention
has been given to the process of exchange. There have been
few empirical studies of either the institutions or the
people in the exchange process. Furthermore, at a time

when population growth is outstripping food supply, there

28

has been relatively little attention to that basic element
in exchange: the distribution of food. It is the purpose
of this thesis to look at food marketing in economic de-
velOpment in Puerto Rico, an area where rapid development

has occurred.

Plan of the Thesis

 

The present chapter has reviewed the economic and
social science literature relative to economic develOpment

and the role of marketing43

in that develOpment. It re—
veals that more research effort on the systems of exchange
may be rewarded with better understanding of how to accel-
erate economic develOpment.

Chapter II presents a description of the research
methodology and describes where the research took place.
Included in the chapter are the specific questions to which
the thesis is addressed, as well as the specific hypotheses
which will be tested.

Chapter III is an attempt to explicate a. histor-
ical view of what happened in Puerto Rican food distribu-
tion from 1950-1965 in relation to the more general field

of accelerated develOpment. This chapter is a word picture

of what happened and why.

 

43Throughout this thesis the terms marketing, distri-

bution, and exchange will be used interchangeably even though
the author recognizes that some readers will suggest that
marketing is a broader term. The term "marketing" is used
sparingly because of the connotations of high-pressure sales—
manship and "flim-flam" it carries for many.

29

Chapter IV deals with the economic variables of
the changing food distribution picture in Puerto Rico. A
considerable number of tables will be presented in that
chapter, quantifying the process described in Chapter III.

Chapter V is concerned with the sociological vari-
ables of the changing food distribution system. In this
chapter an attempt is made to determine the "type" of per-
son who brought about change. Some ideal types of persons
and institutions are described.

Chapter VI offers conclusions and recommendations,
and attempts to integrate the review of the literature of
Chapter I and the general questions posed in Chapter II
with the empirical findings of Chapters III, IV, and V. In
the appendices are detailed descriptions of the history of
the project of which this thesis is a part, and of the
sampling procedures, COpies of the survey instruments for

consumers and retailers, and a factor analytic matrix.

CHAPTER II
RESEARCH METHODOLOGY

SCOpe and Purpose of the Stugy

As noted in chapter I, in countries in the early
stages of develOpment marketing has received relatively
little attention from economic planners and technical as-
sistance experts. There is a wide range of Opinion con-
cerning the role, if any, of marketing in economic devel-
opment.

To a great extent, the role of marketing is an
empirical question that can be investigated. One specific
area that lends itself to empirical research is the market-
ing of food products. This is a particularly apprOpriate
area of research at this time because food supplies have
not kept pace with pOpulation growth. Some data seem to
indicate that producers increase production as they gain
assurance about what quantity is needed and some assurance

that prices will remain at acceptable levels.

The Setting
One of the first empirical studies of the role of

distribution in economic develOpment was published from

30

31

field work done in Puerto Rico from 1949 through 1952.
This makes it a very desirable place to study the role of
market institutions in economic development. The study,
Marketing Efficiency in Puerto Rico, by John K. Galbraith
and Richard Holton, provides an effective benchmark for a
1966 study of the same geographical area. ~In the 20 years
between 1940 and 1960, real per capita income tripled, yet
the 650 persons per square mile spread over this mountain-
ous island in the Greater Antilles make it one of the more
densely pOpulated areas of the world.

Today there are those who would deny the applicabil-
ity of Puerto Rican experience to other areas of the world,
since Puerto Rico has had special considerations. But one
can speak of special considerations only SEHEEEE; what
counts e§_en£e is merely the subjective judgment of man.
Unless man is viewed at least partially as the creater of
his own environment, a theory of economic develOpment is
not possible.1

Puerto Rico is one of the few communities in which
there has been a strongly reform-minded government which
has undertaken a planned action program as an outgrowth of
formal studies of its distribution system. It is one of
the few areas where rapid change in the distribution system
has not resulted in intense political repercussions.

Thus, this thesis is a case history of an area

 

. 1L. J. Zimmerman, Poor Lands,lRich Lands: The Widen-
1ng Gap (New York: Random House, 1965): p. 108.

32

where much change has occurred, where benchmarks have been
made by the studies of the early fifties, where documenta-

tion is relatively good.

Core Objectives

This thesis is concerned with the retail food dis-
tribution system in Puerto Rico for the years 1950 to 1965.
As a building block in the total picture of the role of
marketing in economic development, its goals are: (1) to
describe accurately what happened in food retailing from
1950-1965; (2) to investigate and explain the process by
which change occurred in the Puerto Rican food retailing
sector during a period of directed and planned develOpment;
and (3) to understand better the variables correlated with
innovativeness as well as multi-variate correlates of the
innovative process.

These three broad objectives will be pursued in
order to shed light on some critical questions of the role
of marketing in development. Some of the questions which
seem particularly critical at this time include:

1. How can W. W. Rostow's ideas of a "national market"

be operationalized? That is, how does one measure the
amount of a "national market" that exists in a given area?
What type of recommendations are needed for making more of
a national market in a given geographical area?

2. How can it be determined if improvements in exchange

or changes in the distribution system accelerate develOpment?

33

3. Can changes in the distribution of food accelerate
develOpment? If so, is the acceleration due to reduction
of risk, is it brought about by countervailing power, or
is it because more products are moving through the system?

4. Has the food distribution made a significant con-

tribution to economic develOpment in Puerto Rico?2

 

2All of these questions could imply a mechanistic

view of the world. Such is not meant to be the case. The
author believes that each of us imposes structure upon real-
ity. That is, we each have our own perceptions of reality,
which may or may not be a correct and prOper way of viewing
reality. Some psychologists have suggested that one's view
of reality is always biased. Kenneth Boulding in The Image
has implied that complete objectivity is never possible.
The researcher's view of reality influences the planning by
limiting, to some extent, the variables he chooses to look
at. One's view of reality also influences the analysis and
recommendations made on the basis of the facts given.

 

The author subscribes to the view of Joel Bain who,
in his book Industrial Organization, states (p. 459) general
goals of public economic poiicy:

Most citizens will probably agree that the primary
general aim of government economic policy in the
United States should be to promote a good overall
performance by the economy as a whole, in the sense
of fostering an Optimal level of aggregate material
welfare for the pOpulace. The good overall perform-
ance to be sought will generally embody: (1) a high
or "full" level of employment of productive resources,
including labor; (2) an efficient use of employed re-
sources in production, leading to a maximization of
the value of aggregate output obtained from the em-
ployed resources; (3) reasonable stability of aggre-
gate employment over time, or freedom from undue
fluctuations in economic activity; and (4) a reason-
ably high rate of progressiveness, as reflected in
the growth of the value of aggregate output per unit
of resources employed.

34

Method of Analysis

This thesis explores the role of food marketing
during a time of rapid economic development of Puerto Rico.
The aggregate statistics published for the entire island
are examined for the years 1950 to 1965. But, in partic—
ular, the study is focused upon the two cities of San Juan
and Mayaguez for the following reasons. The cities have
had vastly different rates of growth. Between 1950 and 1960
the San Juan standard metrOpolitan statistical area increased
in pOpulation 26 per cent, while the Mayaguez standard met—
rOpolitan statistical area decreased 4 per cent. In addi—
tion, there is some indication that income changes in the
two areas are considerably different. Thus, while little
difference was shown between the median levels and the
changes over this period, the distribution of income is

more concentrated in San Juan.

Analysis

The analysis presented in the next three chapters
employs three different but complementary approaches. In
this way, it is hoped to understand better the numerous
changes occurring in food distribution as they can be re-
lated to the problem in processes of economic develOpment.
First, a historical description of the change will be pre—
sented. Chapter III draws heavily upon secondary source of
data from both official and non-official sources. At the

end of the chapter certain observations are made.

35

Chapter IV, in the area of institutional economics,
is devoted to an economic analysis of factors influencing
and being influenced by the changes in retail food distri—
bution. There are discussions concerning those variables
that affected the behavior of consumers, the changes in
prices and wages, and the changes in the retailing of food.
This and the fifth chapter depend heavily upon special sur-
veys which were conducted as part of this research program.
In Chapter V, sociological research methodology is used to
determine the explanations for criteria for retailing in-
novativeness. Depth interviews with the largest firms,
coupled with the results of earlier sociological studies,
were used to develOp measures of those variables associated
with growth and innovativeness. Surveys of medium- and
small-size firms allow testing of certain key hypotheses.
The statistical procedures are designed to seek the most
economical explanations for change in marketing behavior.
In Chapter V, successively more SOphisticated statistical
techniques are employed in order to explain behavior of
market participants. These statistical techniques begin
with zero order correlations, move to multiple correlations,
and finally present a factor analysis of the behavior of
market participants. The sixth chapter presents a summary
of conclusions and recommendations.

The hypotheses to be tested by the survey data are

given below.

36

Hypotheses to be Tested

The hypotheses to be tested are divided into two
groups, the ones concerned with the economics of improved
retailing, and the ones having to do with the sociology of
improved retailing.

1. As an economy experiences increases in real in-
come, an increased per cent of food consumed will move
through commercial market channels.

2. Employment effectsof food retailing changes are
two-edged. There is more employment as a result of the
greater percentage of food moving through the commercial
market channels, but there is less employment as a result
of efficiencies introduced.

3. Food retailers' gross margins will tend to rise
as more functions are performed by these retailers. But
food retailers' gross margins will tend to fall as innova—
tions are adOpted by the less traditional Operators and as
the size of stores increases.

4. Families with high incomes shOp at the supermarket
to a significantly greater extent than those with low in-
comes.

5. Food prices of basic commodities are lower in
supermarkets at a given point in time than in the smaller
stores.

6. Sales growth will be correlated with modern at-

titudes of managers.

37

7. Nationality will be correlated with innovativeness;
Puerto Ricans will be negatively correlated with innovative-

ness in contrast with peOple not native to the island, who

will have positive correlations.

8. Supermarkets in a develOping economy are patronized

by a significant percentage of poorer families.

9. The combination of economic, psychological, and

demographic variables will explain more of the variance on

innovation indexes than has been explained before.3

 

3Personal

 

Age

Education

Mobility

Educational achieve—
ment for child

Income

Nationality

Attitudes

Modernization
Market progressiveness
Trust
Risk orientation
Hoarding index
Supermarkets have all
the business they
will get
Government helps in-
fluentials
Competition rougher
5 years ago

Communication

Use of mass media

Use of mainland information

Knowledge and use of
government service

Political knowledge

Why Others Left Business

 

Old age
Poor manager
Competition of supermarkets

Economic Behavior of Firm

 

Years in business

Size of business by license

Dollar sales, 1964

Per cent of sales on credit

City

Neighborhood income level
near store

Sales growth

Dollars spent on advertising
Per cent purchases from U. 5.
Number of suppliers

Perceived income of customers

38

The Surveys

Building upon the informal interviews, formal

structured interviews were given to the owners or man—

agers of a disprOportionate stratified sample of food

retailers in the two Puerto Rican communities. Also,

there was a survey of consumers in the two communities.

Six field surveys were conducted in Puerto Rico

by the Latin American Food Marketing Study. These six

surveys of participants in the food marketing system were

fielded from December 1965 through March 1966. In each

survey, similar questions were asked in each of the four

different areas of communications, economic performance,

value orientations, and personal demographic information.

Specifically, the universes and their respective samples

are given below:

 

 

 

Name Universe Sample Type No.
Food retailers San Juan and Random-—Dispr0por-
Mayaguez SMSA tionate stratified 140
Food wholesalers San Juan and Random--DisprOpor-
Mayaguez SMSA tionate stratified 64
Consumers San Juan and Random--used sam-
Mayaguez SMSA pling frame of
Dept. of Labor 387
Farmers Western region, Random--Dispr0por-
farms larger tionate, used sam-
than 3 acres pling frame of 172
Dept. of Agriculture
Truckers Santurce, Purposive 65
Bayamon,
Rio Piedras
and Mayaguez
Plazas
Feed Processors Island-wide Purposive 3O

 

4

with retailers and consumers.

See Appendix C for the formal questionnaires used

39

Results of only the food retailer and consumer sur-
veys are discussed in this thesis. Other theses, which were
mentioned in the Foreword, as well as reports of the Latin
American Food Marketing Study, will discuss the findings of

other surveys.

Summary

The goals of this study are: (l) to describe ac-
curately what happened in food retailing from 1950 to 1965;
(2) to investigate and explain the process by which change
occurred in the Puerto Rican food retail sector during the
period of directed and planned develOpment; and (3) to
understand better the variables correlated with innovative-
ness as well as of the innovative processes among retailers
of food in a develOping economy.

These three objectives were pursued in order to
shed light on some critical questions on the role of mar-

keting develOpment.

CHAPTER III
FOOD RETAILING, 1950-1965

Introduction

This chapter deals primarily with the first two
of the three objectives mentioned in chapter II. Specif-
ically, an attempt is made to describe accurately what
changes occurred in food retailing between 1950 and 1965.
Also in this chapter, as well as the next, an attempt is
made to understand and explain the process by which these
changes came into being, on the basis of the historical
'evidence.

The "poor house of the Caribbean" had a per capita
growth of real income of more than 5 per cent per year be-
tween 1950 and 1961.1 Between 1960 and 1965, that growth

rate was even greater.2 The food distribution system on

 

1Junta de Planificacion de Puerto Rico, Ingreso y
Producto Puerto Rico, 1940, 1947-1960 (Estado Libre de

1

Puerto Rico, 1964), p. 7.

2Another measure of the rapid growth is the following
statement from Status of Puerto Rico,JReport of the United
States-Puerto Rico CommisSion on the Stipus of Puerto Rico,
August 1966. "Durifig tfié period 1948-65’Tthere wa§i an in-
crease in per capita personal income from $376 to $900 in
'constant 1965 dollars'." P. 54.

 

4O

41

this smallest island of the Greater Antilles, which lies
1,600 miles southeast of New York City and 1,300 miles east
southeast of Miami, has also changed greatly in the last 15
years. Some economists contend that perhaps food distribu-
tion changes helped bring about some of the change. Puerto
Rico is one of the few political areas where the government
sponsored studies of food distribution changes and then took
action to implement suggested changes.

This thesis concentrates on the time period 1950—65,
but the foundations were laid long before the actual changes
were noticed. These foundations took the form of related,
somewhat consecutive events that began in the political
philOSOphy of the first-elected governor, Luis Mufioz—Marin.
His leadership promoted the formation of a Planning Board
in 1942 and led to a broad-gauged study by Dr. Harvey
Perloff, which was published in 1950. The Perloff study,
in turn, encouraged numerous and detailed studies, such as
Robert Branson's thesis, "The Structure and Efficiency of
Food Marketing in Puerto Rico,"3 and an Agricultural In—
formation Bulletin4 on marketing facilities. These studies
and field work by the Social Science Research Center of the

University of Puerto Rico led to the Galbraith and Holton

 

3Robert E. Branson, "The Structure and Efficiency of
Food Marketing in Puerto Rico" (unpublished Ph.D. disserta—
tion, Harvard University, 1954).

4Referred to in footnote #27, p. 57.

42

report which resulted in the Food Commission hearings,
which in turn led to action by Fomento5 beginning in 1954
and 1955. These foundations introduced such innovations
as the Pueblo Supermarkets and the Central Market in the
Puerto Nuevo area. In order to understand better the u
changes, it is necessary to examine these building blocks

of the foundation.

Early Political Influences

As early as the late 1930's and 1940's, the Econom—
ics Section of the University of Puerto Rico Agriculture
Experiment Station, under the leadership of Dr. Luis Sol
Descartes,6 published a number of studies concerning food
consumption and nutritional levels. The School of TrOpical
Medicine and the School of Home Economics also were study-
ing the nutrition of the island's people. In late 1940, a
study was commissioned by the University's Social Science
Research Center. Dr. Harvey Perloff was asked for an ob-
jective analysis of the complex economic structure then
develOping on the island. Perloff's appraisal of the na-

ture and economic possibilities of Puerto Rico was published

 

SFomento is the Spanish name for the Economic Devel-
Opment Administration. The origins and the work of Fomento
are cOvered in more detail later in this chapter.

6Dr. Luis Sol Descartes later became secretary of
the treasury as well as noted advisor to high government
officials of Puerto Rico.

43

in 1950 by the University of Chicago in a book entitled
Puerto Rico's Economic Future.

Perloff noted in his wide-ranging discussion of
Puerto Rico as it existed in 1950 and before, that the
expenditures of most Puerto Rican families were limited
to the basic necessities. In fiscal 1940, such expendi-
tures equaled 45 per cent of total consumption and, in
fiscal 1944, they were 51 per cent.7 Perloff also called
attention to an earlier study of wage-earner families
which showed that 60 per cent of income was being spent
for food alone. Still, the diet of many Puerto Rican fam-
ilies was nutritionally inadequate.

Perloff found many problems in the economy, includ-
ing overexpansion of the number of retail food stores which,
instead of lowering prices, really added to the cost of dis-
tribution. In 1939, Puerto Rico had 20,000 retail estab—
lishments as against Hawaii's 4,000, but there were only
8,000 paid retail employees in Puerto Rico as against 13,000
paid employees in Hawaii.8 Another problem which faced the
island was its inability to supply its own food needs, even
though it was geared to agricultural production. Farm prod—
ucts, sugar, coffee, and tobacco contributed more than 80

per cent of Puerto Rico's total exports. In the 1940's,

 

7Harvey Perloff, Puerto Rico's Economic Future
(University of Chicago, 1950), p. 170.

8Ibid., p. 180.

44

42 per cent of the volume and 54 per cent of the value of
foodstuffs consumed on the island had to be imported.9 As
a possible solution, Perloff recommended importing bulk
grain and rice and processing them on the island so that
end products could be obtained more cheaply. This method
would also provide additional employment for local labor.lO

Probably the greatest marketing problem uncovered
by Dr. Perloff was the poorly organized agricultural mar-
keting structure.) His survey indicated that there was good
land available for crops; there were many available workers;
and there was a definite need for the crOps produced, whether
they were intended for export or local use. Food still had
to be imported at a very high cost, so he reported the great
need for a revamped food production and marketing system
within the island. His suggestions included the expansion
of public market facilities in urban areas and the estab-
lishment of COOperative—type fruit and produce centers in
rural regions, which would also provide grading, packing,
and storage facilities at strategic shipping and distribu-
tion points. He summarizes the situation succinctly:

The important point is that improvements in Puerto
Rican agriculture are virtually dependent on the

improvements in the agricultural distribution struc-
ture, which would narrow the gap between farm price

 

9Ibid., p. 80.

loIbid., p. 323.

45

TABLE 3-1.--Recommended per capita food consumption in
Puerto Rico as compared with actual per capita consump-
tion, 1940-41

 

 

’ACtuaI'
Per Capita Consumption
. Shown by
Requ1rements
Food Group Wage Earner
(Lbs. per
Study (lbs.
Year)
per week x
52)
Milk and dairy products 581 153
except butter)
Potatoes, other starchy
vegetables, fruits
(except citrus) 338 418
Dried beans, peas, nuts 28 63
Citrus fruits, tomatoes 81 25
Leafy greens and yellow
vegetables . 102 6
£998 23 8
Lean meat, poultry, fish 73 41
Flour, cereals (including
rice) 190 215
Fats and oils (including
salt pork) 47 36
Sugar 47 6O

 

Source: Perloff, Harvey (1950). Puerto Rico's Economic
Future. (Chicago) Table'89, p. 172.

46

and consumer price, reduce waste and spoilage,

and generally increase the amount of food reach-

ing the consumer in good condition and at a

reasonable price.11

Perloff was, of course, only suggesting but his

penetrating analysis, made with so little available data,
served as a landmark study for those who followed. Through—
out his book, Perloff made projections of the patterns that
would need to be Operating by 1960 if the people of the
island were to achieve some economic advance. These pat-
terns indicated a number of vital relationships which he
felt were often overlooked. His description follows:

By following through the logic of the interrelation-

ships it can be seen that the success of an indus-

trial program which requires a solid base of consumer

purchasing power, is dependent to a significant degree

on the success achieved in raising farm yields, since

that is the key to increased food production and real

savings in food purchases for the consumers. By the

same logic of interrelationships, improvements in the

diet of the people are intimately tied to sound land

use planning, while the total amounts of income and

employment on the island are dependent in large mea-

sure upon the success of research, pilot plant and 12

commercial experimentation in developing new crOps.

Thus he laid the cornerstone for the forward planning

which resulted in many studies and much political action in

Puerto Rico.

Political Background
The problems of inadequate diet, high food costs,

and a low standard of living concerned not only economists

 

11

Ibid., p. 276.
12

Ibid., p. 331.

47

such as Perloff but also the physicians at the Institute
of TrOpical Medicine. The politicians were also concerned.
One politician in particular, Luis Mufioz-Marin, the first
elected governor of Puerto Rico, saw the problems in terms
of interrelationships, as did Perloff. His campaign slo—
gan, "Pan-Tierra-Libertad" (Spanish for "bread, land,
liberty"), indicated his involvement with, and understand—
ing of, the economic situation.

In Poet in the Fortress, Thomas Aitken, Jr., des-

 

cribes Mufioz-Marin's early confrontations with the food
problem. In 1932, Mufioz-Marin achieved his first elec-
tive post, senator-at-large for the Liberal Party. Ac-
cording to Aitken, in the early part of that year, Mufioz—
Marin argued for independence because of the high prices
of the foods Puerto Ricans had to import.13 Mufioz-Marin
said "The North American tariff was set by the North
American Contress to protect the interests of the Ameri-
can people. And it will annihilate Puerto Rico obliquely,
in passing, almost without thinking, with the brutal inno-
cence of an elephant walking on a colony of ants."14

Munoz-Marin also expressed dissatisfaction with

President Roosevelt's gubernatorial appointment in 1932:

 

13Thomas A. Aitken, Jr., Poet in the Fortress (New
York: Signet Books, the New American Library, Inc., 1965),
p. 9.

l41bid., p. 97.

48

"Over and above all these things is the fact that our
people are dying of hunger...And in the face of this
reality, we are playing politics."15 The years 1934-
1936 were years of frustration for Mufioz—Marin because
he was out of office and politically powerless. But,
on July 22, 1938, he announced the formation of the
POpular Democratic Party, the party which in the future
would challenge the power of the wealthy. At an early
meeting of the Party, Mufioz-Marin explained the differ-
ence between freedom and independence:

Man could not find freedom in political independ-
ence alone. He must first be liberated from the
binding grip of hunger. He must be relieved of
the ubiquity of filth and escape from exposure of
semi-nakedness. He must have a shelter safe from
rain or the burning heat. His freedom requires a
fair chance to live without sickness wringing his
intestines, boiling his blood, or throbbing in his
head. He needs an Opportunity to earn a living
and to work without the nagging fear that disease
and malnutrition may be debilitating his children.
Liberty, if a man is industrious enough, includes
a parcel of land on which he may raise some food
for his family and, luckily, a bit more to sell.
Freedom is being a man, not a beast of burden.
When this liberty is won, and only then, can polit-
ical bonds be challenged as obstacles to liberty.
Then independence might mean liberty, too.16

The POpular Party held its official constituting
meeting on July 21, 1940. The party leadership presented
a program for approval that evening. It included such

things as support for the law limiting corporate land

 

15Ibid., p. 102.

l6Ibid., p. 130.

49

owners to 500 acres, a law which had been part of a bill
passed in 1900 by the U. S. Congress, but which had been
ignored for the most part. It included protection of ag-
riculture and farm rights, a market place for fruit and
produce, agricultural COOperatives, and a food commission
to reduce the cost of living.

It was believed that the jibaro might again sell
his vote for a dollar or two with which he could feed his
family for a few days, since empty political promises
brought nothing. To combat this possibility, the POpular
Party candidates publicly swore that, if elected, they
would implement every plank in the Party platform. Their
apparent honesty and good faith were rewarded. The elec-
tions of 1940, while not a landslide victory, gave the
Popular Party 10 senators and 18 representatives, while
an Opposing party, the Coalition, had 9 senators and 18
representatives. In Ponce, the center of Spanish tradi-
tionalism, a well-known patriarch of a wealthy sugar fam-
ily was defeated by a worker candidate of the POpular
Party. For his own part, Mufioz-Marin received the largest
vote of the candidates for senator-at—large, which assured
his election as president of the senate.

As senate president in the Puerto Rican government,
Mufioz-Marin was the third most powerful political leader

in Puerto Rico. The most influential was the presidentially

50

appointed American governor, and the second most influ—
ential was the resident commissioner from Puerto Rico who
served in Washington.
At the Opening of the legislative session, Feb-
ruary 10, 1941, Aitken quotes Mufioz-Marin as saying:
The land problem was specifically discussed before
the people. The peOple were asked if they wanted
the breaking up of concentrated land holdings...
The peOple were clearly told that on their votes
depended the decision as to whether this land pol-
icy be followed or not... The resolve to lower
the price of staple foods and raw materials was
explained to the people. The people by their votes
directed that this policy be followed... There was
expressed the intention to establish general mini-
mum wage legislation... The peOple, by their votes,
directed that this policy be carried out... For
these purposes, and subject to these orders, the
people have elected us. Here we are.1
Using his position to remind the senators to make
good on their campaign promises, Mufioz-Marin made the years
of 1941 and 1942 very productive ones for Puerto Rico's
economic future. It was during this time that the Water
Resources Authority, the Communications Authority, the
Puerto Rico Industrial Development Company, the Government
Development Bank, and the Land Authority were established.
The Puerto Rican Planning Board was set up to coordinate
these other agencies.
At this same time, World War II had a great effect

on Puerto Rico's economy. Since grains for alcohol were

finding war uses and imports of Scotch were cut off to the

*1

l7Ibid., p. 154.

51

United States mainland, Puerto Rican rum found wide,
though grudging, acceptance. Prices rose for this prod—
duct, as well as for two other products of the island,
sugar and tobacco. The excise taxes collected by the
federal government were turned back to the island treas-
ury, giving the insular government $160 million above its
budget. Certainly the dollars spent by the armed forces
on the island also added to the revenues of the island's
citizens and government. This same prosperity reached
into the other countries of Latin America:

Argentina's coffers were swollen from sales of
wheat, other cereals, and meat. Brazilian mil-
lionaires became almost as numerous as her coffee
beans. Venezuela fattened on oil exports. Colom-
bia, Peru, Mexico, Cuba, Uruguay, every Latin
American country, had food and raw materials to
sell to a buyer who was almost unconcerned about
the price. Many of those who have called the Open
American marketplace a special advantage for Puerto
Rico have had short memories for the years when the
Allies were insatiable buyers for nearly every prod-
uct all Latin America could offer... Munoz-Marin
and his team insisted on reinvesting the government
surplus in a program of social projects to build
the spirit, the health, the education, and the work-
ing capacity of the Puerto Rican peOple. They also
initiated a program of industrial develOpment to
provide postwar employment. Most Latin American
nations concentrated the benefits of their gains
within a limited sector of wealthy families who
used the new wealth to buy land, political influ-
ence, and the protection of a series of praetorian
guards for captive government.18

Aitken goes on to point out that in some of the other Latin

American countries, "The man with the hoe was forgotten--

until the day he should exchange it for a gun."19

18Ibid., p. 161.
19

Ibid., p. 162.

52

In 1944, prior to the POpular Party convention,
Mufioz—Marin had a long talk with an American visitor, Ben
Dorfman, a tariff expert who had worked on plans for the
economic separation of the Philippines from the United
States and who was engaged in a study of Puerto Rico's
economy. Dorfman pointed out that Puerto Rico and the
Philippines would produce similar products for sale on
the American market. Since the Philippines had more nat-
ural resources, their products could be sold more cheaply.
He explained to Mufioz-Marin that an independent Puerto Rico
competing with the Philippines for the American market would
starve. Dorfman met Mufioz-Marin's every remark by relent-
lessly "cutting back his arguments with the facts of Ameri-
can international obligation and Puerto Rico's limited re-
sources."20

In 1945, Mufioz-Marin spelled out in the San Juan
newspaper, El.§22221 his philoSOphy and his thoughts about
where Puerto Rico was going. There, for the first time, he
talked of the Commonwealth in fairly clear terms. In June
of the next year, he wrote two articles for El.§2222 called

21

"New Solutions for Old Problems." In these articles, he

defined liberty and the contrasting forces pulling on it.

20Ibid., p. 169.

21Excerpts of these two articles appear on page 178

0f Aitken's book.

53

He wrote that man must first of all be free from the fear
of hunger. Then he could have the liberty to govern him-
self. Thus, the motto of the POpular Democratic party be-
came "Pan-Tierra-Libertad," which implied sufficient food
at reasonable prices, land reform, and liberty for all. On
July 25, 1946, the presidentially appointed Governor Tugwell,
who had worked so closely behind the scenes with Mufioz-Marin,
handed in his resignation. Then, in 1947, the United States
Congress accorded Puerto Rico the right to elect its own
governor beginning in 1948. The congressional resolution
of approval of the Commonwealth of Puerto Rico22 in its as-
sociations with the United States was signed into law by
President Truman on July 3, 1952. Finally, on July 25,
thousands of Puerto Ricans watched Governor Mufioz-Marin
raise the flag of Puerto Rico.

As mentioned previously, Mufioz-Marin was more than
a politician. Before achieving the commonwealth status, it
was Mufioz-Marin's leadership that resulted in the formation
of the semi-independent agencies which so contributed to
the develOpment of Puerto Rico. All the agencies estab-
lished in 1941-42 survived the tumultuous years of develop-
ment. However, the Puerto Rico Industrial Development Com-

pany (PRIDCO), which was charged with setting up and Oper-

2Commonwealth with the United States is a unique
relationship. Puerto Ricans are U. S. Citizens. Puerto
Ricans pay taxes only to the Puerto Rican government. They
do, hOwever, have free access withoUt.threat of tariff.’
to the entire United States market. On the other hand, Amer-
ican ships are permitted to haul cargo to Puerto Rico.

54

ating a few government-owned industrial plants, did not
satisfactorily meet the needs of the situation. As Theo-
dore Moscoso, the first and up to that time only head of

PRIDCO, said:

We soon became aware, however, that government had
neither the financial nor human resources to estab-
lish and manage the thousands of factories which
were required23.to raise the standard of living of
our peOple...

Thus, in the late forties, some new ideas were
tried. There emerged a new semi-independent agency called,
in English, the Economic DevelOpment Administration. In
Spanish, it was referred to by the more popular, "Fomento."
PRIDCO then became the financial arm of Fomento.

MoScoso's comments about the formation of the Fomento
agency are also most enlightening:

When I began to experiment in development work in
Puerto Rico, it was far from a recognized discipline.
We called it Fomento, which is generally translated
as develOpment. But the two words do not mean the
same thing, and the difference in connotations may
hold some lessons for us today. DevelOpment is gen-
erally associated with a variety of social and eco-
nomic objectives...Fomento has an earthier ring. Its
origin was the political decision of Governor Luis
Mufioz-Marin to make a massive attack on stagnation in
Puerto Rico and to convert the island into a socially
healthy and economically prosperous community. The
work of Fomento... was made possible by the Governor's
success in protecting us "fomentarigns" with the
shield of his political leadership. 4

 

23Teodoro Moscoso, "Industrial DevelOpment in Puerto

Rico," in Methods of Industrial Develo ment, eds. Albert
Winsemius ana john A. P1ncus (OECD, I982), p. 101.

24Gove Hambridge (ed.), Dynamics of DevelOpment

(New York: Frederic A. Praeger, Inc., 1964), p. v.

55

Fomento had many tasks. In general, it was the
primary agency for bringing about a rapid economic develop-
ment of Puerto Rico.25 It is best known today in the United
States for its very successful industrial develOpment pro-
gram. A part of this program was the implementation of the
Governor's Food Commission report. The philOSOphy underly-

ing this implementation was to provide the island with a

balanced competitive scene.

First Attempes to Change
Food Retailing

 

A part of the Puerto Rican government's concern
with develOpment lay in improved food distribution. The
island government had been searching for a cheaper and
better method of food distribution. This search was one
evidence of Mufioz-Marin's concern for pragmatic implemen-
tation of political promises dealing with real problems
facing the people. One approach to "Pan-Tierra-Libertad"
was the government-sponsored PRACO stores of the late
1940's. Though they were not successful, possibly be-
cause they were not knowledgeably managed and the people
were not ready for self-service stores, the PRACO experi-

ment gave the Puerto Ricans an introduction to the super-

 

25A more complete description of Fomento and its
predecessor agency, PRIDCO, is contained in William H.
Stead, "Fomento--The Economic DevelOpment of Puerto Rico,"
Planning Pamphlet 103, National Planning Association,
Washington, D. C., March 1958.

56

market Operations that followed in the fifties.26 And
the failure also paved the way for additional studies,

which will be dealt with in the following section.

Recommended Marketing Reforms

 

in the Early Fifties
Early in 1949, Governor Luis Munoz-Marin requested

the assistance of the Marketing and Research Facilities
Branch, Production and Marketing Administration, U. S.
Department of Agriculture, in undertaking a study of the
marketing facilities and distributive system of Puerto
Rico, with special emphasis on the needs of metropolitan
San Juan. The study began in the fall of 1949. A pre-
liminary statement covering the major marketing facility
problems of the San Juan area was presented to the govern-
ment of Puerto Rico at an informal meeting during July
1950. In December 1950, a preliminary report was pre—
sented in a series of meetings to government agencies and
private individuals and firms interested in the market.
This report noted that:

The primary defects in the San Juan facilities for

handling food and related products are: (l) the

lack of sufficient warehouse facilities at ship-

side; (2) the splitting of market Operations among

several market areas; (3) the excessive costs of

cartage, deterioration and spoilage; (4) the ab-

sence of a suitable livestock market with the nec-
essary slaughtering and processing facilities for

 

26An interesting and detailed story of the PRACO

stores is included in Robert Branson's thesis, which was
cited earlier.

57

the proper handling of animals, particularly of
heavier weights; (5) the lack of grain storage,
feed mixing, and milling facilities for the ef-
ficient handling of imported grains and the lack
of utilization of the various commodities pro-
duced on the island that could be used in mixed
feeds; and (6) the nsed for vegetable oil ex-
tracting facilities.

To correct these deficiencies, the report recom—
mended that facilities be constructed for a wholesale pro-
duce market, that a slaughtering and meat processing plant
be established, and finally that grain storage, feed mix—
ing,and vegetable oil extracting facilities be established
in the same area as the produce market and livestock
slaughtering plant. The report recommended that each of
these be built to a specific size and in the same general
area. About 79 acres of land would be required, which
should be located in a given area immediately southwest
of the mouth of the Martin Pena Channel. It is interest-
ing to note that today in Puerto Rico there are grain stor-
age facilities and a new market area for wholesale Opera-
tions located in that area. The bulk grain storage is
owned by private owners, while the Puerto Nuevo Central
Market is government-owned and rented to private businessmen.

Another aspect of the food problem, that of actual

retailing, was the subject of a study done by Robert Branson.

 

27U. S. Department of Agriculture, Marketing Facili-
ties for Farm_and Related Products at San Juanz Puer o Rico,
Agriculture Bulletin No. 60 (Washington, D. C., June 19317,
p. l. ' ,.

 

58

A group of professors from Harvard University had been
invited by the Social Science Research Center of the Uni-
versity of Puerto Rico to do a study of food retailing and
wholesaling on the island. Branson, a doctoral candidate
from Harvard, was hired by the group to do some of the neces—
sary research. At the same time, Caleb Otten,of the U. S.
Department of Agriculture, was studying food warehousing
and distribution, and so the two men were able to use some
of the same survey work and integrated their research to
some extent.

Branson undertook detailed study of the economics
of Puerto Rico's food distribution in 1949 and 1950. One
of his conclusions was that there were too many retail and
wholesale firms for prOper return and efficiency. A second
conclusion was that credit as it existed in the food distri-
bution business was doing a terrible disservice to the
island:

At present, rightly or wrongly, a considerable part
of the burden of feeding the economically destitute
in Puerto Rico is being born by the food marketing
structure, in the form of overextension of credit

to these groups. This larger aspect of retail store
credit will eventually have to be faced in terms of
policy issues which extend beyond the confines of
the food marketing structure itself. It is suffi-
cient to mention the inherent ramifications; some

consideration will have to be given to this prob-
lem later.28

 

28Branson, Op. cit., p. 182.

59

Branson found that retailers needing capital ac-
quired it by using their credit with wholesalers, rather
than by borrowing from a bank. Consequently, their abil-
ity to participate in competitive purchasing was severely
restricted, and partly due to this, food prices to the con—
sumer remained high. One of the reasons for this was the
high bank interest rates resulting from a lack of venture
capital in Puerto Rico. Those who owned capital on the
island avoided risky investments.

Branson, through a description Of the economic
conditions prevailing in food retailing and wholesaling,
laid the foundation for the Galbraith and Holton study
with its detailed recommendations for change in the food

distribution system.

The Galbraith and Holton Report

Branson's analysis provided much of the necessary
data. What was needed now was a theory based on this data
that could be put to work. Richard Holton and John Galbraith
were called upon to do the analysis and make policy recom—
mendations. One of Holton's major concerns in the report
involved a model food system, comprised of the Optimal re-
tail unit, the Optimal wholesale unit, and an estimation of
the saving that could result if the food system were ration—
alized. Among Galbraith's contributions was the suggestion

that specific policy measures be developed for improving

60

the efficiency of the marketing system through consumer
and retailer education as well as by direct steps, such
as supermarkets in urban areas, and COOperatives in rural
areas. The report served as a basis for the Food Commis-
sion report to Governor Munoz-Marin. All of the sugges-
tions made by Galbraith in 1954 in chapter 15 have been
implemented.29

According to the 1950 census, there were 2,210,703
persons in Puerto Rico served by 16,747 retail food stores.
The Census of Business reports that these peOple bought
$109,112,100 worth Of food at retail stores. There was
one grocery store for every 156 inhabitants. This com-
pares to one grocery store for every 396 inhabitants in
the United States as long ago as 1929, and one store for
every 581 persons by 1954.30

In 1948, in the United States as a whole, food

31 The Puerto Rican

stores averaged sales of $62,062.
census reports that only 6,569 of the 16,747 establish—
ments recorded more than $3,000 gross sales for the year

1949. However, those 6,569 stores sold $97,922,900 of

 

29Galbraith and Holton, Op. cit., pp. 185-198.

30Earl H. Brown, "An Economic Analysis of Bantams
and Conventional Convenience Food Stores" (unpublished
Ph.D. thesis, Michigan State University, 1961), p. 14.
31U. S. Census of Business, Vol. 2, 1948, pp. 10
and 11.

61

the total $109,102,100 retail food sales. Thus, even the
larger stores averaged only $14,907 in sales annually, far
less than the U. 5. average.

The independent Galbraith and Holton study of food
retailing, made in 1950 before the census results were
available, was based upon an island-wide sample of 425
food stores and 52 fruit and vegetable stores. This study
excluded the street vendors and other specialized busi—
nesses that were covered in the census. In addition, they
omitted stores that had less than $1,000 annual sales.
Still, the average sales per store was only $24,000 a
year.32 Even in this study which looked at the larger
food stores, one can estimate that more than 50 per cent
of those stores had less than $600 per month gross profit33
out of which all expenses including wages were to be paid.
There were few, if any, retailers getting rich on profits
from their small stores.

Purchasing food on credit was almost universal in
Puerto Rico in 1950. Between 40 and 80 per cent Of the

total sales were on credit.34 Credit was even more pro-

v.

nounced among stores who catered to high-income families.

 

32Galbraith and Holton, Op. cit., Table 5, p. 17.

33Calculated on the basis of 30 per cent Of $2,000.
Table 3-2 shows that actual margins were lower than this.

34Galbraith and Holton, Op. cit., p. 20.

62

There 75 to 100 per cent of the sales were on credit. With
these high-income families, telephone ordering was frequently
done.

On the other hand, delivery service was less common.
None of the stores in the rural areas reported Offering de—
livery service. This, too, was a service for high-income
families.

There was a large concentration Of total retail
store sales in canned goods and staples, and purchases at
food stores were supplemented by consumers shOpping at the
plazas mercado (Old Spanish-style central market places)
and buying from street vendors. Sales per employee, as
well as per customer, were low for most food stores. Fi—
nally, the great number Of stores contributed to the slow
turnover of goods for the individual store. Entry into
the food business was relatiVely easy because wholesalers
provided credit.

In 1950, a retailer who purchased a given line of
commodities from three or less suppliers was considered by
Galbraith and Holton to have "few suppliers." A store
with a complete line (staples, canned goods, fruits and
vegetables, and meats) could have as many as 12 suppliers
and still be considered to have "few" suppliers according
to the classification of the 1950 study. Most retailers
purchased from more than 12 wholesalers. In fact, the

Branson survey, which was reported in the Galbraith and

63

Holton book, indicated that 195 out Of 422 firms had more
than a dozen suppliers. In addition, more than 50 per cent
of the group of stores that had less than a dozen suppliers
were stores of less than $1,000 a month in sales.

Food retailers in 1950 had very much of a'live and
and let live" philosophy. There was no advertising. There
were no special price sales. Food store Operators believed
that the market was of fixed size and that advertising or
cutting price would only hurt themselves and/or their
friends who Operated other food stores.

Detailed estimates of expenses were obtained in
1950 by Branson from 229 retail stores. A summary Of those
studies is shown in Table 3-2. Because Of the lack of ac-
counting information among small stores, the sub-sample of
229 was biased toward the larger stores. More specifically,
the average annual sales reported in the special survey were
$32,376. The distribution was highly skewed, and 95 per
cent Of the firms sold less than $24,000 annually. Table
3-2 shows little difference in gross margins among stores
of differing sizes, but net profit for the larger stores
was double that of the smaller. Selling costs and rent

were lower for the larger stores.

Other Reports
In 1950, virtually all the fruits and vegetables

moving to urban centers in Puerto Rico were purchased by

64

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65

itinerant truckers on the farm or at concentration points
along the highway. Nathan Koenig Observed that:

The movement of products from the farms to the mar-
keting centers of Puerto Rico is a costly process...
All the fruits and many other products that move in
the market are sold by count. Although some of the
products are placed in sacks, their handling is as
costly as handling bulk shipments. Since there is

no grading to promote buyer confidence, the practice 35
of the trade is to inspect each item that is received.

According to Koenig, the most prevalent source of
market price and supply information was market observation
or word—Of—mouth reporting. The merchant truckers obtained
price information by direct observation in the various mar-

ket plazas they visited.36

 

v—v

35Nathan Koenig, A Comprehensive Agricultural Pro-

gram for Puerto Rico, U. S. Department of AgEICulture
(Washington, D. C., 1953), p. 221.

36As Kelly M. Harrison reports in his 1967 thesis,
"Agricultural Marketing Coordination and Its Role in Agri-
cultural Development in Puerto Rico":

The inefficient marketing system for fresh fruits
and vegetables in 1950 was harmful to the Puerto
Rican economy in several respects; producers were
encouraged by the structure of the marketing sys-
tem to remain small and to avoid diversification
in production methods. The risks associated with
the fluctuating price and supply situation dis—
couraged producers from allocating resources in a
more efficient manner. Margins Of middlemen were
kept high and the resulting profits were low for
the inefficient marketers. Finally, consumers
were deprived of the Opportunity to purchase food
supplies at the lowest possible price and were un-
able to satisfy their need for specific types and
qualities of product. The overall effect Of the
inefficient marketing system was to retard Puerto
Rican economic develOpment.

66

Marketing of meat, like the marketing of fruit
and vegetables, was similarly primitive. Low volume by
a large number of operators, Operating under poor con-
ditions, resulted in high costs. In addition, sanitary
precautions were practically non-existent.

Harrison also tells about 1950 egg production
and marketing. Production was widely scattered among a
large number of subsistence farms. There were no grading
or handling regulations. The result was an uncoordinated
and apparently inefficient marketing system, which in-
volved a high degree of risk for all concerned. Due to
the lack of large-scale commercial egg producers, there
were large numbers of egg dealers who collected eggs and
either retailed them directly or sold them to other re-
tailers for sale to consumers. Then, too, consumers were
confronted with fluctuating egg prices. As a result of
the risk and inefficiencies mentioned above, Puerto Rican
consumers continued to purchase large quantities Of im-
ported eggs which were also Of low quality due to the
length; transport time and handling conditions typical
in the shipment of perishable goods.

Dairying had developed as second to sugar in dol—
lar volume by 1950. In the forties, strides had been
made in increasing production and eliminating diseases Of
cattle, but processing and distribution hampered the im—

provements in milk production. Of the 159 million quarts

67

produced, only about 56.5 million quarts entered commer-
cial sales channels. There were no regulations on milk
prices; producers and their buyers were completely free
to bargain and establish milk prices throughout the year.
As a result of inefficiencies in marketing, Puerto Ricans
imported and consumed almost as much milk in the form of
evaporated and dry milk as was produced and processed for

local consumption.

Summary of Early Studies

 

Food distribution in 1950 was a conglomeration
of many problems. There were small farmers at the mercy
of fluctuating prices. There were many small retailers,
few of whom were Operating at efficient levels. And
there were great quantities of food imported from the
mainland. Basically, the situation was characterized
by great uncertainty, resulting from a lack Of quality
grading practices and/or government regulations. A few
attempts had been made to improve the distribution sys-
tem, but they had not been effective overall. Real
changes were needed, and the commonwealth government,
under Mufioz—Marin's leadership, set to work to bring

about those changes.

68

Government Organization for Change

The food distribution system was not working ef-
fectively in 1950. Having previously made promises to do
something about high food prices, Governor Munoz-Marin
was faced with the necessity of bringing about changes
in food distribution. It is a tribute both to the com-
prehensiveness Of the studies and to the governor and his
Officials that they were willing to step forward and take

the risks inherent in change.

The Food Commission

Following the publication of the above—mentioned
studies, Governor Munoz-Marin appointed the Food Commis-
sion which he had first promised in 1940.37 This was a
shrewd political step on the governor's part, because it
brought into the decision process people who could have
effectively stOpped the changes. At about the time the
Food Commission was appointed, the governor announced

that present food prices were too high, just as he had

done in 1940.

 

37The Commission was composed Of respected per—
sons from the University, the government, and both the
United States and Puerto Rican business communities.
Lansing Shields the president of Grand Union Supermarkets,
was chairman of the Commission. Other members included:
Frank Ballester, Frank Besosa, Maurice C. Bond, Ramon Colon-
Torres, William Crow, Hugh J. Davern, Francisco Frieria,
J. K. Galbraith, Millard Hansen, Bretton Harris, Austin
Iglehart, William G. Karnes, James McGowan, Jr., Candido
Oliveras, John Paton, Beardsley Ruml, Charles F. Seabrook,
Ramon Sefieriz, and Francis Whitmarsh.

69

The stated purpose Of the commission was to evalu-
ate the findings Of the economic studies and make recom—
mendations for implementing the proposals. Galbraith and
Holton's was one of the key economic studies evaluated.
Mufioz-Marin's unstated purpose was to bring the affected
parties together. Those who might have objected to reform
and who might have sabotaged the efforts to bring about
change found themselves serving as members of the commis-
sion. Thus, the governor was assured that all commission
members were publicly committed to support any government-
sponsored reform program, since any reform would be based
on their recommendations...un1ess dissident members broke
from the majority and Offered minority recommendations.
The groundwork had been carefully laid to prevent that.

In April of 1954, the governor's Food Commission
made its report.‘ In it the members unanimously agreed
with most of the suggestions made by the various studies.
The committee suggested the following changes:

1. The establishment of supermarkets in urban areas.
This recommendation was particularly questioned
by those who maintained: people bought food on
credit; most consumers did not have cars; most
peOple did not like to shOp in large stores; and
maids did most of the shOpping and were unfamil—

iar with supermarket shopping methods.

7O

2. Consumer COOperative retail units for rural
areas. A federation Of these retailers' co-
operatives was recommended to form a wholesale
warehouse in the San Juan metropolitan area.

3. Government assistance in building and site selec-
tion to help local businessmen who wanted to es-
tablish new stores. (The emphasis throughout
the commission's report was on aid to local
Puerto Rican businessmen.)

4. A tax incentive for food processors.

5. The expansion of agricultural production with
stress on import substitution.

6. An intensive training program for food store

employees and consumers.

Fomento

After the governor's Food Commission report was
made public, some concern arose over which agency would
take over the responsibility for implementing the recom-
mendations. The apprOpriate department, Agriculture and
Commerce, was at that time much more concerned with social
programs and with trying to improve rural living conditions.
Fomento resolved the problem by creating a specific group
to administer a food distribution program within the gov-
ernment's industrial develOpment branch. Fomento took the
responsibility initially to help industrial develOpment

and it was discovered that indigenous management for the

71

industrial development program was in short supply. As

a result, management was being hired from the United
States mainland, and some of the mainland wives were not
happy with shopping facilities in Puerto Rico. In an in-
terview, Teodoro Moscoso stated that the initial purpose
Of FOmento getting into food distribution was to provide
"continentals" with supermarkets so that they would find
working in Puerto Rico more pleasant.

E. Lee Feller was the first director of the food
distribution program. The primary work of the department
was to teach owners and Operators how to modernize and
convert to self-service Operations, and also to instruct
and train employees in handling Of perishables and meat.
In July 1956, a formal food distribution program was set
up. In 1957, the Office of Food Distribution was replaced
by the Commercial Development Department and the area of

involvement was expanded.38

Department of Agriculture and Commerce

Even though there was a single Department of Ag-
riculture and Commerce, its work was primarily agricultural
in focus. The department was pushing for better commodity

grading, standards, and market information. Commercial

38See H. C. Barton, Jr., "Puerto Rico's Industrial
DevelOpment Program, 1942—1960," prepublication COpy Of a
paper presented at a seminar of the Center for International
.Affairs, Harvard University, Cambridge, Mass., October 29,
1959.

72

ventures were handled mostly by Fomento. However, in 1958,
the Agricultural Services Office Of Fomento was moved to
the Department of Agriculture in response to pressure for
increasing agricultural production. The Department of Ag-
riculture then took the responsibility for the develOpment
of the Central Market, the food wholesaling complex which
had been first recommended by Branson and Otten in 1951.
The department made additional studies but no firm steps

to establish a central market for more efficient handling
of food were taken until the Department of Commerce was es-
tablished in 1961. Then, the secretary, Dr. Carlos Lastra,
formed the Commercial Development Company, which in turn
forged ahead with the new wholesaling complex, where now
are located the "Sea-Land"39 docks and some of the major

food importers and wholesalers.

Department of Commerce

As mentioned previously, the programs of Fomento's
Office of Commercial Development involved the establishment
of supermarkets and shopping centers. As a result of these
actions on the part of Fomento, some Puerto Rican business-
men felt new and intense competition. Some businessmen
felt it would be impossible to stay in business without the

help Of some government agency. In response to requests by

 

39"Sea—Land" is the major container ship company

serving Puerto Rico. As of 1966, almost all imported foods
were coming into Puerto Rico in container ships. Each con-
tainer was actually a semi-trailer without wheels. Such con—

tainers speed loading and unloading as well as cut shipping
losses.

.73

individual businessmen and their associations, the Depart-
ment of Commerce was created by a law passed in July 1960
from elements in Fomento and in the Department of Agri-
culture and Commerce. It began giving service in August
1961. The newly formed department was not to serve only
businesses to the exclusion Of others. The law specific-
ally provided that the department favor effective compe-
tition so that the distribution system was favorable for
the consumer as well as the retailer or wholesaler. One
of the programs in the department was provided by the
Division of Financial Services. This division helps busi—
nessmen secure loans. The Division Of Technical and Com-
mercial Development helped more than 5,000 businessmen
modernize their businesses in the first 4 years of Opera-
tion. In addition, training programs and seminars have
been continued in the tradition that Fomento had estab-
lished during the mid-fifties with its numerous training

programs.

The Commercial Development Company

At the urging of the then Secretary of Commerce,
Dr. Carlos Lastra, the above company was created by the
Commonwealth Legislature in June 1962. The Commercial
Development Company's first task was the construction of
a building for the establishment of a United States based

chain retail discount store in Santurce. A total of

74

$1,120,000 was invested in this 90,000 square-foot unit.
Another major project of CDC was the construction of the
Central Market for food wholesalers at a cost of $1,872,360.
Presently, there are two warehouses providing 358,000 square
feet. Recently, CDC allowed contracts for the construction
of an additional 350,000 square feet of warehouse space.
Also, CDC is involved with the Department of Agriculture and
the various municipal governments in the construction of a

modern plaza de mercados and commercial centers. The Com—

 

mercial DevelOpment Company also is authorized to make loans
to private businessmen for bettering commercial facilities
in Puerto Rico. Finally, CDC has recently started a program
for guaranteeing rents Of small- and medium-size businesses

in shopping centers.40

Changes That Occurred in Food Retailing

In the preceding section, government reforms and
the institutional organization to change food distribution
was discussed. To explore the effects of these efforts,
it is useful to discuss some of the highlights of changes
in food retailing beginning about the time of the creation

of the governor's Food Commission in 1954.

 

40This description Of the Department of Commerce and
the CDC depends heavily upon the mimeographed paper, "La
Funcion del Departamento de Comercio in el Desarrollo Comer—
cial de Puerto Rico," Departamento de Comercio, Oficina de
Economica y Planificacion, 9 de Junio de 1966.

75

Significant Changes
In order to implement the findings of the Food
Commission, Fomento bore the brunt Of government efforts
to bring about change. Fomento had funds for helping es-
tablish supermarkets; it helped the COOperative stores
form a large centralized wholesaling Operation through
both financial and technical assistance; it encouraged
the establishment of a voluntary group of independently
owned food stores; it provided training for employees and
technical assistance for those retailers who wanted to
modernize their stores and/or management. The Agricultural
Extension Service worked with the COOperatives to get bet-
ter management. These several avenues of change were tried
in the hOpe of fostering a balanced competitive scene and
in the hOpe that some would succeed even if others failed.
Fomento also took the responsibility of encouraging
supermarket development and approached certain San Juan
food wholesalers about the possibility of establishing
such stores. The government was willing to match private
businessmen dollar for dollar in their establishment. Cer-
tain wholesalers in Ponce, the second largest city of Puerto
Rico, as well as in San Juan, were asked to participate.
In addition, certain San Juan retailers were Offered Fomento
cooperation, but though one retailer agreed to cooperate,
it was not in the way the government wanted. Representa-

tives of all segments of the food distribution system

76

community were offered assistance in the creation of super-
markets. However, none Of the businessmen in food retail-
ing or wholesaling accepted help at that time on the terms
offered. There are those who today ruefully admit that
perhaps they should have accepted Fomento's Offers of help.
There are also government officials who wish that somehow
more effort could have been put into encouraging local re-
tailers to change their ways Of doing business. It was

the outsiders who were among the first to accept the risks
of establishing supermarkets, first in San Juan and later
in the other urban areas of Puerto Rico. Admittedly,

there were in 1954 some locally Operated supermarkets,

but they were not doing well. A chain of four stores with
the latest equipment failed in the mid-fifties. One of

the more successful local Operators refused Fomento's help

in expanding his Operations.41

A stateside firm, Todos, a
division of the Rockefeller-sponsored IBEC (International
Basic Economy Corporation), agreed to a government request
to start supermarket Operations in Puerto Rico. By 1958,
Todos was having financial difficulties, allegedly due to
inexperienced management. Grand Union, whose president,
Lansing Shields, had been president Of the Food Commission
in 1954, purchased the Todos Supermarkets. It is said that

Grand Union's entry was requested by government officials

to insure meaningful competition for other private Opera-

 

r4lThisman today still Operates one large supermarket.

77

tors. Nevertheless, it was Grand Union that received the
bad publicity when intense Opposition developed to super-
markets extending their Operations outside of San Juan in
1961. Grand Union was forced to forego investments in
Fajardo and Arecibo, two cities about 45 minutes drive

from San Juan. Both of these cities were forecast to en-
joy rapid growth. The "invasion Of foreign corporations"
was heatedly discussed in 1961 on the floor Of the legis-
lature. The speaker of the house, Ernesto Ramos Antonini,
led a heated fight against the establishment of supermar-
kets outside of San Juan, and Grand Union consequently suf—
fered a delay in growth. In contrast to the problems of
Grand Union, "Puerto Rico and Pueblo are growing together,"
just as currently advertised. Pueblo did not have the
political problems of Grand Union. Perhaps part of the
reason was due to the company being viewed as a Puerto
Rican Operation from its inception.

Pueblo supermarkets got their start frOm an extran-
jggg, Harold Toppel, who Opened his first store in the
spring Of 1954 without any help from Fomento. He did not
receive Fomento help because he was not a local business-
man for whom these funds had been set up. Moreover, many
Of the wholesalers refused to work with him because he was

not Puerto Rican. But Fomento encouraged him, particularly

78

after his second store was established.42 TOppel was a
hard-driving, result—oriented executive with sound busi-
ness sense. He believed the Puerto Rican government was
and is "clean and honest" and the political climate the
kind needed for business growth. He now considers himself
Puerto Rican, and the evidence of that belief is in the

name Pueblo, its slogan "Puerto Rico y_PueblO Progresan

 

Juntos," and its employees who are nearly all Puerto Ricans
rather than mainland imports. When necessary, he has hired
and trained local people, and in many cases promoted them

to executive posts. His trust in Puerto Rico has been re-
turned; Pueblo in 1965 sold more food than its next two
closest competitors combined. Pueblo Supermarket Corpora-
tion made a net profit Of $1,829,544 from its founding in
1956 through January 31, 1960. All that profit was retained
in Puerto Rico and reinvested in the food retailing busi-

ness. Since 1960, dividends to common stockholders have

 

42That an outsider was the one to establish what
became the most successful food retailing chain is an in—
dication Of the Openness of Puerto Rico's political climate.
The extranjero, the foreigner, made truly significant con-
tributions to changes in food retailing in Puerto Rico.
But these contributions would not have been possible had
the pragmatic and result-oriented Puerto Rican leaders not
set up an atmosphere of permissiveness and encouragement.
This atmosphere was one of encouragement for anything that
looked as if it might work. Fomento's help perhaps was a
necessary, but certainly not a sufficient, condition for
growth. The primary reason for Pueblo's success is due to
its founder, Mr. Harold TOppel, an outstanding example of
the successful extranjero. Aspects of extranjeros are
dealt with in detail in later chapters.

79

approximated 30 per cent of annual earnings. The remain-
der has been reinvested, mostly in Puerto Rico. The 1961
drive to keep "foreign dominated" firms out of the smaller
cities of the island, and probably also to slow their rapid
growth in San Juan, did not visibly affect Pueblo, which
concentrated most of its efforts in San Juan until 1964.43
Outside of the legislature, the executive arm of the govern-
ment was still convinced of the need for larger retail es-
tablishments. Fast on the heels Of the legislative hear-
ings on the detrimental effects of supermarkets, one of the
first taSks of the Commercial DevelOpment Company was the

construction of a building for a United States-based chain

retail discount store in 1962.

COOperative Stores

Fomento made a loan in order to help the food re-
tail COOperatives get a food wholesale warehouse. The new
food wholesale firm, the Federation of Consumer COOpera-
tives, was supposed to provide lower cost products to both
member stores and other food retailers who were too small
to have their own warehouses. While sales of cooperative
food stores increased Over the years, the performance was
spotty. The COOperative food wholesaling Operation has

not proved to be the effective countervailing power that

 

43There was one store in Ponce in 1959, but it was
April 1965 before Pueblo Opened another Puerto Rican store
outSide of San Juan. In 1964, a store was Opened on a near-
by island.

80

it was hOped to be. Perhaps change at the wholesale

level has been less successful because it was a poten—
tial threat to the existing and profitable food whole-
saler-importers. Some of the wealthiest and most influ-
ential families in Puerto Rico were owners Of the food
wholesaling-importing firms, These food brokers-import—
ers—wholesalers were extending credit, dealing in commod—
ity speculation, and permitting retailers to perform the
warehousing function on credit. The cooperative wholesale
Operation found it difficult to buy the products it needed
at what it considered proper prices.44 Then, too, the
cooperative warehouse found the traditional suppliers Of
the stores making special deals in order to hold their
customers.

One of the most successful cooperative stores was
in the western city of Mayaguez, where university faculty
members made significant contributions to the guidance of
that store and its growth. Until late 1965, it was the

only supermarket in Mayaguez.

Independent.StoresikIncorporated.

From the beginning of its food distribution pro-
gram, Fomento supported the creation of a buying group of
small retailers called the Independent Stores, Inc" (ISI).

The group began with 15 merchants located in various parts

 

44This problem Of difficulty in buying will be
dealt with more extensively later.

81

of the San Juan metrOpolitan area; each member contributed
$1,500 to the organization and Officers were elected. Some
members were sent to observe operations in the United States.
Tentative financing arrangements were made with local banks
and also with the Government DevelOpment Bank.

Financing for expansion proved a real problem be-
cause the Operators did not have such things as Operating
statements for a two- or three-year period. They had no
such comprehensive records. Even the Government DevelOp-
ment Bank would not accept loan applications without ade-
quate financial records,45 so there were few funds for ex—
pansion available to these retailers. The bankers had
many alternative Outlets for profitable loans in the boom-
ing Puerto Rican economy. vThey did not feel it necessary
Or desirable to loan money to "high risk clients." Through
programs such as ISI, Fomento tried to "get the retailers
out of hock to their suppliers, get them out of credit
sales, and then upgrade the stores to self-service."46 In
the late fifties, ISI failed because of the lack Of aggres-

sive grOup spirit. However, the technical advice and man—

agement training programs continued for individuals.

 

45See Chapter VI for discussion of alternatives to
such financial requirements.

46Explanation to the author by Don Lemons, long—
term consultant to the Puerto Rican government and former
Fomento employee.

82

Interaction Between Changes in Food
Retailing and the Government

The government interest in distribution, while in-
tense and in many ways helpful, was not an unmitigated
blessing to the local businessmen. While Fomento, the De-
partment of Commerce, and the Department of Agriculture did
much to encourage larger and more efficient retail estab-
lishments, the Planning Board, the Department of Agriculture,
and the Department of Justice were involved in other deci-
sions regarding food retailing. Retail establishments, like
other institutions, Operate within a specific society which

has certain rules and sanctions.

Planning Board Regulations

As mentioned earlier, there has been a Government
Planning Board since 1942. The Planning Board has been in-
timately concerned with all major economic events in Puerto
Rico. The 1962 edition of the Planning Board regulations,
governing the develOpment of new suburban shopping centers,
specifically decrees what stores, including food stores,
will be in various neighborhood shopping centers. Further,
the Planning Board specifies the minimum sizes of these
stores under the title "Construction of Commercial Facili-
ties." The quote below is a translation of part of their

regulations:

83

Commercial facilities will be constructed on the
basis of roughly a minimum area of 15 sq. feet per
dwelling or lot. These buildings can have roughly

a maximum area of 25 Square feet per dwelling or

lot. The develOper will justify the size. As a
part Of the minimum commercial facilities required,
space shall be provided for grocery stores, pharma-
cies, doctors' Offices, cafeterias, hardware store,
laundromats, bakeries, according to the minimum size
that is established in the Appendix of this regula—
tion. The other uses pointed out in the Appendix

are Optional. But this statement does not relieve
the develOper from providing the minimum rough area
of floor for the stores specifically required. The
contractor or developer shall prepare the floor plans
with the distribution and use Of all space for all
the buildings that are projected to be utilized for
commercial means. In the develOpment of subdivisions,
the board shall submit to the consideration gf the
Department of Commerce for its endorsement.4

Since the construction company must build and pay
for the neighborhood shOpping center, this specific re-
quirement for stores within each develOpment has been met
usually with the minimum-size stores specified. Many of
the resulting food stores are too large to be run by one
employee, but too small to compete adequately with the
large supermarkets in terms of lines of merchandise carried.

Then, too, in the more settled neighborhoods, pri-
vate entrepreneurs disregarded the dictates Of government
regulatOry agencies by constructing small food stores
within houses. There are a great number Of these so-called
"clandestine stores" in the suburbs around San Juan. In

many cases, without Planning Board approval and in compe-

 

- 47Re lamento Sobre Facilidades Vecinales, Junta de
Planificacion, G

obiernogae Puerto Rico, 1962, p. 13.

84

tition with the shOpping center stores, garages are being
remodeled to form small stores. Competing with these stores
and frequently located in the Open areas between suburbs,
large supermarkets of 15,000 or more square feet have been
constructed. The food store Operators in the authorized
Planning Board stores Of the suburbs are forced to compete
with the "mom and pOp" stores in the homes and with the
larger supermarkets outside the suburbs. They are poorly
equipped to do either job very well.

Many of these Planning Board-sponsored stores seem
today to be of the wrong size. The larger stores have
greater assortment and, therefore, can change their "mix"
of products in such a way as to charge lower prices for
necessities. 0n the other hand, the clandestine stores,
since they are owned and Operated by the same person, are
permitted to set their own hours and days of Operation.
A11 retail establishments that employ workers must close
at 6 p.m. every night except Friday, when they may remain
Open until 9 p.m. In addition, any retail store that em-

ploys workers is not permitted to be Open on Sundays.

The Department of Agriculture

The Department of Agriculture tried to help Puerto
Rican farmers and consumers by establishing grading require—
ments for incoming produce. The requirements, some Of which

were established back in 1957, effectively cut Off imports

85

of trOpical starchy vegetables such as plantains, bananas,
and root crOps. Retailers must also note the origins of
eggs, chickens, and other forms Of meat. Thus, these prod-
ucts also are more difficult to bring from other areas.
Such restrictions have probably resulted in higher prices

of certain commodities.

Anti-Trust Laws
As early as 1954, Galbraith and Holton mentioned
that the exclusive agency arrangement, which many mainland
food processors had with importers in Puerto Rico, might
be illegal in terms of the United States Robinson—Pattman
Act.
Certain practices Of the exclusive agents and their
principals are conceivably, though not certainly,
illegal under the Robinson-Pattman amendment to the
Clayton Act.48
They went on to suggest that legal changes to the
exclusive agent arrangement either by the Commonwealth
Government or the Federal Government might not be the an-
swer. They specified the question, "What will be the ef—
fect? Will the resulting changes in distribution methods
really effect a reduction in costs or will the income now

enjoyed by the agents simply be shunted intoother hands?"49

 

48Galbraith and Holton, Op. cit., p. 194.

491bid., p. 196.

86

Apparently, the answer was that there would be
no noticeable effect because, until recently, no Official
action was taken. But within the past two years two new
laws have been enacted. The new Puerto Rican anti-trust
laws are starting to be applied, but as yet are not much
of a force in the market place. The two laws seem to be
at cross purposes with each other. Puerto Rico's unique
broker law50 is a law which seems to protect vested in-
terests. The main provisions are that a principal (pro—
cessor or manufacturer) may not change his agent without
giving the agent rewards for the future stream Of revenue
under the presumption that these revenues are a result of
prior effort of the agent on behalf Of the principal. Per-
haps because it has not really been tested yet, it stands
now as a structural constraint which perhaps prevents cer-
tain individually small reforms in marketing which might
otherwise take place.

Another unusual legal situation is that the United
States anti-trust laws are seemingly held in abeyance, es-
pecially with respect to the wholesale sector. At present
the larger retailers have the Opportunity of buying either
from the local wholesaler-distributor lOcated on the is-
.land or to buy from the mainland, which sometimes means

differences in prices because some processors sell as if

 

50Law #75, approved on June 24, 1964, as amended
on June 28, 1965, is entitled "Dealer's Contract - Renewal;
Just.Cause."

87

Puerto Rico is an export market. If the processor or
manufacturer wants to change his arrangements, he faces
a dilemma. If he accepts the fact that Puerto Rico is
part of the United States territory and sells directly
to a retailer and bypasses his agent, his prior relation-
ship with the agent who represented him is threatened by
the local brokerage law. On the other hand, if the local
wholesaler—importer acts as a broker, then the United
States processor is subject to some question either under
federal or local law, if there are differences in price
or if the differences in price do not fully allow for
quantity and services and differences in order size.

The other Puerto Rican anti—trust law is patterned
after the Robinson-Pattman Amendment and Clayton Act. It

prohibits price discrimination.Sl

It also provides for
the establishment of an Office of Monopolistic Affairs.
This Office can conduct Federal Trade Commission type hear—

ings. As of May 1966, the Office was Operating with a lim-

ited staff and taking action only as complaints came in.

CO—Op Laws
Law #29l,entitled "General Law of COOperative

Societies Of Puerto Rico," was approved by the Puerto

 

51Law #77, approved on June 25, 1959, is entitled
"Commerce Prohibition Of Monopolistic Practices and Pro-
tection tosFair and Free Competition."

88

Rican Legislature on April 9, 1946, and has been the basis
on which all cooperatives Operate. The law specifically
spells out who can form COOperatives and the tax benefits
provided. Article 5 says that a cooperative can be formed
by a group of 11 or more "consumers" or "producers." Thus,
retailers are not permitted to form a COOperative buying
group such as Associated Grocers in the United States. This
puts medium-size, progressive, independent businessmen at a
possible disadvantage, since they cannot form a buying group.

The law does, however, permit a COOperative to make
up to 49 per cent of its sales to non-members. In fact,
the Cooperative Federation, the wholesale warehouse arm Of
the cooperative food stores, does supply independent retail
Operators.

The federation got its start when the consumer co—
Operatives were reorganized in 1956 with the help Of Fomento
and the Agricultural Extension Service. A federation of
these cooperatives was established for serving as whole-
saler to the retail COOperative stores. Fomento loaned the
federation a substantial amount to help it get started.
Among probable reasons for Fomento's encouragement of the
co-Ops were: (1) to implement Food Commission recommenda—
tions that food cooperatives should be given a hand; (2)
to encourage some countervailing force for such private

supermarkets that were being established; and (3) to act

89

as a political device to prove to critics that the govern-

ment had not sold out to private industry.

Resulting Additional Investment
in Food Retailing

Investment in Puerto Rico looked much more promis—
ing in the early sixties than it did in the mid-fifties.
Some new firms had been attracted into food retailing by
the high profits of the more efficient Operators.52 A
new discount house with a large supermarket was established
in San Juan in late 1964. While the supermarket Operation
was mainly owned by Continentals, the day-toéday Operations
of "Supermercados de Discuentos de Puerto Rico" were man-
aged by Puerto Ricans. A local image was created, and a
stateside buying office provided purchasing assistance.
By mid—1966, this company had three stores in Operation
and plans for more. Their initial entry had been very
successful. Essentially, they borrowed part Of their suc-
cess formula from Harold TOppel, the founder of Pueblo--
"Be concerned about results, have faith in the local peOple,
buy wherever it is cheapest, and do better than your com-

petitors."

 

52Pueblo Stores was publicly held, and certain
brokers and investors' advisory services were recommending
the purchase of Pueblo stock in 1962 due to its very high
profits.

90

Summary

In Puerto Rico, there are several threads which
could be considered basic to the changes that occurred in
food retailing between 1950-1965, but the interest and at-
tention Of one man, Luis Munoz-Marin, stand out. Privately
and publicly, he strongly supported food distribution re-
forms. He had the political shrewdness and courage to move
forward with potentially dangerous reforms, reforms which
would hurt some businessmen. He had the willingness to
trust and wait for intellectuals and technicians who showed
him how to accomplish reform.

During 1949 and 1950, intensive studies were made
of the state Of food production and distribution through-
out the island Of Puerto Rico. These studies resulted in
the governor appointing a Food Commission. The commission,
which had been a political promise from as far back as
1940, recommended the implementation of a number of reforms
that had been suggested by the earlier economic studies.

The Economic DevelOpment Administration, better
known as Fomento in Puerto Rico, took the responsibility
for putting to work the Food Commission's recommendations.
Fomento's primary efforts were directed toward encouraging
local businessmen in new methods and types of stores. Pri-
marily, though, the more successful change agents were
newcomers to food distribution in Puerto Rico. There was

too much risk in these new ideas for most of the existing

 

91

Operations. The most successful programs of change were
with the large supermarkets. The interest of other gov-
ernment departments was fairly extensive, but not an un-
mitigated blessing.

Another contributing factor to the ease with which
change was introduced was the rapid growth in the total
economy and in family incomes. There was, during these
‘years, a 5 per cent-plus growth rate,which meant there was
more for almost everyone. The higher incomes meant that
consumers were ready to buy new products which the re-
tailer could introduce most quickly. Thus the retailer
gained dominance over the distribution channel.

Below is a paradigm of accelerated change in food
distribution which can result in increased development.
(It is believed that this paradigm, while it is one way
of understanding what happened, is not unique to Puerto

Rican food retailing.)

 
  
 
 
  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

A l\ _
political fact preempt— selecte
recogni- gather? ing Of ‘food
tion of ing vested market-
potential about interest ing in-
role of agri— Opposi— stitutes
food mar— culture tion by reform
keting in and dis- political
cost Of tribution means I
living aspects (based 0
of food facts) I
system I
‘ l
I

L_ __ _ reinforcement |__ _ _ _ _ __ __ _

of success

92

An explanation of the paradigm.--The diagram
above is a concentrated way of laying out the manner
it was perceived that food distribution could change
and, as a part Of its change, contribute to economic
development. It should be kept in mind that even though
neither the time period nor the feedback loops are spe—
cified in the paradigm, in the view Of the author, they

do exist and influence the results.

CHAPTER IV
THE ECONOMICS OF IMPROVED FOOD DISTRIBUTION

Introduction

This chapter deals in more detail with the spe-
cifics Of change in food retailing, 1950—1965, and con-
tinues an analysis of the process of change. Economic
variables are dealt with, while in the subsequent chapter
sociological variables are considered. Thus, Chapters III
and Iv both deal with the first two objectives Of the
thesis, i.e., to describe accurately what happened in food
retailing from 1950 to 1965 and to investigate and explain
the process of change during a period of planned develop-
ment.

This chapter is divided into four main sections.
The first is concerned with factors accounting for demand
changes in terms of those economic and demographic vari-
ables important in changing demand. The second section
is devoted to changes in price, price'levels, and price
differences. The third section deals with the changing
retailer. It includes such variables as employment, store

size, and costs of Operation. The last section is concerned

93

94

with the effects of changes in food retailing upon eco-
nomic develOpment. Some of the earlier-mentioned hypoth-

eses are discussed.

The Changing Consumer

Income Change

One major change was the increase in family income.
Money coming into the Puerto Rican family increased 145 per
cent, compared to the United States average of 63 per cent.
And yet many Puerto Ricans were still poor. The 1959 median
family income was less than one-half the median income of
the poorest state in the United States, Mississippi ($2,844).
It can be noticed in Table 4-1, that the United States as a
whole as well as Mississippi and Puerto Rico have shown in-
creases in income. However, it is evident that Puerto Rican
families in 1959 were just about where Mississippi families
were 10 years before. As late as 1959, 44 per cent of the
families had incomes of less than $1,000.

Table 4—2 shows the changes for the United States
as a whole, Mississippi and Puerto Rico over the lO-year
period indicated. It can be seen that family incomes in
both Mississippi and Puerto Rico increased faster than the
rest of the United States. It can also be seen in Table
4-2 that while Puerto Rico has made great strides in the
fifties, its percentage change in median family incomes was
not greatly different from the rate of changes in the median

income of Mississippi families.

95

TABLE 4—l.——Income distribution of spending units, Puerto
Rico (1949 and 1959)

 

 

Ithme, HOlIars DEECefitage ofgi fiercentage of=:
(current prices) spending units, families,
1949 1959
Under 1,000 - 74 42.4
1,000-1,999 16 23.5
2,000-2,999 5 12.9
3,000e3,999 2 7.0
4,000—4,999 :1 4.4
5,000-7,499 . . 7.2
7,500—9,999 2 . .
10,000, or over . . 2.1
Not reported . . 0.6

 

Sources: G&H Marketing Efficiency in Puerto Rico, p. 6,

Table l.

StatisticallAbstract of the United States,
p. 341, Table 46.

U. S.,Census of POpulation, 1960, Mississippi,
pp. 264134, TabIE 66.

Family Income, p. 390, Table 119.

U. 5., Census of ngulationl_l960, PC(l)—53C,
Table 57, p. 129.

 

TABLE 4-2.--Comparisons of current $ incomes, median family
incomes, United States, Mississippi, and Puerto Rico, 1949
and 1959

 

_ _United Stites *Mississippi Euerfio Rico
Median income ml949 1959 1949 1959 1949 1959
53319 .55417 $1228 $2844 $534 $1268

 

 

 

»As % of U. S. 100% 37% 52% 16% 23%
% change,
based On 1949 63% . . 132% . . 145%
% change,
based on 1959 39% . . 57% . . 59%

 

Source: Calculations from Table 5-1.

96

There are, however, indications that the rate of
change of Puerto Rican family incomes has accelerated since
1959. By 1963, Puerto Rican median family income was esti-
mated tO be $1,856.1 AnOther indication of the rapidly
increasing income is the results found in a survey of fam-
ilies in San Juan and Mayaguez. While the distribution in
the two cities are different, it is obvious that this is a
considerable improvement over that reported in the 1959

census, as indicated in Table 4-1 earlier.

TABLE 4-3.—-Family income before taxes, 1964, by income

classesi San Juan and Mayaguez

Percentage of families

 

 

 

”Income
San Juan Mayaguez
Less than $1,000 27.4 21.6
$1,000-1,999 17.41 20.9
$2,000—3,499 20.00 29.8
$3,500-4,999 13.0 _ 14.9
$5,000-9,999 13.9 11.2
$10,000 or more 8.71 ' 1.4
N = 230 134

Source: Latin American Food Marketing Study, 1965-66

 

According to this survey, less than 30 per cent of

the families were in the lowest income bracket, as Opposed

1This was derived from Planning Board estimate of
1964 mean family income of $4,244, and by using_the same
percentage relationship as existed between 1959 median and
1960 mean incomes. _At that time, median income was 44 per
cent of mean income.

97

to 44 per cent in 1959. IAlthough median income cannot be
determined precisely, it is in the $2,000-$3,499 category
in both San Juan and Mayaguez.

One must admit that the minimum income necessary
for survival is undoubtedly less in Puerto Rico, where
there is a year-round temperature above 70° F. and heavy
clothing is unnecessary. Not even Mississippians can
claim a climate like that. Still it may be that it costs
more to maintain any given standard of living in Puerto
Rico because of higher prices. (That issue will be dealt

with in a later section.)

POpulation Change

For a variety of reasons, including a common cit-
izenship, there is fast and economical movement between
the United States and Puerto Rico. This movement has been
especially pronounced between New York City and Puerto
Rico. The air fare of $45 one way for the 1,603 miles
between New York and San Juan is among the lowest in the
world. One is told stories, apocraphyl perhaps, of hard
selling travel agents who worked the rural areas (where
unemployment was especially high during the fifties)
selling one-way air tickets on the installment plan to
New York. The Puerto Rican-born pOpulation of New York
City tripled between 1940 and 1950 and increased from

187,420 to 429,710 between 1950 and 1960. By 1960, there

[1

98

were 615,384 Puerto Rican-born persons living in the
continental United States.2

Because of the heavy migration, the total pOpu-
lation of Puerto Rico increased less than 12 per cent,
yet the crude birth rate of Puerto Rico was considerably
higher than the United States. Table 4-4 shows the dif—
ferent rates of pOpulation change and crude birth rate.
Were it not for out-migration, Puerto Rico could have had
a most serious population problem which would have compli-
cated the development problems of the resource-poor and
heavily pOpulated island.3

TABLE 4-4.--Crude birth rate and pOpulation growth, 1940,
1950 and 1960

 

 

 

 

 

Item Crude birthirate,l'-. POpulation
(per 1,000) A . (in thousands)
1940 1950 1960 194011? 1950 1960
Puerto
Rico 38.5 38.7 31.1 1,869 2,210 2,513
% change,
1950-60 11% 7%
United
States 19.4 24.1 23.7 152,271 189,417
% change,
1950-60 19%
Source: Puerto Rico Statistical Yearbook, 1964, p. 5,
table 2:
Statistical Abstract Of U. S., 1965, p. 48,
table 48.

 

U. 3., Bureau of Census, Puerto Ricans in the
United States. 1960. Table A, p. 7.

3One of the better reports is the book by Reflben
Hill, J. Nayone Stycos, and Kurt W. Back, The Famil and
lggpulation Control. (Chapel Hill: University of North
Carolina Press, 1959.) '

99

More recently, Puerto Ricans have been moving both
ways. This movement of Puerto Ricans and Continentals in
and out of Puerto Rico has probably been a contributing fac—
tor to the relative ease with which the many changes in food
products and distribution have been accepted.

Table 4-5 indicates that Puerto Rico has had and
maintains a considerably younger pOpulation than the United
States. Note especially the median age in Puerto Rico,
which indicates that 50 per cent of the population is under
19. In this respect, the age of Puerto Ricans is more like
a number Of Latin American countries rather than the United
States. Yet, in spite Of the high birth rate, the great
numbers of youth, and the increasing longevity of Puerto
Ricans, the per capita net product of Puerto Rico has grown

greatly. Certainly, out—migration has made a contribution.

Cpnsumption Change

For a number of years, including 1963, total con-
sumption exceeded disposable personal income. According
to the Statistical Yearbook Of Puerto Rico, total expendi-
tures in 1963 were $2,053,000,000, or 101.3 per cent Of
disposable personal income of $2,026,000,000. 0n the United
States mainland, consumption is usually between 90 and 95
per cent of disposable personal income. Table 4-6 compares
personal expenditures in the United States and Puerto Rico.

Two of the most Obvious shifts in Puerto Rico have been

TABLE 4-5.-—Se1ected age distribution of Puerto Rican:and

United States populations in 1940, 1950, and 1960

 

 

 

 

 

 

Per cent Per cent
14 & under 65 & over Median Age
1940 Puerto Rico 40.5 3.4 19.2
United States 25.1 6.9 29.0
1950 Puerto Rico 43.2 3.9 18.4
United States 26.2 9.3 30.2
1960. Puerto Rico 42.7 5.1 18.5
United States 31.0 9.2 29.5
Sources: 1964 Statistical Yearbook, Puerto Rico, table 2,
p. 2.
1955 Statistical YearbookJ Puerto Rico, table 5,

 

p. 8.
1965 Statistical Abstract Of the United States,
tabIe 48, p. 48.

(l) the decrease in percentage spent on food, while diets
were being up-graded, and (2) the increase in spending upon
recreation and transportation out of incomes considerably
smaller than U. S. Mainland incomes. Puerto Ricans still
spent a larger share of income on food than their mainland
counterparts. By 1963, Puerto Ricans were also spending
greater percentages on transportation and recreation.
Another indication of changing per capita consump-
tion Of various foods is the index Of per capita Consump-

tion indicated in Table 4-5. Overall the suggestion is

101

TABLE 4-6.-—Consumption patterns, United States and Puerto
Rico, 1950 and 1963—64

 

United States Puerto Rico

 

Item 1950 1963 1950 1964

Food, tobacco,

alcohol 33.8% 25.4% 43.9% 32.6%
Clothing,

accessories 11.9 9.9 10.1 10.6
Personal

care 1.2 1.7 1.0 2.2
Housing & house-

hold Operations 10.2 13.0 21.4 21.3
Medical care

and death 4.9 6.8 3.1 4.5
Personal business

services 4.5 6.6 . 1.4
Transportation 11.6 12.6 . 11.8
Recreation 5.8 6.1 . 9.0
Miscellaneous

expenditures 2.5 3.8 5.3 6.5

 

Total personal
income expen— b

ditures $194,277,000 $375,000,000 $670.6a $2,173.3
Disposable -

personal

income in

millions $207,700,000 $402,500,000 $637.8 $2,056.8

 

a1950 Puerto Rican figures include $8.1 million Of
expenditures by non-residents, which amounted to 1.2% of
total expenditures.

b1963 Puerto Rican figures include 101.5 million
dollars of expenditures by non-resident Puerto Ricans,
which amounted to 4.7% Of total expenditures.

Source: United States Statistical Abstract. 1965.
Ingreso y Producto, Puerto Rico, 1965, Junta de
PlanificaciOn, Table l, p. 8 grd., table 13,
p. 320 2'

 

that.Puerto Ricans are eating higher-quality foods. Possibly
part.of this is due to free food, part to higher incomes, and

;part to better food distribution.

102

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00 I 000H em I mmma 00 s 000A uuseoum

 

ommalovma .mooom pmuumamm mo cowuaesmcou muwamu MOO mo mecHll.blv mqm<e

103

Free Food Program

The free food program has been another of the
contributory factors to the lowering of the per cent Of
consumption expenditures spent on food. It is sponsored
by the U. S. Department of Agriculture and the Commonwealth
Department of Health. In 1956, as a result of a hurricane,
a free food program was established. Needy families were
able to Obtain U. S. Department of Agriculture surplus
foods through the Puerto Rican Department of Health. In
1957-58, over 8 million dollars worth of food (valued at
its cost to the government) was distributed. The program
was expanded by bits and pieces. A major addition was a
school lunch program. Later, high protein foods were made
available to pregnant women. The eligibility requirements
have been loosened so that today no Puerto Rican needs go
hungry. In 1965, rice, flour, butter, powdered milk, dried
eggs, and lard were given to needy families.’ The federal
government bore the cost of the original food, as it does
for every other U. 5. state. In fiscal 1965, the cost to
the government of food given to needy Puerto Ricans was
nearly 25 million dollars. The development and growth of
this free food program has been a boon to the development
of the retail food distribution system. NO longer is the
commercial sector forced to make ethical judgments regard-
ing food for the indigent. The poorest families now re—

ceive their needs through government channels. Retailers

104

and wholesalers are not forced to give credit to those
very poor families who may never pay anyway, so the re—
tailer has not the burden Of unpaid bills as he had in
1950 when Branson made his study. Neither is the retailer
forced to suffer the consequences Of pilferage and robbery
from those who have insufficient money to buy food. Thus,
the Puerto Rican government has removed a burden from the
commercial food distribution sector.

The retail value Of this food give-away program is
considerably above the government cost. Assuming that the
government cost is 50 per cent of retail price, then in
1965 the retail value of the free food program was nearly
50 million dollars, 9 per cent of total food consumption of
$567 million. The public records indicate that some member
Of 20 per cent of Puerto Rican families received free food.
Yet, Only 5 per cent of the families admitted receiving
that assistance in the consumer food marketing study survey,
one portion of the Latin American Food Marketing project.

Some possible explanations include (1) bias to ad—
mitting receiving free food, or (2) a bias in income because
the survey was conducted in only two urban areas, San Juan

and Mayaguez.

Diet Changes
This diet change is readily indicated by the chang-

ing make up of imported dollar value. The basic commodities

105

(rice, dried beans, tomato sauce, lard, cod, and salt
pork) accounted for 38 per cent of total food imports in
1950; but,by 1963, these same commodities accounted for
only 23 per cent of total food imports.

One possibility is that price decreases in these
basic commodities accounted for all or part of the rela-
tive decline in importance. Calculation of cost per unit
for each commodity indicated that none of the prices de—

creased. In fact, all of them increased since 1950.

ShoppingiHabits

There is only a limited amount of direct factual
evidence of consumer behavior in Puerto Rico during and
since the early fifties. Yet, there have been studies of
various aspects Of family life, such as mental illness and
birth control. The Department Of Labor conducted decennial
surveys of consumer expenditure in 1943, 1953, and 1963.
One can infer from the studies of Galbraith and Holton,
census data, and the Labor Department's survey, that in
the early fifties Puerto Rican families were poor. Few
people had any durable goods, such as refrigerators or
automobiles. Predominantly, families bought food on credit.
They bought fresh fruits and vegetables in the plaza. The
great changes in wages, the even greater changes in total
output, accompanied by migration to and from the United
States mainland, contributed to the changes in the Puerto

Rican's buying habits.

106

A part of the Puerto Rican phase of the Latin
American Food Marketing Study in 1965-66 consisted Of a
survey of families in San Juan and Mayaguez. The survey
consisted of 246 households in standard metrOpolitan sta-

tistical areas of San Juan and 141 households in Mayaguez.4

Increase in Ownership of Consumer Durables

Although there was only one car for every 75 per—
sons in Puerto Rico in 1946, the survey indicated that half
of the families in San Juan and Mayaguez owned cars in 1965.
The Ownership of refrigerators is almost universal, which
can be seen in the table below.
TABLE 4-8.——Percent of families owning cars, refrigerators,

and freezers, San Juan and Mayaguez standard metrOpolitan
statistical areas, 1965-66

 

 

Item San Juan Mayaguez
r r—
Car 48 50
Refrigerator 96 92

Freezer capacity of 8 lbs.
or more in refrigerator 87 78

 

Source: Consumer Survey, Latin American Food Marketing
Study, 1965-66.

 

4It is discussed in more detail in the Foreword.
Most Of the findings are presented in other reports which
can be Obtained from: Latin American Food Marketing Study,
Michigan State University, East Lansing, Michigan. A few
of the findings that bear directly upon food retailing are
discussed below.

107

The Relative Importance of Three
Types of Retail Stores

For years, the p122§,ggl_mercado was the place to
shop for fresh food. Even in 1966, there was a major Puerto
Rican government program that helped municipalities rebuild
their existing Operations. In the Opinion of several local
people, the plazas still sold a significant portion of the
local produce, yet only 44 per cent Of the families admitted
buying any food at the plaza within the 2 weeks preceding
the interview. The money spent at the plaza was signifi-
cantly less than other types Of stores. Table 4-9 gives
the per cent of families spending various amounts at the
three main types Of retail food outlets. It is Obvious
from these tables that food stores and supermarkets are
much more important than the plaza. The majority of fam-
ilies shop at both colmados and the supermarket.

Table 4-10 is another indication of the importance
of the supermarket in 1966. The tables indicate the place
of shopping on the basis of income. While the analysis in-
dicated that a statistically significant prOportion Of
higher income families shop at supermarkets than lower in-
come families, a considerable percentage of the poorest
families do the majority of their shOpping at supermarkets.
Thus, there is some truth in the statement that supermar—
kets are for the rich; but,like so many pOpular expressions,

there is also an element Of falsehood for in San Juan 38

108

TABLE 4—9.--Per cent of families buying & average amounts spent
at the plaza, colmado and supermarket, 1965

 

 

"COImado
Item ‘ Plaza (small food Supermarket
store)
Percent buying 44 72 58
Most frequent means Of
transport by those
families buying 66% 83% 69%
(walking)
Modal distance Over 1 km. Same block Less than
1 km.
Use credit N/A 57% 9%
Use delivery service N/A 32% 22%
Modal # times shopped
in 2 weeksT' 2 Bimodal 2 San Juan
2 + 8 1 Mayaguez
Average $ spent in
previous 2 weeks:
San Juan $3 $22 $28
Mayaguez $6 $24 $15

 

Source: Latin American Food Marketing Study survey, 1965-66.

 

per cent of the poorest families had purchased most of their
food at supermarkets in the past 2 weeks.

Overall, there was a significantly greater percentage
Of families buying at the supermarket in San Juan. One Of
the reasons for a higher percentage Of supermarket purchases
in the San Juan area is the greater number of supermarkets
there. There is one supermarket for every 2,000 persons in

San Juan, but only one for every 10,000 persons in Mayaguez.

109

TABLE 4-10.--Per cent of families in four income groups
buying their food at supermarkets in San Juan and Mayaguez

 

w ‘ _—,

Family income‘levela

 

 

 

 

ShOpping Per cent
level overall Low Medium . High Tofial

San Juan:

Supermarket 64.5 38.1% 65.5% 94.2% 149

Other 35.5 61.9% 34.5% 5.8% 82
Total N = 63 116 52 231
Mayaguez:

Supermarket 38.8 13.8% 43.2% 58.8% 52

Other ' 61.2 86.2% 56.8% 41.2% 82
Total N = 29 88 17 134

 

aLow = less than $999
Medium = $1,000-4,999
High = $5,000 or more

Source: Latin American Food Marketing Study survey, 1965-66.

 

Lack of Importance of Maids

Before conducting the survey, many persons in depth
interviews revealed they thought the maid was a most impor—
tant person in the shOpping for food. The consumer survey
indicated this not to be true. Table 4-11 indicates the
important persons in the purchase of foods for the family.
Even though a maid was not found to actually purchase the
food, two per cent of the families did have a maid who pre-

pared the meals.

110

TABLE 4-1l.—-Significant persons in the purchase and
preparation of food in San Juan and Mayaguez, SMSA,

 

 

1965-66
Question City Housewife Man Suspgpd Maid
"Who decides San Juan 246 83% 7% 10% 0
what food
to buy?" Mayaguez 141 75% 12% 11% 0
"Who purchases San Juan 246 77% 14% 8% 0
I!
the fOOd? Mayaguez 141 54% 27% 14% O

 

Source: Latin American Food Marketing Study survey, 1965-66.

 

CO—Ongembership

I COOperatives of various forms have been vigorously
promoted by the government of Puerto Rico since 1945. One
of the results of the Food Commission work in 1954 was a
revitalized program of strengthening food cooperatives.
Yet, by 1965, in San Juan and Mayaguez, food cooperatives
were not as important as one might have expected. Only 4
per cent Of San Juan consumers belonged to a co-Op, as com-
pared to 13 per cent of Mayaguez consumers. Mayaguez co-Op
members were more loyal to the co-Op, as indicated by their
answer that 59 per cent of the co-Op members would continue
buying at the co—Op even if other supermarkets had lower
prices. This may be because the co-op in Mayaguez was the
only supermarket-type store prior to this. The co-Op in
the small community of Mayaguez did provide a valuable ser—

vice in terms of a wide range of goods and the low prices

111

it fostered. On the other hand, only 33 per cent of San
Juan co-op members would continue buying at the co-Op if
prices were lower elsewhere. This difference may be due

to alternatives available to consumers.

Sense of Community

The small per cent Of membership in food coopera-
tives should not be taken to indicate a lack of sense of
community. Puerto Rico is not like the backward society
that Banfields studied in which every person was out for
himself and did not see how any good could come from help-
ing others. In Puerto Rico, one senses a faith that things
can be made better by hard work. First, there is a trust
in the government, based on 25 years of experience Of the
government fulfilling its promises. Second, although there
are complaints about long lines and minor inefficiencies Of
government Offices, the people seem to share a common belief
that the government is honest and truly reform—minded. The
consumer survey confirmed this sense of community. Sixty-
seven per cent Of the respondents who thought improvements
could be made in their own community said they would be

willing to devote 50 hours of free time annually to work

on community improvement projects.

Use Of Information about Food
For a number of years, Mrs. Judith Frias de Ramirez
Of the Agricultural Extension Service has been_preparing a

5Edward C. Banfield, The Moral Basis of a Backward
Society. (Glencoe, Illinois: The Free Press, 1958.)

112

newspaper column for the most widely read Spanish language
daily newspaper, §1_Mgggg.

In addition, since the mid-fifties there has been
an increasing use of newspaper advertisements by food re-
tailing firms. The table below notes the consumer response
patterns.

TABLE 4—12.--Positive reaction to newspaper information
about food, 1965-66

 

Question San Juan Mayaguez

 

"DO you read Mrs. Frias de Ramirez's
food information column?" 22% 21%

"DO you read newspaper
food advertisements?" 32% 45%

"Do the advertisements influence
your purchasing patterns?" 38% 35%

 

Source: Latin American Food Marketing Study survey, 1965-66.

 

The table indicates that more families read and claim
to be influenced by commercial advertisements for food than
by the extension service columns. Although over 20 per cent
of the families claim to read the extension services column,

a greater percentage claim to read food-store advertisements.

Measurement and Evaluation Of
Changes in Food Retailing
Introduction
The goal Of this section is a more complete descrip—

tion of: (1) the costs of food retailing and how those costs

113

have changed over the years; (2) differences in retail
prices in very large and very small stores; and (3) some
measures Of efficiency in 1965 with comparisons to earlier
times and other areas. In addition, it had been planned
to relate a number of variables to sales growth. The
measurement of this variable was Operationalized as the

difference between 1959 and 1964 annual sales.

Changing Costs of Operation

An average gross margin of 23 per cent was reported
for Puerto Rican food retailers in 1950.6 This figure is
compared with gross margins calculated by the Minimum Wage
Division of the Commonwealth Department of Labor.

The Department of Labor is required by law to make
a detailed study of both revenues and expenses Of each in—
dustry biennually. The results are tabulated by sub-type
within industries as well as by geographical areas. One
of the industries is retailing. Two sub-classifications
within retailing are supermarkets7 and retail food stores
(i.e., stores which sell food to take home). The data are
presented for the entire island and then by three zones.

This chapter deals with the data for the entire island

and Zone 1, which is almost equivalent to the San Juan

 

6Galbraith and Holton, 2p, cit., p. 29.

7Defined as 3,000 square feet or more with self-

service.

114

TABLE 4—13.-—Dollar salesa Of establishments in the sample
Of Labor Department survey of food retailers, Puerto Rico
and Zone 1

 

 

 

 

:;' uer o ico EOne_l - §an juan §fi§f
Year Supermarkets Food Supermarkets Food
(census) stores (census) stores

 

(thousands Of dollars)

1955 7,314 Nsb 6,048 NSb

1956 14,010 97,357 12,411 31,345
1959 38,260 87,272 34,945 19,075
1960 49,835 Nsb 40,920 NSb

1961 56,042 137,434 45,237 32,337
1963 77,005 122,202 60,363 44,941
1964 85,398 132,680 65,198 42,987

 

aThe figures in Table 4-13 for any given year will
be less than the Census of Business because they do not in-
clude: (1) those firms without employees which amounted to
over 18,000 establishments selling $37,000,000 Of food and
drink in 1963; (2) restaurants or restaurants within hotels
which had sales of $55,000,000 in 1963; (3) some small firms
which are sampled instead of censused. If the figures above
are added to the given sales figures and an estimate is made
for the sampling ratios involved, they are indeed comparable
to the Census of Business. By these standards, between 12
and 20 per cent Of sales Of S.I.C. 54X and 581 are restau-
rant and bar sales.

bNot Sampled
Source: "La Industria de Comercio a1 por Menor," Estado

Libre Asociado de Puerto Rico, Departmento del
Trabajo, mimeographed, various years.

 

115

Standard Metropolitan Statistical Area. It is necessary
to look at both of these areas because many of the most
meaningful changes in food retailing have been concen-
trated in San Juan. The data was collected from a dis-
proportionate stratified sample with a census of the larg-
est stores. .Stores without employees are not sampled at
all, and the fewer the employees the less the sampling
percentage. The accountants who prepare these reports
have access to records of the various licensing author—
ities, the income tax returns at the Department of the
Treasury, as well as the company's own records. The
ground rules under which the data has been collected

have remained relatively constant since the first survey
was run in 1955. Table 4-13 presents total sales figures
for the stores included in the various surveys. It is
Obvious that sales of supermarkets have grown more than
sales of other food stores with employees.

According to Table 4-14, the gross margins for
supermarkets have increased from an average of 12.2 per
cent in 1955 to 17.8 per cent in 1964. The National Com—
mission On Food Marketing reported a similar trend in the
United States.8 However, even as late as 1964, gross

margins for both types of food retailers were considerably

 

8National Commission on Food Marketing, Organiza-
tion and Competition in Food Retailin . Technical Study
No. 7, U. S. Govt. Printing Office, 66, p. 216.

 

116

TABLE 4—14.--Average profit as a per cent of sales, of super-
markets and food stores in Puerto Rico, various years

1 1 1 1 1 1 4

Item S.M.a F.S.b S.M. F.S. S.M. F.S. S.M. F.S. S.M. F.S.

(Rér cent)

 

Gross
profit 12.2 14.2 15.0 11.9 ,17.1 . . 17.4 12.2 17.8 12.0

 

Net

profit 4.1 3.0 2.8 3.1 3.7 . . 4.2 2.6 4.0 2.1
a
Supermarkets
Food Stores

Source: "La Industria de Comercio a1 por Menor," Estado Libre
Asociado de Puerto Rico, Department del Trabajo,
mimeographed.

 

less than they were reported in 1950. The larger gross margin
of supermarkets since 1959 might imply higher prices. But,

as will be discussed more thoroughly in a later section, the
implications are that supermarkets in reality have lower re-
tail prices. Lower retail prices with a larger gross margin
imply better buying practices.

However, while the gross margins of supermarkets
were increasing, the gross margins of other food stores have
been falling. Gross margins of other food stores in San
Juan have dropped from 20.1 per cent in 1956 to 15.5 per
cent in 1964, where the supermarket growth has been the
greatest.

The trend of net profits has been similar to the

trend of gross profits. Increased wages have absorbed much

117

of the increase in gross profit. Still, average net
profit in 1964 of 4 per cent was considerably better than
2.1 per cent average for all Supermarket Institute members.9
The number one success story.--Pueblo Supermarkets,
the company that most every knowledgeable person admits has
brought about much of the change in Puerto Rican food dis—
tribution, has been even more profitable than the average.
As shown in Table 4-15, Pueblo's gross profits have in-
creased most rapidly since 1960 when a wholly owned sub-
sidiary, Pueblo Wholesale Company, was formed. In fact,
it can be seen by comparing Tables 4—14 and 4-15 that
Pueblo profits have pulled ahead of the average since 1960.
Since that time, the management of Pueblo has concentrated
on integration and coordination Of marketing activities.
It has purchased food processing plants, helped an egg

"corporative"lo get started, and encouraged local meat

production.11

(In late 1966, the partially owned cattle
fattening Operation was closed down due to financial and

cattle supply problems.)

 

9National Commission on Food Marketing, Excerpts
from Su ermarketIInstitute_§igure Exchange Re or s, l -
1964, Technical Report #7, SuppIEment #1, U. S. Eovt.
Printing Office, 1966.

lo"Corporative" is a term coined by Dr. Charles
Slater which denotes a local solution to some local prob—
lems. Corporatives are run like corporations, but are
organized and have the benefits of COOperatives.

11Market coordination activities Of the last 15

years is the main thrust of a thesis by Kelly Max Harrison
of Michigan State University, 1967.

 

 

118

TABLE 4-15. Sales and cost of goods sold by Pueblo Super-
markets, fiscal year ending January 31, various years

 

 

 

gross Cost of
Fiscal sales goods sold Gross Net profit
year ‘ (in (in profit after tax
thousands) thousands)
$ $ % %
1959 13,830.9 11,472.4 17 3.3
1960 17,663.8 14,549.9 17 3.9
1961 21,867.8 17,793.0 18 4.1
1963 31,370.7 25,335.4 19 4.4
1964 38,413.5 30,975.6 19 4.2
1965 47,659.7 37,206.0 21 3.9
1966 55,787.8 43,189.9 22 4.2

Source: Annual reports.

 

The success Of Pueblo has attracted the attention
of competitors who have become established in Puerto Rico
within the past 2 years. The arrival of aggressive compe-
tition is probably a healthy omen, since Pueblo was faced
with the "General Motors" dilemma.

Pueblo, with nearly 20 per cent of total Puerto
Rican grocery store sales and perhaps 30 to 40 per cent of
San Juan grocery sales, is so large that its actions are
quite visible. Its high profits are a matter of public
record. If profits and growth were to continue unabated,
its Operations might face possible monOpoly problems. On

the other hand, Pueblo has the capability of reducing its

119

retail prices in order to lower profits. A 2 per cent cut
in prices would bring Pueblo's net profits down to the most
profitable of United States supermarket firms. But then,
on the basis of Table 4-14, half the regular food stores
would be losing money if they met those prices.

Selected efficiency comparisons.--In 1950, Galbraith
and Holton calculated sales per store, per employee, per
customer transaction, inventory turnover, and the number of
suppliers for various size retail stores. Sales per em-
ployee are compared for selected years of the Census of
Business in Table 4-16. Various measures are compared to
the 1965 survey data in Tables 4-17 and 4-18.

TABLE 4-16.--Annua1 sales per employee in grocery stores,
1948-49 and 1963, as indicated by the U. S. Census of Business

DOIIar Sales per WOrker

 

 

 

 

 

 

Sales Size 1948-49 1963
‘fiT§T“"'ET§? U.S. P.R.
All stores 24,216 970 48,631 8,990
Under $50,000 12,581 577 N/A 5,403
$50,000—299,999 25,875 1,524 N/A 16,097
$300,000—999,999 39,372 N/A N/A 27,653
Over $1,000,000 37,214 N/A N/A 36,743

 

Sources: Galbraith and Holton, Marketing Efficiency in Puerto
Rico, Harvard University Press, 1954, p. 17.
National Commission on Food Marketing, 1966, p. 15.
T e - .

1963 Census of’fiusiness, p. 45,

120

It is Obvious that the scale of retailing has in—
creased considerably. However, there are still many more
food stores per inhabitant in Puerto Rico than in the united
States. Yet, the total number of stores has remained con-
stant in spite of the increased economies Of scale. These
economies of scale are best illustrated by sales per em-
ployee and weekly sales per square foot Of the largest
stores. The size of customer transactions shows a consid-
erable difference as size increases. Also, it appears that
the largest store sizes in both San Juan and Mayaguez com-
pare favorably with U. S. productivity levels in terms Of
an inventory turn. Fifty per cent of Supermarket Institute
members in the United States had inventory turnovers between
14 and 23 times annually. It can be seen that the larger
Puerto Rican stores approach the average U. S. supermarket
efficiency level. In Tables 4-16, 4-17, and 4—18 it is
evident that the largest store category in each city was by
far the most efficient.

The data presented in this section seem to indicate
that the larger stores, i.e., supermarkets, are more effi—
cient. The larger stores have the same or lower prices,
the’highest sales per employee, and the highest sales per
customer transaction. The largest stores have the fastest
inventory turnover and the most sales per man hour. They

also have the highest average net profits.

121

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123

All these advantages seem reasonable, but they
contradict the findings of the National Commission on Food
Marketing. In the United States, utilizing confidential
data from the 9 largest food chains and holding store size
constant at various levels of 4,000 through 16,000 square
feet, there was found to be no statistical significant cor-
relation between store expense and store size.12

The analysis by the National Food Commission seems
to be remiss on at least two counts: (1) it seems not to
have analyzed a large enough range of store sizes, and (2)
the data was analyzed by company. Perhaps an analysis by

metropolitan area would have led to considerably different

conclusions.

Procurement Problems

The one area of food retailing that has not met or
contributed to the changing conditions in Puerto Rico is
food wholesaling. However, that is beyond the sc0pe of
this thesis. It is enough to note that the mean number of
suppliers serving the largest stores in San Juan is 73.
Even the smallest stores (i.e., those retailers whose sales
are $12,000 annually or less) average 6 wholesalers. Since
the Department of Labor reported 1964 average gross profits

of 11.2 per cent in food wholesaling and since some large

 

12National Committee on Food Marketing, op. cit.,

p. 140.

124

retailers were their own wholesalers,l3 most local re-

tailers were at a distinct disadvantage in terms of cost.
Those Operators who were large enough to operate their
own wholesaling were saving at least part of that 11.2

per cent gross profit of the wholesaler.14

Size of Stores

The average size of food stores, eating and drink—
ing places, in terms of sales, is increasing in Puerto
Rico but not as fast on the average as in the United
States. While Tables 4—17 and 4-18 referred to this,
Table 4-19 gives further indications of this growth. The
sales of stores selling less than $5,000 annually have
remained constant at about 5 per cent of total food sales
from 1954 to 1963 for all of Puerto Rico. 0n the other
hand, in San Juan, where supermarket growth has been con-
centrated, the sales of these smallest stores have slightly
decreased from 2.1 per cent of total food sales to 1.9 per
cent. During these same 9 years, those stores selling more
than $1,000,000 annually have grown from 1 per cent of

sales to 17 per cent for the whole island and, according

 

130f the two largest Operators in the San Juan area,
Pueblo averaged 50 per cent storage space, and the other
averaged 45 per cent storage space in addition to the small
warehouse they had.

l4Supermarket Institute figure exchange gives ware—
house and delivery costs for supermarkets at less than 2
per cent in the United States, 1964.

125

TABLE 4-19.--Average annual dollar sales of food stores
and eating and drinking places, Puerto Rico, San Juan SMSA,
and Mayaguez SMSA

 

 

Total
Year island San Juan, Mayaguez
1949 $ 6,514.72 $ 13,545.88 $ 8,434.46
1954 15,754.06 27,888.15 10,939.01
1958 13,472.78 25,668.09 13,186.44
1963 18,252.93 34,060.91 18,762.24

 

Sources: 1949 Table I, page 3; San Juan Table 63; and
Mayaguez Table 50; 1954 Table I—l, p. 3, San
Juan Table II—l, p. 48; and Mayaguez III-2A,
p. 144; 1958 Table A-1, p. 12; San Juan Table
II-l, p. 47; Mayaguez Table III-2A, p. 149;
1963 Table A—1, p. 12; San Juan Table Cl, p. 34;
Mayaguez Table A1, p. 14.

 

to the same Census of Business, in the San Juan area, these
large stores account for 31 per cent of total sales.

There has also been a change in number and dollar
sales of corporation grocery stores. In 1949, corporation
sales of groceries, almost all of which can be assumed to be
large supermarkets, amounted to $3;439,000, but by 1963 this
figure had jumped to $86,089,000 with over half of the growth
coming in the latter 5 years of this time period. The
growth of corporation sales was even more rapid in the San
Juan area over the same time period. The Census of Business
reports San Juan metrOpolitan area corporation grocery sales
at $30,181,000 in 1958. By 1963, corporation grocery store

sales had increased to $71,036,000.

126

Thus, while total sales from food stores and eat-
ing and drinking places increased from $290,028,000 in
1958 to $411,164,000 in 1963, or 42 per cent, the dollar
sales of supermarkets increased 48 per cent between 1959
and 1963. And, in those same 4 years, Pueblo's sales in-
creased 127 per cent. Thus, supermarkets in total have
had a disproportionate increase over that time period, and

Pueblo sales increased even more.

Trend Toward Cash

In 1949, Galbraith and Holton reported that 94
per cent of the retail food stores made some credit sales,
while more than half of the stores did 60 per cent of

15 The suCCeed—

their total volume of business on credit.
ing Censuses of Business indicate a growing trend toward
cash sales, especially in the San Juan area. Table 4-20
indicates this trend more explicitly. It was the smaller
stores that were the heavy sellers on credit, as shown in
Table 4—20. It is also clear that credit sales have de—

creased more rapidly in San Juan than in Puerto Rico as

a whole.

Differences in Retail Prices
While price level information and computed price

indices are helpful in determining changes over time, they

 

15Galbraith and Holton, op. cit., p. 178.

127

TABLE 4-20.—-Trend toward cash sales in food stores, eating,
and drinking places, 1954; 1958, 1963.

 

 

 

 

EstaBIIShments Establishments
Reporting Some Reporting Credit
Item Credit Salesa 61-29% of Total Sales
Estab- Total ngab— Total
lishment Sales lishment Sales
Puertogfiico
1954 16,299 162,204.9 4,021 48,352.7
% of totalb 93.3% 78.2% 23.3% 23%
1958 17,204 178,472.5 4,952 58,336.9
% of total 80.3% 62% 23% 20%
1963 17,862 248,062.3 4,651 63,399.2
% of total 80% 60% 20.7% 15.4%
San Juan Standard MetrOpolitan
1954 3,093 49,476.3 795 13,947.3
% of total 74% 66% 19% 19%
1958 3,031 48,908.6 734 12,565.4
% of total 70% 47% 17% 12%
1963 3,558 74,023.0 524 11,543.0
% of total 66%. 42% 10% 6%

 

aAll sales figures in $1,000.

bAll percentages refer to total food stores or food
store sales.

Source: 1954 Census Table I—6 and Table II-6;
1958 Census Table I-6 and Table II-6;
1963 Census C-S.

 

128

tell nothing about prices in different kinds of stores at
a point in time. Neither do gross profit comparisons tell
anything about comparative retail prices. A higher grOSS'
profit might reflect higher retail prices, lower purchase
prices, or both. In this section, prices of specific items
are compared. As a part of an extra study of small retail-
ers in mid-May 1966, it was decided to collect prices from
nearby supermarkets. Prices were collected on 9 food items
which are used by even the poorest Puerto Rican family. In
addition, a comparison was made on the prices of the popular
Puerto Rican beverage, rum. Table 4-21 indicates that the
average supermarket price was less than the average small
store price in 5 of the 9 food items, as well as all brands
of rum. The greatest absolute price difference was on the
dried cod fish ("bacalao") which, according to the inter-
viewers, was even more pronounced because the quality of
the product was higher in the supermarkets where the price
was lowest. The highest percentage differences were on
flour and lard.

Where supermarkets had higher prices, there was an
average of 9 per cent difference. Most of this difference,
though, was due to the 30 per cent price difference on

plantains.l6

16There is a master's thesis being written on the
price spreads in crops like plantains. Mr. Luis Davis Flores
Will write his thesis in economics at the University of
Puerto Rico as part of the LAFS project. See the Foreword
for a better description.

129

 

 

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130

In addition to this factual evidence of prices,
which indicates the supermarket prices are similar and
in general lower than small store prices, the owners of
the small stores were asked why their sales had decreased.
All respondents who reported a sales change reported a
sales decrease. 0f the 75 per cent who reported a sales
decrease, half blamed it in one way or another on the fact
that supermarkets sell for lower prices.

In the larger store, there is more freedom of ac-
tion in setting prices in order to achieve a profitable mix.
Basic commodities, which all families buy, have a relatively
inelastic demand curve from an industry viewpoint. That is
to say, the consumption of rice, beans, or dried cod fish,
which are very important in the average Puerto Rican diet,
will not vary much regardless of the average price. 0n the
other hand, certain convenience foods, such as T.V. dinners,
probably have a highly elastic demand from an industry View.
However, the sale of many food products with a highly elas—
tic demand, and greater profit potential, depend to some
extent on impulse sales to the consumer. And the way im-
pulse sales are made is to get the consumer into the store.
Convenience foods and/or new products are bought mainly by
higher income peOple. These convenience foods may have
inelastic demand at the firm level. That is, the customer
may buy a convenience food without much regard to the price

Once he sees it in the store.

131

If these situations are perceived to be true, the
retailer might well cut prices on the basic commodities,
knowing that they are purchased by great numbers, and hOpe
that the lower price on these commodities will act as a
drawing card to bring peOple into the store. In addition,
he might reason that with increased traffic he can make a
greater dollar profit by selling more of the relatively
higher profit foods to the high-income families. If, in
fact, this happens, as it appears to in Puerto Rico, it
can have the same effect as a progressive income tax. In
this case, as with a progressive income tax, the rich
families who are most able to afford it are paying more.
Because of competition, the basic commodities are priced
near to or perhaps even below cost.l7 So the poor family
gets food at a lower price than it could in the smaller
store where only the basic commodities are sold.

The other side of this situation of basic com-
modities being priced at or near cost in the larger stores
is that the small retailer is then faced with a dilemma.
He must:

1. Let the price spread widen between his small

store and the supermarket and thereby lose cus-

tomers, or

2. Meet the lower price in his own store and

thereby lose profit, or

 

17There was some limited indication, on the basis of
personal attendance at a merchandising meeting, that the prices
of basic commodities will be driven even lower in the near
future.

132

3. Expand his store to sell a wider line at a

time when his profits are decreasing.

Supplemental Survey

As previously cited, an additional survey was made
in May 1966. -The sample was purposive and the number was
small (N = 40). But it was felt necessary to have a better
indication of what had happened to the small retailers and
why there had not been greater Opposition to the rapid
growth of supermarkets in the San Juan area.

Three reasons seemed to predominate:

l. Supermarkets had taken business from the small
stores, and, as they had done this, the husband had lost his
usefulness as a shOpper for groceries. He would still stop
at the colmado, but instead of buying food, he bought a beer
or two. In this way, the small stores became similar to
neighborhood taverns.

2. The beer and rum companies, with funds avail—
able for merchandising and advertising, made it easy for
the small food stores to sell beer and rum.

3. The Operators knew that the government sup-
ported the large store Operations.

The majority of the 75 per cent of respondents who
claim that their sales had gone down blame it on the lower
prices that consumers find in supermarkets. According to

the respondent's recall, there has been very little, if any,

133

increase in sales of any type of item. The only claims
of increase have been on sales of "liquor for on-premise
consumption" (7 per cent), and sales of "liquor to take
out" (4 per cent). Most of the decrease has been in food.
In fact, 86 per cent of respondents answered that their
food sales had either "decreased a little" or "decreased
a lot." Alcoholic beverage sales decreased less: about
72 per cent of respondents claim decrease in "liquor
sales to take out," and -- the lowest rate of decrease --
about 50 per cent of respondents said that their "liquor
sales for on-premise consumption" decreased either a"lit-
tle" or "a lot."

Beer and rum sales seem to have been of some im-
portance to small retailers, especially sales of these
alcoholic beverages for on—premise consumption. Although
there is insufficient evidence to say with assurance that
the increased consumption of beer and rum contributed to
the ease with which supermarkets have become dominant, it
can be inferred that liquor sales have definitely helped
the small retailer to subsist after the supermarket in-
vasion.

Although a small retailer often has to pay super-
market retail price for the bottle of rum, he profits on
it by selling it by the drink -- something that the super-
markets cannot do. Nevertheless, when asking the small

retailer, "What have you done to defend yourself from

134

supermarkets?" only one respondent answered that he had
"devoted more to liquor." Nevertheless, about 80 per cent
of respondents who sell liquor claim that they would not
obtain enough profits to stay in business if they were to
stop selling liquor.

Thus, it does seem that beer and rum sales have be-

come more important in the operations of the smaller store.

Employment Effects

Though the changes were not for-ordained, the pre-
vious sections discussed how the largest stores have been
the most successful. Still, the aggregative employment
statistics suggest a double-edged employment effect from
changes in food retailing.

At the present time in many of the Latin American
countries, there is a great percentage of consumption that
does not enter into the market economy at all. It is con—
sumed where it is grown. Thus, there are fewer jobs than
there would otherwise be if more food moved through the re-
tailing sector. An increasing percentage of food moving
through the marketing system at any given point in time will
mean an increasing number of jobs. This phenomenon has fre-
quently been overlooked by theoreticians as well as political
decision makers who have recognized the possibility of chang—
ing the food distribution system. These people have been
concerned about the elimination of disguised unemployment

in food retailing. Galbraith and Holton in their 1954 report

135

were concerned with the unemployment that would become
obvious if food retailing were rationalized.

Since the days of Adam Smith, most persons have
accepted the view of specialization that he articulated:
with specialization one's standard of living can be higher.
Therefore, from a theoretical standpoint, it would seem
likely that many families would prefer to specialize and
buy their food, if the food they need is priced lower and/or
they have increases in real income and/or the food becomes
more available in the food stores. In Puerto Rico, a greater
percentage of total food consumption is moving through the
commercial sector. Table 4-22 indicates how the percentage
has increased since 1949.

In Puerto Rico, only 44 per cent of the total food
consumption was passing through the retail food stores in
1949. As a result of private and intensive government ef-
fort to bring about both industrialization and marketing
changes, over the years an increasing percentage of the food
has been passing through the marketing sector. By 1958, 63
per cent of the food consumed was passing through the retail
food stores. This additional percentage passing through the
retail sector created over 12,000 new jobs at 1958 average

18

productivity levels. Food retailing changes did mean in-

creased employment in this particular case. One could say

18There were a total of 41,535 peOple working in
retail food stores in 1958.

136

TABLE 4-22.--Per cent of food consumed that is purchased in
the retail system food stores and eating and drinking places,
various years, 1949-1963, Puerto Rico

 

 

Number Food Total Value Per Cent
Stores,a Sales Value Food, Liquor of Food
Year Eating and of Food Pur- and Tobacco Moving
Drinking chases Consumption Through
' Places (Millions) (Millions) Retail
Store
1949 19,811 130.1 294.4 44
1954 17,558 208.9 390.7 53
1958 31,327 290.0 459.9 63
1963 22,526 411.7 656.6 63

 

I aGrocery stores not separated from eating and drink-
ing places.

Sources: 1949 Census ofBusiness, Puerto Rico, Table l, p. 12.

 

 

 

 

1954 Census of Business, Puerto Rico, Table I-1,
p. 3.

1958 Census of Business, Puerto Rico, Table I—l,
p. 3.

1963 Census of Business, Puerto Rico, Table A-1,
p. 12.

 

In resso y Produgto, Puerto Rico 1965, Junta de
P1anificacion,Febrere 1966, Table 13, pp. 32—33.

 

that in regard to food distribution, more of a "national
market" was and is being created.

There have been increasing efficiencies in food
retailing. Since 1950, average sales per employee have in—
creased considerably. Still, there is a wide range of pro-
ductivity among retailers. For example, in 1963, the dollar
sales per employee for supermarkets was $40,000, while the

average dollar sales for smaller stores was only $5,000 per

137

employee. Suppose that Puerto Rico had had only super-
markets with the average productivity of $40,000 per em-
ployee. Then employment could have been as low as 10,000
peOple working in food distribution, instead of over 47,000
people. On the other hand, the Opposite would be that with-
out any supermarkets, and if all stores had productivity of
$5,000 per employee, employment would be over 80,000 in

food distribution.

Thus, it can be seen that the empldyment effects
of changes in food retailing are two-sided in nature: in-
creased employment, as a result of more food passing through
the marketing system, and unemployment created through in-
creasing productivity of each worker. In the time period
under consideration, paid employees working in food stores,
eating and drinking places has increased from 2,906 to
25,032.19 However, total employment has not changed that
drastically, because each establishment must have a pro—
prietor and many small stores have family help. The result
was that over 23,000 persons were working in food retailing

in 1949, as compared to over 47,000 in 1963.

Conclusion
Let us consider the impact of food marketing changes

at this industry level of aggregation. Recall that 63 per

 

19
p. 114.

1949 Census of Business, Puerto Rico. Table 9,

138

cent of the food in 1963 passed through commercial channels
versus 44 per cent in 1949. $287,000,000 would have passed
through commercial channels in 1963 had only 44 per cent of
food been commercially sold. The average productivity in
1949 meant $5,000 per employee when the food price index
was at 91.2; in 1963, the food price index was 144. The
per-employee sales in 1963 would have been $7,900 in cur-
rent dollars, assuming no change in productivity. Thus, by
dividing per capita sales in current dollars into the sale
figure as if 44 per cent went through commercial channels,
we can estimate the number of employees the food retailing
industry would have had if no increase in commercial chan-
nels had developed, i.e., $287,000,000 - $7,900/employee
equals 36,200 employees. In contrast, the 1963 food re-
tailing employment was 47,000. Such comparisons are spe-
cious because other factors changed, such as income and the
mix of food products eaten. However, such analysis does
suggest that instead of always being a labor releasing in—
dustry when developed, food retailing can absorb labor. I
This is especially true when the productivity increases
are accompanied by gains in real income, a relative reduc-
tion in retail price, and upgraded quality.

Politicians and technicians have been reluctant to
recommend changing the food distribution sector because of
the potential political problems resulting from retiring

present employees. And, most plans for reform do recommend

139

increasing possible output per employee. Thus, regard-
less of possible potential benefits to the consumer, the
spectre of immediate and increasing unemployment far out-
weighs those potential consumer benefits in the mind of
the political decision-maker. Puerto Rican politicians
thought differently.and were willing to risk unemployment.
The above analysis also suggests that in a dynamic
economy the consumer benefits can mean increasing employ-
ment in food distribution. In Puerto Rico, the aggregate
result has been increased employment. At least some of
those employment increases have come about because of in-
creasing labor efficiencies and prices lower than they
would otherwise have been. Total employment has increased

in food distribution and thus new entrants have come in.

Some Methodological Considerations

As mentioned earlier, sales growth was a dependent
variable for several hypotheses. It was not possible to
utilize it as an Operational variable because many respond-
ents did not have written records and could not remember.
In addition, over 50 per cent of those 91 respondents with
sales over $12,000 annually have entered the business since
1959, which was the base year for measuring sales growth.
Thus, food retailing seems a much more dynamic sector in

terms of entry than had been supposed.

140

Survey

The depth interviews took added importance in this
study because of the limited time and money available to
devote to any one form, and the differing willingness to
respond to the formal questionaires. (The appendix deal—
ing with the sampling procedure notes how all sizes of food
retailing firms were sampled.) As the field work proceeded
in Puerto Rico, it was discovered that important but differ-
ent problems were associated with the smallest and the larg-
est retailers. Nevertheless, the interviewing of the middle
range of firms was going as expected.

It was found that among the "subsistence retailers"
(e.g., those with a municipal license that listed annual
sales of $12,000 or less), few had any written records of
their Operations. In addition, many of these small oper-
ators found it difficult to understand the questions and/or
verbalize answers to some of the questions. As noted in
Appendix B, there was a lower interview completion rate as
well as a lower rate of adoption of innovations among the
smallest firms. Thus, the 49 "subsistence retailers" were
eliminated from all the statistical manipulations discussed
in Chapter V. They were, however, included in the analysis
of Chapters III and IV.

0n the other hand, the two largest retail firms in
Puerto Rico were not pressed to share certain confidential

information with the author. To have reported information

141

from them would have been to divulge confidences of their
operations. Yet, these two firms accounted for between 10
and 20 per cent of total Puerto Rican retail food sales in
1965. In addition, the methodology, as set up, called for
one interview in each firm. The assumption was that the
firm was best represented by the values, attitudes, and
beliefs of its owner or manager. However, in the multi—
store retail firm selling over $10,000,000 annually, it
was difficult to determine with whom and how many struc-
tured interviews should be made.

In the largest firms then,the decision was made to
depend more heavily upon the informal, unstructured discus-
sions. Notes were taken during the discussions and a writ-
ten memorandum was made immediately after each interview.
The facts of each interview were checked with knowledgeable
persons in government or private industry. Much insight
into the operations was gleaned, but the two largest firms

were not included in the survey analyzed in Chapter V.

Summary

Family income has changed more rapidly in Puerto
Rico in the last 15 years than in the United States. Ac-
cording to the 1960 census, family income in Puerto Rico
was about half that of family income in the poorest U. S.
State, Mississippi. As late as 1965 in San Juan, the
largest city on the island, over 20 per cent of the fam—

ilies had gross incomes of less than $1,000 annually.

142

In spite of an extremely high birth rate, Puerto
Rico experienced a lesser population increase between 1950
and 1960 than the United States as a whole. However, in
the late fifties, some Puerto Ricans began returning from
the mainland and a greater number of mainland-born American
citizens were taking up residence in Puerto Rico. This im—
migration to the island, together with a youthful popula-
tion, rising wages, and greater variety in the Fomento—
encouraged supermarkets have resulted in higher quality diets.

Shopping habits have changed drastically. Contrary
to pOpular myth, maids do not do the grocery shopping. In
spite of intensive government efforts to foster COOperative
food store develOpment, few consumers indicate any prefer-
ence for the "co—Ops." The same survey showed that consumers
pay more attention to food store advertisements than to news:
paper extension service recommendations.

The Department of Labor biennial surveys of the cost
of operations of retailers indicate different trends for
supermarket gross profit and food store gross profits. Su-
permarket profits are increasing, as are their sales. Food
store gross profits are decreasing, yet prices in the super-
markets seem to be lower for basic commodities except lo-

cally grown starchy vegetables.

143

There has been a high turnover of food retailers.
The median year of establishment of the business for those
retailers selling less than $12,000 per year was 1954,
while the median year for larger stores was 1960. Small
retailers have apparently turned increasingly to becoming
beer parlors as means of survival. The economics of scale

in food retailing are pronounced.

Conclusions

1. Cooperatives have not provided a viable counter
force in San Juan, but in Mayaguez they led the way with
new multi—line supermarkets. In the rural areas, they pro—
vided new variety and services.

2. Economics of scale and the ability to buy
directly from the United States mainland provide large—
scale retailers with distinct advantages over small re—
tailers tied to the traditional importers.

3. Food distribution, instead of being a process
that always turns laborers out onto the market as develOp-
ment occurs, can, in fact, increase employment because of
the expanded prOportion of food moving through the com-

mercial sector.

CHAPTER V

INNOVATIVE BEHAVIOR AMONG FOOD RETAILERS

IN PUERTO RICO

Introduction

This chapter presents some further insights into
the development process of food marketing in the economic
develOpment of Puerto Rico through the special lens of
social research. The measurement and analysis of innova-
tive behavior are considered in detail. This research ef-
fort has been an interdisciplinary approach from its for-
mulation. The writer has been guided in his efforts by
economists, agricultural economists, and social scientists
concerned with the communications and innovations processes.
The previous two chapters have generated some insights into
the role of food retailing in the economic development of
Puerto Rico. Also, there have been some insights into the
role of food retailing in development of other nations.
Chapter III presented some insights that grow from the politi—
cal and economic history of this sector of the Puerto Rican
economy. Chapter IV provided insights into the economic
process and utilized rather extensively the more traditional

economic measures.

144

145

The reader will recall that in Chapters I and II
a fairly careful appraisal was made of the political,
economic, and social factors in the process of economic
develOpment. It was noted that many economics writers
became sensitive to the inadequacies of their own disci-
pline and have moved beyond the neo—classicists in look—
ing at the problem of develOpment in 2222.

Those economics writers became convinced of the
limitations of economics per se and realized the necessity
of discussing the role of the innovator or entrepreneur.
Schumpeterl in particular dealt with this problem, as well
as others. Keynes alluded to it in his discussions. Solow
and others have concentrated on the role of technical change.
L. J. Zimmerman2 has suggested that the concerns of the neo-
classicists are not enough.

A more recent example of an economist who feels un—
comfortable working within the limits laid out by the neo—

classicists is in an article that appeared in the June 1966

 

lSchumpeter, 22, 333., p. 61, states:
"Traditional economic theory describes events from a
standpoint of circular flow with no changes, or ones
that are introduced are continued. This is analogous
to blood flowing inside an organism. However, eco-
nomic life experiences changes, some of which do not
appear continuously, and which change the framework,
the traditional course itself. They cannot be under-
stood by means of any analysrsof circular flow. We
seek to learn how do such changes take place, and to
what economic phenomena do they give rise?"

2 . .
Zimmerman, op. Cit.

146

 

edition of the American Economic Review. Harvey Leibenstein
reviews 7 studies in 6 different nations that have been con-
cerned with misallocation of resources on a macro level as
well as 27 studies of labor productivity in certain indus—
tries in 7 different counties. He notes that the welfare
effects of macro—misallocation of resources are small, ap-
parently less than 2 per cent. However:

There is one important type of distortion that cannot

easily be handled by existing microeconomic theory.

This has to do with the allocation of managers . . .

But the (economic) theory does not allow us to examine

this matter because firms are presumed to exist as en-

tities that make Optimal input decisions, apart from

the decisions of its (sic) managers. This is obviously

a contradiction and therefore cannot be handled.

0n the other hand, 27 studies concerned with labor
efficiency, which include such things as attitudes, sug-
gest productivity increases from 5 to 71 per cent with little,
if any, added investment. Leibenstein admits that a large
part of these productivity increases would come from motiva-
tion which is not a normal economic variable. One of the
purposes of this chapter is to try to explicate some of the
variables in what Leibenstein calls "x—efficiency."
Medium-size retailers were selected because they

were large enough to enter the race for modern retailing

Operations. Yet the two largest organizations have been

exempted primarily because they were used to provide the

 

3Harvey Leibenstein, "Allocative Efficiency Vs.
X-efficiency," American Economic Review, LVL (June 1966),
397.

147

criteria for the attributes of innovation. It would have
been inappropriate to select innovations from retail out-
lets on the mainland or Europe. Ths special conditions of
Puerto Rico may make some of the desirable innovations of
Europe or the United States inappropriate. 0n the other
hand, the very small retail outlets were exempted from this
analysis because there is a special kind of retail business
much more in the tradition of the street merchant or tiny
tienda that is accounting for a smaller and smaller share

of the Puerto Rican food business.

Innovations in Marketing

Although there have been numerous studies of innova—
tion, few have been made in the field of marketing. The
Michigan State University Diffusion Documents Center, under
the leadership of Everett Rogers, had available as of July
1966, 708 empirical studies on the spread of new ideas, but
only 15 of these studies had been conducted in marketing.4
Thus, empirical studies are lacking in diffusion of innova—
tions in marketing just as there are few empirical studies
concerned with the related area of marketing's role in
economic develOpment. Yet without innovation in marketing,
it is doubtful that marketing can make a contribution to

economic develOpment.

4E. M. Rogers, Bibliographyign the Diffusion of In-
glgvations, Diffusion of Innovations Research Report 34,
Department of Communication, Michigan State University
(July 1966), p. 6.

148

Innovation as a Condition for Growth

Although innovation has been found to be a neces-
sary condition for economic growth (see citation of Leiben-
stein earlier), and it has been noted as a necessary con-
dition for increasing agricultural production, few would
suggest that it is a sufficient condition. In fact, there
are examples of great innovators (e.g., the Tucker of auto
fame) who were forced out of business.5 Thus, innovation
is a necessary but not a sufficient condition for growth.

It is possible to overadopt new innovations, but frequently
it is impossible to know when overadoption has occurred un—
til a later time period.

A case example of innovation as a necessary but not
sufficient condition is cited below:

In the mid—fifties in San Juan, Puerto Rico, there
was a chain of 4 supermarkets which were among the few in
existence in Puerto Rico at that time. These 4 supermarkets
were, by the standard presented later in this chapter, among
the first innovators, but they were closed by bankruptcy
within a short time. However, another man started a super—
market chain in 1956 and adopted many of the same practices
used by the bankrupt firm. As of 1966, his is the most
financially successful and perceived to be the most progres—

sive supermarket chain in Puerto Rico. Many attribute his

 

5When one looks at matters after the fact, he can
smugly assign the hundred dollar word "overadoption" to such
failures. But the state of the arts in measuring innovations
is such that "overadOption" is only an after-the—fact consid-
eration.

149

success to managerial skill, which is measured only with

difficulty, if at all.

Methodology

It seems evident that there are a great number of
items that fit into the universe of innovations over a
period of time within a particular part of the economic
system. It is just as apparent that a selection of a sam—
ple of innovations from out of that universe must be made.
Furthermore, the ideal way to study the adOption of in-
novations would be through field experiments, which is what
various consumer product firms do with test marketing of
their new products.

In this particular study of food retailing, the
investigation of innovations is by recall of 9 specific
items. These 9 ideas are so common in mainland United
States retail grocery stores that they are accepted as the
natural way of doing business. They were selected after
depth interviews with the two largest food retailers in

Puerto Rico indicated their applicability there.6

 

'61t should be noted again, as it was in Chapter II,
that the analysis in this chapter does not utilize all 140
retailer interviews, nor does it include the establishments
of Puerto Rico's two largest food retailing firms. The re-
sult of the former exclusion is that the statistical analy-
sis is based upon 91 respondents and ignores the 49 "sub-
sistence retailers," who seem to be quite different from the
larger ones. Since the two largest retail firms were used
to establish a valid list of innovations, they were not a
part of the analyskspresented in this chapter.

150

Some research efforts in the spread of new ideas
have been deeply concerned with the pattern of innovation.
Sociologists have given intriguing names to the types of
peOple who try out a new idea at different times in its
life cycle.7 While these names and other tools of the
trade, such as the adoption curve, are interesting, they
are not of central interest here and will not be discussed
further. The purpose of this chapter is to understand bet—

ter the correlates of "innovativeness."

Limitations of Diffusion Research

Research in the diffusion of innovations on the
basis of recall data has its limitations, just as every
research technique does. One is usually, as in this study,
looking at a small, select number of innovations introduced
to a given economic group over a specific time period. The
selected innovations are a non-random sample of all possible
innovations. Since it is recall data, one can question only
those respondents who have remained in business throughout
the years.

Such a technique creates two possible biases in a
dynamic situation. Some entities could have adopted or did
adOpt in actuality, and have gone out of business in the

intervening time. To the extent that they differ from those

 

Some of the more pOpular names have been: innova-
tor-experimentor, carrier—early adopter, develOper-follower,
exploiter-laggard.

151

remaining in business, bias is introduced. 0n the other
hand, in a dynamic situation, new firms are always enter—
ing. If innovativeness is measured on a basis of time of
adoption, the new firm may be categorized as a late adopter
when, in fact, it is one that adOpted the practices as soon
as it could.

When the subjects of the research are business es—
tablishments, there is the problem of correspondence between
the firm and decision-makers within the firm. In the rural
sociology tradition, the individual farmer has been assumed
to be a permanent fixture of his farm. To the extent that
such assumptions do not hold or are not statistically con-
trolled, unexplained variance may be higher and a bias may
be introduced.

Another problem with this type of research is the
recall of earlier behavior. It has been indicated by Katona,
of the University of Michigan Survey Research Center, that
recall for any behavior over a time span more than a few
months is subject to gross errors. Still a cross—sectional
diffusion study requires recall information. In addition,
Rogers and Rogers have noted that recall of several items
provides more accurate information than recall of a single

item.8

 

8Everett M. Rogers and L. Edna Rogers, "A Methodo-
logical Analysis of AdOption Scales," Rural Sociology 26:4.
(December 1961)

 

152

Scales

Innovativeness is a construct. It is made up of
phenomena that exist in the real world. Innovativeness is
either measured as the time of adOption of a single new idea
or as some mathematical combination of the adoption of a

finite number of innovations.

The Innovativeness Scale

 

In this study there are 9 items making up the vari-
ous innovativeness indices.9 These 9 innovations are prac-
tices that are used by most United States mainland food re-
tailers, and are typical of practices used by the more effi—
cient retailers in advanced areas. Retailers were asked
about the applicability and use of the following 9 items:
(1) self-service groceries, (2) self-service meats, (3) pre-
packaged produce, (4) cash register, (5) Off-street parking,
(6) sales on cash only, (7) paid advertisement, (8) partici—
pation in training, and (9) group purchasing.

Each respondent was asked about the applicability of
each of the 9 innovations for his operation. If he felt it
applicable, he was asked if he ever used it. If he had ever
used it, he was asked the year he adopted it and if the in-
novation was in use at the time of the interview. Up to
this point, the methodology was very similar to other studies

of diffusion of innovation.

 

9See Appendix C for this particular part of the ques-
tionnaire.

153

One of the main differences between this study and
previous ones was that the applicability of each of the 9
innovations was also judged by the author. The applica-
bility for each innovation was the author's Opinion based
upon his practical experience in food distribution and also
upon other sections of the questionnaire. The author as-
sumed that all of the stores interviewed could use a cash
register, parking space, sell on a cash basis only, and
could purchase through a group. The applicability of the
other 5 innovations depended upon what the store sold, the
size of the store and other economic variables. Thus, the
author's view of applicability was that of an outside judge
or expert. Methodologically, it could be checked by other
judges, but was not.

The two questions concerning the applicability of
the various innovations was felt to be a necessary step
because of the wide diversity of food retailers. In addi-
tion, it was thought that there would be a significant
positive correlation between an "objective measure" of an
outsider and the owner—manager's perception of the appli-
cability of given innovations. It was hypothesized that
there would be a significant positive correlation between

the index of agreement on perceptions between the objective

source and the owner—manager and the other innovation indices.

Throughout the short history of diffusion of inno-

vation studies, there have been a number of ways suggested

154

for measuring innovations. As mentioned earlier, Rogers
suggested that more than one innovation should be used to
make up a scale:

The evidence to date suggests that recall dates of

a single innovation may be considerably invalid, but

that adoption scales composed of a number of innova— 10

tions may help to balance out part of this invalidity.

In this study, five different indices were constructed

from the survey information. The indices were constructed as

follows:

Innovation Index #1

This index notes only the gross number of applicable
innovations adopted. The expert's Opinion of applicability
for adOptions was summed for each respondent and divided
into the sum of the number of innovations that had been
adopted. This result was multiplied by 100. The highest
possible score would be 100 per cent and the lowest would

be zero.

Innovation Index #2

This measures the earliness of adOption. The year
of adoption column was converted to a percentile for each
innovation. The percentiles were summed and divided by the
number of applicable innovations in order to arrive at an

average.

 

10Rogers and Rogers, 2E! cit., p. 330.

 

155

Innovation Index #3

This index measures innovativeness in comparison
to the age of the firm. The hypothesis underlying this
rather different index was that firms innovate when they
are new. After being in business a while, they stOp in—
novating. The index was constructed by subtracting the
year of establishment of the firm (minus a constant 1 in
order always to work with positive numbers) from the year
of innovation. The differences are summed and then divided
by the number of subtractions performed in order to have an
average which can be compared to different numbers of in-

novations.

Innovation Index #4

This is an index of perceptual agreement. Here the
. expert's opinion of the applicability of the 9 innovations
was summed and divided by the sum of the owner's opinion of

the applicability.

Innovation Index #5

This is the summed relationship between the owner's
perception of the applicability of the 9 innovations and the
use of those innovations. It is the extent to which percep-
tions of possible use and actual use of the innovations can

be correlated.

156

Results of Hypothesis Testing

It was hypothesized that there would be significant
correlations between each of the five innovation indices.
Table 5—1 below indicated the zero order correlations.

TABLE 5—1.—-Zero order correlations between the various
innovation indices (N = 91)

 

Innovation Index

 

 

Innovation Index 1 2 3 4 5
1. (PIA) per cent of inno-
vations adopted 1 l.
2. (AYA) average year of a
adoption .767 l.
3. Self renewal .121 .042 l.
4. Perceptual agreement .948a .585a .129 l.
5. Do use/could use .3113 .061‘ .169 .354a l.

 

aStatistically significant .01.

Source: Survey data.

 

It is seen that the hypothesis did not hold up in
certain indices. It is obvious that Index #3 was measuring
something different from the other indices. Factor analysis
techniques should indicate how it is that Index #3 is dif-

ferent from the others.

The Expert Versus the Owner
Table 5-2 denotes: (l) the lack of agreement be~

tween the expert view of applicability and the owner's view

157

TABLE 5-2.--Perceived applicability and use of each of the
nine innovations

 

Owner Owner Percep- Expert
Perception tion of Ap- Perception
Innovation Versus plicability Vs. Use of
Expert Versus the Inno-
Perception Firm Use vation
r r r
1. Dry grocery
self-service .l9l .899a .173
2. Meat self-service .280a .951a .266
3. Pre—packaged fruit a a
and vegetable .303 .985 .298
4. Cash register .177 .902a .160
5. Parking for cars .041 .999a .041
6. Cash sales only .060 .946a .057
7. Paid advertising .039 .998a .039
8. Training programs .056 .889a .050
9. Group purchasing .028 .998a .028

 

aSignificant at/or beyond the 99% confidence level.

 

of applicability for each innovation; (2) the high degree of
correlation between what the owner believes applicable and
his use of that innovation; and (3) the correlation between
the expert Opinion as to applicability and the use of the
innovation.

Columns 1 and 3 show the low degree of correlation
between the expert opinion and the use of the innovation by

the firm. Basically, column 2 reveals that firms are using

158

those innovations the manager believes applicable. The

high correlation between Innovation Index #4 and Innovation
Index #1 in Table 5-1 indicates that the agreement is greater
in those firms with high adoption rates. Among those firms
with higher percentage adOption, there is a higher agreement
in perception of innovations. (The correlation coefficient
is r = .948.) Thus, one could conclude that innovative

firms perceive possibilities to a greater degree than non—

innovative firms.

Conclusion

 

This low correlation coefficient between the per—
ception of the outside expert and the perception of the
owner-manager could lead to two or three different conclu-
sions. The first possibility is that the United States
"expert's" views of what innovations are good, prOper, and
necessary for a food retailing establishment are invalid
for food retailers in San Juan and Mayaguez, and the owner—
managers know this. However, the significant correlation
between perception of individual innovations and the per—
centage of innovations adopted (PIA-Index 1), as well as the
significant correlation between perception and average year
of adoption (AYA—Index 2) would tend to discredit this line
of argument. This would be even more meaningful if the re-
tailers with greater sales growth have a significant corre—
lation with the perception index, but that correlation is not

significant. Thus, the results are somewhat inconclusive.

159

Another possible interpretation is that the United
States expert's perception is in actuality valid, but the
operator will not see using the innovation as being to his
advantage. The experience of 20 years of failure of trav-
eling experts in having their recommendations implemented
might be accepted as tentative proof that the outside ad-
visory expert is unlikely to accomplish change in the system.

If change comes about when a man with the power to
do something risks what he had because he believes in it,
then extra capital will not necessarily bring about the change.
In food retailing, in Puerto Rico at least, the owner-managers
who are not now using the innovations see.Ltt1e need for them.
Thus, either the attitudes change, or new peOple come into
the business who see additional Opportunities. The main
change agents in Puerto Rican food retailing have been new
entrants. (See Table B-3.)

Rogers noted that if one expects high adOption, "it
is the characteristic . . . not as seen by experts but as

perceived by the potential adopters that really matters."11

Prediction of Innovativeness

Much of the work of Everett Rogers has been concerned
with obtaining sufficient information for predicting innova—
tiveness. Social scientists have completed studies and now
have tests which purport to predict the probabilities of

success in specific occupations, academic pursuits, and even

 

lRogers, Diffusion of Innovations, p. 123.

160

marriage. However, those who loan money for investment, as
well as those government officials who are concerned with
bringing about social change, have little to go on . . .
except faith in their own expertise.

Consider the case of Puerto Rico in the mid-1950's.
The governor had requested studies of food distribution. A
commission analyzed the studies and recommended that the
food distribution system needed change. The Economic Devel-
Opment Administration made available technical assistance
and capital for changing the system. As with most projects
of this type, funds and administrative time were not unlim-
ited. Thus, one of the questions was selecting which busi-
nessman should be helped by major efforts of the government.
The banker's standards of loans is one of past performance
for which wealth is a fairly good indicator. Thus, an up-
standing, respectable, second or third generation business-
man would have more possibility of obtaining a loan than
would otherS. It was noted in Chapter I that the theories
of E. E. Hagen12 and Eric Hoffer13 suggest that the outsider
would be more likely to try something new and unproven. As
mentioned in Chapters III and IV, the administrators of the
Economic DevelOpment Administration found that to be the

case in Puerto Rico. Successful local businessmen were

 

12Hagen, 22. cit.

l3Eric Hoffer, The Ordeal of Change (New York:
Harper and Row, 1963).

161

unwilling to shoulder the risk of new ideas. They were
unwilling to risk what they had for the uncertain future

of something that might fail. Thus the EDA was forced to

turn to outsiders as well as those Puerto Ricans who had

not yet been eminently successful. It was a matter of in-
tuition to identify those who would be more likely to succeed.

It would be helpful to know the characteristics which
explain some, if not all, of the variance in innovativeness
of food retailers. Since a program of directed change has
taken place in Puerto Rico since 1955, a study of the factors
associated with innovativeness in food retailing would be
worthwhile as a preliminary effort to devise a predictive
tool for use of change agents in food retailing in other
areas.

Three such methods of analysis will be used in this
study. First, the zero-order correlation of a number of
independent variables with the two highest inter-correla—
tions of the measures of innovativeness (the dependent
variables). (These two are Innovation Index #l—-percentage
of innovations adopted [PIA], and Innovation Index #2--
average year of adoption [AYA]). Second, the multiple cor—
relation of series of "independent" or predictor variables
with the dependent variables in terms of innovation. And,

third, factor analysis as a search method to see which

162

variables are most related to the various measures of
innovativeness.l4

Zero order correlation, the relation of one inde-
pendent variable to one dependent variable, is subject to
the same limitations as the Chi-square or t-teSt, except
that it provides an indicator of the strength of the rela-
tionship. It indicates how much prediction of the inde-
pendent variable can be improved by knowing the value of
the dependent variable. Still, zero order correlation has
the weakness of abstracting one variable from the interre-
lationships of the world of reality.

The purpose of utilizing such an approach for under-
standing who are the firms and the individuals is one of
economy or, in other words, a task of successive approxi—
mation. Certainly, the most economical in time and money
is zero order correlations. If the zero order correla-
tions do not give satisfactory results, then multiple cor-
relation will be utilized. In order to see what variables
go together, to better understand certain ideal types and
thereby better understand who are the innovators, factor

analysis will be used.

 

14Many of the diffusion studies have used Chi-square
or the t-test to check for significant differences in two-
way relationships. While such studies are useful, they pro—
vide less useable information for the decision-maker or
change agent because the variables are isolated from the
system within which they Operate.

163

Some Zero-Order Correlations

Hypotheses to be Tested

In Chapter II, a number of bi-variate hypotheses
were proposed concerning the importance of certain vari-
ables in relation to innovativeness. They are listed in
shortened form in Table 5—3. Some of these hypotheses and
the background for them was discussed in greater detail in
Chapter II. It can be determined from the table that the
majority of these hypotheses are statistically significant.
The name of the variable is noted in Table 5-3. The hypoth-
eses that were not accepted will be discussed first, fol-
lowed by the discussion of those hypotheses that were accepted.

Bi—Variate Hypotheses Not Showing
Significant Differences

 

ES! firms 2£2_mg£g innovative than established figgg,
The evidence does not support the hypothesis. Another con-
firmation that this contention was not accepted was the dis-
covery that Innovation Index #3--Self renewal15 is not sig—
nificantly correlated with the other innovation indices nor
with many other variables. Basically, the evidence is that
while the age of the owner or manager is inversely correlated
to PIA, the age of the firm has no relationship to innova—
tiveness. Another reason might be that the firms are all

relatively young. The median age of the 91 store Operations

 

15 . . . . .
See the section on index construction earlier in

this chapter.

164

TABLE 5—3.—-Zero order correlation relationships with two

measures of innovativeness

 

De endent Variable

 

 

 

Per Cent' Year of
Independent Variable Name AdOpted Adoption
Correlation Coefficient
-(PIA) (AYA)
r r
Innovative firm managers a b
are younger .351 .165
Innovative firm managers have more
education, years school completed .317a .246a
Innovative firm managers differ
significantly in natural origin:
Puerto Rico -.317ac -.286ac
Cuban .350 .181
United States .084 .131
Innovative firms utilize
more government help .359a .295a
New firms more innovative than
old established firms .139 .028
Size of sales .342 .895
Innovative firms, more sales growth .000a .097a
Innovative firms have fewer suppliers .495 .300
Innovative firms have greater
United States purchases .122 .153
Innovative firms have greater know-
ledge of, and use of, U.S. prices .379a .347a
Innovative firm managers have
more political knowledge .278a .225a
Innovative firm managers have b b
more.military experience .235 .215
Innovative firm managers have
higher use of mass media .127 .134
Innovative firm managers have a a
higher government index scores .410 .351
Innovative firm managers have
more mobility .086 .054
VALUE
Innovative firm managers have ac ac
more modern attitudes -.291 -.267
Innovative firms have more
educational achievements (son) .011 -.034C
Opinion why peOple go out of
business--old age —.335ac -.284ac
Innovative firms have more
market progressivism —.l93C -.180C
aSignificant at 99% level. Source: Latin
b . . American
CSignificant at 95% level. Food Study,
Minus (-) indicates more modern. 1965—66.

165

was 5 years,16or, to put it another way, 50 per cent of the
stores in our sample were started after 1960.

Innovative firms hgyg_m2£g'sglgs growth. Perhaps this
hypothesis was not confirmed because of the inadequacies in
the written records. (Only 11 per cent of the respondents re-
ferred to written records for data.) Thus, there were a great
number of cases where the respondents did not remember what
sales had been made in an earlier time period. The arbitrarily
chosen time period over which sales growth was to be measured
was 5 years, an intermediate time period in U.S. accounting
terms. It was obvious, after the field results came in, that
in the dynamic Puerto Rican situation, 5 years was a "long
time," since 50 per cent of the stores had been founded within
that period. Thus, the rejection of this hypothesis is felt
to be due to a measure of sales growth that did not fit the
situation in which it was used. The author's "expert" belief
is that the innovative firms had a much greater degree of sales
growth. And, one evidence of this is the rapid growth of the
percentage of food sold by corporate stores which are signifi-
cantly greater adopters of innovation. However, statistically
the hypothesis was not supported.

Innovative firms will have fewer suppliers. The

 

 

 

 

 

hypothesis could not be accepted, even though the correla-
tion coefficient was statistically significant. Correlation

is .495 with PIA and .300 with AYA, respectively, which

 

16See Appendix B for a more detailed discussion.

166

is just opposite from the predicted direction. In other
words, the more innovative firms,which will be noted later
and are also the larger firms, had more instead of fewer
suppliers. The direction and statistical significance of
this correlation between number of suppliers and innovative
firms is another designation of the lack of vitality of

17

full-line food wholesaling in Puerto Rico.

Innovative firms buy 2 greater percentage 23 their

 

merchandise directly frgm'thg United States. This hypoth-
esis could not be accepted due to the lack of a statistic—
ally significant correlation coefficient. Early evidence
from the three largest food retailing firms showed they were
dealing directly with U.S. suppliers. This fact led the
writer to believe that buying directly must be more profit-
able and therefore the more innovative firms would buy
directly from the United States also. Such was not the case.
Innovative £i£m_managers will hayg greater 222.2£

the mass media. Many previous studies18 had indicated that

mass media usage was correlated with innovativeness, yet
there was not a statistically significant correlation. Al-

though there is no reasonable explanation, the variable

 

17Another aspect of the belated lack of change in
food wholesaling is discussed in the preceding chapter.

18A good bibliography in this area is Delbert T.
Myren, Communications in Agricultural Development, Londres
40, Mex1co 6 D.F., MexiEo, November 1965.

167

"index of mass media exposure" does make a significant con—
tribution to the multiple correlation against these same
independent variables.

Innovative firm managers have greater mobility. One

 

of the more complicated variables, mobility, was measured by
summing the scores of four questions. Perhaps it was not
significant because all Puerto Ricans travel a lot. In our
survey, 72 per cent of the respondents had been outside
Puerto Rico.

Innovative firm managers will_wggt their £233.52

have more education. This hypothesis is similar to the one

 

 

previously presented. There is little variation in educa-
tion aspirations for sons; fathers want their children to
have at least a college education and they believe it pos—
sible.

Innovative firm managers will have more progressive

 

 

market attitudes. The market progressiveness index was the

 

summation of nine Likert-type questions asked of all re—
tailers. The questions, which were new as a set of ques-
tions, subsequently proved not to be unidimensional, and
.did not make up a scale. Thus, one of the reasons for this
index failing was its methodological inadequacy. A later
analysis will correlate the nine individual items in this

index to the indices.

168

Bi-Variate Hypotheses that Were Accepted

Although the above—listed eight hypotheses could
not be accepted, 13 of the hypothesized relationships
presented in Table 5-3 were statistically significant. The
profile that one draws of the innovative person is that he
is younger, had more education, is likely to be an extran-
jggg, has utilized more government help, has more suppliers,
and has a greater knowledge of United States prices.

The variable with the highest £_is one that was
correlated in the Opposite direction. The second-ranking
variable, knowledge and assistance of government help, ex-
plained only 17 per cent of the variance in innovativeness.
Thus not one of the statistically significant zero-order
correlations was high enough that a decision-maker would
want to take action utilizing these findings as a basis for
any major program.

Still, it is notable that the significant correlations
are in both economic and social variables. Eight out of the
21 independent variables mentioned in the simple correlations
are economic in nature and are concerned with the performance
of the firm. While only 3 of the 8 are statistically signif-
icant, they have higher correlation coefficients than the 6
of the 7 sociological variables. In short, while both eco-
nomic and social variables are significant, zero-order cor—

relation leaves something to be desired.

169

Multiple Correlation

Multiple correlation is a statistical method whereby
a series of independent variables is related to one dependent
variable. Some diffusion of innovation studies have util—
ized multiple correlation to predict innovativeness in the
past. Rogers summarizes a number of the studies through
1962 in his Table 10-1. From 17 to 64 per cent of the vari-
ation was predicted in those analyses.19 Since Rogers' book
was published, a Diffusion Documents Center has been estab—
lished at Michigan State University. Annually, the center
publishes a bibliography of the empirical studies concern-
ing innovation. 0f the one thousand studies listed in the
1966 bibliography, only 80 have utilized multi-variate sta-
tistics including multiple correlation. The explained
variance in innovation studies using multiple correlation
extends from a low of 17 per cent to a high of 69 per cent.
A summary of those studies using multiple correlation is
presented in Appendix E.

It is interesting to note that in all of those cases
where 30 per cent or more of the variance in innovativeness

has been explained, there is a combination of economic and

sociological variables.

Hypothesized Relationships
As a result of perusals of earlier studies, reviews

of various theories of social change, and personal depth

 

19Rogers, Diffusion of Innovations, p. 288.

170

interviews with participants in Puerto Rico, it became
obvious that any set of independent variables from a single
discipline would have limited predictability. It was
therefore decided to utilize the power of a large-scale
computer and draw upon a great number of variables in
order to raise the explained variance.20 Since the unit
that could adopt was the retail food establishment (in
most cases a firm) but information was obtained from the
owner, manager, or primary decision—maker, we collected
both personal and institutional information. The 35 inde—
pendent variables used to predict innovativeness were broken
into the following groupings: demographic, performance, and
value orientations and opinions. They are presented in
Table 5-4.

Two different measures of the dependent variable
were used just as they had been in the zero-order corre—
lations. Innovativeness Index #1 (PIA) was the measure of

the percentage of innovations adopted. Innovativeness

 

20Two objections to the practice of using a large
number of variables in the past have been: (a) the horren—
dous calculation job (but computers have removed that prob-
lem), and (b) the problem of spurious correlations result—
ing from the great number of variables. However, the sta-
tistic R72 which takes account of the extra variables, is
useful here. R“ is the multiple coefficient of determina-
tion adjusted by degrees of freedom. The value of R‘2 lies
in the fact that adding an additional independent variable
to the least sguares equation will never decrease R2 and
may increase R slightly due to spurious correlation. 0n
the other hand, R‘ may decrease since the additional vari—
able and its degrees of freedom are accounted for.

TABLE 5—4.—-Statistically important variables

 

Demographic

City
Sales by license
Neighborhood income level
Age of owner
Education of owner
Income of owner
Nationality

Puerto Rican

Cuban

United States

Performance

 

Actual sales

Sales Growth

Per cent sales on credit
Perceived family income
Number of suppliers

Per cent purchases in U.S.

Mass media usage
Political knowledge
U. 5. prices

Government help, use and know

Mobility

Values orientation

and Opinion

Personal

Modernization

Trust

Trust

Risk orientation

Trust

Hoarding index

Mobility

Educational achieve-
ment, son

Supers have all

Government programs
help only

Competition larger
6 years ago

Index of market attitudes

Why left:
Old age
Poor market
Super compt.

 

Index #2 (AYA) was a measure of the average time of adop—

tion of the innovations in comparison to a ranking of

other firms that had adOpted each of the nine innovations.

It is interesting to note that R2

and R"2 for the percent—

age of innovations adopted (PIA) is .875 and .833, respec—

tively. The two measures of explained variance are lower

when year of adoption (AYA) is considered. In this case,

R2 = .722 and R_2= .629.

the explained variance is

among the highest yet reported in studies of innovation.

172

Only 11 of the 35 hypothesized variables were
significant at 95 per cent confidence or more in helping

2 of .833. Those 11 variables which are

explain the R-
presented below are the ones contributing the majority

of the explanation for innovation: size of sales by munic-
ipal license; education of owner; actual dollar sales in
1965; per cent of sales on credit (negative); index of
trust; index of hoarding prOpensities; "supermarkets have
all the business they are going to get" (negative); "others
left retailing because they were poor managers" and "others
left retailing because of competition from supermarkets."
It is evident that there are "economic," "sociological,"
and "psychological" variables in the above list. Thus,

one could conclude that it is necessary to draw upon a
number of disciplines in order to increase explained vari-
ance in innovativeness. The hypothesis that predicted the
above 35 variables would be statistically correlated is
thus accepted on the basis of the high R2 of .722 and .875.
The correlations are significantly different from zero.

Using Zero Order Correlations as
Indicators for MuItiple Correlations

21
Some researchers have used the zero order corre-

lation coefficients to search out the best predictor for a

 

21See Rex R. Campbell, "Prestige of Farm Operators
in Two Rural Mississippi Communities," unpublished Ph.D.
thesis, University of Missouri, 1965, for an example.

173

multiple correlation prediction of a dependent variable. The
author went through the various zero order correlations be—
tween 183 independent variables and the previously mentioned
innovation indices. The 17 independent variables with the
highest correlation coefficient that made intuitive sense
were chosen for a multiple correlation run with the same two
innovation indices used before. Those variables are noted

in Table 5-5. The explained variance with these 17 variables
is R2 = .809 for PIA and .674 for AYA. While still high, it
is lower than the explained variance based on hypothesized
relationships. So, at least in this case, the raw empiricism
was not as useful as multiple correlation based upon theoret-
ical relationships. It is interesting how economic, socio-

logical and psychological variables all aid the prediction.

TABLE 5-5.--Multiple correlations with independent variables
with high zero order coefficients with innovativeness

 

Demographic Values
Age of business Luck
Age of owner Risk orientation
' Supermarkets have all

Performance the business
- Government programs, use

Actual sales

Credit, per cent of sales

Number of suppliers

Number of employees

Telephone orders

Monthly rent

Persons coming by car

U. 5. price knowledge

Yesterday media reading

Discounts taken

Purpose of training program

 

174

Factor Analysis

Introduction

 

The evidence of the correlations as well as that of
the preceding chapters seems to indicate that variables as-
sociated with any one academic discipline are not sufficient
for explaining changes in a complex interacting system like
food retailing. There is evidence that some better applica—
tions of a wholistic approach would help.

Since the availability of the computer, the statis-
tical technique of factor analysis makes the above conjecture
an operational and empirical question. It can be determined
how important is a multi-disciplinary approach. Eighty—
seven of the variables in the retailer survey were assigned
to a factor analysis. Another hypothesis which emerges from
the earlier chapters is that the environment and the econom-
ics of the situation do not fully define the set of avail-
able Opportunities and limitations. Many of the Opportuni—
ties and limitations exist within the mind, as was discussed
in the earlier section on differences in perception between
an owner-manager and an expert. Partially because of these
perceptual differences, it was noted that occasionally

extranjeros had to be depended upon to bring about the major

 

changes in food retailing. The difference in views concerns
both values and opinions,22and is indicated by agreement or

IZZValues and opinions are closely related and are fre—
quently difficult to distinguish. Some techniques of measurement
are the same for both. However, we differentiate between them on
the following basis: value is something for which there exists ac-
cepted evidential proof, while Opinion has no accepted evidential
proof. In this thesis, no attempt is made to distinguish between
them.

 

175

disagreement with the various statements made by individuals
associated with food retailing. These agreements and dis-
agreements are noted in terms of Likert scaling. Thus, it
seems that factor analysis could be of use in distinguish-
ing between types of peOple and firms and in determining

the make—up of some ideal types.

Techniqye of Factor Analysis

Factor analysis is a mathematical statistical tech-
nique devised some 30 years ago.23 Because of the laborious
calculations required, factor analysis was never very popu-
lar. The cost in time and labor did not usually justify
the possible results. Computers have changed that; today
a very complicated multifactor solution can be calculated
in a matter of minutes. In the analysis of this data, the
computer took 29 minutes and 45 seconds to solve 14 separate
87—variable factor analyses.

In factor analysis, one is searching for the kinds
of things that cluster on a given mathematically constructed
vector. The technique provides the researcher with:

(l) The amount of total variance in the variables
under consideration which is explained by each

factor;

(2) The amount a given variable contributes to a
specific factor;

(This corresponds to a correlation coefficient.)

 

23Oneof the better books explaining factOr analysis
is by Harry H. Harman, Modern Factor Analysis, University
of Chicago Press, Chicago, 1960.

176

(3) The "communality" or amount of the variance in
each variable accounted for by the particular
factor solution.

The researcher uses the computer print-out and looks
specifically for the particular combination of the highest
explained variance combined with the fewest number of fac—
tors which makes the most "intuitive sense" and on which
the pertinent variables show high loading. Factor analysis
is, therefore, useful when one is trying to make certain an
index measures one thing and/or when it is desirable to re-
duce a great number of variables for purposes of explana—
tion. In this study, the factor analysis was conducted with
the same retailers used in the correlation runs discussed

earlier in this chapter.24

An Example

Earlier in this chapter there was the discussion of
whether or not the innovation indices measured the same under-
lying construct. One way of determining whether or not in-

dices measure the same construct is through factor analysis.

 

24It will be remembered (and is discussed in Appen—
dix B in more detail) that the total sample of 140 retailers
was made of food retailers of various sizes. There were 49
who had sales of less than $12,000 annually. They were found
to have few accounting records. They were older. Because
they were socially and statistically different, they are not
included in the factor analysis. In the appendix, the name
"subsistence" retailers is given these Operators because,
even with the outrageously high 30 per cent gross profit and
10 per cent net profit, the profit for the largest Operator
would only be done for $1,200.

177

Basically, Table 5-6 shows that Innovation Indices l, 2,
and 4 measure the same thing. This can be seen because
the three indices are loaded most heavily on the same fac-
tor and the communality is higher. Another aspect Table
5-6 shows is the amount of variance in each index that is

explained by the factor analysis.

TABLE 5-6.-—Factor loadings for the five Innovation Indices

 

 

 

Innovation Indices Factor

Name No commu’

’ I II III IV V VI nalities

% adopted 1 .79 .18 .09 .05 .24 .09 .73
Year of

adoption 2 .65 .18 .13 .03 .16 .08 .51
Renewal 3 .01 .13 .14 .ll .08 .02 .20
Perceptual

agreement 4 .75 .14 .13 .06 .21 .05 .65
Action vs.

perception 5’ .12 .10 .14 .10 .35 .04 .18

 

Appendix E reproduces the six-factor matrix solution
together with the name and associated variable numbers.
Listed below are the six tables which correspond to the in-
dividual factors. Only those variables are listed which
have a loading of .30 or greater. Those variables with the
highest loading and that contribute most to a given factor
have the highest numbers. Also, it should be noted that,
contrary to typical experience with factor analysis, no one

factor explains more than 10.5 per cent of the variance

178

here, yet all six factors explain 42 per cent of the vari—
ance in these 87 variables in the questionnaire.

By looking over the variables in each factor, names
have been assigned which seem indicative of the variables
grouped in that factor. Factor 1 and 3 describe certain
types of firms, factors 2, 4, and 5 describe types of owner-
managers, and factor 6 is a combination owner-firm index.

The names that have been given each of the factors follows:

Factor 1 - "Large modern firm"

Factor 2 - "Modern businessman"

Factor 3 - "Older non-growth oriented firm"

Factor 4 — "Traditional person" who is hOping for
better days ahead

Factor 5 — "Small traditional retailer"

Factor 6 — Modern independent owner—business

Each will be described in some detail below.

Large modern firm — Factor 1. Table 5-7 on the next
page lists the 21 significant variables which contribute to
this factor and explain 10.5 per cent of the total vari—
ance in the 87 selected variables. Because three innovation
indices are loaded on this factor, obviously this is the
large innovative corporation. It does a considerable busi-
ness in United States merchandise, and uses a great amount
of advertising. It is more likely to have an extranjero as
manager rather than a native Puerto Rican. In one sense it

was surprising that the "merchandise inventory" loading was

179

TABLE 5-7.--Large modern firm, factor 1

 

 

 

Ovariance
Variable #a Explained=lO.5%
FA # Item Primaryb
11 Type of legal org. this establishment has -.49
(corporation)

14 Square feet of sales are .61
15 Merchandise inventory at end of 1964 .30
17 Total number of people working .69
18 Total number of hours worked .54
19 Use of posters in showcase .49
20 Use of handout sheets .74
21 Use of ads in newspapers .46
22 Use of ads on T.V. .37
23 Use of loudspeakers for advertising .64
24 $ spent on ads and promotion last year .63
25 Number of weekly sales transactions .60
26 Number of suppliers .54
27 Per cent of purchases direct from U.S. .35
59 Personal family income of manager in 1964 .40
64 Size as determined from municipal license .81
74 Index of knowledge of U. 5. prices .64
79 Innovation Index No. l--per cent adopted .78
80 Innovation Index No. 2—-year of adoption .65
82 Innovation Index No. 4--perception agreement .74
85 Puerto Rican nationality -.50
86 Cuban nationality .45

 

aVariable numbers are for the computer identifica—
tion. The first number corresponds to the number on the

left sidg of the matrix in Appendix E.
Only those valiables with a loading of 30 or more

were listed as having a primary loading.

 

not higher than it is (.30). But in another sense, it is
understandable because of the instabilities of supply due
to hurricanes and shipping strikes.

The Young Modern Entrepreneur — Factor 2. This
factor is heavily weighted by value orientations and com-

munications behavior. Table 5-8 indicates that this factor

180

explains 7 per cent of the variance, yet it does not have

one variable from the discipline of economics.

There are

only three of the eight items of the index of modernization

included in this factor. Here, then, is an indication that

the modernization index was not single-valued;

TABLE 5-8.——Modern businessman, factor 2

it appears

 

 

 

. a varIEnce
Variaple # Explained=7%
Primary
FA# Item Loading
4 Read newspaper yesterday .46
5 Newspapers read regularly .53
6 Read a magazine yesterday .50
7 What magazines read regularly .55
10 Knowledge of political leaders .52
28 "Children should be instructed to
follow ways of past" —.65
30 "When a problem arises, one should
depend on leaders" —.67
36 "I prefer to work alone rather than
be tied to family" .57
38 "Consumers spend more for platanos
when scarce" -.68
39 "Egg classification and refrigeration
law is wise" -.4O
43 "Increase in income means smaller
proportion for food" -.50
47 "Milk regulations have benefited
business and consumer" —.61
49 "Supermarkets have all the business" -.49
51 "If friend asked you to co—sign a loan,
what would you do?" .45
57 Age -.42
58 Highest grade passed in school .45
66 T.V. main source for local news —.32
75 Index of government help .43
78 Loans most important source of funds
for expanding .35

 

aVariable numbers are for computer identification.
The first number corresponds to the # on the left side of
matrix in Appendix E.

 

181

to have measured more than one concept. (See factor 5 for
a better indication of the modernization index.) It ap—
pears from factor 5 that the modernization index identified
the traditional person better than the modern person. There
are six variables which are attitudes toward events and
parameters of the market place. It is rather obvious that
this individual would prefer not to have the government
regulating his business. He is highly educated, reads a
lot, and knows of government assistance, but he does not
use it quite as much as Type 3. He is oriented to the
future and is willing to borrow money to expand his busi-
ness. He is Optimistic in that he would willingly co—sign
a note for a friend.

The Older Firm with the Older Managgr — Factor 3.
Here is a company in trouble. As indicated in Table 5—9,
the owner has faith that the government will help him. His
sales have not grown, but he had adOpted some innovations
as indicated by the index of renewal. He knows about, and
has used, the government help to a greater extent than any-
one else. Five per cent of variance is explained by this
factor grouping.

As a matter of conjecture, one wonders if this man
isn't too old to carry the burden of competition in today's
world of business. Perhaps at one time he was progressive.
Perhaps he is just about to turn things around, but he is

feeling the pressures of competition. He does not believe

182

TABLE 5-9.-—Variables associated with the older firm that
is not growing, factor 3

 

 

 

. a variance
Variable # Explained=5%
Primary
FA# Item Loadng
12 Years business established .63
16 Index of sales growth —.68
29 "Happy with changes, new better than old" .32
34 "Confide only in relatives" -.42
36 When dealer reduces prices,
less earnings for him -.45
39 Egg classification and refrigeration
law is wise .41
40 When dealer reduces prices, less
earning for everyone -.39
42 "Group organizations such as buying
associations can be beneficial" -.6O
47 "Government programs benefit
select groups of dealers -.43
49 "Five years ago competition was stronger —.38
54 Putba windfall in local bank -.44
57 Age .32
65 Newspapers main source .36
75 Index of government help .48
81 Innovation Index No. 3 .40

 

aVariable numbers are for computer identification.
The first number corresponds to the # on the left side of
the matrix in Appendix E.

bThe primary loading of the variable age was on
factor 2, since it is loaded in the opposite direction.
Here it is used to better explain this factor.

 

in the benefits of group action, but does believe in price
reductions for certain merchandise.

The Transitional Manager - Factor 4. Table 5-10
shows that here is a manager who has not yet made up his
mind as to his true views. These 12 variables describe the

value orientations of a manager who is not consistent in

183

his values, but they do explain 5 per cent of total vari-
ance. 0n the one hand, he believes the problems of sell-
ing fruits and vegetables are more risky today, but at the
same time he claims that general competition was stronger
5 years ago. He does not want his son to have much educa-
tion and would not spend any windfall money for additional
education, but he would buy durables. The man has traveled

a lot, but apparently it is travel without specific business

TABLE 5-lO.--Transitional manager, factor 4

 

 

 

a Variance
Variable # Explained=5%
FA# Item Loading
46 "Risk and insecurity in selling fruits
less today" —.51
48 "Figures of Department of Agriculture
are reasonable and unbiased" -.33

49 "Five years ago, competition and
pressure were stronger" .33
55 Use of windfall income, buy or pay

 

 

debt on durables .65
56 Use of windfall income, education

for the family -.71
60 Year schooling desired for oldest son —.37
65 Newspapers main source for local news .37
67 Radio main source for local news -.69
70 Radio main source on prices for

fruits and vegetables -.48
73 Index of agriculture radio effect —.50
84 Index of mobility .54

aVariable numbers are for computer identification.

The first number corresponds to the # on the left side of
the matrix in Appendix E.
purpose. He claims to get his local news from the news-

paper and does not listen to the radio.

184

The Traditional Manager - Factor 5. In Table 5-11,
we see the portrait of the poorer and less successful busi-
nessman. He has his store in a poor section of town. His
world view is more traditional. He does not consider him-
self a continental, i.e., a U.S. citizen. The "expert" and
the traditional owner-manager disagreed most as to the inno—
vations applicable to his business. He doesn't trust others,
believes the market is of fixed size, and that government
actions benefit a select group. He believes in luck, an at—
titude generally associated with traditionalism.

Basically, it is doubtful that anyone can help this
fatalistic and poorly educated man.

The Modern Independent Businessman - Factor 6. This
man, as indicated in Table 5-12, is similar to the modern
businessman of factor 2, in that he uses the mass media ex—
tensively. However, he does not use interpersonal communi-
cation. He has not been quite as successful. His business
has been profitable and he has used the profits for rein—
vestment in his company. He uses advertisements and he
Operates in a "better" residential area. He either is a
member of a group or believes in group buying. He would
be the most likely to continue buying from a group instead
of from a one—shot wholesaler who offers a better price.

He believes he can influence his environment. There is a
sharp contrast between this type and the traditional manager.
Four per cent of the variance is explained by the "modern

independent businessman" factor.

185

TABLE 5—ll.--The traditional manager, factor 5

 

 

 

. a ‘Variance
Variable # Explained=5%
FA# Item Loading

1 Level of income in residential area —.44
31b "Better if scientists left things alone .41
32 "Most important thing in life to

succeed is luck" .59
33 "Things of past are better,

changes bring problems" .34
35 "Eat, drink and be merry, for

tomorrow we may die" .56
36 "Prefer to work alone rather than be

tied to family" ' —.45
41 "Consumers only spend a fixed

amount on food" .61
47 "Government programs benefit select

group of dealers" .40
50 "If relatives asked to co-sign

loans, would you?" —.57
51 "If friend asked you to co-sign, would you?" -.34
52 "How would you invest $10,000 saved from

income;"don't understand or savings account —.48
58 Education -.43
83 Innovation Index No. 5 -.35
85 Puerto Rican nationality .37
87 U. S. Continental -.34

 

aVariable numbers are for computer identification.
The first number corresponds to the # on the left side of
the matrix in Appendix E.

bBecause it helps explain the variance, this vari-
able is left here although it is loaded higher elsewhere.

 

Conclusion

If one were going to arrange the six factors from
that representing the most modern to that representing the
most traditional, the listing might be as follows: large
modern firm, together with modern businessman; modern inde-

pendent; older non-growth firm; transitional manager;

186

TABLE 5-12.-—Modern independent businessman, factor 6

 

 

 

. a VErIance
Variable # Explained=4%
FA# Item Loading

1 Level of income in residential area .31
2 Listened to radio yesterday .63
3 Hours listened to radio in a week .59
4 Read newspaper yesterday .46
5 Number newspapers read regularly .53
8 Watch television yesterday .64
9 Hours per week watch television .56
11 Type of legal organization this
establishment hgs -.36
21 Ads in newspapers b .35
31 "Better if scientists left things alone" -.38

53 Different wholesaler offered $.25 a box less,
would you continue buying from regular store? .33
68 Interpersonal channels are main

source of local news -.52
76 Personal savings of inheritances most

important source of funds -.46
77 Profits from same business most important

source of funds .51

 

aVariable numbers are for computer identification.
The first number corresponds to the # on the left side of
the matrix in Appendix E.

bThis variable loaded more heavily on other vari-
ables, but it helps explain the variance and was included.

 

traditional manager. Factor analysis has helped the under-
standing of the firms and persons associated with food re—
tailing in Puerto Rico in that it gives us profiles of
ideal types. For instance, a develOpment banker would do
well to concentrate his efforts on a person or firm with
the characteristics of the "modern firm" or the "modern

businessman."

187

Summary

Innovation has been a byword in Puerto Rican food
retailing, but there are differing perceptions of applica-
bility of specific innovations. The statistical analysis,
which concentrated upon those stores with more than $12,000
sales and had the added limitation of not including the es—
tablishments of the two largest retailers, was a methodo-
logical success. The explained variance of innovativeness
was the highest that has yet been reported. Other studies
are presented elsewhere. The independent variables were
multidisciplinary and represented variables of both the
firm and the individual responsible for major decisions
in that firm.

An attempt to develOp new innovation scales was a
limited success. However, it was evident that a respondent
felt he was using most ideas that were applicable.

The simple correlations with innovativeness were of
less use than the multiple correlations. Contrary to hy-
pothesized results, the number of suppliers serving a firm
increased as innovativeness and size increased. Both
multiple correlation and factor analysis help explain who
the innovators were and what kind of variables are associ-
ated with those persons or firms most likely to bring about
the change in food retailing in Puerto Rico. As has been

discovered in other studies, the innovator tends to be a

188

well-informed person of younger age, who is meeting with
some financial success. More likely than not he is some
sort of foreigner. The business is not one of the smallest
types because he then could not afford to fail in his inno-

vations.

Conclusions

Perception of applicability of innovations varies
and is important in the adoption of those innovations. Un-
less the owner-manager perceives the need for an innovation,
it is unlikely it will be adOpted. The "expert's" view of
the applicability of innovations was highly related to
those persons who were more likely to try an innovation.

Innovative-type individuals and firms can be iden-
tified with greater than chance probability. A multi-
disciplinary approach produced a higher explained variance
of innovativeness than any previous study.

Change agents should look for persons with the

characteristics noted in Tables 5-4, 5—7, 5-9, and 5—12.

CHAPTER VI
CONCLUSIONS AND SUGGESTIONS

Introduction
In Chapter II it was suggested that there were

three core objectives within the total framework of deter-
mining the role of marketing in economic develOpment. These
objectives were: (1) to describe accurately what happened
in food retailing between 1950-1965; (2) to investigate and
explain the process by which change occurred in the Puerto
Rican food retailing sector during a period of directed and
planned development; and (3) to understand better the vari—
ables correlated with innovativeness as well as multivariate
correlates of the innovative process. Chapters III, IV, and
V covered these objectives in detail. The three objectives

were followed by some specific questions which were not

covered earlier.

Broad Issues Considered

The "National Market"

The first broad question raised in Chapter II dealt

\vith Rostow's phrase, the "national market." First of all,

189

190

it was asked how is a "national market" identified? Fur-
ther, how is it to be Operationalized? The national mar-
ket could be defined as the exchange between people mea-
sured in money terms. If this definition is accepted, then
the per cent of total consumption and investment that
passes through commercial channels could be considered an
index of the amount of a national market that exists. In
this sense, there was more of a national market in food in
1963 than in 1949. In 1949, only 44 per cent of the food
consumption passed through retail food stores, but by 1963
the figure had increased to 63 per cent.

A second part of the question on national markets
concerned the recommendations for creating more of a na-
tional market. Some insights were generated in the pre—
ceding chapters of this thesis. Based upon the Puerto
Rican experience, it seems clear that the precursers of
change were many. One of the biggest was the public and
private commitment of the most powerful politician and
the first elected governor of Puerto Rico, Luis Mufioz-
Marin. He committed himself and his party to a broad
program of social reform in the late thirties. He found
a co—worker, Teodoro Moscosco, who became the implementer
of Mufioz-Marin's ideas. Moscosco, as chief of the Puerto
Rico Industrial Development Company and then of Fomento,

was concerned with achieving results. He was willing to

191

go wherever necessary to get persons who could help
achieve the results for "Operation Boot Strap." He was
willing to give help to new entrants, even foreigners.
Not only was Munoz-Marin committed to social reforms,
but he commissioned studies by the experts and then
acted upon the experts' recommendations.

Retail food stores introduced new products to the
consumer. The unique commonwealth status permitted food
retailers to by—pass local exclusive agents and whole—
salers if it was advantageous. Some of the larger re-
tailers were buying three-fourths of their supplies di—
rectly from the United States in 1965.

Another contributor to the creation of more of a
national market was the reduction in gross margins both‘
as a result of directed efforts at change and also pri—
vate initiative. It was noted in Chapters III and IV
that gross margins had apparently decreased since 1949
and that prices of basic commodities were lower in super-
markets in 1966 than in the smaller stores. Lower retail
prices on basic commodities have seemingly meant more pur-
chases of those and other products. There is considerable
circumstantial evidence that during the time period in
question the demand for most goods, including food, was
elastic.

Still another way in which more of a national mar—
ket was being created was through contract buying arrange—

ments between the large food retailing concerns and certain

192

producer groups. Partially as a result of better coordina-
tion and reduced price fluctuations, production has in—
creased on certain high-value items such as eggs and milk.

Finally, it should be said that the increasing de-
velopment of the national market was not in any way pre-
ordained or mechanical. It depended strongly upon new
entrants to bring about the necessary changes. The strong
suggestion of the Puerto Rican experience is that, by and
large, assistance is difficult, if not impossible, to pro—
vide for existing firms. Most of them do not want it and
will accept it only when their backs are against the wall.
0n the other hand, new entrants with certain sociological
traits discussed in Chapter V seem to have a better chance
of contributing to the increased national market. All of
this is in agreement with the theories of Eric Hoffer,
Everett Hagen, and E. G. Barnett. They tell us that change
is difficult and risky. Therefore, it is likely to be the
newcomer who will bring about the change because he can only
better himself.

In short, then, to create more of a "national market"
prices should be lower, and there should be a planned pro—
gram backed by the political leaders to foster greater ef-
ficiencies. In addition, the political leaders need cour-

age to permit newcomers to rise to the surface.

:32 1 94
Measuring Improvements in Exchange

A second broad issue raised in Chapter II was how
one measures the improvements in exchange or changes in
the distribution system that accelerate develOpment. Us-
ing the conventional tools of economics, statistics and
other behavioral sciences, it is difficult if not impos-
sible to assign causes for accelerated development.

It was mentioned in Chapter I that Currie and
others have proposed some different ideas for accelerating
development. Currie, in fact, is not satisfied with the
generally accepted definition of develOpment as a rise in
average per capita income. He would rather be concerned
with the level of living of the masses. Others, such as
Belshaw, accept the definition of increase in average per
capita income as the single best measure of develOpment,
but have different ideas on how to achieve it. Empirical
studies of the causes of accelerated develOpment are few.
Those that exist attribute it largely to technological ad—
vance of one form or another.

Correlation techniques can show that various factors
are associated with accelerated development. As mentioned
in Chapter III, between 1950 and 1960 in Puerto Rico the
real per capita income increased slightly over 5 per cent
per annum. During this time period and continuing into
1965, the distribution system changed rapidly. Still, us—

ing the tools of this thesis, it is impossible to say that

195

these correlated changes in distribution, which were tech—
nological innovations, caused the accelerated development
of Puerto Rico during the 15 years following 1950.

The engineering technique of systems analysis is
a tool that offers the possibilities of assigning causa-
tion to the development process. Systems analysis, in
conjunction with a large scale computer, provides the frame-
work for building a model. That model can then be tried
out countless times with varying options. The causation(s)
of accelerated development can be quickly identified in
the model. The closer the model is to the actual system
it represents, the more certainty one can assign of causa—
tion in that actual system.

A systems model of the Puerto Rican economy has
been designed by John Griggs of Michigan State University.
In his simple model, which forms the basis of his Ph.D.
thesis, he centered his attention on the effects of dis—
tribution on the Puerto Rican economy. A second genera-
tion model is being developed by Thomas Webb, also of
Michigan State. He will use this more SOphisticated sys-
tems mOdel to assess the effects of changes in distribu-
tion upon economic development. Thus, it is seen that
although this thesis could not answer the question of the
causes of accelerated development, work is progressing in

this field.

196

Changes in Food Distribution

A third question which was more specific depended
upon an affirmative answer to the preceding one. It was
asked if "changes in the distribution of food accelerated
development." This is a relative situation. If changes
in distribution in general do not accelerate development,
it is doubtful that changes in food distribution will.

A comprehensive and final answer to this question
was not developed in this thesis.:However, some first ap—
proximations are available from the evidence discussed in
Chapters III, IV, and V. Changes in food distribution
seemed to accelerate develOpment by providing added em-
ployment in the retail food sector. Total employment in
retail food distribution actually increased during the
years that efficiencies were being introduced. Also,
there is evidence that the lowering of the risk for grow-
ing certain perishable and high—value products,such as
milk and eggs, aided the economy through greater local
production. During this period of rapid income growth,
Puerto Rico imported no greater percentage of its food
in 1964 than in 1950. Yet, Robert Stevens suggested that
most countries who experienced rapid growth in per capita
income beginning at a low level could expect a large por-
tion of the added income to be spent on food, thus result-
ing in a "food drain." This "drain" occurred because pro-

duction of few countries was able to keep up with the

197

increased demand for food. The circumstantial evidence
is very strong that the existence of large scale retail-
ers who could make long term contracts in conjunction
with a positive program of government regulation and as-
sistance was a positive force in seeing that Puerto Rico
did not experience this problem during the 1950's. These
factors are discussed in more detail in the Ph.D. thesis
of Mr. Kelly Harrison.

The develOpment of stronger countervailing forces
in food retailing was another contributing factor. Fomento,
the Puerto Rican government institution that was charged
with bringing about industrial and commercial develOpment,
was responsible for setting up or encouraging new retail
operations. Fomento tried first to encourage established
local businessmen to invest in new retail facilities on a
matching funds basis. When Fomento failed in this attempt,
it became willing to help new entrants, such as Harold
TOppel of the newly established Pueblo stores. In addi—
tion, Fomento aided the Consumer COOperative Federation
with funds and technical assistance. Fomento also pro—
vided assistance to independent store Operators by help-
ing establish association buying and advertising.

Some attempts proved more successful than others.
In the late 1950's, one of the early corporate chains was
having financial difficulties. The governor himself ap-

pealed to a major supermarket chain in the United States

198

to enter the San Juan area to provide effective counter-
vailing power. It seems likely that this countervailing
power is in for some changes. In 1964, a new entrant from
the United States began a chain of stores. In 1966, larger

retailers began construction of two new food warehouses.

Contribution to Economic Development
On an intuitive basis, it seems safe to conclude
that food retailing has made a contribution to the eco-
nomic development of Puerto Rico in the following respects:
1. Employment has increased in food retailing.
2. Since 1956 food prices have not risen as rapidly
as wages. (How much of this is due to efficien—
cies in United States farming and processing and
how much is due to changes in Puerto Rican food

distribution is difficult to say.)

3. As noted in Chapter IV, Puerto Ricans are better
fed today than they were in the past.

4. As a result of contract buying and government
cooperation, the production of certain high-
value crOps increased significantly. Puerto
Rico did not experience a "food drain."
Correlates of the Innovative Process

As mentioned in the introduction to this chapter,
the third broad objective of the thesis was to understand
.better the correlates of the innovative process. Those
‘who direct or support programs of change would be aided
by knowing more about who the innovators are and how

cflnange comes about. Chapter V discussed the detailed

findings.

199

It was discovered that a combination of social,
psychological, and economic variables would explain the
largest share of the total variance yet reported. (The

explained variance was R2 = .875, for one measure of the

dependent variable innovativeness, and R2 = .722 for the
other.)

In order to get a better picture of the types of
firms and persons that were involved in food retailing in
Puerto Rico, 87 variables from the questionnaire were sub—
mitted to a factor analysis. The best solution appeared
to be a six—factor solution which explained 41 per cent
of the total variance. From the statistical analysis of
Chapter V, it appears that the ideal type person to bring
about change can be identified.

In factors 1, 2, and 6, and in the multiple cor-
relation, we find the man who is young, well—educated, is
a foreigner, who utilizes the mass media to a significant
degree. In general, he is well-informed; he knows of the
government programs set up to help him and his business,
and, in addition, he has a knowledge of prices in other
areas. He has traveled more than normal and believes in
man influencing his outcome.

Basically, the harbinger of change is not the man
with a store in the poorest section of town, but neither

is he necessarily the member of the establishment which

200

bankers sometimes prefer. Change agents, such as develOp—
ment officials, could possibly raise their predictive
capabilities if a personality and information knowledge
test were to be given loan applicants. The test could be

constructed from the findings of Chapter V.

The Innovation Indices

The questions concerning the innovations were
similar to those used in previous studies. Five differ-
ent innovadon indices were constructed.

While editing, an additional part was added to
the questionnaire by the author. The applicability of
each of the nine items, which served as the raw material
for the innovation indices, was judged on the basis of
goods sold, size of sales, and type of store. This ap-
plicability as judged by the author was used in the con-
struction of certain indices and also as a comparison
with the applicability as perceived by the owner. There
was considerable disagreement between the applicability
as judged by the author and the owner-managers. However,
there was significant and high correlation between the
author's and the innovator's perceptions,and the owner's
perceptions of applicability and use of the innovations.
One conclusion to be drawn from this is that the recom—
mendations of the outside short-term expert will not have

much meaning to the participants within a given social

201

system, due to the fact that the participants' perceptions
of possibilities and needs are likely to be quite differ-

ent.

Facts Concerning Food Consumption

In spite of one of the highest birth rates in the
world, the Puerto Rican population growth was less than the
percentage growth of the population of the United States
between 1950 and 1960. This smaller population growth ap—
parently contributed to the well being of Puerto Ricans in
terms of income which, in spite of an excellent growth, is
still less than the poorest state of the United States.

The consumer survey that was conducted in Mayaguez and San
Juan as a part of the Latin American Food Study in 1965—66
found that 25 per cent of the families still had annual in-
comes of less than $1,000, but the average incomes were
considerably above what they had been. Such low incomes
have been suggested as reasons for low purchases at super—
markets.

Some critics contend that supermarkets are only for
the rich. While it was found to be true that a signifi—
cantly greater prOportion of the rich shOpped at supermar-
kets, 58 per cent of all families in the San Juan and
Mayaguez SMSA's bought most of their food at supermarkets.
‘While 44 per cent of the families did some shopping in the

central market or plazas, little money was spent there. In

202

San Juan, the average weekly expenditure was $1.50, and
in Mayaguez, it was only $3.00.

Some persons thought that the maid of the well-
to—do families did much of the shopping, just as Galbraith
and Holton had reported in 1949-50. Apparently there has
been considerable change in the manner of food purchase
since, in the consumer survey, there was not one family
who admitted that the maid did the food shopping. There
were two probable explanations for this: supermarkets
make shOpping easier and perhaps even more enjoyable, and
other job alternatives made it more difficult to find do-
mestic help. Also, the man of the house is not a signifi-
can:person in the food purchasing decisions. The woman
makes these decisions.

Although the above facts are interesting, a study
such as this is of little value to policy makers in govern-
ment or private industry unless there are specific recom-
mendations accompanying it. The next section is devoted

to making some specific recommendations.
Policy Recommendations

Some Suggestions for Puerto Rico

1. Countervailing powers. Basically the Puerto
Rican government and private businessmen deserve plaudits
for the excellent performance of the retail food distribu-

tion sector since 1950. The Openness of the Puerto Ricans

203

to newcomers and to new ideas is laudable. The willing-
ness to permit new forms of competition should be main-
tained just as various means of countervailing powers
have been. Even though the effort to form a buying and
advertising association of independent stores failed in
the late fifties, government and/or private interests
should be ready to help form a new association since two
of the largest retail chains have warehouses under con-
struction. The new warehouses will probably lower the
cost of purchases between 1 and 4 per cent. These lower
costs can be reflected in lower prices, which will put
the independent stores in tough competition. It could
be reflected in higher profits which would leave the two
larger Operators open for anti-trust prosecution. In all
probability, the larger operators will opt for passing at
least part of their savings on to the consumer, which will
benefit the consumer but put the stores without warehouses
in a cost price squeeze. Based upon past experience as
well as the theories of Schumpeter and Hagen, some of the
existing operators who previously wanted nothing to do
with group associations will be willing and anxious to
join an association which will lower their cost..

There was some pressure in early 1966 to take anti-
trust action against the most successful retail food chain

because of its high profits. This author believes that

204

such action would have a disastrous effect on the invest—
ment climate. He believes that the government can spend
its efforts and money much better by fostering counter—
vailing forces which make competition stronger.

2. Foster the further develOpment of a "national
market." The marketing of fruits and vegetables has changed
little since it was first studied in the early fifties.
Some of the larger stores prefer to import produce from
the United States mainland because of assurances of qual-
ity and price. There is a need for a coordinated retailer,
government, and producer program similar to programs used
to increase local egg production during the early sixties.

If imports of trOpical fruits and meat from nearby
islands were less complicated, more of a regional market
could be created. Commonwealth Agriculture Department reg-
ulations keep some products from flowing freely into Puerto
Rico. More study is needed of the prospects for trade
within the Caribbean. However, it would appear that Puerto
Rico could profitably export manufactured goods and buy
more foods from nearby islands, especially the Dominican
Republic.

3. Consider changing certain laws. Three areas
that are now specifically covered by commonwealth laws
and regulations seem to be blocking the further develop—

ment of a "national market."

205

The law under which COOperatives are permitted to
Operate in Puerto Rico was approved before Commonwealth
in 1946. As pointed out in Chapter III, there is no pro—
vision under the law for retailers or commercial opera—
tors of any sort to form a COOperative. The law permits
only "consumers" or "producers" to form COOperatives. Yet,
in the United States some of the best retailers (e.g.,
Associated Grocers) are members of a retail-owned COOpera—
tive. The independent food retailers of Puerto Rico need
this alternative in order to remain a viable countervail-
ing power.

Another area in which there are shackles which pre-
vent effective operation of competitive forces is the anti-
trust and monOpoly field. Law No. 75, which was approved
in June 1964, protects vested interests. Although some
have argued that it is unconstitutional, it had not yet
been tested at the time of this writing. The main provi-
sion is that a processor-manufacturer may not change his
exclusive representative without giving the agent a dis—
prOportionate share of the future revenues.

‘Another unusual legal situation is that the united
States anti-trust laws are seemingly held in abeyance, As
of May 1966, there was a Commonwealth Office of Monopolis—
tic Affairs, but it was new and operating with a limited

staff. In contrast to the spirit of the United States'

206

anti-trust laws, there are differences apparently in price
for a given quantity of goods purchased from the United
States. Yet the above office was not prosecuting.

The 1962 edition of planning board regulations
governs the development of new suburban shopping centers.
That regulation specifies the minimum and maximum size and
the type of stores to be constructed in each suburb. Since
the construction company must build and pay for the neigh-
borhood shOpping center, the requirement has been met usu-
ally with the minimum size store. Many of the resulting
food stores are too large to be run by one employee but too
small to compete adequately with the large supermarkets in
terms of lines of merchandise carried. Thus, this regula-

tion should be studied for possible change.

Applicability of the Puerto Rican Experience

Certainly Puerto Rico is different. A sovereign
nation would have more difficulties in letting retailers
buy from suppliers in other areas. But, one must remain
impressed with what can be done when there is consensus
and a commitment to the objectives - which, in this case,
was better food distribution in order to lower consumer
prices. The experience of Puerto Rico has convinced the
author that it is possible to avoid Robert Steven's "food
drain" with improved distribution. The experience of Puerto

Rico shows that public policy working in conjunction with

207

private enterprise can help make a better life for the
people. It was only as the government got out of Oper—
ating its own business and into a facilitative role that
the rate of growth increased.

The Puerto Rican experience shows that the fear
of unemployment as a result of commercial reforms can be
and probably most always is a straw man. In a free and
Open society, reforms do not come about overnight. We
live in a dynamic world and any new institution brings
about reactions. As more efficient Operators came into
the scene in Puerto Rico, total employment in retail food
distribution actually increased. There was apparently no

time when employment decreased.

0n Bringing about Reform

It is a known fact that Puerto Rico is one of the
few areas of the world that has had a thorough—going re-
form in food distribution with little political opposi—
tion. One of the reasons for this was the manner in which
the government of Puerto Rico approached the subject. The
sequence of events which was described in detail in Chap-
ter III was critical. First the tOp political leader in-
dicated his concern with what he and others perceived to
be a problem (in this case, high food prices). Some tech—
nicians were asked to make a detailed study of the situa—

tion and publicly make available their results. After the

208

study was made, the top political leader appointed a com-
mission of interested parties to study the technicians'
recommendations. Finally, the government began a system
of planned reform, acting upon the commission's recom-

mendations.

A Paradigm_

The diagram below is one way of describing the
changes that took place in Puerto Rican food retailing
over the last 15 years. The rectangles are events which
appear to be significant in bringing about changes that
could affect rates of development. Each person and each
institution within which that person operates in a given
social system is a production-consumption unit (PCU).

That is, he has the potential to produce and the need to
consume in order to survive. Persons and institutions
relate to other persons and institutions through exchange.
The arrows in the paradigm represent exchange. The ex—
change may or may not have a monetary value assigned to
it; but,in the absence of coercion and if the relation—
ship is to continue, in the long run both parties must
perceive a gain from the exchange.

Economic development necessarily implies increased
exchange due to increased specialization (i.e., interde—

pendence).

209

A Paradigm of Events and Exchanges

in Food Retailing Changes

Commitment of
Political Leaders \\\\\\
;7 .1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Description
Analysis and /’ Commitment
Prescription // of Parties
of Interest
/7 ’/ to Goals
// 44r*‘”I"—
/
Felt Need /' Action Programs,
for Improve- ” Public or Private
ment by PCU

 

 

 

 

 

 

 

 

 

 

r. Accelerated \-\
/ DevelOpment /// N

No effect
A l

Disturbance Failure

 

 

 

Start

 

 

C, > = exchange which is made up of messages and goods
and services.

 

Increased exchange will not come about rapidly with-
out some factor to disturb the semi-closed system. The PCU
.changes internally-—then he takes action and makes happen
one of the events specified in the diagram. To the extent
that the PCU can bring about a successful exchange relation-
ship with other PCU(s), the other events may take place.
Either formal or informal description analysis and prescrip—

tion is necessary.

210

The event "commitment of political leaders" is
especially critical. If the politicians Oppose the change,
it will probably not come about.1 On the other hand, the
event "commitment of political leaders" by itself is not
a sufficient condition. It is desirable to have the com-
mitment of parties of interest, so that they will not com-
pletely block the suggested changes. If the parties of
interest are in a position which prevents them from block-
ing suggested changes, then action programs can be initiated.

At the time action programs are initiated, it cannot
be known for certain what the outcomes will be. The best-
planned efforts may not turn out as desired, but the action
program is more likely to be successful if the PCU (govern-
ment, corporation, or individual) had pragmatic individuals
who: (1) are concerned with results which, in this case,
are perhaps lower prices and certainly a higher capital out-
put to input rate; (2) are open to new solutions; (3) are
committed to the goals of a better standard of living; and

(4) have the ability to predict the individual contributors

to change (i.e., the innovator).

Summary

A government that was organized to solve problems

and the blessing of the top political leader was a basic

 

1There are those changes that come in spite of
political Opposition but they seem to be rare. The Oppo-
sition to chain stores in the United States was overcome
by their economic advantages.

211

factor in the changing retail system. The United States
government is organized differently. The check and bal—
ance system sets up ministries which represent various
interest groups (e.g., Labor, Commerce, Agriculture). In
sharp contrast, the Puerto Rican government of the fifties
had a powerful charismatic leader who essentially had three
Operating ministries: (l) planning--to make sure programs
were moving toward agreed upon goals on time and at reason-
able costs; (2) Fomento--the semi-autonomous agency charged
with the horrendous job of assisting industrialists and
commercial interests in setting up a sufficient number of
operations to increase income of the Puerto Rican citizens
and also hold down unemployment;2 (3) the Department of
the Treasury-—charged with getting sufficient revenues for
the government to Operate. Although there were other min—
istries, these three held the power.

In reforming the food distribution sector, Puerto
Rican officials made an intelligent choice in staying close
to the consumer. They depended upon the retailers' knowing
what consumers wanted and being able to get these goods
from producers and processors.

Basically, the officials were concerned with a com—

mon set of goals: keeping food prices from rising too

 

2Puerto Rico had the well—known escape valve of
unlimited migration at low cost to the United States.

212

rapidly and improving the retail stores. They were Open—
minded and willing to try a number of avenues. They were

not married to any ideology except pragmatic results.

Further Research Needs

 

The research project of which this thesis is a part
is funded through February 1968. In October and November
1966, the author and other members of the team moved on to
one of two less—developed areas: (1) Recife, Brazil, in
the northeast of that largest of South American nations, and
(2) La Paz, Bolivia, the capital of the poorest country in
Latin America. There, this research effort is being con—

tinued.

APPENDIX A

HISTORY OF THE LATIN AMERICAN FOOD

MARKETING STUDY

APPENDIX A

A HISTORY OF THE LATIN AMERICAN

FOOD MARKETING STUDY

The signing of a contract dated April 15, 1965, by
John A. Hannah of Michigan State University and C. H. Roller
for the United States Agency for International DevelOpment
climaxed a close interchange of ideas and modification of
previously unsolicited prOposals for studying the change in
food distribution and its impact on economic develOpment.
Dr. Charles C. Slater and Dr. Harold M. Riley were the co-
leaders of this project, which was first prOposed in late
1963.

At that time a feasibility study that suggested the
introduction of a major investment of AID funds in food re-
tailing and wholesaling in Bogota, Colombia, was under way.
The director of this study, Mr. E. Lee Feller, who had been
the chief of Fomento's food distribution action in Puerto
Rico during the mid-fifties, believed approval of a full-
scale investment program was imminent and invited Dr.
Slater to look over the proposal to make suggestions for
research and training which could be incorporated as a

complementary program. In December 1963, Dr. Harold Riley,

214

215

an agricultural economist, was invited to join Dr.
Slater,because of the former's experience and interest in
research and teaching of agricultural marketing in Colombia.
Frequent contact was maintained with Mr. Herbert Turner of the
newly established Technical Cooperation and Research Office

in the Agency for International Development. Mr. Turner
provided many helpful suggestions for formulating this unso-

licited research proposal.

Seed Money

 

In early 1964, it became evident that some funds
were needed for a bibliographical search as well as a
reconnaissance trip to South America. Dr. Garland Wood,
Director of the M.S.U. Latin American Studies Center which
was established in 1964, approved use of $4500 of a larger
Ford Foundation Grant for seed money. This grant provided
the funds for the initial contacts. The bibliographical
search by the author of this thesis showed that little had
been written on the role of distribution (marketing) in
economic development. In many cases, the underlying ra-
tionale of the development economist's theoretical con-
struct of perfect competition with its complete knowledge
and complete freedom of movement of resources generally
ignored any need to look at distribution. In some other
situations, the probable significance of distribution was

noted but not dealt with.

216

There was considerable uncertainty connected with
the feasibility study being concluded by Mr. Feller through
his company, Alliance Associates, in early 1964. Yet it
seemed it might well lead to a major action program in food
distribution in Bogota, Colombia, beginning in late 1964.
If so, the researchers wanted to be on the scene of bench-
mark studies before that action program started. Research

support from host country nationals would also be necessary.

The Trip

In June 1964, therefore, a survey trip was made to
Botota, Colombia, and San Juan, Puerto Rico, by Drs. Riley
and Slater and Mr. Wish. In Bogota it quickly became evi—
dent that (1) there would not be any USAID-sponsored in—
vestment program growing out of Mr. Feller's feasibility
study because of the political prOblems associated with
the prOposed changes in food distributions; and (2) there
was an even greater need for a major research effort con-
cerning distribution and its effect on economic develOp—
ment, partially because few people had any inkling of the
role of distribution in economic develOpment.

It was obvious that some of W. W. Rostow's speeches,
which later were rewritten and became chapters on the crea-
tion of national markets in his book View from the Seventh
Elggg, reflected ideas on the role of distribution that
could and should be subject to test. If Rostow were at

least partially correct, then the process of accelerating

217

development lay, to a much greater extent, within the capa-
bilities of a given nation than was previously thought pos-
sible. While in Colombia and Puerto Rico, there were sev-
eral instances brought to our attention in which distribution
played a critical role in the rate of develOpment. An FAO
official with several years' experience in land reform had
become convinced that distribution improvements, through
better communications and more stable prices, were more im-
portant than land reform. There were other reports of
similar experiences. Few, if any, were documented. Even
when documentation was available, it primarily involved
case studies without strong theoretical structure.

San Juan was the second stOp because of changes in
food distribution that had been introduced as a result Of
the 1950 pioneer study of marketing institutions--Marketing
Efficiency in Puerto Rico. The coordinators of the project
wanted to know what had happened in Puerto Rico, where the
situation was different. For fourteen years a popularly
elected government with a strong commitment to social reform
and economic develOpment had supported and implemented eco-
nomic feasibility studies. The above—mentioned Marketing
Efficiency in Puerto Rico was only one of several studies
impinging upon distribution. In addition, there was evi-
dence of individual and governmental concern for increas—
ing food production. However, no overall evaluation of

these changes had been made. Nonetheless, since Puerto

218

Rico was-—and is-—a Commonwealth in association with the
United States, various censuses of population, business,
manufacture, and agriculture were available. As a result,
Puerto Rico seemed like a logical place to begin the research.
While being somewhat dissimilar, it was not completely dif-
ferent from the United States. Puerto Rico is not strictly

a Latin American country, but it is not strictly North Amer-

ican either. It served as a stepping stone.

The Contract

After returning to East Lansing at the end of June
1964, Drs. Slater and Riley worked closely with Mr. Herbert
Turner of USAID in drawing up a completely new prOposal for
submission to the U. S. Agency for International Develop-
ment. The research approach prOposed was approved by late
December 1964. Final approval followed in late winter and

the contract was formally signed in April 1965.

The Provisions of the Contract
Appendix B of the contract between Michigan State

University and the U. S. Agency for International DevelOp—
ment spelled out the general plan of operation. The primary
purpose of this research project was to initiate and conduct
a comparative study of food marketing systems in Latin Amer-
ican countries in the early stages of economic development.
The study has, as its broad purpose, the design of more ef—
ficient, low cost food processing, marketing, and distribu—

tion systems.

219

The contract specifies that the work will be per-
formed first in Puerto Rico and then in a growing urban
area of some Latin American country. In Puerto Rico, the
research team was charged with performing the following
tasks in four major work areas: (1) to analyze changes in
the food marketing system; (2) to study communication net-
works for information concerning prices and supplies at each
step along the assembly and distribution channels serving
the food shed; (3) to consider the process of adoption of
marketing innovations; and (4) to evaluate such findings in
an effort to produce some general recommendations. Before
the first phase was completed, a seminar was also to be
held to discuss all preliminary findings.

Phase II research was to parallel the studies con-
ducted earlier in Puerto Rico. "The carry—over to the sec-
ond phase will include independent and critical variables
of food marketing systems; indices, statistical, and other
indicators of performance; data collection methods and de-
vices including field-tested interview schedules; technical
factors such as preservation, storage, and physical handling
systems, capital sources, labor conditions, marketing in—
stitution conditions, and regulatory framework."1 The field
work for the second phase was initiated in November 1966 in
Recife, Brazil, by a team sent by Dr. Kelly Harrison of the

Agricultural Economics Department.

1Page B-6, USAID Contract, AID/TCR - 786.

220

In October 1966, this author began work on a re—
lated USAID—sponsored project with the Latin American

Market Planning Center in La Paz, Bolivia.

APPENDIX B

SAMPLING PROCESS

APPENDIX B
SAMPLING PROCESS

The Sample

The sample of retailers and the universe from which
it was drawn will be discussed below. There were actually
two disproportionate stratified samples selected, one in
the Mayaguez Standard MetrOpolitan Statistical Area and the
other in the San Juan Standard Metropolitan Statistical
Area. In each city, the municipal government maintains a
list of commercial establishments that gives the name of
the business, its address, and the sales base on which it
was taxed. From these lists of retailers, those that had
codes indicating food retailers were chosen. It was evi-
dent that the size and sale distribution approached a
right triangle. In that universe for each city, a number
was assigned to each firm. On the basis of Snedecor, page
501, formulas were calculated to determine the necessary
sample size in each of five strata when a 95 per cent con—
fidence limit was chosen for a 10 per cent error in the
variable annual sales. After sample size was determined,
a skip interval was calculated based upon sample size and

size of the universe. An entry point into the universe

222

223

list was selected from a random number table and the sample
selected in this way. In each strata of each city, 30 per
cent additional names were chosen to make allowance for re-
fusals, out of business, etc. In case the above names were
insufficient, the procedure was to take the next name below
the one for which a contact was not possible.

One reason for sampling the two cities separately
was that the municipalities use different criteria to de-
termine the annual sales and, subsequently, the tax to be
paid. For instance, the largest pueblo store in San Juan
is listed on the tax duplicate as having about $6,000,000
in annual sales, which is close to estimate. On the other
hand, the Mayaguez Co-Op Supermarket is listed as having
only $300,000 in sales when, in fact, it has about
$3,000,000. It would appear that Mayaguez authorities
use a much lower base from which to tax.

When one wishes to talk of the hypothetical popula-
tion of San Juan and Mayaguez retailers, he uses an addi-
tional weighting of "4" for San Juan retailers. All
weighting calculations were made on the basis of the
sample obtained.

It can be noted from Tablelid below that the larger
stores were censused in each city. Their importance should
not be underestimated since the 27 largest stores, or 0.6
per cent of the stores, had 49 per cent of the business in
San Juan. On the other hand, 1.7per cent of the stores had

25 per cent of the business in Mayaguez.

224

TABLEI$J.--Characteristics of firms in the sample

 

Numfier of" WeighEOfor
Sales Range Establish- Sample Sample Population

ments DeSired Obtained Estimates

SAN JUAN SMSA,

2,000— 11,999 3,249 30 22 86
12,000— 47,999 824 30 30 16
48,000—119,999 113 10 7 10
120,000-479,000 63 19 14 3
480,000 plus 27 27 16 l

(census)

MAYAGUEZ SMSA

2,000— 11,999 642 30 27 20
12,000- 47,999 41 (7) 16 14 2
48,000-119,999 8 8(cens.) 7 l

120,000-479,999 4 4(cens.) 3 1
480,000 plus 0 O

 

Further Modifications for Analysis

Since those retailers in the smallest category, i.e.,
selling less than $12,000 annually, seem to be quite differ-
ent from other retailers, they were removed from certain of
the analyses. The reasoning behind this is not difficult
to envisage. (1) Any food retail establishment with less
than $12,000 sales, and with 25 per cent gross margin,
which according to Puerto Rican Department of Labor figures
is high, would have only $3,000 annually to pay all Operat—
ing expenses. They would find it difficult, if not impos-
sible, to survive if such an establishment were their only
means of income. Those of us on the project began referring
to these small stores as peasant or subsistence retailers.

(2) Interviewers found the small retailers had great diffi-

225

!

culty in giving meaningful answers to the questions they
were asked. (3) There was a very high turnover of small
retailers. Only the older person or the downtrodden seems
to stay in business as a retailer selling less than $12,000
annually. These were indicated both by an older median age
of such small retailers and by the greater number of uncom—
pleted interviews.

The tables below show two measures of the differ-
ences between those firms selling less than $12,000 an-
nually which, henceforth, will be called "subsistence re-
tailers" and the larger firms. (Appendix C gives other
definitions which are mentioned.)

TABLEjB-Z-—Year of establishment and per cent of inter-
views completed.

 

far cent of*

 

Median .
Establishments
view Completed
Subsistence Retailers
(sales of $12,000
annually or less) 1954 45%
Other Retailers
(sales of over
$12,000 annually) 1960 63%

 

The primary reason for failure to complete an in-
terview was that the firm had gone out of business. Thus,
while there appears to be a higher turnover among small
retailers as evidenced by the low completion rates, there

are those subsistence retailers who remain year after year.

226

Table B—3 indicates the effect of eliminating the
subsistence retailers from consideration of the innova-
tions. It is obvious that the subsistence retailers were

significantly less as adopters of these innovations.

TABLE B-3--Per cent adopting various innovations

Weighted Per Cent

 

 

 

Weighted . . .
Innovation Item Per Cent AdOption WIth £11m- Increase
Ado tion ination of SubSis-
p tence Retailers
1. Self-service,
Dry Groceries 21.6 48.5 26.9
2. Self-service,
Meats 11.7 21.6 9.9
3. Pre-pak fruits
& vegetables 11.3 20.6 9.3
4. Cash register 75.2 87.0 11.8
5. Parking lot 7.2 28.3 21.1
6. Cash sales only 50.7 33.5 -17.2‘
7. Paid advertising 7.6 16.3 8.7
8. Participate in
employee training5.7 8.8 3.1
9. Group buying 8.8 7.5 -O.7

 

Because of these differences, the subsistence re-
tailers (n = 49) were excluded from the following analyses:
(1) simple correlation; (2) multiple correlation; (3) factor

analysis; see Chapter 5.

 

‘There was a statistically significant difference in
"cash sales" on the basis of city. Statistically, more stores
sold on a cash—only basis in San Juan than in Mayaguez. When
the city variable is held constant, the per cent selling on
cash-only increases with increasing size. Among the "subsis—
tence retailers," 59% sold for cash-only in San Juan, while
only 11% sold on cash-only in Mayaguez.

APPENDIX C

QUESTIONNAIRES

CONSUMERS

AND
RETAILERS

228

LATIN AMERICAN FOOD MARKETING STUDY

RETAILER

DO NOT READ THIS PAGE TO THE RESPONDENT,
BUT FILL OUT BEFORE MAKING THE INTERVIEW

109-12

Project number

Name of the country and metrOpolitan area

Column 5 Column 6
Puerto Rico 1 San Juan 1
Second country 2 Mayaguez 2
Third country 3 Rural 3

Other 4

Zone within the city

01 06 12
02 07 13
03 08 14
04 09 15
05 10 16
ll 17

18

Survey number

Retailers 0001-0999 Wholesalers 1001—1999
Farmers 2001-2999 Consumers 3001-3999
Processors 4001-4999 Truckers 5001-5999

Office name:

 

Office address:

 

Telephone number:

 

Name of the persons interviewed'

President, Manager Housewife
Owner Husband
Second Chief Old child

Third Chief Other

229

1.14-15’ Interviewer's number: Interviewer's name:

 

 

(COLUMNS 1 TO 15 AME IN ALL CARDS)
1.16-17 Number of the card:

GEN RAL INFORMATION TO B FI D BY
THE INTERVIEWER FROM OBSERVATION

1.20 Income level in the residential area:

1. High 2. Medium 3. Low 4. Very low
COMPARE WITH THE PHOTOGRAPHS AND MARK ONE

1.21 Type of the location (retailers only):

1. Neighborhood small store standing alone
2. Secondary commercial center

3. Downtown commercial area

4. Commercial center in modern suburb

5. Stall in Central Market

6. Adjacent to the Central Market

1.22-23 Week in which the interview was completed:

01 8-14 Nov. 03 22-28 Nov. 05 6-12 Dec.
02 15-21 Nov. 04 29 Nov.-5 Dec. 06 13-19 Dec.

 

 

 

 

_ ppoint— _ _ Spe-
Meet ment Day Hour Com Person Closed Re Moved cify
ing Date Time pleted Not In fused Others
M
1 T
N
M
2 T
N
M
3 T
N

 

 

 

 

 

 

 

 

 

 

INTRODUCTION. SAY THIS: "Good morning. My name is
am an interViewer rom the study on the distribution Of food

in Puerto Rico. This study is being made by the Alliance for

Progress under the supervision of Michigan State Univer-

sity. This work will provide valuable information for the

economy of Puerto Rico. All this information is strictly con—

fidential and will not be revealed to any government agency

or other private interests.

 

230

IF THE STORE CANNOT BE CLASSIFIED UNDER ANY OF THE CATEGORIES,
DO NOT INTERVIEW IT

1.24 Retailer: Type of business

Supermarket with complete line

Full with complete line

Coffee Bar GO TO THE NEXT QUESTION
Meat and/or fish shOp

Chicken and egg shOp

Pastry shOp--retailer
Retailer--wholesaler

. Others

mummbwmw

ASK ONLY OF CAFES AND BARS

What percentage of your sales are for consumption
in your establishment? %

IF 50% OR MORE IS CONSUMED IN THE
ESTABLISHMENT, DO NOT INTERVIEW IT.

What percentage of the sales consumed in your
establishment are drink sales?

% of sales ' % of edible sales

First, it is necessary to know how many persons
work here.

number of persons

1.25 Are you the person in charge to do most of the
decisions in your business?

 

 

O No
1 Yes IF SO, GO TO THE NEXT PAGE. IF NOT, ASK:
1. Who is the person? Name
.‘Title

 

2. Well, according to the investigation method
that the University is using, I have to ask
some questions to that person. Is the per-
son in his office, or here?

NOTE: THE PERSON WHO MAKES THE MAJORITY OF THE D CI IONS
IN THIS BUSINESS IS THE ONE WHO SHOULD BE INTERVIEWED.

231

LATIN AMERICAN MARKETING STUDY

PART I
COMMUNICATION BEHAVIOUR

READ: INTERVIEWER: Mr. , the next part of the
questionnaire has to do with communi-
cation means. It is very important to
know about the communications that you
use in order to evaluate the question-

 

naire.
1.26 Did you listen to the radio yesterday?
0 No
1 Yes
1.27 Do you usually listen to the radio?
0 No GO TO #1.30
1 Yes
1.28—29 How many hours, more or less, do you listen to
the radio in a week?
hours
1.30 Did you read the newspaper yesterday?
0 No
1 Yes
1.31 Do you usually read the newspaper?

O No GO TO 1. 4
1 Yes

IF THE ANSWER IS "YES"

1.32-33 Which of the local newspapers do you usually read?

 

 

 

El Mundo Miami Herald

El Imparcial San Juan Star

El Dia New York Times
Others

 

1.32—33

Total Newspapers

232

1.34 Did you read any kind of magazine yesterday?

0 No
1 Yes

1.35 Do you usually read general information magazines?

0 No GO TO #1.38

1 Yes
IF THE ANSWER IS "YES"

1.36-37 Could you give me the names of the magazines you
usually read?

DO NOT READ THE ANSWERS

Time Bohemia

Life Readers' Digest
San Juan Review Religious
Boricua Other (specify)

 

Total Number of Magazines

 

1.38 Did you watch television yesterday?
0 No
1 Yes
1.39 Do you usually watch television?
0 No GO TO #1.42
1 yes

IF THE ANSWER IS "YES"

1.40—41 Approximately how many hours a week do you
estimate you watch television?

Total Number of Hours

1.42 Which of the following is your principal source
of local news?

Newspapers
Television

Radio

Member of the family
Storekeepers

Other friends

OWU'IbUJNH

233

1.43 Are you a member of any of the following
organizations?

READ THIS LIST TO THE INTERVIEWEE
AND NOTE EACH ONE:

 

Chamber of Commerce Lions
Junior Chamber Rotary
Retailer Association Others

U. S. Chamber of Commerce

 

(specify?
Total Number

1.44—49 May I have the names of the following persons?

IF THE ANSWER IS "I DON'T KNOW" OR "I DON'T REMEMBERfl
MARK FALSE

 

 

1.44 Chief Justice of the U. 5. Supreme Court (Earl Warren)
DO N T READ
1 Correct THE NAMES TO
0 False THE INTERVIEWEE
1.45 Prime Minister of Communist China (Mao Tse-Tung or

Chou En-Lai)
1 Correct

0 False
1.46 Director of Industrial Development Company
of Puerto Rico (Rafael Durand)

1 Correct

0 False
1.47 Secretary of the Department of Commerce in
Puerto Rico (Jenaro Baquero)

1 Correct

0 False

1.48 Secretary of State of Puerto Rico (Carlos J. Lastra)
1 Correct
0 False

1.49 Provisional President of the Dominican Republic

(Hector Garcia Godoy)
1 Correct
0 False

1.50 Governor of Puerto Rico (Roberto Sanchez Vilella)

1 Correct
0 False

1.51

234

Total Correct

ASK ONLY TO BUSINESSES OF 10 OR MORE EMPLOYEES:

1.56—57

1.58

In your business, with whom do you consult
about your commercial problems?

 

 

 

 

 

 

Name Position
1.
(With whom else?)
2.
(With whom else?7
3.
DO your business friends believe that you are one
of the first in adOpting new methods in the market?
0 No
l I don't know
2 Yes
During the last month did you talk with your busi—
ness friends about new commercial techniques?
0 No
l I don't know
2 Yes
Total of 1.52 and 1.53
In general, do more persons come to you looking for
information and advice than go to other businessmen?
0 Less
1 I don't know
2 More
Which do you believe are the island's two most

progressive food retailers?

l. 2.

 

Do you sell fruit and vegetables?

0 No PASS TO 31.62

1 Yes

1.59

235

Specifically, which in your principal source
of information about the prices of locally
grown fruits and vegetables?

READ THE ANSWERS

 

1. Newspapers

2. Radio

3. Visits to the market MARK ONLY ONE
4. Businessmen

5

. Other non-business people

If you have heard in any news program about
other retail prices of fruits in the market,
could you tell me what government agency spon-
sors the mentioned programs?

1. Department of Agriculture
2. Other agencies
3. I don't know

IF ANSWER IS DEPARTMENT OF AGRICULTURE:

 

1.61

1.64

How does this program help you? Does it tell
you much, something, little, or nothing?

3 Much

2 Something
1 Little

0 Nothing

Do you have any knowledge of the prices in the
United States of articles that you sell?

0 No GO TO 1. 4
1 Yes

Where do you get these prices?

 

Name

 

How does this knowledge help you? Does it tell
you much, something, little, or nothing?

3 Much

2 Something
1 Little

0 Nothing

What trade magazines do you read?

DO NOT READ THE ALTERNATIVES

 

None Grocergram
Chamber of Commerce Magazine Other(spe-
Supermarket News cify)

 

Total EDITOR: COUNT AND WRITE THE TOTALS

236

1.65 What source of information do you believe is more
useful, if you were to enlarge your business?

REFER TO CARD A

Neighbors or parents

Professors or teachers

Sales representatives MARK ONE

Government agencies

Consumers

Competitors

Mass communication source (newspaper, radio,
magazine)

Yourself--no other source

\lO‘U‘lhwwH

(I)

1.66 What kind of help does the Commerce Department
provide for businesses like yours?

0 None

(Aid in loan
(Training
1(Technical aid
(Sponsorships
(Other aids
(Don't know

 

1.67 Have you utilized this help?
0 No G0 #1.69
1 Yes
1.68 Have you been satisfied with this help?
0 No
1 Yes
1.69 What's the purpose of the training program of

the Commerce Department and Grand Union?
ANSWER: TO TRAIN BUTCHERS AND OTHER EMPLOYEES FOR STORES

0 Don't know, or false
1 Correct

END OF CARD

 

NEW CARD

2.20

237

RETAILERS

PART II — ECONOMIC INFORMATION

What is the legal organization of this
establishment?

READ THE ALTERNATIVES TO THE INTERVIEWEE AND MARK ONE

2.21-22

Year

2.24

2.25‘31

Private business or family
Partnership

Closed corporation

Open corporation

Cooperative (consumer or the owner)
Other (specify)

ONUWhUONH

 

In what year was this firm established?

IN TWO DIGITS-—FOR EXAMPLE, "47"
TO B C MPL T D Y TH D T R

1 Less than One year
2 1-5 years

3 6-10 years

4 11—20 years

5 More than 20 years

Do you (or the company) Operate other super—
markets, neighborhood groceries, or food stores
of any kind?

0 None

1 One MARK ONE
2 Two

3 Three

4 Four or more

Besides your business as a food retailer, does
your firm perform other functions, such as....?

0 No Wholesaler or agent

1 yes

0 No Food processing

1 Yes

0 No Production of agricultural products
1 Yes

2.32—36

2.37

238

O No Transportation

1 Yes

0 No Public warehouse or refrigerated warehouse
1 Yes

0 No Other activities related to food

1 Yes

Total TO BE COMPLETED BY THE EDITOR

IF ANSWER IS YES IN #2.25:

Which was the total value of your sales as a whole-
saler and food agent in 1964?

 

Total sales in 1964 IN DOLEARS

Since 1950, what has been the most important source
of funds for enlarging your business?

INTERVIEWER: READ CONSECUTIVELY THE
CATEGORIES FROM 1 TO 7. MARK ONE ONLY

2038—40

Personal funds or inheritance

Income from the same business

Loan from other family members

Loan from other individuals, not parents
Commercial loans

Loan from government—sponsored agencies
Other (specify)

\jmm-bUJNl—J

 

What was your total sales volume last week, includ—
ing credit sales?

OBTAIN EXACT SALES IF IT IS POSSIBLE, ESTIMATED
IF THERE ISN'T DATA

2941-46

2.47-52

Weekly IN DOLLARS

 

What was the sales volume in our retail business

during the past year? ESTIMATE EXACTLY, I964 OR
CALENDAR YEAR NEARLY TO 1964

Annual IN DOLLARS

What was the sales volume in your retail business
five years ago?

Annual IN DOLLARS ESTIMATE OR EXACT

2.57—60

239

What is the size of this location (exclude the
part that's used for residence)?

Square feet = X TO BE COMPLETED
long wi e BY THE EDITOR

 

How big is the sales area?

Square feet = X TO BE COMPLETED
Wide long BY THE EDITOR

 

Are you the owner of the building where your
business is?

O No (Go TO #2.62-65(a)
1 Yes (GO TO #2.62-65(b)

2.62—65(a) IF ANSWER IS "NO" What is your monthly rent?

2.62-65(b) IF ANSWER IS "YES" What would be the monthly rent

(a) or (b)

2.66—70

2.71-75

if you were going to rent to
others?

Total IN DOLLARS

 

What kind of equipment do you have? MARK HOW MANY YOU
HAVE OF EACH ONE

 

 

1. Cash register

2. Refrigerator, not self-serve

3. Self-service refrigerator

4. Deep freeze

5. Cold storage for meat, fruits, and vegetables
6. Truck

7. Others (specify)

 

 

What is the actual value of your equipment and
furniture, if you were going to sell today?

Value IN DOLLARS

 

What was the value of your merchandise inventory at
the end of the 1964 calendar year?

Inventory IN DOLLARS

END OF CARD TWO

NEW CARD

240

.1 -l7
bb 3.18-19

How many persons work in this business?

READ THE CATEGORIES TO THE INTERVIEWEE

Number

Owner or manager

 

 

 

 

3.22—23 Relatives without pay
3.24—25 Relatives with pay
3.26-27 Employees not relatives
3.28-30 Total persons TO BE COMPLETED BY THE EDITOR
3.31—45 How many hours weekly does each of your employees
work?
Hours READ TH CATEGORIE T THE IN ERVIEWEE
3.31—33 Owner or manager
3.34-35 Relatives without pay
3.36-37 Relatives with pay
3.38-41 Employees not relatives
3.42-45 Total hours TO BE PL T D BY H DI R
3.46—51 What method of advertising and promotion do you use?
READ THE LIST AND MARK THE CORRECT ANSWER ON
ALL THE CATEGORIES
3.46 Window posters
O No
1 Yes
3.47 Handbills
O No
1 Yes
3.48 Advertisement in the newspapers
0 No
1 Yes
3.49 Advertisement by television
0 No
1 Yes
3.50 Loudspeaker
O No
1 Yes
3.51 Others (specify)

 

O No
1 Yes

3.56-59

241

How much did you spend in advertisement and
promotion last year?

Total IN DOLLARS

Approximately how many individual sales trans-
actions do you have weekly?

INTERVIEWER: IN SOME STORES, THIS INFORMATION IS IN

3.60

IF MORE

3.62

3.63

THE CASH REGISTER

To 10%
lO-l9%
20-29%
30-39%
40-49%
50-59%
60-69%
70% or more

mummbWND-J

What percentage of your sales were credit?

None ‘OO_TO-#3733
To 10%—
lO—l9%
20—29%
30—39%
40-49% GO TO 33.32
50-59%
60-69%
70% or more

mummbwml-‘O

THAN 1 AR D LI ER D T THE H ME, A K:

What part of the home deliveries were ordered by
phone?

0 None

1 Less than 25%
2 25-49%

3 50% or more

What percentage of your sales were made to
restaurants or buyers who are not domestic
consumers?

0 None

1 Less than 10%
2 10-19%

3 20-29%

4 30% or more

242

3.64 What do you think is the annual family income of
the majority of your clients?

1 Less than $2,000 annually
2 $2,000-$4,999

3 $5,000-$7,999

4 $8,000 or more

3.65 Could you estimate approximately how many people
come to your store by car?

Almost no one
Less than 25%
25-49%
50-74%
75—100%

bWNl—‘O

At what time is your store Open during the week?

 

 

 

 

 

 

 

 

 

 

 

Monday A.M. to
Tuesday A.M. to
Wednesday A.M. to
Thursday A.M. to
Friday A.M to
Saturday A.M. to
Sunday A.M. to
3.67 How many hours is it Open weekly?

THE EDITOR MAKES THIS CALCULATION

Less than 40
40-49

50-59

60-69

70-79

80—89

90 or more

END OF CARD #3

NEW CARD

\lO‘UlnD-UJNH

04 4.16—17
bb 4.18-19

243

4.20-27 Could you estimate how your sales are divided into
each of the following eight groups of products?

INTERVIEWER: SHOW THE LIST ON THE CARD B . NOTE TO THE
INTERVIEWEE THAT THESE ARE SALES FOR TAKE—HOME CONSUMPTION

H

4.20-21 .
4.22—23

pink)
0 0

mm
o

4.34-35 8.

LL Lela lafiafi'zfl Le
."

Total 100%

Dry groceries (canned goods, grains, rice,
sugar, cereals, crackers, candy, etc.)
Drinks (soft drinks, beer, liquor)

Bread and fresh baked goods

Dairy products and eggs, fresh milk, cheese,
ice cream

Frozen food (juice, vegetables, food)

Fresh and frozen meat (beef, pork, chicken,
fish, luncheon meat)

Fruits and vegetables

Non-edible products (paper, cleansers, dog
food, tobacco and cigarettes, etc.)

4.36-43 What percentage of all your merchandise arrives at
your store by the following means of transportation?

INTERVIEWER: READ THE ALTERNATIVES AND WRITE THE PERCENTAGE

LJfllflLQ

Total 100%

 

4.36-37 By truck from the suppliers
4.38-39 By your own trucks

4.40-41 By independent truckers
4.42-43 Others

244

Normally, from how many different suppliers do
you buy in one month?

SHOW CARD C TO THE INTERVIEWEE AND NOTE THE NUMBER IN

THE FOLLOWING TABLE.

Number
of

Suppliers

4.44-45
4.46-47
4.48-49
4.50-51
4.52—53
4.54-55
4.56—57

INDICATE THE TOTALS AT THE LEFT.

 

 

 

IProduct 4HOw many "How much How How

category are whole- direct many many
salers or from pro- are are
commission cessors? truck- direct
lmerchants? ers? from

farms?
Direct
Food
EEinks

 

 

Bread and
Pastry
Dairy
Products

  
  
  

 

 

 

 

 

Fruit ana
Fresh
Vegs.

 

 

 

 

 

 

Eliminating duplication, how many different sup—
pliers do you have?

Total of suppliers
Is your principal supplier a retailer or commissioner,

direct processor, trucker, or a farmer? Could you
give us his name?

MARK THE CATEGORY AND WRITE THE SUPPLIER'S NAME

1 Retailer or commissioner
2 Direct processor

3 Trucker

4 Farmer

 

Name of principal suppIier

What percentage of your total purchases do you buy
from your buying group or principal group of sup—
pliers?

%

 

245

What percentage of your purchases come directly
from the U.S.A. to you? (For example, purchases
from a commission merchant or wholesaler from
the United States.)

%

 

What percentage of your total purchases are...?

READ EACH ONE

4.67—68
4.69—70
4.71—72
4.73-74
4.75-76

4.77—78

At the time of delivery or within 10 days
Within 30 days
Within 60 days
Within 90 days
Other (specify)

 

Total 100%
On what percentage of your purchases do you take
a discount? (For example, special discount for
cash payment, for buying in large quantities.)

% of purchases

END F CARD 4

246

 

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moon: on OHDOU umcu meHuomwQ mo COHCHQO unwoxm

 

 

 

mHHHromr wO\pcm .
mumomamzmc ca >wflumam3m .

 

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mwfiwmuouml
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m o m mmOfiuumwm
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MUHBU<mm DZH30AAOh NIB abom< ME SMOhZH OB DOM EXHA DQDO3 H 302 bHIoH.m mo

Qm<U 3mz

 

 

 

NEW CARD

06
bb

247

6.16—17 NOTE: FROM THE LAST QUESTION, CHOOSE THE
6.18—19 LATEST ADOPTED PRACTICE AND ASK THE FOLLOW-
ING; IF MORE THAN ONE WAS ADOPTED AT THE
SAME TIME, CHOOSE THE PRACTICE THAT HAS
THE HIGHEST NUMBER. -

From whom or from what source did you first learn of
this practice?

Name and number

 

READ THE SOURCES ALOUD

6.21

6.23

Seeing it yourself
Advertisements

Wholesalers MAR NE
Friends

Government agencies

Salesmen

Others (specify)

 

\JO‘U115UJNH

 

When you heard for the first time about the practices
of cash sales only, was this commentary favorable or
unfavorable?

O Unfavorable
l Favorable

When you heard for the first time about self-service
groceries, was this commentary favorable or unfavorable?

O Unfavorable
l Favorable

 

IF THE INTERVIEWEE BELONGS TO A BOEING GROUP, ASK QUESTION #6.25;
IF THE INTERVIEWEE BELONGS T0 N0 GROUP, ASK QUESTION #6.24.

6.24

Why did you join a buying group?

Ml AR" K—ONE 0N"L' Y L'DO-N ' Tl-R-EAD'

1 Lower prices

2 More convenient to buy in only one place
3 Administrative help

4 Dissatisfied with other wholesalers

5 Others (specify)

 

248

6.25 Why didn't you join a buying group?
MARK ONE ONLY, DON'T READ

Prefer to be independent

Very expensive

My business is very small

Too many rules

There isn't sufficient variety
Others (specify)

(”(11.5me

 

READ THIS: Now I would like to ask you about the
changes in your business.

 

6.26-31 What plans do you have for making changes in your
business in the next two years?

TRY TWO TIMES, BUT DON'T READ. MARK ALL: NO, YESLMDON'T KNOW

6.26 Enlarge and/or improve my actual building
0 No
1 Yes
6.27 Build a new building
0 No
1 Yes
6.28 Buy new equipment
0 No
1 Yes
6.29 AdOpt new presentation methods in fruits
and vegetables
0 No
1 Yes
6.30 Other (specify)
0 No
1 Yes
6.31 None
0 No
1 Yes

END OF PART II

NEW CARD

249

PART II-A

26 26.16-17
bb 26.18-19

How many dollars' loss had you because of robbery
and pilferage last year?

Loss IN DOLLARS

26.24

26.25-28

Could you say that the robbery and pilferage prob-
lem in your business is bigger, the same, or less
than five years ago?

3 Bigger
2 The same
1 Less

Do you have insurance in the following areas?

READ AND MARK ONE "YES" OR "NO"

26.25

26.26

26.27

26.28

26.29-32

Personal life insurance

0 No
1 Yes

Health and accident insurance

0 No
1 Yes

Insurance for automobile used in business

0 No
1 Yes

Robbery and pilferage in your business

0 No GO TO £26.34

1 Yes
IF ANSWER "YES”, GO TO 323.28

Annually, what is the cost of the robbery and
pilferage insurance in your business?

Annual cost IN OOLLARS

250

26.33-38 Which one of the following measures do you

utilize to protect from robbery?

READ AND MARK 'Y ' OR "N " F R A H E

26.33

26.34

26.35

26.36

26.37

26.38

Night watchman

O No
1 Yes

Alarm system

0 No
1 Yes

Photographic equipment

0 No
1 Yes

Large mirrors

0 No
1 Yes

Employ only relatives

0 No
1 Yes

Others (specify)

 

O NO
1 Yes

251

LATIN AMERICAN FOOD MARKETING STUDY

PART III ATTITUDES

 

 

NEW CARD
07 7.16—17 INTERVIEWER: Mr(s). , now I would like
bb 7.18-19 to ask for your frank Opinion about each one of

the following statements. GIVE CARD To INTERVIEWEE
Please listen while I read the statement, and
later tell me the number of the card which most
nearly corresponds to your Opinion of the state—
ment. Your answer could vary between Number 1
(complete disagreement), 2 (in disagreement),

3 (indifferent), 4 (agreement), and 5 (complete
agreement).

INTERVIEWER: USE YOUR FINGER TO POINT TO THE NUMBERS ON THE
CARD. IF THE INTERVIEWEE ANSWERS THE FIRST QUESTION WITHOUT
GIVING A NUMBER, ASK HIM WHICH CORRESPONDS TO HIS OPINION.
MAKE SURE THAT IN ALL THE QUESTIONS IN THIS SECTION, THE IN—
TERVIEWEE ANSWERS BY NUMBER ONLY.

7.20 Children ought to be instructed to follow the ways
of the past to the letter.

IF THE INTERVIEWEE DOES NOT ANSWER BY NUMBERJ MAKE HIM

7.21 I am very happy with the changes that are taking
place in Puerto Rico because new customs are usu—
ally better than old ones.

7.22 When a problem comes up in our community, the best
thing is to depend on the leaders to decide what
should be done.

7.23 We would be better off if the scientists would
leave things alone.
7.24 To succeed in life, the most important thing is luck.
7.25 I believe the things of the past are much better
and that changes usually bring problems.
7.26 One really can trust only relatives.
7.27 Let's eat, drink, and be merry, for tomorrow we
may die.
7.28 I prefer to work alone rather than be tied to my

relatives.
END OF CARD SEVEN

NEW

252

08 8.16-17

8.20

8.27

8.28

8.29

8.31

When a merchant reduces his prices on some
article, this always means less profit for him.

Consumers spend more money on bananas when
they're scarce than when they're abundant.

The mandatory ruling for classification and
refrigeration of eggs has proved to be a good
regulation.

When a merchant reduces his prices, the result
is less profit for all.

The consumers can only spend a fixed portion of
their income on food. The only way to increase
their food expenditures is to increase their in—
come.

Group organizations (e.g., agricultural COOpera-
tives, retail buying groups) can be very beneficial.

Whenever family incomes increase, there is a
greater proportion spent on food.

The milk regulations have benefited both the
businessman and the consumer.

Supermarkets have all the business they're
going to get.

The risk and insecurity in buying and selling
tropical fruits is much less today for all par-
ticipants in the marketing channel (that is,
from farmers to consumers) than it was ten
years ago.

The government programs usually benefit only a
selected group of merchants who are influential
in politics.

The statistics of the Department of Agriculture
on agricultural production, volume of sales, and
prices are reasonable and not biased. ‘ -

Five years ago, the competition and pressure of
other food stores was much stronger than it is
today.

253

INTERVIEWER: That completes the section that requires you
to answer according to a scale of agreement
or disagreement. Now I would like to ask you
some questions that you could answer choosing
the alternative you prefer.

INTERVIEWER: READ THE QUESTIONS AND THE ALTERNATIVE
ANSWER AND THEN MARK THE ANSWER OF THE INTERVIEWEE.

 

8.33 Today if a close relative would ask you to sign a
personal loan that amounts to a month's salary,
for a worthwhile purpose, what would you do?

2 I would gladly sign it.
1 I would sign it because I feel obliged to do so.
0 I wouldn't sign it.

8.34 Today if a close friend asked you to sign a per-
sonal loan that amounts to a month's salary, what
would you do?

2 I would sign it gladly.
l I would sign it because I felt obliged to do so.
0 I would not sign it.

Now, let us assume that you have saved $10,000 from your
regular income.

READ THE QUESTION TWICE) DON'T EXPLAIN

8.35 Which of the following investment Opportunities
would you choose?

1 An investment which insures a 6% profit, or
$600 annually. ,

2 An investment in which there is'a 50—50 chance
of getting a 30% return on the investment or
of finding a 10% loss. For example, you would
have equal probability of getting a $3,000 an-
nual profit or of losing $1,000.

0 Don't understand

8.36 Let us assume that you belong to a buying group.
If another wholesaler offers the same product
at 25¢ less per box, would you do the following?

1 I would buy from the private wholesaler.

2 I would ask the group for a lower price, and
if they refused, I would buy from the whole-
saler.

3 I would buy in the group.

254

8.36—43 Let us suppose you received a gift of a sum equal
to your annual salary. How would you use it? In-
dicate three of the following uses from the card
you have in your hand.

MARK "NO" IN THE CATEGORIES YOU DO NOT SEEECT
8.37 (1) Hide it in a safe place

0 No
1 Yes

8.38 (2) Put it in a local bank

0 No
1 Yes

8.39 (3) Invest in my business or some other

0 No
1 Yes

8.40 (4) Send to a bank in the United States,
Canada, or Europe

0 No
1 Yes

8.41 (5) Buy or make payments on household goods,
a car, trips

0 No
1 Yes

8.42 (6) Buy a farm or real estate

0 No
1 Yes

8.43 (7) Education of the family

0 No
1 Yes

END OF CARD #8

END OF PART III

NEW

09
bb

9.20

255

PART IV INDIVIDUAL INFORMATION

9.18-19 now‘we will continue.

How old are you?

Less than 24
25-34

35-44

45—54

55-64

65 or more

C‘U‘thJONI-J

What school did you last attend?
Name of the school .

How many years of schooling did you have?

Grade

\lOWUW-bvwwt-‘O
l—‘
O
I
H
N

17 or more

Have you been in military service for one year
or more?

0 No GO T .
1 Yes

Did you use the G.I. Bill for education?

0 No
1 Yes

What is your major occupation?

 

 

1 Owner of a food store IF ANSWER IS 1 OR 2,
2 Manager of a food store GO TO #9.25
3 Professional doctor, lawyer,
professor, government official, etc.
4 Farmer
5 Owner of another business IF ANSWER IS 3
6 White collar worker TO 8, GO TO 9.27
7 Skilled worker
8 Other

256

IF ANSWER IN . 4 IS THAT THE MAIN CCUPATION
IS IN THE FOOD BUSINESS:'

9.25 How long have you worked in the grocery business?
0 LeSSathan 1 year
1 Between 1-5 years
2 Between 6-10 years
3 Between 11-15 years
4 More than 15 years

9.26 Were others in your family in the grocery business
before you?

O No G N TO .
1 Yes

IF ANSWER IN #9.24 IS THAT THE MAIN OCCUPATION
IS NOT IN THE FOOD BUSINESS:

 

 

I

9.27 Did you at one time work in the food business more
than a year?

0 No
1 Yes
9.28 Do you know of other food merchants who have left

the food business?

0 No GO ON TO £9.31

—‘

1 Yes

9.29 IF ANSWER IS YES
Were the majority of these persons friends, rela-
tives, neighboring merchants, or others?

1 Friends or relatives
2 Neighboring merchants

3 Others
9.30 Why do you think they are not in the food business now?
1 On account of their age
2 They were not good managers
3 Competition of the supermarkets
4 They did not have enough money or were not able

to get enough
Other (explain)

()1

 

9.31

257

How long have you lived in the same place?

1
2
3

Less than one year
More than one but less than five years
More than five but less than ten years

4 More than ten years

5

I have lived here all my life

I—WF ANSWER I " ", G TO Q scrim.

9.32

Where did you live before?

1...:

mpwm

Head of the district (Ponce, Mayaguez, Arecibo,
Aguadilla, Humacao, Bayamon, Guayama)

Other city

Cuba

Continental United States

Other (specify)

 

What do you consider yourself: a Puerto Rican, a

CWU'thJNH

North American, a Cuban, or other?

Puerto Rican
Cuban
Continental United States
Italian
Spanish
Other (specify)

 

Have you been outside of Puerto Rico?

0
1

No
Yes .

To what religious group do you belong?

bWNi-‘O

None

Catholic

Protestant (denomination)
Jewish

Other (Specify)

 

 

Before paying taxes and social security, in which
category, by number, does the income of your family
fall in 1964, including all sources of income?

mQOWUThUJNl-J

Less than $500
$500-$999
$1,000-$1,999
$2,000-$3,499
$3,500-$4,999
$5,000-$9,999
$10,000-$19,999
$20,000 or more

9.37-38

9.39(a)

9.39(b)

9.40(a)

9.40(b)

9.43

258

How many people depend on this income?
1:22

Number of persons

Do you have children?

 

No IF'XNEWER‘IE‘NOT‘st #9.39Tb) and 9.40fb7
Yes IF‘ANEWER'IE‘YES; ASK—#9739Iai and“9.40(a7

How much education do you want for them or for
the oldest?

 

If you had a son, how much schooling would you want
for him?

0

1—3

4—6

7-9

10-12
13—15

l6

17 or more

\lmmfiwwl—‘O

Do you believe this is possible?
Do you believe this could be possible?

0 No
1 Yes

Do you play the lottery regularly?

O No
1 Yes

How long have you worked in this business?

Less than one year

Between one and five years
Between six and ten years
Between eleven and fifteen years
Sixteen years or more

bWNI—‘O

How long have you been in this place?

IF ANSWERS ARE NOS.
Between one and five years 0, l, 2, 3, ASK THE

Between six and ten years NEXT QUESTION

Between eleven and fifteen ears
Sixteen years or more GO TO 39.55

Less than one year

QWNl-‘O

259

Who had this place before you?

Name

 

Address

 

 

bbbbbbb 9.43-49 BlanE_-b

9.50

As a valuable contribution to the study, we need the
additional cooperation of various companies. One of
the directors of this study will be soliciting in-
formation in more detail from businesses such as
yours. This information will also be confidential.
We will want to get your accounting records to de—
termine cost of operation.

At a later date, would you be in a position to pro-
vide your accounting records for 1964 (in strictest
confidence) with the director of our research?
O .NO
1 Yes

PART IV A

COMMENTS OF THE INTERVIEWER

TO FILL OUR AFTER THE INTERVIEW

9.51

How much time did the interview take?

Less than 60 minutes
60-74 minutes

75—89 minutes

90-104 minutes
105—119 minutes
120—150 minutes

More than 150 minutes

\IOWU‘IubUJNH

What was the source of information?

0 Accounts register seen by the interviewer

1 Accounts register seen only by the owner
of the business

2 Personal estimates of the interviewee

Do you believe the interviewee answered honestly?
0 Almost never
1 Yes, sometimes

2 Yes, always

Other comments:

 

260

LATIN AMERICAN FOOD MARKETING STUDY

CONSUMER

DO NOT READ THIS AGE T HE R 0ND NT

1.1-4

1.5—6

1.13

1.14-15

Project number

Name of country and metropolitan area

Column 5 Column 6
Puerto Rico 1 San Juan 1
Second country 2 Mayaguez 2
Third country 3

Segment number
Survey number

Name of person interviewed:

 

Home address:

 

Telephone number

 

Income level in residential area COMPARE WITH PHOTO-
GRAPHS & MARK ONE

1 High

2 Middle

3 Low

4 Very low

Interviewer number

Name

 

01 1.16-17 Card number
bb 1.18-19

Week interview completed

03 22-28 November 05 6-12 December 07 20—23 December
04 29 November 06 13-19 December 08 27 December-
3 January

261

SAY THIS: "Good morning. My name is . I am an inter-
viewer from the study on the distribution of food in Puerto
Rico. This study is being made by the Alliance for Progress
under the supervision of Michigan State University. This work
will provide valuable information for the economy of Puerto
Rico. All this information is strictly confidential and will
not be revealed to any government agency or other private
interests.

1. Are you the housewife?

Yes PASS TO #2.25
No PASS TO #3

IF THE PERSON WHO ANSWERS THE DOOR IS MALE:

2. I would like to speak to the woman of the
house. Is she in? .

IF THERE IS NO HOUSEWIFE:

3. Do you prepare your meals in the home?

END THE INTERVIEW
NO
Yes

4. Are you the person who makes the majority of

decisions as to what and where to buy the food
for the home?

Yes PASS TO 32.25

No
5. Who is this person?.

Name

 

Now, according to the method of investigation
the University is using, I have to ask a few
questions of this person. Is this person at
home?

NEW CARD

262

PART I ECONOMIC INFORMATION

02 2.16—17
bb 2.18-19

2.22

How many persons live and eat regularly in the
home?

Number of persons

Which best describes the composition of this
family?

CIRCLE ONE 1 Married couple with no children under 18

 

2 Married couple with children
3 Woman with children
4 Other

 

During the last week, how many members of your
family ate one or more meals outside the home?

Number of persons

 

Does a hired woman cook most of the meals in
the home?

0 No
1 Yes
2 Yes, we have one, but she does little cooking

Who decides what food to buy for the family?

 

l Housewife

2 Man in the family CIRCLE
3 Both~wife and husband together ONE
4 Maid

5 Other (specify)

Who actually buys most of the food for the family?

Housewife

1

2 Man in the family CIRCLE
3 Both wife and husband together ONE
4 Maid

5 Other (specify)

 

GIVE

THE INT R I WEE THE H T

263

AN R AND

READ THE FOLLOWING:

On this sheet we have a list of places where it is possible

to buy groceries.
purchases:

 

 

 

The following question refers to your

 

 

 

2.28 Where did you buy most of your food two years ago?
MARK 0 Don't know, or doesn't apply
ONE 1 Village
2 Co-op supermarket
3 Grand Union
4 Lucky Seven
5 Other supermarket
6 Food Stores
7 Market place
8 Other (specify)
2.29 Where did you buy most of your food during the
last month?
0 Don't know, or doesn't apply
1 Village
MARK 2 Co—op supermarket
ONE 3 Grand Union
4 Lucky Seven or Cuin
5 Other supermarket
6 Food Stores
7 Market place
8 Other (specify)
. Can you walk to any of these places?
READ
EACH 2.30 Supermarket
TYPE 0 No
1 Yes
2.31 Food store
0 No
1 Yes
2.32 Specialized food stores (bakery, etc.)
0 No
1 Yes
2.33 During the last two weeks, have you bought
groceries at any supermarket?
O No GO TO 33.28
EEEER TO 1 Yes In which of the supermarkets did you buy grocer-

HANDOUT ies? Among these, in which did you buy groceries?

264

2.34—54 Approximately how much spent for food, not includ-
ing non-food items, in each of the supermarkets in
the last two weeks?

2.34—36 Village WRITE DOLEXRS
NOT CENTS

 

2.37—39 Grand Union
2.40—42 Co-op

2.43-45 Lucky Seven
2.46—48 Cuin

2.49-51 Bargain Town
2.52-54 Other (specify)
2.55 m

2.56 During the last two weeks, how many times has your
family bought food in supermarkets?

NEW

CARD

 

bbb 3.18-20

FOR THE SUPERMARKET WHERE HE MADE THE MAJORITY OF THE
PURCHASES (2.34—54), ASK:

3.21 What is the distance from the house to the
principal supermarket?

In the same block

Less than .5 kilometer
From .5 to 1 kilometer
Between 1 and 2 kilometers
Between 2 and 5 kilometers
More than 5 kilometers

mmbWNl-J

3.22 What kind of transportation was used to get to the
supermarket the last time you went? MARK ONE

Walking both ways

Walk one way, return by taxi

By bus or public car

Taxi both ways

Private car (family or friends)
Other (specify)

OWU‘lbUONl-J

 

265

3.23 Do you use delivery service when buying from
supermarkets?

O No, or there is none
1 Yes
2 Sometimes

3.24 Do you buy on credit at this supermarket?
O No, or there is none
1 Yes
2 Sometimes

3.25-27 Why did you choose this supermarket?

READ THE QUESTION AND SHOW THE INTERVIEWEE THE ANSWERS ON
THE SHEET. IN THE SPACE PROVIDED, WRITE THE NUMBERS OF
THE TWO OR THREE REASONS MENTIONED.

 

 

3.25 First reason
3.26 Second reason
3.27 Third reason

 

END OF THE S CTION ON SUP RMARKETS

3.28 During the last two weeks, has your family bought
food from a food store?

0 No GO TO 33.45

1 Yes

3.29-31 Approximately how much did you spend on food at
food stores during the last two weeks?

Dollars spent $

 

3.32 How many times has the family bought food in a
food store in the last two weeks?

Number of times

FOR THE FOOD STORE WHERE HE BOUGHT MOST OF THE PURCHASESy_ASK:

 

3.33 How far from your house is it to the food store?
1 In the same block READ AND
2 Less than .5 kilometer CIRCLE ONE

 

3 From .5 to l kilometer

266

 

 

3.34 What means of transportation did you use to get to
the food store the last time?
1 Walking both ways READ AND
2 Walk one way and return by taxi CIRCLE ONE
3 by bus or public car
4 Taxi both ways
5 Private car (family or friends)
6 Other (Specify)

3.35 Do you Use the store's delivery Service?
0 No, or there is no service
1 Yes
2 Sometimes

3.36 Did you buy on credit at this store?

0 No, there is no credit
1 Yes
2 Sometimes

3.37-39 Why do you shop at this food store?

READ THE QUESTION AND SHOW THE INTERVIEWEE THE XNSWERS ON
THE SHEET. WRITE THE NUMBERS OF TWO OR THREE REASONS MEN—
TIONED IN THE SPACE PROVIDED.

 

 

3.37 First reason
3.38 Second reason
3.39 Third reason

 

END OF THE SECTION ON FOOD STORES

 

3.40 During the last two weeks has the family bought
fruit, vegetables, or other food from the market
place?

0 No GO TO 33.49
1 Yes-

3.41-42 Approximately how much was spent at the market
place in the last two weeks?

$ Dollars spent

3.43—44 How many times has the family bought food at the
market place in the last two weeks?

Number of times

 

267

 

3.45 How far is it from your home to the market place?
1 In the same block READ AND
2 Less than .5 kilometer CIRCLE ONE
3 From .5 to l kilometer
4 Between 1 and 2 kilometers
5 Between 2 and 5 kilometers

3.46 What means of transportation did you use the last
time you went to the market place?

Walking both ways READ AND
Walking one way and return by taxi CIRCLE ONE
By bus or public car

In taxi both ways

Private car (family or friends)

Other (specify)

 

O‘Ulbwwi-J

 

3.47-48 What are two main reasons you buy at the market
place?

READ THE QUESTION AND SHOW THE INTERVIEWEE THE ANSWERS IN THE
SHEET. WRITE THE NUMBERS OF THE TWO REASONS MENTIONED IN THE
SPACE PROVIDED.

3.47 First reason

 

3.48 Second reason
END OF THE SECTION ON MARKET PLACE

3.49 During the last two weeks, has your family bought
at a meat shop?

 

O No GO TO .5
1 Yes

3.50—51 How much did you spend at the meat shop during the
last two weeks?

$ Dollars Spent

3.52453 Blank

 

3.54 How far is it from the meat shop to your house?
1 In the same block REES—KNO-MXRK_ONE
2 Less than .5 kilometer
3 Between .5 and l kilometer
4 Between 1 and 2 kilometers
5 Between 2 and 5 kilometers

268

Do you buy on credit at the meat shop?
0 No, or there is none

1 Yes

2 Sometimes

What are two main reasons you buy at this meat shOp?

READ THE QUESTION AND SHOW THE INTERVIEWEE THE ANSWER IN
THIS SHEET. NOTE THE TWO MENTIONED.

 

 

 

During the last two weeks, has your family bought

 

How much did you spend at the poultry shOp during

How many times did you buy there in the last two weeks?

What is the distance from your house to the poultry

Between 1 and 2 kilometers
Between 2 and 5 kilometers

Did you buy on credit at the poultry shOp?

What are two main reasons you buy at this poultry

ShOp? fiEfiB‘TfiE‘EfiESTION'KNB'SHBW‘INTEfi-
VIEWEE THE ANSWERS ON THE SHEET.
WRITE THE Two MENTIONED.

3.56 First reason
3.57 Second reason
END OF SECTION ON MEAT SHOPS
3.58
at a poultry shOp?
O No GO TO 34.25
1 Yes
30 59-60
the last two weeks?
$ , Dollars spent
3.61-62
Number of times
3.63
shOp?
1 In the same block
2 Less than .5 kilometer
3 'From .5 to 1 kilometer
4
5
3.64
O No, or there is none
1 Yes
2 Sometimes
3.65-66
3.65 First reason
3.66 Second reason

 

END OF THE SECTION ON POULTRI SHOPS

269

4.20 During the last two weeks has your family bought
from a bakery?

1 Yes

4.21-22 About how much was spent at the bakery in the last
two weeks?

$ Dollars spent

4.23-24 How many times have you bought at the bakery during
the last two weeks?

Number of times

 

4.25 How far is it from your house to the bakery?
1 In the same block EEXD-XND-EXRR-ONE
2 Less than .5 kilometer
3 From .5 to l kilometer
4 Between 1 and 2 kilometers
5 Between 2 and 5 kilometers

4.26-27 What are your two most important reasons for buying
at this bakery?

READ THE QUESTION AND SHOW THE INTERVIEWEE THE ANSWERS
ON THE SHEET. WRITE THE TWO MENTIONED.

4.26 First reason

 

4.27 _ Second reason

 

END OF THE BAKERY SECTION

4.28 During the last two weeks has your family purchased
from a dairy?

O No GO TO £4.33
1 Yes

4.29-30 Approximately how much was spent on milk purchased
directly from the dairy?

$ Dollars spent
4.30 Did you buy on credit at the dairy?
O No, or there is none

1 Yes
2 Sometimes

4.31

4.32

270

What are the two main reasons you buy from this
dairy?

 

READ THE QUESTION AND
SHOW THE INTERVIEWEE

THE ANSWERS ON THE SHEET.
WRITE THE TWO MENTIONED.

First reason

Second reason

END OF DAIRY SECTION

 

 

 

 

 

 

 

 

4.33 During the last two weeks have you purchased from
a street peddler?
O No GO TO 54.45
1 Yes

4.34—35 About how many dollars were spent with street
peddlers in the last two weeks?
$ Dollars spent

4.36-37 How many times did you buy from street peddlers
in the last two weeks?

Number of times

4.38-39 What are the two most important reasons why you
buy from street peddlers?

4.38 First reason

4.39 Second reason

END OF STREET PEDDLER SECTION

4.40—50 How much was spent in the following places during
the last two weeks?

4.40-41 Special fruit and vegetable stores

4.42-43 Truckers at roadside stands

4.44-45 Farmers on the farm

4.46-47 Others (specify)

4.48—50 Total spent FOR THE EDITOR

4.51 Did you get any gifts of food from friends or rela-

tives that live in the country last month?

0 No
1 Yes

4058.64

271

Did you receive any food from the government
last month?

0 No
1 Yes

Do you feel that brand-name products like Goya,
DelMonte, etc., indicate quality?

0 No
1 Yes

Do you belong to a consumer's co-Op?

JL_JBL__

1 Yes

 

 

How many years have you belonged to this co-op?

1 Less than 5 years CIRCEE ONE
2 5 to 10 years

3 More than 10 years

Would you buy in a co-op like yours if other
supermarkets had lower prices?

0 No
1 Yes
9 Don't know

Does the family save or invest part of its income?

0mm

1 Yes]

 

In which of the following forms are your savings now?

READ THE AETERNATIVES AND CIRCEE ALL WHICH ARPLY

4.58
4.59
4.60
4.61
4.62
4.63
4.64

Cash

Banks

Bonds

Stocks

Real estate

Invested in businesses
Other

272

4.65-70 What are the family savings for?
4.65 To buy a house

4.66 To buy durable possessions (furniture,
refrigerator, car, T.V., etc.)

4.67 For old age

4.68 For emergencies
4.69 For children's education
4.70 Other
4.71 Do you have a refrigerator in your home?
0 No
1 Yes
4.72 Do you have freezer capacity of eight pounds

(4 quarts) or more?

0 No
1 Yes
4.73 Does the family have a car or pick-up truck?
0 No
1 Yes

END OF PART I - ECONOMIC INFORMATION

273

PART II — INDIVIDUAL INFORMATION

INTERVIEWER: Mr.(s) , now we will continue with

the interview and I will ask you a few per-
sonal questions.

How old are you?

24 or less

25-34

35-44 CIRCLE ONE
45—54

55-64

65 or more

CWU'IQ-UJNH

Last school attended?

Name of school

 

How many years of education?
Grade

1-3
4-6
7-9
10-12
13—15
l6
17 or more

\JOWU‘IstONl-‘O

MAKE THE FOLLOWING QUESTIONS DIFFERENT DEPENDINE ON SEX

9.22

Has your husband (or you) Spent at least a year
in the military service?

0 No G T .
1 Yes

Did he (or you) use the G.I. Bill for education?

0 No
1 Yes

How many members of the family work outside the
house?

Number WRITE THE NUMEER

9.26

9.29

1 Yes]

0 No(

274

Does the housewife work outside the home?

1 No housewife

O NO GO TO ¥§.§7

2 Ye

 

 

Part—time or full-time?

1 Full-time
2 Part-time

Has any-member of the family ever owned a food
store, supermarket, or small coffee shOp?

0 No GO TO 39.32

 

Is he still in business?

1 Yes 55“To 39.32

 

 

How many years since he left the-business?

Less than 1 year

1 to 3 years

4 to 6 years R D R
7 to 9 years

10 years or more

UWTbWNl-J

Is he (or she) retired, unemployed, or employed now?

 

1 Retired ) GO TO £9.32
2 Unemployed )
3 Employed

Employed in the food business?

0 No
1 Yes

Have you always lived in this city?

1 Yes GO TO 39.34
0 No

275

9.33 Which of these best describes the place where you
lived before moving to this city?

READ THE ANSWERS AND CIRCLE ONE

 

 

1 Other principal city on the Island (San Juan,
Mayaguez, Ponce, Arecibo)
2 Small town on the Island
3 Rural area on the Island
4 Cuba
5 Other Caribbean island
6 Continental United States
7 Other (specify)
9.34 Have you ever been outside Puerto Rico?
0 No
1 Yes
9.35 To what religion do you belong?
0 None CIRCLE ONE
1 Catholic
2 Protestant
3 Jewish
4 Other
9.36 Before taxes and social security, what was the

total income of the family in 1964?

 

 

1 Less than $500

2 $500-$999

3 $1,000—$1,999

4 $2,000—$3,499

s $3,500—s4,999

6 $5,000—$9,999

7 $10,000-$19,999

8 $20,000 or more
9.37 Do you have children?

0 No ASK'#9T38(b7‘and 39.39(5)

1 Yes EASK #9.38(a) and #9.39(a)
9.38(a) How many years of education do you want for your

oldest son?

(b) If you had a son, how many years of education would
you want for him?

(a) and (b)

le—‘O

0 4 10 to 12 years
1 to 3 years 5 13 to 15 years
4 to 6 years 6 l6

7 to 9 years 7 17 or more

276

9.39 (a) Do you think it will be possible?

(b) Do you think it would have been possible?

0 No
1 Yes
9.40 Do you play the lottery regularly?
0 No
1 Yes

END OF INDIVIDUAL INFORMATION SECTION

277

LATIN AMERICAN FOOD MARKETING STUDY

 

PART III - ATTITUDES
NEW CARD
07 7.16-17 INTERVIEWER: Mr(s). , now I would

 

 

bb 7.18—19 lIke your frank opinion aBout the following
statements: GIVE THE INTERVIEW E THE CARD.
Please listen while I reaHBEHe statement and
later tell me the number on the card which
most nearly corresponds to your Opinion of the
statement. Your answer could vary between
Number 1 (complete disagreement), 2 (in dis-
agreement), 3 (indifferent), 4 (in agreement),
and 5 (complete agreement).

INTERVIEWER: USE-YOUR FINGER TO SHOW THE NUMBERS ON THE CARD.
IF THE INTERVIEWEE ANSWERS THE FIRST QUESTION WITHOUT GIVING
A NUMBER, ASK THAT HE (SHE) GIVES THE NUMBER CORRESPONDING TO
HIS OPINION. OBLIGE THE INTERVIEWEE IN ALL OF THE QUESTIONS
IN THIS SECTION TO ANSWER WITH A NUMBER ONLY.

7.20 Children should be instructed to follow the ways of
the past to the letter.

IF THE INTERVIEWEE DOES NOT ANSWER BY NUMBER, MAKE HIM
7.21 I am very happy with the changes that are taking

place in Puerto Rico because new customs are usu-
ally better than old ones.

7.22 When a problem arises in the community, it's best
to depend upon the leaders to decide what should
be done.

7.23 We would be better off if the scientists would
leave things alone.

7.24 To succeed in life, the most important thing is luck.

7.25 I believe the ways of the past are much better, and
that changes generally bring problems.

7.26 One can really trust only relatives.

7.27 Let's eat, drink, and be merry, for tomorrow we
may die.

END OF CARD SEVEN

 

278

NEW CARD

bb 8.18—19

8.20 The big supermarkets should be regulated by the
government before they drive the small stores out
of business.

8.21 The weighing scales in supermarkets are fixed to
favor the owner.

8.22 The mandatory nature of the grading and refrigera-
tion of eggs has proven to be a wise regulation.

8.23 I don't trust the advertisements for specials in
the supermarkets.

8.24 Consumers can only spend a certain percentage of
their income on food. The only thing that would
increase the amount they spend on food is an in-
crease in income.

8.25 Consumers need more and better information on
prices and quality of products to help them in
their shopping.

8.26 It's risky to buy pre-packaged fruit and vegetables.

8.27 The milk regulations have been beneficial to both
business and consumers.

8.28 Supermarkets have all the business they are going
to get.

8.29 The risk and insecurity of selling and buying minor
fruits are much less today for everyone than they
were ten years ago.

8.30 Government programs usually benefit only a select
group of businessmen influential in politics.

8.31 The quality and variety of foods are better now
than ten years ago.

8.32 It's more fun to shop in a large supermarket than
to shOp in a small food store.

8.33 Stricter regulations are needed for the butchering

and distribution of meat.

279

8.34 The weighing scales in food stores are fixed to
favor the retailer.

8.35 Assume you had an annual bonus of $500. How would
you divide up the money into the following categories?

INDICATE THE AMOUNT IN DOLLARS THAT YOU WOULD USE IN THE
FOLLOWING CATEGORIES:

 

 

 

 

 

 

8.35—37 Put it in a safe place $
8.38-40 Put it in a savings account. $
8.41—43 Spend it on food. $
8.44—46 Spend it on other family necessities like

clothes and household goods. $
8.47~49 Automobile and transportation. $
8.50-52 Spend it on improving the house. $
8.53—55 Invest in some business. $
8.56—58 Education of the family. $
8.59—61 Others (including recreation) $

Total (EHOUiO-BE_EEOO3 $500.00

8.62 Do you think you could get an additional job?

0 No

l I don't know GO-TO—EETEE'

2 Yes
8.63 What minimum hourly rate would you accept for

this extra job?

I can't work more

I don't want to work more
Less than $.50 per hour
$.50 to $.75

$.76 to $1.00

$1.01 to $1.50

$1.51 to $3.00

More than $3.00

mflmU'IDOONP-J

280

8.64 What improvements do you feel could make your
community a better place to live?

DO NOT R AD T AN WERS

 

 

1 Nothing END OF PART III, GO TO PART IV
2 More parks and amusement centers
3 More and better schools
4 More and better public subdivisions
5 Others (Specify)
8.65 Would you or your wife be willing to devote 50

hours of your free time next year to work on
projects that would improve your community?

0 No

1 Yes ENE OF PART III, GO TO PART IV

281

PART IV COMMUNICATION BEHAVIOR

INTERVIEWER: Mr.(s). , the next part of the ques-
tionnaire has to do with the methods of com-
munication. It is very important to know the
methods of communication you use to be able
to evaluate the questionnaire.

INTERVIEWER: PLACE A CIRCLE AROUND THE NUMBER AND THE

 

ALTERNATIVE.
1.26 Did you listen to the radio yesterday?
0 No
1 Yes-
1.27 Do you listen regularly?

O No GO T 31.35
1 Yefl

 

1.28-29 How many hours per week do you listen to the radio?
hours
1.30 Did you read the newspaper yesterday?
0 No
1 Yes
1.31 Do you read the newspaper regularly?
0 No GO T 31.34
1 YesL_

 

1.32-33 What newspaper do you read regularly?

 

DO NOT READ THE NAMES. CIRCLE ALL THOSE WHIOH APPLY.
El Mundo Miami Herald
El Imparcial New York Times
El Dia Wall Street Journal
San Juan Star Others

Total newspapars TO BE COMPLETED BY EDITOR

1.34 Did you read a magazine yesterday?

0 No
1 Yes

1.35

1.36-37

282

Do you read information magazines regularly?

O NO GO TO 31.35

1 Yes

Which magazines do you read regularly?

DO NOT READ THE ANSWERS. CIRCLE THOSE WHICH APPLY.

1.42

Bohemia Others (specify)
Boricua

 

Selecciones - Readers' Digest
Alma Latina

 

Life
Look

 

Time

 

Total number of ma azines
TO BE COMPLETED BY EDITOR

Did you watch television yesterday?

0 No
1 Yes

Do you watch television regularly?

O NO GO TO 31.42

1 Yes

Approximately how many hours a week do you watch
television?

Hours

 

What is your main source of local news?

READ THIS LIST TO THE INTERVIEWEE AND CIRCLE ONE ONLY.

1 Newspapers 4 Family members
2 Television 5 Businessmen
3 Radio 6 Other friends

283

This is a quiz on top officials: The respondent is
asked to identify leaders by their titles.

IF THE ANSWER IS "I DON'T ENOW," MARK EALSE.

1.48

Chief Justice of the Supreme Court (Earl Warren)

1 True
0 False

Prime Minister of Communist China (Mao Tse-Tung
or Chou En-Lai)

1 True

0 False

Director of the Fomento Co-Operative

of Puerto Rico (Abimael Hernandez)
1 True

0 False

Secretary of the Department of Commerce of

Puerto Rico (Jenaro Baquero)

1 True

0 False

Secretary of State of Puerto Rico (Carlos J. Lastra)

1 True

0 False

Provisional President of the Dominican

Republic (Hector Garcia Godoy)
1 True

0 False

Governor of Puerto Rico (Roberto Sanchez Vilella)

1 True-

0 False

Total correct FOR THE EDITOR

During the last month, have you heard or seen in
the press, radio, television, newspapers, magazines,
anything that made you change your food buying habits?

O NO GO TO £1.34

1 Yes

284

1.53 Example of what made you change.
DO NOT READ THE ALTERNATIVES

1 Announcements of better prices in other stores.

2 Articles that considered a substitute product
better.

3 Articles that advised a different type of purchase.

4 Other (specify)

 

 

 

1.54 What is your main source of information?
0 None ?‘
1 Newspapers CIRCLE ONLY ONE 7
2 Radio programs 1
3 Advertisement handouts fl
4 Visits to various food stores and supermarkets ”
5 Other people r

1.55 What general information magazines do you read and
find useful for the buying and preparation of food?

DO NOT READ THE ALTERNATIVES

BOHEMIA GOOD HOUSEKEEPING
BORICUA BETTER HOMES & GARDENS
VANIDADES LADIES' HOME JOURNAL

PARENTS' MAGAZINE OTHER MAGAZINES (specify)
FAMILY CIRCLE

Total magazines TO BE COMPLETED BY EDITOR

1.56 Do you participate with your neighbors and other
families in activities like bingo, social events,
religious groups, etc.?

 

O No
1 Yes
1.57 What two food businesses in the community seem

most progressive to you?

 

 

1.58 Do you read this column? EHOW_THE-HEXOEINE-OF_THE
COLUMN BY JUDITH FRIAS
DE RAMIREZ
O No GO TO 31.55

1 Yes

 

285

How valuable is it to you? READ THE ALTERNATIVES

Very valuable

Of some use

Not useful at all

Don't know, have no Opinion

:5me

Do you read weekly the food advertising in the
newspapers?

0 No GO TO 31.62

1 Yes

Do these advertisements influence you as to where
you buy food?

0 No
1 Yes
2 Just some products

Do you take advantage of Specials in the food stores?

0 No
1 Yes
2 Sometimes

Do your friends consider you a person who likes to
try new things?

0 No
1 Yes
2 Don't know

 

286

PART IV A

Comments of the Interviewer

TO FILL IN AFTER THE INTERVIEW

9.51

Interview time

\IO‘U1fikADNl-4

U

0

NF—‘O

Less than 60 minutes
60-74 minutes

75-89 minutes

90-104 minutes
105-119 minutes
120-150 minutes

More than 150 minutes

you think the respondent answered honestly?

Almost never
Yes, at times
Yes, always
Other comments

 

 

Could the respondent read?

0
l
2

Not at all B R TH AP R
A little WITH THE ANSWERS
Well

 

287
SHEET FOR THE RESPONDENT TO READ

Sources of Food

 

 

 

 

 

 

 

 

 

2.28 l. Pueblo 5. Other supermarket
2.29 2. Co—op supermarkets 6. Food stores
2.33 3. Grand Union 7. Market place
2.37 4. Lucky Seven or Cuin 8. Other
Methods of Transportation to Stores
3.22 1. Walking both ways
2. Walking one way, return by taxi
3. By bus or public car
4. Taxi to and from
5. Private car (family or friend)
6. Other (specify)
Reasons for Choosing of Store
3.24 l. Convenient, very close ‘
2. Products fresh and high quality
3. Store is clean
4. Buy on credit
5. Deliver the groceries to my house
6. Prices are low
7. They are helpful and friendly
8. Great variety of products
9. Don't know
Total Family Income, 1964
9.36 1. more than $500.00 5. $3,500-$4’999
2. $500 — $999 6. $5,000-$9,999
3. $1,000-$1,999 7. $10,000—$19,999
4. $2,000—$3,499 8. $20,000 or more
Attitude Scale
8.35 l. Disagree completely 4. Agree in general
2. Disagree in general 5. Complete agreement
3. Indifferent, or no answer

APPENDIX D

PREVIOUS STUDIES THAT UTILIZED MULTIPLE

CORRELATION TO PREDICT INNOVATIVENESS

APPENDIX D

PREVIOUS STUDIES THAT UTILIZED MULTIPLE

CORRELATION TO PREDICT INNOVATIVENESS

The summary of the studies that follow is an expan—
sion of Table 10-1 that appeared in Diffusion of Innovations.
Most of the additional studies were obtained from Michigan
State University's Diffusion Documents Center.

Although there are over 1,000 research reports in the
Michigan State University's Diffusion Documents Center, only
the 23 studies reported here utilized multiple correlation
as the statistical technique. Many of the other studies used
bivariate analyses of one type or another. In the studies
using bivariate analysis, the explained variance was not as
great as the explained variance of up to 68.9 per cent ac-

counted for here.

289

290

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cowpmwacmnu: mo mmumma

 

 

 

mnwEhmm Ammmav
H.Nv mo coapflmom UHEOGOUQ mumeumm >xuzgcmx vacuumsu< .m
mucmumaeou coaumuflczeeou
msumum amauom Amhmmav
o.hH wmcwnu oumzou mpzpflup< mumeumm Oon mummom .¢
OGH>HH mo Hm>mq
suflflflnm mcflcumumflo
Macaumuwcmmuo
Eumm ca anmumnsmz Ammmav
o.mm meoucfi Show mmouw mumeumm camcouma3 QQOU .m
chHum>OccH
oumzou monufluu<
mcfl>fia mo Hm>mq
uumwcou coaumeuomcH Aommav
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SORHHOHMOHO Hmucmz
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0.0m mEouca Eumm mmouo muosumm mmmcmx QQOU .H
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mo “GOO umn .
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291

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mmmcm>fiuuomQ3m maou mud:

coaumusom “mommav
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COHDOQHUHOHOQ Hmauom

coaumuaou Aommav
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292

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mmanmflum> mmmcmpaaoaoemou
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unpopm Hafiuom
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CH mucmaum>
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293

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m.mv . Show mo Guam CH mumeumm momma COHaHqu: .mH
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mumeumm Ammmav
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cowuwusou
mnummem
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mumucmu swan: Op mQHuB mmflpwc
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mm<
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OOSGHDEOUII.HIQ OHQOB

294

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0 C0 H0

 

omzcflucoouu.auo magma

APPENDIX E

FACTOR ANALYSIS

296

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mavm.° o ocoo.o m Ndmm.o v Avov.c . n vamA.c m Hofin.o A

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moanmaum> swz um mo EOAOSHom uouomm Ram

Him manna

2E97

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BIBLIOGRAPHY

BIBLIOGRAPHY

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Schumpeter, Joseph A. The Theory of Economic DevelOpment.
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306

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Drucker, Peter F. "Marketing and DevelOpment." Journal
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Fliegel, Frederick C. "A Multiple Correlation Analysis of
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Havens, A. Eugene. "El Cambio en la Tecnologia Agricola de
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Hollander, Stanley C. "Retailing Cause or Effect?" Pro-
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Hoyt, Elizabeth. "Impact of a Money Economy on Consumption
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Junghare, Y. N. "Factors Introducing the Adoption of Farm
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Leibenstein, Harvey. "Allocative Efficiency Vs. X-Efficiency,"
American Economic Review, LVL (3)(June, 1966), 397.

Madigan, Francis C. "Predicting Receptivity to Community
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Massell, Benton F. "Capital Formation and Technological.
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Mehren, George. "Marketing Organization and Economic Devel-
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307

Myers, Kenneth H. "Marketing's Role in the Economy,"
Proceedings of the Winter Conference of the
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Ramsey, Charles, and others. "Values and the AdOption
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Rogers, Everett M., and Rogers, L. Edna. "A Methodological
Analysis of Adoption Scales," Rural Sociology, 26
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Rostow, W. W. "The Concept of the National Market and its
Economic Growth Implications," Proceedings of the
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Slater, Charles C. "The Role of Food Marketing in Latin
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308

Unpublished Works

Armstrong, Joseph B. "County Agent Activities and the
Adoption of Soil-Building Practices." Unpublished
Master's thesis, University of Kentucky, 1959.

Barton, H. C., Jr. "Puerto Rico's Industrial DevelOpment
Program, 1942-1960." Pre-publication copy of a
paper presented at a seminar of the Center for
International Affairs, Harvard University, Cam-
bridge, Mass., October 29, 1959.

Bennett, Peter Dunn. "The Role of Government in the Pro-
motion of Efficiency in the Retail Marketing of
Food products in Greater Santiago, Chile." Un-
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Branson, Robert E. "The Structure and Efficiency of Food
Marketing in Puerto Rico." Unpublished Ph.D.
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Brown, Earl H. "An Economic Analysis of Bantams and
Conventional Convenience Food Stores." Unpub-
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1961.

Campbell, Rex Randall. "Prestige of Farm Operators in Two

Rural Missouri Communities." Unpublished Ph.D.
thesis, University of Missouri, 1965.

Economic Development Administration. "Food Consumption in
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(Mimeographed.)

Flinn, William L. "Combined Influence of Group Norms and
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Harrison, Kelly M. "Agricultural Marketing Coordination
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309

Hobbs, Daryl. "Factors Related to the Use of Agricultural
Chemicals in Iowa Farms" Unpublished Master's
thesis, Iowa State University, 1960.

Jain, Navin Chand. "The Relation of Information Source Use
to the Farm Practice AdOption and Farmer's Charac-
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thesis, University of Guelph (Canada), 1965.

Kimball, William J. "The Relationship between Personal
Values and the Adoption of Recommended Farm and
Home Practices." Unpublished Ph.D. thesis, Uni-
versity of Chicago, 1960.

Lamont, Douglas Felix. "A Theory of Marketing DevelOpment:
Mexico." Unpublished Ph.D. thesis, University of
Alabama, 1964.

Oliver-Padilla, Otis. "The Role of Values and Channel
Orientations in the Diffusion and Adoption of New
Ideas and Practices: A Puerto Rican Dairy Farmer's
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Rogers, Everett M. "A Conceptual Variable Analysis of
Technological Change." Unpublished Ph.D. thesis,
Iowa State University, 1957.

 

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