TESTING INSTITUTIONAL ACCEPTANCE OF HEW FOOD PRODUGTS= A CASE STUDY ON PROCESSED ONION PRODUCTS Thesis for the Degree of Ph. D. HICHIGAN STATE UNIVERSITY CLYDE LOCKWOOD MARINE 19 6 4 M" 0-169 Date LIBRARY Michigan State University 'This is to certify that the thesis entitled TESTING INSTITUTIONAL ACCEPTANCE OF NEW FOOD PRODUCTS: A CASE STUDY ON PROCESSED ONION PRODUCTS presented by Clyde Lockwood Marine has been accepted towards fulfillment of the requirements for Ph. D. degree in Agricultural Economics (WI/Q1212 45711271 #1102} Major professor May 25, 1964 f3“? LIBRAR Y L" Michigan State University ABS TRACT TrsTmc lI'iSTITUTIOI‘IAL ACCEPTmCE or NEW FOOD PRODUCTS: A CASE STUDY ON PROCESSED ONIOhT PRODUCTS By Clyde Lockwood Marine There has been little development of techniques for testing the market acceptance of new food products designed for the institutional food market. Methods for testing consumer preferences and acceptance of new retail food products have been fairly well refined but the institutional segment of the food market has been largely ignored. The primary objectives of this study were; (1) to develop methodology for testing institutional market acceptance of new food products by means of an institutional sales test, (2) to determine the market potentials for processed onion products, and (3) to gather data on the utilization of onions and onion products by the institutional food market. In the winter of 1962-63 an institutional sales test was con— ducted in Detroit, Michigan to test the acceptance of frozen diced onions. The test was conducted by having samples of the tested pro- duct distributed to Detroit institutions by the frozen food distribe utors in Detroit. The reactions of institutional buyers and chefs to the product were recorded and an attempt was made to sell the product to institutions. weekly records were kept of the initial and repeat sales to each institution for a period of nine months. The second part of the institutional sales test was completed in the summer of 1962 by a survey of institutions in Detroit to deter- mine the amount of market penetration of the tested product and to gather data on purchase patterns and utilization of onions and onion products. A random sample of 376 of the 1800 single—unit feeding establishments in Detroit were surveyed by means of personal inter- views. In addition all multi-unit feeding firms in Detroit were sur— veyed; there were ll such multi-unit firms with a total of 5&0 in- dividual feeding establishments. Sales of frozen diced onions under the institutional sales test were 34 cases of 24 pounds in November, 67 cases in December and 69 cases in January. During the sales test the price of frozen diced onions was 18 cents per pound compared to a price of 7 or 8 cents per pound for fresh onions. Thirty-seven Detroit institutions made a trial purchase of frozen diced onions during the 12 week test period. The reasons for lack of better acceptance of the tested product as given by chefs are as follows in order of importance: (1) habitual use of other forms of onions, (2) price, (3) poor quality or flavor, and (A) lack of freezer space. The 376 single-unit institutions and 5&0 establishments of multi- unit firms included in the Detroit survey used a total of 105,632 pounds of fresh onion equivalent per week or 5,448,40h pounds per year. Of this total amount, the following percentages were used in various foods: (1) sandwiches — 33.3%, (2) salads or relishes - 3.8%, (3) soups or gravies - 15.2%, (A) stews - 8.7%, {5) fried with meat - 7.8%, (6) meatloaf - 5.9%, (7) flavoring for baked meats - 6.6%, (8) onion rings - 9.753, (9) creamed onions - 4.1%, (10) spaghetti sauce - 2.8%, and (11) other foods — 2.1%. There appears to be a good prospect for expanding the institu— tional market for processed onion products. As institutional labor costs increase and the quality of onion products are improved, in- stitutions will use more processed onion products. Projections from the survey indicate that there is a potential U.S. institutional mar- ket for all processed onion products of 291 million pounds per year (fresh equivalent). The institutional sales test appears to be a promising technique for testing the institutional acceptance of new food products. The chief advantage of the sales test over other test methods such as the demonstration-interview technique is the fact that the tested product is actually offered for sale in a test market. This should make pre- dictions of acceptance more reliable than those based on other test techniques if the sales test is properly conducted and controlled. TESTING lI‘ISTITUTIOI-EAL ACCEPTANCE OF NEW FOOD PRODUCTS: A CASE STUDY ON PROCESSED ONION PRODUCTS By Clyde Lockwood Marine A THESIS Submitted to Michigan State University in partial fulfillment of the requirements fer the degree of DOCTOR OF PHlLOSOPHY Department of Agricultural Economics 19 64 ACKI'I OI'JLE'ID GHEI I TS The author would like to express his thanks and appreciation to Dr. W. Smith Greig for his assistance in planning and conducting this research project and for his guidance during the writing of the thesis. Appreciation is also expressed for the help of Mr. Dennis Isidro, Mr. Neil Ballman, and Mr. Hirofumi Matsusaki in conducting the survey of institutions. TABLE OF CON TH"? TS ACKI-I OI‘JLED GEE-1E1"! TS LIST OF TABLES CHAPTER I. II. III. ll-ITRODUCTION REVIEW OF LITERATURE AND BACKGROUND DEF ORIVIATIOI‘I A. B. C. D. Trends in Food Processing Growth of the Institutional Food Market The Need for PreéMarket Testing of New Food Products The United States Onion Industry 1. Production 2. Consumption 3. Onion Processing a. Size and location of current processing b. Potentials for expansion of onion processing c. Marketing problems METHODOLOGY A. B. C. Hypothesis and Assumptions 1. Product Tested 2. The Theory of Institutional Sales Testing 3. Data Needed Institutional Sales Test 1. Characteristics of the Test Market 2. Conduct of the Test Onion Utilization Survey 1. Questionnaire Design 2. Conduct of the Survey 25 27 28 36 36 37 38 42 #3 A3 50 52 53 RESULTS OF SALES TEST AND SURVEY A. Sales Test Results B. Results of Onion Utilization Survey Singleeunit Establishments a. Responses to questions on frozen diced onions b. Responses to questions on dehydrated onions c. Responses to questions on french fried onion rings d. Responses to questions on canned onions e. Possible use of processed onion products Multiple-unit Organizations a. Detroit school system b. Drive-in chains 0. Restaurant chains d. Multi-unit feeding units associated with other businesses The Total Detroit Institutional market a. Total Onion Usage b. (Product Forms Used Expansion of Detroit Data to National Data Evaluation of the Predictive Model SUMMARY AND CONCLUSIONS A. Statement of the Problem B. Hypothesis and Assumptions C. Institutional Sales Test D. Onion Utilization Survey E. Results of Sales Test F. Potentials for Processed Onion Products G. Relevance of Assumptions Underlying the Study H. Recommended Procedure for institutional Sales Tests 1. The Predictive Medel IV. 1. 2. 3. A. 5. V. BIBLIOGRAPHY APPENDIX 56 62 62 72 7h 75 76 80 81 83 86 88 9o 91 96 102 108 111 112 113 115 1.16 118 ll? 125 Table I. 11. ill. 1V. V. VI. Vll. VIII. X. LIST OF.TABLES Per capita consumptiOn of fruits, vegetables, and potatoes in fresh and processed forms Estimates of retail price changes for relatively unprocessed and processed farm foods, selected years Results of institutional sales test, sales in cases and number of new and repeat purchases Characteristics of singleeunit feeding establishments in onion utilization survey by type of institutions, yearly annual food sales, number of employees and number of meals served per week. Onion usage of single—unit institutions, by class of institution and all single-unit institutions Percentage of onions used in eleven types of foods by class of institution, all single-unit establish- ments, all multi-unit establishments and all institutions Opinions of Detroit chefs on the possible use of frozen diced onions in nine types of foods, based on responses to the following question: Can frozen diced onions be used in the following foods? Opinions of Detroit chefs on the possible use of dehydrated onion products in nine types of foods, based on responses to the question: Can dehydrated onions be used in the following foods? Opinions of Detroit chefs on the possible use of canned onions in nine types of foods, based on responses to the question: Can canned onions be used as a substitute for fresh onions in the following foods? Percentages of total onions used in 11 types of foods, by class of multi-unit feeding establishments and for all multi-unit establishments included in the Detroit onion utilization survey Page 10 57 6h 65 77 78 79 82 XI. Xll. Xlll. XIV. XVI. XVII. XVIll. XIX. Responses of the Detroit Public School dieticians to the following questions: Can dehydrated onions be used in the following foods? Could canned onions be used as a substitute for fresh onions in the following foods? Number of units, yearly sales, number of employees, number of customers served per week, use of fresh onions, and use of dehydrated onions - 5 drive-in chains in Detroit, Michigan Responses of restaurant chain A's dieticians to the following questions: Can dehydrated onions be used in the following foods? Could canned onions be used as a substitute for fresh onions in the following foods? Number of units, number of employees, customers served per week, fresh onion use, dehydrated onion use, and canned onion use - for 3 Detroit feeding establishment chains Characteristics of the Detroit institutional market, by single-unit and multi-unit firms, by numbers of units, by type of unit, with yearly sales, number of employees, and number of meals served, Detroit Michigan, 1962 Total Detroit institutional onion usage per year, by product form, by type of institution, for single- unit, multi-unit, and total institutional use, Detroit, Michigan, 1962 Total Detroit institutional onion usage per year by type of food, by type of institution, for single-unit and multi-unit firms, and for all firms, Detroit, Michigan, 1962. Possible annual use of dehydrated onions in ten types of foods by type of institution, for single-unit multi-unit firms, and for all institutions, Detroit, 1962 Possible annual use of frozen diced onions in ten types of foods by type of institution, for single- unit, multiaunit firms, and for all institutions Detroit, 1962 Size of the Detroit sample in relation to size of U.S. public eating place business 84 85 87 92 93 9A 97 99 104 XXl. XXll. XXIlI. Dehydrated onions: Current market penetration and market potentials. Expansion of sample results based on stated acceptance of the product, by three size classifications of the sample, number of firms, dollar sales, and numbers of employees, Detroit, Michigan, 1963 105 Frozen chopped onions: Market potentials based on stated acceptance of the product minus current dehydrated onion use. Expansion of sample results by three size Classifications of the sample, number of firms, number of employees and dollar sales, Detroit, Michigan, 1963 106 Potentials for factory processed french fried onion rings. Detroit sample expanded based on numbers of establishments, numbers of employees and total dollar value of sales, Detroit, Michigan, 1963 107 CHAPTER I INTRODUCTION During the past 25 years the United States food industry has been marked by numerous major changes. Among these changes have been the development of mass merchandising, increased food processing, extensive advertising and promotion of branded food products, the advent of highly convenient and specialty foods such as T.V. dinners and the introduction of thousands of new processed food products. These changes have brought about adjustments in the marketing patterns of most food commodities and changes in the structure of the food industry. Virtually all farm foods bought by consumers today have gone through some type of processing such as trimming, washing or packaging and many foods are completely factory processed into heat and serve dishes. The proportion of the total food supply processed beyond the steps of washing and grading increased from 25 percent in 1925 to 35 per- cent in 1951”]- An index of processing of all farm foods shows a 21.0 per- cent physical increase and a 77 percent per capita increase in volume processed during the period 1909 to 1958. The category of fruits and vegetables has shown one of the largest increases in processing with a 280 percent per capita increase from 1909 to 1958.2 One result of the increased processing of fruits and vegetables has been the developnent and introduction of many new fruits and vegetable product forms. The widespread adoption of new processing techniques such as freezing and concentrating frozen juices and the improvement of older techniques such as drying have greatly expanded the number of foods which can be marketed in processed form and the number of ways in which foods can be processed. With the developnent of different food product forms and new food pro- ducts, nany problems have arisen in the area of food marketing. Food processors are faced with the problem of developing new and better food products and finding markets for them. This process is com- plicated by the fact that processors of basic food commodities supply three distinct groups of customers: household consumers, restaurants and institutions, and remanufacturers of food products. Remanufacturers are processors who make consumer food products such as soups and sauces from foods which have been previously factory processed. Each of these seg- ments of the total market for food desire varying amounts of convenience in food products and use different criteria in purchasing food. There is considerable risk involved in the developnent and intro- duction of new food products. A processor can never be sure if a new pro- duct will catch on in the market and develop sufficient sales to make its production profitable. It has been estimated that only one out of every ten new products lel succeed.3 The costs of developing a new processed food product can be quite expensive. Recent estimates indicate that pro- motion expenditures of a magnitude of 1,000,000 dollars are needed to successfully introduce and market a new consumer product on a national basis.4 With the inherent risks of failure and high costs of develop— ment and promotion of a new food product it is imperative that a food processor have a reasonably accurate idea of the probable saleability or acceptance of new food products prior to their cormnercialization or mar- keting. This information is needed for both the consumer and institu- tional segments of the total food market. Most major food processors gain information on the probable success of new products by testing the products in various ways such as laboratory testing, consumer preference testing, and market or sales testing. The techniques for laborabory testing and consumer preference test- ing of new products are fairly well defined. Considerable developnent has also taken place in the areas of consumer acceptance testing, cer— tain types of institutional acceptance testing and retail sales testing. There appears to be a serious lack of published research or methodology dealing with the prediction of market potentials for new food products at the institutional level. To the author's knowledge, there is no published research on methods of conducting institutional sales testing. A major portion of this study is devoted to the developnent of method— ology for conducting institutional sales tests. An examination of the fruits and vegetables which are extensively processed leads to the conclusion that they have several characteristics in common which make them adaptable to processing. ln view of the trends in processing of other fruits and vegetables it appears that onions might have considerable potential for processing. During the time this study was being planned a new processed onion product, frozen diced onions, was introduced at the retail level in several Midwestern Cities. Since this new food product had not been offered for sale to institutions it seemed ideal for use as a test product. The primary problem dealt with in this study is the lack of adequate technique for predicting institutional market potentials of new food pro- ducts. The specific objectives of the study are: (1) To develop method- ,v ology for conducting an institutional sales test; {2) To use the devel- oped methodology in an actual institutional sales test of a new processed food product to determine the practicality and workability of the meth- odology; (3) To develop a predictive model using data developed in the institutional sales test which will predict regional and national institutional.market potentials for new processed food products; (A) To examine the potentials for onion processing; [5) To determine the in- stitutional market potential for frozen diced onions; and \b) To devel- op data concerning the purchase and utilization of onions and onion products by institutional feeding establishments. FOOTNOTES - CHAPTER I 1M. U. Burk, Consumption of Processed Farm Foods in the United States, U.S. Department of Agriculture Marketing Research Report No. 409, (Washington: U.S. Government Printing Office, 1960), p. 5. 2W. H. Waldorf, mtput of Factories Processing Farm Food Products in the United States! 1909-1958, U.S. Department of Agriculture Tech- nical Bulletin No. 1223, (Washington: U.S. Government Printing Office, 1960), P0 in 3The Big Challenge in Food Marketing, fighth Biennial Grocery Study mew York, This Week Magazine, 1959), p. 9. Libido, p. 9. CHAPTER 11 REVle OF LlTERATURE AND BAUKGROUNU lNFORMATlON A. Trends in Food Processing Processing of farm food products has greatly expanded in the United States over the past 55 years. An index of factory processing of all farm foods shows a 240 percent increase in amount processed and a 77 percent per capita increase in the period 1909 to 1958.1 Most commodity groups have shown increases in factory processing but poultry and fruits and vegetables have shown the largest increases during the last half century. Processing of fruits and vegetables has shown a 635 percent phys- ical increase and a 280 percent per capita increase from.l909 to 1958. Farm.marketings of fruits and vegetables during the same period had a physical increase of only 156 percent.2 United States per capita con- sumption of fresh fruits and vegetables has declined for several years but has been offset by increased per capita consumption of processed fruits and vegetables. The per capita consumption of processed fruits and vegetables increased from 88 pounds in 1935 to 229.3 pounds in 1960 as shown by Table l. The 163 percent increase in per capita con- sumption of processed fruits and vegetables compares to an increase of only 7.7 percent in total per capita consumption of fruits and vege- tables. Specific examples of commodities with exceptionally large 1 increases in processing since 1935 are citrus fruits and potatoes. -7- TABLE I. PER CAPITA cmsmrnom 0F FRUITS, momma; AND POTATOES m FRESH AND PROCESSED 10815.3 Pounds of Per Capita Consumption Fresh Processed Total 1935 1960 1935 1960 1935 1960 Citrusb 1.1.6 33.7 3.6 52.6 18.2 86.3 Fruit (Other than Citrus )b 91.9 61.7 37.1. 50.1 129.3 114.8 Vegetablesc 11.1.2 101.9 47.0 99.6 158.2 201.5 Potatoesd 112.0 82.0 .1 27.0 112.1 112.0 TOTAIS 389.7 282.3 88.1 229.3 477.8 511.6 aMaior Statjigtical Series of the ULSL Department of AgriLculture: How They are Constructed and Used, U.S. Department of Agriculture, Agricultural Handbook No. 118 (Washington: U.S. Government Printing Office, 1957), pp. 31-41. bU.S. Department of Agriculture, The Fruit Situation, January 1, 1961, PP. 2h-290 c’Congumptigmn Trends and Patterns for VegetablesL Potatoesg Sweet PotatoesA Drg BeansL and Peas. U.S. Department of Agriculture, Agri- cultural Handbook No. 215 (Washington: U.S. Government Printing Office, 1961), p. 110 dU.S. Department of Agriculture, Crop Reports, "Irish Potatoes; Utilization of the 1960 Crop with Comparisons", March, 1961, p. 3. Factory processing of citrus fruits has shown a 11.60 percent per capita increase from 1935 to 1960.3 In 1960 over 60 percent of total citrus consumption was in processed form as compared to 7.5 percent in - 1935. (See Table I) The increase in citrus processing has come from chilled juices, canned citrus sections, and frozen concentrated juices, with frozen concentrated orange juice being the main factorJ" Potato I. ~1‘ 4‘ r. I" r‘ [V I. -8- processing increased from less than one percent of the commercial crop in 1935 to 25 percent of all potatoes marketed commercially in the United States in 1960.5 The increase in potato processing has been spread over numerous frozen and dehydrated forms as well as potato chips. Largely as a result of technological developments in freezing and dehydration techniques, the total amount of potatoes processed increased from 24.7 million hundredweight in 1956 to 18.3 million hundredweight in 1960.‘3 The developments in potato processing may be an indication of the 'po- tential growth of onion processing since they have many similar char- acteristics. Several factors are probably responsible for the large increases in factory processing of farm foods. Waldorf relates about 3/1. of the increase in factory processing of all farm foods between 1909 to 1958 to increased marketing of food products by farmers and attaches lesser importance to changes in purchase patterns of processed and unprocessed foods, reduction of food production for home use, shifts of processing from the non-factory processing sector to the factory processing sector, and technological changes. However, Waldorf found that only 24 per- cent of the increase from 1909 to 1958 in factory processing of fruits and vegetables could be attributed to increased farm marketings.7 Burk divides factors affecting consumption of commercially process- ed foods into supplq,7 affecting factors and demand affecting factors. - Included in factors affecting supply are technological changes, cost relationships and changes in.marketing institutions. Demand elements include income, urbanization, bane-food production, and employment and education of homemakers.8 Technological advances and changes in market— ing institutions have doubtless had considerable effect on increased consumption of processed foods. improvements in freezing and dehydration methods have made possible the marketing of many convenient, high-quality food products whiCh were not available prior to 1940. Frozen fruit juice concentrates, dehydrated and frozen potato products, cake mixes, and frozen poultry are specific examples of items which have become widely available as a result of new technology and gradual adoption of previously available technology by the food marketing industry. Changes in retailing, primarily the growth of supermarkets and mass merchandis- ing, have also increased the availability of processed food products. The relationship between cost of processed versus unprocessed food items has changed considerably over time in this country. Many of the technological developments in food processing have not only resulted in high quality and convenient food products but in many cases have lowered the relative costs of food items. A 1957 survey of retail costs of highly processed and relatively unprocessed food products in- dicated that highly processed foods are only slightly higher in price than equivalent amounts of unprocessed foods.9 Retail prices of pro- cessed fruits and vegetables have increased at a slower rate than.their relatively unprocessed counterparts.lo (See Table 11) These relative decreases in cost over time of processed foods are probably due to savings in transportation and handling charges, concentration of pro- duction in lowbcost producing areas, and increased scale of factory food processing operations. Many examples can.also be cited where a .10- processed product is cheaper than an equivalent amount of the same food in fresh or unprocessed formoll Demand elements do not appear to be as tmportant in the historical increase of factory processing of farm.foods as are supply elements. TABLE 11. ESTlMATES 0F RETAlL PRlCE CHANGES FOR RELATlVELY UNPROCESSED AND PROCESSED FARM.FO0DS, SELECTED YEARS.a lNDEX l9h7-l949 = 100 Commodity Group Sub-indexes of Bureau of Labor Statistics Retail Food Price lndex All Farm Foods 1935 1939 19h? 1954 Relatively Unprocessed 49 47 95 111. Processed 54 50 99 110 Fruits and Vegetables Relatively Unprocessed 46 44 96 ll3 Processed 63 55 105 l04 2M.C. Burk, Consumption of Processed Farm.Foods in the United States. U.S. Department of Agriculture Marketing Research Report No. 409, (Washington: U.S. Government Printing Office, 1960), p. 5. Burk reports that the demand elements of income and urbanization ac- counted for less than one-third of the change in consumption of process- ed food products between 1942 and 1955.12 Income was found to be the primary demand factor affecting increased consumption of processed foods, accounting for an increase in consumption of all processed foods of about 10 percent between 1942 and 1955. Burk estimates that rising labor costs in restaurants, rising real incomes, urbanization shifts, technological p. developments, and social changes by 1975 will increase per capita con- sumption of processed foods by 18 percent over 1954 levels.13 If this projection holds true, factory processing of farm foods will continue to increase and at a faster rate than consumption of all foods. B. Growth of the Institutional Food Market United States Department of Commerce statistics show that in 1961 the United States' expenditures for foods and beverages ambunted to 81.1 billion dollars. Of this amount, 20.8 billion, or 25.6 percent, was accounted for by meals and beverages purchased in public eating places or furnished by governmental or other institutional feeding establish- ments.lh This means that over 25 percent of all money spent for foods and beverages in 1961 was devoted to meals and beverages consumed away from.home. The institutional segment of food and beverage expenditures increased from 18 percent of total food and beverage expenditures to 25 percent of all food and beverage expenditures during the period of 1955 to 1961.15 Institutional feeding establishments as used here refers to restaurants, cafeterias, hotels, inrplant feeding services, catering services, schools, hospitals, prisons, and all other private and public establishments serving meals on a regular basis with the exception of boarding houses and private households. The United States Department of Agriculture estimates that 17;1 percent of the physical volume of dome estic foods marketed in the United States in 1959 was marketed through public eating places as compared to 15.2 percent in 1950.16 These com- parisons indicate that the institutional segment of the United States market for food is growing in size and relative importance over time in -12- terms of volume of food used and percentage of total food and beverage expenditures accounted for. The increases in the institutional market for food can probably be attributed to increases in in-plant feeding, urbanization changes, shifts in the age distribution of population, increases in incomes, increased travel, and growth of the labor force. To the author's knowledge, there is no published research on the factors which affect the size of the in- stitutional market for food. An illustration of the lack of information about the institutional food market is provided by Burk in the following quote: "Although we may expect further increases in the proportion of the total food supply handled by eating places, we lack basic statist- ical and economic information on which to develop sound projections for this segment of the market."17 The United States Department of Agri- culture began a series of surveys in 1956 to determine the nature and scope, buying practices, food uses, and size of the away-froméhome segment of the food market.18 The institutional market for food has been partially described in a recent publication of the Louisiana Agri- cultural Experiment Station which lists and discusses possible institut— ional markets for canned Louisiana sweet potatoes.19 A good deal more of this type of researCh is needed to outline the nature and dimensions of the institutional food.market as well as specific buying practices and needs of this segment of the food industry. 0. The Need for Pro-Market Testing:gf New'Food Products One of the characteristics of the food processing industry, partic- ularly since 1945, has been the continuous development of new food pro— -13- ducts. In l958 a chain store executive estimated that 70 percent of the individual food items sold by his company were not in existence ten years earlier in their present form.20 New products have been described as the lifeline to survival for both processors and distributors in the food industry.21 One large food manufacturer has stated that over two- thirds of their line of products is new since 1945.22 In order to satisfy consumer demands for more convenient food products and to meet competition, the United States food processing industry has spent huge sums for research and developnent on new and improved food products. Not all new food products appeal to consumers or develop a profitable level of sales. The mortality rate of new grocery products which are introduced on the market is estimated at 80-90 percent.23 A failure is defined as a product which does not develop a profitable level of sales and is withdrawn from the market within a short time after its intro— duction. The costs of new product developnent, commercialization and pro- motion can be very high It has been estimated that the 00st of develop- ing and marketing a new product nationally is at least one million dol- lars.21‘ The high cost of advertising and promotion of new products is illustrated by the combined advertising budget of $8,705,000 spent to promote dehydrated potato products by 5 of the leading processed potato distributing firms in 1960.25 The high costs of new product failures . make knowledge of a product's market potential prior to its introduction a virtual necessity. Pro-market or market testing is the technique used by many food processors to gain early information on a product's com- 4‘ mercial market potential. in recent years a great deal of research effort has been devoted to the broad area commonly referred to as "market testing." As in many of the relatively new areas of social science, there is little standardiz- ation or agreement of usage of various terms employed in reporting re- sults from "market tests." Before looking at the research and literature available in this area, it is appropriate to decide upon definitions for the most commonly used terms. These definitions are by no means origin- al and in some instances may not agree with popular usage of the defined terms. However, these definitions will hold wherever the terms are used in this study. (1) Consumer preference refers to the ordering of choices among two or more alternative products or product modifications by a con- sumer or group of consumers. (2) Product acceptance is defined as the degree of saleability of a product in a given market situation. Pro-market testing can be broken down into three general cate- gories--product quality testing, preference testing, and acceptance testing. Another method of classifying work done on pre-market testing is by the techniques used for testing; laboratory panels, a mass consumer panel and sales tests. Considerable work has been done in the area of determining differences in product quality among various product adapt- ations or product grades. Dawson and Harris have classified and report- ed on some 400 articles dealing with the use of sensory methods for measuring differences in food quality.26 Most of these articles deal -15- with the use of trained or untrained sensory panels for differentiating product quality on the basis of taste, odor, appearance, texture, or other physical product characteristics. Generally, the first step in pre—market testing of a new food product is in the area of consumer preferences. Most major food products processors maintain laboratory taste panels for the purpose of initial consumer preference testing of new products. These panels are used to test several modifications of a new'food product under controlled con- ditions and give their preferences among the sanmues of the product with regard to taste, appearance, or other product characteristics. In ad- dition to small private laboratory panels, some consumer preference tests have been conducted with relatively large groups of consumers chosen in such a way that they are representative of the consumer public at large with respect to characteristics known to affect food purchas- ing patterns. Ebcamples of different types of market test methods can be illus- trated by a review'of recent literature pertaining to market testing of new food products. Greig and Larzelere have reported on consumer pre- ference tests of new'apple and potato products through the Michigan Consumer Preference Panel in.Detroit, Michigan.27 Use of large lab- oratory-type panels has been reported by Lockhart and Gaines in testing 28 and by consumer preferences for canned and frozen orange juice, Dalrymple in testing preferences for grades of applesauce.29 Methods of setting up large consumer panels and conducting panel tests have been reported by Girardot and Peryam.3o and by Schwartz and Pratt.31 Research -l6- has been conducted on the kinds and amount of bias involved in consumer panel test results by Nair.32 Mass consumer panels may be used to test consumer preferences for a new’product. The two basic differences between laboratory panels and mass consumer panels are: (1) ‘Mass panels are usually larger and more representative of the general consuming public than laboratory panels; (2) Mass panel tests are conducted by having a group of consumers use a new product in their homes rather than in a laboratory under con- trolled conditions. mass consumer panels can be used to compare a tested product with competing or substitutable products (consumer pre— ferences) and to determine advantages and disadvantages of a tested product (consumer reactions). The U.S.D.A. has used the mass consumer panel technique in testing consumer preferences for apple juice concen- trate, frozen peas, and canned orange juice.33 A.report by Miller, Nair, and Harriman indicates that consumer preference tests_of a new product by'both a laboratory panel and a mass consumer panel yielded essentially the same results.3h However, laboratory panel tests do not allow'the collection of consumer reactions to a new product under con- ditions in which the product will normally be used. Even though a new product may show up well in preference testing, the real answer to its success is consumer acceptance or willingness to buy under specified market conditions. The saleability of a new food, product can be partially predicted by the use of product acceptance testing. Product acceptance testing goes beyond the point of deter— mining preferences between product variations and attempts to determine (.i. 1.1"; -17- if consumers will actually buy a new product. As soon as one moves from.the area of consumer preference testing, market testing takes a new dimension. In product acceptance testing, the food industry must be concerned with both the consumer and the in— stitutional segments of the food market. In the case of new consumer food products, the most common technique for testing product acceptance is the retail sales test. Even though a product has passed through lab- oratory tests and preference tests with flying colors, the critical ques- tion of the product's saleability is still unanswered. The techniques of retail sales testing have been developed to a rather high degree by the U.S.D.A. Agricultural Marketing Service, state agricultural exper- iment stations, private research organizations, and consumer product manufacturers. The basic methodology of retail sales tests is well described by Applebaum.and Spears in their article "Controlled Experi- mentation in.Market Research."35 Retail sales tests have been used for many purposes such as the evaluation of merchandisinngethod , measuring effects of promotional expenditures on sales, and examination of con- sumer preferences as well as product acceptance. The degree of confusion in terminology in consumer research is illustrated by the number of studies dealing with.merchandising techniques which.contain the words "consumer preference" or "consumer acceptance" in their titles. Most retail sales tests of this type can be more accurately described as merchandising research rather than studies of consumer preference or acceptance.36 An example of the use of retail sales testing to check consumer preferences is reported by Banner and Turner.37 This test used i ll. -18- several stores to compare the sales of new jams and jellies made from Alabama blackberries with sales of established brands. Retail sales tests have been used by Greig and Larzelere38 and by Dwoskin and Jacobs39 to test acceptance of dehydrated mashed potato products. These tests indicated that dehydrated potato flakes would have a high level of consumer acceptance. This product has since been marketed on a national basis and has attained considerable market suc— cess. Other use of retail sales tests to check product acceptance have been made by'BrownL‘O with frozen stuffed peppers, by'Scotthl with frozen passion fruit juice and by WrightlF2 with cut flowers. When properly conducted, a retail sales test can be a very useful aid to a food man- ufacturer in deciding whether or not to market a new consumer product. One major difference exists between acceptance testing of new' products at the institutional level as opposed to consumer acceptance testing. In the case of the institutional.market a food processor must not only ascertain that consumers will like his product when it is served to them.but also that the buyers, dieticians, or chefs of in- stitutions will buy and serve the product to their consumers. A successful consumer product may not be bought by institutions because of difficulty of preparation, high cost, short storage life, or any of a number of factors that bear on a restaurant buyer's choice of food products and types. Conversely, certain types of processed food prod- ucts may be inherently better suited to use by institutions than by homemakers. Such products would show poor results from.a retail sales test but might gain very wide acceptance by the institutional.market. -19- The problem existent in such a situation is that different criteria are used by institutional food buyers than those used by homemakers. Con- sumer acceptance test data may give little indication of the acceptance of a new'food product at the institutional level. The principal method presently used for predicting product acceptance by the institutional market is the demonstration-interview'technique. This technique consists of demonstrating the preparation of a new food product to a sample of buyers for institutional feeding establish- ments and then recording the buyers reactions to the product by means of an interview after the demonstration. Predictions of product acceptance are made on the basis of information gained from the interviews. One obvious disadvantage of this teChnique is that the buyers may not act according to the responses which they give in an interview; The demon- stration-interview'technique has been used by Greig in examining the institutional acceptance of dehydrated potato flakes.h3 MbCreary found that Greig's predictions of institutional acceptance of potato products based on the use of the demonstration-interview technique were not reliable as far as individual institutions or products were concerned but that predictions for total sales of dehydrated potato products were fairly reliable.44 The demonstration-interview'technique has been used by McGrath and Sills to test institutional acceptance of dehydrofrozen peasits and byGreig"+6 in testing acceptance of dehydrofrozen apple slices. Market Research Report Number 580 is a report of the use of a modified version of the demonstration-interview'technique to test in- stitutional acceptance of dehydrated sweet potato flakes.A7 In this study the reactions of restaurant patrons to dishes prepared from the tested products were gathered as well as the reactions of the buyers and chefs of the cooperating institutions. Institutional acceptance testing by the demonstration-intervieW’ techniques differ from consumer acceptance testing in the fact that the tested product is not actually offered for sale to the institutions. While it is possible to obtain information on the reactions of institu- tions to a product by the demonstration-interview'technique, only very limited predictions about sales of the product can be made. The success- ful use of retail sales tests in determining consumer acceptance of new’ products suggests that an institutional sales test would be a good method for determining institutional product acceptance. The lack of any pub- lished methodology for conducting institutional sales tests together with the need for a reliable method of determining institutional ac- ceptance of new'food products are the primary reasons and justifica- tions for this study. D. The United States Onion Industry In the early'stages of planning for this study it was decided to run an institutional sales test as a part of developing institutional sales test methodology. A new onion product was introduced on the retail market which seemed to have the possibility of widespread use in the institutional food trade. The following background information on the onion industry and potentials for onion processing was developed to serve as a guide for deciding whether or not to use frozen diced onions as a test product in an institutional sales test.h8 1. Production U. S. commercial onion production can be broken down into three broad seasonal categories: early spring onions, grown principally in Texas and harvested in late February to early April; intermediate onions, grown in Texas, California, Washington, New Jersey, Arizona and New Mexico, and harvested in late spring and early summer months; and late summer onions grown principally in New York, Michigan, California, Colorado, Oregon, Wisconsin, ldaho, Minnesota and Washington, and har- vested in August or September. Early spring and intermediate onions are harvested and marketed almost immediately with little storage involved. These onions are normally characterized as being rather perishable in nature, producing lower per acre average yields than late summer onions, and having high production costs in relation to late summer onions. Average F. 0. B. prices received for spring onions are gen- erally higher than those of intermediate or late summer onions. The late summer crop customarily makes up about 75 percent of the total U.S. commercial onion crop. A large portion of the late summer onions are stored for use during the period from September to March. The major- ity of onions for processing come from the late summer crop since these are normally lower priced and available from storage stocks during much of the year. U.S. acreage of onions has been declining for the past 23 years, . with large year to year acreage fluctuations. Acreage planted does not present a clear picture of total onion production since unharvested or unmarketed acreage may often be a larger part of the total during years -22- of large crops, poor weather conditions, or low prices. The total area planted to onions has declined from l32 thousand acres in l939 to the l96l level of 9l thousand acres.“9 The primary reason for the decline in acreage planted has been the spectacular rise in yields per acre resulting in significantly increased total production and lower prices. Average yield per acre of onions has increased rapidly over the past 23 years from 135 cwt. (national average) per acre in 1939 to 260 cwt. per acre in 1961.50 This rise can be primarily attributed to improved vari- eties and cultural practices including the use of irrigation in the western growing areas. Total onion production has increased substantially over the past ten years. For example, annual average onion production for the five year period 19h6-50 was 20.6 million cwt. as compared to annual average production during 1956-60 of 24.3 million cwt.5l This amounted to an increase in production of approximately 18 percent over a ten year time period. The increase in onion production has about equaled the increase in U.S. population thus leaving per capita production nearly constant. A very close relationship exists between the amount of annual production and annual average onion prices. There appears to be little evidence of a trend line in actual dollar prices for onions during the period 1939- 1960. However, in terms of constant dollars, or the season's average price received by growers adjusted by an index of prices paid for farm inputs, there is somewhat of a downward trend in prices received by growers. Increased production efficiency and greater yields per acre apparently enable onion producers to grow onions at relatively lower costs than they were able to do 20 years ago in.terms of constant <1: \ -23.. dollars. An overall average price for onions during the period 1939- 1960 is approximately $2.40 per cwt. and season's average prices have ranged from $h.60 per cwt. to as low as $1.10 per cwt. depending primarily on the size of the crops).2 New York, California, Michigan and Colorado produce approximately 55 percent of total U.S. onion production and '12 percent of the late summer onion crop. There has been a definite upward trend in acreage and production in California. The trend toward increasing onion pro- duction in California is due, at least in part, to the increase in onion dehydration. Acreage in New York has remained relatively stable while Michigan and Colorado acreage has declined slightly during the past 10—12 years. Production in new York has gone up steadily over the past 15 years while Michigan production has risen slightly and Colorado production has fallen. Over the past five years, on the average, New York has produced 19%, California 17%, Michigan 10% and Colorado 9% of the U.S. total commercial onion production.53 There is a very sig- nificant upward trend in yields per acre for the four major late crop producing states since 1950. This is due to improved seed, better cultural practices, disease resistant varieties, and better pest and weed control. 2. Consumption Official U.S.D.A. estimates of annual per capita consumption of onions range fran 10.3 to 13.3 pounds of onions during the period 1935- l960.5h These data do not provide a complete picture of actual onion consumption since onions used for dehydration and in various canned foods are excluded from.the computations. Apparent per capita con- sumption, or total U.S. production.marketed.minus net exports and divided by population ranged from.ll.5 to 14.3 pounds annually depend— ing on the particular year investigated. These figures do not account for onions exported or imported in processed form.but do take account of international.movements in fresh form. In addition to commercially produced onions it is estimated that onions produced for home use add at least an additional three pounds to per capita consumption figures.55 U.S.D.A. data indicate that onions are the fifth most popular vegetable in terms of national per capita consumption. In addition to estimates of per capita consumption, some mention should be made of consumer purchases and characteristics of purchases of onions. Data were collected on consumer purchases of onions through the MiChigan State Chiversity Consumer Panel during the years 1952-1958. The per capita purchases of the panel families were in the neighborhood of 6.5 to 7.4 pounds of onions annually. .Most of the differences be- tween purchases as reported by the panelists and U.S. per capita con- sumption figures can be accounted for by factors not included in the panel purchase data. These factors include onions consumed in the form of meals eaten away from.the home and in processed foods. The consumer panel data indicate that an average of 97 percent of families make onion purchases annually. Sixteen percent of families buy onions in any given week and onion purchases make up three percent of money spent for vegetables, on the average.56 -25- 3. Onion Processing Almost thirteen percent of the U.S. commercial onion crop was pro- cessed into primary onion products in 1962. Some canning and dehydra- tion of onions took place during world war ll but only in the past seven years (1956-62) has there been any appreciable quantity of onions processed in the United States. Onions probably offer a high potential for increased processing due to their universality of use, disagreeableness in handling, bulkiness per unit of price, and perish- ability. Primary onion products produced at present include several dehydrated forms--sliced, flaked, minced, chopped, and powdered; small whole canned or frozen onions; frozen french fried onion rings; frozen diced onions; pickled onions; onion juice; and onion soups. Some of these products are relatively new, are convenience items, and do not as yet have a very large market. a. Size and location of current processing At the present time there are at least 41 food processing companies engaged in some type of primary onion processing. Onion processing plants are located in Massachusetts, Rhode lsland, Connecticut, New’YOrk, Delaware, Maryland, Pennsylvania, Virginia, Tennessee, Georgia, Louis- iana, Michigan, lllinois, Wisconsin, Nebraska, California and Oregon. Fifteen of these firms can small whole onions or french fried onion rings, 20 firms freeze onion products, 5 firms dehydrate onions, and at least one firm produces onion juice. lt is estimated that 3.1 million cwt. of fresh onions are annually used by these primary onion process- are.57 Of this total approximately 2.5 million cwt. of onions are used 1‘ 5‘ I. -25- by dehydrators. At present onion dehydration in the U.S. is confined to California. Dehydration is increasing rapidly and at least three large plants have been built in the past four years. The principal markets for dehydrated onions are the remanufacturing market (com— minuted meats, salad dressings, sauces, and pickles), restaurants and other institutions, the export market, and the Armed Forces. Onion dehydrators are able to maintain a year round operation by taking ad- vantage of the widely varying climatic conditions throughout California to obtain year round supplies of onions. Thus the location of onion dehydration plants is presently primarily raw product oriented. The volume of fresh onions being used for canned whole onions and canned french fried onion rings is estimated to be about .3 million cwt. per year.58 Canning plants are located in eight different states and appear to be raw'product oriented with some canning done in most of the major onion production areas. Normally the onions from.commercial pro- duction areas which are too small for fresh market use make up the raw material supply for the onion canners. Canned onions are considered by most people to be a specialty item.and whole boiled onions are served as primarily a holiday season dish in.New’England. Some major food companies are market testing frozen small whole onions and frozen stew vegetables (combination of carrots, small potatoes, and small whole onions) but no data are available as to consumer acceptance of these products. The production of frozen french fried onion rings and frozen diced onions uses approximately .3 million cwt. of fresh onions annually.59 -27- The french fried onion ring producers appear to be market oriented for transportation cost reasons. Frozen french fried onion rings are cur- rently being produced in thirteen states usually near large population concentrations. Trade sources indicate that the major quantities of frozen onion rings currently produced are being sold to the institut- ional trade with small quantities entering retail markets. Frozen diced onions are being processed by a few firms in the onion producing regions of the Eastern part of the United States. This product is a recent in- novation with each of the processors having started production since 1959. A limited amount of pickled onion products and onion juice are produced in the U.S. primarily for the remanufacturing market. b. Potentials for expansion of onion processing Some of the factors which indicate a high potential for the pro- cessing of onions are: (1) onions are almost universally used, (2) fresh onions are disagreeable to handle, (3) onions are a minor item.in the consumer's total food bill. (4) onions are a bulky item per unit of price in fresh form, (5) onion production is seasonal in nature requiring stor- age of onions for six months of the year and (6) some preparation.methods of onion products are difficult. Commercial processing of onions should offer considerable efficiences in labor, savings in waste, reduction of seasonal variation in prices to producers and consumers, and a great deal of convenience to the homemaker. Potentials for dehydrated onions appear to be very large. The remanufacturing and institutional markets for dehydrated products are far from.being saturated. With the world trade in onions of 17 to 18 million hundredweight per year and the high ~28- proportion transport cost is of the delivered price of fresh onions, world trade in dehydrated onions should greatly increase over time.60 Frozen diced onions have gained good initial acceptance at the retail market level. Institutional acceptance of frozen diced onions will prob- ably depend on the quality-cost relationships between frozen and dehy- drated products and fresh onions. c. Marketing prOblems Any expansion in onion processing will necessarily be dependent on the ability of processors to successfully market existing or new onion products in larger quantities. Certain marketing problems are present and must be dealt with in expanding the market for any product or group of products. Problems.facing onion processors include: (1) lack of knowledge of onion utilization, (2) what product forms consumers prefer, (3) what size and type of package should products be packed in, (h) what price should be charged for products, (5) should the products be promoted and, if so, how'much, (6) what are the needs of the three markets for onions-~retail, remanufacturing, and institutional, and (7) what will be the degree of acceptance of onion products by retail and institutional buyers. These problems were Obtained from.a survey of onion processors to ascertain the major problems in marketing their products. To the author's knowledge, no information is available concerning the form in which onions are used or the percentage of onions used in various dishes such as salads, relishes, stews, meat dishes, sandwiches, or onion dishes. Generally, one considers onions as a seasoning or spice, but considerable amounts of onions are also eaten as vegetables either in -29- onion dishes or in stews or casseroles. The ways in which onions are used and relative amounts used in each way need to be known by the onion processor to serve as a guide for the form of processed products. If most onions are used in diced form there would probably be little demand I for an onion product of another form.such as slices. It is possible that onions are used in enough forms that there would be a market for several product forms, each tailored to a particular onion use. This has proven true in the case of potato processing where there are many product forms, each tailored to particular use patterns. Along with product form, the potential onion processor needs to consider package type and size in designing his product. For the retail market, packages need to be at- tractive, properly sized, cheap and durable. Package design and color have been shown to be quite important in the appeal of a product to con- sumers. Packages for the institutional market must be designed keeping in mind such factors as product storage life, durability of packaging, convenience and costs of packaging material. A very important problem.to any manufacturer is the pricing of his product. In the case of onion products, they must compete in.terms of price and convenience with raw onions which are available year round at widely varying prices. New onion products which are convenience items can be priced at a higher price per pound than raw onions at retail and possibly still attract a market. The question to be solved by an onion - processor is howhmuch more per pound will the consumer or institutional buyer pay for a convenient form of onions? Various means of price deter- mination can be used such as cost pricing, market skimming, or "seat of .30- pants pricing." In the case of a new retail or consumer onion product which would seem.to appeal to consumers, the processor may benefit by using a market skimming price or one which is higher than his costs of production. As long as a processor has no competition for a particular neW'product he mey'be able to maximize his revenue by setting his initial price at a relatively high level with the intention of lowering it when a competing processor enters the market. In the case of onion products designed for the institutional market, the price will need to be rather close to the price of raw onions since institutional buyers are probably more cost conscious than are homemakers. Another factor to be considered in price determination is the possibility of promotion of a product. ln certain cases prices may be set at slightly higher levels if promotion of a product is to be quite extensive. Thus, the potential onion pro- cessor'must decide if his product will be promoted and, if so, to what extent as an integral part of his price setting decision. The large variation in fresh onion prices will probably present problems to onion processors both from the standpoints of raw product procurement and competition of fresh onions with processed onion products in the market unless the processor contracts for.major portions of his total needs. Processors will need to arrive at a price for their product which can be maintained throughout the year but which will enable their products to compete with fresh onions in the market. Due to present high costs of onion processing, it is likely that onion products will only be able to compete with fresh onions on a convenience and standardized quality basis rather than in terms of price, at least for the near future. I\ -31- One marketing problem.of food processors which has received relative- ly little attention in the past is meeting the needs of the institutional food market as opposed to the retail market. Most market research has dealt with the retail market with little or no attention to the prefer- ences or buying practices of institutions. This fact is well illus- trated by the following statement of the research director for a national restaurant chain. "Processors and suppliers are not yet close enough to the problems and needs of the institutional feeder to be of real assist- ance. They spend millions of dollars searching every phase of the home consumption food field at the retail kitchen levels, yet food raisers and processors invest nothing in studying the needs of restaurant and institutional feeding." ln many ways these two markets require com- puetely'different analyses. The institutional food buyer is much more concerned with product cost per unit than is the average homemaker. Processed onion products should probably be tailored specifically for either the retail or institutional market, but certain products could be interchanged between the two markets merely by changing size and type of package and price. Onion processors are faced with the problem.of deter- mining the degree of acceptance of various onion products by both the retail and institutional markets. It was decided to concentrate this study on the institutional market for onion products. Specific questions to be studied are the acceptance of frozen diced onions, onion utiliz— ation, type and size of package desired by institutional buyers, product form desired, and what institutions would be willing to pay for processed onion products. .‘V (V / FOOTNOTES - CHAPTER II lWaldorf, 5220 92:20, P0 50 2Ibido, Po 6. 3The Fruit Situation, 92. gitr, p. 27. “Agricultural Handbook No. 118, op. cit., pp. 28-30. 5Irish Potatoes: Utilization of the 1960 Crop With Comparisons, 22-.Ellor P-.3o 6Ibid. 7Waldorf, _0_Qo Ellie, p. 30 eBWk, 22. 92.20, p. 330 9R. G. Harris and P. B. Dwoskin, "Convenience Foods and Their Costs to Consumers ," The Marketing and Transportation Situation, July, 1958, pp. 27-33. lOBurk, op. 91.19., p. 15 11G. S. Weiss, "Time and Money Costs of Meals Using Home and Prekitchen-Prepared Foods ," The Journal of Home Economics, XLlII, (1951+), P0 99. 1L2Burk. 22- 22;... p. 31. lBIbido, p. 360 ”U.S. Department of Commerce, Survey of Current Business Supplement for 1262, September, l962, p. 39. lsIbido, P0 380 16M. C. Burk, Measures and Procedures for Analysis of U.S. Food Consumption, U.S. Department of Agriculture Handbook No. 206, (Washington: U.S. Government Printing Office, 1961), p. 92. 17Burk, Consumption of Processed Farm Foods in the United States. p. 330 13E. s. Hockstein, Emplgyee Food Services in Manufacturing Plants, U.S. Department of Agriculture Marketing Research Report No. 325, (Washington: U.S. Government Printing Office, 1959), p. 1. See also Marketing Research Reports 326, 377 and 358. ,c 1. .33- 19F. J. Kost and P. R. Ewell, Institutional Markets for Louisiana Canned Sweet Potatoes, Department of Agricultural Economics Mimeo 803 (Baton Rouge: Department of Agricultural Economics, Louisiana State University, 1962). 20Campbell SouppCompany Annual Report - Fiscal Year 1959, p. 7. 21The Big Challenge in Food Marketing, pp. g;§., p. 29. 2292-9... p. 9. 23mm. ”his” p. 29. 25 26E. H. Dawson and B. L. Harris, Sensory Methods for Measuring Differences in Food Quality, U.S. Department of Agriculture, Agricultural Information Bulletin No. 34 (Washington: U.S. Government Printing Office, 1951). Food Field Reporter. June 19, 1961, p.23. 27W. S. Greig and H. Larzelere, "Consumer Taste Preferences Among Dehydrated Mashed Potato Products," National Potato Council News. V, NO. 2 (1957): PP. h-6' 28E. E. Lockhart and J. M; Gaines, "Acceptance of Fresh, Frozen and Canned Orange Juices," Fogg Research. XIV (1949), pp. 429:433. 29D. J. Dalrymple, A Survey of Applesauce Preference, (Cornell University Merchandising Experiment Papers No. 7; Ithaca: Cornell University Press, 1959). 30N. F. Girardot and D. R. Peryam, "Selection of Sensory Testing Panels," Food Technology. VI (April, 1952), pp. 140-143. 31M. Schwartz and C. H. Pratt, "Simultaneous vs. Successive _ Presentation in a Paired Comparison Situation," Food Research XXl (1956), pp. 103-108. 32J. H. Nair, "Mass Taste Panels," Food Technology, III (1949). pp. 131-13 6 O 33J. S. Hunter, Consumer Preference for a 6 to 1 Apple Juice Concentrate. U.S. Department of Agriculture Marketing Research Report No. 343 (washington: U.S. Government Printing Office, 1959). 31+P. G. Miller, J. H. Nair, and A. J. Harriman, "A Household and a Laboratory Type of Panel for Testing Consumer Preference," Food Technology, IX (1955). pp. 445-449. -3[,_.. 35W. Applebaum and R. Spears, "Controlled Experimentation in Marketing Research," The Journal of Marketing, XIV (1950, pp. 505-517. 36Research in Retail Merchandising of Farm Products, U.S. Department of Agriculture Marketing Research Report No. 416, (Washington: U.S. Government Printing Office, 1960). 37M. J. Danner and J. L. Turner, Consumer Market Study of "Chilco" Jam and Jelly. Alabama Agricultural Experiment Station Circular No. 119 (Auburn: Alabama Polytechnical Institute Press, 1957). 38W. S. Greig, F. 0. Strand and H. E. Larzelere, Relative Retail: Sales and Elasticity of Demand for Dehydrated Mashed Potato Products. Michigan State University Department of Agricultural Economics Mimeo 732 (East Lansing: Department of Agricultural Economics, 1958). 39P. B. Dwoskin and M. Jacobs, Potato Flakes: A New Form of Dehflrated Mashed Potatoes: Market Position and Consumer Acceptance in Binghamtong Endicott and Johnson CitL N.Y.. U. S. Department of Agriculture Marketing Research Report No. 186 (Washington: U.S. Govern- ment Printing Office, 1957). 40E. Brown, Fropen Stuffed Peppers: A New Frozen Food? South Carolina Experiment Station Report No. 127 (Clemson: Department of Agricultural Economics, 1957). Alf. Scott, Progen Passion Fruit Juice; An Appraise; of the Mainland Market, Hawaii Agricultural Experiment Station Report No. 25 (Honolulu: Department of Agricultural Economics, 1955). 423. Wright, "Marketing Trials Reveal Vast Sales Potential," Southern Florist and Nurseryman, LXVIII (1955), pp. 28-31. 43w. s. Greig, The Restaurant; HotelL and Institutional Market for Dehydrated Mashed Potatoes, Michigan State University Preliminary Report (East Lansing: Department of Agricultural Economics, 1957). “E. K. McCreary, The Use of the Demonstration-Interview Technique in Estimating the Institutional; Acceptance of Dehydrated Mashed Potatoes, (unpublished Master's dissertation, Department of Agricultural Economics, Michigan State University, 1962), p. 45. #53. J. MoGrath and M. s. Sills, Restaurant Acceptance of Dehydro— frozen Peas. U.S. Department of Agriculture Marketing Research Report No. 198 (Washington: U.S. Government Printing Office, 1957). 46w. s. Greig, Market Potentials for Dehygpofpozen and Dehflro— canned Apple Slices, Department of Agricultural Economics Mimeo No. 801 (East Lansing: Michigan State University, 1960). ‘Q I‘ -35- ‘h7P. B. Dwoskin, Market Test of Instant Sweet Potatoes in Selected Institutional Outlets, U.S. Department of Agiculture Marketing Research Report No. 580 (Washington: U.S. Government Printing Office, 1963). A8This information has been reported by w. S. Greig and c. Lockwood Marine in Onions and Their Processing Potential, Department of Agricultural Economics Mimeo 858 (East Lansing: Michigan State University, 1962). 1‘9Commercial Vegetables for Fresh Market, U.S. Department of Agriculture StatisticaL Bulletin NO. 126 and Revisions (Washington: U.S. Government Printing Office, 1953), p. 29. 5°Ibid. flmm. 52M" 1961 revision, p. 47. 53lbido, p. [+10 ‘ 54C.S. Department of Agriculture, The Vegetable Situation. October 1960, p. 39. 55U.S..nepartment of Agriculture, The National Food Situation, August, 1954, p. 4. Estimates of onions grown for home use in 1953 were divided by 3.5 to arrive at estimates for 1960 of 3 pounds per capita. 56Unpublished Data from.Michigan State University Consumer Panel, James D. Shaffer, Michigan State University, 1961. 57 An estimate based on partial survey of U.S. onion processors. 58 9.3.1.0 59 $13.14.- 60World Trade Yearbookl lQpO. Foreign Argi.culture Organization, United Nations, p. 28. " ‘rl ll: CHAPTER III METHODOLOGY A. Hypothesis and Assumptions The primary questions examined in this study are the following: can an institutional sales test methodIolgy be developed which would be workable and can a predictive model be developed using the data generated by the sales test which will serve as an accurate and low cost indicator of the institutional acceptance of new processed food products? It is hypothesized that a sales test can be developed which will generate the data needed for a predictive model to determine the institutional accept- ance of new processed food products. Assumptions underlying the develop~ ment of the institutional sales test methodology are as follows: (1) It is assumed that the institutions in a selected test market or test markets are representative of all United States institutions insofar as the acceptance of new processed food products is concerned. Specifically, it is assumed that the restaurants and institutions in Detroit are representative of U.S. institutions in terms of types, sizes, ownership patterns and other factors which may affect acceptance of new processed food products. (2) It is assumed that there will be no change in institutional sales of products which directly compete with the test product. (3) It is assumed that a measure of the size of the "institutional market" in the test market can be developed. There are three measures of size which may be applicable: (a) number Of institutions, (b) number of employees, and (c) volume of annual sales. It is assumed that one of .3 7.. these measures of size can be compared to national data on the public eating place business in order to project test market sales into national sales data. (4) 1t is assumed that the quality, form, technology and prices Of competing products as well as promotional or sales efforts given to com- peting products will not change during the period in which the sales test is conducted. (5) lt is assumed that the variables Of price, quality and con- venience of the tested product, usage patterns of competing products, size and type of institutions in the test market, and certain unknown variables will affect the institutional acceptance Of the tested product. Variables to be studied are the usage patterns Of competing products and size and type of institutions in the test market. All unknown variables will be assumed to have either an unimportant or strictly random effect upon the acceptance of the tested product. The relevance and plausability of these assumptions will be examined in a later chapter Of this thesis in light of information developed through a survey of the institutional food market in Detroit, Michigan. 1. Product Tested During the time this study was being planned and an institutional sales test method being developed, a new processed onion product, frozen diced onions was introduced at retail stores in several midwest cities independently by both a Tennessee processor and a New YOrk processor. The product was produced by peeling raw onions, dicing them.into approxr imately 1/4 inch cubes and quick freezing:them. The frozen onions were 4. . . . ,. . I . . . . . :,. . 6 . . . . . x w . l v v . ,. 133- either individually quick frozen or broken up after freezing but prior to packaging in order to make them free flowing. The product was packed in twelve ounce polyethylene bags which were being sold at 19 cents each at retail. The product had achieved considerable sales success in the east- ern part of the United States and initial sales in the midwest markets seemed to be developing well. Since this product had not been intro- duced to the institutional market, it presented the possibility of test- ing the institutional acceptance.of a completely new and different onion product which had already gained some acceptance at the retail level. This study was planned to consist of two separate but integrally related parts. The first portion was an institutional sales test de- signed to determine institutional acceptance Of frozen diced onions and the second portion was a survey of institutions designed to determine utilization of fresh onions and all onion products and to determine the market penetration of frozen diced onions during the sales test. The institutional sales test of frozen diced onions was attempted to determine the practicality of the developed methodology for conducting institution- al sales tests. 2. The Theory of Institutional Sales Testing Since there are no published reports dealing with institutional sales testing, there is no established body of theory covering such tests as a means of predicting institutional acceptance of new'products. However, there is a body Of published information covering the successful use of retail sales tests as a method of predicting consumer acceptance of new'prodncts. The theory Of retail sales testing is really quite .39.. simple and rudimentary. A new product is placed in stores within a well defined test market area generally consisting of a city or standard met- ropolitan area. The retail sales test is closely controlled from the standpoint that product price, amount of promotion given the product and sales iffort given the product are set at the same levels planned for use in national commercialization of the new product. The primary data developed in a retail sales test are the actual sales of the tested pro— duct over a specified period of time. In addition data are Often col- lected on the prices, promotional effort, and sales volumes of directly competing products in the test market as well as consumer reactions to the tested product. The predictive model used in retail sales testing is a very simple one which contains only four quantitative factors. These factors are sales of the tested product in the test market over a specified period Of time, national sales Of the tested product, the population of the test market area, and the population of the United States (or some other well defined area). The sales of the tested product are obtained from store audit procedures or product shipment records and the population figures are derived from U.S. Bureau of the Census information. Predictions of national sales Of the tested product per unit of time are derived from the following equality: . .. U.S . Pogllation _ T t M k t Sal National Sales ( es ar e es) (Test F ket Po lation) In some instances the relationship between the number Of households in the test market and the total number Of U.S. households is used instead _h@_ of the population relationship. The relationship of numbers of house- holds is most commonly used in predictive models for durable goods. Since the procedure for conducting retail sales tests has been well refined and retail sales tests have proven useful for predicting consumer acceptance of new products, it seems logical to pattern an institutional sales test methodology after retail sales test methodology. If we as- sume that an institutional sales test should be modeled after retail test procedure then the method for conducting an institutional sales test would be as follows: (l) Place the product to be tested on the institutional market in a well-defined test market or markets. (2), Carefully control the selling price of the tested product, the amount of promotion given the product, and the sales effort expended on the product. (3) Maintain records of sales volume of the tested product over a given period of time. (4) Make projections of potential national volume of the tested product by means Of a predictive model. It was pointed out above that predictions of national sales of a new product are based on sales of the product in.the test market and the relationship of the test market population to total U.S. population. This Obviously assumes that there is a relationship between the accept-. ance (sales) of the new product and the size of the population of the test market (as well as other factors such as price, quality, and con- venience of the tested product). In the case Of the institutional market there are three measures of size of the "population" of institutions within any given test market or are. These are numbers of institutions, annual volume of sales, and number of persons employed in food pre- paration and service. It is difficult to determine which of these three measures of size would correspond to test market population (as used in retail tests) and form.the basis for a predictive model useful for pre- dicting national acceptance Of new institutional food products. It was assumed earlier that type and size of institutions in a test market would affect the acceptance of new processed institutional food products. This assumption was based on the past institutional acceptance of other new processed food products such as frozen french fried potatoes and de- hydrated mashed potatoes.‘ These products were most rapidly accepted by large, high-vOlume institutions and multi-unit or chain institutions. In view'of this previous history and general background knowledge of the in- stitutional food market the following is suggested as a predictive model for use in projecting national institutional acceptance of new processed food products from test market sales: Multi-Unit Institutions National Institutional Sales = [Test Market Sales to ] Annual.DOllar Sales Volume of Multi-Unit Institutions in the total U.S. ll Annual Dollar Sales Volume of Multi-Unit Institutions in the test market Test Market Sales to [Annual Dollar Sales Of Single Single Institutions Unit Institutions in the U.S. Annual Dollar Sales of Single Unit Institutions in the test _market ll ‘42- The accuracy Of this model will be examined in a later section of this study by using it to estimate present national institutional use of dehydrated onions from survey data gathered about institutional use of dehydrated onions in the test market. The estimate derived from.the pre- dictive model will be compared with other estimates of institutional use Of dehydrated onions to determine whether or not the relationship between annual dollar volume of sales of institutions in a test market and an- nual dollar volume of sales Of total U.S. public eating places forms a valid basis for projecting institutional acceptance of a new processed food product in a test market into national potentials for the product. The best method for testing the accuracy of this predictive model would be to compare predicted national sales of the tested product to actual national sales but this would probably require several years in the case of the particular new product used in this study. 3. Data Needed The data needed for a predictive model for acceptance of a new in- stitutional food product include the following: (a) Sales Of the tested product during a specified time period in the test market, (b) annual volume of sales of institutions in the test market (by type of institu- tion), (0) number of institutions in the test market, (d) number of per- sons employed by institutions in the test market, and (e) the same above four factors for total U.S. public eating places. If the predictive model is to be based only on the relationship of sales volume in the test market to sales of total U.S. public eating places then number of in- stitutions and number of employees would not be needed. In order to have -43 _ some check on the accuracy of the suggested predictive model the follows ing types of data are needed: (1) amount of fresh and processed onions used by various types of institutions in the test market, (2) reactions of chefs to the use of processed onions, and (3) annual volume of bus- iness and number of employees of each institution in the test market. Additional information such as onion usage by product forms, ways in which onions are used in various foods, prices of fresh and processed onions, extent Of institutional familiarity and use of processed onion products for use in various dishes, and preferences for container types and sizes was gathered because it was felt that the information would be very valuable reference material for the food processing industry. B. lnstitutional Sales Test 1. Characteristics of the test market The city used as a test market was Detroit, Michigan. Detroit is an industrial city with a city limit population of 1,670,144.and a metro- politan area population of 3,762,360. The population of Detroit is made up of 70.7 percent white, 29 percent Negro, and .3 percent other non- white races as compared to the United States population which is 88.4 percent white, 10.5 percent Negro, and 1.1 percent other non-white races. The white population of Detroit is fairly well spread over various ethnic origins such as English-Irish, German-Polish, French, Latin, Slavic, and_ ScandinavianeNordic. Consumer surveys of onion usage have shown that Negroes tend to use fewer processed onions than whites, but the rel- atively high percentage of Negroes in Detroit was not expected to affect the acceptance Of a new onion product by Detroit institutions. _[+[+_ Public eating establishments in Detroit cover a wide range Of op— erations from yacht club dining rooms to sandwich stands. There are large numbers of specialty restaurants which cater to the tastes of ethnic groups such as Chinese or Greeks. Though quite diverse in nature, the institutions in Detroit, taken as a group, are probably similar to those Of other large industrial cities. The 1958 Census of Business lists 2,387 eating and drinking places within the city limits Of Detroit with annual sales of $126,109,000 in 1958. In the summer of 1961 there were 2,269 eating establishments on the account records of the nine maj- or frozen food distributors serving the city of Detroit. In addition, seventy-one institutions were listed in the yellow pages of the Detroit telephone directory which were not included in the account records of the frozen food distributors. In order to have up—tO-date and accurate name and address information, it was decided to define this group of 2.340 establishments as the universe of all eating places within the city limits Of Detroit. This group Of 2,340 feeding establishments included schools, hospitals, manufacturing plant food services, catering compan- ies, and all types Of restaurants. Thus, it covered all segments of the institutional food market as it is defined in this study. It is est- imated that this group of 2,340 establishments include virtually all of the public eating places in Detroit and account for at least 95 Percent of the total volume of sales by public feeding places within the city limits of Detroit. . 2. Conduct of the test In setting up the method for conducting an institutional sales test l. .45... it was felt that the test should fit into the normal marketing channel through which processed food products are supplied to the institutional market. Institutions are usually supplied by one or more wholesale dis- tributors who normally handle a complete line of institutional items. Some distributors handle only certain types of food items such as frozen foods, dry groceries, or produce, but most distributors serving the in— stitutional market handle certain items in most of these categories. Processed food products normally move from processors to institutions by one Of two routes. If a processor has his own sales force the market chain runs from processor to distributor to institution. ln other cases, where a processor does not have a sales force, the pattern of distrib- ution is from the processor, through a food broker, to distributors, and to institutions._ Brokers generally act as intermediaries between pro- cessors and distributors and are reimbursed by processors for selling their products. Brokers do not assume ownership of products and gener- ally do not become involved in the physical handling or storage of pro- ducts. Some large multi-unit institutions, such as school systems or restaurant chains, buy food products directly from processors, thus bypassing the distributor in the marketing chain, but this practice is not widespread. A food processor with a new product to be introduced to the in- stitutional market usually will retain a broker in any city or trade area. in.which he wishes to introduce his product if he does not have a sales organization of his own. The first step in introducing a new institutional 'product is to persuade distributors to carry the product and Offer it to .g6- institutions. Various incentives such as cash bonuses, rebates, or free merchandise may be used to entice distributors to carry a product. A processor will normally provide distributors with a supply of the new pro- duct to be distributed to institutions as free samples to expose buyers and chefs to the product. After the chefs have had a chance to try the new'product, salesmen of the distributors will attempt to sell the pro- duct to the institution. Depending upon the inherent characteristics of the product its sales will either develop to a profitable level or never materialize. Perhaps the most difficult step in this process is to get distributors to carry a new product. With hundreds of items already carried in their inventories, distributors are Often hesitant to take a new product on unless it appears particularly promising. The following method was devised for conducting an institutional sales test based on the normal marketing channels for institutional food products. The method consists of the seven following steps: (1) Distribution of product samples to selected institutions by distributor salesmen, (2) Recording of first reactions to the product, (3) Attempts to sell the product to institutions by distributor salesmen, (4) Keeping weekly records of initial and repeat sales Of the product to individual establishments for a period Of twelve weeks, (5) keeping monthly records of total sales in the test market for a period of twelve months as a check on predictions of the acceptance of the tested product, O .47- (6) Maintenance of a supply of a product in a central warehouse to be drawn on as needed to fill orders, and (7) Survey a sample of institutions in the test market after the sales test to gather data on utilization and purchases Of the tested product and competing products and to determine market penetration of the tested product. The first procedure undertaken in arranging a test of frozen diced onions was to contact the processors Of the product and secure their co- operation in supplying samples and of stocking a backup supply of the product in a Detroit freezer warehouse. Both processors agreed to co— operate fully in the test and proceeded to develop an institutional pack of frozen diced onions. One brand of the product was packed in two pound printed polyethylene bags with twelve to a case and the other brand was packed in five pound cardboard cartons with six cartons to a case. The processors Supplied 800 of the two pound bags and 200 of the five pound cartons to be used as samples for the sales test. An agreement was negotiated with the processors to charge the same price per pound for their respective brands during the period of time the test was scheduled to run. The price agreed upon was 13 cents per pound to the distributors on a case lot, exrwarehouse basis. An ex-warehouse price is the price of the merchandise picked up at the warehouse and includes transportation and storage charges but not delivery. This price was not considered com-- petitive with the going price for fresh onions but, in VieW'Of large peel- ing losses and high processing costs with the technology used to produce frozen diced onions, the processors were not willing to set the price any -48- lower. A later section of this study deals with the effects of the price on the results of the sales test. The processors also agreed to stock a back up supply of their product in a Detroit freezer warehouse to be drawn on as sales developed. An arrangement was made with the brokers for the two processors to keep records of any movements of the product from warehouse to distributors. The nine principal frozen food distributors serving the institutional market in Detroit were contacted to explain to them.the purpose and na- ture of the proposed sales test. The distributors all agreed to par- ticipate in the test and to cooperate in any way possible. The test method was explained to sales managers and they were asked to brief their salesmen of the way the test would be conducted, how to solicit reactions to the product, and methods of keeping records of sales. Salesmen were asked to treat the product in the same manner they would treat any newly introduced product and not to attempt any special push to sell the tested product. All distributors were requested to charge the same price for case lots of frozen diced onions but no attempt was made to control quan- tity discounts on the product. The 1,000 samples available for distrib- ution were prorated to the nine distributors on the basis of the number of institutions they had on their account records. No attempt was made to select specific institutions to receive samples. Distributor salesmen were asked to pass out the samples to the institutions which were most frequent purchasers of other frozen vegetable products. lt was decided that exact control of sample distribution to a pre-selected group of institutions would not be practical since it would require considerable .49 .. extra work by the cooperating salesmen. The failure to control sample distribution was expected to give an upward bias to the sales test results, but was not expected to seriously affect the accomplishment of the objectives of the test. It was necessary to strike a compromise be— tween preciseness of results to be obtained and the amount of extra work which would be expected from the salesmen taking part in conducting the test. Distributors were notified on the 22nd of October, 1961 that samples would be picked up from the central warehouse in preparation for the start of the sales test. Promotional leaflets explaining uses for frozen diced onions, preparation methods, and advantages of the product were attached to each sample before they were picked up’by distributors. A supply of promotional leaflets were provided for salesmen to give to the institutional buyers and chefs when the sample was delivered. No other attempts were made to promote or advertise the product under the test. Copies of the promotional leaflets used are included in Appendix A. Arrangements were made to provide each salesman with an insulated carry- ing container to insure that samples would remain properly frozen during delivery to institutions. A supply of prepared forms was furnished each salesman for reporting sample delivery, reactions to the product, and weekly sales of the product. Sample distribution was begun on October 24 and continued through November 6, 1961. One week after the sample dis- _ tribution was completed, records were collected from salesmen concerning institutions which received samples and initial reactions to the product. The price charged by distributors averaged about 18 cents per pound of 1‘ -50- frozen onions on a case lot basis and slightly higher prices were charged for broken case sales. The price of fresh onions delivered to institu- tions at the beginning of the sales test was 6 cents per pound for Mich- igan onions and 10 cents per pound for western onions. Records for initial and repeat sales to individual institutions were collected from salesmen each week during the twelve week test period. In order to have a cross check, weekly records were also kept on removals from the central warehouse by each distributor during the test period. With a few exceptions, the test proceeded smoothly and according to plan. Some difficulty was experienced in getting all samples delivered and some salesmen were slow in turning in their records of sales. Better con- trol over the test would have been possible if fewer distributors and salesmen had been used in carrying out the test. One distributor refused to release sales records to individual accounts for the last four weeks of the test period and one distributor did not distribute the product which was given him to be sued as samples. With these two exceptions the cooperation of brokers, distributors and salesmen was excellent. C. Onion Utilization jurvey In the summer of 1962 an onion utilization survey of Detroit instit- utions was conducted as a followup to the institutional sales test of frozen diced onions. It was decided to conduct the survey after the sales test was completed in order to avoid influencing the sales test re—0 sults. The survey was designed to determine the amount of penetration of the potential market which had been made by frozen diced onions during the sales test and to determine the reactions of institutional chefs to -51- the product after it had been used on a trial basis. A master list of _names, addresses and telephone numbers of Detroit feeding establishments was compiled from.the account records of the nine principal Detroit frozen food distributors plus all additional public feeding places listed in the yellow pages of the Detroit telephone directory. All in- stitutions outside the city limits of Detroit were eliminated from the list. The master list included approximately 5A0 establishments which were part of multi-unit operations and approximately 1800 establishments which were single—unit operations. An organization having five or more feeding places with centralized purchasing and menu planning operations was considered to be a multidunit organization. At the time of this survey there were eleven such organizations in Detroit including the Detroit SChool System, four drive—in chains, three restaurant chains, two department store chains with cafeterias or lunch counters in their stores, and one drug store chain with lunch counters in each of its outlets. It was decided to include all of the multi-unit feeding establish- ments in the survey since each one of these represents a substantial por- tion of the total Detroit institutional food market. The multi-unit organizations were separated from the single-unit establishments prior to selecting a sample from the master list. From the approximately 1800 singleaunit establishments included in the master list, a simple random‘ sample of hOO was selected to be surveyed. No effort was made to strat- ify the sample as to size of institution, volume of business, class of institution or any other criteria. The size of the sample was arrived -52- at primarily on the basis of the amount of time and money available for conducting the survey. l. Questionnaire design The questionnaire developed for use in the utilization survey was made up of seven principal sections. These sections were as follows: (l) General information, (2) Amount of onion usage by forms and type of onions used in various types of foods, (3) Specific questions deal- ing with the use of frozen diced onions, (4) Specific questions deal- ing with the use of dehydrated onion products, (5) Specific questions dealing with the use of french fried onion rings, (6) Specific quest- ions dealing with the use of canned onions, and (7) Questions dealing with the potential use of all forms of onion products in various types of foods. The general information section dealt with number of employees, number of meals serves, and volume of business of the institutions. This information was gathered to serve as a basis for making projections of the utilization data to national figures. The section on onion usage was designed to determine the amounts of fresh onions andonion products pur- chased, relative amounts of onions used in various types of foods, prices of onions and onion products, and the form of onions used in var- ious types of foods. The sections dealing with specific onion products were designed to determine the extent of institutional familiarity and use of the products, reasons for use or nonause, and preferences for type and size of containers for the various onion products. The last section of the questionnaire was made up of a series of questions to determine the opinions of chefs as to whether or not alternative forms -53... of processed onion products could possible be used in various dishes and types of foods. The questionnaire was pretested and revised three times Before the final form was selected. The pretesting was done in instit- utional feeding establishments in Lansing, Michigan. A complete sample copy of the questionnaire used in the survey is included in Appendix A. 2. Conduct of the survey The survey was conducted by a team of four interviewers who person- ally interviewed the food buyers and chefs of individual eating estab- 1ishments. Since different types of feeding establishments were expected to have widely varying use patterns for onions, each institution was placed into one of nine institutional classes.i These nine classes were (1) drive-ins, (2) cafeterias, {3) hospitals, schools or prisons, (A) low class restaurants, (5) medium.or high class restaurants, \6) private clubs, (7) coffee shops, \8) in—plant food services, and (9) other types of feeding places. The same questionnaire was used for all types of feeding establishments. The classification was done primarily to aid in the analysis and reporting of the results of the survey. EaCh institu- tion was contacted by telephone to secure cooperation and to make ap- pointments for interviews. Appointments were made two or three days in advance of the date an interview was to be conducted. Most of the ap- pointments were set up between the hours of 9:30 a.m. to ll:00 a.m. and 2:00 p.m. to h:30 p.m. in order to avoid meal times or periods of food ' preparation. This was done in an attempt to improve the cooperation of buyers and chefs and to secure the undivided attention of the respondents during the interviews. In most cases both the food buyer and head chef -54.. or menu planner were interviewed but in some instances one person per- formed both functions. Information concerning purchases, and prices of onions and onion products as well as general information was obtained from the food buyers. Information relating to onion usage in various foods and suitability of various onion products for alternative uses was obtained from menu planners or chefs. If for any reason interviews could not be completed or appointments were broken, new appointments were set up and callbacks were made. In the case of the multi-unit organizations, interviews were con- ducted with the food buyers and dieticians or menu planners of all el- even organizations. lnformation was obtained from the central offices of the multiaunit organizations since purchasing and menu planning for all units is done on a centralized basis by these organizations. Usable questionnaires were Obtained from.376 of the 400 individual feeding establishments selected for inclusion in the survey. The other 24 institutions either had gone out of business, closed for remodeling, or would not provide certain information requested from them. Ques- tionnaires were completed on all eleven of the multi-unit organizations. The information obtained from the multidunit organizations covers 540 separate feeding establishments in Detroit. FOOTNOTE - CHAPTER III J-A distinction was made between medium or high class restaurants and low class restaurants on the basis of type of meals served, sani- tation rating, average price of meals and appearance of the restaurant. To be rated medium or high class a restaurant had to have a Grade A sanitation rating, serve fuLL course ala carte meals, and be clean and attractive in decor. CHAPTER lV RESULTS OF SALES TEST AND SURVEY A. Sales Test Results Samples of frozen diced onions were distributed during the period of October 24, l961 to November 6, l96l and the sales test began on November 1. The first sale of frozen diced onions under the institution- al sales test was made on November 4, l96l. Sales increased from 34 cases of 24 pounds each in the month of November to 67 cases in Decem— ber and to 69 cases in January. Table llI shows sales in cases by months along with the number of new and repeat customers for each of the nine cooperating distributors. One of the chief advantages of the in- stitutional sales test as a technique for determining acceptance of new food products is the fact that it provides information on the amount of repeat pruchases made. Quite often a new product will be bought as an experiment by several customers and sales figures may look very favor— able initially. A new product will have limited success unless it can attract substantial numbers of repeat purchasers. Therefore, the break- down of sales into new and repeat purchases during the sales test gives a very good picture of how'well the product can hOld customers and also the frequency of repeat purchases. Sales developed in a regular pattern during the twelve weeks of the actual sales test but it was expected that more new customers would buy the product on a trial basis than actually did so. Considering the fact that approximately 850 individual institutions received samples of the product it was surprising that only 37 establishments made a trial -57.. .eomm Ewes: no: mega lam swam: mommom S 3 .3 3. a m as d. N. S N am an mate a m N. m a m H s m o e e m m a. 3 m 3 m m a S 3 m m m om a a ma N. m m S m e m m m e e m m H m a m e a Bow 30m How 38 edema 3% Sow sesame 2% Hem eeemem .52 Bow cassettes momma $me $30 momma mpoEopwdo mommo mpoEoumdo momwo mpoEOpmso mommo r I has .9194 382 .obm Edema monaooom nonaolroz o Emanuele game 92 E2 so Easel ea enemas 2H am .995 made éesHSBHemZH .8 Beam 0 .HH mamas purchase of the product. 0n the basis of the twelve week sales test a processor would not be expected to be overly enthusiastic about this product's acceptance at the institutional level. By projecting the monthly sales of January of 69 cases into a national figure, procssors could expect an annual sales volume of 28,152 cases of frozen diced onions or 675,648 pounds at the institutional market level. This pro- jection assumes the following delivered prices for onions and onion products: fresh onions, 8! per pound; frozen diced onions, 18¢ per pound; and dehydrated onions, 80¢ per pound. Any projections beyond the actual test market are usually subject to considerable error and in this case we cannot be certain if dollar volume of sales is an accurate indicator of the amount of onion usage of an institution or of the ac- ceptance of a new food product. This projection is made on the basis of annual dollar volume of public eating places included in the sales test as compared to dollar volume sales of all U.S. "public eating places" according to the form— ula below. U.S. Potential Sales = 828 cases annually .0294 U.S. Potential Sales = 28,152 cases annually (24 # net) Where .0294 = the proportion of dollar sales of total U.S. public eating places accounted for by Detroit institutions. (This is a more easily presented form.of the predictive model equation presented previously in Chapter 3, p. 41.) There are several possible reasons why less than five percent of the institutions receiving samples of frozen diced onions in the sales -59- test made a trial pruchase. Among these could be inferior product qual— ity, restricted product adaptability, institution shortage of freezer storage space, resistance to change among chefs and buyers, lack of sales effort by distributors' representatives, and price relationships between frozen diced onions and other onion products. Since instit- utions are quite cost conscious, the primary reason for the small num- ber of initial sales was probably due to price. During the time the test was being conducted the equivalent of an 18¢ per pound of frozen diced onions could be obtained from.fresh onions for about 13-14} in- cluding peeling losses and labor costs and from dehydrated onions for about 13! While product quality and convenience might be superior in frozen onions, an institutional buyer would have to weigh convenience and product quality rather highly in order to make a rational purchase of frozen diced onions at a cost of 4-5fl per pound more than other forms. In gathering the reactions of chefs and buyers to frozen diced onions the most frequent complaint was high price. Some chefs said that the product had poor appearance after thawing or cooking but most chefs rated the quality of the product as quite high. Table III shows that sales of frozen diced onions fell from 69 cases during the month of January, 1962 to an average of roughly 10 cases per month for the next six months. On February 7 the primary processor dis- tributing the product in Detroit raised the price to distributors from- 13¢ to 20¢ per pound. This raised the prict to institutions to 25-27! per pound as compared with a price of 13-14; for the equivalent amount of fresh onions.2 There is no way of determining how high the instit- -60- utional sales of frozen diced onions in the test market would have gone over a longer time period if the price had remained constant. It can only be assumed that the price rise shut off sales increases before a clear picture of acceptance had emerged. The effect of various factors other than price on sales of frozen diced onions is extremely hard to evaluate. Institutions are at present making extensive use of frozen foods of all kinds. They are using large amounts of frozen peas, potato products, and other vegetables as well as many portion control frozen meats. Storage space for frozen foods in all but the newest restaurants is probably inadequate to handle the ever expanding volume of frozen food used. This problem of storage space may have had an adverse effect on the sales of frozen diced on- ions since they were competing with relatively more important food pro- ducts for frozen food storage space available. The product form of frozen diced onions is not suitable for all uses of onions. The relative amount of onions used by institutions in diced form.is about 59 percent of total onion usage but certain uses require large chunks of onion.3 Large pieces of onion are normally used in stews, as flavoring for roasts, to make onion rings and as slices on sandwiches. A survey of restaurants concerning the form of onion desired for various uses indicated that diced onions would be suitable for most uses of onions but would not be preferred for certain specific uses. Frozen diced onions would not be as adaptable to all uses as fresh onions but could be adapted to the same general uses as dehydrated onion products which are also in diced form. -61- A factor which commonly affects the success of any new product is the general attitude of resistance to change. Many chefs form.habits of using a particular type of product such as fresh vegetables and are not interested in trying new products. All of these factors can have an effect on a new products' acceptance and they probably had some effect on the sales test of frozen diced onions. From.the experience gained in conducting this institutional sales test several modifications can be recommended for incorporation in future tests of this type. From the standpoint of maintaining good control over the test it would probably be wise to work with only one or two distributors serving the institutional trade in a test city. This would cut down on the number of salesmen keeping records of sales and make possible better control over distribution of product samples. Thorough briefings of all salesmen involved in the test and some means of compensating them.for the work of record keeping would probably ime prove cooperation by the salesmen. A.more important modification of the test procedure would be the use of two or more test markets. The same test should be run in at least two cities with the product priced at a different level in each test city. This would provide information about the effect of price on sales of a new product and enable the food processor to determine the proper price to charge for his product in order to obtain a profitable sales volume. In the case of the Detroit. sales test no information was gained as to what sales of frozen diced onions would have been if the price had been set at a lower level. A complete procedure for conducting institutional sales tests will be -62- outlined in the final chapter of this study. B. Resultg of Onion Utilization Survey The onion utilization survey conducted in Detroit included 376 single-unit feeding establishments and ll multiaunit feeding firms, with 540 individual feeding establishments. In order to determine the onion usage of various types of institutions it was decided to analyze and present the data from the single-unit and multi-unit groups separately. In later sections of this study, the data from both single-unit and multidunit groups are combined for the purpose of predicting market potentials for various onion products and for making projections of onion utilization. l. Single-unit establishments The singledunit establishments contacted in the institutional sur- vey of onion utilization were subjectively placed into one of nine classes by the interviewers during the interviews. 0f the 376 instit— utions interviewed, there were 27 drive-ins, 21 cafeterias, 19 hospitals or private schools, llO low class restaurants, 71 medium.or high class restaurants, 20 private clubs, 56 coffee shops, 20 in-plant food ser- vices, and 32 in an "other" category. \See Table IV) Institutions in- cluded in the "other" category were hot dog stands, sandwich stands, bars, etc. This sample of 376 institutions was probably larger than would be necessary to get a sample representative of all institutions in a test market. The sample was purposely made large because of a lack of knowledge about the relationship between size and type of institution and onion usage. An interesting and useful followup to this Itudy would ~63- be a process of subsampling to determine the minimum size sample of in- stitutions needed in a test market to be representative. lt is possible that a small sample stratified by size or type of institution would yield satisfactory results. I The yearly volume of business, number of employees and number of meals served per week at morning, noon and evening are presented for each class of single-unit institutions included in the survey in Table IV. In some ways these three characteristics of institutions are all measures of relative size of the various classes of institutions. The dollar vol- ume of sales of private schools and hospitals is not exactly comparable to the dollar volumes of the other classes since feeding operations in these institutions are to a certain extent non-profit ventures. All of the 376 institutions interviewed used some onions each week. Table V presents a summary of the number of pounds of fresh onions used per week, pounds of processed onion products used per week in fresh onion equivalent, total pounds of all onions used per week in fresh onion equi— valent, and price paid for fresh onions per pound for each institutional class. Conversion ratios used for putting processed onion products into fresh onion equivalent are as follows: kl) one pound of dehydrated onion products equals 8 pounds of fresh onions, (2) one pound of undrained can- ned onions equals one pound of fresh onions, (3) one pound of frozen diced onions equals l l/2 pounds of fresh onions, and (4) one pound of - frozen onion rings equals one pound of fresh onions.h The largest users of fresh onions and total onions were private clubs, medium.or high class restaurants, drive-ins, and schools or hospitals in that order. The ,h -54- .mpsoaSmpmop o>amsaoxo .ope>apanaemm o>am moosaoeHo .mpoaaoo mo mosomsdmw ch .euam pao51oaweam o oouooamcoo mm3_wcamweopsm ooom mo mcaceean some oonaamapcoo psonpfi3 use mesmenmaapepmo o>wm more mmoa :pfi3_suam dm oaseem awe dammee meaa emomm aoe seem e.ea oaeee m.ema ,emm nemmeao aaa madam woe momom mme sewna see amm m name on mm mooneo oemma med oemme asam oeomm eoea com oa omam eoa om eoeoaeenoe pooaiuoa eeeem ase eoamm ewe eemom mmm mmm a moan me em done ooaeoo ommam eeoa oeaem mosa oeesa new oee mm seas pom om onoao oee>aol maeoe mema emcee meoa emeee ese mama mm emama eam ab oneoaeeeom emeao seam no asaoez Smoe on Rene an 033 tea on m omee Ne oaa engaged meeao :3 aeome mama maeme aemm memam eeom mes mm eaem eom ea aooeom to aeoadeom eowem emma eemoe eema emmea eas mma m meow maa am eatepomou aaeme moea enema mmea omama oem mam ea acme pea em nauoeaoo aeeoe .>a aeeoe .>< aepoe .>< aeooa .ea aeeoe .ea meaco>m cooz weaenoz moohoaaem modem nonesz coapSpflpmeH mo mmmao xomz mom oo>hom masoz mo uoeesz Ho Amoesz MHmewwll mama: mam sesame maaaz to are? 92. mesaSaaa as warez .maem 80a ease aamaaa .zoaSeaenE to was . Mm Nm>mbw zoaadNHAHBD 20420 2H mezmzmmHAmdemm UZHQMHmVBHZD mAGZHm m0 mOHememeodmdmo .>H mqmde -65- pcoaeuwfiavo coaco serum “0 mega CH 9 pcmadafidvo guano emoam mo monsom eHo 8. $8“ 42% See ma ofiem «.2. moneeao 3 mo. +554 mm mm... m momma. we macspo no. Clam... R. can NH 33... ow mauopomwo 95am .mfia 8. mean an we Na eemm 3 none 8:8 5:. soon On... 3mm +3 omam eoa 0.3.0 09.95an phenomenon 3. 3mm ama ammo ea some 3a mneao email no ssaooz we. came .3 0mm m 8.3 mm pemgmpmem mmmao 33 ea. eomm ed 2.4 mm 85 am aoonom no aeoaamom Nb. 03.3 30a 5mm ma min—u mm «.230me so. seam oma 4mm ma eaam e3 caters adobe .3. depom. .3. adobe .>< moods xooz mxooz pom oomD x003 mom soapsflupqu mo mmmao emote pom you o to: 30.20 oommooonm own: mcoaco 9.8m ooaam coaeo .34. mo monsom serum mo moedom BHZDIMHUafim .34 Q7? zoageaemz... mo mac Hm mmzoaebeaemfi. 9H2: @8an ho amen: 20420 .> Manda @20ng2. mzH . -66.. amount of onion usage is probably related to the type of meals served by the various classes of institutions. Large amounts of onions are used on hamburgers by drive-ins and the other large users serve full course meals which require more onions for seasoning than would be need- ed for short orders or sandwiches other than hamburgers. Most instit- utions buy onions from produce dealers, but some small restaurants pur- chase small quantities of onions from.retail grocery stores. The aver- age price paid by all institutions for fresh onions at the time of the survey was seven cents per pound. The price of fresh onions ranged from four cents per pound to seventeen cents per pound with schools paying the lowest price and small, low Class restaurants paying the highest. There were large differences in the average amounts of processed onion products used by the various classes of institutions with low class restaurants and "other" institutions using virtually no processed onion products. This finding bears out the assumption.made earlier that size and type of institution would affect the acceptance of frozen diced onions. There appears to be a relationship between the type of instit- ution and the amount of processed onions used. The private clubs, hospitals, and cafeterias which presently use processed onions would probably accept a new processed product more readily than those classes of institutions using few processed onions presently. 0f the 376 institutions interviewed, 105 institutions or 28 per- cent of the total used some form of processed onions. Fifty instit- utions regularly used canned onions, 46 regularly used dehydrated onion -67- products, l8 used frozen french fried onion rings, and four institutions used frozen diced onions. Prior to this survey there was no accurate statistical information available, to the author's knowledge, concerning the way in which onions are used by institutions. One of the important factors in the success of a processed food product is that the product form.be suitable for the major uses of the food. it is known that onions are used in several types of dishes or foods and in several forms. The most common forms in which onions are used are diced, sliced, whole or quartered, and rings. The primary dishes or foods for which onions are used are the following: (l) on sandwiches, (2) in salads or relishes, (3) in soups and gravies, (4) in stews, (5) fried with steak or liver, (6) in meatloaf, (7) as flavoring for roasts or other baked meats, (8) as onion rings, (9) as creamed onions, (10) in spaghetti sauce, and (ll) in other miscellaneous uses. The chefs or menu planners of all establishments interviewed in this survey were asked to indicate the foods or dishes in which they used onions and the relative amounts used in each type of food or dish. A summary of the percentage of total onions used in various types of foods is given in Table Vl for each class of institution, for all single- unit establishments, for all multiaunit establishments, and for all in- stitutions included in the survey. The apparent large differences in the use patterns between classes of institutions are due to the differences in types of food served by different classes of institutions. Drive-ins which serve primarily hamburgers or short orders use 47.8 percent (on a weighted basis) of -53- NJ. N.N e.a m.N._. e.e e.e m.m 0.w e.a ._..m. mad hogm one. ea meoaeooaemoa aaa a. e.a a. «.ma e.e e.e «.4 e.e e.e e.a m.0m mooosnnaaneenm oaee.aeanz aaa noaeno oooem e.m e. m. e.aa e.e e.e m.ea a.o e.e o.ee .naeo no mean m.m e.m e.e e.e m.e a.om e.ea e.e m.ea a. ~.m noaeno .onem e.em e. e.ae noaeno nauoeaeo o.e o.em 0.0m o.e o.oa o.em o.ma .eam .nom .oom o.m e.m e.a“ .a.ma e.e e.e e.a o.e mfia e.e new npcofinnaoeanm eaoeuoaeoam aaa e.e m.m e.a o.e m.e e.e o.e o.e e.aa o.e 0.0m noneo m. o.e e.a o.m o.e o.e m.e o.e m.om e.a m.mm .oeeo eeeal e.a e.a o e.m a.e e.e ~.e o.e o.ma e.e e.me noonm ooeeoo e. m.m o.e e.aa o.e m.m e.e e.e o.me e.a e.a nnoao oeeeaea m.e «.4 m.m e.ea e.e e.e e.a m.ma o.em a.e o.~a .omom eeeao neam e.e o.e o.a m.m e.e o.e e.ea o.e e.ma e.m m.om .eeom mmeao_:oa e.a e.a o.e e.e m.ma m.oa o.e o.e e.em ~.e e.e maeoaomom e. e.e o.e e. e.a e.e e.oa o.ea m.ea e.a e.e neanoeoeeo d. e. 0 H.m4 0.4 N. e.a N. N.N 0.4 0.54 meHIo>aao memos moose nooaeo madam eoaem nee aeoa peoaxz mzoee meson meeaem eonoazeoem ooaeaoaenoa porno appoewomm ooeeomo coaoo weaao>mam apnea ooapm mo mmmao mzoaeseaamza aaa oza .mazmzmmaamaemm aazpuaeapz_aaa .mezmzmmaamaeem eazsnmaozam aaa .zoaasaaemza lo mmeao am moose as mamas zmsmam 2a new: mzoazo lo moaezmomma .a> mamas -69- their onions on sandwiches and 45.l percent as onion rings. lnstitutions which serve full course meals, such as cafeterias, hospitals and high class restaurants, use more onions for soups and stews and as flavoring in meatloaf or baked meat dishes. The wide differences in onion usage patterns of various types of institutions indicate that the use of a sample containing many types and sizes cf institutions was necessary to obtain meaningful data on the way onions are used. A stratified sample could have been used to cut down on the size of the total sample while still yielding accurate usage data. Considering the onion use of all single—unit institutions combined, the percentages used in the various foods are as follows: kl) sandwiches, 25.5 percent; {2) soups or gravies, l7.3 percent; (3) onion rings, l2.l percent; (4) fried with steak or liver, 9.8 percent; (5) stews, 9 per- cent; (6) meat flavoring, 6.4 percent; (7) meatloaf, 6.4 percent; (8) salads or relishes, 4.5 percent; {9) spaghetti sauce, 3.5 percent; (l0) other uses, 3 percent; and \ll) creamed onions, 2.5 percent. kSee Table Vl) The use of onions by'multi-unit establishments is 50.5 percent on sandwiches, 12.2 percent onion rings, 7.6 percent for stews, 6.7 per- cent in soups, 6.6 percent in meatloaf, 6.5 percent for meat flavoring, 4.3 percent for fried onions, 2.6 percent in salads, 1.7 percent in spaghetti sauce, .9 percent in creamed onions, and .4 percent for Other uses. (See Table VI) Perhaps the best indication of onion use patterns of the instit— utional market can be obtained from.the usage information of all estab— lishments inCluded in the Detroit survey. The amounts of onions used in the ll food groups by all 376 single-unit establishments and the 540 establishments of the multi-unit firms were combined to give the total amount of onions used per week by these 916 separate feeding establish- ments covered by the survey. The percentage of total onions used for various foods by all institutions combined was as follows: (1) sand- wiches, 43.5 percent; (2) onion rings, 12.3 percent; (3) soups and gravies, 9.6 percent; (4) stews, 8 percent; (5) meat flavoring, 6.4 per- cent; (6) meatloaf, 6.4 percent; (7) fried onions, 5.9 percent; (8) sal- ads or relishes, 3.1 percent; (9) spaghetti sauce, 2.2 percent; (l0) creamed onions, 1.4 percent, and (11) other uses, 1.2 percent. (Table VI) It was mentioned above that the form.in which onions are used is important as well as the type of food in which they are used. 0f the total onions used by the institutions covered in this survey, 59 per- cent are used in diced form, 15.7 percent are used in whole or quartered form, 12.3 percent are used in onion ring form, and 13 percent are used in sliced form. It is conceivable that dices onions could be used in place of part of the onions presently used in whole or quartered form and those used in sliced form. The maximum.percentage of institutional onion usage which could be in diced form would be approximately 75 percent of total usage. At present, most of the onions used for processed onion products are pungent in nature with the exception of those used for frozen french fried onion rings. Special varieties of onions with high pungency and high solids content have been developed in California in an effort to improve the flavor level of dehydrated onion products. The chefs inter— viewed in Detroit were asked to give their preferences for sweet or pun- gent onions for use in ten types of dishes or foods. At least 70 percent of the chefs stated a preference for sweet onions for use in all types of dishes. Of those chefs preferring sweet onions, the major reasons cited for their preference were flavor and size with flavor mentioned by about 150 respondents. The major reasons given for preferring pun- gent onions were flavor and price. Either this question was misinterp- reted by the respondents or there is a discrepancy between the prefer- ences of the chefs and the buying practices of institutions. Discuss- ions with several produce dealers in Detroit have revealed that 60-75 percent of the onions bought by institutions in Detroit are of the late—summer, pungent type. Since pungent onions are generally cheaper, the chefs may use the less preferred pungent onions as a means of re- ducing costs. Chefs were asked to state their preference for either fresh onions or some form of processed onions for all onion uses. 0f the 371 chefs who stated a preference, 351 preferred fresh onions and 20 preferred processed onions. The major reasons given for preferring fresh onions and the number of respondents who gave each of the reasons is as follows: (1) economy, 33; (2) convenience, 16; (3) flavor, 189; (4) texture, 14; (5) habit, 37; and (6) other reasons, 40. 0f the 20 chefs who preferred processes onion products for general use, 16 of them.listed conveniencev as the reason for their preference. Information was solicited from.the institutions concerning the peeling and waste loss from the use of fresh onions. One-hundred and fifteen institutions reported a peeling loss of -72- under five percent, 130 institutions reported a 5-9 percent loss, 95 reported a peeling and waste loss of over 20 percent. a. Responses to Questions on Frozen Diced Onions A group of questions were included in the questionnaire to determine the familiarity and use of frozen diced onions. 0f the 376 institutions interviewed, 182 had seen frozen diced onions and 194 had not seen or heard of the product. One-hundred and six institutions or 28 percent of the total number interviewed had tried at least a sample of frozen diced onions. Reasons given for trying the product and the number of times each was mentioned were (1) free sample, 79; (2) convenience, 10; and (3) other reasons, 9. There were four institutions regularly using frozen diced onions at the time the survey was conducted. Reasons men- tioned for failure to try frozen diced onions were lack of freezer space, habit, poor quality of the product, and high price of the product. The reason most commonly mentioned for not trying the product was habit or customary use of other forms of onions. One-hundred fifty-three re- sponses were obtained regarding preferences for the type of container for packing frozen diced onions. One-hundred twenty institutions pre- ferred polyethylene bags, 21 preferred paperboard boxes, and 12 prefer— red some other type of container such as aluminum foil bags or metal containers. This preference was probably influenced by the fact that most of the samples of frozen diced onions distributed during the sales test were packed in polyethylene bags. There was little agreement as to the size of container preferred for frozen diced onions. Forty-two -73- chefs preferred one pound packages, 37 chefs preferred two pound pack- ages, 12 preferred three pound packages, and 55 chefs preferred packages of five pounds or more. b. Responses to Questions on Dehydrated Onions Dehydrated onions are probably the most well known of any of the processed onion products. Two-hundred sixty-two institutions, or 70 percent of the total number interviewed, were familiar with some form of dehydrated onions. The first dehydrated onion products were intro- duced to the institutional market shortly after the end of world War II. Of the 262 institutions who had seen dehydrated onions, 56 were exposed to them prior to 1950, 60 institutions saW'them.between l95l and l956, 7l saw'them.between 1957 and 1959 and 67 saw them.since 1960. One- hundred ninty-one institutions have tried dehydrated onion products since 1948 with 110 of these trials occuring since 1957. At the time of this survey, 46 institutions were using some form of dehydrated onions on a regular basis. Reasons mentioned by the chefs for trying dehydrated onion products were: (1) free samples, 73; (2) convenience, 43; (3) good flavor, 6; (4) reasonable price, 7; and (5) other miscellaneous reasons, 47. Institutions who had tried dehydrated onion products gave the fol- lowing reasons for discontinuing their use: (1) poor flavor, 44; (2) high price, l6; (3) poor appearance, texture, or quality, 12; (4) inconvenient to use, 6; and (5) other miscellaneous reasons, 43. Several institutions do not use dehydrated onions regularly but keep a supply on hand for use when they temporarily run out of fresh onions. -74- c. Responses to Questions on French Fried Onion Rings French fried onion rings are carried at least once per month on the menus of 154 of the 376 single-unit institutions interviewed in this sur- vey. Onion rings are continuously on the menu of lOl establishments and 51 of these institutions regard french fried onion rings as a "special- ty of the house." Onion rings are served as a side dish by 87 instit- utions, are used as a garnish by 49, and are used both ways by 19 in- stitutions. One-hundred thirty-six institutions make their own onion rings from fresh onions and l8 regularly use partially cooked and frozen onion rings. A total of 74 out of 376 institutions have tried using frozen onion rings during the past five years. The chief drawbacks to the use of frozen onion rings and the number of times mentioned were: (1) poor flavor or breeding, 53; (2) poor texture, 35; (3) hard to pre- pare, 22; (1.) high price, 16; and (5) others, 18. Out of 145 chefs who stated a preference between frozen and fresh onion rings, l15 preferred fresh and only 30 preferred frozen rings. It seems likely that certain technological problems causing poor quality in frozen french fried onion rings will need to be corrected before the institutional market for this product can reach its potential level. An attempt was made to ascertain what chefs prefer in terms of breeding, ring size, package size, and degree of processing for processed onion rings. Since there seems to be a good institutional market potential for frozen onion rings, it. was felt that the preferences of chefs could give valuable guidance to onion processors for future improvements of this product. Chefs of 177 institutions stated preferences for degree of breading -75.. desired on onion rings with 127 preferring light breeding and 50 pre- ferring heavy breading. The breakdown obtained on size of ring prefer- ences was as follows: 10 chefs prefer rings under two inches in diameter, 169 chefs prefer rings from two to three inches in diameter, and,lOO chefs prefer rings of four inches or more in diameter. The sizes of packages and number of chefs preferring each were: one pound, 28; two pounds, 29; five pounds or more, 24; and portion pack, l2. Chefs were asked to state their preferences among seven possible types of processed onion rings. The number of chefs preferring each type was: (l) raw, breaded, and frozen- 96; (2) raw, unbreaded and unfrozen - 62; (3) raw, breaded and unfrozen - 46; (4) breaded, part- ially cooked and frozen - 35; (5) raw, unbreaded and frozen - 25; (6) breaded, fully cooked and frozen - l0; (7) breaded, partially cooked and unfrozen - 8. Based on the chefs' preferences, the most acceptable type of processes onion ring could probably be described as follows: blanched, frozen rings of 2-3 inches in diameter with light breeding and packed in boxes of one pound and five pound sizes. d. Responses to Questions on Canned Onions Fifty of the Detroit institutions interviewed are regularly using canned onions. These are primarily used for soups, stews, and creamed onions. Of the 376 institutions surveyed, 65 of them carry creamed on- ions on their menu at least once per month. One-hundred seventeen in-i stitutions have tried canned onions at some time within the past five years. Most of the institutions having tried canned onions are those which serve complete dinners or full course meals. When asked to give -76- reasons for not trying canned onions, 180 institutions of the 259 who have not tried canned onions mentioned that they do not serve any primary onion dishes or dishes which require whole onions. Chefs were asked to state their preferences among various sizes of canned onions and types and sizes of containers for canned onions. One-hundred four chefs pre- ferred canned onions of one-half inch diameter, 55 Preferred onions of one inch diameter, and l0 preferred onions over one inch in diameter. The overwhelming preference in container type and size for canned onions was the number l0 size metal can. Only 12 out of 154 chefs stating a preference for container size mentioned any other than a number 10 can. e. Possible Use of Processed Onion Products One of the most important factors affecting the institutional potential for processed onion products is the opinion of institutional menu planners and chefs about the use of processed onion products in various types of foods. ln the Detroit institutional survey, the chefs or menu planners of all establishments were asked whether or not they thought frozen diced onions, dehydrated onions, and canned onions could be used in a variety of dishes and foods. Respondents were asked to ignore price differentials between the processed products and fresh onions. Responses to these three questions are summarized in Tables Vll, Vlll, and lX. At least 65 percent of the responding chefs felt that frozen diced onions could be used for all the listed foods except sandwiches. Only 52 percent of the chefs felt that frozen diced onions could be used on sandwiches. At least 62 percent of the chefs said that dehydrated onions -77- TABLE VII. OPINICNS OF DETROIT CHEFS ON THE POSSIBLE USE OF FROZEN DICED ONIONS Di NINE TYPES OF FOODS, BASED ON RESPONSE TO THE F OILOWHVG QUESTION: CAN FROZEN DICED ONIONS BE USED IN THE F OILOWING FmDS? Total Yes No Responses % Yes a) On Sandwiches 164 153 317 52 b) Salads or Relishes 203 113 316 64 c) Soups or Gravies 291 33 324 90 d) Stews 266 58 324 82 e) Fried Onions for Steak or Liver 250 70 320 78 f) Meatloaf or Stuffings 292 32 321+ 90 g) Flavoring for Pot Roasts, Baked Meats or Other Meat Dishes 273 51 324 84 h) Creamed Onions or Other Onion Dishes 200 105 305 66 i) Spaghetti Sauce 281 37 3l8 88 -78- TABLE VIII. OPINIONS OF DETROIT CHEFS ON THE POSSIBLE USE OF DEHYDRATED ONION PRODUCTS IN NINE TYPES OF FOODS, BASED ON RESPONSES TO THE QUESTION: FOLLOWING FOODS? CAN DEHYDRATED ONIONS BE USED IN THE Total Yes No Responses % Yes a) On Sandwiches 134 177 311 43 b) Salads or Relishes 160 146 306 52 0) Soups or Gravies 286 30 316 91 d) Stews 256 60 310 81 e) Fried Onions for Steak or Liver 219 93 312 70 f) Meatloaf or Stuffings 279 37 316 88 g) Flavoring for Pot Roasts, Baked Meats or Other Meet Dishes 261 54 315 83 h) Creamed Onions or Other Onion Dishes 188 115 303 62 i) Spaghetti Sauce 262 46 308 85 -79- TABLE IX. OPINIOI‘IS OF DETROIT CHEFS ON THE POSSIBLE USE OF CAI‘UVED ONIONS IN NINE TYPES OF FOODS, BASES CN RESPG‘ISES TO THE QUESTION: COULD CANNED ONIONS BE USED AS A SUBSTITUTE FOR FRESH ONIONS IN THE FOLLOWING FOODS? Total Yes No Responses % Yes a) On Sandwiches 74 243 317 23 b) Salads or Relishes 3.18 200 318 37 c) Soups or Gravies 275 50 325 85 d) Stews 296 32 328 90 e) Fried Onions for Steak or Liver 200 122 322 62 f) Meatloaf or Stuffings 250 74 324 77 g) Flavoring for Pot Roasts, Baked Meats or Other Meat Dishes 255 71 326 78 h) Creamed Onions or Other Onion Dishes 292 30 322 91 i) Spaghetti Sauce 245 76 321 76 -80- could be used for all foods other than sandwiches, salads or relishes. Forty—three percent said that dehydrated products could be used in salads or relishes. Slices of raw onions are commonly used on certain types of sandwiches, but drive-ins use dehydrated onions extensively on hamburgers. Sixty-two percent or more of the responding chefs said that canned on— ions could be used in all foods except sandwiches and salads or relishes. Thirty-seven percent of the chefs felt that canned onions could be used in salads or relishes and only 23 percent said that canned onions could be used for sandwiches. At the time the survey was conducted, dehydrated onions were about the same price as fresh onions on an equivalent basis, but frozen diced onions and canned onions were considerably more expensive than fresh onions. It is possible that in the future both dehydrated and frozen diced onions will be competitive with fresh onions on a price basis. In a later section of this chapter estimates of the potential market for processed onion products will be developed by using the opinions of chefs concerning the substitutability of processed onions for fresh onions. 2. Multiple-unit organizations Due to the small number of mnlti-unit organizations covered by this survey and the diversity of their operations the survey results obtained from the multi-unit organizations will be presented for each firm. A separate summary of the information obtained as a result of the survey will be presented for each of the eleven organizations without reveal- ing their identities. -81- a. Detroit Public School System The Detroit Public School System has 137 schools with lunchrooms. The entire system.uses 1,250 pounds of fresh onions and 1,600 pounds (fresh equivalent) of chopped dehydrated onions per week during the 36 school weeks. Both the fresh onions and dehydrated onions are bought on a bid and contract basis with fresh onions purchases weekly and dehydrated onions purchases once per year. The following is a breakdown of the percentage of total onions used by the school lunch- rooms in various types of foods: (1) salads or relishes, 12 percent; (2) soups or gravies, 28 percent; (3) stews, 10 percent; (A) fried onions with meat, 5 percent; (5) flavoring for pot roasts or other meat dishes, 20 percent; (6) meatloaf or stuffings, 20 percent; and (7) spaghetti sauce, 5 percent. (See Table X) This utilization breakdown was calculated by the head dietician of the school system from the master menus and recommended recipes used by all school lunchrooms. Both sweet and pungent onions are used by the school system.and rel- ative prices determine which type is used. Normally, Michigan (pungent) onions are used for 6 1/2 months of the school year or from September through February. Peeling and waste loss from fresh onions was est- imated at twelve percent. The dieticians and menu planners prefer fresh onions for use in salads, stews, and fried onions for texture reasons and prefer dehydrated onions for other uses because of convenience and uniform flavor of the dehydrated product. The school system has been using dehydrated onions since 1955 and all dehydrated onions are purchased in sealed number 10 a. a.a a. m.ma m.e e.e m.e e.a e.e e.a n.0m managemeaneemm pnesuaeaaz 44¢ ©.N m. m. e.aa u.¢ e.a m.:4 4.m w.4 o.mq mqwmno muopm .pme 90 mahm m.m s.m e.a o.e m.m m.om 5.04 e.a ~.44 a. m.m mcfleeo nemnsmpmom EN e. e.a. 235 5-653 e.a . 0.0m o.em o.m o.ea o.mm o.m4 .Seeeam qoosom afloupmo new: pmnpo modem mcoflco mmCHm mcfiuo>mam «woa pmozxz mzmum mmdom mvmamm monowzvcmm mcoflpzpflpmaH fleeeemeam eeaeeeo coaeo p.626 name: eeaea mo mamas Nm>mbm 20HH88o oom.m 000 008.4 FMA a 88m .nom aflonpmm 82888 88888 8882188882 884.888 804.88 888.888 000.8 48868-888 dflNddfll oom.8 www.04 away mponpo mmmudm 8mm dmauoa mo mmwpopmmmo 8:843 .wwz m4 o 45w 4 NON m4 mom macaw mommoo 884.84 884.8 888.88 88 88840 8888888 088.88 088.04 888.88 088 88888888888 88840 2888 488”~4 888nm 480.88 888 88888888888 88840.208 888 88 888 8 808.84 40 8400208 .8 848888808 888.08 800 848.44 004 8888888880 880.88 808.4 888.48 084 824-88888 888888 8882-848888 «8.000.48 8000.482 8448dccd um>88m 84802 momhoqaem mo .02 moawm 84880w 8888: mo .02 :0885888888 mo 88840 8884 .28088042 .8808888 .888888 88882 80 8888222 828 88880828 80 888202 M88888 888888 8842 .8422 80 8888 88 .8842: 8 88488852 88 .82248 8422:4882: 828 8H22u880288 88 .882882 8820482848824 8408888 888 80 804884888088880 .82 88888 2 -93... .82848 08m 8o 04Q2881958 8 no 08883 82848 000.4 80 8882888M* 80.004 84.0 8 .8 88.88 88.88 . 8 24 848808 8.48.4.4 8.48 8.488 8084.8 4848.8 848808 80.004 88.0 88.8 88.88 88.08 8 24 488081228 .408.8 8.m 8. 8 8.888.8 8.084.4 488081228 m.m48.4 u: .mmww w.844.4 8.4N4 824820 88088 .8m0: no 0580 m.m>d m.8 4.8m 0.4N4 N.¢om 824820 8288588802 m.moo.4 In I: 0.080 0.080 824820 24188480 8.8.04 .3 I: 8.88 0.84 22888.48 400200 8408880 82848 842048402 88.0 84.8 88.44 84.88 . m 24 48808 8 .44 8.4.8.88 8.18.0.8. 81.48.88. 48808 n: nu 8.88 8.888 . 88280 nooflbhmn 0240oom 8.8 4.8 8.88 8.888 82848 .882 4.8 8.8 8.884 8.088 82028 888800 u: 8.84 8.408 0.888 82240 8888488 8.8 8 .88 8.844 8.480.8 88288288882 88840 2842 8.84 4.84 8.4m 0.0mo.4 88288288802 88840.304 8.0 0.4 4.844 8.884 8400208 8888488 8 848842808 8.0 4.48 8.88 8.884 8848888880 8.44 .. 8.88 8.488 82488480 _ . 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H.m .. .. m.om ampmmm Hoogom pfionpmn manflm pacoufipasz o.m05.u ¢.>Nm m.4mm m.m¢¢ m.¢¢w m.oam Hmpoennsw m.¢m¢ w.5a m.¢a ¢.o m.oa 0.0m umsgo m.mmq :.H 0.9 m.¢ e.a b.m mafi>pmm mzflnmmm pumam .mmz mubmw m.¢a b.ua .. o.mm e.a: mnogm mommoo m.mqu m.¢ «.5H m.¢m a.mm m.>m mpsao wpm>flgm m.mam.m m.oo m.uo m.pmm c.4fi «.mua mpnmgsmpmmm mmmao swam o.ama.a m.mw m.¢¢ m.HH «.mm o.¢b magmasmpmmm mmwao gag .14mm o.ma m.ma ¢.>N 5.4N m.mm maoogom é mampdnmom flammm 5.m >.mm 4.0m a.¢ o.o¢ mmflpmpmmmo m.mom N.m N.m u. N.mom H.m mcHuo>Hpm mapflm pfinanmamcflm mam: mosmm mCOfico mmcwm mpmmz 46909 pogpo appmnwwmm umamogo cease onmm you. mCflpo>mHh \ :. A.pcoou .HH>x mqmde -95- were primarily due to differences in types of food served. Chefs of Detroit institutions were asked to state their opinions about the potential or possible use of dehydrated onion products, frozen diced onions, and canned onions in various dishes and foods. The opin- ions of each individual chef were weighted by the total amount of onions used and the relativeamounts of onions used in various foods by the in- stitution for which the chef worked. By this process a weighted estimate was obtained of the potential market for dehydrated onions, frozen diced onions and canned onions in the total Detroit institutional market. (See Tables XVllI and XlX) Since any of the three forms of onions can be adapted for several uses, the potential market for the three products in Detroit institutions are as follows: (l) dehydrated onions, 69 per- cent of total onion usage; (2) frozen diced onions, 65.8 percent of total onion usage; and (3) canned Onions, 35.6 percent of total onion usage. Since uses of these three products overlap, the maximum.poten- tial market for all three products combined would be approximately 70 percent of total onion usage. b. Product Forms Used At the time of the Detroit survey, total institutional onion usage was made up of 67.2 percent fresh onions, 29.9 percent dehydrated onion products, 2.5 percent canned onions, and .h percent frozen onion pro- ducts. lt is expected that fresh onions in institutional onion usage will be replaced to a considerable degree over time by processed onion products. The degree to which processed onion products replace fresh onions will be largely determined by product quality, price and con- -97— .msfinm mum .Ho managing m no women. manna.“ 00min mo mpmeflpmmrx e.mom m.mmm e.mmm e.eaa.a a.mem m.aow.m nausea We.“ New Mama. E e.a EH H3033 o.es a.me m.mmm e.aaa a.se e.aee maaaao macaw .fiom .Ho mam e.aaq q.mm a.mm e.ae e.e a.m meaeao pcmasmpmmm .. m.¢aw .. -u .. N.eaa.a mcamao cH-m>aeo 0.0m e.a e.aa m.Ha .. 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At the time the survey was con- ducted the cost of one pound of onions ready to use from the various onion product forms was as follows: (1) fresh onions, l5 cents (in- Cluding peeling and waste losses and labor costs); (2) dehydrated onions, l3 to l8 cents; (3) frozen diced onions, 27 to 30 cents; and \h) canned onions, 27 cents. The cost of fresh onions can be expected to vary considerably depending upon the time of year and size of the onion crop. On the basis of these cost relationships along it appears that dehy- drated onion products have the best potential to replace fresh onions in the institutional market. However, other factors such as product qual- ity differences, the possibility of technological improvements, and cost reduction of frozen diced onions may alter these competitive rel- ationships between fresh onions and the various onion products over time. In 1962, Detroit institutions used an estimated total of 1,119,500 pounds (fresh equivalent) of onions in the form of french fried onion rings. Of this amount only 51,100 pounds or 4.5 percent were made up of processed frozen french fried onion rings. Chefs were asked to state their preferences for fresh onion rings or frozen onion rings and to give the reasons for their preferences. Eighty percent of the chefs responding to this question preferred fresh onion rings. Reasons stated by chefs for preferring fresh rings were: (1) poor quality or flavor of frozen rings, (2) cost of frozen rings, and (3) other mis- cellaneous reasons. If technological improvements can be made which will allow the factory production of high quality frozen onion rings -l02— at a price competitive with the cost of onion rings made by institutions from fresh onions, there would be a potential market for this product of 1,068,300 additional pounds in the Detroit institutional market. A. Expansion of Detroit Data to National Data It was stated earlier that results from an institutional sales test could be expanded into national data by one of three means: (a) numbers of establishments, (b) numbers of employees, or (0) total annual dollar sales. In this section, the Detroit data on current onion usage and potentials for onion products will be projected into national figures in order to evaluate the predictive model previously proposed in Chapter lll. Table XX compares the Detroit institutional market with the na- tional total public eating place business in terms of numbers of estab- lishments, annual dollar sales and numbers of employees of both single- unit and multi—unit institutions. 0n the basis of expansion of the Detroit survey data, estimates of total institutional use of onions, possible use of dehydrated onions, current dehydrated onion usage, and market potentials for dehydrated onions during 1961 are given in Table XXI. These estimates were ob- tained by projecting information from.the Detroit survey into national data by means of the relationship of Detroit institutions to U.S. public feeding placesin terms of three size measures; number of establishments, number of employees, and annual volume of sales. For example, the 6 figure for national total onion usage of 386,637,800 pounds (fresh equivalent) was derived by using the predictive model presented previous- ~103- ly on pagelaL. The calculations are as follows: National Onion Usage = (Detroit multi—unit usage) ($sales of mmlti-unit firms in total U.S.) (useles of multi-unit firms in Detroit ) plus (Detroit single—unit usage) (fisales of singledunit firms in total U.S.) ($sales of single-unit firms in Detroit ) National Onion Usage (3,831,600) (1.902.146.000) ( 100,666,000) plus (7,699,600) (94135.4881000) ( 223,795,000) National Onion USage 386,637,800 pounds Table XXll presents a series of estimates of U.S. total possible use of frozen chopped onions and possible market potentials for frozen chopped onions. These estimates are based on the stated acceptance of frozen diced onions for various food uses by Detroit chefs. The possible market potential figures for frozen chopped onions are derived by sub- tracting the portion of total U.S. onion usage already captured by de- hydrated onions from.the possible use figures. (Dehydrated onions have already captured approximately 35 percent of the amount of total onion usage for which a diced product is suitable). Table XXlIl presents estimates of the amount of french fried onion rings used, factory pro- cessed onion rings used, and additional potentials for factory processed french fried onion rings for the total U.S. public eating place business. 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