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The U.S. and Industries: Market Structure, Structural Change, and Economic Perfornnance

John M. Connor

United States Economics. Agricultural Department of Statistics, and Economic Report No. 4 51 THE U.S. FOOD AND TOBACCO MANUFACTURING INDUSTRIES: MARKET STRUCTURE, STRUCTURAL CHANGE, AND ECONOMIC PERFORMANCE. By John M. Connor, National Economics Division; Economics, Statistics, and Cooperatives Service; U.S. Department of Agriculture. Agricultural Economic Report No. 451.

ABSTRACT

The major conclusions the National Commission on Food made in 1966 about trends in the industrial of the U.S. food manufacturing industries are still valid. numbers are declining, average market concentration is among the highest in the manufacturing sector and is rising, product diversification has risen, food advertising has more than doubled, and the profitability of very large firms has remained higher than that of smaller firms. Foreign investment is substantial and rapidly growing, most food media advertising is on TV, profit rates have risen by over 50 percent in the last 25 years, and the overcharge on processed is about 10 percent.

Keywords: competition, food manufacturing, tobacco manufacturing. Industrial organization, market structure, performance, monopoly, oligopoly, firms

The names of proprietary firms and brand names are used in this publication to report facts on available data. The Department neither guarantees nor warrants these names and products and implies no approval of the products to the exclusion of others which may also be suitable.

ACKNOWLEDGMENTS

The author is indebted to Loys L. Mather for his help as co-author of the Directory of the 200 Largest U.S. Food and Tobacco Processing Firms 1975, from which much of the data on the roles of the largest were derived.* The collecting and coding tasks for those data were performed by three research assistants at the of Wisconsin at Madison—Juan Morelll, Miguel Carriquiry, and Michael Pratzel. Charles Handy, Bruce Marlon, Gerald Grlnnell, and Russell Parker generously provided constructive criticism of early drafts of this report. The report was typed by Judith Peterson, Angela Moore, Karen Robinson, and Frances Yates. Tom Houser is thanked for his generous assistance with the programming that produced many of the tables. Debra Ritter edited the report.

This report is published by ESCS in cooperation with the core research unit of NC-117, a North Central Regional Project on the "Organization and Control of the U.S. Food Production and System," University of Wisconsin.

*See reference 16, page 73.

Washington, D.C. 20250 March 1980 CONTENTS

Page

SUMMARY iv

INTRODUCTION 1 Importance of the Processed Foods and Tobacco Industries • 2 Brief History of the Processed Foods and Tobacco Industries 7

INDUSTRY STRUCTURE TRENDS 8 Decl ine in Company Numbers ••••••... 9 Increasing Merger Activity 10 Increasing Concentration • • 10 Increasing Firm Diversification 14 Increasing Product Differentiation 24

INDUSTRY PERFORMANCE TRENDS 32 Increasing Profitability 32 Growth Rates 34 Labor Productivity •.. • 37 Prices 38

THE 200 LARGEST FOOD AND TOBACCO PROCESSING FIRMS 38 Data Sources on the Largest Companies 39 Size and Industry Characteristics 41 Diversification 48 Characteristics .. • • 52 Advertising ••..••.... 56 . • • • • 63 Profitability 66

EVALUATION OF ALTERNATIVE DATA SOURCES 68

PUBLIC POLICY IMPLICATIONS 71

REFERENCES 73

APPENDIX .—Supplementary Tables and List of the 200 Largest U.S. Food and Tobacco Processing Companies, 1975 77

iii SUMMARY

The 50 largest food manufacturing firms' share of that industry's total assets rose from 42 percent in 1963 to 63.7 percent in 1978, and could rise to 100 percent by the year 2000. This report confirms long-term structural trends in the food and tobacco manufacturing industries, as first identified by the National Commission on Food Marketing in its 1966 study. These trends, which reinforce the market power of the largest firms, include:

. The number of firms is declining by about 3 percent per year,

. The numbers of mergers, industry concentration, product diversification into and out of industries, and product differentiation are all increasing.

. The profitability of firms with assets over $100 million was higher than for smaller firms in most years.

•Other trends identified by this report were:

. Foreign investment in U.S. food and tobacco manufacturing firms is large ($1.8 billion in 1975) and is rising rapidly; investment by U.S. firms abroad ($4.7 billion) is rising less rapidly.

. TV advertising of food products accounts for over 50 percent of all media advertising, and is increasing.

. Profit rates for food and tobacco industries exceeded the rates for the rest of manufacturing for the first time during the early seventies.

. Wliolesale prices of food products are elevated an average of 10 percent by the oligopolistic structure of food manufacturing.

• The 200 largest food and tobacco manufacturing firms account for two-thirds of industry , over four-fifths of industry assets, four-fifths of all media advertising, and over 96 percent of all research and development.

iv The U.S. Food and Tobacco Manufacturing Industries:

Market Structure, Structural Change, and Economic Performance

John M. Connor *

INTRODUCTION

It has been 15 years since the National Commission of Food Marketing (NCFM) issued its final report and a series of oft-quoted technical studies on the industrial organization of several food subsectors and industries. This present report updates some of the data and examines the validity of some of the major conclusions of Technical Study No. 8 of that series, The Structure of Food Manufacturing. This report, like the ÑGFM study, focuses on those elements of industry structure t-hat affect ecoipmic performance: firm numbers and distribution, product and geographic diven^fication, and product differentiation. The structure of many of the food manufacturing industries has changed significantly since the early sixties. These changes were brought about by the enormous merger wave of the late sixties, the appearance of highly diverse conglomerate firms, and an acceleration in the multinat^ional investments of food firms. Thus, this report will examine changes in organization during 1950-75, but especially the latter half oí that period, using data from two majo-r sources. The first group of sources is data collected by the Bureau of the Census, the Internal Revenue Service (1RS), the Federal Trade Commission (FTC), and other govern- ment ^Lgen'cies. The publication of the 1972 Census of Manufacturers, some parts of which'i^^re-5tily released in late 1977, is one occasion for this report. The second major data source is the Directory of the 200 Largest U.S. Food and Tobacco Processing Firms 1975 (16). This directory relied on published and purchased data to identify those companies, both domestic and foreign-owned, with the greatest sales of food and tobacco products processed in the in 1975. Because market structure data taÈe so long to generate, 1975 was chosen as the terminal year for this study to main- tain comparability among sources. By on such a diverse set of data sources, this report assesses the particular strengths and limitations of the various sources and the extent to which they may complement one another. Focusing on the largest companies, the report examines how the structure and performance of many food industries are dominated by the operations of their leading firms. The report will also be useful to policymakers considering public policy options dealing with nodes of market power in the food system. * John M. Connor is an agricultural economist with ESCS and at the time the manuscript was completed was Adjunct Assistant Professor in the Department of c€ the Universi*€-y of Wisconsin at I^dison. Table 1—Selected indicators of the importance of the U.S. and tobacco manufacturing industries, 1975

[ The 51 four-digit SIC food and tobacco manufacturing Indus tries Indicators of 'Proportion of total U.S.* Proportion of importance manufacturing 'total United States

Percent

Value of shipments 17.3 —

Value added 11.7 3.A

Civilian employment 8.7 1.7

Capital investmenti.'^ 9-5 2.4

Energy consumption-2/ 7.4

Value of U.S. farm utilized 68.0

Personal consumption expenditures 21.1

— = Not applicable.

l^/ For manufacturing this item includes all capital expenditures involving new plant capacity, permanent additions or alterations, and new machinery or equipment; for the united States, this item is defined as total nonresidential, fixed, private investment. 1/ Energy consumption data is for 1974. Sources: (18, 25, 29). .Importance of the Processed Foods and Tobacco Industries

The food and tobacco manufacturing industries account for a large portion of total manufacturing output. They purchase large amounts of raw agricultural products and other inputs, and receive a considerable share of household consumption expenditures (table !)•

One way that the size of these industries was measured used data on value of shipments collected annually by the Bureau of Census (25). 1/ Values of shipments are defined as *'...the received or receivable net selling values, f.o,b. plant, after discounts and allowances, and excluding freight charges and excise taxes. However, in a few industries where large inventories are the rule, value of production is used in place of value of shipments. Also, in industries where product s are cus tomarily delivered by employees of the manufacturing establishment (such as fluid , bread. and soft drinks), value of shipments includes delivery charges. 2/ The food and

j^/ Underscored numbers in parentheses refer to literature listed in the references section at the end of this report. 2/ In this report, "shipments" and "sales" are sometimes used interchangeably, though properly speaking the first term relates to establishments and the second to enterprises. Enterprise (firm or company) manufacturing sales are alvjays less than or equal to the sum of .its plants' shipments since intracompany shipments are netted out of total shipments. Table 2— Value of product shipments and value added for the U.S. food and tobbaco manufacturing industries, 1975

Value added Value of product ; Value divided by Industry groups ! added shipments shipments

Million dollars Percent

Meatpacking ; 29,813 4,166 14.0 Processed meats ; 5,818 1,542 26.5 Poultry and egg : 5,611 1,463 26.1 Fluid milk 10,309 2,919 28.3 Other dairy products : 9,738 2,027 20.8

Canned and 9,931 3,677 37.0 Frozen and dried foods : 6,0A6 2,297 38.0 Breakfast 1,695 1,056 62.3 Pet and animal feeds : 9,445 2,347 24.8 Other grain products 8,716 2,258 25.9

Bread, rolls, cake : 7,736 4,879 63.1 Cookies and crackers : 2,588 1,410 54.5 Sugar : 6,132 1,578 25.7 Candy and chewing gum : 5,092 2,038 40.0 Fats and oils : 8,057 967 12.0

Margarine and cooking oils : 4,248 666 15.7 and malt : 6,296 2,184 34.7 Wine and brandy : 1,250 640 51.6 Distilled : 1,815 1,064 58.6 Soft drinks and flavorings : 9,880 4,370 44.2

Canned and frozen fish : 2,043 732 35.8 : 2,823 1.109 39.3 Other processed foods : 6,229 2,755 44.2 , , and other tobacco : 5,854 3,512 60.0 Tobacco stemming and redrying : 1,745 210 12.0

Total : 168,900 51,864 30.7

Source: (25).

tobacco nianufacturlng industries shipped $168.9 billion worth of food and tobacco products in 1975, of which 95.5 percent were processed food products (table 2), 3^/

_3/ Based on value of product shipments rather than value of plant shipments. The second definition of shipments aggregates all shipments from plants by their four- digit SIC primary product designation; in 1975 this totaled $181 billion. The first definition aggregates all five-digit SIC product class shipments from whatever industry the plants are located. Thus, the value of product shipments excludes nonfood and nontobacco products made by plants categorized in those industries but includes food or tobacco products made in plants outside the industry. These two major industry groups accounted for 17.3 percent of all manufacturing shipments in 1975; "Food and Kindred Products" was the largest of the 20 U.S. major industry groups, while "Tobacco Manufacturing" ranked nineteenth. 4_/

The 47 Food and Kindred Products industries produce virtually all the items conmionly considered by consumers as food or beverages. Almost any manufactured product primarily composed of animal, marine, or matter (except fibers) is included in this industry. Unprocessed food items are not included, however; these are fresh and vegetables, fresh unpackaged fish, whole grains, and unbroken eggs. Food consumed on the farm or from household gardens is also excluded, even though some may be preserved. A few food ingredients are categorized in chemicals or other industries: artificial flavorings, colorings, some preservatives, and . Finally, an insignificant amount of processed food is made outside of the manufacturing sector in small bakeries, delicatessens, and other retail establishments.

Food and Kindred Products also includes some products not generally regarded as food or beverages. Most of these are food processing byproducts or partially refined agricultural materials. The byproducts include inedible animal and fish parts, bran, oilcake, fruit rinds, and others. Some fats and oils, such as linseed, are not generally for human consumption, while others such as wet corn mill products, animal feeds, and chocolate coatings syrup are used exclusively by other food processing industries. Only about 13.4 percent of the value of product shipments in 1975 fell exclusively into the byproduct or producer's categories. A significant portion of some other industries' outputs, notably milled and sugar, are shipped to other food industries; these shipments account for an additional 8.5 percent of total Food and Kindred Products shipments. Altogether, about 78 percent of the industries' shipments, valued at $130 million in 1975, were used for final consumer demand. Net processed U.S. food exports were insignificant.

The tobacco processing industries are included along with the food manufacturing industries in this report for several reasons: (1) tobacco products are largely marketed through grocery stores, (2) tobacco products are promoted in much the same way as any highly differentiated food product, (3) both food and tobacco products are agricultural in origin, and (4) the major makers have all acquired large food processing capacity during the last 10 years. Tobacco manufacturing is the only major industry group for which these four conditions are true.

Three of the four tobacco processing industries produce consumer goods: cigarettes, cigars, and and . The remaining industry, tobacco stemming and redrying, makes a semifinished product for the other three tobacco industries and for . In total, 77 percent ($5.9 billion) of the 1975 shipm.ents of these industries met final U.S. consumer demand.

The relative size of various firms, particularly within the manufacturing sector, can be measured either by their shipments or value added. Value added for a firm or industry is the residual dollar value remaining after subtracting the cost of all production inputs purchased from other firms from the value of shipments and

4/ Product classes, industries, major industry groups, and enterprise industries are defined according to the Standard Industrial Classification Manual (1972), U.S. Office of Mnagement and Budget. The Standard Industrial Classification (SIC) identifies 130 five-digit product classes in the 47 four-digit industries comprising the two-digit SIC major industry group called "Food and Kindred Products." All tables giving industry detail are arranged by SIC number. In most such tables combinations of four- digit SIC industries (such as "Meatpacking") and groups of four-digit SIC industries (such as "Other Dairy products") are listed. other receipts. It includes wages, salaries, an imputed rent for invested capital and other inputs, profits, and advertising. Value added is generally considered a superior measure of the relative economic importance of various industries because it avoids the duplication of shipments of goods used by other plants as inputs for their production activity. Value added is also used to measure the contribution of an industry to an economy's Gross National Product (GNP).

Table 2 provides the 1975 value of product shipments and value added for the 51 food and tobacco processing industries. Total value added was $51.9 billion, about 30.7 percent of the value of the sector's shipments and about 3.4 percent of GNP. Some food industries have quite large shipments but relatively low value added; the meatpacking, butter, poultry, cheese, sugar, tobacco stemming, and animal feeds industries are examples. For these industries, the costs of the raw agricultural inputs are a high portion and the costs of labor a low portion of the value of shipments. The situation for other industries is just the reverse: value added is a relatively large part of the industry's shipments. Examples of these industries are breakfast cereals, flour mixes, bread, cookies and crackers, all beverages, and cigarettes. The cost of the ingredients for these industries is relatively slight; a major factor in boosting the ratio of value added to shipments is the profits and advertising components. _5/

The food and tobacco manufacturing industries are important users of U.S. resources—labor, capital, energy, packaging materials, and raw farm products. Those industries employed 1.6 million persons in the United States in 1975, or about 8.7 percent of total employment in the m.anufacturing sector (25). Further, domestic expenditures for new plants, machinery, and other capital equipment in 1975 totaled $3.5 billion, which was 9.5 percent of all new manufacturing investment. Around 1970, the food processing industries were using nearly 90 percent of the output of the metal container industry (36). Food and tobacco processing requires extensive energy resources; in 1974, these industries purchased or generated over $1,5 billion worth of energy or over 7.4 percent of the total for manufacturing. By one estimate, food processing accounts for 40 percent of all energy consumed by the entire commercial food production-distribution system (29). That system, together with home preparation of foods, utilizes one-sixth of all U.S. energy production. Energy use (measured in physical units) in the food system tripled during 1940-70, with the proportion of total energy used by the food system rising substantially.

Precise data on the proportion of farm products purchased by the U.S. food and tobacco manufacturing industries are not readily available. USDA market basket data reveal that the farmers' share was about 42 percent of the 1975 retail level expenditures of consumers, or about $88 billion. This figure closely corresponds to the $88.1 billion level of total cash receipts portion of farm income in 1975, but the two concepts are not equivalent. The market basket of U.S. farm foods includes nonprocessed foods; the cash receipts from farm marketings figure includes exports and nonfood products. U.S. imports of food and beverage products, both raw and processed, totaled $6.2 billion in 1975; however, net imports of processed foods was small (about $400 million) had nearly counterbalanced by net exports of processed tobacco products ($340 million).

USDA does estimate that in 1975, 73.6 percent of all marketed farm were for civilian and military food and beverage consumption, the rest being used for tobacco, fibers, and other nonfood products (7.2 percent) and for export (19.2

5_/ The proportion of food ingredient costs for the meatpacking, poultry, butter, cheese, sugar, feeds, and tobacco stemming industries averaged 79 percent in 1972. By contrast, the proportion for flour mixes, bakery products, breakfast cereals, beverages (beer, wine, , and soft drinks), and cigarette industries was 19 percent. percent). After netting out that portion of marketed farm products consumed fresh, the remainder, about $57.9 billion of farm cash receipts or 66 percent of the total, is used by the U.S. food processing industry. 6/ A further $2.2 billion in 1975 tobacco production was almost entirely purchased by the U.S. tobacco manufacturing industries. Thus, the total proportion of U.S. farm output consumed by the domestic food and tobacco manufacturing sector was 68 percent in 1975; excluding exports it was 84 percent.

Finally, processed foods and tobacco represent an important segment of household consumption expenditures. Americans spent $209.5 billion on food and beverages in 1975 and an additional $5.5 billion on tobacco items. Total food and tobacco expenditures amounted to 22.3 percent of all personal consumption in the United States (18). Again netting out unprocessed foods, expenditures on manufactured food and tobacco products totaled $198 billion in 1975 (21.1 percent of personal consumption) . 7_/

Consumers are concerned about food not only because it is a large item in their personal budgets but also because of the relationship of diet to health and the quality of service they receive. Food prices for 25 years prior to 1972 had declined relative to the prices of all consumer goods. In fact, the index for farm level food prices in 1971 was identical to that of 1948. During 1948-72, however, retail food prices rose 35 percent. Thus, though almost unnoticed by the public at the time, higher marketing margins were solely responsible for the steady increase in food* prices during that period. Beginning in 1972, sharp increases in retail food prices occurred because of higher raw food prices as well as higher processing and retailing margins (51). Even as crop and prices plummeted after 1974, the marketing margin has continued to rise (by 21 percent during 1974-78), causing a subsequent rise in the wholesale and retail prices of processed foods.

Some processed foods and many tobacco products have been linked to national health problems. The carcinogenic effects associated with smoking are well known. More recent, however, are allegations of a causal connection between several food ■ ingredients or additives and heart disease, cancer, tooth decay, and obesity (57). While only the latter two ills appear incontrovertibly linked to diet at this time, the safety of processed foods is likely to remain a topic of public discussion (50). The nutritional quality of foods may be related to ttie type of business rivalry exhibited by an industry. In particular, the extensive fabrication of some foods is designed to create physical differences that can be the basis for image advertising of a product.

Whether related to health and safety concerns or other matters, public skepticism remains over how well the food and tobacco processing industries are serving consumers. A 1977 poll of consumers on attitudes toward business and the consumer movement (5^) queried which industries the consumer movement ought to be giving the most attention in the future. Food manufacturing was ranked first among 27 industries by the general public, even though food items were among the three most frequently

¿/ In supermarkets about 9 percent of food sales were in fresh fruit and vegetables (K>) and the farmer's share of a sample of 12 such products averaged roughly 33 percent in 1975. The other major unprocessed food is eggs, whose 1975 value of production was about $2.7 billion (63). Thus, of the $88.1 billion in farm production utilized for domestic food consumption ($64.8 billion), $2.7 billion was consumed as fresh eggs, $4.2 billion was consumed as fresh produce, and the remainder ($57.9 billion) was purchased for further processing. 7/ The retail value of fresh eggs was about $4.2 billion and that of fresh produce about $12.7 billion in 1975. H c cited product groups whose prices were thouglit to have increased as a result of regulatory changes brought about by the consumer movement.

Brief History of the Processed Foods and Tobacco Industries

Judicial and Congressional concern about the economic performance of the food and tobacco industries is not entirely new. This concern appears to be connected with the advent of large-scale production and marketing methods. Evidence of oligopolistic conduct has surfaced repeatedly over the last several decades in these industries.

Prior to the late 19th century, large-scale businesses were practically unknown in the food processing industries. Most food processing consisted of harvesttime preservation and the preparation of raw products for immediate consumption in the home. The industrial processing that did take place—mainly flour milling, distilling and brewing, vegetable , and cheese making—tended to be highly localized in both its sources of inputs and geographic extent of demand. Processing companies made one product in a single plant.

Numerous in the late 19th and early 20th centuries contributed to the rising importance and larger scale of the U.S. food processing industries. The declining cost of railway, waterway, and transportation made geographic specialization of food processing possible. Declining real energy costs, mechanical inventions, and adoption of assembly line techniques increased the optimal economic size of processing facilities. Moreover, better communications, improved financial and techniques, and the development of new legal instruments (such as State chartering of limited-liability ) encouraged development of multiplant firms. Perhaps the first U.S. food industry to adopt large-scale economic organization was meatpacking. The invention of the refrigerated railway car during the 1880s was the crucial factor in encouraging the centralization of meat slaughtering and dressing in major railway terminal cities like Chicago. Intense merger activity during the 1890s led to the formation of four dominant meatpacking firms. Aided by many practices now considered illegal, these firms largely monopolized the wholesale and retail distribution of meat, both within the United States and in international trade with Western Europe (37). Few of the other "trusts" formed in the 1890s for various food products (sugar, salt, , corn products) were as effective as the meat trust, though many of its features were subsequently adopted by other food industries.

The first rigorous publication analyzing the industrial organization of the food processing industries is a monograph published by the Temporary National Economic Committee of the U.S. Congress (61^) . The basic theme of that landmark study was the inevitability of horizontal diversification and among firms in food processing industries subject to certain types of technicar changes.

The monograph adequately encompassed the food manufacturing industries by studying only meatpacking, dairy products, flour milling, bread, cookies and crackers, and fruit and vegetable canning (alcoholic beverages were not discussed), since the poultry and egg processing, breakfast cereals, flour mixes, frozen foods, wet corn milling, pet foods, candy, oils, and soft drinks, were all relatively small in the thirties. Hoffman identified 25 companies that effectively dominated the six industries of the time: ". . . (i)n the food industries the situation is commonly one of the few large firms and numerous small ones" (61, p. 79). The role of mergers in the formation of most of the large firms was stressed along with increasing economies of plant scale. Instances of price fixing, , and other antitrust offenses were noted in the most concentrated industries. In most of the food processing industries covered, the relative positions of leading firms that remain independent are practically unchanged today.

On the whole, Hoffman judged that the concentration of control in food manufacturing did not approach that of several other major industries such as steel, automobiles, tires, tractors, and cigarettes (63^, p. 89). Few instances of national advertising of food products could be cited. Data on profitability as a proportion of total capital for some 2,000 firms during 1924-28 indicated that food processing firms were about as profitable as the rest of manufacturing (61, p. 95). Even during the depression period 1930-37, the profitability of the 30 or so largest food and tobacco corporations generally averaged over 10 percent of total capital; profits were above average for the tobacco, diversified processing, and retail chain corporations and below average for meatpackers and canners (61, p. 96).

The early history of the tobacco industry is especially instructive (34^, 62). The Tobacco Trust was formed around the turn of the century through a combination of predatory pricing and selective massive advertising. In 1911, the Supreme Court found the guilty of monopolizing the cigarette trade; eventually the monopoly was split into 16 segments. In another case heard in 1946, the court set an important precedent in their finding against the big three cigarette makers (American, Reynolds, and Liggett and Myers). The rulé of law established was that strong evidence of "conscious parallelism" in pricing and purchasing patterns throughout the thirties was sufficient to prove that price fixing had occurred. Their collective 85-percent market share contributed to the finding of their guilt of monopolizing the industry; price coordination through price leadership, which is not illegal under present interpretation of the law, appears to remain the norm in the industry (62).

Perhaps more important as a standard for the marketing of processed foods are the influential marketing methods used by the cigarette industry during the last century. One theme is the periodic introduction of physically differentiated products. In the early history of the tobacco industry this took the form of machine-rolled cigarettes (replacing hand-made ones in the 1880s), "Turkish" cigarettes (imported leaf was mixed with Virginia after 1900), and Camels cigarettes and imitators (which contained hurley tobacco saturated with sweetening syrups) (62). Filtered, mentholated, long, extra long, and low- varieties are now on the market. The existence of many forms of the same product, and frequent shifts in these forms, make the entry of new firms quite different. In 1910, the Tobacco Trust alone produced 100 brands of cigarettes. Average product life cycles have become very short.

In addition to physical differentiation, the cigarette industry has pioneered promotional devices. The early history of the industry saw the widespread use of redeemable coupons and prizes, frequent changes in packaging, various price inducements to wholesalers, and the establishment of retail tobacco chains. After 1910, most of these avenues were abandoned for national media advertising which became increasingly sophisticated and intense, approaching levels that were among the highest of any industry. Data on cigarette advertising for the year 1903 show that as much as 49.9 percent of sales was being expended for this purpose, though it averaged about 9 to 10 percent in the late fifties before the major companies diversified (34).

INDUSTRY STRUCTURE TRENDS

The NCFM in its 1966 technical report on food manufacturing identified six major changes during the post-1945 period that have significant consequences for competitive conditions in the sector. Those changes were: (1) a decline in company numbers, (2) increasing merger activity, (3) an increase in concentration, (4) increasing diversification of leading firms, (5) increasing product differentiation efforts, and Table 3—Numbers of food and kindred products companies, census years 1947-72

: Average annual change Year Companle!¿/ : from previous census year

Number Percent

1947 41,147 0

1954 38,610 -0.86

1958 : 36,545 -1.31

1963 : 32,617 -2.06

1967 : 27,706 -3.19

1972 : 23,326 -3.00

\J Number of companies in major industry group SIC 20, including some oil refining industries and fluid milk which were in other major industry groups in the earlier years. Some companies operating in more than one industry may be counted more than once; in 1967 and 1972 such double counting amounted to 4 and 5 percent of the total shown, respectively.

Sources: (53) and table 1.

(6) a growing profitability of large versus small food manufacturers (46). These trends have continued and generally intensified during the period since the early sixties.

Decline in Company Numbers

The number of food manufacturing firms declined in every Census year during 1947- 72, and the rate of exit appears to be increasing (table 3). In the rest of manufacturing, the number of'firms has increased, except during 1963-67.

During the forties and fifties, the decline in the number of food companies was connected with the closing of plants of inefficient size, particularly in industries serving local or regional markets. ^/ Another related trend was the greater decline in highly concentrated industries (46). The number of companies in industries with fairly low levels of concentration, such as the meat processing industries, actually increased over 1947-58.

3^/ In 1963, the local market industries were considered to be ice cream, fluid milk, animal feeds, soft drinks, and bread (SIC's 2024 2026, 2048, 2086, and 2051) (41^). Other sources would add the brewing industry (£), but by the early seventies this had evolved into a national industry with four or five leading companies distributing in most regions of the country. For the extent of geographical dispersion, see appendix table 9. Food and tobacco company numbers for most industry categories have declined since 1958 (table 4). Except for meatpacking and frozen foods during 1958-63, every industry category declined in numbers during every census period. This change in food and tobacco company numbers stands in stark contrast to the increase in company numbers in evidence for the rest of the manufacturing sector. Especially large declines occurred in some of the local market industries. Unlike the earlier period, however, the changes in company numbers do not appear related to inefficient plant size. Parker (52), for example, found that for industries experiencing large declines in company numbers during 1967-72, the changes were unrelated to average establishment size.

Increasing Merger Activity

The major reason for declining company numbers appears to be the high number of mergers particularly during the late sixties. A Federal Trade Commission (FTC) report on large mergers in and manufacturing found that over $5 billion of food and tobacco manufacturing assets had been acquired during 1948-68 (30). Those assets amounted to 9.4 percent of all acquired corporations' assets during that period; moreover, they represented 14.1 percent of the assets of all corporations in the food and tobacco industries in 1965. The food processing industries ranked fifth among the 20 major industry groups in the value of assets acquired.

Despite the decline in numbers of food and tobacco processing companies and the relative increase in other manufacturing firms, the food and tobacco processing industries are relatively and increasingly prone to merger activity. Parker has calculated that 186 food manufacturing companies with $10 million or more in assets were acquired over 1948-74; on average this was 10.7 percent of all such mergers, but the proportion rose steadily over the period studied (52).

Using an alternate way of examining merger trends, it is apparent that nearly one-fifth of all large manufacturing acquisitions have been made by food and tobacco processing companies, almost all of the latter quite large (table 5). Except for the peak merger years of 1966-70, the proportion of all large mergers by these companies appears to be increasing. Other studies have shown that the growth of the largest food processing companies depends on an active acquisition policy. Connor showed that at least 40 percent of the total assets of the 100 largest food processing companies could be attributed to mergers during 1950-75 rather than to internal growth (13). His method involved the assumption that once acquired, the merged segment grew at the same rate as the assets of the whole company.

Increasing Concentration

Declining company numbers and merger activity have also contributed to increasing seller concentration in food and tobacco manufacturing. There are two basic ways of measuring industrial concentration. Aggregate concentration reveals the extent of unequal size distribution among firms in a broadly defined group of industries. Industry concentration shows the proportion of sales (or other size measure) attributed to the leading firms in a single, narrowly defined market.

Aggregate asset concentration among all food manufacturing firms is high and increasing. In 1963, the 50 largest corporations accounted for 42 percent of all food manufacturers' assets, but by 1978 their share rose to 63.7 percent, an average increase of 1.5 percentage points per year (fig. 1). At that rate, the 50 largest firms would own all food manufacturing assets by the year 2000. In 1950, they controlled only 35.9 percent (projecting from data in 46). The 200 largest firms owned 81.1 percent of the assets of food manufacturing corporations in 1978.

10 Table 4— Numbers of food and tobacco manufacturing companies, census years 1958-72

Companies "Change In company '. Weigh ted average. Enterprise 1972 industry • numbers 1958-72 . 1958 : 1963 : 1967 : 1972 . cone entrationl^/ • •

^Number -Percent

Meatpacking 2,595 2,768 2,466 2,212 -15 34.0 Processed meats and poultry 2,437 2,028 1,906 1,584 -35 25.1 Fluid milk • 4,159 3,957 2,895 1,941 -62 66.0 Other dairy products . 3,138 2,551 2,082 1,465 -53 50.4 Canned fruits and vegetables 1,259 1,071 860 702 -44 39.9

Frozen and dried foods : 1,733 2,082 1,804 1,734 0 50.5 Animal feeds 1,901 2,012 1,682 1,544 -19 57.0 Grain mill products 917 734 607 483 -47 54.7 Bread and rolls . 4,190 4,230 3,336 2,672 -48 57.0 Cookies and crackers 262 266 263 231 -12 60.5

Sugar and candy : 1,408 1,182 1,143 951 -32 56.5 Fats and oils ; 753 716 638 515 -32 48.2 Alcoholic beverages 525 444 371 352 -33 53.0 Soft drinks and flavorings 4,435 3,998 3,383 2,525 -40 85.6 Other processed foods : 3,544 3,114 2,700 2,598 -27 56.2 Tobacco products 350 249 202 168 -52 76.7

Total, food and tobacco 35,606 31,402 26,338 21,680 -39 54.7

Rest of manufacturing 234,233 242,725 240,647 243,372 +4 43.3

W Four-firm sales concentration in the 5-digit SIC product classes, weighted by 1972 U.S. shipments values. Con- centration ratios are the sums of the market shares of the four leading firms. For local market industries, local market concentration ratios were used instead of national ratios (9), (46).

Sources: (22) and (23). Figure 1

Percentage of the Food Manufacturing Assets Owned by the 50 Largest Firms

1960 1963 1969

1974 1978 2000

* Prpiected.

Sources: For 1963-74, 1RS Source of Statistics of Income^ various years; for 1978, data supplied by the Financial Statistics Program of the FTC; for 1950, estimated from (46, Table A-1); for 2000, based on a projection of compound annual growth rates of either 1963-78 or 1969-78. Table 5—Large manufacturing acquisitions by food and tobacco processing firms, 1948-75

Proportion of all Periodi/ [ Acquisitions—' large manufacturing acquisitions

Number Percent

1948-60 58 14.5

1961-65 56 19.8

1966-70 96 16.1

1971-75 76 28.1

1948-75 286 18.4

J^/ Year of completion of merger. _2/ Acquisitions of firms with $10 million or more in total assets in the year pre- ceeding acquisition and acquiring firm is: (1) primary to SIC 20 or 21, (2) among the 200 largest food and tobacco processing firms in 1975 based upon their U.S. sales in SIC 20 plus 21, or (3) was acquired prior to 1976 by one of the 200 largest. Includes only mergers for which data were publicly available.

Source: Large merger series of the Bureau of Economics, Federal Trade Commission.

Though the rest of manufacturing hardly serves as an adequate standard of competition, the last column of table 4 indicates that average industry sales concentration in the food and tobacco industries is markedly higher. Parker and Connor calculated that food and tobacco manufacturing rank fourth and first, respectively, among the 20 major industry groups of manufacturing in terms of average concentration (53, p. 44). Average four-firm sales concentration in food manufacturing only rose from 47 percent in 1958 to 52 percent in 1972. Concentration is particularly high in those industry categories which market differentiated products: grain mill products, bakery products, candy, soft drinks, and cigarettes, for example.

According to Bain's classification system of industries on the basis of their levels of concentration, about four-fifths of the food and tobacco manufacturing industries are considered oligopolies; only one-fifth are classified unconcentrated (table 6) (2_). These proportions are about the same when considering food and tobacco processing activity in terms of value added. During 1958-72, the proportion of value added originating from highly or very highly concentrated industries taken together rose from 24 to 34 percent of the sector's total, while the proportion in the two least concentrated categories taken together declined. However, tables of this type are quite sensitive to small shifts in industry concentration ratios.

13 Table 6—Classification of the food and tobacco manufacturing industries. Bain's concentration types

Distribution of Industries value added Tnn ustry concentration typei.' 1958 ; 1972 1958 ' 1972

Number Percent

I. Very highly concentrated 11 5 19 15

II. High concentrated 4 12 5 19

III. High^-moderate concentrated 10 13 38 35

IV. "Low-grade" oligopolies 12 11 20 9

V. Unconcentrated 10 10 18 21

Total . 47 51 100 100

IJ The types are defined as: type I has an eight-firm concentration ratio (CR8) of 90 percent or more or a four-firm concentration ratio (CR4) of 75 percent or more; type II has CR8 of 85 to 90 percent or CR4 of 65 to 74 percent; type III has CR8 of 70 to 84 percent or CR4 of 50 to 64 percent; type IV has CR8 of 45 to 69 percent or CR4 of 35- 49 percent; type V has CR8 of 44 percent or less or CR4 of 34 percent or less. Local market concentration ratios are used for five industries.

Sources: (2. 46 p. 31. 22),

Increasing Firm Diversification

A fourth major change in competitive conditions in the food and tobacco processing industries is an increase in firm diversification. There are at least three distinguishable types of firm diversification: horizontal product, vertical product, and geographic. When a manufacturing firm begins to sell a new product or service, it has undergone product diversification; if the new product is used as an input for an existing production process or vice versa, the diversification is considered vertical. All other product diversification is horizontal. Finally, when an existing product is sold in a new territorial market, the diversification is geographic. In practice, horizontal and vertical forms of diversification are difficult to distinguish using available data, and many cases of diversification involve both geographic and product aspects.

Horizontal Diversification

Before 1950 the extent of product diversification was relatively minor in the food processing industries (32), though several firms had already diversified geographically by selling their major brands nationally. The NCF>i found that horizontal diversification among the 200 firms with the largest amounts of value added in food manufacturing increased by 50 percent over 1954-63, using the number of different Census food industries as a measure of diversification (46). The rate of increase was significantly higher among the top 50 firms than among the rest of the top 200 (46, p. 52). Participation in industries outside of food manufacturing by the

14 200 largest firms increased by 50 percent, mostly by firms primarily engaged in retail trade. Thus a considerable number of grocery store companies appeared to have vertically integrated backward into food processing during this period (table 7). Only a few drug, , and other manufacturing concerns and no tobacco companies at all were diversified into food by 1963.

The movement toward greater horizontal diversification by food processing companies has continued. A study of 25 large food processing firms found that their diversification had increased by 140 percent over 1950-71, using the proportion of company sales outside of its two principal industries as the measure (37). Horst also found that increases in diversification were significantly related to the slower growth and lower profitability of these companies around 1950.

Another study of 25 leading food processing companies charts their diversification by a count of the number of grocery products in which they had significant sales during 1950-75 (14). The results indicate a strong shift towards diversification among a constant sample of firms that were already most diversified in 1950 (table 8), Regardless of the particular measure of diversification, the trend toward greater product heterogeneity within major food processing firms appears well established.

Census enterprise statistics afford an additional opportunity to measure the extent of food and tobacco industry diversification and its movement over time. There are two basic methods of examining this diversification. The first is the extent of emplo3nnent of firms primary to a food or tobacco industry outside that industry. The second concept refers to employment diversification into those industries by companies categorized primarily outside those industries. Both measures are, of course, affected by the limitations inherent in placing diversified firms into an appropriate and meaningful industry category.

Using the numbers of employees as a measure, three different indexes of outward diversification by food and tobacco companies were .calculated (table 9). The first index indicates that in four enterprise industries, about half or more of all emplo3nnent by companies primary to that industry in 1972 was in establishments outside their firm's primary industry. The four industries were meatpacking, milk, bread, and grain mill products. Most of this diversification was attributable to a relatively small number of large companies, several of which had less than one-fifth of their total company employment in their primary industry. On average, 42 percent of the employees of food and tobacco processing companies worked outside their principal industry category.

The other two indexes in table 9 reveal the extent food and tobacco company employment is committed to industries that lie outside of food and tobacco manufacturing or of manufacturing altogether. On average, about 10 percent of the companies' employment is situated within food and tobacco industries other than their primary enterprise industry. A common pattern, for example, is for meatpackers to engage in the processing of meat into sausages or for cheese companies to package fluid milk (see also app. table 1). Nearly one-quarter of all employment of food and tobacco manufacturing companies falls into the nonmanufacturing sectors, particularly wholesale and retail trade.

It is somewhat risky to compare levels of diversification over time with these data because the composition of the sample can change quite radically between Census years. In 1963, for example, International Telephone and Telegraph (ITT) had not yet acquired Continental Baking and was likely categorized as a communications equipment manufacturer; by 1972, Census had apparently classified ITT primarily in bread baking. Even if none of the 1963 bread companies had become more diversified by 1972, the addition of so large a conglomerate as ITT would of necessity increase all

15 Table 7—The 200 largest food manufacturing companies, by primary industry of company> 1954 and 1963

X Food manufacturing companies±.'

Primary : Among the 50 largest ' Among the 200 largest industry : of companyi-' 1954 ; 1963 '\ 1954 1963 :

Numb er

Meat processing : 9 7 23 21 Poultry and egg processing : 0 0 1 0 Fluid milk : 4 6 17 12 Other dairy products 2 1 7 4 Canned fruits and vegetables 7 4 14 16

Other preserved fruits and vegetables Ü 5^ 5 13 Breakfast cereals 2 3 2 3 Wet corn milling 1 1 8 6 Animal and pet foods : 1 1 10 7 Other grain mill products : 2 1 10 6

Bread : 6 6 25 19 Cookies and crackers : 3 3 7 6 Sugar : 1 1 13 16 Candy and chewing gum : 2 2 14 11 Oils and margarine : 1 0 3 6

Beerl/ : 0 0 2 1 Other alcoholic beverage s 3^/ : Ö 0 0 0 Soft drinks and flavorings : 2 2 8 10 Other food processing : 4 A 14 15 Tobacco processings^/ : 0 0 0 0

Subtotal : 47 47 183 172

Drugs 0 0 3 3 and toiletries : 1 1 2 2 Other manufacturing : 0 0 2 5 Wholesale trade : 0 0 1 2 Food retailing : 2 2 6 11 Other nonmanufacturing : 0 0 3 5

Total : 50 50 200 200

1/ Primary Census industry classification were determined (1) by ascertaining the largest industry division (manufacturing, wholesale trade, etc.) on the basis of establishment payroll and then (2) ascertaining the industry on the basis of estab- lishment value added in manufacturing. 2^/ The 50 and 200 largest food manufacturing companies were selected on the basis of their value added in food and kindred products excluding alcoholic beverages. 3J Note that alcoholic beverage value added was speci- fically excluded, as was tobacco manufacturing. Source: (46, p. 236) .

16 Table 8—Diversification of 25 leading food processing companies, 1950-75

Number four-digit SIC Companies grocery product industries ; 1950 ! 1966 '. 1975

Number

1 to 5 : 14 5 0

6 to 10 : 8 14 13

11 to 20 3 6 9

20 and over 0 0 3

Sources: (46) and Economic Information Services, Inc. For 1950 and 1966, only industries with $500,000 in sales by company were counted; for 1975, the cutoff was $1 million.

the indexes of diversification. Nevertheless, table 9 assembles 1963 data on food and tobacco company diversification data on a basis comparable to that for 1972.

Except for "other processed foods," firms were generally more specialized in 1963 than in 1972. The change in diversification over time can be calculated by dividing the 1972 figure by the comparable 1963 figure. For example, the increase in "same industry" diversification for meatpacking was 365 percent during 1963-72. The increase in employment diversification was above average (over 60 percent) in the meat, bread, soft drinks, and tobacco industries. The few declines were likely due to the acquisition or reclassification of more diversified conipanies rather than to any decrease in employment diversification. In the sugar and candy category, for example, several large diversified candy and chewing gum firms were acquired during 1963-72, leaving the far more specialized sugar companies to dominate the category.

The second approach to diversification of Census enterprise data uses total industry employment rather than total company employment, and measures diversification into food and tobacco manufacturing by companies primarily classified elsewhere (table 10 and app. tables 3 and 4). Again, three variations on the same index are presented. On average, nearly one-fourth of all 1972 employment in food or tobacco manufacturing establishments was accounted for by companies primarily classified outside of that same industry category; over 9 percent of all employment is by non- food and tobacco companies; 3.8 percent is by nonmanufacturing firms. Most diversification into meatpacking is due to grocery store firms and to one company classified in steel mills (probably LTV Corp.) (app. table 3). Grocery retailers are prominent in the processing of milk and dairy products, bakery products, and some miscellaneous foods such as chips and coffee. The lines between fluid milk and other dairy products are not dra\m very tightly, and there is some blurring between canning and other forms of fruit and vegetable preserving. Freezing in particular seems to be spread across several food and other industries. Grain products and miscellaneous foods are the other categories with significant spreading of production among food processing firms. At the other extreme, companies primarily classified in the bakery, sugar, alcoholic beverage, and tobacco industries are still relatively specialized.

The major sources of diversification into food and tobacco manufacturing are backward vertical integration and conglomerate diversification. Except for the meatpacking (integration into meat processing) and fluid milk (integration into other dairy products) companies, there is little apparent forward vertical integration

17 Table 9—Employment diversification of companies primary to the food and tobacco manufacturing industries, 1963 and 1972

Proportion of total company employment outside

Primary ' Primary Food and enterprise • enterprise tobacco Manu f a c t u r ing±.' industry • industry manufacturing

1963 : 1972 1963 : 1972 ■ 1963 \ 1972

Percent

Meatpacking 27.4 49.6 17.7 36.9 11.2 29.0 Processed meat & poultry 4.4 16.0 3.6 10.6 3.4 9.3 Fluid milk 34.5 53.3 19.1 33.3 16.9 21.9 Other dairy products 31.5 41.5 17.7 24.8 17.0 20.8 Canned fruits & vegetables . 29.0 36.6 20.8 27.0 15.4 23.3

Preserved fruits & vegetables ; 29.3 30.2 17.3 16.4 15.0 12.6 Grain mill products • 36.6 59.3 26.1 45.3 22.3 35.0 Bread, rolls, cake : 10.7 50.0 8.8 46.0 8.7 32.3 Cookies and crackers : 37.3 39.1 25.4 29.7 23.5 21.9 Sugar and candy : 21.5. 26.8 18.0 19.2 16.7 16.2

Fats and oils : 28.2 36.4 21.1 10.9 17.4 19.9 Alcoholic beverages : 28.0 32.4 26.8 27.0 15.3 21.9 Soft drinks and flavorings : 7.8 30.5 6.5 26.1 6.2 16.3 Other processed foods : 38.4 31.6 21.0 20.4 18.2 18.2 Tobacco products : 24.9 48.6 23.9 34.5 17.4 22.6

Total : 25.7 41.8 17.7 31.5 14.3 23.4

1/ Because employment/sales ratios tend to be higher in the nonmanufacturing industries, the proportion of emplo3mient outside of manufacturing tends to overstate sales diversification in this category.

Source: (20) , table 4 and previous years and Appendix tables 1 and 2.

within food and tobacco processing by companies primary to those industries (app. table 3). 9_/ Very few grain mill product companies have integrated into the bakery industries, for example, and sugar companies do not produce much candy or soft drinks. Several food and retailing firms have integrated backward into food processing, particularly of milk and bread. Diversification by manufacturing companies outside of food and tobacco processing is predominantly of the conglomerate type. Drug firms are active in candy production, and soap companies have produced oils and margarine for years; in both cases there are similarities in production and marketing methods. Other than a single case of forward vertical

9j Data on manufacturing sector employment by agricultural firms are not published but are probably negligible.

18 Table 10—Employment diversification into the food and tobacco manufacturing industries by companies primary to other industries, 1963 and 1972

Proporti on of total industry emplojraient by companies primarily classified outside

Enterprise samef> : Food and industry : tobacco Manufacturing industry ■ ananufacturing

1963 ; 1972 : 1963 ; 1972 : 1963 ; 1972

Percent

Meatpacking ! 2.6 12.1 2.0 9.1 1.3 1.9 Processed meat and poultry : 28.4 31.7 3.1 3.4 2.3 1.9 Fluid milk 7.2 19.0 4.1 10.2 3.0 7.2 Other dairy products 41.4 38.1 6.4 12.4 5.3 7.2 Canned fruits & vegetables : 19.3 28.9 3.4 11.9 2.4 1.9

Preserved fruits & vegetables 21.9 34.2 3.8 12.3 2.4 3.0 Grain mill products : 16.5 24.8 6.4 6.8 3.1 3.1 Bread, rolls, cake : 12.6 15.2 9.8 9.9 9.8 8.8 Cookies and crackers 12.7 21.7 5.8 2.9 3.7 1.4 Sugar and candy : 18.8 29.7 7.7 14.3 4.0 3.4

Fats and oils : 36.7 45.0 16.1 21.4 3.5 2.1 Alcoholic beverages : 1.4 13.0 .7 8.5 ,2 2.5 Soft drinks and flavorings : 2.6 9.3 1.1 3.5 .6 .1 Other processed foods : 21.9 36.5 10.1 11.6 7.0 6.0 Tobacco products : 2.4 4.9 2.2 4.3 2.1 1.5

Total ! 14.2 23.2 5.6 9.4 3.7 3.8

Sources: (21, 23), tables 4 and 6 and previous years, and Appendix tables 3 and 4.

integration by a metal can maker, no food machinery or container manufacturers have production in food processing. Thus, the balance of diversification of nonfood manufacturers is seemingly unrelated to similarities in production technologies; that is, it is either due to marketing complementarities or to conglomerate diversification, 10/

Except for nonmanufacturing firms, there has been a marked increase in diversification into food processing in 1972 compared to 1963 (table 10). With few exceptions, every industry category has experienced increased diversification, however measured. The meatpacking, fluid milk, preserved fruits and vegetables, cookies and crackers, candy, soft drinks, and alcoholic beverages industries have undergone the

10/ Informed guesses as to the identity of these conglomerate firms are given in the footnotes to appendix table 3. Some of these cases are due to the reclassification of former food processing companies into other industries.

19 most ehange. Except for dairy products, there has been little increase in food processing by food wholesalers and retailers over 196S-72 (app» tables 3 and A). Within food and tobacco, diversification has increased particularly for tobacco and bread companies. Even more striking perhaps is the increased participation of firms in the "other manufacturing" industries; during 1963-72 the number of enterprise categories with significant employment in food processing increased from 11 to 24. In 1963, only soap companies employed as much as 2 percent of their em.ployees in any single food processing category, but by 1972 at least eight enterprise categories in manufacturing qualified. At most, three of those eight cases could be attributed to the reclassification of former food manufacturers into other nonfood industries (13). Practically every instance can be traced to the acquisition of a large food and tobacco manufacturer.

Vertical Diversification

What is especially useful about employment diversification data for food and tobacco processing companies is what they suggest about the extent of vertical integration by food and tobacco manufacturers (app. tables 1 and 2), Employment data in selected industries permit one to estimate the maximum possible amounts of both backward and forward ownership integration. 11/

Backward integration into agriculture is very modest, exceeding 1 percent of company employment only in the meat and poultry processing, grain milling, and oil industries. The production of containers is also modest in most industries; exceptions include boxes by the cookie and cracker makers, glass containers by dairy products firms, and metal cans by the canning and preserving and alcoholic beverage companies. The most extensive form of potential "vertical" integration is in the form of separate central administrative offices (CAO's) and auxiliary establishments; these vary from 1.7 to 9.2 percent of company em.ployment. Overall, total possible backward integration varies from 3 percent (in bread) to 11 percent (tobacco and grains) of total company employment.

Forward vertical integration by food and tobacco manufacturers mainly takes the form of separate wholesale, retail, and sales office establishments. Wholesale establishments and utilize from 0.5 to 3.3 percent of company emplojmient; the proportion is highest in the milk and oils industries. Less important is forward integration into retail stores, except for milk and candy companies which have 2 to 3 percent of their employment in retail stores. Ownership of eating places, primarily "" chains, however, is important; for 5 of the 15 industry categories (meatpacking, canning, grains, alcoholic beverages, and miscellaneous foods) such employment exceeds 5 percent, and only 3 categories have none. The most common form of forward integration is sales offices for grocery products; here employment goes as high as 13 percent and is over 3 percent in nine of the categories. In all, forward vertical integration potentially accounts for 3 to 14 percent of food manufacturers' employment and exceeds 10 percent in half of the enterprise categories.

In general, the extent of both types of potential vertical integration increased during 1963-72 (app. table 2). Agricultural emplo3mient was more widespread in 1972, though it decreased slightly for canning and tobacco companies. With one or two

11/ The "maximum possible" amount would equal the actual amount of production integration only if all the output of downstream establishments owned by a company are shipped within that company. Actual amounts will be less than the amounts shown to the extent that the output is sold to third parties not in the same industry as the parent company. Vertical integration by contract or long-term purchase agreements is not considered.

20 exceptions, food or tobacco manufacturers increased their activities in the chemical ingredients, containers, and industrial machinery industries. Use of special establishments for administrative and auxiliary activities increased for virtually all companies. On average, the proportion of company employment in potentially backward vertically integrated activities increased by 30 percent over 1963-72.

Forward vertical integration into wholesale and retail trade has also increased; one exception is the decline in retail bakery operations of the bakers. The expansion into eating places was especially large, but increases and decreases in sales personnel appear to have cancelled one another. On average, total forward ownership integration employment rose by about 38 percent over 1963-72.

Geographic Diversification

Related to the movement toward greater horizontal product diversification is a trend toward increased geographic diversification. Much of the growth of the largest food processing companies in this century can be attributed to the successful national distribution of a popular regional brand. Such a strategy then permits the use of national advertising media, which are normally less expensive per delivered message than alternative media or promotional methods. For bulky food products, geographic expansion has entailed the emergence of multiplant firms and methods of coordinating their production.

The extent of multiplant ownership is at best a rough proxy for measuring domestic geographic diversification, but it is one of the few indicators available. Previous analyses of multiplant ownership in manufacturing have established that it is the principal basis for high market concentration (5u, p. 92). Leading firms tend toward multiplant operations much more than their smaller rivals.

One conclusion possible from Census data on multiplant ownership is that it is strongly related to both company size and product diversification. In 1963, Census data revealed that the 200 largest food manufacturing companies each operated an average of 140 different establishments, including 18 food manufacturing plants; the 50 largest firms operated 46 food manufacturing plants each (46^, p. 239).

More recent data on multiplant ownership are shown in table 11; these 1972 data show the average number of food manufacturing establishments per company. Leading firms in each industry have many more plants on average than smaller companies. Firms ranking below the top 50 almost invariably operate only a single plant. These data also demonstrate that multiplant ownership is characteristic of industries serving local demand or dependent on regional sources for input supplies. Multiplant operations are characteristic of even medium-size firms in the meatpacking, fluid milk, ice cream, canning, animal feeds, bread, bottling, and potato chip industries.

Census enterprise data for 1972 confirm the relationship between multiplant ownership and both firm size and diversification. The 163 companies with sales of $100 million or more whose primary activity was food or tobacco processing owned an average of 135 establishments of all kinds, plants as well as warehouses, retail stores, sales offices, and administrative offices (23). Moreover, these same data show that diversified food companies (those operating establishment in two or more industries) had 20 times as many establishments as do single industry firms. Finally, multiplant ownership was notably higher among food anjd tobacco manufacturing companies than in the rest of manufacturing.

One outstanding trend in geographic diversification of the last two decades is the international spread of production by U.S. food and tobacco firm.s. The three

21 Table 11—^Multiplant ownerähip in the U,S, food and tobacco manufacturing industries by the largest companies in each industry, 1972

Average manufacturing 1 / establishiaents owned per company—' Industry group Four 5 to 20 21 to 50 All other largest • largest •largest companies

Number

Meatpacking 12.4 4.6 2.5 1.0 Processed meats 9.8 2.5 1.8 1.0 Poultry and egg 6.0 2.9 1.5 1.0 Fluid milk . 37.6 12.5 4.2 1.0 Other dairy products ; 12.5 3.4 1.3 1.0

Canned fruits and vegetables 9.8 4.1 1.9 1.1 Other preserved fruits and vegetables : 4.7 2.3 1.5 1.0 Breakfast cereals : 3.1 1.3 1.0 Pet and animal feeds : 21.6 7.8 2.4 1.1 Other grain products 5.0 2.1 1.1 1.0

Bread, rolls, cake : 49.8 8.3 4.4 1.0 Cookies and crackers : 6.3 2.8 1.3 1.0 Sugar : 5.5 1.4 1.0 — Candy and chewing gum : 2.3 1.4 1.4 1.0 Fats and oils 7.5 2.3 1.1 1.0

Margarine and cooking oils ! 4.6 2.8 1.1 1.0 Beer and malt 4.4 2.2 1.0 1.0 Wine and brandy 3.7 2.0 1.1 1.0 Distilled liquors ; 7.0 2.2 1.1 1.0 Soft drinks and flavorings ; 13.6 4.9 2.9 1.1 Canned and frozen fish 2.7 2.5 1.4 1.0 Coffee 4.3 3.3 1.0 1.0 Other processed foods 15.2 3.6 2.3 1.0 Cigarettes, cigars, and other tobacco 2.6 1.6 1.1 1,0 Tobacco stemming and redrying : 4.8 2.7 1.1 —

Total 8.9 3.0 1.6 1.0

= Not applicable^

J^/ A company is defined as the total of the individual manufacturing establishments under one ownership within an industry or group of industries. The same company may appear in two or more industry groups. Company size is determined by the total value of shipments and other receipts of its plants (including intracompany transfers); for a few industries, value added is used to rank companies instead of value of shipments. "All other companies" are those operating at least one plant in the industry that rank below the 50 largest.

Sources: (22). Concentration Ratios in Manufacturing; table 8.

22 major meatpackers and the Tobacco Trust made large foreign investments in the early part of this century, especially in the United Kingdom. A few other manufacturers of dry groceries had stakes abroad before 1950, mostly in Europe and Latin America (37). As early as 1929, U.S. companies had 35 food manufacturing investments in Europe and 51 in Canada (69, p. 63). But the major part of the growth in international production has come since 1950 and especially since 19v60 (table 12). Average annual growth rates in the stock of foreign direct investment in food and tobacco processing were 8 percent during 1929-50, 11 percent during 1950-63, and 24 percent during 1963- 75. Increases were especially large in Europe and the "other" areas.

The figures in table 12 may understate the importance of foreign investment of U.S. food companies. The sales of their foreign affiliates are typically over three times as large as the book values of direct investment shown; thus, in 1975 the sales

Table 12—U.S. foreign direct investment in the food and tobacco manufacturing industries, 1929-76

Value of U.S. foreign direct investment-

Year ; : Latin : Other All Canada Europe America areas areas

Ml] Lllon dollars

1929 25 38 118 8 190

1936 83 47 74 16 220

1940 110 46 62 17 245

1950 214 67 182 34 496

1957 ; 320 149 201 53 723

1963 467 326 200 141 1,234

1966 : 600 597 365 209 1,771

1969-?-'' : 753 829 516 321 2,419

19722/ ': 984 1,330 525 427 3,266

1975 ': 1,369 2,032 720 604 4,725

1976 i 1,436 2,211 788 653 5,088

IJ Foreign direct investment is measured by the value of U.S. residents' net equity in and loans to foreign affiliates. Up to 1950, tobacco processing was included in these data. 2^/ Estimated from geographic trends in manufacturing.

"Sources: (5) and Survey of Current Business, various issues.

23 of foreign food manufacturing affiliates of U,S. firms were probably over $15 billion, or about 10 percent of the domestic sales of U.S. food manufacturing companies. Foreign investment is even more important to the largest food firms; among a sample of the 36 largest food processing firms, Horst calculated that about 17 percent of their total assets were abroad in 1971 (37)« Another source, based on more reliable data, placed the proportion of net worth abroad at 18 percent for 22 quite large food processing companies in 1972; moreover, 21 percent of corporate income was derived from foreign operations (49)» Ml 22 companies were among the 500 largest industrial firms in 1972.

Finally, a special survey of the 298 largest U.S. multinational corporations in 1970 carried out by the U.S. Tariff Commission found that these companies' foreign sales amounted to 15 percent of the total U.S. sales of processed food products (65). Thus, it is apparent that the largest food processing companies operations overseas are increasing. Moreover, the pattern of foreign expansion closely resembles that of domestic product diversification, especially the reliance on growth through merger and the tendency for greater growth into the more differentiated industries (37).

•Investment into the U.S. food and tobacco manufacturing sector by non-U.S, firms has increased at the same time that U,S, firms have increased their investments abroad. Private direct investment by foreign companies has increased 25-fold over 1934-76 (table 13). As a proportion of all manufacturing foreign investment, food and tobacco investments now account for 15 to 20 percent; the peak in this ratio (38 percent) was reached about 1959. The 1974 census provides the most detailed data on the industry distribution of foreign investment to date, showing foreign investment in food and tobacco manufacturing heaviest in beverages, miscellaneous foods, and tobacco.

Data on the geographic sources of foreign direct investment in the U.S. food and tobacco industries show that in 1934 virtually all investment flowed from Canada and the United Kingdom (table 14). The U.K. investment share has declined drastically, though in absolute terms it has risen fivefold. Canadian investment is the most important, but Swiss, French, and Dutch investors have gained in relative importance. Japanese investment is still small, given Japan's economic size, and investment from the less developed areas remains insignificant.

Increasing Product Differentiation

The fifth major industry trend, increasing product differentiation, is especially significant. Numerous studies have found that the level of product differentiation is both a source of increasing concentration and a determinant of elevated, supranorraal profitability (3^, 23, 42_, 30^) • Successful product differentiation permits the manufacturer to raise the price of the product over that of close substitutes. Once a brand is well entrenched in a particular market, product differentiation can have the further effect of increasing barriers to new entry. This arises because the effort needed by a potential entrant to change consumer preferences is usually greater than that required to ensure continued loyalty. Furthermore, established sellers often have the advantage of substantial economies of scale in advertising. 12/

Three main types of advertising and sales promotion are generally used—media advertising, other advertising, and sales promotion (table 15). Advertising used in its narrow sense delivers persuasive messages to reinforce the buying habits of present consumers or to entice potential consumers. Most of these messages reach

12/ For an analysis of the role of advertising in creating and maintaining market power, s ee (12).

24 Table 13—Foreign direct investment into the U.S. food and tobaèco manufacturing industries, 1934-76

Value of foreign direct investment intoi'

' Canning \ Food and tobacco manufacturing Year Meat Dairy , Grain Bakery . Total Tobacco products .products pre- milling .products ^^^^"g^^ food . Proportion of .serving Total value all manufacturir 2/

Million dollars^/ — Percent

1934 - - - _ - - - 77 14

1937 - . - - - - - 97 19 116 16

1941 - - - 150 294/ 177 24

1959 - - - 758Í/ 173Í/ 931 38

1974 : 34 28^^ 124^/ 4 1 721 1,384 2441/ 1,628 20

1976 : - - - 1,627 287^/ 1,914 15

- =r Industry detail not available.

]_/ Book value of controrlled affiliates and branches. 2^/ Excluding petroleum refining. 3_/ Dash indicates not available. Note that 1976 data were not comparable to 1974 data because á5 changes in industrial classification criteria. 4/ Estimated from other ratios and residuals.

Sources: (64), Survey of Current Business, various issues, and U.S. Department of Commerce Foreign Direct Invest- ment in the United States, Vol. 2 (April 1976). Table 14—Foreign direct investment Into the U.S. food and tobacco manufacturing industries, by geographical area of foreign parent, 1934-74

Distribution of the value of foreign investment^/ Location of foreign . parentj^/ . 1934 ! 1959 ; 1974

Percent

Canada : 30.9 59.9 41.3

France ■ .0 .61/ 5.2^/

Germany ' .0 .0 .1

Netherlands .2 4.ll/ 7.7

United Kingdom \ 64.4 28.4 15.6

Switzerland : .9 7.6 23.8

Other Europe : 3.2 .4 .9^/

Japan : .0 .0 3.7

Latin America : .3 .0 1.6

Other areas : .0 .0 .1

Total Î 100.0 100.0 100.0

1/ In most cases the "first" foreign parent, not the ultimate one. 1/ Based on food processing alone when tobacco not available, or on sales or total assets where investment not available. 3/ Estimated from other ratios and residuals.

Sources: (69) and Survey of Current Business, various issues.

consumers today via the mass electronic and printed media. Advertising in a broader sense, however, includes other activities, here termed sales promotion. Sales promotion is directed both at intended consumers and at the distributors of products. Though the distinction is somewhat circular, advertising properly speaking is what advertising agencies do, while sales promotion is largely carried out by the manufacturers, advertising expenditures by corporations are considered tax-deductible expenses in the year they occur, while most sales-promotion activities are treated as costs (or netted from sales in the case of discounts).

One detailed study of two food manufacturing industries contains estimates of both advertising and sales promotion expenses (41) . The cold breakfast cereals industry in 1965 spent 14.9 percent of sales on direct media advertising and an additional 0.1 percent on media advertising; other advertising (coupons,

26 Table 15—Types of advertising and sales promotion used by food and tobacco manufacturers, by expenditure importance

Advert is ingi'1/ Sales promotion other than advertising—'2/ Media Other

Spot ^/ zJ Cents-off Direct sales forces; free or subsidized in-store service; liberal delivery terms Q/ Network television-^' Point-of-purchase displays and return policies

General magazines^/ Free samples for consumers Discounts, rebates, and "price-paks" to distributors News pap erar.' Direct mailings of advertising brochures Product development activities Billboards and other outdoor-3/ Catalogues Premiums, sweepstakes, contests, and re- Newspaper supplements^' demption coupons

"Cooperative" advertising^' Package and packaging messages

Spot radio^' -^' Market testing and taste panels

Network radio""3/ Free samples and demonstrations given in stores Special magazines Trade fairs and conventions displays Trade magazines Bribery and coercion

1/ Activities normally performed by specialized advertising agencies, but occasionally handled by the manufacturers themselves* _2/ Selling activities normally performed by the manufacturer or by a specialized firm (other than an advertising agency) under contract, such as brokers, research and development laboratories, marketing consultants. The rankings in this column are derived from several years' of reading Advertising Age and similar trade magazines. See also Doyle (26^). 3/ Measured media advertising; expenditures available by both brand and manufacturer on a quarterly basis. h_l Spot advertisements are those placed during transmission time controlled by local stations. 5j Advertising of branded products that is placed in multiproduct ads by grocery retailers and for which they are reimbursed by the brand manufacturer. point-of-purchase, and free samples) amounted to 1.5 percent of sales; sales promotion outlays (mainly premiums, introductory price allowances, salesmen, and market research and development) accounted for 8.3 percent of sales. Thus, the highly differentiated cold breakfast cereals industry spent a total of 24.8 percent of its sales revenue on all types of advertising and promotion.

The second industry, cookies and crakers, is considered only moderately differentiated, yet its sales promotion costs are high because of an expensive driver- salesman delivery system (other industries with direct-store delivery systems include dairy products, many other refrigerated and frozen foods, bread, soft drinks, alcoholic beverages, and snacks). In 1965, this industry devoted over 12.6 percent of its sales to media advertising (3.4 percent), other advertising (0.7 percent), and sales promotion^ (8.5 percent plus an unknown amount for ; distributor price allowances). Thus, the proportions of total marketing expenses made for advertising versus sales promotion can vary tremendously depending on the nature of the product. Also, media advertising outlays, the most visible of the expenditures, are often only the tip of the iceburg.

Differentiation of most food and tobacco products is usually the result of advertising. Total worldwide advertising expenditures by U.S. food and tobacco corporations are available from summ.aries of their tax returns published by the Internal Revenue Service (38). Total advertising expenditures in 1975 by food and tobacco corporations according to this source were $4,079 million, 32 percent of the total advertising expenses claimed by all manufacturing corporations and over 15 percent of all reported U.S. advertising outlays. I3j These estimates are probably understated because they do not reflect advertising by and agricultural cooperatives, nor do they include advertising on food products done by companies whose primary classification lies outside of food or tobacco manufacturing. It appears that on balance there is somewhat more diversification into food processing than out of food processing. Moreover, diversification "into" has occurred in the more differentiated product areas. Thus, 1RS data probably understate the true amounts of total advertising on processed foods in the United States, but the data are not adequate to establish this point definitively.

More precise but partial measures of advertising on food and tobacco products are available from measured-media expenditure reports. These reports are prepared by marketing services companies that continually monitor the media time or space purchased by an advertiser for a particular product and then estimate expenditures from current price lists of the medium involved. 14/ National advertising expenditure reports are currently available for eight media: network television, network radio, spot television, spot radio ("spot" advertisements are those placed during transmission time controlled by local stations), general magazines, newspaper supplement magazines, daily newspapers, and outdoor advertising (mainly billboards). 15/ Except for products or firms with very small advertising budgets (less than $25,000 annually), these reports provide a coirtprehensive account of media advertising, product by product and firm by firm. As already noted, however, point-

1_3/ Corporations have wide latitude in deciding which particular expenses are to be reported as advertising expenses and which are to be counted as simply costs of sales. 14/ Spot radio uses a questionnaire sampling approach rather than actual m.onitoring. Network TV and radio monitoring is complete, but large monitoring samples are used for spot TV, magazines, outdoor, and newspapers (16). 15/ Only five media expenditure reports were published in 1950: network TV, general magazines, daily newspapers, farm magazines, and newspaper supplements. Farm magazine advertisement reports are no longer readily available, while radio reports became available from about 1967 and outdoor reports from about 1970. Spot TV reports were published from about 1956.

28 of-scale advertising and other nonmedia forms of promotion are not included; also, expenditure data on cooperative advertising of food products by food stores do not identify the manufacturers subsidizing this type of advertising. But media advertising generally represents well over half the total advertising expenditures of food firms.

The record of measured-media advertising expenditures on food, beverages, and tobacco products indicates three main trends: (1) a long-term rise in the total, (2) a change in the composition of the media employed toward more television, and (3) an industry-wide increase in the intens-ity of advertising.

Though the figures for the earlier years are somewhat less reliable, it appears that media advertising expenditures doubled every 12 years during 1950-75, rising an average of about 10 percent (table 16). Expenditures accelerated during the most recent period, rising at an average annual rate of 16.2 percent over 1972-77. The "real" amount of media advertising, that is, the number of messages delivered to consumers, is difficult to calculate. TV advertising rates per minute of air time have risen rapidly in the last few years, but the number of TV viewers and the number of minutes of TV advertising per day have also risen. Thus, the increase in TV advertising outlays may understate the number and duration of advertising messages delivered. Rates on most of the other media have generally followed the economy-wide rate of inflation more closely (36).

Perhaps more striking is the continued upward trend in television advertising expenditures by food and tobacco producers, despite the ban on cigarette advertising on television that took effect in late 1970. 16/ Expenditures on printed media and outdoor advertising have risen much more slowly, while radio advertising has declined throughout the period (except in 1976). This trend is significant because the printed media are often held to contain a higher ratio of factual information to image content while television generally conveys more image material and less concrete information. In addition, there are probably greater economies of scale in television messages than any other kind of media and thus may present greater barriers to entry (12). Finally, previous research indicates that TV advertising has a stronger adverse effect on economic performance than other kinds of advertising (55).

From an annual survey of U.S. advertising expenditures (commissioned by Advertising Age every year since 1940), one can estimate the proportion of all media advertising on all processed food and tobacco products (table 17). For those eight media for which it was possible to di\stinguish food and tobacco outlays, the ratio between the two categories has remained remarkably constant at about one-third. A slight dip in that proportion took place during 1968-72 because of the upheaval in cigarette advertising; pet food advertising also rose rapidly at about the same time (pet food advertising could not be determined for the earlier years, but by 1975 it constituted almost 2 percent of all advertising in the eight comparable media).

Food and tobacco advertising accounted for 25 to 35 percent of all network television advertising during 1950-77. The proportion of spot television is much higher, reflecting the regional distribution patterns of some food products. The proportion of magazine and newspaper advertising outlays devoted to food and tobacco products remained fairly steady, but radio use declined. Over half of all outdoor advertising involves food or tobacco items, almost all of it for alcoholic beverages and cigarettes.

16/ Measured media television advertising expenditures on tobacco products averaged more than $200 million per year over 1968-70, and then dropped to $20 million in 1971. Television advertising for cigars, chewing, and pipe tobacco is still permitted. The distilled liquor manufacturers have a self-imposed rule against all radio and TV advertising.

29 Table 16—Measured U.S. media advertising of manufactured food and tobacco products, various years, 1950-77

Newspapers | General : ■ Network Spot and Outdoor Total Radio ] ', Year : 'television • television ' magazines : suppléments

Million dollars

1950 : 619 17 20i/ 2462/ 100 1961/ 40^/

1954 : 771 120 70i/ 204?./ 129 205I/ 43Í/ 2593/ 1958 989 187 164 181^/ 152 46Í/

1963 1,298 262 392 1591/ 217 218 50i/

1967 : 1,709 511 543 140 245 217 53^/

1972 : 1,746 418 492 129 289 319 99

1975 : 2,237 480 669 126 337 404 121

1976 : 2,686 689 843 136 292 489 136

1977 : 3,160 1,045 855 128^'^ 477 500^/ 155

Note: Amounts do not include pet foods which in 1975 totaled $135 million.

1/ From (46) estimate from a linear trend line. 1/ Spot radio estimated with linear trend lines, network radio likewise for 1958 and 1963 only. ZJ Newspaper advertising for tobacco and alcoholic beverages products only was estimated using four linear trend lines^ A/ Estimated by means of four least-squares linear trend lines backward through time. For tobacco products, out- door advertising was held constant at its 1970 level. 5/ Spot radio and newspapers estimated with 1970-76 trend lines.

Sources: Leading National Advertisers, Inc., Radio Expenditure Reports, Inc., Media Records, Inc., and (46) Table 17—Total U.S.media and other advertising of processed food and tobacco products, 1950-77

Eight media with comparable data available. proportion of all U.S. advertising ! All other Total Year : Network : Spot , advertisingi./ advertising —/ General Newspaper : televi- :televi- : Radio magazines and ¡Outdoor Total : s Ion ' s ion supplement -

—^Percent— ^- — ^Million c lollars

1950 34 743/ 21 381/ 42I/ 40 1,725 2,291 1954 28 íá/ 1 343/ 34I/ 34 1,346 2,805 1958 25 41 21 361/ 353/ 33 2,438 3,427 1963 26 56 53I' 22 31 *4i 34 3,129 4,427 1967 35 55 37 20 26 421/ 34 4,014 5,723 1972 : 23 37 27 20 29 52 28 4,678 6,424 1975 : 25 30 24 23 33 55 30 6,350 8,587 1976 ; 24 39 22 22 33 54 29 7,191 9,880 1977 : 30 39 18 22 30 53 30 8,446 11,604

y Includes special magazines with low circulations (such as trade magazines), local newspaper advertising by re- tailers, business newspapers, farm publications, local radio and television advertising (other than regular "spot" advertising), local outdoor advertising, direct mailings, and miscellaneous advertising. "All other advertising" was assumed to be the same proportion for food as was the "total eight-media" for food. -/ The sum of "eight-media" total and "all other advertising." Two categories, direct mailing and "miscellaneous" (presumably free samples, coupons, point-of-sale displays, and others) advertising, are not classified media advertising. These two components have in recent years comprised about 33 to 35 percent of total advertising expenditures. Many other sales promotion expenditures are not included in this column (table 15). Total U.S. advertising for all products in 1975 was reports to be $26,606 million (1RS 1978). 3/ Estimated from linear, OLS trend lines. Somewhat less reliable than the other entries in this table. See table 16.

Sources: Table 16 and Advertising Age, September 4, 1978, pp. 32-33. Assuming that the ratio of food plus tobacco advertising to all advertising is the same for the eight comparable media as it is for all other forms of advertising, it is possible to project the total amount spent on the U.S. media advertising of these products (table 17), From $2.3 billion in 1950, U.S. food and tobacco advertising outlays reached $8.6 billion in 1975. By 1978, annual expenditures will have exceeded $13 billion (out of an estimated total for all products of $43 billion).

The data assembled up to this point have dealt mainly with advertising narrowly defined. There are no precise data which measure the extent of advertising and sales promotion in the U.S. economy. One estimate for the United States for the late sixties was a total of $60 billion, of which about only one-third was attributed to advertising expenditures (55, p. 27). Given the overall rise in advertising and sales promotion outlays since then, that figure is likely twice as high today.

Another means of measuring advertising and promotional activities are the frequent announcements in the trade or business press concerning the promotional costs associated with the introduction of new food and tobacco products. Miller Brewing, for example, a subsidiary of Phillip Morris, claims to have spent $20 million for first year support of its new "Lowenbrau" beer; this is almost twice the previous annual average media advertising for the entire subsidiary during the early seventies (27). Another example is the introduction of R. J. Reynold's "Real" brand cigarette in mid-1977. The company spent $40 million for the first 6 months; about $15 million went for advertising and the rest was used for over 2,000 salespersons (most temporarily employed), 130 boxcar loads of display materials, and 25 million free sample paclcages (19)—all for a targeted $80 to $120 million in annual sales.

A final point about advertising by food and tobacco processing firms relates to the intensity of their advertising, that is, their advertising-to-sales ratios. Deductible advertising expenditures are available from the 1RS by primary industry and size class of corporation, although these data are increasingly distorted by firm diversification. In 1975, the latest year for which data are available, the food and tobacco manufacturers reported total U.S. advertising expenditures of $4,079 million, or about 2.3 percent of their sales. The rest of manufacturing has an advertising-to- sales ratio of only 1.1 percent. The average food advertising intensity has displayed a long-term and nearly uninterpreted rise, from only 1.1 percent in 1947. Their average advertising-to-sales ratio is the highest for any major industry group except chemicals, which includes the high advertising drugs, soaps, and toiletries industries. Looking only at the average for the food and tobacco processing industry obscures the fact that the advertising intensities of the very large firms have historically been considerably above that of the smaller firms. Over the 1958-62 period, for example, food manufacturing firms with $100 million or more in assets had over three times the advertising intensity of corporations with $1 million or less in assets (46, p. 68).

INDUSTRY PERFORMÂÎÎCE TRENDS

Several criteria are used to judge the economic performance of industries« The technical study on food manufacturing of the NCFM focused on profitability (46). This study reexamines that dimension of performance and presents data on industrial growth, productivity changes, and monopoly price elevation.

Increasing Profitability

The sixth major trend in the food and tobacco industries identified by the NCEM concerns profitability. During the last quarter century, the profit rate of food manufacturers has increased by 50 percent (table 18). More appropriately, their

32 Table 18—Profitability of food and tobacco manufacturing compared to all manufacturing corporations, 5-year periods, 1951-75

Profits after taxes as a proportion of stockholders' equity Ratio of food Period to all Food and tobacco Other manufacturing manufacturing manufacturing profitability

Percent

1951-55 8.4 11.5 73

1956-60 9-8 10.4 95

1961-65 10.1 10.8 93

1966-70 11.4 11.7 98

1971-75 13.2 11.9 111

Sources: Federal Trade Commission Quarterly Financial Reports and app. table 6.

profitability has increased to such an extent that during 1971-75 food manufacturers' profits were higher than for the rest of manufacturing. About 8 percent of the sales of food and tobacco companies are by agricultural cooperatives, while at most 0.1 percent of the sales in the rest of manufacturing are by cooperatives (53). The FTC profit data refer only to profit making corporations, while the equity data include all companies (including cooperatives), thus understating the profitability of food manufacturing relative to the rest of manufacturing by about 8 percent.

The data presented in table 18 should be interpreted with caution. First, the definition of the food manufacturing major industry group has changed slightly over time. The main change occurred during the fifties when the oil refining industries and fluid milk packaging were added to the major industry group. Had these industries been included earlier, the trend toward Increasing profitability would have been accentuated.

Second, the product mix of companies falling into the food manufacturing classification has changed over time. Generally, one finds more diversified firms in the later periods. Food manufacturing firms have generally moved production of type foods to more profitable highly formulated foods; other firms categorized in the major industry group derive large portions of their profits from nonfood industries. On the other hand, there is some evidence that firms classified outside of food manufacturing have diversified into more formulated type of food products (53, pp. 46-54). Thus, the impact of diversification on profitability in food manufacturing cannot be precisely assessed.

Third, it appears that the share of food manufacturing sales by cooperatives increased during 1951-75; since their equity is included in the table but not their profits, the upward trend in profitability is understated. A fourth point is that the measure of profitability employed here (current net profits over stockholders' equity) probably understates real corporate profitability during the highly inflationary

33 period since 1970. One researcher has calculated that inflation-adjusted corporate profits rates were 27 percent higher during 1971-75 than unadjusted rates (28). Prior to 1968, practically no inflation adjustment was necessary. In siim, these four considerations do not appear to invalidate the profit trends shown in table 18, but until a longitudinal profit series is available from the FTC's Line of Business program, one cannot precisely measure Industry profits«

Several studies that have looked at the determinants of profitability of firms in the food manufacturing industries have found that in most industries, large firms have higher average profitability than small ones. The NCFM, however, found that for food manufacturing, the reverse was true prior to 1960 (46, p. 185). After 1960, large food manufacturers were generally more profitable than small ones, but this may have been due to factors other than size alone. More recent data on the relationship of firm size to profitability reveal that the largest size class of food manufacturing firms was more profitable than firms for the two smaller size classes in every year shown (table 19). The differences in profitability appear to widen in recession years such as 1960, 1970, and 1974.

Most economists have turned to industry structure and other such characteristics for an explanation of profitability. Meat processing, sugar, edible oils, fluid milk, and basic grain milling have historically had below-average profit rates (46, p. 193). Frozen foods, some bakery, dairy, and grain mill products, candy, most beverages, and miscellaneous foods on the other hand, have typically displayed superior profitability.

Likely sources of the supranormal and rising profits in food manufacturing are industry concentration, product differentiation, and other departures from perfect competition that can give firms more market power. Three major statistical studies of the food manufacturing industries confirm this prediction. Collins and Preston, using regression analysis on 32 food manufacturing industries, found that four-firm sales concentration was significantly related to industry "price-cost margins," a proxy for profitability (11). Their model was able to explain 80 percent of the variation in margins. This was the best fit of the 10 major industry groups studied. A more ambitious statistical analysis by the FTC involved the 97 largest food manufacturing firms of 1950 (30). Employing detailed and precise data, this study found that firm profitability was consistently related to seller concentration, advertising intensity, and firm market shares. At competitive levels of industry concentration and advertising, predicted profit rates were close to the prtoe lending rates of major financial institutions in the early fifties (about 6 percent), but with high concentration and advertising levels profit rates doubled (30, table 1-3). Rogers has verified the FTC findings using a sample of 60 firms with data from 1967-72 (56).

Growth Rates

During 1950-72, food manufacturing value of shipments grew at average annual rates of 4.7 and tobacco manufacturing at 2.2 percent; the whole manufacturing sector experienced a 6.4-percent growth rate, however (24)« Generally, the food industries have shown somewhat slower but steadier growth than the rest of manufacturing. Tobacco manufacturing has been one of the slowest growing major Industry groups (only has been slower)^ particularly since the onset of widespread public health concerns in the midsixties. Industries such as dressed poultry, frozen foods, breakfast cereals, alcoholic beverages, soft drinks, fish, and miscellaneous foods have grown substantially (table 20). Other industries producing more basic commodities such as flour, milk, bread, and sugar have relatively low rates of long- term growth. Because the growth rates given in table 20 are based on undeflated dollars, part of the growth is due to volume changes and part to price changes.

34 Table 19—After-tax profits as a proportion of stockholders' equity, by assets size class, selected years, 1947-74

1 Food manufacturing by asset size class Year :' $1-50 ! $50-100 '. Over $100 : million . million , million

Percent-''

1947-/ : 15.3 16.6 12.4 1954Í/ : 6.8 7.7 7.8

1958Í/ : 7.3 8.7 8.4 1959^'' : 7.5 9.3 9.1 1960^/ 6.1 7.3 9.6

1961Í/ 6.2 8.1 9.3

1963 6.9 9.7 9.9

1965 ! 8.5 7.2 9.1 1967 : 7.9 9.2 9.8 1970 : 4.6 5.4 7.2 1971 : 7.7 7.1 7.7 1972 ': 6.2 6.5 7.8

1973 : 8.4 6.6 8.5

1974 : 8.4 3.8 10.0

1975 : 11.8 8.7 11.5

U Data exclude the 1RS minor industries for brewing and alcoholic beverages. 2^/ Net income after tax includes the following Source Book items: total net income (total receipts less total deductions) less gross income tax liability ("taxes paid" are already included among the deductions) plus income tax . Unlike ordinary 1RS usage, "net income tax" includes "constructive taxable income from related foreign corporations"'and includes foreign income tax credits (some additional foreign taxes paid are included as deductions). Thus, the after-tax net income concept used here is are strictly a domestic, economic profits definition. "Stockholders' equity" is the same as the net worth definition used by 1RS: capital stock plus paid-in surplus capital plus retained earnings, both appropriated and unappropriated.

Sources: (46, p. 191) and 1RS Source Book of Statistics of Income, various years.

35 Table 20—Industry growth rates in food and tobacco manufacturing shipments, 1954-72

Increased value of shipments of comparably defined: .eeasüaliaduáferies1/ Industry groups • 1954- 631/ ' 1963-72 ; 1954-72 • •

Percent

Meatpacking ¡ 37 56 113 Processed meats : 14 95 122Í/ Poultry and egg : 58 71 188 Fluid milk : 53 34 105 Other dairy products : 23 66 102

Canned fruits and vegetables : 39 47 105 Other preserved fruits & vegetables : 96 100 392Í/ Breakfast cereals : 81 80 225 Pet and animal feeds : 44 66 138 Other grain products 29 26 632/

Bread, rolls, cake 47 36 100 Cookies and crackers : 39 53 Sugar 34 27 84±./ Candy and chewing gum : 38 65 128 Fats and oils : 41 77 150

Margarine and cooking oils : 11 56 73 Beer and malt : 21 71 108 Wine and brandy : 41 198 321 Distilled liquors : 53 65 153 Soft drinks and flavorings : 89 135 344

Canned and frozen fish i 62 124 263 Coffee : -14 25 Other processed foods : 64 92 2ik/ Cigarettes, cigars, other tobacco : 47 35 99 Tobacco stemming and redrying 31 21 59

Total!/ : 48 66 145

1/ For a few industries growth rates are based upon increases in value added (SICs 20Tl, 2013) or value of production (SICs 2032, 2033, 2035, 2037, 2085, 2091, 2092, 2111, 2121, 2131, 2141) rather than value of shipments, 2/ Consistent 1954-72 industry definitions are incomplete, but such definitions are available for the 1954-63 and 1963-72 subperiods, so 1954-72 growth rates are derived from those of the subperiods shown. V Weighted by 1972 value added. 4_/ These growth figures are overstated for some industries because shipments figures for 1954 did not include the value of resales whereas subsequent years did include resales.

Sources: (22, 46, pp. 257-260).

36 Labor Productivity

Another performance measure that reflects industry progressiveness is rates of change in labor productivity. Fourteen food and tobacco industries have averaged about 3-percent annual rates of productivity increase during 1970-75 and 1963-75 (table 21). The performance of the brewing, candy, and wet corn milling industries is particularly impressive. Wliile 14 out of 60 industries selected is hardly a random sample, it is noteworthy that only 6 of the 14 food industries lie above the median in terms of productivity growth rates. Low progressiveness in some food industries could

Table 21—Labor productivity indexes for selected food and tobacco manufacturing industries, 1950-75

Output per employee- hour, average annual rate of change Census industry, ranked Rank | by 1970-75 rate of changei' 1970-75 ; 1963-75 : 1950-75

Percent

1 Wet corn milling : 8.8^/ 4.4^/ —

3 Candy and confectionery 7.9 5.1 4.0

6 Beer 6.9 7.0 5.6

15 • Soft drink bottling : 3.8 2.3 —

16 Canned fruits and vegetables : 3.72/ 3.12/ 2.82/

28 Animal feeds and pet foods • 2.6Í/ 4.1Í/

31 : milling \ 2.52/ 2.81/ ~

32 : Cigars ! 2.3 3.1 5.3

35 . Bakery products : 2.2 2.8 2.5

38 Flour milling : 2.0 3.1 4.0

42 Cigarettes ! 1.7 1.5 1.4

49 Flour mixes '- .9^/ 2.62/ ~

50 Breakfast cereals ; .2^/ .72/ ~

55 Sugar . - .7 1.8 3.8

— = Not available

1^/ Rank among 60 four-digit SIC Census industries or three-digit major industries. Nos. 16, 28, and 35 are major industries. 2/ 1970-74, 1963-74, or 1950-74.

Source: (4)

37 reflect either lack of opportunities for technological change or a failure to take advantage of more efficient techniques that are available.

Prices

A recent review of the industrial organization literature found only five empirical studies of the effect of industry market structure on manufacturers' prices (66). A few studies have also estimated the extent to which prices have been raised by specific price-fixing conspiracies; an example of a food industry is a study of bakers in western Washington State (46)*

One empirical analysis calculated the extent to which 1975 wholesale food prices were raised above competitive levels by such indexes of monopoly as sales concentration and advertising intensity (53), These are not price increases over time, but rather rises in consumer prices at one point in time above the price levels that would have reigned had the industries been workably competitive. The analysis found that there are three major components of the price differences, each of which is approximately equal in size for food manufacturing in the aggregate: (1) monopoly profits, half of which are transferred to government as corporate taxes, (2) excess advertising expenditures, that is, sales promotion activities designed to enhance the market power of a firm rather than inform consumers, and (3) X-inefficiency due to inadequate cost controls, excess production capacity, unjustified managerial withdrawals, excessive wage settlements, and other sources. Only 3 to 4 percent of the price increase is attributable to the deadweight or allocative loss incurred by society because oligopolistic firms reduce their output levels.

Two different statistical models each yield prices that deviate from the competitive norm by about 10 percent (table 22). However, the range among industry categories is quite large, from zero for meatpacking to 29 percent for breakfast cereals. The regression analyses showed that the height of the price increase due to monopoly is positively related to industry sales concentration, the intensity of industry advertising, and the proportion of TV advertising to other forms of media advertising. These relationships indicate poor competitive performance in industries exhibiting such departures from perfect competition.

THE 200 LARGEST FOOD AND TOBACCO PROCESSING FIRMS

Industrial organization analyses have typically relied on one of two main data bases: aggregate industry data or financial information on individual firms. Individual firm data have generally been collected on only the largest firms because they comprise a large portion of an industry's activities and because their data are more accessible than for smaller firms not regulated by the Securities and Exchange Commission (SEC).

There is another, more compelling reason for focusing on the largest food firms: the likelihood that the size of firms may account for differences in their competitive conduct. As Arnould (1_, p. 32) concluded:

"...two forms of competition exist among food processing firms. Smaller firms compete effectively by using price, whereas larger firms compete using nonprice tools...such as product differentiation and the results of R&D outlays."

38 Table 22—Estimates of wholesale price elevation due to monopoly in the U.S. consumer food manufacturing industries, 1975

Elevation in wholesale prices due to monopolyX/

Industry gtöut» i From price-ícost | From national brand- ', regression equation \ private label ! No. 3 ; regression equation

: Percent

Meatpacking : 0 0 Meat processing : 5.6 1.6 Poultry and egg products : 0 3.6 Fluid milk : 5.3 7.8 Other dairy products : 3.2 8.9

Canned fruits and vegetables : 5.4 11.2 Other canned and dried foods : 16.0 16.1 Flour mixes : 21.9 26.2 Breakfast cereals * : 29.0 29.5 Pet and animal foods : 8.6 20.0

Other grain mill products : 8.6 16.3 Bread, rolls, and cakes : 3.7 5.9 Crackers and cookies ! 16.3 21.2 Sugar : 3.4 9.0 Candy and chewing gums : 16.2 20.1

Oils and margarine : 9.1 20.4 Beer : 18.8 12.5 Wine : 11.3 12.2 Other alcoholic beverages : 24.2 14.3 Soft drinks and flavorings : 19.3 15.3 Coffee : 18.8 16.6 Other processed foods : 12.6 13.2

j^/ The two columns are not completely comparable. The first column includes all domestic shipments of the product group, while second includes only domestic consumer sales• Sources: (53, pp. 61, 65, and 66).

Data Sources on the Largest Companies

Three major sources of data provide some industrial detail on U.S. manufacturing firms grouped by size. All three sources yield comparable data, though the methods of selection and industry categorization differ somewhat.

The first source is tabulated data prepared by 1RS from annual corporate income tax returns. Selected income statement and balance sheet items are given for all active corporations by size of company and by major industry group. Less detailed preliminary data are first published about 3 years after the end of the tax year being reported (39), while more complete reports are released about 5 years later. Even more detailed data (such as an assets and sales) are available in the 1RS Source Book

39 Table 23—Total U.S. revenues and assets of all activé U.S. food and tobacco corporations, 1975

Major industry group ' Corpora tionsi' : Total U.S. Total U.S. revenues assets

: Number Million dollars

Food manufacturing • 14,442 158,841 73,599

Tobacco manufacturing : 39 14,058 15,052

Total : 14,481 172,899 88,651

\J Corporations with and without net income.

Source : (38).

which categorizes firms by minor industries (table 23). 17/ The 1RS does not gather data on foreign corporations, the foreign activities of U.S. companies, farmers cooperatives, or on certain partnerships and proprietorships. Finally, all the data on a consolidated company is placed under its principal business (the industry in which its total receipts are the largest).

The second and more detailed government data source on a company basis is the enterprise statistics of the Bureau of the Census (22). Data on plants and other establishments, employment, sales, value added, and other Census information are tabulated by company size, legal form, and enterprise industry categories (combinations of three- and four-digit SIC industries). These statistics are published about 5 years following the quinquennial censuses of manufacturing. 18/ Unlike the 1RS income statistics, the Census enterprise statistics cover all companies, including farmers* cooperatives, partnerships, and proprietorships; only activity in the United States is counted, however. Enterprises are categorized by primary industry on the basis of their payroll amounts. Tabulations of the enterprise statistics reveal the extent of industry diversification and vertical integration.

A third data source on large companies can be termed quasipublie. They are accessible to any researcher at no or low cost, can be freely extracted and (if not copyrighted) quoted, and are different from the proprietary and often secret data of firms available only to employees of those firms. These sources include annual reports to stockholders of public companies; annual 10-K forms submitted to the SEC; regularly published lists of large companies in business magazines such as Fortune; financial manuals compiled by bond-rating companies, such as Moody's; and specialized company data sold by marketing research firms, such as Leading National Advertisers or Economic Information Services.

17/ 1RS "minor" industries correspond to a 4-digit SIC industry, two or more 4-digit SIC industries, or a single 3-digit SIC major industry. Thus, they are sometimes referred to as 2-1/2-digit industries and are very similar to Census "enterprise" industries. 18/ The 1972 enterprise statistics became available only in the spring of 1978.

40 Quasipublic sources were utilized to compile a directory of the 200 largest food and tobacco manufacturing companies in the united States in 1975 (16) (app, table 10). The 200 companies were selected solely on the basis of their net 1975 U.S. sales of processed food and tobacco products. 19/ A wide variety of quasipublic sources were drawn upon to identify the companies and determine their total sales, U.S. sales, and food and tobacco manufacturing sales. Unlike the government-collected sources, an absolute sales cutoff was used to select the largest firms. Thus, this list also includes companies that are primary to other industries, such as drug manufacturers or large food chains. No companies were excluded because of their legal status; agricultural marketing cooperatives, foreign-based companies, and privately held firms are included, as well as public corporations.

Finally, sales and other data are recorded at the highest level of company consolidation. All controlled affiliates and subsidiaries of the same firm are combined with information about the parent company. For example, both U.S. and subsidiaries of Nestle Alimentana, (Nestle, Inc. and Libby, McNiel and Libby) are consolidated together with the other worldwide operations of this Swiss company. The 1RS and Census may treat the two subsidiaries as separate companies. Details on sources and methods can be found in Connor and Mather (16).

Size and Industry Characteristics

Census data from 1972, the most recent year available, indicate that there are a large number of companies and plants in the food and tobacco manufacturing industries. In that sector, there were 28,455 separate establishments, including 916 central administrative offices, 61 research, development, and testing laboratories, and 360 other auxiliary establishments (22). 20/ Of the remaining 27,118 production facilities (plants or factories), 56 percent had 20 or fewer employees. Yet the average shipments size of food and tobacco plants is nearly twice as high as that of the rest of manufacturing; output per man-hour is over twice as high.

The number of companies operating at least one plant in the food and tobacco processing sector is shown in table 24. Only 1,481 (6 percent) of all firms produce outside of their primary Census industry, but because these firms are much larger and may have plants in several different industries, they account for 27 percent of all sales in the sector. High proportions of industry sales in fluid milk, oils, and miscellaneous foods are accounted for by companies primarily classified outside those industries. The tobacco industry, on the other hand, is highly specialized. In 1963, only 4 percent of all companies had establishments outside their primary industry category, accounting for only one-fifth of all food and tobacco processing sales.

The very largest food and tobacco processing companies accounted for a very high share of all activity in the sector (table 25). In 1972, the 163 food and tobacco companies with U.S. sales exceeding $100 million accounted for 65 percent of the sales

19/ Sales were net of intracompany transactions, sales taxes, tariffs, excise taxes, and similar additions. The sales included exports of goods made in the United States and those imported and resold in the U.S. under long-term marketing agreements. Processed food and tobacco products are all those classified in major SIC industry groups 20 and 21. The year 1975 represents the fiscal year ending between July 1, 1975, and June 30, 1976. Estimates were often made to distinguish U.S. from foreign or food from nonfood sales. 20/ Most administrative offices are a contiguous portion of an operating plant; only physically separate facilities are counted as auxiliary establishments.

41 Table 2A—Companies with plants in the food and tobacco manufacturing industries, 1972

Companies in same : Companies in other industry category [ Total sales : industry category Enterprise i and receipts industry '. of establish- Proportion of [ Proportion of [ ments Ntffliber total sales ] Number—' total sales and receipts and receipts

¡Million dollars Number Percent Number Percent

Meatpacking : 23,007 2,223 88 70 12 Processed meats and poultry 8,467 1,582 62 112 38 Fluid milk : 9,423 1,941 72 84 28 Other dairy products : 6.919 1,465 57 155 43 Canned fruits and vegetables 4,060 702 65 64 35 4> Frozen and dried foods : 7,438 1,081 59 129 41 Grain mill products : 12,171 2,027 73 193 27 Bread and rolls : 6,134 2,672 82 128 18 Cookies and crackers : 1,763 231 76 26 24 Sugar and candy : 6,641 951 71 91 29

Fats and oils : 6,905 515 38 80 62 Alcoholic beverages ; 6,843 352 86 30 14 Soft drinks and flavorings : 6,946 2,525 85 84 15 Other processed foods : 8,190 3,260 57 226 43 Tobacco products : 5,921 168 98 9 2

Total : 120,829 21,695 73 1,481 27

2_/ Includes companies in other food or tobacco processing industries as well as outside that sector.

Source: (23) and table 1. Table 25—Number and size of the largest companies primarily classified in food and tobacco manufacturing, 1972

• Companies with total U.S. sales and '• Companies with total U.S. = receipts of $100,000,000 or more ■ emploT^mènt of 1 ,000 or more Enterprise industry Sales and Sales and : Number . . Number receipts receipts

: Number $ Million Nvimber $ Million

Meatpacking : 35 17.671 25 15,985 Processed meats and poultry : 5 l,322i' 13 1,809, . Fluid milk : 13 8,980,. 16 8,799!' Other dairy products : 4 4.I73I' 3 4,090i/ Canned fruits and vegetables 7 1,984 13 2,2461'

Frozen and dried foods : 9 3.255 20 3,856Í'' U) Grain mill products 20 14,292 22 14,215 Bread and rolls 6 16 6,537 Cookies and crackers : 2 l!o682/ 6 1,319 Sugar and candy 18 4,613 19 4,37ll/

Fats and oils 5 2,064 4 1.910 Alcoholic beverages 19 7,552 19 7,93ll' Soft drinks and flavorings 6 3,194 11 3,524 Other processed foods : 4 2,708i/ 7 2,439l' Tobacco products 10 9,086 14 9,3121./

Total large companies : 163 88,016 208 88,343

Total food and tobacco companies : 21,695 136,455 21,695 136,455

1/ Midpoint of a range, necessitated by disclosure rules of the Census. 2^/ Assumed largest company was Nabisco (with 1972 sales of $924 million) and obtained sales of second-ranking firm (probably Keebler) by subtraction. This assumption is supported by food company sales data by industry pro- vided by Economic Information Services, Inc.

Source: (23 and tables 5 and 6) of all food and tobacco companies. 21/ Large companies are located in all the enterprise categories, but are particularly numerous in the meatpacking, milk, grain, sugar, alcoholic beverage, and tobacco industries. In some industry categories, the companies' sales exceed total industry shipments (see also table 24), indicating highly diversified companies in that category. From other evidence in the enterprise statistics, for example, one can see that the conglomerate ITT is categorized as a bread company even though the sales of its Continental Baking subsidiary accounted for only 10 percent of total company sales of $10,839 million in 1972. 22/ Examples of this kind underscore the increasing inadequacy of official statistics to describe the industry distribution of enterprise activity, 23/ Only a few enterprise categories remain relatively unaffected by this problem; processed meat and poultry, sugar and candy, and soft drinks are examples.

Sizes represented among the 200 largest food and tobacco processing firm.s vary widely. Total 1975 sales ranged from $121 million (for Colonial Provisions) to $13,967 million (ITT). The largest company primarily classified in food processing was Unilever, Ltd. ($23,645 million in worldwide sales), and the largest domestic- based firm primarily classified in food processing was Kraftco ($4,957 million). All of the 200 manufactured a minimum of $121 million of U.S. sales of processed food or tobacco products themselves. 24/

The 200 largest food and tobacco companies accounted for a large share of all U.S. food and tobacco processing activity (table 26). In 1975, the value of food and tobacco manufactures shipped was $168.9 billion (table 2). The 100 largest food firms were responsible for at least 53 percent of those shipments and the 200 largest for about 64 percent. 25/ Another source, preliminary 1975 TKS corporate income tax returns, offers a different basis of comparison. The 159 noncooperatives primarily classified as food or tobacco processing companies reported a total of $105.5 billion in U.S. sales from all activities. This represents 1.1 percent of the number but at

21/ The sales by companies shown in table 24 and succeeding tables cannot be compared with the shipments figures shown in table 2 since company sales figures exclude intra-firm, inter-plant shipments. Only the sales of single plant firms are roughly equivalent to their shipments. Moreover, the sales by firms shown in table 24 include receipts from activities outside of food and tobacco manufacturing. 22/ ITT's categorization in the bread industry is revealed by the large number of employees in such industries as communications equipment (ITT*s former primary industry), automobile rentals (ITT owned Avis in 1972) , and (Hartford Insurance Group). 23/ Other highly diversified companies which probably distort the relationship between establishment data and enterprise statistics are united Brands, Consolidated Foods, Greyhound, Norton Simon, Beatrice, Borden, Kraftco, lU International, National Industries, General Mills, Quaker , Pillsbury, CPC International, Ralston Purina, Central Soya, Anderson Clayton, Coca-Cola, Pepsico, , National Distillers, General Foods, Nestle, Standard Brands, J. Lyons, Reckltt & Colman, Imperial Group, American Brands, BAT, Phillip Morris, R. J, Reynolds, Rapid-American, American Home Products, Procter & Gamble, Chessebrough-Ponds, W. R. Grace, SCM, RCA, Gulf and Western, LTV, Foremost-McKesson, Cargill, Cook, Continental, Loews, General Beverage, and several food chains. See appendix table 3. 24/ The only exception, other than resulting from estimation error, are products imported and marketed under long-term agreements, principally alcoholic beverages. 25/ The proportions shown in the last column of table 25 understate the participation of the largest companies since net sales data are compared to gross plant shipments. The $168.9 billion figure includes an unknoxm amount of interplant, intrafirm shipments that are netted out when consolidated sales figures are reported. The shipment data also exclude some $400 million in net imports of processed foods, but these are nearly balanced by $340 million in net tobacco exports.

44 Table 26—Size characteristics of the 200 largest food and tobacco processing companies, 1975

Sales of the 200 largest ] Total food" Share of ^total U.S. food Companies ranked : and U.S. food : by their U.S. total united : and tobacco ' States ' tobacco ' and food and tobacco : (U.S. and processing foreign) only processing' tobacco manufacturing sales : (U.S. and •processing : shipments • foreign)

•n j n 1 J ^ aoxxars — "• Percent

10 largest 38.5 32.6 28.7 23.8 14.1

20 largest : 85.8 63.8 51.2 38.2 22.6

50 largest : 169.5 123.0 93.7 66.7 39.5

100 largest \ 214.8 161.5 119.6 88.7 52.5

200 largest : 275.9 207.2 145.4 107.3 63.5

Sotiir.ce: (16, 25). least 61 percent of the total U.S. revenues of all food and tobacco corporations in 1975 (see table 23). 26/ This comparison is subject to an unknown degree of error because the standards of industrial classification are not identical, particularly with respect to some large, highly diversified corporations. The size distribution of firms among the top 200 is quite skewed (table 26). The 20 largest firms accounted for 31 percent of the total sales of the 200, while the 50 largest are responsible for 61 percent (these percentages differ from those in table 26 which reflect total U.S. sales of food and tobacco processing shipments).

The large size of many of the top 200 companies Implies that many of them hold high-ranking positions in many individual food and tobacco manufacturing industries. One method of determining company ranking reveals that the 200 largest firms in 1975 held all four leading positions in 43 consumer product classes (41 percent); they occupied two or more of the top four positions in 84 of the classes, or 81 percent (app. table 5). By comparison, the 100 largest food manufacturers in 1963 held all four leading positions in 39 of the food product clases or 36 percent.

Almost 84 percent of the food and tobacco processing sales of the 200 largest food and tobacco manufacturing firms are by the 162 firms whose primary activity lies in one of these industires (table 27). The largest numbers of food firms (32) lie m the laeat processing industries, followed by beer and sugar companies. There are, on the other hand, only two large firms primarily classified in the candy and gum ^^ industries (Hershey Foods and Wrigley). The table also indicates that most "nonfood

26/ The 1RS returns include some receipts other than sales, thus the 61 percent figure is slightly conservative.

45 Table 27~Industry distribution of the 200 largest food and tobacco processing companies, 1975

U S. food and tobacco processing sales

Number -Billion dollars-

Meat processing 32 23.5 18.6 Poultry and egg processing 6 1.3 1.3 Fluid milk 8 4.7 2.2 Other dairy products 9 19.4 12.3 Canned fruits and vegetables 7 3.0 2.2

Other preserved fruits and vegetables 4 4.1 3.1 Breakfast cereals 3 5.3 2.9 Wet corn milling 4 4.0 2.2 Animal and pet foods 5 4.8 3.1 Other grain mill products 9 4.9 3.3

Bread 5 2.2 2.1 Cookies and crackers 3 3.0 1.4 Sugar 12 4.3 4.1 Candy and chewing gum 2 .9 .8 Oils and margarine 6 5.9 3.9

Beer 13 5.7 5 1 Other alcoholic beverages 9 5.4 3, 1 Soft drinks and flavorings 8 6.4 3, 8 Other food processing 8 19.4 7, 9 Tobacco processing 9 19.8 6.6

Subtotal 162 148.0 89.7

Drugs 5 7.2 1.3 Soaps and toiletries 3 20.8 2.6 Other manufacturing 10 36.5 5.2 Wholesale trade 8 22.4 3.7 Food retailing 7 34.5 3.2 Other nonmanufacturing 5 6.5 1.6 Total 200 275.9 107.3

Source: (16). firms (those not primarily classified in food manufacturing) are primarily in the drug, soap, food retailing, and food wholesaling industries. 27/

27^/ The "other nonmanufacturing" category in table 26 includes three companies that were too conglomerated to classify in any industry.

46 The industry distribution of the 163 largest food firms revealed in the 1972 Census enterprise statistics is remarkably similar to that shown in table 27 (see also table 25) even though the method of industrial classification differs somewhat. Recall that Census enterprises are classified on the basis of U.S. payroll amounts, whereas the 200 largest data set is classified on the basis of worldwide sales. The 1975 industry distribution shows eight more meat, five more beverage, and four more miscellaneous food companies; it also indicates five fewer fruit and vegetable preserving and four fewer sugar companies than in 1972. All other categories show differences of at most one firm.

Table 28 is similar to table 27 except that the 38 nonfood firms were distributed according to their primary food or tobacco manufacturing activity. For exfflnple, the increase in meat processing was due to the addition of one food retailing chain (American Stores) and one conglomerate firm (LTV). There are few changes in the poultry or milk categories from table 27 to 28, but nine firms from various other industries had canning or freezing as their primary food processing industry. Five

Table 28—Food industry distribution of the 200 largest food and tobacco processing companies, 1975

U.S. food and Total tobacco Primary food industry . Companies sales processing : sales

Number Billion dollars

Meat processing : 34 31.0 20.9 Poultry and egg processing ; 6 1.3 1.3 Fluid milk : 10 9.0 2.9 Other dairy products : 10 20.4 12.4 Canned fruits and vegetables 10 6.0 3.0

Other preserved fruits and vegetables ! 10 14.5 4.5 Breakfast cereals 3 5.3 2.9 Wet corn milling 5 4.6 2.4 Animal and pet foods : 7 11.2 4.1 Other grain mill products : 9 4.9 3.3

Bread : 9 30.8 5.2 Cookies and crackers : 4 8.0 1.6 Sugar : 12 4.3 4.1 Candy and chewing gum : 4 4.2 1.3 Oils and margarine : 11 34.8 7.7

Beer : 14 6.9 5.4 Other alcoholic beverages : 10 7.7 3.6 Soft drinks and flavorings : 10 8.2 4.1 Other food processing : 11 37.1 9.5 Tobacco processing : 11 25.6 7.3

Total ': 200 275.9 107.3

Source; (16)

47 nonfood firms, ITT, and four grocery store chains were added to the bakery products industries. No nonfood companies diversified into sugar but two drug firms (Squibb and Warner-Lambert) produced chewing gum and candy. Five nonfood firms were prominent in and other oil processing, but relatively few nonfood firms diversified into brewing, distilling, and soft drink bottling. Four nonfood conglomerates—Unilever, W. R. Grace, Loews, and Gulf & Western—entered the miscellaneous foods or tobacco categories, however.

D iv er s if i cat ion

Neither 1RS nor Census enterprise data are very useful in detailing the levels of product diversification of large versus small food and tobacco processing companies. Neither source reveals anything about the extent of foreign diversification of U.S. firms since they collect data only on the domestic income earned and U.S. establishments of companies they survey. 28/ To supplement these sources, this report relies on quasipublic information on the 200 largest food and tobacco processing companies.

Product Diversification

The 162 food and tobacco manufacturers of the 200 largest companies (table 29) derive over 17 percent of their total sales from activities other than food and tobacco manufacturing; within the United States they are somewhat less specialized. The nonfood manufacturing companies earn from one-fifth to one-half of their revenues from food and tobacco processing operations* By these measures, the meat, fruit and vegetable, wet corn milling, bread, sugar, candy, beef, soft drinks, and miscellaneous foods companies are the least diversified.

The U.S. sales diversification of the 163 largest food companies selected on the basis of their 1975 sales appear somewhat lower than the employment diversification for the largest companies using 1972 employment as the criterion (see also column 4 of table 9). This discrepancy is largely attributable to differences in primary industry classification criteria. Census has included some conglomerate firms among the food manufacturers whereas the directory of the 200 largest has placed those firms in "other manufacturing."

The very largest firms are decidedly more diverse in products and geography than the rest of the 200 (app. table 10). Examining only domestic-based;public corporations yields the following. Among those 57 companies with total sales of over $1 billion, only 47 percent of those sales were derived from their food or tobacco processing operations but at least 20 percent were from foreign operations. Among the 60 firms with sales of under $500 million, however, the percentages were 91 and 4 percent, respectively. Thus, medium-size U.S. food firms are considerably more specialized and domestically oriented.

Diversification of the largest food manufacturers into chains has been very important in the last 10 years, and has occurred mainly through merger. Altogether, 35 food processing firms among the 200 largest operate 93 different operations with total U.S. sales of at least $5,595 million in 1975 (or 2.7 percent of total U.S. sales of the top 200) (table 30). Most of the chains are fast-food type . 29/

28/ 1RS data do show foreign dividends received and foreign tax credits, however. 29/ Some of the trademarks listed may be experimental operations consisting of only one establishment. Another common type of chain is the "family" or "theme" restaurants. While these are not strictly speaking fast food outlets, they do offer limited menus and a decor that is highly uniform across the country.

48 Table 29—Sales specialization among the 200 largest food and tobacco manufacturers, 1975

Ratio of world-- , Ratio of U.S. food wide food and • Industry group ICompanies and tobacco sales tobacco sales ■ to total U.S. sales to total sales •

: Number ^T>-^—- >.

Meat processing : 32 82.7 86.6 Poultry and egg processing : 6 94.7 94.7 Fluid milk : 8 46.4 51.3 Other dairy products : 9 78.3 73.8 Canned fruits and vegetables : 7 86.5 87.1

Other preserved fruits & vegetables : 4 97.6 98.9 Breakfast cereals : 3 72.3 71.3 Wet corn milling 4 88.5 91.3 Animal and pet foods 5 74.1 82.3 Other grain mill products : 9 77.7 77.3

Bread, rolls, cake 5 99.6 100.0 Cookies and crackers 3 85.8 79.7 Sugar 12 94.8 95.2 Candy and chewing gum 2 95.2 96.3 Oils and margarine 6 83.6 77.3

Beer 13 94.9 94.7 Other alcoholic beverages 9 70.4 72.6 Soft drinks and flavorings 8 87.2 84.9 Other food processing 8 82.3 78.8 Tobacco products : 9 68.3 61.9

Subtotal : 162 82.6 79.8

Drugs : 5 22.2 27.6 Soaps and toiletries ; 3 49.8 40.8 Other manufacturing ; 10 16.6 19.8 Wholesale trade : 8 16.8 16.5 Food retailing : 7 11.0 11.0 Other nonmanufacturihg : 5 25.1 25.4

Total : 200 52.7 51.8

Source: (16)

Foreign Diversification

Government-collected data on the extent of foreign diversification by food and tobacco manufacturers are unavailable, except for the food processing major industry group as a whole (see table 12). However, the annual reports of most companies now

49 Table 30—Food service operations and their sales of the 200 largest food and tobacco manufacturing companies, 1975

Food service sales

Million dollars

Heublein Fried Chicken, , 1,550 Country style, H. Salt Seafood, Davis Bros.,, Zantigo Mexican-American, Zapata

Pillsbury , Steak and Ale, Bennigan's, 841 Granny's Attic, Hungry Jack, Hungry Lion, Jolly Ox, Poppin Fresh Pie Shops, Three Crowns

J. Lyons— Baskin-Robbins Ice Cream, Tastee Freeze, 489 London Steak Houses, Wimpy's

ITT Sheraton Inns and 335

Ralston Purina Jack-in-the-Box, Stag & Hound, Boards 321 Head, Hungry Hunter, Barclay Jack's Monterey Jack's, Mountain Jack's, The Boat House, The Dry Dock, Tortilla Flats

General Foods , Crock & Block, Ernie's 275

United Brands A&W 268

General Mills , Betty Crocker, Hannahan's 180

Squibb Dobb*s House, Steak N' Egg 162

Nestle Stouffer's, Borrel, Bob's, Cohills, 157 Movenpick, Swiss Inn

Great Western United Shakey's Pizza 124

Greyhound Greyhound, Post House 131

International Multifoods Mr. Donut, Scanda House, Sveden House, 104 T. Butcherblock, Boston Sea Party

W.R. Grace Far West 100

Del Monte^' Del Monte Service Systems 95

Consolidated Foods L. & K., Lyon Inn, Almanack, 61 Paddys, Lyon'et. Penny Pincher Inn, Royal Buffett, Towne House

See footnotes at end of table. Continued

50 Table 30—Food service operations and their sales of the 200 largest food and tobacco manufacturing companies, 1975

• Food service Company U.S. food service operations sales

Million dollars

Riviana Foods^^ : Lum's, Ranch House 60

ÁMFAC : Fred Harvey, Island Holidays 50

Green Giant— : Henrici's, Hoffman House 48

CPC International : Dutch Pantry 44

Campbell Soup : Clark's, Hanover Trail, Herfy's, Pietro'si 42

Quaker Oats : Magic Pan 35

Borden : Borden Burgers 28

Dean Foodsi' : Bressler's Ice Cream, Baskin-Robbins 25

Peti/ : Stuckey's 21

American Stores : Alphy's 21

Esmark : Dipper Dan 17

Smithfield Foods Smithfield Inn, Family Fish House 11

Rapid-American Holland House, Wm, Talley House —

Federal : Holly Farms Chicken —

General Host : Hot Sam ~

Hubbard Milling ': Henry's Drive-In —

United Biscuit : Carry Out Bars ~

Southland . Charles & Co. —

Dibrell Bros. : Briarpatch Kentucky Rib-Eye —

Total : 5,595

— Amount not available.

_1/ Baskin-Robbins is owned by J, Lyons but Dean Foods has a franchise to operate units in certain parts of the United States, 2^/ Acquired by other companies since 1975.

Sources: (16) and Food Service Today, November 1976.

51 break out sales by major regions if their foreign operations constitute a significant portion of total sales. The extent of foreign sales of 187 of the 200 largest domestic-based food and tobacco processing firms is shown by primary industry classification (table 31). 30/ On average, these firms derived 16 percent of their revenues from abroad in 1975, but the degree of multinationality is considerably greater among the nonfood manufacturing firms. In some industries, the leading firms are domestically oriented: meat, poultry, fluid milk, bread, sugar, and beer are the major ones. A few industries obtain over one-fifth of their sales from foreign operations: preserved fruits and vegetables, breakfast cereals, wet corn milling, cookies and crackers, soft drinks, tobacco, and miscellaneous foods. The ratios in table 31 do not necessarily apply to the entire industry because larger firms tend to have more foreign sales than do smaller ones; however, the ratios shown are roughly proportional to total industry involvement.

Ownership Characteristics

Census enterprise statistics are useful in demonstrating the prominent role played by agricultural cooperatives in the food and tobacco manufacturing industries (table 32). In 1967, cooperatives accounted for about 6.8 percent of sales of all companies primary to the food and tobacco industries; this compares with only 0.1 percent in the rest of manufacturing. They are located predominantly in the processed meats, dairy products, canning, and oil processing industries. Proprietorships and partnerships account for less than 2 percent of sales, but this may be misleading because several of the largest food corporations, despite their legal designation, are controlled by large blocks of stock held by members of the same family ( 1^), The Nation's second largest brewing company, Schlitz, for example, is 75-percent owned by some 500 members of the Uihlein family.

The position of farmers* cooperatives has probably increased slightly in recent years to 7 or 8 percent of sales, but 1972 Census enterprise data are not comparable with those of previous years. 31/ Their share has increased somewhat in processed meats and poultry, fluid milk, canned fruits and vegetables, and oils.

Thirteen foreign-owned firms ranked among the 200 largest firms, based on their U.S. food and tobacco manufacturing sales. These foreign firms, originating from only three countries, accounted for 5.3 percent of the 200 firms' U.S. food and tobacco processing sales. 32^/ In terms of food processing sales worldwide, the two largest

30/ Foreign firms are excluded for obvious reasons. However, the analogous concept for them is the proportion of U.S. sales to total sales; in 1975 that ratio was 25 percent. For the two large Canadian distillers among the 200 largest, the ratio was 64 percent. 21/ Graham has found that Census, unlike its practice in 1963 and 1967, placed all taxable cooperatives among the corporations (33_) . Thus for the first time in 1972, the "other company" legal category of Census statistics included only nontaxable (Section 251) cooperatives, which covers only 50 to 60 percent of all cooperatives. 32/ Some of these foreign companies may be regarded as having dual nationalities. The two Canadian distilleries, Seagrams and Hiram Walker, earn over half their revenues from sales in the United States. Unilever is categorized as a United Kingdom company, but legally it is composed of two nearly equal parts, Unilever, Ltd. in Great Britain and Unilever, N.V. in the Netherlands. The two parts are governed by boards of directors with several common members and a contract that coordinates their commercial activities. Finally, Nestle Alimentana has a complex capital structure which ensures majority Swiss ownership, but which also allows it to be governed by a Panamanian (Unilac, Inc.). During World War II, Nestle's worldwide operations were managed from its U.S. headquarters in Stamford, Conn.

52 Table 31^—Foreign sales of the 187 largest domestic-based food and tobacco manufacturing firms, 1975

Ratio of foreign Primary industryl./ Companies to total sales

Number Percent

Meat processing 31 7.5 Poultry and egg processing ; 6 0 Fluid milk : 8 9.7 Other dairy products 9 14.3 Canned fruits and vegetables 7 15.3

Other preserved fruits and vegetables 4 25.1 Breakfast cereals 3 24.8 Wet corn milling : 4 38.8 Animal and pet foods 5 22.2 Other grain mill products ; 9 12.0

Bread, rolls, cake 5 3.7 Cookies and crackers 2 27.5 Sugar : 12 .6 Candy and chewing gum 2 10.8 Oils and margarine : 6 15,6

Beer 12 0 Other alcoholic beverages 8 11.6 Soft drinks and flavorings 8 29.3 Other food processing : 5. 21.2 Tobacco products 6 24.4

Subtotal 152 12.5

Drugs : 5 35.4 Soaps and toiletries 2 20.0 Other manufacturing 10 28.4 Wholesale trade : 8 .8 Food retailing 6 8.2 Other nonmanufacturing 4 5.2

Total 187 16.0

1/ Based on industry with largest worldwide sales in 1975.

Source: (16).

foreign firms, Unilever and Nestle, each exceed the sales of the largest domestic- owned company, KraftCO, by more than $2 billion. The United States is clearly an important market for these foreign food firms, however. In 1975, fully 25 percent of their total sales were derived from their U.S. operations. Several recent large mergers, general economic conditions, and company policies make the United States an

53 Table 32 Legal form of companies in the food and tobacco manufacturing Industries, 1963 and 1967

Proportion of total sales and receipts of industry category orginélrÈûiiiéfrom:

Enterprise Corporations, proprietor- industry Cooperatives!^/ ships and:' category 1963 1967 1963 1967

Percent

Meatpacking 99.2 98.8 0.8 1.2 Processed meats and poultry 94.2 87.5 5.8 12.5 Fluid milk 87.9 84.9 12.1 15.1 Other dairy products 56.9 58.1 43.1 41.9 Canned fruits and vegetables 85.2 81.1 14.8 18.8

Other canned and frozen foods 94.1 94.7 5.9 4.3 Grain mill products 90.0 90.9 10.0 9.1 Bread and rolls 99.9 99.8 .1 .2 Cookies and crackers 100.0 100.0 0 0 Sugar and candy 95.1 96.1 4.9 3.9

Fats and oils 88.2 83.9 11.8 16.2 Alcoholic beverages 89.1 98.4 1.9 1.6 Soft drinks and flavorings 99.6 99.6 .4 .4 Other processed foods 99.7 99.7 .3 .3 Tobacco products 100.0 100.0 0 0

Total 93.6 93.2 6.4 6.8

IJ May include a small number of estates, trusts, and receiverships; includes tax- liable and nontaxable cooperatives.

Sources: (33) and table 3.

even more attractive investment location for foreign-based multinational corporations (15). 33/

33/ The annual reports of several foreign food firms indicate management decisions to expand their current U.S. operations or acquire going U.S. concerns. Nestle Alimentana, for example, intends to increase its U.S. sales from 20 percent in 1975 to over 30 percent of total sales by 1983. Both Nestle and Unilever have made very large acquisitions in recent years: Nestle bought Alcon Laboratories for $277 million in 1977 and Unilever took over National Starch and Chemicals for $480 million in 1978.

54 Table 33—Number and sales of the 200 largest food and tobacco processing companies, 1975

Sales of the 200 largest. companies

'U.S. food and tobacco Ownership status î Companies Total U.S. , processing sales

Number —Billion dollars ^^-

U.S. public corporations 144 201.2 164.0 87.4

U.S. private companies : 26 22.0 21.7 8.1

U.S. cooperatives 17 11.2 11.2 6,2

Total U.S.-owned companies 187 234.4 196.9 101.7

United Kingdorn-owned 7 26.3 5.4 3.0

Cnaadian-owned : 5 8.2 3.6 1.4

Swiss-owned : 1 7.0 1.3 1.3

Total foreign-owned 13 41.5 10.3 5.7

Total 200 275,9 207.2 107.4

Source: (16, table 3)

The domestic-based firms among the 200 largest fall into three legal categories: private companies, public corporations, and agricultural cooperatives. 3kJ Agricultural cooperatives accounted for 5.7 percent of the U.S. sales of the top 200 food and tobacco firms, which is somewhat less than the proportion found in the 1967 census for all firms (table 33). Private U.S. companies (some of which may be organized as limited-liability corporations) were responsible for 11 percent of those sales, three-quarters of which came from two large grain trading companies (Cargill

34/ Identification of income-tax-exempt agricultural cooperatives was made by using a ïTst provided by the U.S. Department of Agriculture. Public corporations are those required to register with the Securities and Exchange Commission (SEC) because they have issued at least some type of debt instrument (usually voting shares) for purchase by the public. All other U.S. companies were considered "private" ("proprietorships and partnerships" in Census terminology). With the exception of the Jos. E. Seagrams, Inc. subsidiary of Seagrams, Ltd., the subsidiaries of foreign-owned firms are considered privately held corporations by the SEC and Census.

55 and Continental) and an additional tenth from nine private meatpaekers, 35/ Because a large part of the grain trading firms' sales is from wholesale operations, the private U.S. companies' share of the food and tobacco processing sales of the 200 largest is much smaller, only 7.5 percent. The balance of U.S. sales of the 200 (79 percent) is accounted for by publicly held U.S. corporations.

Advertising

Data on advertising levels by individual firms are most readily available for media advertising. Many publicly owned companies provide information on their advertising expenditures (media and nonmedia) in their annual reports to stockholders, but only when their auditors deem the amount significant. Privately owned, cooperatively owned, or foreign owned firms only rarely make such information public.

Advertising expenditures are highly concentrated among the largest food and tobacco processing firms. Based on four measured media (network and spot TV, newspapers, and magazines), the 20 largest food manufacturers accounted for 44 percent of all such media advertising by total food manufacturers in 1964; the 50 largest spent over 80 percent of the total (46). Buring 1954-64, media advertising concentration appeared to increase. The extent of advertising concentration was greatest for the two national media, network TV and magazines, and was decidedly less concentrated for the media that permit the advertising of regional products, spot TV, and newspapers.

Forty-seven of the 100 leading media advertisers of 1975 had substantial food and tobacco product sales (table 34). These companies account for roughly three-fifths of all advertising by the 100 leading advertisers. Food and tobacco manufacturers appear to be relatively heavy users of spot television and other advertising, primarily outdoor.

Two alternative approaches can be used to measure the amounts of advertising by the largest food and tobacco manufacturers. The first tallies the tax-deductible advertising expenditures reported in the firms' annual financial statements (table 35). Nearly all of the 95 reporting companies' annual advertising outlays are by publicly owned, domestic-based companies; foreign corporations, cooperatives, and private companies do not usually provide this information to the public. Though the amounts in table 35 are arranged by the primary enterprise category, not all the advertising in the category is spent to promote the companies' prijnary products, nor are all the promotional expenditures used for media advertising.

The second approach assembles 1975 data on only the measured domestic-media costs for all 6,600 brand products of the 200 largest food and tobacco processing companies (table 36). These data permit precise and complete classification of advertising expenditures by industrial category. For example, $31 million was spent on measured media advertising meat products by all of the top 200 food firms, whether or not they were primarily meat processing companies. Although this approach does not capture nonmedia advertising nor any foreign advertising, the industry patterns are quite consistent with the other measurement approach (table 35).

Total advertising by the 95 reporting companies was over $4,500 million, 61 percent by companies whose primary activity is food or tobacco processing. On

35/ One other large grain trading company aiaong the 200 largest, Cook Industries, was a public corporation in 1975. Due to heavy losses from futures market speculation. Cook sold off most of its assets. By 1978, Cook no longer ranked among the 200 largest food processing firms.

56 Table 34—Advertising expenditures of food and tobacco manufacturing firms among the the 100 largest media advertisers, 1975

Share by food and tobacco processing companies_2/ Total U.S. measured six media Network Other media Total Spot TV Magazines advertising TV mediae' advertiser si./ expenditures

Million dollars Percent

10 largest 1.195 60 57 70 43 81

50 largest 2,902 65 62 69 66 69

100 largest 3,820 58 55 61 56 71

1/ Based on total advertising in six media (network and spot TV, network radio, magazines, newspaper supplements, and outdoor advertising). 2J Companies among the 200 largest food and tobacco processing companies in 1975 based upon their U.S. salas of SIC 20 plus 21 products. 3J Newspaper supplements, network radio, and outdoor advertising.

Source: Leading National Advertisers, Inc., AD & Summary, January-December 1975 and (16).

average, slightly over 3 percent of these company net revenues were channeled into advertising in 1975. The advertising-to-sales ratios vary considerably from industry to industry. Relatively large advertising expenditures are characteristic of companies in the preserved fruits and vegetables, breakfast cereals, candy, alcoholic beverages, and soft drinks categories; outlays are much more modest for the meat, milk, and oils companies. Among the nonfood companies, there is a striking gap between the 7 drug and soap firms and the 14 others.

An analysis of the relationship between the total advertising and media advertising attributed to the 95 reporting companies in the United States indicated that 61 percent of all advertising expenses are for measured media advertising, the balance being for nonmedia advertising. This analysis was made on the assumption that advertising intensity on sales abroad is the same as that in the United States. 36/ By assuming this relationship also holds for the 105 companies among the 200 that did not report their total advertising expenditures in 1975, it is possible to project that total advertising worldwide for all of the 200 was $6,900 million. A slightly different method, based on the primary classification of the firms and reported

36/ For all 95 reporting companies, U.S. measured media advertising expenditures were expanded by the ratio of total U.S. sales as shov7n in Connor and Mather (16). Most of the foreign operations of U.S. food firms are in Canada and Western Europe where except for the prominence of government owned television networks, the pattern of media advertising is similar to the United States. Thus, this method may slightly exaggerate the proportion of media to total advertising and correspondingly underestimate the projected total advertising for the 105 remaining companies.

57 Table 35—Advertising expenditures reported among the 200 largest food and tobacco processing companies, 1975

Companies Total Total sales of Advertising- Primary reporting advertising reporting to-sales industry advertising expenditures companies ratio

Number -Million dollars- Percent

Meat processing 5 21.6 2,642 0.82 Poultry and egg processing 2 7.1 696 1.02 Fluid milk 3 9.6 2,626 .37 Other dairy products 5 364.5 16,001 2.28 Canned fruits and vegetables 5 48.8 2,676 1.82

Other preserved fruits and vegetables 2 222.6 3,428 6.49 Breakfast cereals 3 247.0 5,332 4.63 Wet corn milling 1 90.3 2,742 3.29 Animal and pet foods 1 127.4 3,149 4.05 Other grain mill products 4 62.9 3,275 1.92

Bread, rolls, cake 4 28.1 1,686 1.67 Cookies and crackers 2 83.7 2,112 3.96 Sugai: 2 8.9 575 1.55 Candy and chewing gum 2 50.3 908 5.54 Oils and margarine 2 19.3 2,902 .67

Beer 7 123.2 4,292 2.87 Other alcoholic beverages 7 200.2 3,745 5.35 Soft drinks and flavorings 8 327.1 6,353 5.15 Other food products 5 396.4 10,412 3.80 Tobacco products 4 317.9 9,343 3.40 Subtotal 74 2,756.9 84,903 3.25 Drugs 5 575.1 7,197 .99 Soaps and toiletries 2 444.4 7,188 .18 Other manufacturing 6 435.7 29,509 .48 Wholesale trade 1 9.9 340 .91 Food retailing 3 196.2 14,695 .34 Other nonmanufacturing 4 99.0 5,037 .97 Total 95 4,517.2 148,869 3.03

Sources: (16 and table 6) Table 36—Measured U.S. media advertising expenditures by the 200 largest food and tobacco processing companies, 1975

Measured media advertising

Product group [ Itemsi/ '1 • [Networls Spot ! Print ; Other : Total TV ! TV Inedia \ media

Number -Million doll ars

Meat products : 297 10 13 6 3 31 Poultry and egg products : 35 2 4 1 1 9 Fluid milk and yogurt 285 5 14 2 3 24 Other dairy products 314 7 11 9 2 29 Canned fruits and vegetables 274 25 21 14 2 63 Other preserved fruits and vegetables . 484 55 54 34 11 154 Breakfast cereals 122 77 39 10 2 129 Pet and animal foods 221 62 38 16 0 116 Other grain mill products : 173 22 13 8 1 44 Bread, rolls, and cake . 159 3 27 3 1 34 Cookies and crackers 1 98 23 6 4 1 34 Sugar : 35 0 1 1 1 3 Candy : 190 45 25 5 8 83 Chewing gum : 31 13 28 5 7 54 Oils and margarine : 117 31 27 8 3 68 Beer : 93 54 38 5 23 121 Wine : 103 12 16 11 7 46 Other alcoholic beverages : 418 0 0 108 32 140 Soft drinks and flavorings : 196 45 79 9 21 154 Coffee ! 89 24 33 8 4 69 Other processed foods : 422 70 35 19 3 128 Cigarettes : 193 0 0 269 67 336 Other tobacco products : 110 7 2 3 1 12

Subtotal : 4,659 592 524 558 204 1,881

Paper products : 35 17 17 5 0 40 Drugs : 289 93 27 8 9 137 Soaps and polishes : 248 142 74 14 1 231 Toiletries 196 109 35 15 2 161 Dolls, games, and toys : 61 14 9 4 0 28 Food stores : 36 . 0 30 0 4 35 Eating places : 94 24 36 0 5 65 Other products : 977 61 34 52 9 149

Total : 6,595 1 ,052 786 656 234 2,727

j[_/ Each branded product or service of all 200 companies is counted as a separate item. Many of the items listed are identical products carrying different trademarks. Different package sizes or flavors are not counted as separate items.

Sources: (16, and table 7).

59 advertising-to-sal es ratios, yields an estimate of $8 billion. 37./ Thus, the total advertising of the top 200 food and tobacco processing firms (not all of it on food and tobacco products) was roughly between $7 and $8 billion, or 2.5 to 2.9 percent of their worldwide sales.

U.S. media advertising by the 200 totaled at least $2,700 million in 1975, two- thirds in only 11 of the 30 product groups shown in table 36. Considering the size of the U.S. markets involved, advertising is quite low for most meat, dairy, flour, bread, sugar, and some other commodity-type food products. The top 200 firms are also prominent advertisers of drugs, soaps, toiletries, and restaurants (mostly fast-food chains).

By Media

Excluding spirits and cigarettes, 80 percent of all advertising expenditures by the 200 largest firms are for television. Thus, the 200 largest rely on television to a significantly greater extent than do other food and tobacco advertisers. (See also table 16.) The 200 largest also rely heavily on media advertising for food and tobacco products; their total media expenditures of $1,881 million accounted for 84 percent of the U.S. total even though they account for only 60 to 64 percent of the sales of U.S. processed food and tobacco products. Companies below the top 200 rely primarily on media other than network TV to advertise, for the 200 account for virtually all expenditures in this medium for food and tobacco products. The 200 account for only about 77 to 78 percent of all spot TV and print media expenditures, however.

Over half of all food and tobacco measured media advertising by the 200 that is not on television is for cigarettes and liquor. The distillers have long refrained voluntarily from advertising spirits on television. Since 1970, the Federal Communications Commission has forbidden cigarette ads on radio and television, primarily because of the carcinogenic effects of smoking. Hearings considering restrictions on TV advertising of highly sweetened food aimed at children are also underway. Both cigarettes and liquor are thus heavily advertised in newspapers, magazines, and billboards. Beer companies also purchase relatively large amounts of space on billboards. Radio advertising accounts for only a small share (4.4 percent) of all media advertising expenditures of the top 200 firms.

By Company Size

Not only do the 200 largest firms account for over 80 percent of all food and tobacco media advertising, but the 50 largest firms among the 200 also account for a disproportionate share—nearly 70 percent (table 37) . These firms dominate network TV, and rely less on the printed media, radio, and outdoor advertising. Finally, the ratio of measured media advertising to U.S. sales is twice as high (1.5 percent) for the 50 largest companies as for the 100 smaller firms (0.8 percent). 38/

37/ Two different methods were used to project total advertising expenditures of the 105 nonreporting companies. For both, total company sales were multiplied by an advertising-to-sales ratio. The first ratio is for comparable reporting food firms, shown in table 31. The second ratio is for the four-digit SIC advertising-to-sales ratio for the four leading advertisers (app. table 5). 38/ More precise data on the dominance of large companies in food and tobacco advertising are given in appendix table 5. An "advertising concentration" index has been developed for all the five-digit SIC consumer product classes and four-digit industries; that index measures the ratio of media advertising by the top 200 companies among the four largest advertisers to advertising by the top four (or top eight) advertisers.

60 Table 37r--Measured U.S. media advertising among the 200 largest food and tobacco processing companies, ranked by their U.S. food and tobacco processing sales, 1975

[ Share of measured U.S. media advertising U.S. food Share of and tobacco U.S. sales manufacturing Network . Print ; Other Spot TV Total , among the companies , TV ', media ', media 200 largest

Percent

10 largest : 18.9 14.9 22.9 18.3 18.6 15.7

20 largest 31.6 29.7 37.3 34.6 32.7 30.8

50 largest : 73.5 69.9 63.5 58.6 68.8 59.4

100 largest 89.5 84.1 85.9 81.3 86.4 77.8

200 largest 100.0 100.0 100.0 100.0 100.0 100.0

Source: (16)

By Ownership Type

Another way of examining measured-media advertising expenditures is the pattern across the various ownership categories. The 13 foreign companies among the 200 largest accounted for 10 percent of all U.S. media advertising outlays even though their U.S. sales were only 5 percent of the total (table 38). Thus, foreign multinational corporations tend to market products that are highly differentiated relative to the rest of the 200 largest. From other data sources, it is known that foreign food processors hold significant market shares in such products as liquor, cigarettes, coffee, , dried soups, margarine, cookies, soaps, and toiletries (15).

The reverse is true for the farmers' cooperatives among the 200 largest food and tobacco manufacturing companies. Because they market primarily commodity-type products in the meat, dairy, and grain industries, their share of U.S. measured media advertising is very low, only 0.4 percent, compared to their 5.4 percent share of U.S. sales among the 200 largest. Privately held U.S. firms also did very little media advertising, only 3.6 percent of the total. Again, this can be attributed to their primary lines of business, grain trading and meatpacking. Thus, the major share (86 percent) of U.S. media advertising is done by publicly held domestic-based corporations, especially those that rank among the 50 largest food and tobacco firms.

Sales Promotion Activities

Perhaps equally important to large food and tobacco manufacturing firms are the costs of nonadvertising forms of sales promotion (see table 15). Some large companies employ their own sales forces that can directly approach the managers of warehouses.

61 Table 38—^Measured U.S. media advertising expenditures by the 200 largest food and tobacco processing companies, by ownership status, 1975

Measured U.S. media advertising

Ownership status ' ' Network TV- Spot TV •Print media •Other media ' Total

Million dollars

U.S, public corporations • 1,166.8 699,7 828.0 200.2 2,894.7

U.S. private companies : 13.7 26.6 75.0 4.4 119.7

U.S. cooperatives : 2.0 4.6 3.6 .7 10.9

Total U.S. owned companies : 1,182.5 730.9 906.6 295.2 3,925.3

United Kingdom-owned 53.3 41,5 47.6 12.5 155.0

Canadian-owned 1 3.6 7.2* 111.5 15.6 137.9 Swiss-owned : 22.1 13.9 6.8 .6 43.4

Total foreign-owned : 79.0 62.6 165.9 28.7 336.3

Total 1,261.7 793.5 1,072.5 234.1 3,361.6

Source: (16). grocery stores, or restaurants. 39/ Nabisco employs over 2,000 driver-salesmen who alert managers to new products, forthcoming promotional campaigns, and special deals being offered by their company. They also set up special aisle displays, check shelves for visual impact or product freshness, and may encourage outlets to allocate more shelf space or a slightly more desirable position to their products. Salesmen can be valuable conduits for rapid feedback of information to manufacturers on product performance. Few if any food manufacturers below the tttp 100 have their own direct sales forces.

There are a myriad of other promotional efforts directed at consumers. Package and the use of costly, attractive packaging materials is one common method of promoting food and tobacco products. On average, 13 percent of the production costs of consumer foods are attributable to packaging. Even more expensive may be the distribution of cents-off coupons, test marketings, free sample giveaways, and tie-ins with other related products. The design of promotional campaigns and general marketing strategies requires specialized marketing experts. Consumer response to new

39/ The extent of direct sales force employment is indicated in appendix tables 3 and 4. These data underestimate the true extent of direct sales forces because salesmen operating out of offices that are part of manufacturing establishments are counted as employees of the manufacturing establishment.

62 products is carefully monitored, often with the aid of sophisticated statistical techniques. The cost of these and other promotional activities is high, but the precise level is normally unavailable from public sources. One major company's promotional costs, however, recently came to light: H. J. Heinz in its annual financial report restated its total sales in 1977 because its "trade deals and promotional discounts" were being included in its advertising budget instead of following standard accounting practice and reducing its sales figures. The restatement reduced its 1975 sales by 7 percent.

Changes in Advertising Over Time

Media advertising expenditure records are available on a consistent basis for the midsixties onward. All processed food and tobacco products' advertising outlays were collected by company and by SIC industry. The media advertising intensity of food and tobacco products increased by at least 10 percent during 1967-75 (table 39). 40/ This trend is most noticeable among the moderately differentiated consumer products industries such as frozen foods, processed meats and poultry, and milled rice products (app, table 7).

Research and Development

Food and tobacco industries have historically ranked rather low in terms of research and development (R&D) expenditures. Both the food and tobacco manufacturing industries allocated less than 0.5 percent of their revenues for R&D during the last decade; this is less than one-fourth the national average in manufacturing. Out of 17 major industry groups, food and tobacco ranked 14th and 15th, respectively, on the basis of the private R&D to sales of companies reporting to the National Science Foundation (NSF) (48). This low ranking is somewhat unexpected in view of the relatively large size and profitability of food manufacturers, both of which are held to encourage innovative activity (58).

The introduction of new products or more efficient production processes is a key element in industry organization. R&D expenditures or the employment of R&D personnel are generally considered the most revealing input-type index of firm and industry technological . Firms with large R&D programs relative to their size are better able to introduce new production methods that raise productivity and hence lower overall production costs per unit. Large R&D efforts also reflect company judgment that the potential for new product discovery is high in their industry. In the food processing industries and in their equipment-supply industries, many patents have been granted for materials-handling machinery.

In addition to its role as a measure of progressiveness, R&D outlays are regarded by industrial organization economists as an aspect of firm conduct, especially characteristic of large, diversified firms. That is, new product development can be viewed as a strategic option much like that of pricing or output changes. New or redesigned products can be developed in response to or anticipation of new products by rival firms. As such, R&D serves a function similar to advertising in that it can physically differentiate the products of the firms. Because few truly new food products have been invented in recent decades, much R&D activity in this sector has been directed at new packaging, increased storability, and novel flavorings and

40/ This trend is not sensitive to the choice of any base year over 1963-69 nor to any terminal year over 1974-78; the base period lies above and the terminal period lies below the 1950-78 trend line.

63 Table 39—Changes in media advertising intensities of manufactured food and tobacco products» 1967-75

Average média Type of industry -L' .advertising-to-sales Change (number) [ ratio 1967-75 1967 ; 1975

Percent

Highly differentiated consumer products (16) ; 5.42 5,77 +0.35

Moderately differentiated consumer products (14) 1.58 2.07 +0.49 Relatively undifferentiated consumer ; products (8) 0.741/ 0.55 -0.19 or +0.281/

All consumer products (38) : 3.02 3.31 +0.29 or +0.40l/

All producer goods (10) : 0.14 0.13 -0.01

Total, 48 products : 2.42 2.65 +0.23

V Highly differentiated consumer goods industries have a 1975 media advertising-to- sales ratio of over 3 percent; relatively undifferentiated industries have ratios of less than 1 percent. Three industries excluded because of significant industry defini- tional changes between 1967 and 1975 (see appendix for details). 2/ The number on the right excludes SIC 2023 (canned milk). The very high adverti- sing in this industry in 1967 is apparently due to extraordinary introductory advertising in liquid, milk-based diet beverages (Carnation's "Slender," Pet's "Sego," and others). By 1975, most of these products had disappeared.

Source: Appendix table 7. colorings. 41/ An OECD report opines that 80 or 90 percent of food industry R&D is directed at differentiating products. Government reports questioning health and safety have also stimulated industry research. The cigarette industry is trying to develop a safe substitute for tobacco or synthetic or natural flavoring to replace

41/ There are two fairly comprehensive sources of information on new products. The New Product News, compiled weekly since 1964 by the Dancer-Fitzgerald-Sample (D-F-S) advertising agency, distinguishes between new brand introductions and item introductions into food or drug stores, the latter including variations in color, shape, and flavor, but not package size. A most interesting finding was that a mere 15 companies introduced 226 new items (18 percent) in 1977. A reliable second source on new product introductions is the Nielsen Early Intelligence Syston, which measures all items newly placed on food retailers' shelves anywhere in the country. Nielsen's definition of an item is broader than that used by D-F-S because it includes all package variations, even minor changes in size, cents-off specials, and price-packs. By its broad definition, Nielsen counted 54,380 items being carried on food retailers' shelves at the end of 1977; during that year, a total of 9,700 new items were added by retailers and 7,200 items were dropped (many "new" ones among them).

64 what is lost when "tar" is removed. Manufacturers face ever more stringent and detailed requirements concerning food safety, nutritional content, and nutritional labeling.

R&D expenditures data are subject to the usual reservations resulting from firm diversification (table 40). The 49 food and tobacco companies among the 200 largest reporting R&D spent only $301 million on this function during 1975. _42/ This was 0.5 percent of their total sales, or about the same as reported by the NSF for the whole industry. While the meat, dairy, and oil firms showed quite low R&D intensity (and breakfast cereals relatively high), there are only slight differences among the food industries. More striking, however, is the contrast between food manufacturing and other manufacturing industries. Food processing firms that are primary to drugs, soaps, and other manufacturing industries appear to have considerably more ambitious R&D programs.

R&D expenditures are measures of the inputs into formal innovative efforts. On the output side, scientific and technical discovery is often measured by the number of patents awarded to companies. This index of discovery is unsatisfactory because it cannot easily be adjusted for differences in quality or commercial value, but it does have the virtue of availability.

A second measure of innovative output is the number of publications in scientific and technical journals by personnel affiliated with a firm. These data were extracted from Scientific Citation Abstracts which covers several thousand journals. Again, they suffer from the defect of being simple counts with no adjustments for quality differences. Yet for both indicators, a firm's propensity to patent or permit publication is tempered by company policy with respect to secrecy.

The two indexes of progressiveness or scientific-technical discovery appear to parallel one another (table 41). As with reported R&D expenditures, only 74 to 75 food and tobacco processing firms (out of 162) appear to have any measurable R&D results. 43/ In the meat processing industry, for example, only 6 out of 32 firms had any perceptible innovations. At the other extrem^, all three of the breakfast manufacturers among the top 200 show substantial progressiveness; the same is true of wet corn milling. Both indexes show that firms among the top 200 account for over 95 percent of all R&D output.

The industry patterns cannot by themselves establish any obvious relationship to market structure elements that have been suggested as determinants of progressiveness, such as firm size, industry concentration, product differentiation, and technological opportunity. However, in a statistical study of progressiveness of nearly 100 food processing companies, Culbertson (20) has found that the level of inventive activity in several time periods significantly related to: (1) a positive linear specification of industry product differentiation, relative firm market share, and firm sales diversification, (2) a quadratic specification of four-firm concentration (in the markets in which the firm operates) which peaks at about 60 percent, and (3) increasing returns to firm size up to about $150 million in assets but decreasing

42/ R&D is broken out in company accounts only if the amount is deemed "significant," probably 1 percent or more of revenues. Most firms appear to prefer reporting even modest R&D activities to enhance their public image, though foreign firms rarely report the items in their stockholders' reports. Table 40 probably understates total R&D expenditures by the 200 largest food and tobacco manufacturers by $150 to $200 million in 1975. 43/ However, patents are assigned to a company only about 4 years after the initial application date and perhaps 5 to 10 years after the initial discovery.

65 Table 40—Research and development expenditures of the 200 largest food and tobacco processing firms, 1975

, R&D-to-sales Primary : Companies '• R&D 1 Total sales industry '• reporting ¡expenditures : ratio

Number ^Millions of dollars Percent

Meat products 4 4.4 2,506 0.2 Dairy products 4 31.2 10,587 .3 Preserved fruits and vegetables 8 38.8 6,476 .6 Breakfast cereals : 3 49.9 5,332 .9 Other grain mill products : 6 46.0 8,895 .5

Bakery products : 2 9.9 2,639 .4 Sugar, candy, gum : 6 10.2 2,977 .3 Oils : 2 5.6 3,070 .2 Beer 4 9.6 2,174 .4 Other alcoholic beverages 2 5.4 1,183 .5

Soft drinks : 2 11.5 3,124 .4 Other food processing : 4 59.8 10,272 .6 Tobacco processing : 2 18.6 3,250 .6

Subtotal 49 300.9 62,487 .5

Drugs ! 5 244.9 7,197 3.4 Soap and toiletries : 3 298.8 20,833 1.4 Other manufacturing : 7 667.2 31.758 2.1 Wholesale trade : 3 3.4 3,453 0.0 Retail trade ! 3 2.5 9,462 0.0

Total : 70 1,517.7 135,190 1.1

Source: (16)

returns to size for larger firms. 44/ Thus, medium—size diversified food processing companies (with sales of, say, $150 to $500 million) with strong market positions in concentrated industries are the most likely candidates to have relatively large R&D programs and patentable R&D results.

Profitability

A key measure of industrial performance is profitability. Relatively high profitability, when sustained over fairly long periods of time, can often be

44/ These are preliminary results from a generalized least squares regression model.

66 Table 41—Research and development output of the 162 largest? food and tobacco processing companies, 1961-75

Scientific and tech- Primary industry nical publications, 'Patents assigned in of company or 1SJ65-75Í/ '.United States, 1961-751/ subsidairyi' Publi- Companies : :Companies : Patents cations

Number

Meat processing 7 311 7 978 Processed poultry 1 0 1 0 Fluid milk 4 14 4 49 Other dairy products 6 206 6 730 Canned fruits and vegetables 4 65 6 49

Other preserved fruits and vegetables 3 136 4 225 Breakfast cereals 3 162 3 953 Pet and animal foods 1 114 1 123 Wet com milling 5 178 5 644 Other grain mill products 5 102 5 251

Bread, rolls, cake 3 33 2 15 Cookies and crackers 2 15 2 89 Sugar 8 104 7 48 Candy and chewing gum 3 5 3 17 Oils and margarine 5 199 5 277

Beer 4 82 4 205 Other alcoholic beverages 4 38 4 697 Soft drinks and flavorings 2 80 2 63 Other food processing 4 249 4 734 Tobacco products4_/ 1 7 1 35

Total, 162 largest companies 74 2,392 75 6,283 Total, all companies 100 2,433 100 6,550

y Subsidiaries of diversified companies categorized into their primary industry. 2J Publications written by employees of company, from Science Citation Abstracts. 2/ Patents assigned by U.S. Patent Office, in all fields. y The search for companies in this industry was incomplete.

Source: (54).

attributed to market imperfections. Numerous statistical studies of profitability have established that supranormal returns are caused by high seller concentration, product differentiation, and barriers to new entry (66). Moreover, three large-scale regression analyses have verified these relationships for large food processing firms (L; 30; 56). The FTC study (30), for example, found that firm profitability was significantly and positively related to concentration, firm market share, and industry advertising-to-sales ratio; profitability was negatively related to firm diversification and unrelated to firm size. A more recent test also supports the inverse relationship between firm diversification and profitability (8).

67 Of the 200 largest food and tobacco manufacturing firms, 147 reported profits in 1975 (table 42) and 11 firms, or 6.5 percent, reported losses. 45/ The weighted average profitability calculated for the 116 food and tobacco firms, 13.6 percent, is slightly above the average reported to the FTC for 1971-75 (see table 19), but somewhat below the average for 1975 alone (see app. table 6). One reason for the divergence is differences in the sample. Since table 42 includes the worldwide operations of foreign-owned firms as well as a much smaller number of companies than the FTC used, its data are not comparable to 1RS or FTC profit data. Data from 1 year, however, are not as reliable as an average of several years.

Despite these caveats, it is interesting to compare rates of return across industries because profit data are not available at this level of industry. 4_6/ Some industries were well above average: poultry, breakfast cereals, corn products, cookies and crackers, sugar, candy, and soft drinks. Most of these industries are imperfectly competitive by one or more criteria, but the high rates in poultry and sugar are probably due to special and temporary conditions. 47/ The lowest profits were earned in meatpacking, alcoholic beverages, and food retailing; in the latter case, this average is considerably below historical rates. On average, the nonfood and tobacco firms earned slightly lower rates of return, but the drug firms were well above the average of the 200 largest companies. In summary, very few large food and tobacco processing companies lost money, and every industry displayed profits that were at or above the prime lending rate of the period, wtfich is one standard of a normal rate of return on investment.

On average, foreign firms had the lowest profit rates and cooperatives the highest, although the latter's accounting methods are not comparable (table 43). It is the cooperatives, which as a class are generally relatively small, that raise the unweighted industry averages above the weighted ones. However, the smaller firms among the 200 largest are still more profitable even when the cooperatives are excluded. The low foreign company rates of return, on the other hand, drag down the average profit rate for reporting companies to below the FTC figures. Foreign companies also have different accounting standards than U.S. firms.

EVALUATION OF ALT^Î^TIVE DATA SOURCES

Industrial organization research on broadly defined industries relies on either government-collected data aggregated by industry or on individual firm data which may be considered quasipublic. Government data are unparalleled for industry aggregates on plant and firm numbers, sales concentration, value added, shipments, domestic geographic spread, and similar features. Both sources yield essentially the same conclusions regarding the large size, industry sales distribution, diversification, and profitability of the largest companies. Both also demonstrate the limitations placed on research by the increasing diversification of the largest food and tobacco firms.

45/ The remaining firms, mostly privately owned, did not report their profitability. Cooperatives are excluded because their accounting methods are not comparable to other types of companies. 46/ The FTC will publish 1975 profitability rates for about 15 lines of business in food and tobacco manufacturing in 1980. 47/ Poultry dressing is a highly cyclical industry. In 1973-74 most of the major firms lost money, but in 1975 they were on the rebound. Over a period of several years, poultry dressing has displayed very low profit rates. Sugar profits were high in 1975 because of extraordinarily high sugar prices during 1974; unanticipated supply shortfalls have been offered as the explanation, but several sugar companies were recently indicted for price fixing.

68 Table 42—^Average after-tax profits rates of proprietary firms among the 200 largest food and tobacco companies, 1975

; Profits as a proportion '. of stockholders^s equity Primary Companies • industry reporting*-'^ :Unweighted * Weighted by equity

Number -Pe

Meat processing 19 11.9 10.1 Poultry and egg processing 4 27.9 24.7 Fluid milk 6 11.9 13.1 Other dairy products 5 13.1 13.7 Canned fruits and vegetables 4 11.5 13.4

Other preserved fruits and vegetables 3 13.7 13.0 Breakfast cereals 3 17.9 17.4 Wet corn milling 3 22.6 19.5 Animal and pet foods 1 14.8 14.8 Other grain mill products 6 15.0 13.7

Bread, rolls, cake 5 14.7 14.5 Cookies and crackers 3 16.3 15.1 Sugar 9 20.6 19.9 Candy and chewing gem 2 17.4 17.3 Oils and margarine 2 11.3 11.6

Beer 8 10.2 11,9 Other alcoholic beverages 7 10.2 10.6 Soft drinks and flavorings 8 18.4 19.3 Other food processing 8 14.3 12.5 Tobacco products 9 13.8 13.6

Subtotal 116 14.6 13.6

Drugs 4 18.8 19.1 Soaps and toiletries 3 14.7 13.5 Other manufacturing 9 9.4 10.4 Wholesale trade 5 13.5 10.9 Food retailing 7 10.0 11.0 Other nonmanufacturing 3 12.2 11.6

Total 147 14.1 13.2

1/ As is the convention in 1RS reports, this table also reports profitable companies only. Cooperatives are excluded.

Sources: (16^, and table 9).

69 Table 43—Profitability among the 200 largest food and tobacco processing companies, by ownership category, 1975

After-tax profits over equltyi./ Ownership status r^oitmân'îûe ~— Unweighted Weighted

• NIITTIHPT" —rercent"

U.S. public corporation : 134 14.5 14.0

U.S. private company 2 6.9 7.4 U.S. coopera t ive 10 26.9^/ 32. ¿^

United Kingdon-owned í 6 10.9 10.4

Canadian-owned : 4 10.8 9.4

Swiss-owned ; 1 11.8 11.3

Total : 157 14.9 13.5

Total excluding cooperatives : 147 14.1 13.2

II Weighted by equity of flrm^; unweighted treats all firms equally. 2/ Neither the profits nor equity data are accounted for in the same way as the other proprietary firms in the table.

Source: (16).

Compiling data on large companies and their products from quasipublic sources has several advantages over sole reliance on 1RS or Census enterprise data. First, it Identifies specific firms participating in a particular industry. The anonymity of government sources severely limits the researcher interested in the organization of a particular industry. Their necessarily strict rules used to categorize enterprises into their primary industries and to restrict disclosure of individual firms imply a considerable loss of detail through aggregation. Second, census-taking and tax- gathering authority stops at the national border. That is, public government data sources normally collect and publish data only on the domestic activities of both U.S and foreign firms, though some infrequent surveys are made of foreign direct investment by U.S. firms. 48/ With quasipublic sources, it is possible to identify with some degree of accuracy the multinational involvement of U.S. firms as well as the penetration of foreign firms.

48./ Censuses of foreign direct investment are made by other branches of the Department of Commerce at irregular intervals; the most recent ones were in 1955. 1966, and 1977. These data are not linked to the census of manufacturers or the annual survey of manufacturers. Censuses of foreign firms in the United States were also made in 1959 and 1974.

70 A third advantage of reliance on quasipublic sources is the excellent detail available on media advertising. In industries such as food and tobacco processing composed almost entirely of consumer goods, these data sources allow a researcher to chart the introduction and rise of particular brand products and give timely information on the strategic thrusts and counterthrusts typical of oligopolistic industry conduct. Product advertising expenditures can provide approximate market shares information, demonstrate the extent of product proliferation, and indicate shifts in demand within finely defined product classes.

A fourth advantage of quasipublic sources is that they tend to be available more quickly than either 1RS or Census data, which take from 3 to 8 years to be published. 49./ FTC Quarterly Financial Reports are more current, but are available only on a major industry group basis at present; the FTC's line-of-^business reporting program promises to be an important disaggregated data source on large companies. 50/ By contrast, media advertising expenditure reports are available quarterly only 3 months after the close of the reporting period.

Research on industrial organization that depends only on quasipublic sources is subject to severe limitations, however. Private companies, foreign firms, and cooperatives simply do not release as much data to the public as is required of companies subject to SEC regulation. Publicly owned and regulated corporations usually reveal the minimum required about themselves. Activities which they interpret as insignificant segments of their business (often a 10-percent criterion is applied in these cases) may go unreported. Annual reports have largely become Instruments of rather than precise documents of corporate conduct and performance.

PUBLIC POLICY IMPLICATIONS

Several trends in food and tobacco manufacturing organization noted in this report may be detrimental to the interests of the consuming public. The summary report of the National Commission on Food Marketing, based on extensive technical studies of the 1945-63 period, concluded that "(t)wo groups in the food industry appear to have substantial market power: retailers ... and large manufacturers, usually diversified with strong national brands" (46, p. 95).

The present survey of market structure and performance characteristics in the food and tobacco manufacturing industries up to 1975 demonstrates that there is little, if any, evidence of amelioration. On the contrary, changes in company numbers, concentration, product differentiation, diversification, and barriers to entry all imply further departures since 1963 from the economic standards of perfect or workable market structures. 51_/ Virtually all the structural changes noted for most of the food manufacturing industries during the past quarter century will

49/ Census data are now linked to 1RS returns for statistical purposes, but this procedure is slow (6 to 8 years), cumbersome, and quite expensive. These data have not been as widely utilized for economic analyses as the 1RS Source . 50/ Line-of-business data for 1973 were published in early 1979. Within a few years, these data should be available about 6 months after the end of the calendar year. The Office of Federal Statistical Policy and Standards is currently considering a line-of-business reporting program for all firms. 51/ Industrial organization economists use the term workable competition to characterize markets that exhibit slight structural departures from perfectly competitive markets which may be justified by economies of scale, technological change, ,or other factors contributing to superior efficiency.

71 reinforce the market power of leading firms, with a consequent decline in consumer welfare, 52/

There are few countervailing trends on the horizon. Farmer , some of which have been antipathetic to food processing firms, may be growing politically weaker as membership erodes. Consumer groups are still active in expressing concerns over food prices, safety, and nutrition, but their legislative impact has been spotty. Two nodes of countervailing power in the food system that appear to have held their own are food distributors and cooperatives with food manufacturing capacity. Backward vertical integration into manufacturing and the purchase of private label products by large grocery chains have presentesd a formidable threat to manufacturers of advertised consumer foods. Among the 40 largest grocery chains in 1963, nearly 18 percent of the sales of processed foods were self-manufactured (46, p. 78). Among all grocery stores in 1975» self-manufacture plus specification buying resulted in private label sales of over 16 percent of all processed foods sold, excluding meat (5¿). These figures indicate no diminution in the potential buying power of grocery retailers against the advertised brands of leading manufacturers. Whether any of the consumer surplus wrested from food manufacturers by retailers is passed on to the ultimate consumers remains an open question. Cooperatives, on the other hand, because of their specialization in commodity-type food products, appear to offer less of a challenge to the major brand manufacturers.

The antitrust agencies have found major structural cases lengthy and expensive to pursue. The FTC's case against the three major breakfast cereal manufacturers has already been in the courts for 7 years. The Antitrust Improvements Act, enacted in 1979, has altered court procedures to allow the Government to act more quickly in preventing mergers. Yet most of the resources of the antitrust agencies have been directed at violations such as price fixing that are relatively easy to prove in court since they involve specific acts by firms. Most enforcement has also been directed at Industries with little product differentiation. Other policy directions that could be taken under current U.S. laws such as advertising restrictions, compulsory trademark licensing, and conglomerate merger enforcement remain relatively controversial and untried (40).

Present U.S. antitrust enforcement may be ineffective in dealing with the degree of market power already established in some of the food and tobacco manufacturing industries.

"By promising more than they can deliver, antitrusters mislead the public into believing economic power is being policed successfully ... But ... until an alternative is found we must retain and strengthen our antitrust laws and enforce them greater vigor, not less while recognizing that they must be supplemented by other forms of social control" (45, p. 853).

Some food industries, notably industries that manufacture producer goods, are still workably competitive. But for the more oligopolistic ones, bolder measures may be needed. Among suggestions made by others are a stricter merger policy, legislatively mandated industrial restructuring, broader investigations by the PTC, an incomes policy. Federal chartering of corporations, restrinctions on advertising, and international cooperation in the formation of specific poiicles dealing with multinational investment. Both the feasibility and effectiveness of some of these actions are subject to debate, but the food system's continuing drift toward monopoly appears to justify further consideration of new policies.

52/ The existence of market power and its structural sources are inferred by the empirical studies cited above on the determinants of monopoly profits and monopoly prices. The higher the monopoly prices and profits, the lower the MarshallIan consumers' surplus, which is one commonly accepted measure o£ consumer welfare. Roughly speaking, the economic surplus accruing to a consumer is the difference between what he/she is willing to pay and what the market requires to be paid.

11 REFERENCES

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73 (19) Crittenden, Ann, "$40 Million For a Real Smoke," New York Times. May 15, 1977.

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(25) _• Annual Survey of Manufactures, 1975. Washington, D.C. 1975,

(26) Doyle, Peter. "Economic Aspects of Advertising: A Survey," Economic Journal. Vol. 68: pp. 570-602. 1968.

(27) Edwards, Larry. "John Murphy of Miller is Adman of the Year," Advertising Age. January 9, 1978. —^"

(28) Ehrbar, A.F. "Unraveling the Mysteries of Corporate Profits," Fortune. August 27, 1979, pp. 90-96.

(29) Federal Energy Administration. Energy Use in the Food System. Washington, D.C. 1976. "■ '

(30) Federal Trade Commission. Economic Report on the Influence of Market Structure on the Profit Performance of Food Manufacturing Companies. Washington, D.C. i y üb?.

(^^) • Economic Report on Corporate Mergers. Washington, D.C. 1969.

(32) Gort, Michael. Diversification and Integration in American Industry. Princeton: Princeton University Press. 1962.

(33) Graham, James A. Established U.S.: Government Cooperative Statistics, Madison, Wisconsin. 1978.

(34) Greer, Douglas. Advertising and Competition, Ph.D. thesis. Ithaca: Cornell University. 1968.

(35) Grieg, W. Smith. The Changing Structure of the Food Processing Industry. Bulletin 827. Pullman, Washington: Cdllege of Agriculture Research Center, Washington State University. 1976.

(36) Hession, Charles H. Metal Container Industry, in Walter Adams (ed.). The Structure of American Industry. Fourth edition. New York: Macmillan"! ^1971.

(37) Horst, Thomas. At Home Abroad: A Study of the Domestic and Foreign Operations of the American Food-Processing Industry. Cambridge: Ballinger. 1974.

(38) Internal Revenue Service. Statistics of Income 1975, Corporation Income Tax Returns. Washington, D.C. 1979 and previous years. ' "

74 (39) . Preliminary Statistics of Income 1975 Corporation Income Tax Returned, Washington, D.C. 1978.

(40) Marion, Bruce. Government Regulation of Competition in the Food Industry. Working paper no. 21. Madison, Wisconsin: NC-117. 1978.

(41) Mather, Loys L. Advertising and Mergers in the Food Manufacturing of Industries. Working paper no. 35. Madison, Wisconsin: North Central Project 117. 1979.

(42) Mueller, Willard F., and Larry G. Hamm. "Trends in Industrial Market Structure, 1947 to 1970," Review of Economics and Statistics. Vol. 66, pp. 511-20. 1974.

(43) Mueller, Willard F., and Richard Rogers. "The Role of Advertising in Changing Market Concentration." Review of Economics and Statistics, forthcoming.

(44) Mueller, Willard F. The Celler-Kefauver Act; 27 Years of Enforcement. A report to the U.S. House of Representatives Subcommittee on and Commercial Law. Washington, D.C. 1978,

(45) . The Control of Agricultural Processing and Distribution. American Journal Agricultural Economics, Vol. 60, pp. 848-55. 1978.

(46) National Commission on Food Marketing. The Structure of Food Manufacturing, Technical Study no. 8. Washington, D.C. 1966.

(47) . The Structure of Food Retailing. Technical Study no. 7. Washington, D.C. 1966.

(48) National Science Foundation. Research and Development in Industry, 1972. NSF 74-312. Washington, D.C. 1974.

(49) Newfarmer, Richard S., and Willard F. Mueller, Multinational Corporations in and Mexico. A report to the Subcommittee on Multinational Corporations of the Committee on Foreign Relations, U.S. Senate. Washington, D.C. 1975.

(50) Packard, Vernal S., Jr. Processed Foods and the Consumer. Minneapolis: University of Minnesota Press. 1976.

(51) Parker, Russell C. "The Baking Industry," Antitrust Law and Economics Review. Summer, pp. 111-22. 1969.

(52) . The Status of Competition in the Food Manufacturing and Food Retailing Industries. Working paper no. 6. Madison: North Central Project 117. 1976.

(53) Parker, Russell C, and John M. Connor. "Estimates of Consvmier Loss Due to Monopoly in the U.S. Food Manufacturing Industries," American Journal Agricultural Economics, Vol. 61, pp. 626-39. 1979.

(54) Peckham, Brian. Economics and Invention; A Technological History of the U.S. Corn Refining Industry. Ph.D. dissertation. Madison: University of Wisconsin. 1979.

(55) Porter, Michael E, "Interbrand Choice, Media Mix and Market Performance," American Economic Review Proceedings. Vol. 66, pp. 398-406. 1976.

(56) Rogers, Richard T. Appendix D in Mueller. 1978.

75 (Sv'') Select Conimittee on Nutrition and Human Needs, U.S. Senate. Dietary Goals fer the United States. Washington/ P.C. 1977.

(38) Scherer, F« M. Industrial Market Structure and Economic Performance. Chicago: Hand McNally. 1970.

(59) Sentry Insurance Company. Consumerism at the Crossroads: A National Opinion Research Study of Public, Activist, Business, and Regulator Attitudes Toward the Consumer Movement. Cambridge: Louis Harris and Ass^^ the Marketing Science Institute. 1977.

(60) Simon, Julian. Issues in the Economics of Advertising. Urbana: University of Illinois Press. 1970.

(61) Temporary National Economic Committee. Large-Scale Organization in the Food Industries. Monograph no. 35- Washington, D.C. 1940.

<62) Teniiant, Richard B^ "The Cigarette Industry," in liait er Adams (ed.). The Structure of American Industry. Fourth edition. New York: Macmillan. 1971.

(63) U.S. Department of Agriculture, Agricultural Statistics, 1976/ Washington, D.C. 1976.

(64) . ; • The U.Sv Food and Fiber Sector: Energy Use and Outlook. Washington, D.C. 1974.

(65) U.S. Tariff Commission. Implications of Multinational Firms for World Trade and Investment and for U.S. Trade and Labor. Washington, D.C. 1973.

(66) Weiss, Leonard W. "The Concentration Profits Relationship and Antitrust," in Harvey J. Goldschmid (ed.), Industrial Concentration; The New Learning. Boston: Little, Brown. 1974.

(67) "The Structure-Conduct-Performance Paradigm and Antitrust," University of Pennsylvania Law Review. Forthcoming.

(68) Wilkins, Mira. The Maturing Multinational Enterprise; Amerlean Business Abroad from 1914 to 1970. Cambridge: Harvard University Press. 1974.

(69) , (ed.). Foreign Investments in the United States. New York: Arno Press. 1977, 1978.

76 Appendix table 1—Employment diversification of food and tobacco manufacturing companies, 1972

Proportion of total company employment of companies primary to- --2/

Other Industry JL./ ] ; Meat Other fruits V.' ' Cookies, Sugar Fats Beer, ' Meat- Soft Misc. : and Milk dairy . Canning and Grains Bread and and and wine, Tobacco packing :drinks : foods [poultry vege- cracker^ candy • oils liquor 1tables

Percent

Meatpacking : 50.4 0.3 0.2 0.7 0.3 — 0.9 — — 0.3 — — — — Processed meats and î poultry 6.4 84.9 1.4 0.5 .7 2.8 4.3 .6 — 0.1 10.1 1.4 — 0.2 0.3 Fluid milk : 1.3 ^- 46.7 11.1 — — — .1 — — — __ Other dairy products .7 — 5.8 58.5 ~ .3 — .1 — — .4 — — .5 — Canned fruits and vegetables J .4 .6 1.4 1.1 63.4 3.8 .5 .1 — .1 »_ .3 .1 .5 1.2 Preserved fruits and vegetables 1.1 .5 1.7 2.3 5.5 69.8 1.7 1.0 1.3 .7 1.0 .1 .8 4.5 1.2 Grain mill products i .2 2.5 .9 — .2 .5 40.7 .3 2.8 3.0 4.3 .5 — .2 Bread, rolls, cake .1 1,7 1.7 — — 1.1 .9 50.0 — — ^_ 1.4 2.1 Cookies and crackers : .9 .9 — — .5 .3 .1 60.9 — — .2 Sugar and candy r3 1.9 1.9 1.1 .4 .1 1.3 .6 3.4 73.2 — — — 1.7 2.8 Fats and oils .8 .4 .4 1.1 — .3 1.9 — — .7 63.4 .1 .1 ,4 Alcoholic beverages — .1 — — — .1 .1 — .3 .4 67.6 Soft drinks and 2.3 flavorings .4 — 1.4 ~ .1 .1 .3 — — .1 ~ 1.3 69.5 .8 .1 Miscellaneous foods : .6 .4 2.1 — 2.0 3.4 2.6 .3 1,1 2.5 — .2 3.3 68.4 3.5 Tobacco — — — — — — — — .7 — 51.4 Total food and tobacco 62.7 90.4 66.7 75.7 73.0 83.8 54.7 54.0 70.2 8.12 79.9 73.0 73.9 79.6 65.4

Possible backward vertical integra- tion 3/ :

Agriculture, — , fishing ! î7 2.1 .1 .8 .8 1.3 ^- — .1 2.6 .9 .3 .3 Wood containers and N.E.C. Ï .1 — .3 — — — — .2 — -^ — ,4 .2 Paperboard contain- ers and boxes : .1 .1 — — — — 1.3 --. _^ .6 —^ Miscellaneous chemicals ! .1 .2 .7 .2 — .5 .5 .1 — ,3 .4 — .2 .3 .4

See footnotes at end of table. Continued- Appendix table 1—Employment diversification of food and tobacco manufacturing companies, 1972—Continued

Proportion of total company employment of companies primary to— 1/ ' ; other : Industry i' ' Meat . Other , fruits Cookies' Sugar Fats Beer, : Meat— Soft Misc. . and Milk ■ Canning and Grains ] Bread and and and wine, .Tobacco :packing. dairy . ¡drinks foods . poultry] vege- crackers] candy oils liquor " tables ;

: Percent

Possible backward vertical integra- tion ^/—Continued

Miscellaneous plastic products : 0.1 0.3 0.7 0.3 0.5 0.5 — Glass products : --^ ■ 2.3 0.7 0.4 0.1 0.2 Metal cans and con- —— —•■ —— 0.7 0.2 — tainers — ~ .7 2.0 1.8 .1 — Special industry — 1.9 _ machinery : — .2 .1 .1 Refrigeration and 0,3 — .3 .2 .3 service machinery ^. — .6 .3 — — Computer services : .1 — • .2 — .1 .1 -*. Business services, .2 *-- — — — — — N.E.C. ' 1.3 —_. — —— —-. CAO»s and auxili- .2 — — — — .1 aries for manufac- turing 1,9 1.6 3.4 6.9 5.9 4.7 8.4 1.7 6.4 3.4 5.5 4.8 4.2 4.6 9;2 Total possible back- ward vertical integration £/ 4.3 4.9 6.4 9.6 9.4 8.1 10.9 3.2 8.0 3.9 8.5 8.7 5.6 6.2 10,4 Possible forward : vertical Integra- j tlon kj : :

Wholesale grocery : products : 1.8 1.2 2.6 1.3 1.4 .9 .8 Wholesale beverage : .8 .8 .5 .2 .2 1.0 .9 products : — — ~~ —— — __ Retail grocery : 1.0 .1 — .5 stores : 1.8 ..2 1.7 .1 .5 __ __ Retail bakeries : .3 __ ^x ~ .2 1.1 — — ^„ — — See footnotes at end of table. Continued- Appendix table 1— ■Employment diversification of food and tobacco manufacturing companies. 1972—4tontinued

Proportion of total company employment of companies primary to- --2/

Other Industry U Meat ' fruits, ;Cookies , Sugar ' Fats Beer, : : Meat- • Other Soft : Misc. and ' Milk [Canning and Grains Bread \ and and , and wine, .Tobacco :packing dairy drinks ' foods poultry vege- ; crackers candy • oils liquor tables

Percent

Possible forward vertical integra- : tion ^/—Continued #. Retail food stores. N.E.C. • 0.1 0.2 1.1 0.5 0.2 Eating places 4.9 .9 "— 2.1 — —_'" 0.1 — ; 1.6 .6 7.0 1.1 8.4 1.7 — — Public warehouses .2 .3 — .8 6.7 .1 6.3 — Sales offices for .2 — — 3.1 .1 grocery and beverage products • 3.8 .5 6.1 9.7 1.1 2.3 2.7 3.3 13.2 3.1 ^'^ 2.1 3.5 3.3 Total possible for- ward vettical integration y • 12.5 3.2 13.7 12.3 9.5 4.4 12.3 7.5 14.0 6.4 3.3 13,2 3.4 10.6 3.9 Other manufacturing:

Textiles 1.3 — .8 ~ .3 .8 — Apparel .8 .1 .3 1.5 .1 1.1 — Other wood products .3 — — — _^- .3 .8 — .4 — — .9 .2 — .2 -■-, Other paper products: — "" .1 — — — — __ .1 .3 «_ ~— .2 1.2 and : .5 .7 .3 — . .6 : .3 — .5 .7 -_ .1 — Drugs : .3 ,5 — — . .2 2.4 Soaps and toiletries: __ .3 — .7 .1 — __ .5 ,2 .6 — .1 Agricultural : """ — — — __ — .3 1.1 chemicals : .4 .1 .7 — .5 .3 .1 „ Other chemicals : .1 . 7 ,- — .4 Petroleum refining : .1 -_ .8 ~ .2 __ Rubber products : —_ .2 ~ -- .1 — __ *^ __ .1 —~ — — Leather products : .5 —— .3 ~" —— .1 -^ __ — — Other nonmetallic : .2 — — — : __ .1 . 1 Primary metals : .1 "— .3 — — .2 .5 — ~ — — 1.4 — 1.0 .1 1 See footnotes at end of table. Continued- Appendix table l~Employment diversification of food and tobacco manufacturing companies, 1972—(continued

Proportion of total company employment of companies primary to- -2/

Other Industry i./ Meat ' Other , fruits CoOkies Sugar Fats Beer, [ Meat- . Soft Misc. and Milk dairy Canning and Grains Bread , and and , and wine, ;Tobacco packing drinks foods , poultry vege- "crackers , candy ; oils liquor tables

Percent

Other manufactur- : ing—Continued : — 1.6 0.2 0.9 ~. — _. 2.5 -- — — — 0.5 Fabricated metals î — __ .9 1.2 Other machinery : -_ — 0.2 — 0.1 .6 0.7 0.8 0.4 Electrical equip- — ~ 1.0 — — ment : .7 .1 .2 — .3 — 4.8 — .3 Transportation : — — 1.0 — — — .5 — — — 0.1 1.0 — equipment : .1 — . Instruments — — — — — """ .5 ttlscellaneous manu- — -- .9 0.6 .6 facturing : 1.1 — .3 — — 3.7 .1 2.8 —

Total other manu- 8.3 .9 11.7 facturing: 7,5 .7 9.1 0 0.7 1.3 8.2 11.9 4.9 2.3 .8 1.8

Other nonnanufac- Ï tuting : — — — .3 .1 .5 — .1 -~ .3 extraction Ï .1 — .3 — .1 — .2 .1 .1 1.1 1.5 ~ "" Other wholesale ,8 — .1 4.6 .1 .6 .5 1.6 trade : .9 1.3 1.1 .3 .3 .5 4.4 — — .6 3.4 .6 .6 1.5 1.0 2.0 ~— .7 .2 Other retail sales Î 5.6 1.8 1,4 ""*■ 1,2 Other sales offices : 1.0 .4 .7 .2 .3 3.9 .7 1.6 .1 .4 Other GAO's and .8 .2 .6 1.3 auxiliaries : 1.0 .1 .8 .4 .9 .6 3.5 1.1 .1 1.3 .4 Transportation and — — .1 .9 .1 utilities : .5 — .2 — , 2 — .3 Finance, insurance. — .4 .3 real estate : .4 — — .2 ,2 .3 6.8 1.0 1.0 .7 Other service .4 4.2 .7 4.3 industries : 2.8 .2 — 2.0 .1 .1 10.1 .2 .1

RAO ■frinhnnt-i».« af-- t^rtf\ of 1" ahle. Continued-- Appendix table 1—Efflployment diversification of food and tobacco manufacturing companies, 1973—tiontinued

Proportion of total company employment of companies primary to— 2/

; Other Industry JL/ \ ' Meat ; Other ; ' fruits Cookies ; Sugar ' Fats Beer, ] Meat- Soft . Misc. , and ; Milk ¡ dairy Canning and Grains , Bread and and 1 and wine, . Tobacco packing \ drinks foods /poultry 1 vege- crackers candy oils liquor ,tables

Percent

Total other non- manufacturing 12.3 1.8 4.8 1.8 7.0 2.7 13.1 22.7 1.9 5.5 8.4 2.4 8-2 2,5 9.0

Total ¡ 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

— = Not applicable.

_1/ All industries with 100 or more employees of any food or tobacco manufacturing company. 2^/ Parts may not add to total because industries with small employment are omitted. _3/ The sum of employment percentages in the supply industries listed above. 4_/ The sum of employment percentages in the wholesale, retail, and service industries listed above.

Source : (23). Appendix table 2—Employment diversification of food and tobacco manufacturing companies, 1963

Proportion of total company employment of companies primary to 1/ Industry category of : Other Cookies Sugar Fats Beer, establishment Meat • fruits and Soft Misc.; Meat- Other Grains Bread emplo3mient If and Milk Canning-* and crack- and and wine, drinks foods* packing dairy candy liquor poultry • vege- ers oils • fablpR Percent

Meatpacking 72.6 0.3 0.2 0.2 Processed meats and poultry 6.5 95.6 0.1 0.6 0,5 2.6 4.5 3.7 fl.6 Fluid milk 65.5 6,3 .9 Other dairy products 1.3 8.0 68.5 .1 0.1 .7 Canned fruits and vegetables 1.3 2.4 71.0 5.9 1.3 .5 Preserved fruits and vegetables 2 .2 1.9 .6 5,4 70.7 1.9 1,2 0.2 .7 .6 5.6 Grain mill products 3 .2 .4 .2 — .4 63.5 .2 3.1 .3 3.4 .4 — 4.0 Bread, rolls, cake -. — 1.2 — .9 .2 89,3 2.5 —*_ — Cookies and crackers _ .«— .1 __ —— --. 1.0 .2 62,7 .3 .3 Sugar and candy _ —^ .9 2.4 .4 .1 .5 .2 1.6 78.5 — «* 4.2 Fats and oils 3 .5 1.3 .2 1.4 *—^ — 71.8 .6 Alcoholic beverages — — --. .0 .1 .4 Soft drinks and flavorings -« .2 .1 .6 92.2 .4 Miscellaneous foods 1 .7 1.1 .5 .6 .8 .3 4.2 .8 .3 .4 61.6 Tobacco - —. — — — — — — .2 — Total food and tpbacco 82.3 96,3 80.9 82.2 79.2 82.7 74.0 91.4 74.5 81.9 78.9 73.3 93.4 78.9

Possible backward vertical integra- tion 3/: Agriculture, forestry, fishing 4.0 1.0 1.5 1.8 Wood containers and N.E.C. 1.1 1.0 Paperboard contain- ers and boxes 1.2 .3 .9 Miscellaneous chemicals 2.1 .1 1.9 .6 .2 Continued- See footnotes at end of table. Appendix table 2—Employment diversification of food and tobacco manufacturing companies, 1963—Sontinued

Proportion of total company employment of companies primary to Zf

: Other : Cookies Industry ll -- ^ : Meat ¡fruits : ; Sugar : Fats Beer, Other and Soft Misc. Milk Bread : and : and wine, :Tobacco .^^ir : and dairy Canning: ^^^ • Grains crack- drinks foods .packxng ^^^itry . vege- : : candy : oils liquor : tables :

Percent

Possible vertical backward vertical integration V— _ Xontinued

Mlscellanous plastic products 0.6 0.1 Glass products 0.6 1.3 .1 Metal cans and con- tainers .3 0.2 2.1 0.9 0.1 0.3 0.3 Special industry machinery 0.1 .1 — 0.2 Refrigeration and service machines .1 Computer services Business services, N«E«C* GAO*8 and auxili- aries for manu- facturing 1.8 0.3 4.2 3.1 5.8 3.2 8.6 .8 2.0 3.1 3.7 4.0 1.2 5.9 6.2

Total possible backward vertical integration 3^/. 4.1 .3 5.4 3.3 13.3 4.7 10.5 .8 3.4 6.0 7.4 5.8 1.8 7.8 8.2

Possible forward vertical integra- tion hi

Wholesale grocery products 1.3 1,8 2.6 1.1 1.9 .2 .2 .2 Wholesale beverage products .6 Retail grocery stores 2.6 Retail bakeries 2.3 Continued- See footnotes at end of table. Appendix table 2—Employment diversification of food and tobacco manufacturing companies, 1963—continued

Proportion of total company employment of companies primary to 2i

: Other Industry Cookies Xl Meat ifruits Sugar : Fats : Beer, Meat- Other and Soft Misc. and Milk Canning : and Grains Bread and : and ' wine. îTobacco dairy crack- drinks foods packing poultry : vege- candy '- oils : liquor ers

Percent

Possible forward vertical integra- tion ^--Continued

Retail food stores » N.E.C. 0,2 .6 0.9 — 1.1 — 0.1 3.4 Eating places .4 1.0 — — 0.5 0.2 .1 0.9 Public warehouses .1 — — .3 .2 — 3.5 .5 Sales offices for grocery and bev- erage products 6.8 7.1 5.7 1.0 3.1 3.2 3.5 17-5 1.5 4.4 0.3 6.8

Total possible for- ward vertical Integration y 7.3 2.2 10.5 10.2 2.1 9.0 4.4 6.3 17.7 5.8 3.5 5.0 9.1 .2

Other manufacturing:

Textiles .6 1.3 .2 Apparel .2 Other wood products Furniture Other paper products .1 .7 Printing and publishing .1 1.5 Drugs .6 Soaps and tpiletties .6 .2 Other chemicals .3 .3 .9 2.3 Petroleum refining Rubber products Leather products 1.5 Other nonmetallic minerals .1 Primary metals 5.9 .7 Fabricated metals .1 1.8 Other machinery .2 Continued— See footnotes at end of table. Appendix table 2—Employment diversification of food and tobacco manufacturing companies, 1963~eontinued

Proportion of total company employment of companies primary to 21

; Other Cookies Industry If Meat : fruits = Beer, Meat- Other and Sugar Fats Soft Misc. and Milk Canning : and Grains Bread and and • wine. íTobacco packing dairy crack- drinks foods poultry : vege- ers candy oils • liquor ; tables

Percent

Other manufacturing

Electrical equip- ment 1.0 0.4 1.5 .2 Transportation Instrijments Miscellaneous manu- 0.1 facturitig 0.6 0.6 .2

Total other manu- 0.3 5.0 facturing 4.1 1.0 1.2 .5 2,0 0.4 0.8 2.6 10.1

Other nomigïi&ufâc- turing .3 Mineral extraction Construction Other wholesale 4.8 .3 .1 .2 .5 trade .3 2 .1 .1 .1 2.4 .9 .2 .9 Other retail trade 2 1.4 .4 .3 .4 1.9 .4 .9 .4 2.6 1.8 .7 2.8 Other sales offices .7 1 .5 .4 .5 .2 .6 .8 1.2 .9 1.0 Other CAO*s and 2.8 1.6 1.4 6.1 auxiliaries Zj .5 3 .2 3.1 1.7 1.6 3.3 1.2 2.7 2.6 2.3 Transportation and — — utilities — — .6 .2 — — — .6 ~ — — Finance, insurance, — — — real estate - ~ — — — .1 — — .1 — — Other service __ ^ — — -_ ~ — industries .1 .3

Total other non- manufacturing 1.8 .8 2.2 3.9 3.2 2.7 8.3 2.5 3.9 6.3 8.5 6.0 3.7 3.2 9.4

Total ?taö).o 100.0 100*0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100,0 100.0 100.0 100.0 100.0

— = Not applicable. Ij All industries with 100 or more employees of any food or tobacco manufacturing company. 2J Parts may not add to total because industries with small employment are omitted. 1/ The sum of employment percentages in the supply industries listed above. 4/ The sum of employment percentages in the wholesale, retail, and service industries listed above. Appendix table 3—Employment diversification into the food and tobacco manufacturing industries by companies primary to all industries 1972,

Proportion of industry employment 1/ Industry category of : Other : Cookies companies Ij r Meat :fruits : Sugar : Fats : Betr Meat ¿Other and Soft Misc. and Milk banning: and^ :Grains Breads Tobaccc packing [dairy crack-* * ^^°®* drinks poultry : vegë- : ^ : candy^^^ ': oils ^^^ :liquor foods : ■ : tables :

Other manufacturing:: Percent Mineral extraction Construction 0.3 Meatpacking 87.9 11.8 2.8 2.9 1.3 2.1 .6 0.4 1.4 5.5 — 0.9 1.2 — Processed meat and poultry .2 68.3 .8 .4 2.7 .4 .7 1.2 —«. —^ .3 —^ Fluid milk .2 2.2 81.0 20.4 3.6 2.6 1.8 1.9 4.9 3.9 2.1 — 2.4 3.5 — Other dairy products .1 5.8 61.9 .3 1.0 .7 1.7 — — — — Canned fruits and vegetables .4 .4 71.1 3.8 .3 — — .1 1.5 — Preserved fruits and vegetables .2 2.5 .6 5.8 65.8 .6 1.3 1.7 .1 .9 0.2 .1 3.4 ^— Grain mill products 6.0 1.2 2.4 75.2 1.0 1*7 2.4 9.8 .2 .4 4.0 — Bread, rolls, cake 1.8 1.4 .5 .4 2.3 .7 84.8 .8 1,7 „« -«- — .7 — Cookies and crackers .4 1.4 78.3 1.7 ^^ — ,^, .4 0.5 Sugar and candy .1 .2 .4 2.8 70.3 1.7 .4 .1 2.0 — Fats and oils .1 2.3 .2 1,3 ^- 55.0 .2 — — — Alcoholic }>everages 1.0 .4 .1 .5 ^^ .4 87,0 1,0 .2 — Soft drinks, flavors .2 1,0 ,^ ,^ 90,7 4,3 «-* Miscellaneous foods 0 — 1.0 .7 3.9 3.2 .9 2.0 .4 -« ,7 63,5 ^^ Tobacco products .2 L.7 1.0 2.3 8.5 .5 -*. 3,5 a 3,3 95,1 Total food and tobacco 90.9 96.4 89.8 87.6 88,1 87.7 93,2 aoa 89,4 87,3 78.6 91.5 96,5 88,4 94,7

Manufacturing:

Yarn, thread .6 .9 , paper ¿/ a ^^ — — --— 2.3 Paper contaln&rs ^/ -- 1.7 .1 — — «^ — Commercial printing hj 4.0 3.8 .4 1.1 .5 Industrial chemicals .9 1.4 .4 .4 .1 1.5 Drugs 5/ 1.8 3.1 1.7 5.4 — .4 ,1 .6

See footnotes at end of table.

Continued- Appendix table 3—Employment diversification into the food and tobacco manufacturing industries by companies primary to all industries, .1972- «ion tinned

Proportion of industry employment If Industry X Other : Í category of : Meat : fruits : Cookies :Sugar : Fats : Beer, companies Xj Meat- Other ! Soft ; Misc. ' and Milk : Canning : and :Grains ► Bread : and : and : and : wine, Tobacco -packing dairy [drinks . ^ foods poultry : vege- : crackers: candy : oils :liquor

■■■'■■■"• ¿ ; ■ ■ .■ .' ■ • : tables : ■' ■

Percent

Manufact uring— Continued

Soap and toilet- ries 6/ : — — — — 0.4 0.4 0-6 ~ 3.0 — 0.2 1.3 ~ Agricultural chemicals • 0.4 .3 Miscellaneous — — .4 .1 — — — Rubber 1/ — .5 — — Nonmetallic minerals N.E.C. rO.3 0.9 .3 Steel mills 8/ 6,3 1.0 .3 .4 Grey iron foundries — — 0.1 — .3 Nonferrous metals 9^/ 3.5 .1 — Metal cans 10/ 0 1.7 .1 .5 .1 Other fabricated metals 1.2 1.4 Office and computing 11/ • _„ ~ 0.2 .8 — — 1.7 — ~ .5 — Service machinery 12/ 1.2 2.4 1.7 1.4 .4 3.7 1.1 Radio and TV equip- ment 13/ — .2 3.0 .1 — — — Other electric equipment .5 Transportation ~ 1.7 1.4 — .9 .4 — equipment 14/ ;; ;; — Instruments .5

Total manufacturing 97.4 97.8 91.9 92.0 97.5 96.8 96.6 90.3 97.0 96.4 97.8 96.7 98.5 92.8 97.7

Wholesale trade

Wholesale drugs 15/ 1.9 2.0 — .1 Wholesale groceries . .2 .6 .6 .5 ,8 .2 .4 .1 — .4 — .2 .9 ~

See footnotes at end of table. Continued'T Appendix table 3—Employment diversification into the food and tobacco manufacturing industries by companies primary to all industries, 1972— Continued

Proportion of industry employment 2J Industry : • : Other : category of : : : fruits: Cookies : Sugar: Fats Beer, companies 1/ : Méat- ' "^f ; other ; Soft Mise, - , : and Milk Canning: and : Grains: Bread and : and : and wine, Tobacco dairy .'drinks ' foods •P^^^^^S^poultry : vege- : . crackers : candy: oils liquor : tables :

Percent

Wholesale trade— Continued

Wholesale farm products oa — — — — — 0.3 — — — — — — — Wholesale alcoholic

beverages — — — — .1 — ■— — Other wholesale 16/ : — 0.1 — — 2.3 Total wholesale trade .3 0.6 2.5 2.6 0.8 0.3 1,1 0.1 .8 1.4 0.7 0.4 1.1 2.3

Retail trade

Department stores ' 0.2 0.2 1.3 0.1 17/ Variety stores 18/ .1 -- 2.6 .5 — Grocery stores 19/ ' 1.7 1,0 5.1 2.4 1.2 .6 9.0 3.0 1.4 .4 2.7 Other food stores .3 1.1 .2 — .2 .8 Eat ling places .2 .4 1.7 .5 .1 .2 1.0 Nonstoue retailers .1 .1 .2 .7 .4

Total retail 2.1 1.3 5.6 5.3 1.3 2.6 .2 9.6 3.0 3.3 .9 2.6 1.1 4.8 —

Service industries .2 .3 — .1 .4 .2 .2 — .2 — — ~ 1.0 -^

All Industries 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100,0 100.0 100.0 100.0

— » Not applicable. Ij Industries with 100 or more employees in the food or tobacco manufacturing industries only, tj Due to disclosure concerns, the following assumptions were made with respect to Census ranges: C=150, D«350, E=»700, F=1500, G»3500, H*7000. Individual Industries may not add to sector totals. In some cases, percentages were obtained by subtraction. V Probably Sweetheart Cup Corporation and Gulf & Western, kj Possibly Norton Simon. V Mainly American Home Products, Squibb, Abbott, Morton-Norwich, and Warner-Lambert. 6^/ Mainly Proctor and Gamble, Lever Brothers, and Cheesebrough-Ponds. Ij Probably General Tire and Rubber. %j Mostly LTV Corporation. _9/ Possibly National Distillers and Chemicals, j^/ Probably National Can Corporation. 11/ Probably SCM Corporation. 12/ Indeterminate. 13/ Probably RCA Corporation. 14/ Probably Ogden Corporation. 15/ Mainly Foremost-McKesson. JJ/ Probably Hav-A-Tampa and General . \lj Probably Amfac and Gamble-Skogmo. 18/ Probably Chock Full O'Nuts and Rapid-American. J^/ Mostly large retail grocery chains. Appendix table 4—Employment diversification into the food and tobacco manufacturing industries by companies primary to all industries, 1963

Proportion of industry employment fji2/

: Other : Cookies Industry. 1/ Meat :fruits : Sugar : Fats Beer, Meat^ Other and Soft Misc. and Milk Canning: and : Grains Bread and : and wine, Tobacco dairy crack- drinks foods packing poultry : vege- : candy : oils liquor ers ¡tables :

Percent

Mineral extraction 0.4 0.1

Meatpacking 97.4 13.2 4.3 0,3 0.6 — 0.7 0.4 Processed meat and poultry .2 71.6 .2 .2 Fluid milk .3 92.8 29.3 3.3 3.4 .9 1.4 2.0 3.2 2.1 Other dairy products 2.1 58.6 1.5 .2 .1 1.4 .8 Canned fruits and vegetables .5 76.6 4.4 3,4 .6 Preserved fruits and vegetables. .2 3.5 1.0 .1 9.1 78,1 .5 .6 .1 .8 1.1 Grain mill products .2 5.6 2.0 83.5 .2 3.5 .6 4.7 1.3 Breads rolls, cake 1,9 .3 87.4 1. .4 .7 Cookies and crackers .1 1.6 .6 87.3 .9 2.8 0.2 Sugar and candy 1.4 .6 .1 81.2 1.1 Fats and oils 1.3 1.2 63.3 Alcoho^lic beverages .4 .8 98.6 .6 .3 Soft drinks, flavors .6 .2 97.4 .6 Miscellaneous foods .6 4.4 1.9 .8 4.3 1.0 .4 88.1 Tobacco products .9 .1 97.6

Total food and tobacco 98.0 96.9 95.9 93.3 92.5 96.2 91.3 90.2 94.2 92.3 82.4 99.8 98.9 89.9 97.8

Other manufacturing Yam, thread Sawmills Pulp, paper Paper containers 1.6 Commercial printing Industrial chemicals .1 .8 Drugs 1.0 .5 1.4 .5 Soap and toiletries .5 7.7 1.7 .4 .3 1,6 Miscellaneous .5 .1 .5 Petroleum 1.5 .1

See footnotes at end of table Continued- Appendix table 4—Employment diversifiGation into the food and tobaGcd manufacturing industries by companies primary to all itidustries, 1963—ôontinued

Proportion of industry employment 2/

: Other : Industry 1/ Cookies Meat : fruits : Sugar : Fats Beer, Meat- Other and Soft Misc. and Milk Canning: and :Grains Bread and : and wine, Tobacco packing dairy crack- drinks foods poultry : vege- : candy : oils liquor ; tables i

Percent

Manufacturing— Continued

Nonmetallic minerals 0.6 Steel mills Grey iron foundries Nonferrous metals Metal cans Other fabricated metals 0.8 Office and computing Service machinery Radio and TV equipment Other electric equipment Trans po rtation <6 0.6 .6 0.3 Instruments

Total manufacturing 98.7 97.4 97.0 94.7 97,6 97.6 96.9 90.2 96.3 96.0 96.5 99.0 99.4 93.0 97.9

Wholesale trade :

Wholesale drugs Wholesale grocers .2 .3 .4 ,3 Wholesale farm products 1.0 2.4 Wholesale alcoholic bever- ages .1 Other wholesale 1.0 1.4 Total wholesale trade .2 .4 *2 .3 .5 2,0 .5 2.4 .8 2.1

See footnotes at end of table. Continued- Appendix table 4—Employment diversification into the food and tobacco manufacturing industries by companies primary to all industries, 1963—continued

Proportion of industry employment ij

: Other : Industry 1/ [Cookies „ ^ : Meat : fruits Sugar : Fats : Beer, Other and ! Soft ; Misc. : and Milk Canning;: and :Grains ; Bread and : and : wine, ¡Tobacco packing.p^^^^^"^l^r dairy , crack- \drinks foods : vege- candy : oils Iliquor ! ers • : tables \

Percent

Retail trade;

Department stores ! — — — — 0.1 — — — — Variety stores — — — — — — -_ — — — — — 1.7 — Grocery stores 1.0 1,0 2.2 3.3 1.3 0.9 T" 8.2 3.7 1.7 0.9 ,- 0.1 3.6 — Other food stores : — .9 .2 .3 .7 — 1.0 1.4 — .3 — — — -.- — Eating places —~ .8 .5 .__ 1.9 -"" —"" .5 Nonstore retailers ' -- .-4 — — — — —

Total retail trade Î 1.1 1.9 2.8 4.6 2.1 1.5 1.2 9.7 3.7 3.5 .9 — .2 5.9 —

Service Industries Î ~ — ~ ~ .4 — ~ — — ~ — .2 .2 —

All industries ¡lOO.O 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100,0 100.0 100.0 100.0 100.0 100.0

— = Not applicable.

1^/ Industries with 100 or more eu^ployees in the food or tobacco manufacturing industries only. 1/ Due to disclosure concerns, the following assumptions were made with respect to Census ranges: C=150, D-350, £»700, F«1500, G»350O, 11^7000. Indlvdual industries may not add to sector totals. In some cases, percentages were obtained by subtraction.

Source: (21) and table 6. Appendix table 5—U.S. measured-media advertising of processed food and tobacco products and the position of the 200 largest food and tobacco processing firms, 1975

Leading positions! Advertising i Advertising-to- Total media of 200 largest 2/; concentration ¿/ : sales ratio A/ : advertising V SIC number!./ [ Top ! Top \ Top ■ Top Top *. Top ], Top ! Top four '. eight ' [ four ! eight , 1 four . eight ;] four ; eight

Number - —■— Percent —- — Million dollars

20111 : 2 4 39.6 Ö.03 0.01 1.235 1.444 20112 : 0 0 .00 .00 .000 .000 20113 : 0 0 0,0 0.0 .10 .02 .220 .084 20114 : 0 0 .00 .00 .000 .000 20115 : 1 1 83.3 83.3 .03 .02 .006 .006

2011 : 0.60 1.00 33.8 37.3 .02 .01 1.461 1.670

20136 : 4 8 100.0 100.0 .53 .55 2.035 3.073 20137 : 4 7 100.0 93.5 1.96 2.02 12.431 17.670 20138 ! 2 5 72.6 73.4 .95 .75 2.627 3.122

2013 ! 3.33 6.67 94.3 91.7 1.33 1.30 17.093 23.865

20161 : 2 4 81.5 77.1 .73 .56 3.854 4.643 20162 ! 0 0 .00 .00 .000 .000 20163 ! 4 4 100.0 97.9 .74 .54 2.520 2.575 20164 0 0 0.0 0.0 .05 .03 .19 .19

2016 1.50 2.00 86.2 82.4 .67 .50 6.564 7.408

20171 1 1 83.7 83.7 .03 .02 .043 .043 20172 1 1 95.9 95.9 3.32 2.25 2.525 2.525

2017 1.00 1.00 95.7 95.7 1.12 .75 2.568 2.568

20210 2 2 100.0 100.0 .50 .42 1.323 1.323

2021 2.00 2.00 100.0 100.0 .50 .42 1.323 1.323

20221 3 5 99.0 97.7 1.70 1.35 16.353 16.631 20222 4 5 100.0 100.0 .10 .08 .970 .977

2022 3.50 5.50 99.1 97.8 .88 .71 17.323 17.608

20231 : 3 3 100.0 100.0 .74 .56 2.853 2.853 20232 : 3 3 100.0 100.0 .55 .47 2.046 2.046

2023 : 3.00 3.00 100.0 100.0 .64 .50 4,899 4.899

20240 : 3 7 88.4 90.8 .74 .68 4.035 5.063

2024 : 3.00 7.00 88.4 90.8 .74 .68 4.035 5.063

See footnot(ss at end of table. Continued-

92 Appendix table 5—U.S. measured-media advertising of processed food and tobacco products and the position of the 200 largest food and tobacco processing firms, 1975—Continued

Leading positions Advertising Advertising-to- Total media of 200 largest j./ concentration 3/ sales ratio A/ advertising SIC kl number -L' Top Top Top Top Top Top Top Top four eight four eight four eight four eight

Number Percent Million dollars

20262 4 7 100.0 95.9 9.75 0.68 9.561 11.326 20263 3 6 95.7 94.2 1.55 1.11 2.050 2.211 20264 4 6 100.0 97.9 3.73 3.14 6.078 6.882

2026 3.66 6.33 99.5 96.4 1.13 .86 17.689 20.419

20321 2 2 100.0 100.0 .83 .80 2.665 2.665 20322 3 3 100.0 100.0 2.16 2.02 20.556 20.556 20323 4 6 100.0 86.2 2.48 2.40 3.588 4.721 20324 4 8 100.0 100.0 7.22 6.12 13.639 15.554

2032 3.25 4.75 100.0 98.5 2.52 2.52 40.448 43.496

20331 4 6 100.0 95.6 1.15 .90 5.505 6.143 20332 4 6 100.0 91.1 1.09 1.03 6.335 7.854 20333 1 1 43.1 43.1 3.31 2.24 1.544 1.544 20334 4 7 100.0 96.5 5.29 4.35 13.340 16.995 20335 4 6 100.0 98.2 2.85 2.51 4.267 4.624 20336 4 8 100.0 100.0 3.36 3.21 18.383 21.989 20338 3 5 58.5 59.0 2.40 1.90 4.552 4.958

2033 3.43 5.57 94.9 92.9 2.34 2.09 53.926 64.107

20341 3 5 83.1 79.1 6.82 6.01 8,371 11.769 20342 4 6 100.0 100.0 5.29 4.78 8.204. 8.507

2034 3.5 5.50 91.5 87.9 5.96 5.42 16.575 20.276

20352 3 4 55.3 54.9 1.85 1.48 3.177 3.409 20353 4 6 00.0 87.9 4.81 4.97 6.151 8.396 20354 3 4 93.6 87.5 4.00 3.79 23.772 26.803

2035 3.33 4.66 91.1 84.7 3.70 3.49 33.100 38.608

20371 3 5 96.9 95.6 3.73 2.90 11.625 11.913 20372 4 4 100.0 95.3 1.88 1.21 9.794 10.279

2037 3.50 4.50 98.8 95.5 2.57 1.76 21.419 22.192

20381 4 7 100.0 91.6 2.88 3.24 10.880 15.617 20382 4 7 100.0 91.8 1.91 2.24 9.594 13.905 20383 3 5 72.4 69.9 1.48 1.01 2.234 2.368

2038 3.67 6.33 97.3 90.1 2.21 2.38 22.708 31.890

See footnotes at end of table. Continued-

93 Appendix table 5~U,S. measured-media advertising of processed food and tobacco products and the position of the 200 largest food and tobacco processing firms, 1975—Continued

Leading positions: Advertising :Advertising-to- Total media SIC of 200 largest j./; concentration 3^/ : sales ratio A^ advertising j.^ xiumhetU Top ; Top Top T^p Top Top Top Top four ; eight four eight four eight four eight

Number Percent Million dollars

20411 4 6 100.0 95.1 1.29 0.83 2.385 2.585 20412 1 1 100.0 100.0 6.37 4.78 1.528 1.528 20416 0 0 .00 .00 .000 .000 20413 3 4 95.5 91.3 .27 .23 .708 .770

2041 2.00 2.75 99.3 96.0 .83 .64 4.621 4.883

20430 4 8 100.0 100.0 8.36 8.21 115.509 129.509 2043 4.00 8.00 100.0 100.0 8;.36 8.21 115.509 129.509 20440 4 5 100.0 ^7.1 2.52 1.63 7.042 7.270

2044 4.00 5.00 100.0 97.1 2.52 1,63 7.042 7.270

20455 4 7 100.0 98.4 5.64 4.09 29.522 31.331

2045 4.00 7.00 100.0 9B.4 5.64 4.09 29.522 31.331

20460 2 2 100.0 100.0 .06 .04 .311 .311

2046 2.00 2.00 100.0 100.0 .06 .04 .311 .311

20471 4 8 100.0 100.0 7.83 7.10 87.882 107.742 20472 0 0 .00 .00 .000 .000

2047 2.00 4.00 100.0 100.0 7.42 6.83 87.882 107.742 20481 to 20489 3 5 75.8 71.9^ .94 .82 .285 .338

2048 3.00 5.00 75.8 71.9 .94 .82 .285 .338

20511 3 5 81.3 70.2 1.31 1.27 16.378 21.222 20512 3 4 93.6 90.2 1.51 1.21 6.105 6.602 20513 3 3 100.0 100^0 .23 .15 .389 .389 20514 3 6 99.5 99.2; 3.04 2.43 10.594 10.659 20515 4 4 100.0 96.3 .85 .66 1.117 1.160 20516 1 1 100.0 100.0 7.51 4.78 .526 .526 20517 0 0 .0 .0 .00 .00 .003 .003

2051 2.43 3.29 89.9 82.5 1.43 1.29 35.112 40.561

20521 4 7 100.0 98.7 2.48 2.31 18.592 19.619 20522 4 5 100.0 92.7 1.56 1.60 12.068 15.007

2052 4.00 6.00 100.0 9^6.1 2.01 1.94 30.660 34.626 Continued— See footnotes at end of table.

94 Appendix table 5~U.S« measured-media advertising of processed food and tobacco products and ijthe position of the 200 largest food and tobacco processing firms, 1975—continued

Leading positions; Advertising Advertísing-to- ; Total media of 200 largest A/ concentration 2/ , sales ratio ÍL^ : advertising 1/ number^^^ —1/ i Top ! Top Top ! Top Top ! Top ; [ Top '. Top four ; eight four ; eight four ; eight 1 four 1 eight

Number - Percent Million dollars

20620 : 3 4 83.9 85.0 0.32 0.24 2.409 2.593

2062 : 3.00 4.00 83.9 85.0 .32 .24 2.409 2.593

20630 : 4 4 100.0 100.0 .11 .11 .492 .492

2063 : 4.00 4.00 100.0 100.0 .11 .11 .492 .492

20651 : 3 5 81.1 79.7 4.03 4.19 18.509 23.556 20652 : 3 3 80.4 80.4 2.23 1.62 3.783 3.783 20653 : 4 6 100.0 96.5 6.58 5.50 27.247 30.151 20654 ! 2 2 100.0 100.0 .32 .23 .171 .171 20655 : 0 0 .00 .00 .000 .000 20658 : 2 3 86.2 82.3 1.78 1.70 8,063 8.533

2065 : 2.33 3.17 90.7 87.8 3.57 3.49 57.773 66.214

20662 : 4 8 100.0 100.0 4.89 4.98 16.763 17.868 20668 :' 3 6 90.4 88.3 1.42 1.35 6.280 6.705

2066 ! 3.50 7.00 97.4 96.8 3.07 2.94 23.043 24.573

20670 ! 3 4 98.9 98.6 11.88 10.32 53.472 53.688

2067 ! 3.00 4.00 98.9 98.6 11.88 10.32 53.472 53.688

20752 2 5 36.7 37.7 5.36 4.39 7.669 8.287

2075 . 2.00 5.00 36.7 37.7 5.36 4.39 7.669 8.287

20791 ! 4 7 100.0 92.7 2.17 1.75 30.628 34.356 20792 ! 4 7 100.0 99.1 5.44 3.93 30.541 33.114

2079 ! 4.00 7.00 100.0 95.8 2.83 2.24 61.169 67.747

20821 : 4 8 100.0 100.0 2.70 2.59 81.721 102.248 20824 : 3 5 84.^ 84.5 5.54 4.73 7.063 7.095

2082 : 3.50 6.50 99.4 99.4 2.81 2.67 88.784 109.343

20840 : 4 8 100.0 100.0 4.09 4.30 33.585 44.776

2084 i 4.00 8.00 100.0 100.0 4.09 4.30 33.585 44.776

20853 : 4 8 100.0 100.0 8.74 9.00 93.382 137.637 Continued— See footnotes at end of table.

95 Appendix table 5—U.S. measured-media advertising of processed food and tobacco products and the position of the 200 largest food and tobacco processing firms, 1975—continued

: Leading positions Advertising Advertis ing-to- Total media :o£ 200 largest SIC 1/ ■concentration ¿' sales ratio 4/ advert ising 2.' number —' ! Top Top ' Top \ Top Top ■ Top Top ■ Top ; four \ eight four 1 eight four ! eight four I eight

: Number Percent Million dollars

2085 'i 4.00 8.00 100.0 100.0 8,74 9,00 93.382 137.637

20860 : 4 8. 100.0 100.0 9.47 8,00 97,765 117.977

2086 : 4.00 8.00 100.0 100.0 9.47 8,00 97,765 117.977

20871 : 1 1 100.0 100.0 2.50 1.79 .250 .250 20872 ! 2 3 47.5 48.8 5,85 5,75 1,403 1.437 20874 ! 4 6 100.0 96,7 3,51 3.34 27,972 28.960

2087 ! 2.33 3.33 97.5 94,5 3,57 3,40 26.625 30,647

20910 : 4 7 100.0 99.7 2.38 1.72 8,218 8.745

2091 ¡ 4.00 7.00 100.0 99.7 2.38 1.72 8,218 8.745

20922 . 0 0 0.00 0.00 0,000 0.000 20923 ; 3 4 76.6 73.5 .56 ,40 1.038 1.118 2092A , 2 4 20.0 22.3 1.54 1.08 2.410 2.520

2092 : 1.67 2.67 37.0 38.0 .88 .65 3.448 3.638

20951 : 3 5 93.4 90.9 3.35 2.80 38.207 29.985 20952 , 4 5 93.9 93.7 3.69 3,59 31.599 33.883

2095 3.00 5.00 93,6 92.2 3.50 3,12 69,806 73.868

20970 ¡ 2 3 61.7 57.6 NA NA 1.273 1.397

2097 2.00 3.00 61.7 57.6 NA NA 1.273 1.397

20980 i 2 4 70.2 64.5 4.09 3.35 8.132 9.815

2098 i 2.00 4.00 70.2 64,5 4,09 3.35 8.132 9.815

20991 i 4 8 100.0 100.0 5,53 5.21 18.115 18.399 20992 ; 4 8 100.0 100.0 3,61 3.13 27.859 30.121 20993 ¡ 4 7 100.0 99.4 4,58 3.59 7.929 8.317 20994 : 1 1 77.3 77.3 .82 .79 .824 .824 20995 ¡ 3 5 93.4 92.0 3.52 3.23 13.225 14.267 20996 ¡ 1 1 93.9 93,9 ,79 ,91 .346 .346 20999 ¡ 4 8 100.0 100.0 4,33 4.68 17.169 27.070

2099 i 3.00 5.43 98.7 98,0 3,87 3.64 85.467 99.344 Continued— See footnotes at end of table.

96 Appendix table 5—U.S. measured-media advertising of processed food and tobacco products and the position of the 200 largest food and tobacco processing firms, 1975—-Continued

Leading positions ! Advertising Advertising-to- : Total media of 200 largest concentration ±1 : sales ratio A' advertising 5^/ SIC U mimber i/ = Top ! Top ; Top '. Top Top '. Top ! Top ■* Top four ; eight four ; eight ' four \ eight [ four \ eight

Number — Percent Million dollars

21110 4 6 100.0 99.95 6.43 6.58 266.336 324.751

2111 4.00 6.00 100.0 99.95 6.43 6.58 266.336 324.751

21210 . 4 5 100.0 97.3 5.50 4.10 9.563 10.014

2121 . 4.00 5.00 100.0 97.3 5.50 4.10 9.563 10.014

21310 : 3 5 52.7 48.3 1.93 1.63 3.476 4.265

2131 : 3.00 5.00 52.7 48.3 1.93 1.63 3.476 4.265

- = Not applicable.

\l The four-digit or five-digit U.S. Standard Industrial Classification (SIC) number, 1972 basis. Ij The number of leading positions held by the 200 largest food and tobacco processing firms in 1975, based upon their total U.S. measured media advertising expenditures in the five-digit SIC product class. If fewer than four (or eight) advertisers existed according to our sources, it was assumed that the others were below the 200 largest companies. For the four-digit SIC industries shown, the number given is the simple average of the constituent product classes. _3/ The ratio of total U.S. measured media advertising by the 200 largest firms to total advertising by the four (or eight) largest advertisers. The four-digit SIC industry is the advertising-weighted average of its constituent product classes. kj Total eight-media advertising expenditures divided by estimated 1975 shipments by the four (or eight) largest advertisers. Shipments are corrected for interindustry sales, imports and exports and represent domestic sales to consumer only. 2/ Total measured eight-media advertising in 1975 by the four (or eight) largest advertisers of branded products, whether among the 200 largest food and tobacco processing firms or not.

Source: Leading National Advertisers, Inc. Media Records, Inc., and Radio Expenditure Reports, Inc.

97 Appendix table 6—Income Statement and balance sheet items for food, tobacco, and the rest of manufacturing corporations, annual averages, 1947-77

[ Food and kindred products Tobacco manufacturers All manufacturing After-tax net income over stockholders' equity Year

; Net ' Net Total Net : Net Total Net Net Total, Food and Equity Equity Equity Rest of ' sales income assets sales : income assets sales income assets tobacco manufacturing

-Million dollarsi^ Fercent

1947 • 30,979 1,305 10,984 7,364 2,641 108 1,864 1,065 150,692 10,133 91,939 64,454 16.76 15.56 1948 • 29,678 992 11,624 7,695 3,081 159 2.079 1,155 165,632 11,542 103,171 71,71> 13.01 16.53 1949 ; 29,042 965 11,869 8,124 3,061 156 2,201 1.236 . 154,861 9,021 108,956 77,17£ Î 11.98 11.05 1950 •'31,170 1,063 12,319 8,499 3,129 152 2,254 1,319 181,881 12,864 115,016 82,50£ \ 12.38 16.03 1951 • 43,338 859 16,392 10,443 3,378 129 2384 1,355 244,970 11,869 149,302 97,87a 8.37 12.64 1952 • 43,267 817 16,546 10,692 3,702 120 2,582 1,446 250,184 10,714 159,697 193,448 7.72 10.71 1953 '42,641 870 16,260 10,703 3,768 138 2,636 1,471 265,900 11,340 168,672 107,771 8.28 10.81 1954 42,597 883 16,414 10,907 3,572 156 2,722 1,519 248,496 11,232 168,972 112,554 8.36 10.18

1955 43,564 997 16,722 11,116 3,796 183 2,.715 1,592 278,394 15,099 178,804 199,109 9.29 13.08 1956 45,733 1,337 18,030 ' 11,867 3,959 197 2,798 1,666 307,,256 16,153 200,080 130,680 11.34 12.48 1957 47,995 1,063 18,840 12,225 4,262 220 3,068 1,746 320,039 15,438 216,214 140,370 9.18 11.20 1958 50,896 1,141 19,724 13,014 4,649 249 2,962 1,831 305,281 12,670 219,067 146,245 9.36 8.58 1959 51,131 1,251 20,374 12,412 4,908 265 3,075 1,969 337,817 16,328 236,863 136,012 9.86 10.53 1960 ; 52,590 1,224 21,204 13,884 5,139 281 3,321 2,090 349,690 15,198 251,307 164,489 9.42 9.22 1961 ; 57,119 1,325 23,132 14,804 5,300 303 3,357 2,218 356,424 15,311 261,419 171,478 9.56 8.86 1962 ; 59,314 1,368 24,436 15,377 5,340 306 3,585 2,327 389,404 17,727 279,626 180,514 9.46 9.86 1963 ; 61,266 1,449 25,452 15,999 4,463 327 3,619 2,418 412,678 19,483 295,086 188,990 9.64 10.38 1964 ; 63,784 1,692 26,567 16,708 5,836 345 3,662 2,550 443,072 23,211 311,394 198,530 10.58 11.81 1965 ; 69,145 1,896 28,782 17,526 6,006 354 3,843 2,578 492,201 27,521 339,100 209,557 11.19 13.33 1966 77,671 2,102 31,961 18,672 6,570 389 4,215 2,787 554,180 30,937 381,045 228,557 11.61 13.74 1967 ; 81,881 2,130 34,340 19,606 7,088 420 4,469 2,880 575,427 29,008 416,353 245,559 11,22 11.86 1968 ', 84,838 2,209 36,861 20,337 7,859 436 4,709 2,945 631,911 32,069 461,892 263,431 11.36 12,25 1969 l 92,950 2,382 40,470 21,752 9,162 475 6,288 3,245 694,584 33,248 517,932 287,964 11.43 11.56 See footnotes at end of table. Continued— Appendix table 6- -Income statement and balance sheet items for food, tobacco, and the rest of manufacturing corporations, annual averages, 1947-77—continued

: Aft er-tax new income over . Food and kindred products Tobacco manufacturers All manufacturing stockholders' equity Year , Net Net Total Net Net : Total Net Net ^ Total . Food and Rest of Equity Equity Equity manufacturing aale s !i income assets sales income : assets sales income assets J tobacco

f -Million dollarsi> •'—Percent

1970 .101,109 2,459 45,428 23,468 9,839 569 7,086 3,530 708,810 28,572 564,736 306,036 11.55 9.12 1971 ,105,659 2,754 46,658 24,430 10,551 643 7,798 4,073 751,061 *31,038 591,584 319,008 11.92 9.51 1972 119,782 3,021 52,016 26,927 11,308 676 8,209 4,313 849,523 36,467 633,336 340,398 11.83 10.60 1973 . 140,086 3,723 57,978 29,339 11,804 730 9^335 4,670 982,846 48,234 705,220 370,768 13,14 13.00 1974 .162,098 4,601 66,247 32,461 11,743 801 9,606 5,071 1,078,181 58,747 726,156 389,923 14.39 15.14 (158,262)2 ./ (8,933) (1,060,563)

1975 165,860 4,154 71,036 35,169 13,180 919 11,059 5,675 1,082,937 49,135 782,351 420,225 14.87 11.35 (162.091) (9,987) (1,065,215) 1976 173,141 5,808 75,420 38,623 14,706 1,007 12,392 6,274 1,220,714 64,443 851,837 460,064 15.18 13.88 (169,451) ( 11,964) (1,203,233) 1977 . 181,227 5,554 81.035 41,946 16,516 1,238 13,53§ 7,025 1,349,335 70,459 919,029 493.545 13.87 14.32

(177,437) ■ :i3,696> (1,136,930; 1978 194,639 6,213 86,431 44,065 16,504 1,412 15,124 7,616 1,514,740 81,279 1,017,452 533,252 14.75 15.29 : (190,716) [14,024) (1,496,434]

V Sales and profits annual totals, assets and equity at end of second quarter. Z/ Figures in parentheses are net of sales and excise taxes.

Source: Federal Trade Commission, Quarterly Financial Reports, first quarter, 1952 and subsequent years. Appendix table 7—^Advertising intensities of the food and tobacco manufacturing industries, by estimated advertising-to-sales ratios, 1975

Advertising-to-sales ratiai'1/ SIC Code and industry

Percent

2067 Chewing g\m 12.58 12.10 2086 Soft drinksl/ 4.68 9.47 2085 Distilled liquors 9.57 8.91 2043 Breakfast cereals 13.51 8.36 2047 Pet foodsA/ 1.15 7.42

2011 Cigarettes 9.20 6.43 2034 Dried fruits and vegetables 4.18 5.71 2045 Flour mixes 1.10 5.64 2121 Cigars 4.53 5.50 2075 Soya-based meat analogs^/ — 5.36

2084 Wine and brandy 5.72 4.09 2098 Pasta products 2.65 4.09 2099 Miscellaneous foods 4.62 3.90 2035 Pickles, sauces, dressings 2.83 3.69 2065 Confections 2.22 3.67

2095 Coffee 2.60 3.59 2087 Flavo ringSLâ./ 4.68 3.42 2079 Cooking oils and margarine 3.23 3.10 2066 Chocolate .47 2.92 2082 Beer 4.88 3.42

2037 Frozen fruits and vegetables 1.34 2.57 2032 Canned specialities 3.75 2.52 2044 Rice 1.46 2.52 2033 Canned fruits and vegetables 1.12 2.40 209^^1 Canned fish 1.82 2.38

2038 Frozen specialities 1.34 2.12 2052 Cookies and crackers 1.30 2.01 2131 Smoking and chewing tobacco 3.44 : 1.93 2051 Bread, rolls, cake .92 1.44 2013 Processed meats .01 1.33

2017 Processed poultry and eggs .22 1.12 2026 Milk andfogurt .11 1.12 2048 FeedaS/ £/ 1.15 .94 2022 Cheese .72 .88 2092 Frozen fish .37 .86

See footnotes at end of table. Continued

100 Appendix table 7~Advertising intensities of the food and tobacco manufacturing industries, by estimated advertising-to-sales ratios, 1975—continued

Advertislng-to-sales ratloi' SIC Code and Industry

1967Í/ : 1975

Percent

2041 Grain milling ; 0.00 0.83 2024 Ice cream •• .65 .74 2016 Poultry dressing : .22 .71 2023 Canned milk 3.69 .64 2021 Butter ! .09 .50

2062 Cane sugari./ .31 .32 2063 Beet sugar6,/ .00 .11 2046 Corn starch ! .00 .06 2011 Fresh meat : .20 .12 2061 Raw sugará/ .00 .00

2074 Unrefined olió/ .00 .00 2076 Unrefined oili./ .00 .00 2077 Fats and oilsi/ : .00 .00 2083 Malti/ : .,00 .00 2097 Icei/ .00 .00

2141 Tobacco stemmingá./ : .00 .00

— « not available

JL^/ Ratio of measured media advertising of top four advertisers of branded products to estimated domestic sales to consumers of four largest companies. 2^/ From FTC, as used in Mueller and Rogers (38), For 2016 and,2017 used 1015; for 2047 and 2048 used 2042; for 2037 and 2038 used 2037. 2/ ^^ ^^^7 SICs 2086 and 2087 were combined into a single industry. 4^/ Definitions of SIC industries changed significantly during 1967-75. 5^/ Questionable estimate. 6_/ Producer goods industry.

Sources: (15) and appendix table 5.

101 Appendix table 8—Food and tobacco manufacturing product classes by estimated advertising-to-sales ratios, 1975

Advertising-to-sales SIC dode and product class ratiol/

Percent

2067 Chewing gum 12 .10 20860 Soft drinks 9 .47 20853 Distilled liqours 8 .91 20430 Breakfast cereals 8 .36 20471 Dog and cat food 7 .83

20516 Pastries, especially refrigerated 7 .51 20324 Canned specialities and nationality foods 7 .22 20341 Dehydrated potatoes 6 .82 20653 Packaged candies, exc-udlng chocolate 6 .58 21110 Cigarettes 6 .43

20412 Wheat germ 6 .37 20455 Flour mixes and doughs 5 .64 20824 Malt liqours 5 .54 20991 Ready-to-mix desserts 5 .53 21210 Cigars 5 .50

20792 Margarine 5 .44 (PL)2/ 20752 Soy-based meat analogs 5 .36 20872 Liquid beverage bases, mainly cocktail 5 32 20334 Canned fruit juices 5 .29 (PL) 20662 Chocolate candies and bars 4 .89

20342 Dried soup mixes 4, .84 20353 Sauces for meat, excluding tomato 4 .71 (PL) 20993 Sweetening syrups 4. 58 20999 Miscellaneous prepared foods 4. 33 (PL) 20980 Pasta products 4. 09 (PL)

20840 Wine and brandy 4. 09 20651 Candy bars, excluding chocolate 4. 03 20354 Mayonaise and salad dressings 4. 00 (PL) 20264 Yogurt and flavored 3. 70 20952 Concentrated coffee 3. 68

20371 Frozen juices and fruits 3. 73 (Pli) 20992 Chips 3. 61 20995 Tea 3. 52 (PL) 20951 Roasted ground coffee 3. 51 (PL) 20874 Flavoring powders 3. 38

20336 Catsup and tomato sauces 3. 36 (PL) 20172 Liquid and dried eggs 3. 32 20333 Canned mushrooms 3. 31 (PL) 20514 Soft cakes 3. 04 20381 Frozen pies and other baked goods 2. 88 Continued See footnotes at end of table.

102 Appendix table 8—Food and tobacco manufacturing product classes by estimated advertising-to-sales ratios, 1975—continued

Advertising-to-sales SIC code and product class • ratiol^/

Percent

20335 Canned vegetable juices : 2.85 20821 Beer and ale : 2.70 20440 Rice and rice dishes - 2.52 (PL) 20871 Liquid extracts and flavorings 2.50 (PL) 20521 Crackers : 2.48

20323 Canned baked beans : 2.48 (PL) 20338 Jams, jellies, and preserves ; 2.40 (PL) 20910 Canned : 2.38 (PL) 20652 5-cent and 10-cent candies ; 2.23 20791 Shortening and cooking oils : 2.17 (PL)

20322 Canned soups * 2.16 (PL) 20658 Salted nuts > 2.08 (PL) 20137 Sausages, cold cuts, etc. * 1.96 21310 Chewing and smoking tobacco. ' 1.93 20372 Frozen vegetables 1.88 (PL)

20352 Pickles and pickle products ! 1.85 (PL) 20382 Frozen entrees and nationality foods : 1.85 20221 Natural cheese : 1.70 20522 Cookies : 1.56 20924 Frozen shellfish and soups : 1.54

20263 Cottage cheese : 1.53 20512 Rolls and muffins, especially refrigerated : 1.51 20668 Coeoa powder and beverage mixes : 1.39 20511 Bread : 1.31 (PL) 20411 Wheat flour : 1.29 (PL)

20331 Canned fruits ': 1.12 (PL) 20332 Canned vegetables : 1.09 (PL) 20138 Canned meats : .95 20480 Feeds, mainly horse : .94 20515 Pies : .85

20321 Canned baby foods Î .83 20161 Dressed chickens .83 20994 Baking powder and yeast : .82 20996 Vinegar ,79 (PL) 20262 Fluid milk : .75 (PL) Continued— See footnotes . _ at^ endj -.£of 4-«wn^table

103 Appendix table 8—Food and tobacco manufacturing product classes by estimated advertising-to-sales ratios, 1975—contin^ed

Advertising-to-sales SIC code and product class ratiol/

Percent

20163 Dressed turkeys 0.74 20240 Ice cream .74 (PL) 20231 Dry milk products .72 203S3 Frozen batters, fried chicken, etc. .59 2Ï)232 Canned milk .55

20136 Bacon .53 2X)210 Butter .50 (PL) 2Ö923 Frozen fish .49 20620 Refined cane sugar .34 (PL) 20654 Bulk candies .32 (PL)

20413 Corn meal .27 20513 Sweet yeast goods .23 (PL) 20222 Processed cheese .10 20460 Corn starch and syrup .06 20164 Rabbits .05

20113 Lamb .04 20630 Refined beet sugar .11 (PL) 20111 Fresh meat .03 20115 Lard .03 20171 Processed poultry .02

20112 Veal .00 20114 Fresh pork .00 20162 Dressed hens and fowl .00 20416 Miscellaneous grain mill products .00 20472 Other pet foods .00

20517 Doughnuts .00 206S5 Penny candies .00 20922 Fresh fish .00

J^/ The total measured eight-media advertising expenditures of the four top adver- tisers of branded products divided by estijnated domestic sales to consumers by the four leading firms, 27 The symbol "PL" designates product classes that contain items marketed under "private" or store labels in supermarkets. Specifically^ at least 10 percent of national supermarket sales were private label sales according to a special study by Selling*Areas-^Màrkéting inc. (SAHI). To the extent that the four leading manufacturers product both national brand as well as private label items, the advertising-to-sales ratios are biased downward to an unknown extent.

Sources: Leading National Advertisers, Inc., Media Records, Inc., and Radio Expenditure Reports, Inc.

104 Appendix table 9—Geographical dispersion of production among the food and tobacco manufacturing industries, 1972

SIC : Indexy SIC ! Industry code : Industry code ' IndexW

2011 65.9 2063 124.0 2013 30.7 2065 : 30.6 2016 : ; 80.0 2066 90.6 2017 : 60.5 2067 68.0 2021 95.9 2074 103.9

2022 : 98.6 2075 : 82.5 2023 : 83.1 2076 : 41.3 2024 : 25.5 2077 ! 14.5 2026 : 13.9 2079 : 27.9 2032 : 28.9 2082 : 14.5

2033 49.9 2083 110.1 2034 : 115.1 2084 111.1 2035 : 17.1 2085 39.4 2037 : 63.8 2086 10.0 2038 i 32.3 2087 15.3

2041 ! 60.8 2091 ; 101.1 2043 : 86.1 2092 : 46.4 2044 : 103.9 2095 : 30.1 2045 : 65.1 2097 : 44.7 2046 : 56.7 2098 : 51.5

2048 ': 36.1 2099 ! 10.5 2051 7.3 2111 : 138.1 2052 22.8 2121 : 83.5 2061 : 103.9 2131 : 65.3 2062 51.3 2141 : 130.7

Ij The index is "...the sum of the absolute differences between the percentage of value of shipments accounted for by establishments in each region and the percentage of population in that region. The greater the geographic dispersion, the smaller the numerical value of the index." (11, p.120). The regions referred to are the Northeast, North Central, South, and West.

Source : U.S. Bureau of the Census, 1972 Census of Manufacturers, Industry Report Series.

. 105 Appendix table 10—The 200 largest U.S. food and tobacco processing companies, by their prinicipal industry, 1975

Company sales, 1975 Principal Principal food or U.S. food Company name 1/ Owaership industry - tobacco^. Total and tobacco (SIC) industry^ status^' manufacturing (SIC)

Million dollars

Castle and Cooke 0179 2033 Public 843 157-190 Colonial Provisions 2011 2011 Private 121 121 Dinner Bell Foods 2011 2011 Public 132 132 Dubuque Packing 2011 2011 Private 850 850 E.M.G^E. Packing 2011 2011 Private 155-160 155-160

Esmark 2011 2011 Public 4,740 3,259-3,303 o 2011 2011 Public 380 380 ON Flavorland Industries Frederick and Herrud 2011 2011 Public 355 355 General Host 2011 2011 Public 668 513-518 Glover 2011 2011 Public 155 155

Greyhound 2011 2011 Public 3,748 2,392 Idle Wild Foods 2011 2011 Public 335 335 mini Beef Packers 2011 2011 Public 162 162 Iowa Beef Processors 2011 2011 Public 1,805 1,805 Kane-Miller 2011 2011 Public 658 619

Krey 2011 2011 Private 135 135 Lykes Bros, of Florida 2011 2011 Private 175 175 Marhoeffer Packing 2011 2011 Public 122 122 MBPXL 2011 2011 Public 709 610 Montfort of Colorado 2011 2011 Public 298 298

See footnotes at end of table.

Continued— Appendix table 10—The 200 largest U.S. food and tobacco processing companies, by their prinèipal industry, 1975.

j : Company sales, 1975

' Principal U.S. food Company name • Principal- , ' food or \ Ownership industry — ' tobacco . : Total : and tobacco status^^ (SIC) • industry^' . : manufacturing • (SIC)

Million dollars

Packerland International 2011 2011 : Private 262 262 Spencer Foods 2011 2011 : Public 444 429 Sunnyland Packing 2011 2011 : Private 160 160 Superior Brand Meats 2011 2011 : Private 150 150 United Brands 2011 2011 : Public 2,187 1,289-1,323

Valleydale Packers 2011 2011 Private 300 o 300 West Tennesse Packers 2011 2011 : Private 134 134 Bluebird 2013 2013 : Public 403 403 George A. Hormel 2013 2013 Public 996 987 Hanson Trust (Hygrade Food Products) 2013 2013 : United Kingd om 825 340-350

Oscar Mayer 2013 2013 : Public 1,055 1,029 Rath Packing 2013 2013 : Public 399 399 Smithfield Foods 2013 2013 : Public 138 129 Federal 2016 2016 : Public 539 486 J. D. Jewell 2016 2016 : Private 153 153

Perdue Foods 2016 2016 : Private 175 175 Tyson Foods 2016 2016 : Public 170 170 Valmac Industries 2016 2016 : Public 157 140 Cagles 2017 2017 : Public 136 136 Beatrice 202X 20 2X : Public 4,691 2,662-2,766

See footnotes at end of table.

Continued— Appendix table 10—The 2Q0 largest U.S. food and tobacco processing companies, by their principal industry, 1975

Company sales, 1975

Principal food or U.S. food Principal tobacco^, Ownership Company name 1/ Total and tobacco industry industry^ status- manufacturing (SIC) (SIC)

Million dollars

Borden 202X 202X Public 3,367 2,050 Carnation 202X 202X. Public 2,075 1,553-1,624 Pet 202X 202X Public 1.011 659 Larid 0' Lakes 2021 2021 Coop 1,124 850-1,000 Mid America Dairymen 2021 2021 Coop 637 635

Public 4,857 3,165 o Kraftco 2022 2022 00 L.D, Schreiber Cheese 2022 2022 Private 195 195 Associated Milk producers 2023 2023 Coop 1,479 346-361 Dáiryléa Cooperative 2026 2026 Coop 364 194-214 Dean Foods 2026 2026 Public 279 254-279 215-320 Fairmont Foods 2026 2026 Public 515 H.P. Hood 2Ö26 2026 Private 430 420 lU International 2Ö26 2026 Public 1,823 280 Knudsen 2026 2026 Public 288 265 National Industries 2026 2026 Public 766 205

United Dairymens Association 2026 2026 Coop 187 187 Campbell Soup 203X 203X Public 1,546 1,300 Gerber Products 2032 2032 Public 372 300-315 H.J. Heinz 2032 2032 Public 1,882 1,117 California Canners and Growers 2033 2033 Coop 203 203

See footnotes at end of table. Continued— Appendix table 10—The 200 largest U.S. food and tobacco processing companies, by their principal industry, 1975

Company sales, 1975

Principal [ "food or Principal, , Company i^me \ tobacco-, U.S. food industry — : Ownership industry" Total and tobacco (SIC) : status— ■ (SIC) manufacturing

Million dollars

Del Mótite 2033 2033 : Coop 1,430 776-796 Green Giant 2033 2033 Public 455 320 National Grape Cooperation 2033 2033 Coop 158 158 Stokeley-Van Camp 2033 2033 ; Public 470 447-461 Tri/Valley Growers 2033 2033 : Coop 159 159

Tropicana Products 2033 2033 Public 163 163 o J.R. Slinplot 2038 2038 Private 347 347 Con Agra 2041 2041 : Public 546 518-530 Hubbätä Milling 2041 2041 : Private 150-300 150-300 International Multifoods 2041 2041 ¡ Public 801 323-407

Peavey 2041 2041 Public 506 299-309 Seaboard Allied Milling 2041 2041 Public 298 298 General Mills 2043 2043 : Public 2,645 1,300-1,470 Kellogg 2043 2043 Public 1,214 700-750 Quaker Oats 2043 2043 : Public 1,473 751

Rice Growers 2044 2044 Coop 164 160 Riceland Foods 2044 2044 ! Coop 462 455 Rlvlana Foods 2044 2044 : Public 462 340 Pillsbury 2045 2045 Public 1,422 600-705 A.E. Staley Manufacturing 2046 2046 ; Public 777 700

American ^Products 2046 2046 Public 235 232 GPC International 2046 2046 ! Public 2,742 1,031-1,079 Grain Processing 2046 2046 ; Private 245 245 Mars 2047 2047 : Private 625 441 Sun Industries 2047 2047 1 Private 152 152 Continued— See footnotes at end of table. Appendix table 10~The 200 largest U.S. food and tobacco processing companies, by their principal Industry, 1975

Company sales, 1975

Principal food or Principal Company name 1/ tobacco^/ U.S. food industry ^' industry— Ownership (SIC) Total and tobacco (SIC) status- manufacturing

Million dollars

Missouri Farmers 182 Association 2048 2048 Coop 462 380 Moorman Manufacturing 2048 2048 Private 380 2048 Public 3,149 1,841-1,956 Ralston Purina 2048 405-413 American Bakeries 2051 2051 Public 417 628-648 Campbell Taggart 2051 2051 Public 668 179 Flowers Industries 2051 2051 Public 179 2051 Public 422 422 Interstate Brands 2051 428-452 Ward Foods 2051 2051 Public 467 2052 Public 141 124 Lance 2052 975-1,110 Nabisco 2052 2052 Public 1,971 268 United Biscuits (Keebler) 2052 2052 United Kingdom 872 976-996 Amstar 206X 206X Public 1,119 182 United States Sugar 2061 2061 Public 192 California and Hawaiian 536 Sugar Refinery 2062 2062 Coop 536 183 183 Imperial Sugar 2062 2062 Private 251 R.S-N, Project: 2062 2062 Private 251 Savannah Foods and 354 319-350 Industries 2062 2062 Public 302 278 SuCrest 2062 2062 Public 2063 Public 178 178 Amalgamated Sugar 2063 252 American Crystal Sugar 2063 2063 Coop 252

See footnotes at end of table. Continued- Appendix table 10—The 200 largest U.S. food and tobacco processing companies, by their principal industry, 1975

: Company sales, 1975

Principal food or Principalj. U.S. food Company name tobacco-, \ Ownership . industry — Total and tobacco industry^ statusl' (SIC) ] (SIC) manufacturing

Million dollars

Great Western united 2063 2063 : Public 529 490 Holly Sugar 2063 2063 : Public 221 221 U and I 2063 2063 : Public 200 200 Hershey Foods 2066 2066 : Public 568 480-500 Wm. Wrlgley 2067 2067 : Public 340 290

Archer-Daniels-Midland 2075 2075 Public 1,621 1,240-1.256 Central Soya 2075 2075 Public 1,789 1,063-1,083 Coastal Freezer 2075 2075 : Private 152 152 Gold Kist 2075 2075 Coop 912 631 Hartsville Oil Mill 2075 2075 : Private 188 188

Anderson, Clayton 2079 2079 : Public 1,281 580-585 Adolph Coors 2082 2082 : Public 520 463-478 Anheuser-Busch 2082 2082 : Public 1,645 1,550 C. Schmidt & Sons 2082 2082 : Private 130 130 Chock Full O'Nuts 2082 2082 : Public 163 140

F. & M. Schaeffer 2082 2082 : Public 234 234 Falstaff Brewing 2082 2082 : Public 180 180 G. Heileman Brewing 2082 2082 : Public 189 178 Jos, Schlitz Brewing 2082 2082 : Public 923 897-914 Oljraipia Brewing 2082 2082 : Public 206 206

See footnotes at end of table.

Continued— Appendix table 10—The 200 largest U.S. food and tobacco processing companies, by their ptincipal industry, 1975

Company sales, 1975

Principal food or Principal Ownership Company name 1/ tobacco^i U.S. food industry - status^/ Total and tobacco (SIC) industry^ (SIC) manufacturing

Million dollars

Pabst Brewing 2082 2082 Public 525 525 Rothmans of Pall Mall Canada 2082 2082 Canada- 526 149 Southdown 2082 2082 Public 284 194 Stroh Brewery 2082 2082 Private 200 200 Coca-Cola Bottling of New York 2084 2084 Public 256 233

E. & J. Gallo 2084 2084 Private 400 400 Brown-Forman Distillers 2085 2085 Public 205 130-142 Glenmore Distillers 2085 2085 Public 187 148 Heublein 2085 2085 Public 1,282 879-1,023 Hiram Walker^Gooderham & Worts 2085 2085 Canada 864 122-198 National Distillers and Chemicals 2085 2085 Public 929 170-183 Publicker Industries 2085 2085 Public 212 126-142 Seagram 2Ô85 2085 Canada 1,092 790 Associated Coca-Cola Bottling 2086 2086 Public 157 157 Coca-Cola Bottling of Los Angeles 2086 2086 Public 142 142

See footnotes at end of table.

Continued— Appendix table 10—The 200 largest U.S. food and tobacco processing companies, by their principal industry, 1975

Company sales, 1975

Principal fopd or Principal Company name 1/ tobacco«/ Ownership U.S. food industry industrjr- (SIC) s tatusa' Total and tobacco (SIC) manufac tur ing

Million dollars

Dr. Pepper 2086 2086 Public 138 130-135 Royal Crown Cola 2086 2086 Public 257 170-186 Seven-up 2086 2086 Public 214 149-159 Coca-Cola 2087 2087 Public 2,873 1,584-1,616 175-182 McCormick & Co. 2087 2087 Public 251 1,240-1,300 Pepsico 2087 2087 Public 2,321 C.H.B. Foods 2091 2091 Private 149 149 2,617-2,667 General Foods 2095 2095 Public 3,978 Nestle Alimentana 2095 2095 Switzerland 6,953 1,348 1,130-1,200 Standard Brands 2095 2095 Public 1,800

J. Lyons & Co. 2099 2099 United Kingdom 1,252 267 Reckitt & Coleman 2099 2099 United Kingdom 747 142-152 Consolidated Foods 20XX 20XX Public 2,755 1,025-1,238 Norton Simon 20XX 2DXX Public 1,790 960-1,060 Imperial Group 21XX 21XX United Kingdom 3,435 236 1,196 American Brands ^^^^ 2111 Public 2,570 British^American Tobacco 2111 2^11 United Kingdom 5,560 449 Imasco 2111 2038 Canada 647 125-150 Liggett & Myers 2111 2111 Public 680 503-551 Phillip Morris 2111 2111 Public 2,564 1,684

See footnotes at end of table.

Continued— Appendix table 10—The 200 largest U.S. food and tobacco processing companies, by their principal industry, 1975

Cpiapatny sales, 1975 Principal frincipalj^, food or Company naíDe toba,cco2y industry ^' Ownership industry^^ Ü,S. íood CSICI statuslf (SlCi Total and tohaccQ manufacturing

Mitlion doUays. R.J. Reynolds 2111 2111 Public 3,529 1,807-1,846 Dlbrell Bros. 2141 2141 Public 209 193 universal Leaf Tobacco 2141 2141 Public 617 363 Springs Mills 2211 2037 Public 543 122 Rapid-American 23XX 2085 Public 2,296 216-632 Squibb 2833 2067 Public 1,111 150-182

Abbott Laboratories 2834 2023 : Public 941 123 American Home Products 2034 2032 : Public 2,409 485-505 Mor ton-Norwich 2034 2099 Public 564 188 Warner-Lambert 2034 2067 : Public 2,172 298-328 Proctor & Gamble 2841 2079 : Public 6,513 1,175-1,225

Unilever 2841 20XX : United Kingdom^''l3,645 1,204-1279 Cheeseborouigh-Pond ' s 2844 2033 Public 675 140 W.R. Grace 2869 2092 : Public 3,529 191 IC Industries 33XX 2086 : Public 1,505 149 National Can 3411 203X : Public 799 153

SCM 3572 2079 : Public 1,332 290-320 RCA 3662 2038 : Public 3,728 234-281 Gulf & Western 39XX 2121 Public 3,396 145-205 International Telephone & Telegraph 39XX 2051 . Public 13,967 1,295 LTV 39XX 2011 : Public 4,313 2.063

See footnotes at end of table.

Continued— Appendix table 10—The 200 largest U.S. food and tobacco processing companies, by their principal industry, 1975

Company sales , 1975 ; Principal ] food or . Principal,. Company name ; tobacco«/ : industry — U.S. food industry^ ■ Ownership : (SIC) Total and tobacco ; (SIC) ; statuai/ ; manufacturing

Million dollars

Foremost-McKesson 5122 2026 : Public 2,553 457 Cargill 5153 2075 : Private 10,800 1,355 Continental Grain 5153 2047 Private 5,000+ 645 Cook Industries 5153 2075 : Public 488 179 Farmers Union Grain Terminal Assn. 5153 2083 ; Coop 1,162 305

Univar 5161 2046 : Public 560 161 Farmland Industries 5170 2048 : Coop 1,509 433 General Cigar 5194 2121 : Public 340 129 Agway 52XX 2033 Coop 1,415 423-453 Arafac 5311 203X Public 1,134 277

American Stores 5411 2011 Public 3,207 194 George Western 5411 2052 Canada 5.407 90-155 Great Atlantic & Pacific Tea 5411 2051 Public 6,538 654 Jewel Companies 5411 2051 Public 2,818 254 Kroger 5411 2051 Public 5,339 855-Ö15

See footnotes at end of table.

Continued— Appendix table 10—The 200 largest U.S. food and tobacco processing companies, by their principal industry, 1975

Company sales, 1975

Principal food OÎ+ Principal Company name tobacco^y industry —1/ U.S. food indus tr)r- Ownership (SIC) Total and tobacco (SIC) status3/ manufacturing

Million dollars

Safeway Stores 5411 2079 Public 9,717 390-1,165 Southland 5411 2026 : Public 1,790 312-317 General Cinema 5711 2086 : Public 358 178 LoeWs 6311 2111 : Public 2,702 475-500

—1/ The industry accounting for the most 1975 company sales. If no four-digit industry accounted for at least 10 or 20 percetit of total sales, then the largest three-digit major industry (for example, 202X) or largest two-digit major industry group (for example 20XX) is given instead. Conglomerates are coded 39XX. II The food or tobacco manufacturing industry with the largest amount of company sales in U.S. in 1975. If principal industry is within SIC 20 or 21, then this industry is the same. y If foreign-owned, name of country is given. If U.S.-owned, whether private, agricultural cooperative, or publicly owned corporations. h^l Ultimate parent may be the Rembrandt Group of South Africa. 5/ Unilever is jointly based: Unilever, Ltd. in the United Kingdom and Unilever, N.V. in the Netherlands.

Source: (16) UNITED STATES DEPARTMENT OF AGRICULTURE POSTAGE AND FEES PAID WASHINGTON, D.C. 20250 U.S. DEPARTMENT OF AGRICULTURE AGB 10t THIRD CLASS

H Economies, Statistics, and Cooperatives Service The Economies. Statistics, and Cooperatives SeFvice (ESCS) collects data and carries out research projects related to food and nutrition, cooperatives, natural resources, and rural develop- ment. The tkronomics unit of ESGS researches and analyzes production and marketing of major commodities; foreign agriculture and trade; economic use, conservation, and development of nat- ural resources; rural population, employment, and housing trends, and economic adjustment problems; and performance of the agricultural industry. The ESÇS Statistics umt collects data on crops, livestock, prices, and labor, and publishes official USDA State and national estimates through the Crop Reporting Board. The ESCS Cooperatives unit provides research and technical and educational assistance to help farmer cooperatives operate efficiently. Through its information program, ESCS provides objective and timely economic and statistical infonnation for farmers, government policymakers, consumers, agribusiness firms, cooperatives, rural residents, and other interested citizens.