New Trends in Milk Marketing 



(Continued from page 7) 



in Chicago was delivered to the con- 

 sumers' doorstep as compared to less 

 than 50% in June 1939. 



The facts also show that more than 

 half of the retail milk sold in New 

 York City is cash and carry store busi- 

 ness. It is common knowledge that 

 fifteen years ago relatively small per- 

 centage of groceries and meat were 

 sold cash and carry. At that time and 

 previously most people ordered their 

 groceries and meat delivered to the 

 home. With the advent of chain stores 

 and lower prices, the costs necessary 

 for handling such items were reduced. 

 Thrifty housewives in increasing num- 

 bers started saving the costs of de- 

 livery and credit loss margins by pay- 

 ing cash and carrying home these items. 



The milk business, however, has con- 

 tinued until the last few years with the 

 system of home delivery of milk pre- 

 dominant in merchandizing bottled 

 milk. No one, possibly other than those 

 engaged in milk distribution, can ap- 

 preciate the added cost of this service 

 which of necessity must be added to 

 the price of milk if the dealer is to 

 continue in business. The cost of main- 

 taining a truck is involved. Since this 

 type of busines is usually upon a credit 

 basis with the customer, credit losses 

 are substantial items of expense that 

 must be added to the ultimate price 

 per quart for delivered milk. 



Labor Big Item 



Of recent years labor has been the 

 largest item of expense involved in 

 home delivery. In Chicago, for exam- 

 ple, one of the largest milk distribu- 

 tors reported that for the six months 

 ending June 30, 1939, his cost per 

 quart for labor alone in house-to-house 

 milk delivery was 4.01 cents per quart. 

 In Peoria, Illinois' second largest city, 

 milk deliverymen's salaries have in- 

 creased approximately 22% during the 

 past five years. No one begrudges 

 labor a fair wage but the point I am 

 attempting to make is that the salary 

 of a retail milk route deliveryman must 

 be distributed over some 300-350 quarts 

 of milk each day. As this and other 

 costs increase, they widen the margin 

 between consumer and producer prices. 



In selling milk through stores there 

 are drivers wages and truck delivery 

 costs to be considered, too. But ordi- 

 narily the store pays the dairy cash 

 for the milk. This eliminates credit 

 losses and the store in turn sells for 

 cash. Moreover one truck can deliver 

 to a store at one time several times as 

 many quarts of milk as is carried and 

 distributed in one day in hundreds of 

 stops by door-to-door milk delivery- 



PRODUCERS' MILK DEPOT HAS FREE PARKING LOT 

 Backbone of the Producers Dairy in Danville are seventeen similar cash and coirT 

 stations. 



man. Therefore, truck and labor ex- 

 pense per quart on store delivered 

 milk is much lower compared with 

 door delivered milk for the reason that 

 it is distributed over a much larger 

 volume. It is true that the store opet- 

 ator must charge for his handling of 

 the milk. However, since this in only 

 one item among many that he handles, 

 this service is usually performed for 

 one to two cents per quart by the 

 store-keeper. 



Thus because of economies to the 

 dairy in this system, the milk dealer 

 can afford to make a price to the 

 store-keeper of from two to four cents 

 per quart less than that charged the 

 housewife at her doorstep. And the 

 grocer can, after adding his charges 

 for handling, sell milk to the cash-and- 

 carry customer at one to three cents 

 per quart less than the door delivered 

 price. The consequent lower store milk 

 price has a tendency to encourage larger 

 milk sales. It is for these reasons that 

 there is a definite trend toward store 

 sales. 



I do not want to imply that I feel 

 that the door-to-door delivery system 

 of milk distribution will in time be 

 entirely replaced. I do not believe that 

 it will be. But the customer who wants 

 his milk delivered to his door will 

 have to, and in my opinion should, pay 

 the added expense involved. "The 

 housewife who elects to save expyense 

 will do so by performing the service 

 for herself. 



Flexible Price Struaure 

 The trend toward producers selling 

 their milk for bottling purposes upon 

 a flexible price structure is evident in 

 Illinois. Chicago and its suburban 

 markets were the first major market 

 in the United States to adopt this sys- 

 tem. The Pure Milk Association 

 started selling milk to Chicago dealers 

 on a premium over the evaporated 

 price in November 1935. In Illinois 



the producers cooperative associations 

 at Peoria, Rockford and Bloomington 

 also follow the same plan. 



Under this plan the producers co- 

 operative and the dealer buyers nego- 

 tiate a producers price for milk cover- 

 ing the dealers bottling requirements 

 at an agreed premium per cwt. over the 

 price paid by evaporated milk plants. 

 Only the premium over the evaporated 

 price is negotiated. Each month then 

 the price received by the producer is 

 the evaporated milk price for that 

 month plus the added premium agreed 

 upon. This premium is to cover the 

 added costs of producing milk under 

 rigid city milk ordinances which usu- 

 ally require more sanitary and cooling 

 equipment and delivery exp>ense than 

 is necessary in evaporated milk plant 

 areas. 



Butter Price Controls 



The evaporated milk price is flexible 

 because it is computed monthly upon 

 a standard formula using the average 

 daily current butter and weekly cheese 

 prices as established upon the respec- 

 tive open competitive national butter 

 and cheese markets. It is generally ac- 

 cepted in the industry that all milk 

 prices must bear a relationship to but- 

 ter and cheese prices. Since the evap- 

 orated milk price is computed upon an 

 AAA formula using butter and cheese 

 prices, this arrangement gives a price 

 which is really dependent upon the 

 current prices of butter and cheese and 

 therefore upon the supply and con- 

 sumer demand for butter and cheese. 



I have mentioned that this pricing 

 plan for the sale of milk by producers 

 to dealers is called a flexible price plan. 

 Under this arrangement usually a dif- 

 ferent milk price is paid to producers 

 each month. This plan also assumes 

 that in view of the varying monthly 

 prices to producers the dealers will, 

 when the farmers milk price changes 

 (Continued on page 24) 



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L A. A. RECORD 



