Current selling and pricing practices 



Another series of questions was asked 

 in an effort to obtain a picture of present 

 selling practices of cooperative fruit and 

 vegetable processors. 



One question was, " How were your 



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1953-54 opening prices determined? 

 Answers given indicate costs of production 

 or profit were a factor in price setting 

 less than one-third of the time. This 

 would not perhaps be true over a period 

 of several seasons, when marginal firms 

 would leave or enter the industry as 

 prices went down or up. But for any 

 given season, once these firms had been 

 committed to doing business the prices 

 asked usually would be based on evalua- 

 tion of the competitive situation - prices 

 asked by competitors, volume on hand or 

 expected and the like. 



Processors' replies are reported below. 

 Some firms gave more than one answer. 



Number of 

 Method of setting opening prices firms 



a. Where competitive forces were 



considered: 

 Competition sets the price 37 



Broker sets opening price 3 



Based on current volume plus 



carryover 3 



Based on previous year closing 



price 2 



b. Where costs plus profits were 



considered: 

 Cost plus reasonable margin 15 



Board of directors sets opening 



price 3 



Government support price 1 



At the time this study was conducted 

 there was decided preference for f.o.b. 

 sales, with only four firms basing sale 

 prices on a delivered basis. 



Many leaders in the fresh fruit and 

 vegetable trade believe that a market 

 price cannot be established where most 

 of a given commodity is sold f.o.b. The 

 reasoning behind this position is that it 

 takes many sales to reflect the nature of 

 demand for a given commodity in a given 

 market at a given time. If only a few 

 scattered sales are made, it is difficiilt 

 to obtain the true picture. This situation 

 could exist if most sales were on an f.o.b. 



basis. On the other hand, f.o.b. pricing 

 may make it easier for a shipper to 

 obtain quickly an accurate estimate of his 

 returns. 



Processors were asked: "What 

 portion of your sales were made f.o.b. 

 shipping point? Delivered? '' They 

 replied as follows: 



Sales bases 



All sales f.o.b. basis 

 All sales delivered basis 

 Some f.o.b., some delivered 

 No answer 



Number of firms 



24 



4 



22 



3 



Most of the firms interviewed pro- 

 jected their sales in advance of actual 

 production. The value of such procedure 

 is self-evident. Given some knowledge 

 of demand to be satisfied in the future, 

 production operations can be adjusted for 

 optimum performance, financing needs 

 estimated with greater precision, and 

 overall operating efficiency improved. 



Forty-three firms said "Yes" when 

 asked: "Do you solicit orders for future 

 delivery? " Eight said "No," and two 

 did not reply. 



Current marketing channels 



Information concerning the channels 

 through which products now move and 

 the places to which they move is also of 

 interest in gaining an understanding of 

 the nature of the institutions interested 

 in a joint marketing program. One of 

 the many problems fruit and vegetable 

 processors face is the current shifting 

 taking place in these channels. Tradi- 

 tionally, processed products have moved 

 from the packer through several inter- 

 mediate steps before reaching the retail 

 outlet. This is nolonger necessarily true. 



The growth of chain food outlets is 

 being accompanied by growth of large- 

 scale buying, and to a substantial degree 

 the abrogation of traditional trade 

 channels and the substitution of a direct 

 packer- retailer relationship. Coopera- 

 tive fruit and vegetable processors are 

 being affected by this trend and need to 

 adjust to it. It is possible that small or 

 independent processors may find this 

 more difficult than firms joined in a 

 coordinated program. 



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