HOW US RETAILERS GET RICH ON TUNA

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HOW US RETAILERS GET RICH ON TUNA
By Bill Purcell (Nov. 14, 00)

In the last couple years there has been enormous consolidation and mergers in the USA grocery market which is still continuing. The result is that there is not the competition there once was and the pressure for the remaining grocery chains to service. The resultant large debt seems to have changed their philosophy.
Without the competition there is no reason to sell cheap, 'every day Low price', 'the low price leader' , etc. . In fact, grocers seem to have discovered that there is no other place for the consumer to buy food. Restaurants are definitely still more expensive. As a result retailer chains are pressing branded sellers for more slotting fees' , promotional monies and other costs that must be factored in to pricing, resulting in higher prices. Chains are also taking bigger margins and not passing on savings. In the 'private label' category, there are not all the same costs but chains are using their size to press suppliers for even lower prices. While implementing various 'profit centers' such as deductions for label design, reclamations, in house brokers, etc that the suppliers are forced to absorb.
Despite the lowest tuna prices in 30 years the consumer is generally not seeing lower pricing. While chains are paying about 33 cents for 6 oz Chunk light the retail shelf price continues to be 69 - 79 cents. Even "two for $1.00" is rare. This is not unique to tuna, we are seeing it across most private label categories.
What this seems to add up to is that the USA market is in another changing cycle which is going to be very difficult on the vendor community. Retailers are not interested in moving cases as they used to be , but in making the greatest profit for themselves. They know that they may sell less cases but will make more absolute dollars. They also know that if they do not move the cases, the vendor will be in a weak position with excess inventories that he cannot move and therefore will be in a weak negotiating position. It is a short term mentality as it will cause many suppliers to exit the business ultimately resulting in even higher costs to the retailer and his consumer.
Over time the same high profit margins will allow for the return of the independent grocer who has been nearly eliminated. Wholesale grocers are already moving into this retail niche. The cycle has been seen many times over the years and will repeat itself. The difficulty for the tuna industry is that fishing does not seem that it will decline. No one is willing to exit the catching industry. Even if prices increase, retailers may become accustomed to the high margins and may take the shelf price up with the market. It may be years before we see a return to a normal competitive retail market in the USA.

William E. Purcell is President of Purcell International, Walnut Creek California. His company imports and distributes canned tuna and many other seafood products within the United States. You can react on his opinion at support@atuna.com. When you want to express your own opinion on a tuna related subject on atuna.com, we welcome you, pls. contact us !

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