FIGURE 14 CONSUMER'S CORN FLAKES PRICE The Retail Price and Where It Goes Consumers paid an average of 41.8 cents for a 12-ounce jar of peanut butter FIGURE 15 U. S. DEPARTMENT OF AGRICULTURE 50 NEG. ERS 1735-63 (1) ECONOMIC RESEARCH SERVICE during the 12 months beginning August 1, 1960. Changes in retail prices of this product were small in recent years (fig. 15). Changes in the farm-retail spread and in the grower's return also were small in cents per jar, but in percentage terms some were substantial. The farm-retail spread totaled 30 cents in 196061. and the farm value of peanuts required to produce a 12-ounce jar of peanut butter averaged 11.8 cents. Shellers received an average of 13.9 cents for peanuts equivalent to 12 ounces of peanut butter in 1960-61. The sheller's spread was 2.1 cents-the difference between the value of shelled peanuts at the plant and the farm value of peanuts. The manufacturer's spread averaged 15 cents per jar in 1960-61-the difference between his selling price of 28.9 cents and the sheller's return. This spread included the cost of packaging materials and ingredients other than peanuts, costs of processing and distributing the finished product to wholesale and retail agencies, and profits. The wholesale-retail spread for peanut butter averaged 12.9 cents per jar in 1960–61. Charges for wholesaling and retailing services were combined because wholesaling services were not always performed by distinct wholesaling agencies. Manufacturers sell much of their production directly to retail grocers. Variations in retail prices.—Noticeable differences in retail prices and price spreads were associated with type of retail outlet, brand name, location of consuming area, and container size. Chainstore prices for peanut butter were lower than independent store prices. The most frequent price was 43 cents per 12ounce jar in chainstores and 45 cents in independent stores. Total farm-retail spreads for 1960-61 were 31.2 cents per jar for chains and 33.2 cents for independents. Advertised. nationally distributed manufacturers' brands of peanut butter were generally higher priced than other brands. In 1960-61 the most frequent price was 45 cents per 12-ounce jar for a group of four such major brands compared with 37 cents for a group of minor brands. Prices of major brands com monly were 6 cents higher than for minor brands in 1959–60 and 4.cents higher in 1958-59. The farm-retail price spread of major brands averaged 33.2 cents in 1960-61 compared with 25.2 cents for minor brands. Differences in prices between major and minor brands are indicative of the additional costs incurred in merchandising the highly advertised brands. Retail prices in eight cities were compared. This comparison was limited to chainstore prices of the same four nationally distributed brands in order to provide a regional comparison indicative of differences in prices resulting from market location. Portland, the market farthest from the peanut producing areas, had prices as high or higher than those found in the other seven cities studies. Baltimore and Philadelphia prices consistently fell below the average price for the eight cities. The foregoing comparisons were based on prices for peanut butter retailed in 12-ounce containers. Peanut butter, however, is sold in a variety of container sizes. Substantial variation in retail prices is related to differences in container size. The average per unit cost of peanut butter decreases substantially as container sizes increase up to about 25 ounces. In 1960, 12 ounces of peanut butter in &-ounce Jars cost consumers 46.9 cents compared with 35.1 cents in 18-ounce jars. This meant that the marketing charge for 12 ounces of peanut butter in Sounce jars was about 11⁄2 times as much as in 18-ounce jars. However, for 30ounce containers or larger, reductions in marketing charges from increases in container size were relatively insignificant. 7 Margarine and advertising prices Seven leading margarine manufacturers are among the 100 top advertisers in the United States. Their promotion and merchandising are of such a scope that 11 or more brands of margarine distributed by these companies are known throughout the United States. * Data in this section are for a peanut crop year, which extends from August through July. Prices reported were for the most popular brand sold in each store. Special and sale prices were excluded. The price shown for minor brands is the simple average of bimodal prices of 35 and 39 cents per jar. Chainstore sales comprise somewhat more than 40 percent of retail grocery sales. 7 Comparisons of retail prices by container sizes are based on prices in independent stores, reported to the Statistical Reporting Service, USDA. In 1961, more than 50 percent of total advertising expenditures for margarine were for four superbrands. (These four brands were made from corn oil or had butter added.) During the same year, 44 percent was spent on 7 other leading nationally distributed brands, making a total of 95 percent expended for these 11 brands. Thus, advertising expenditures for other brands were small or insignificant. TABLE 4.-Margarine sales and advertising expenditures: Distribution U.S. totals by brand group, 1957 and 1959–61 NOTE.-Sales: Returns from Marketing Cottonseed and Soybean Oil in Margarine, USDA Marketing Research Report 503, October 1961. Advertising expenditures: Food Field Reporter, Gaylin Co., East Orange, N.J. Highly advertised super and major brands usually are priced substantially higher at retail than the less advertised brands. Superbrands averaged 39.3 cents per pound in 1959 and major brands 29.4 cents compared with an average retail price of 26.5 cents for all brands. Advertising expenditures for the superbrands averaged 5.6 cents per pound, or 14 percent of the retail price. The average cost of advertising major brands was 1.8 cents per pound or 6 percent of the average retail price. Superbrands in 1959 accounted for about 9 percent of total margarine sales and major brands for 35 percent. Total expenditures for advertising margarine in magazines and newspapers and on television increased about 35 percent from 1957 to 1959 and 29 percent from 1959 to 1961 (table 5), or from an average of 1 cent per pound of margarine in 1957 to 1.3 cents in 1959 and 1.5 cents in 1961. Margarine sales increased 10.9 percent from 1957 to 1959 and 10.6 percent from 1959 to 1961. Total expenditures for advertising superbrands increased about 50 percent from 1957 to 1959, resulting in an increase in advertising expenditures of 1.4 cents per pound of margarine. In 1961, advertising expenditures for this type of margarine totaled about 63 percent more than in 1959. TABLE 5.-Increases in margarine sales and advertising expenditures, 1957-59 and NOTE.-Sales: Brand groups sales, Returns From Marketing Cottonseed and Soybean Oil in Margarine, USDA Marketing Research Report 503, October 1961. Total sales, Fats and Oils Situation, FOS 212, Economic Research Service, USDA. Advertising expenditures: Food Field Reporter, Gaylin Co., East Orange, N.J. • Based on information published annually by the Food Field Reporter. Cotton Farm prices of lint cotton used in 25 representative items of cotton clothing and household furnishing averaged about 33 cents a pound in 1962, up 2 cents from 1961. The price in 1962 was higher than in any year since 1956, but was 5 cents lower than in 1952. The retail cost of clothing and house furnishings equivalent to 1 pound of lint cotton dropped to $2.15 in 1962 from $2.19 in 1961. The spread between the retail cost of these items and the price of a pound of lint cotton averaged $1.82 last year, compared with $1.88 in 1961 and $1.76 in 1952. The farmer's share of the retail cost of these articles averaged about 15 percent last year, 14 percent in 1961, and 18 percent in 1952. Cotton accounts for a larger proportion of the retail prices of household furnishings than of clothing. Farmers received 23 percent of the dollar consumers spent for household furnishings in 1962, slightly more than in 1961. The farmer's share for clothing averaged 12 percent in 1962, also slightly higher than in 1961. The farmer's share averaged 33 percent for sheets in 1962, 15 percent for work shirts, and 7 percent for business shirts. RETAIL VALUE OF A GROUP OF 25 COTTON CLOTHING AND HOUSEHOLD ARTICLES EQUIVALENT TO 1 LB. LINT COTTON. ESTIMATED PRICES RECEIVED BY FARMERS FOR COTTON OF GRADE AND STAPLE LENGTHS REQUIRED U. & DEPARTMENT OF AGRICULTURE NEG. ERS 707-63 (1) ECONOMIC RESEARCH SERVICE Average prices received by mills for unfinished cotton cloth and cost to mills of lint cotton increased, and mill margins decreased in the year ended July 1962. Mill margins for manufacturers of 20 selected constructions averaged 41 percent of the value of the unfinished cloth during the year ended July 1962, compared with 44 percent during the previous 12 months, and about 47 percent for the year ended July 1960, when the margin was wider than for any other recent year. Gross margins of wholesale and retail distributors of textile products, as a proportion of net sales, averaged higher in 1961 (the latest year for which data are available) than in 1951. But these margins have shown little, if any, trend since the middle 1950's. The median gross margin for wholesalers increased to 17.1 percent of sales in 1961 from 16.1 percent in 1951. Department store's median gross margin was 36.2 percent of sales in 1961, compared with 35.3 percent in 1951. Tobacco The retail price of cigarettes rose slightly during the 12 months beginning July 1, 1961, continuing an upward trend that began in the 1930's. In 1961-62, the retail price of regular size, popular brand cigarettes averaged 27.6 cents per package, double the price in 1938 and 0.3 cent higher than in the preceding 12 months (fig. 17). Two-thirds of the rise in the retail price from 1960-61 to 1961-62 was reflected in an increase in the farm value of leaf tobacco. State excise taxes increased 0.3 cent, but part of this rise was offset by a decrease of 0.2 cent in the manufacturer's margin. Other segments of the farm-retail spread did not change. Much of the rise in the retail price since 1938 has been absorbed by Federal and State excise taxes. These taxes totaled 12.4 cents in 1961-62, double the total in 1938-39. The distributor's margin was three times as large in 1961-62 as in 1938-39. The combined margin of the manufacturer and leaf-tobacco dealer increased a little more than a fifth during this period. Increased efficiency was a factor accounting for the comparatively small rise in the manufacturer's margin. Output per man-hour increased substantially in plants manufacturing tobacco products. Tobacco growers received 4.2 cents in 1961-62 for leaf tobacco equivalent to a package of regular size cigarettes. The grower's returns have risen fairly steadily in recent years. Returns in 1961-62 were a fourth higher than in 1951-52. But the grower's returns as a percentage of the retail price declined from 15.8 percent in 1951-52 to 15.2 percent in 1961-62. Profits of tobacco manufacturing companies have been higher in recent years than in the early 1950's and late 1940's, but profits as a percentage of sales have not been as high as in the late 1930's. After-tax profits of the five leading manufacturing companies averaged 5.9 percent of sales in 1959-61, 4.1 percent in 1950-52, 4.9 percent in 1947-49, and 9.1 percent in 1935-39. As a percentage of stockholders' equity, after-tax profits of these five companies averaged 14.8 percent in 1959-61, 11.0 percent in 1950-52, 14.3 percent in 1947-49, and 13.9 percent in 1935-39. According to reports published jointly by the Federal Trade Commission and the Securities and Exchange Commission, after-tax profits of tobacco manufacturing corporations in the first three quarters of 1962 averaged |