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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

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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

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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.

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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
IN THE MANUFACTURE OF THE VARIOUS ARTICLES.

U.S. 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

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).

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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

5.6 percent of sales, the same as in the comparable period of 1961, and 12.8 percent of stockholders' equity, down from 13.5 percent in the first three quarters of 1961.

PROJECTS TO IMPROVE EFFICIENCY IN MARKETING

Many of the projects conducted by the Division of Marketing Economics are designed to improve efficiency in assembling, shipping, processing, and distributing agricultural commodities. The marketing system has greatly increased its output of marketing services per unit of resources used. Thus, it has kept marketing costs from rising as much as prices of inputs. But continued efforts are needed to maintain and increase the present high level of efficiency. Inefficiency— the failure to realize the maximum output from resources used-often arises from slowness in adjusting to changes in technology, marketing practices, prices of inputs, and other variables. The frequency of change today makes delay in adjustments a major cause of inefficiency. Lack of knowledge often is the chief reason for this delay. A firm will be reluctant, for example, to increase the capacity of its plant until it has dependable information regarding economies of scale that might reasonably be expected from a larger plant. A single firm, particularly a smaller one, is not likely to have the research resources needed to obtain such information. Research of this nature generally involves obtaining information from several firms.

Usually firms are unwilling to supply the needed information to competitors, though they will supply it to a trusted public agency. Thus, the rate of adjustment to change depends heavily on research by public agencies. Since these agencies make results of their research available to all firms, these results may produce widespread improvements. One may confidently expect that consumers and farmers will share in the benefits flowing from improvements in efficiency that can be made by many firms.

The Marketing Economics Division is currently conducting or has recently completed research projects directed toward improving efficiency in the marketing of livestock, poultry, eggs, manufactured dairy products, grains, cottonseed, peanuts, bread, cotton, wool, and tobacco. It also has projects that are concerned with efficiency in the wholesaling of frozen food and with efficient inventory control and space management in warehouses handling foods and other farm products. Some findings from a few of the efficiency studies are given below.

Marketing costs in multiple-product vegetable freezing plants

The Marketing Economics Division and the California Agricultural Experiment Station recently completed a cooperative study of operations and costs in California vegetable freezing plants. The study shows that substantial economies can be achieved by processing these products in multiproduct plants and thereby reducing underutilization of equipment, management, and other fixed cost components. These economics can best be realized by processing products that mature in different seasons. In this way a plant's operating season is lengthened and costs of management and other factors having fixed costs are spread over a larger annual output. Where a multiproduct plant cannot process products that mature in different seasons, simultaneous processing of two or more products often provides a means of utilizing its capacity more fully than a singleproduct plant could. Thus, its cost per unit would be lower than those of the single-product plant.

The following examples indicate the general nature of some of the results obtained. A specialized plant for freezing broccoli with a capacity of 6,000 pounds per hour requires an investment of about $240,000 in plant and equipment. About the same investment is required for a specialized frozen spinach plant of the same capacity. For an additional investment of $22,000 one can build a plant of the same capacity (6,000 pounds per hour) in which both broccoli and spinach can be processed.

Annual fixed costs (plant and equipment overhead and salaries of managers, superintendents, and office personnel) total about $86,000 for a single-product broccoli or spinach plant of 6,000 pounds per hour capacity, and only $4,000 more for a multiproduct plant of the same capacity adaptable to both products. But the annual output of the multiproduct plant might be much greater.

Savings in costs per unit of output were estimated by comparing total unit costs of different types of multiproduct plants with those of single-product plants. Unit costs of multiproduct plants ranged from about 0.5 cent to 4.0 cents below those of comparable single-product plants, depending on the type and number of vegetables processed, hourly output rates, total hours operated, and other factors.

Bread distribution costs and efficiencies

Consumers paid 21.2 cents for a 1-pound loaf of white bread in 1962, 57 percent more than the 1947-49 price. In this same period all food prices rose 22 percent. A major part of the marketing spread is the baker-wholesaler margin, which increased from 6.0 to 11.5 cents. Rising distribution costs were a major factor in the rise of the price of bread. According to baking industry estimates, distribution costs ranged from about 36 percent of sales with the traditional driver-salesman method of delivery to about 12 percent of sales with the drop delivery method.

A study is underway to find the most economical method of bread distribution, including frozen bakery products, and to recommend feasible ways for its adoption, considering the organization of the industry and labor arrangements. Increased efficiency in distribution and freezing appear to be two of the most promising techniques for increasing efficiency in the baking industry.

Freezing bread stops yeast action in doughs and retards staling rates in baked products. Thus, it permits greater flexibility in the production and distribution of bakery products and under certain conditions results in lower operating costs. Our preliminary estimate is that savings of about 2 cents a pound might be realized compared with the methods now used by most wholesale bakers.

A survey of 1,300 bakers in 28 cities having a population of more than 100,000 showed that nearly 40 percent of these bakers currently froze some of their production. More than half, however, were freezing only 1 to 10 percent of production, and only a few bakers froze as much as 75 percent or more. Some bakery products were distributed in frozen form, but a more common practice was to use freezing only in the production operations and to defrost the products before distribution or sale. Sixty-four percent of the bakers interviewed said freezing resulted in a net decrease in production costs. This indicated decrease in costs was offset in part by the added cost of purchasing and operating a freezer. However, there were also significant savings through reduction in stale losses. Reducing costs of hauling broilers to processing plants

A survey conducted in New England by the Marketing Economics Division showed that costs per pound of assembling live broilers from farms could be reduced by increasing the number of birds assembled per plant and the number procured per mile of truck travel.

As the total volume assembled per plant increases, trucks of larger capacity are used. Also the size of loading crews is increased, permitting more division of labor. Thus, output per man-hour is increased and labor costs are reduced.

Preliminary cost estimates illustrate the magnitude of savings possible by increasing the size of the assembly operation and the volume of broilers that can be procured per mile of truck travel. Where poultry may be procured at the rate of 100 pounds per truck-mile, costs per pound of assembling decline from 0.90 cent for a plant assembling 1 million pounds per year to 0.47 cent for a plant with a volume of 50 million pounds. For a typical plant that assembles 1 million pounds of live broilers annually, costs of assembly per pound vary from 0.90 cent when an average of 100 pounds of broilers can be picked up per truck-mile down to 0.64 cent when the volume per truck-mile is 500 pounds. A plant that assembles 50 million pounds annually could reduce assembly costs per pound from 0.47 cent to 0.36 cent by increasing volume per truck-mile from 100 pounds to 500 pounds.

Costs of mixing feeds

Farmers as producers of most of the ingredients going into mixed feeds and as buyers of feed have a double stake in the efficiency of the mixed feed industry. The Marketing Economics Division is conducting a series of research studies to develop operating cost standards that will be useful to feed manufacturers in decreasing production costs. A recent report presented results of a study of costs incurred in mixing feed. Standard costs per ton of feed were developed for production, maintenance, and supervisory labor; equipment depreciation; interest on investment in equipment; electricity; and fuel. These standard costs total 80 cents per ton in a model plant having a mixing capacity of 80 tons per 8-hour shift and 63 cents per ton in a 200-ton model plant. Each of the above cost items was lower for the plant having the larger mixing capacity. By operating two shifts a day, mixing costs would be reduced to 70 cents per ton for the smaller facility and 55 cents a ton for the larger one. Mixing costs for an annual output of 52,000 tons were 12 percent lower per ton in the larger

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