I faithfully read, with interest, your editorials in SN. Needless to say, the one entitled "The Wholesaling Paradox" [Nov. 3, 1997] caught my eye rather quickly for obvious reasons. The purpose of my letter, however, specifically relates to the statement that traditional clients of wholesalers, independent supermarkets, have seen a market-share decline from 21.4% to 16.8% [during the period 1992 to 1996].
Over the years, we have consistently discovered these kinds of numbers to be quite misleading simply because the industry definition of a chain is 11 stores or more. Therefore, the numbers cited by Vic Orler [an Andersen Consulting partner quoted as the source of the market-share information] only relate to people who have 10 stores or [fewer].
In fact, that is accurate -- their share has declined. However, one of the reasons for the decline is that in many instances they now have 11 stores or more and are classified as chains. But they are still supplied by the wholesale system and companies such as Supervalu.
In fact, at Supervalu, 40% of our business is with people who operate 11 stores or more and are totally supported by the wholesale system and have no desire or need to invest in distribution assets. In our view, your editorial does not clarify this well enough and leaves the impression that there has been a 25% drop in market share. That is not true.
We consistently get similar questioning from Wall Street and we have a difficult time explaining this issue because of the industry's definition of "chain" and "independent." I believe we should be cautious when referring to numbers such as these because, obviously, they can cause erroneous conclusions.
However, I completely concur with the premise and direction of your editorial in terms of the new opportunity for wholesalers. Supervalu's Advantage program contains elements of exactly the opportunity you describe for our future growth.
executive VP Supervalu Minneapolis
EDITOR'S NOTE: For more on Supervalu's Advantage initiative, see this week's editorial on this page and the news article on Page 1.
FDI Study Under Way
I read with interest your editorial of Nov. 3 on "The Wholesaling Paradox." You make some good points. The environment in which independent retailers and wholesalers do business is undoubtedly changing, as it always has. Perhaps the difference today is that it's changing faster than ever before.
Much of the material you cited was from our recent Food Industry Productivity Convention [as the editorial column specified]. Attendance at the meeting was up this year to more than 3,000 from a previous high of just above 2,400. [This interest level] clearly indicates that -- starting yesterday -- wholesalers and everyone else involved in bringing products and consumers together are going to have to cope with some serious change.
Leaders will drive that change. As you noted in your editorial, "Wholesalers can+grow by market expansion, by becoming full-service logistics providers, by becoming full-line suppliers to robust chains, and so on."
Research is one way the FDI helps its members make the most of change. Last year we published "Foodservice 2005," which looked at changing consumer demands. I'm pleased to announce [with this letter] that we have initiated another major study. This one will identify the challenges and opportunities for food wholesalers and their customers, including independent retailers. This research, which should be completed by early 1998, should help us answer many of the excellent questions you raised in your editorial.