Research Reports
Study on Distribution Structure Improvement of Processed Food
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AuthorChoi, Byungok
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Publication Date2012.12.30
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Original
Background of Research
The environment of the processed food distribution industry is being rapidly changed by the influence from the spread out of SSMs (super supermarkets), convenience stores and large distributors. There have been extended direct transactions between processed food manufacturers and large distributors in wholesale and retail distribution industries of processed food, which was led by small and medium-sized companies. Small and medium-sized companies who participate in wholesale and retail distribution have lost competitiveness due to decreasing customers and sales. However, policymaking is difficult for those industries, because the status and problems of those industries have not been researched before. Therefore, it is necessary to investigate the status and problems of wholesale and retail industries of processed food and propose an improvement plan.
Method of Research
In order to identify the current conditions and problems of processed foods distribution, surveys and interviews with processed food wholesalers and retailers were carried out. To identify the actual conditions and problems of processed food distribution in its wholesale stage, agencies, wholesalers, and ingredient suppliers were surveyed and interviewed. For the analysis of those conditions and problems in the retail stage, supermarket owners and restaurant operators were interviewed. The general status and management conditions are investigated using microdata from Wholesale and Retail Trade Survey of KOSIS(Korean Statistical Information System), the retail industry yearbook and the food distribution yearbook. Moreover, examples from abroad are analyzed to find problems and implications concerning the policy on processed foods.
Research Results and Implications
The result of analysis of the sales-to-cost ratio of processed food wholesalers shows that the bigger the wholesalers, the higher the proportion of sales and the lower the sales profit. The issues regarding processed food sales agencies include coercive sale by manufacturers, inconsistent agency management, and worn-out warehouse conditions. The problems related to processed food wholesalers and food ingredient suppliers include increased direct transactions between manufacturers and large retailers and the entry of distribution-specialized companies into the food ingredients market.
The comparison between the sales of the retailers and the consumer price index shows that the increase in the operating expenses is higher than the sales growth, which implies that the competition between supermarkets is intense in the sales process. In addition, the retailers' cost of goods sold and their sales shows that the large retailers’ cost is three to four times smaller than that of the small and medium-sized retailers. It is pointed out that the problems processed food retailers have are reduced sales due to the large retailer’s entry into the market, increasing competition between retailers, and the distribution system that has not taken product characteristics into consideration.
Regarding the master plan for improving the wholesale distribution of processed foods, we propose the following: prevent excessive competition among wholesalers and strengthen competitiveness by reducing distribution and logistics expenses. In order to strengthen the competitiveness of wholesaling, the following are proposed: establish an organized system for each commercial area and zone, support the joint logistics center, and establish order in wholesale distribution.
The master plan for improving the retailing of processed foods includes the following: establishing an organized system for small and medium supermarkets; strengthening the competitiveness of processed food retailing by reducing distribution and logistics expenses; preparing a plan to create added values from processed foods; and eliciting social consensus to stimulate the retailing.
Researchers: Byung-ok Choi, Chang-gon Jeon, Dong-hoon Kim
Research Period: 2012. 1～2012. 12
E-mail address: bochoi@krei.re.kr
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