MERCHANDISING: Food Phenomenon

In Albuquerque last week, Maytag distributors sold four carloads of home freezers, about 25% more than they normally sell in a whole year. Reason for the jump: the distributors offered guarantees to provide frozen foods at “wholesale” prices, i.e., what supermarkets pay—anywhere from 20% to 30% below retail prices.

To do this, Maytag’s Rocky Mountain distributors made deals to buy bulk lots from big frozen-food wholesalers (including such top brands as Birds Eye, Snow Crop, Pictsweet, etc.), then passed the goods on to freezer buyers without additional markups. Explained Maytag’s Santa Fe Manager John McCauley: “We’re not interested in making money on food but in selling freezers.” For buyers, it meant some notable savings: 17¢ for frozen peas v. 23¢ in Santa Fe chain stores, 32¢ for Brussels sprouts v. 41¢, 68¢ for salmon fillets v. 95¢.

Some retailers counterattacked, hinted in ads that “wholesale” meats would prove inferior. Other grocers, after a second look, decided to swim with the tide rather than fight it. One big Santa Fe supermarket (Batrite) agreed to sell meats in quantity to Maytag customers at only 8¢ above wholesale prices. Said Manager Charles Batts: “I’d rather make a few cents a pound and get rid of a big quantity of meat than make a lot more and have to peddle it in little pieces.”

What’s the Benefit? The Rocky Mountain experiment looked like a tie-in between big freezer makers and big frozen-food processors, though both, (out of fear of retaliation by retailers) were letting local agents handle things on an “independent” basis. But the selling of home freezers together with frozen foods at discount prices is already a tremendous new U.S. merchandising phenomenon. So-called “food plans” have been springing up all over the map.

California has 118 in operation, and in San Francisco home freezers have squeezed out TV sets as the No. i seller in home appliances. In Los Angeles, Sears, Roebuck is selling its Coldspot freezers along with arrangements to stock them with food at 25% below retail prices; the Bank of America is financing the Sears food plan on six-month loans. Big Amana Refrigeration, Inc. (TIME, Jan. 16, 1950), which makes freezers for Maytag, got a head start on the freezer boom because one of its distributors, John Bess, pioneered one of the biggest food plans in the East. Through his Freezer Owners Association of America, Bess has made his pitch in 22 East Coast cities, including New York, Philadelphia and Providence; last year he moved $3,000,000 worth of freezers and 2,000,000 Ibs. of frozen foods in Metropolitan New York alone. He estimates his plan saves buyers an average of 15% on frozen foods.

What’s the Catch? As angry retailers are the first to point out, few, if any, of the plans actually sell frozen foods at genuine wholesale prices. The average saving may be no more than 15% below retail, not counting the cost and depreciation of the freezer. Moreover, scores of fly-by-night promoters have unloaded so much inferior merchandise (in California, frozen hamburger often contains far more suet than the law allows retailers to use) that freezer dealers in some cities have had to organize to stamp out abuses. Misleading come-ons are another problem. Example: “62¢ steaks” mean that a whole quarter of a steer must be bought at 62¢ a lb., and even then the bone, fat and gristle wastage may hike the actual price to as much as 95¢. Nevertheless, thousands of consumers are making substantial savings, and many of them are extremely pleased with the results.

One important result of the food plans is that wide-awake retailers are meeting the new competition with such old weapons as special loss leaders, or with price reductions that equal those of freezer plans. Example: last week Los Angeles’ Greater All-American chain took a 4% markup instead of its usual 14%, sold frozen Birds Eye peas at 20¢ per box, about ½¢ cheaper than the “wholesale” price of a competing food plan. Result: it sold a record 1,081 cases in three days. Other grocers are putting in huge freezers of their own so they can buy in bulk (at 5% below usual wholesale prices) and sell case lots to their customers even cheaper than the food planners. Thus all over the U.S., thrifty freezer owners who keep an eye peeled for special sales are able to find real bargains.

Nobody is happier than the frozen-food packers. Since 1946, national consumption of frozen foods has risen from 1.9 billion Ibs. to last year’s 4 billion. And U.S. appliance makers, who have seen their sales of refrigerators and radios approach “saturation,” regard the booming market for home freezers (4,000,000 sold to date) as one of the most promising new frontiers on their horizon.