Barley Rice -- Cash farm income from major farm products, 1956—Continued Sugar crops- Peanuts Other farm products-- Government payments.. Total Source: U. S. Department of Agriculture. 240, 638 239, 018 199, 821 159, 842 2,489, 398 553, 556 82, 167, 086 It is estimated that milk and cream sold by the 1,475,000 dairy farms in 1957 returned to them $4,643 million as above noted. In 1957 consumers paid approximately $8.9 billion to cover the retail purchases they made of that milk and other dairy products processed therefrom. That figure, of course, includes the markup by the retailer in the price of the products handled by him. Except for the amount thus involved, which would total perhaps as much as $1 billion, the remainder of the figure of $8.9 billion would represent the gross dollar volume of sales of the processors and distributors. In the manufacturing and fluid milk distributing sectors of the industry, data on numbers of plants or establishments are not too well established. There were approximately 13,000 establishments distributing fluid milk during 1954, according to trade sources. Some of these establishments also manufactured dairy products. Around 10,000 plants throughout the country manufactured some type of dairy products. Roughly half of these also distributed fluid milk. Therefore, it appears that there were around 18,000 plants or establishments in 1954 which either manufactured dairy products or processed and distributed fluid milk and cream. It is probable that there has been some decline since 1954, although current information is not available. This does not include retail establishments such as roadside stands, drive-ins, drugstores, and other places which freeze products from purchased mix. Of the 10,000 plants throughout the country engaged in the manufacture of some type of dairy products in 1954, it appears that 3,008 were engaged in the production and wholesale disposition of ice cream, according to a list made by the Department of Agriculture for 1955 and which, according to the Department of Agriculture, were selling ice cream at wholesale. It appears that these figures include all plants doing a volume of over 15,000 gallons each year. Plants are included in that figure as engaged in the production of ice cream at wholesale even though they sell a substantial volume at retail. In view of these circumstances, representatives of the Federal Trade Commission have made adjustments to eliminate from that figure the large retail establishments even though they do make some sales on a wholesale basis. All were eliminated who were not making 50 percent or more of their sales at wholesale. Also, when two or more plants were under a single ownership and control, they were counted as a single plant. When those adjustments were completed, the figure of 3,008 was reduced to 1,672 as plants engaged in the manufacture and sale of ice cream at wholesale. Of that number the 8 largest processors and distributors of dairy products in the United States account for the control over and operation of 240 plants. In 1956 approximately 40 percent of all milk produced in the United States was used in cities and villages in the form of fluid milk. An additional 8 percent was used on farms. 24.7 percent was processed into butter, 11 percent into cheese, 6.7 percent into ice cream, and 5 percent into evaporated and condensed milk. An Assistant Surgeon General of the United States once spoke of the importance of milk in the following words: Of all foods none is more important to the health of the individual than milk. It is the principal food of infants and children, and of the ill and aged, for which there is no satisfactory substitute. The inclusion of adequate amounts of milk in our diets is necessary to the proper development of the bodies and minds of our children, and for the maintenance of good health in all age groups. Milk or some form of milk product is consumed daily by practically every person in the United States. P. 91, Brief for the Hearing Examiner of Counsel Supporting the Complaints in Federal Trade Commission Cases Docket Nos.: 6172 Carnation Company, 6173 The Borden Company, 6174 Beatrice Foods Company (Delaware) et al., 6175 National Dairy Products Corp. et al., 6176 Pet Milk Company et al., 6177 Fairmont Foods Company et al., 6178 Arden Farms Company et al., 6179 Foremost Dairies, Inc., et al., 6425 H. P. Hood & Sons, Inc. Hearings, Subcommittee Senate Committee on Agriculture and Forestry, on Milk and Dairy Products, June 1950, p. 1722. CHAPTER III THE PROBLEMS PRESENTED SALE OF MILK IN GLASS GALLON JUGS For a considerable number of years small and independent distributors of milk have undertaken to sell and distribute milk in glass gallon jugs. That has been done for several reasons. When a sale of a glass gallon jug of milk is made, it is of a sort of sale at wholesale being a sale of 4 quarts in combination. Although the cost of the glass gallon jug exceeds the cost of a glass quart bottle, it is less costly than four glass quart bottles. Other savings are incident to the sale of milk in glass gallon jugs. Breakage of any one in the possession of the consumer is usually at the expense of the consumer because of the required deposit to guarantee the return of the undamaged glass gallon jug. The cleaning and sterilizing of a single jug and refilling it with milk does not resuire the same activity required in the cleaning, sterilization, and refilling of milk for glass quart bottles. The testimony on that point is to the effect that the total of the savings effected would permit sale of milk in glass gallon jugs at as much as 10 cents per gallon less than the price per gallon of milk in other types of containers. One small independent distributor, who had been engaged in selling milk in glass gallon jugs at nondiscriminatory prices, testified as follows: 5 Mr. MACINTYRE. Your prices have been lower than those of other distributors who were selling milk in other types of containers, have they? Mr. YOUNG. Yes. When we started business, set our prices at the prevailing prices for glass gallon containers, those prevailing prices were lower generally than the two paper half-gallon containers. Mr. MACINTYRE. In other words, about 10 cents per gallon less than the price per gallon in the 2 half-gallon paper containers? Mr. YOUNG. That enabled the retailer to sell it at 10 cents less. Mr. MACINTYRE. So, in effect, you and the preceding witness were offering the people of Dallas milk in glass gallon jugs at about 10 cents per gallon less than the large distributors were selling milk in paper containers? Mr. YOUNG. Yes; that is correct. And at those prices we were able to make a fair profit. Another small and independent distributor selling milk in glass gallon jugs in Missouri testified that he delivered milk to the home Record, p. 11. 39738 0-59--29 at 70 cents per gallon, plus deposit on the jug, at a time when milk was being sold at retail through stores in other types of containers at 43 cents per half gallon or 86 cents per gallon. He testified that the price at which he was making sales he "was making money." Although in neither Dallas, Tex., nor in the Kansas City, Mo., area was it shown that sales of milk in glass gallon jugs gained sufficient popularity to claim as much as 3 percent of the market, the larger competing distributors selling milk in other types of containers considered the sales by their smaller competitors of milk in glass gallon jugs as presenting quite a problem, competitively speaking, for the large distributors. For example, an official of the second largest nationwide milk-distributing concern frankly stated, "We don't like the package." In that connection he said: 8 I might say this now; that, since this condition started on November 29, we have placed orders for gallon-jug equipment. If we are going to have to compete with major competition, we feel that we will have to have it. The Dallas, Tex., situation It was ascertained that at Dallas, Tex., Borden, Foremost, and other large distributors of fluid milk had been selling milk in half-gallon paper containers for prices as low as 26 cents per half gallon or 52 cents per gallon. According to the sworn testimony of the manager of one of those large distributors, those prices were at levels below cost. He testified that his company had been losing approximately 18 cents per gallon in making sales at those prices and estimated that his company's losses ran from "three to four thousand dollars a day." In that instance it was contended that sales had been made at such low prices in an effort to recapture business, which had been lost to small and independent distributors who were selling milk in glass gallon jugs. Those independents contended that they had only from 1 to 2 percent of the total market and that they were being driven into bankruptcy by the practice of their larger competitors of selling at prices below cost.1 10 An independent dairy operator doing about 1 percent of the market in flued milk in the Dallas, Tex., area testified that he sold gallon jugs of milk at between 10 and 12 cents per gallon below that charged by distributors using other types of containers, but was warned by intermediaries for the large dairies to raise his price on gallon jug sales of milk so that the variation would not be so great or there would be a milk price war." Specifically, this witness testified that one intermediary said: 12 He thought if the price of the gallon jug was raised to a closer margin that it would prevent the milk war. As a result of these warnings this independent did raise his price 5 cents per gallon and held it for 10 days at stores and 15 days on retail Record, pp. 224-225. Record, p. 83. Record, p. 108. 10 Id., pp. 2-30. 11 Record, p. 3, 4, 90. 19 Id., p. 4. routes but reduced when other dairies similarly selling gallon-jug milk had not raised their prices. 13 This witness testified that his basic cost of fluid milk was 46 cents per gallon and that the lowest he could sell to the stores and cover his costs of operating his plant was 65 cents a gallon (wholesale). Yet, during the price war competitors were delivering 2 half-gallon cartons of milk to the stores for 52 cents per gallon." Another witness testified that the gallon-jug price reached a low of 45 cents per gallon which was 1 cent below the actual cost of the raw milk.15 The witness mentioned previously attributed part of the enmity toward his operation as due to his starting to sell milk in gallon jugs to stores only a year before, although he had been in the business of delivering milk to the homes since 1922.16 Another witness operating an independent dairy serving the Dallas area testified that he started in business in April of 1957 selling fluid milk only in glass containers and exclusively to grocery stores at wholesale prices. Sales never exceeded 1 percent of the Dallas market." Similarly, his prices on gallon jugs of fluid milk were 10 cents lower than the larger dairies were selling 2 half-gallon cartons of milk.18 Furthermore, he testified that he was making a fair profit.19 Throughout the summer of 1957, this witness testified he heard rumors and was called on by intermediaries in the trade, to the effect that a price war was in the offing if he did not raise his price on gallon jugs of milk so as to be within 4 cents per gallon of the prevailing prices on 2 half-gallon paper cartons of milk.20 A further threat, due to the differential maintained between the gallon-jug price and the 2 half-gallon paper containers was that a large dairy doing 10 to 15 percent of the milk business in Dallas 21 had ordered gallon bottling equipment and threatened to start selling gallon jugs of milk unless the differential was lowered to 4 cents per gallon.22 This larger dairy did start operating its gallon-jug filling equipment, even offering to fill gallon jugs for the other large dairies at a charge of 10 cents per gallon over cost, though only 1, apparently, accepted the offer on a small scale.23 Immediately the price of milk fell in the Dallas area. The price dropped to below cost, until a differential of 4 cents between the gallon jugs and the 2 half-gallon cartons had been reached.24 A witness for the larger dairy contended they intended only to meet, and not undercut, competition.25 Yet milk sold as low as 30 cents a half gallon (2 half-gallon cartons for 59 cents) in the stores, and wholesaled to the stores at 26 cents per half-gallon 26 during the price war, and gallon jugs sold as low as 45 cents when the milk producers were receiving 46 cents per gallon for their raw milk.2 Sales were clearly below cost.28 13 Id., p. 5. 14 Id., pp. 7, 82, 105. 15 Id., p. 58. 16 Record, p. 9. 17 Id., p. 10. 18 Id., p. 11. 19 Id.. pp. 11-12. 20 Id., pp. 12, 59-60, 67. 21 Record, p. 45. 22 Id., pp. 12-15, 34, 51 Id., pp. 54, 56, 58. 83 119-120. 24 Id., pp. 15, 128. 25 Id., p. 53. 25 Id., pp. 97, 112. 27 Id., p. 58. Id., pp. 106-107. |