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Abstract

In the past year, trade practices between fresh produce shippers and food retailers gained national attention. Shippers are concerned that recent retail consolidation has led to market power and the growing incidence of fees and services. Retailers argue that these new trade practices reflect their costs of doing business and the demands of consumers. Trade practices include fees such as volume discounts and slotting fees, as well as services like automatic inventory replenishment, special packaging, and requirements for third-party food safety certification. Trade practices also refer to the overall structure of a transaction-for example, long-term relationships or contracts versus daily sales with no continuing commitment. This study compares trade practices in 1999 with those prevalent in 1994, placing them in the broader context of the evolving shipper/retailer relationship. Most shippers and retailers reported that the incidence and magnitude of fees and services associated with transactions has increased over the last 5 years. Fees paid to retailers are usually around 1-2 percent of sales for most of the commodities we examined, but 1-8 percent for bagged salads. Information on the incidence and magnitude of these new practices is scarce. To augment information that is publicly available, we interviewed a limited number of shippers, retailers, and wholesalers about their firms and trade practices. We received a high level of voluntary cooperation from the interviewed firms.

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