Changing Times

Competition was fierce in the wholesale grocery industry. Growing urban populations were demanding more from their tiny neighborhood stores while an economic war was threatening to permanently change food distribution. Different wholesale companies served many independent grocers, resulting in fragmentation and inefficiency.

The average wholesaler attended hundreds of small retail customers, using multiple copies of buying orders to price, extend credit, bill, select, and deliver products. In 1933, for example, United States wholesalers received 12% of their orders from retail stores whose annual volume was under $10,000 and 87% from stores which averaged $32,960 in annual sales.

Average gross margins of all wholesale grocers at this time were about 11% of wholesale value. Following World War I, independent retailers began to band together, forming cooperatives. These cooperatives increased buying power and gave wholesalers the ability to share large orders and consequently, benefit from the economies of scale.