SUNK COSTS AND MARKET STRUCTURE JOHN SUTTON Sutton, John, 1948- Sunk osts and market structure: Prie competition, advertising, and the evolution of concentration / John Sutton. 8 ‘The Evolution of Advertising-Intensive Industries ‘81 Introduction and Bumnmary {In hi ehaprer, and in dase hat low, we tr the arate of ‘dvernngntcnve inden, ‘The rls a averting in shaping ever of thee nds canbe teaed to the Beginnings of meer veringat the cao oeteenth entry. Inthe Used Since, Feevample, days market enderin several thee nti bed ‘stable ead brands bythe tara of te centary [ae eat ie sft drink (chapter 8), prepared woupe (chapter 9) abd bie {coakits end crackers appendix 122), bu the deal of hese hie tore are fir the mom par incompletely documented. For that ‘ean, hschapier foc om onload drink nda tohiveemergedin recon tines, te ones od inuaty, which ene Sco being daring the interwar years and only began t develop "play doing the late 1940.1 developnent ie very fly doo. ‘ested, andi provides a uel sating plat ia exkeing the i pats asimplemechanim tat wil induc te breaktown, funy agmented configuration, ad thet then chi chapter Felts to the denieaion of tht mechonbm. This ehape, then,capers mm provides a cousterpint to chap 6 in which the corresponding Fecha characteristic ofthe exogenous unk eat model was set tut At in that chapter, tendering loge es i am atempt 10 A indoty itor a' way’ of explore prison based onthe ‘Nish equa conopt that, on madelswhove conten sin ‘ertloetht cetainconfgaraans cannot emerge, beeane wie fm woul nsec ating ind opal we deviate. Thi chapte, "loi mien eto ny Sn rvamae fae cheng ey Wt ED ns pately remorse our on itv ground. Tt fubletocvng¢astaton fr example whch ach rm nde ES'Gete fined um of average in overt inform nmr othe vues prodt Hach aseting avrg ‘might be eatd as an exogenous sunk cot (ce chapter 8), and cde acted ort. Piirever large the marke becomes, A remaig tinge consisting of an odefinte numberof Fre that dalle or no advertising may coe with thee market Ie 7 Inaske signin, ranging fom about enefith ofthe ttl es {Fist ro aed nt mam say ‘use Brn lade aot ben ‘eh nnn pratt eae me pe ‘Srey Sacco nsete ee ewg al cs usd ting om ‘Tana Ate nnd ade {in the United Kingdom to over thrr quart ia Japan. Ths the Induscy affords considerable vnpe fr the emergence and Vablty ™ Stine by a eompettve anion of adver at y se al nantes of ee jE EMS Sitnc'a compoutve aeanton rae? Want tee vl {doe ich Sow il cen Win amber ef re folios ove rone eo fe’ Wil fm veldvchs pty {Suy poco and cee toe nd ef oration eh 2 lle ton hackle ply Seto ary omit ch any of hoe edn, cin Leen ged lento tine scores liye nin concn he ena carton hewn ie Whe bey tet ‘iui one in thecontet theory oe they een’ es dee ald [n what follows, we begin by examining the U.S. and U.K, mar- kets in whi the even oo nda fit developed. The evlation of mrwtare in these to css above a quite remarable degree of Silay. Ta each cate, i epi vo idendy precise period at ‘eich dua pater emerged and hardened, During that period, Siealating averting oy eroded the prftaity of mid ‘aka ny ths maingit increasingly watractve fr this group {open wid a high adveraing te ‘ingly elierent pattern merged, however, inthe German snd Italian tarket These two markets developed selsvly It, ‘Jn both cases he slew and ety bute a leading niche fn the mathe, which had marked the evolution othe aduty in the United Stes andthe United Kingdom, was aelded, Instead © operative sltna rapidly emerged between the wo leading fms whereby thei interes were merged. Titled bh to an extremely Tigi level of concentration sod toa noch more rpid convergence tom lone dl patern? " ‘Tikaaeacrtecenes obtain Fehr einsece Oe pee mar nop“The Second Theme nce (horizontal product direniaton preset wa ienme in Chapler 2. There twa ponted out that an extene example ouch toon of eqilvs sites when make ae subvied int a Iomber of ore ot le indepondene segment. Tn that stig, we imap have both concentrate guilt, in which the rae tet of fies peat in each wegen, ad ther tore agente equa fn Thich diereat srt of es osupies each opment one market segment enhance the firm's brand esage and So teoerat spor in espe ia oflerings i ober gen). A EScmpanon betwesn the eaten structure of he US. tndasty and {Gator other couse vadled hee provide ting Hstration ofthis point, Un the United Sate » number of eparate market Segments cat be defined, within cach of which a erat wet of [ening fers ative. Elbe, the same bet of fms donna all feament This yetece of segmented strctre within the US. [Bey sone othe fons underlying the wide dvergené in ver i at ‘ty or a9 Joe saa ‘cd ge ore ‘Teta a Abe Inte a m a concencation lees eberved seomthe prevent st of owns (abies), Market Dfilton “Throughout, we low the ual convention of ing the frnen fuente olnclade ose ih prepare) mea, vegetable, ad land deers Weetclude le ereamand Foren areas “Tesays moet vise rand mani fn oxen fod desives om the Indutay’s under, Clarence Bide who Sree « cimpany in ‘New Yorkin 192 (offers fillet A number af ocher rms were ‘lseady precingoaentoed by hat ate, but Brey sinnovation Iayin easing the advantage of ecang aint apy to void damage o the celular arte ofthe fod. He ao bad the itn tion of being he ia free fod in package designed to healt tren Binacye' fit ventare ended i ankrupty, bute went om 1 launch new Sem, General Seafood Corp with dace capital of 100000, The parent fen for Bday company wat Kw at ‘General Foode Gmpany. T1929, he Post Coespany, a rapily ‘iverajing fen, purchated irveyes company, paying 820 millon {avin patente and §2 millon frie eee. The ame ofthe company vat ineditely changed to General Faas Corpora, Throng it the 1030 te market grew lly but sedi by 1889 tal euaey predvction was al below 400 mln pounds (a Ogure that doubled by the endef the war and increased tefl by the ‘nl-10%0). The main base to gro houghout the 19801 yin ‘he cn eae faced in intaling pay cabinets developed by 1.0 Hil 182 hee gla-sTted eases were extemely expensive ral orfot uit east $100 during tne Deprenion years Oem ‘ral Food nding under the Birds Bye rand name, developed 9 ‘une of nates degre to ceavert the proie. I 1981 odie near pce pte an selena thas ‘gente pr Poe Pd erapes ‘contacted withthe Commercial Greit Company to anc: re taller puree dplay nen 1934iccontracted the American Ranier Cop, tomantsctorea ne, lwscot uit inthe form of ‘ed chest his ericed the display element, bt the cs rec ‘Son (o 8200) was ruta Tt then proceeded ote thee new “Ameren to eur at he modet rat $7.0 2 meh, Hac a band with hs sete weat the we of ales ce not totakecisomer ones (tht were phoned in by the retailer direly tothe company's warehours, but rather to overs the etalers fates sratey:enuring tha ened cue contained ony Bs Bye roduc tlking to shoppers with the id af charts designed to monstate the vale afer by foaen fds and edueating the fexalers naff oe sling the companys procs. General Foods Tend wasfellowe over the cour of te 1980s, by a nrsbe fle, tive fod fry, inching mas of thve that would come f0 fis product wat “ieectors tat operate Gee plats in ogriutual arent. With the coming ofthe Rooveel aditration sm 198, the company ‘pone tothe growing anton ate by Heensing dee ab ‘Contrast (or Scopacker) turf patented feezerson royalty Th thi envronment Waterman & Go, one of New York's major oe wholesales, whieh ra een catibutng Bids Eye prods to nstatona yen. In 1988 the company dropped the Bide Bye Hine and wet wp is own ‘Company, Honor Brand rete Fos Att, Honor Brand focused fe telon onthe naewtal ctr, bot 1987 i entered the eal tmothet wih sateqysnehat dire wo that of General Fos ‘Rather va lente dplay ee the company sl them outright 10 feullery who coud pay by inwallments over two year. On the ‘lstribution side, General Fods wel two route: ian che majosty ‘ta retall vale trough own regions] branches, while wing theremainder through ane of dependent whee ditibutrs "The alane Ades ae Inde i» ‘who wete pid percentage of tls revenue. Honor Brandon the ‘ther hand, svoked developing ts own expenive dstbution ne ‘wor by engi product tight to a mute fexhave whole [Mie isttors mayo hae were dary jobber who already had Tefigeatedtrucksand storage equipment Therenuting disbtion et warpachyrealve to that General Foods, burby 1939, Honor rand eal sles bad vento hal he eve othe market leaders Inthe same yen Stoky-Van Camp, one ofthe county's major ners wn theo a mina sarebelder, ook complete ownerhip tf Homer Brand Stokely iterated Honor Bra it sown foren food von In 1954 "Throughout the prewar period, however, the retail market re. rained vry al taped secondary roe fo the nonreal eit The war yar sa substaal cease tal vlame at ‘he Crucial Decades SOUBTEEETED ions were oginnng to appear that AD ‘One ofthe matt, a lependendnribue {or who ad played prota rle inthe prewar indarty. Mott prewar entrant tothe indy were canner to whom owe ods Repeated a mivor sideline to dir main barnes (PTC 1962, rity ty cone forthe mot part all el product though Independent dtibutors Twas inthe media ‘et ‘tworking throng xcaiv wholal datsbutore ered, more bre on nid cen or en apt of product hn = Gling parent marketing neon ; Catnapper in eal | NSlctan cinta alee pan oy snd eee gw ey Ft whores rer FS “=ert iy eae ore innovation lyin the et 4 adverng.emesith of the revenie recived was devoted 1 an othe feed ame rn the 9 commision it ‘hen camel on bough-in rode Moreover, ftv fl thatthe ‘pany coud pre lower cst dan could buy in and Suppor round of pice redaction, With gowing competition frscarce play spacein etal outs, Snow Gropset ut ose ee tora Babar ofypace A second Alemene itt tc ent order t underpin thi otratey, ‘Tarvobypon the welletblised dietbtio outa independent ‘Wea and to masher erty trea chased the new ‘oly in 1946 dh Fat Naooal Store im Baxton and A & Pin bicago Te later nin reported» pling in ales within ety Ulyromprce reductions of10%,-17% Thenewhigh dvetiglow pc aly pursed hy Seow Crop le oan extremely ap sia poearets das wave omg wae enlaiheemetty repr on he int, the Feral Trade Contin dingulibed thee group of fms ong the 270 rms covered by its 1959209. (0 Somewhat over one ofthe en (10) were etblished ex Bee ioto "These were monty canning companies tat had versie {nto Genen fod and thre acount for 33.2% foal als, at ely en a Ps ‘eS etter tec cmege an ig ‘Siscctser or on tO ane ot Trees ge ef wf ites Wen ab mova sae ‘Me Ble Adin ner Idan m (i) "The nest major group af eventy-fve fers had etered in the {mediate potwae period 1945-1919, and eh expand for 31% 1080 la, i) The sity-seven firms that eatere the neste in 1950— 1858 accounted for mere 7.8%, of indanty sles. Thee new fet vere nlmont al sal highly specaized cance fr which fovea [Bod production wat the mala or ole acy, and whieh cond ‘Memes to sonal peal ae nh Ashe FT report ote, het operations ext asia "inge They generally reduced only one or tw vor prot ratbr Una lege value Produc they generally were not diverse into related ates ‘ny generally were itd to loeal markets" (FTC 1862p 6) Th the new climate oh 1950, wid inten brand compet- : ‘ion ed by Birds Ee and Soy Crop, dhe only recent entrants that Gould efecvely compete aero the board were a handil f major © faed produ that had diverted into the aren dung the ety | peer yer Among them was LIDby, MeNell & Libby, which a anal dabton i 1988.7 ‘od posta macht Maven ote nds hed lg ben F SLINTLSS scoot bySuciy de ss Te Serta arin ene a mah SS aie pe oe ee jy nan advertising cleo ther own: they spent $98 milion ia ‘dveting ding 195, whieh ws 4.2 percent of theta advert ing expentitre ofthe indy, and 6. percent ofthe combined cher label tale” (PTC 1962, p. 85). Sng ee adn bali ese bed hn 5 emt “ SA anh dp eelpct “Thirato of averting to nes was characterise ony ofall on aeading ers the FFG ted ato of adersing to (al) {ile 3.2% fre argent firms of 2.2% forthe next elvan {12.9 forthe nde whale The eng rms alo acount for not ofthe oer promotional expentare: the top ive pent $6 tnllion on customer promotion eal in 1958--71% of all such ‘expenditures bythe indy. Ta the role of adverthng changed the sae ofthe retail markt, «acer diferene in pattern vit he nonvetal segment became ‘iden, The fourm concentation ra, ae repoted by the FTO. {br 1858, as $99 overall nthe etal segment it was 99% bt ‘label prods are excel the top four brands seco fr ‘2ajef te total Mt owlabel product was opi by small fis Ivo supple the Isrger Fetal chi ia pnt tong mae hie cars cr ere ama a mettre maa ile once teense Sitar rata ate tet ser lt wig cee be Fines ‘ns sg tn i ae ne Tataae abreast ance eects iecdin aed rte ware Seouuncetasseerasttyeie TE eementete nga ere Borers rate meets Feat ‘EIN puncte me a tne rae pn on oe “Sin ity eee sn ac op me th i eee cop es me ons eee (fre ist. (area pea tp wr ee ag ro ——— Pert ‘regain ed pa by in ak ete US tnt, ‘i The font on ck gt eae rysnd Comoliation ‘ath new tract pate developed oughout the 180 pro ‘Sapedton trad sang Brands sought to combine high ‘Sven! aod lw pina elt to enpore mack! sae. Th pct Gasset by act whee wetegy was based 0 ng caiy al wnber of pce aw scene range product, ed (mon vegetable cad eah pe of Bent extn) ‘The dnndvantage ef sucha ply, which we lowed by others iheindosuys™ werevern ob outwcghed by he fc that eae = othe prac By pric band rahe han by Sant no Set bu ep need vty npernaret, TE aed lon couucu ng of tet ee. The [prin amnion wih heny aiering (ard between Pa Meet andthe ea) loo tpreive growth fae. By the Ine 1990, weve, esha lowed fo ech dee that the {Sentpuc wasnolonge svt ond hiro elled group prising sey sri oy oly ina femal pela categorie tees Toa'Recond ar cpce compen nthe 1905 waste ‘Ercan puck he nels atenpted to ae lower a lower ‘a pris the proce weno arth vegetable pola reached ae Bounces Ate pnt he wend seve i ver the igh itger 0 ounce pack whi came sn nde dad "Fc price compen of he 1 epraeted one ey, How coer anja ung pois Consumer cold now by grade A eerie Ciapeieaiog piesa ea canteens out Seley fad ge foment ec bad Fa mere ee ea tren vege Fron ptt vad he tnd a tr he Tonge ling th casing sry ie choir 7) ag Background of ftenaing pie competion sad ghened mar inate weno iy expec! at ar wae oe Staton orth prod 100 to 1880, ato yo acu of ‘ih fe or were ld proce fly) war eared by {Bp anche nen od cone byte FT repre 182 Mon sf the nsued compan woe small of he Sieve hich ane du were aie ty had ante etow $1 lon, Mly oh iportae squon wee andeaken by leading frau of he fy odeproceing les seqie, urtesn frre angle byte gt eadig compare tay. Te Ef the big anges ecard in 154, hon Sely-Van Camp toured Pabst By ar te nt iprantsoqi, howe at Minute Mal, whe two seus sunt 429% of in lt, Mate Maid Corp, Mies Gone ue pecat, scgtred all amc the Suow Gop Divo of Glo Pot ne, tharbagngthecompany ino he maton nen eget td matiag seed ol to te Bra Eye brant en od Ihr, Mute Maa vente phd of ce wat wth Trew adage we vg rd ytd ebro Fava voter wer cub up 0 cent pr done, tnd Seabrok cad the or ints Mists M's Bes sear by ‘ing coment orange pce fr Scene xa pried she Sertrook regain At the Pam Fd dg especie oo Ue lady sol Pantani the bale wa la bet tegen Mite Maid had ctrl che el ond vqeae Rl oo 1S Gompetiv bc were eo deply dg inp 70). In 187 Mine Mad cpl sig the righ ofa Show Gop fit ed ves Sete Prt, Dt twos Mine Mas ey ‘Shee teen enege tat ttt oan Take county Eatg produ fens conem wats, Minute Mail acnoned fr 20% of indaty capac and {Sap ofl Sow Crop held ter 1 indy cap. ‘Avevemicofan TC compan Mine Maid ved Sen 1985, ofthe ose range sce production ales aequired fom Cinton Foods. Tn the mame yea, Minute Md merged with the Coe-Cola“Te Beinet Ave ene ein Company, which hay sory belo, Iundhed jt Fanta erage Sn ee chapter) "hin merge, te FTC noted in 196, “lic ai Gan independent fm an fnovator tat wat wing 8 ‘Re peoduces new procenngteshniqes, and new packaging thy (and "brought to an ed any ery chat ee or ight have QuURPEL between the Goca-Gta Co, sad Minute Mail” (FTC 1962, p. 128). ater Dselpments 1950-1085 sn numberof compas that Tet iy tw cay Soe reine th 9g te ar alog thr Etmerer evant vn ery Dea aan any Byte ede he erate igh lt ee sm el tome crcl bling poston nei ee wc entrants sed to et, ad coin Sel rman carne of he mark no ll bit ow ied eal i queen dal acter the indy (eet aber herent on ow at ont bo Beer t500wfay Theva of indy has got ae aera acre fc abt 4 ion 55. Fare mnie a hy ibe wel rome ade sees Tesmulet produc onenrteon op sar rte manson in cantar sealer Hwee, eel ndmay a samber oC maj uch hangs TESS ge nthe pny ete wht of hndstr ao the rage fone od cater ABC omer fe at ented sal ew geet fe See ee je gov wt market oben are tem he mar abe cries A Sanon weer ee deed eo dons 188 ahd Selle sce te pedi fon entra o he sane yn pheasant 18 whey aan began call LINDSSD Setometine ben, Te tenant PSY SESIUOPE tudor ins cabled arene Caaf an quer Pury, wich i 1952 sa en Cant red io he Gen veel 268 “Throughout the 1980, ellowing afl temp to enferthe mart some yar bet the Company hituyoe ser apron orig prepared oan vege {abla (ey the egal were combined th a eaoned utter fave) Thenew atgeysccesed ply ata dine when branded Toren vga wercoming der nreasd thet fom oval ‘pple isbary sesponde to thi chalnge wih a heavy, steady Sten cCavertagtapport and sonia lwo ew produc. ies ding tenn withee thr coal ines af owen vegetable an by 1970 pattern emerged dat ha ealned Salle rane in eg fonn pete own abel prodocs ‘Seoun for over bles bu the tae prepare owen ‘egetbls rem very fw. "Although market growth tracted age mamber of majo food rocoto the fe, fe lowed Pils’ atrategy. The other jor tat have ceed fn recent jai id by won. All {ine lending fa the hy coveted poped meal 5 tment were nogued by ted indasty lade: Campiell cqired Swanson fn 1985, Neste squad Stour in 1973, wile Banquet tuned by RGA, was acquired by ConAgra 190. By 198 he de msjrshad over 00% feet the segment (Wi acsounted feranmal eal of sound $4 blioe scompared wih 13 bilion fr Goon ode ae wl) + Continuing compstiton between the major acentated ihe dual Serctre ofthe industry, amos eel nerd rence on nal “coproceon™ Gobconacn) fr ther appt of prfce {General Foods ha moved tony In i diretin cartet pir {toy ett podacton Soa be dropped in vor af oproceas Input product can be bought nme cheaply than ean be reduced lrknwe The rl of General Foo ace beng that ‘Erconuributing what deseiedin the rade prea the "marhetng ‘agi eodated wit the Bid Bye band Some af he "ight that dominated the martin he 19501 iat ee nals peve Ht Mla Mi, ebro ar Sopa) Ones aventrved ptf owner change (Goteh-Van Campo Pctovect bd to United Fonds, ox Se fhe top ames none vegetable, Stokely wa later bought by Quaker On whicald the canned vegetable bine to Oono- iowoc,« Wann canes now known as Stokely USA, which ake under te Stokely brand) Libby exited frm the make,selng ts rae fn interes to Winter Gaede, another othe Big High of he 1850. Cament Stace vey he ee of iain te, Ss et rey a we spear very made by intron standards Far one.c eof ta diferent ie domaine eet TES cding cmtns othe pee ond inthe ote oun Testbed teow: Te ttre of the US, market oe in ia hig vd of concrtrcon within various vein, TEEN Stesng pate ef maketealenhip neon eee, ert ovraleofrceetsrion hat opener ‘Titer caged 145 vale shee ehownin ale Te thenge spent, oxen prepared mea the thee eadng Iernacount for sbeu 0%, fot aes (ie). Even within sept as ate pant event ales al of Cap KENT ct eumplte nner, wheres alan al of Neale se Shanpleaih proach the owe vegetables eo, MMe Ginn ye (General Pods) and Geen Gan. Fa TE aserin 5 tse tnt Freee le Se) Premed me ge) ‘ter pepe oss ei eprint eg) etaedg po (were) as ‘Sona fap Go veo Te Wid =i ‘i, Lenn Oi) feo tom red aang ei) ‘ae an of veri ae fren potas the Helne nhiary Ore- Ta account frabout bal ‘etal sale Orda tong Doth insta and once wo ‘najor competion, Simpl aod Lamb-Weston, concentrate leat ‘lsvelyon the nonretl weto. “Themataiking tore tis patenafxgmenation inthe US svar relates to the event dfleulty mut Indes have expe ced in bowdening their snpe ato egrent, Minute Mais ‘iy ifeles fn moving ou of fonen juve speiaty have “lteudy boon noted, General Reads experiential fa frac potato, a ark ong dominated by an esl evant Ore da, auld by HJ Hens n 1985, a etaine 4.59% stall sate inspite ofthe xppearanceot many new etrats ver the years Bite Tye inaly sland is attempt to bul p a preseee fn hat segment in 1585, The appearance ofthis guente pater consent with dhe theory. Whether oc ntigcontteran eli pattern depende Inter ts on whether he averting incured in one ugrent caries ‘ver effectively nnapporting a rs brad imagein another. eich ‘vetsing spillover are very wea, each segment ean be treated independent market Enty tote top of any segment rune ‘active atoqulrum ply beonse i ental Ney Inerameatal ‘verting ovaye : ‘Dut such advertsing wlloer re strong, then ersventy by snatet lees new sogents wuld become tt coy, and ‘eymented coiiguraion would oollape. This erative temp {in i plauuble a plo, and wo tie fneretng to ak wheter the ‘nea ipl inthe mol tle the whale story. One reent US ee of inert in that penta adn vasa fo the ‘entinsed egmentation of the US. indent. ion rast the bats betwen Stoufer and By th ery 1970, Souter was the leading ality" peter fionen prepared ie, while Sura Lee war he tonne! leer in fewon beled goods Stole entred the Boson Trked goods agit inthe exty 1970, with am aver came + pal hat nite castomer to "rym Selous alternative to Sara {Tee Sara Le retaited by launching new ceva line ‘orn enters within the segment dominated by Stuf. The ex ton prov too coy to atin within aw years bot ‘Companies wide thls new offering (Sara Lex 1975, Stour 1979){83 Frozen Food in the United Kingde 1 thie section, we tr othe very snae pater of development ‘towed within dhe Uc ay la ls ent tage and we ear fn he more recent een feoncentration i the nt a8. Taba proce amet compete with inrensing eletivenen against leading brands “The Fist Phase ‘Aiton alae quick Geng we nated by sever UK. teat ake 10, te manure a come ae paso deere naa dst hough thera nde wat se by Bis Eye teeta poner ear Hirde Ferre npr i 18m wk red Food ra aretha rote onde neportedintheUnite seers ta year war 88% ned by Frond Pwd ney Bee dey Gente ord 10104, Uns bone he ste nbs in Frente Tod Lead fury te Prices anh rae com weld te Bye eding) La (This oh aa Teen Staite ening Bi Eye band owned by ena see need Sure ety Unrate United Kington) Toca af he Hoed Fon en a tong tr ih Glove irs (ister, Bachelor Pet iy Feo Nos Lt) oe py ed el ron ong tei 04s ood 10s Ain the Un Fara aye te arte y sh ck Se gay pcr td the adequacy of daribun hans feria tarll remained yaad upto 196 over thenet ve Tene werent gor ax nto 9%, per annum fm the om, TT oS gewtncontwe ots moremodstrate (aod rsa crcl pi rai owt of te 158 ht sus bycntted a urong ede paton in th dy. Aringy ton he baling wp oe ong nation son ee eee mater ry sapped by oer Uneet graeme manera The lin Advi ne Lu oy subsidiaries, I dsibsin was undertaken by another Unilever tubsiiary, BPD. Lad, » general duration cmspany whose Eigerned tempor vo ace eel Bir Bye Air eter diipay, Bis Bye peraated two apple, Premed snd Fig Alt, to design and athe an open-top ply eainc a 1858 185¢ and thereafter sought new busines only with retailers chat ‘nal svc esbinet Birds yd ot, however, mtmally provide ‘cabinets to setae By he end ofthe 150s, Birds Bye accounted fr 60% of otal ake | aahell GPquickoeen fon inthe United Kingdom. By then, wee thd rowh of he mht ha gun ant © The Second Phase G—The new extant were oft hinds The mloiy ware sada tinned emutactaren tot nce carver a alpen | Indome peciaied nib of de en fod asines. Two ofthe naw ara, however, alse eo challenge Bird Bye cron he board Thsiresperizore ferremme ning praise with hace the ead © 7 dev ending firme inthe U.S, indore the 180 (Le, have [© ranted to eight; ee gure 6.1), i" “The att the new challengers wath Swedish company Fins, whic Began operations inthe United Kingdon in 1936 and wal 1) eid by New ia 1082. By 1954, Fides which had stout ‘rate a hghqalty image oval Binds Bye, had tained an 8% | markt sare, but was tening ta los. Tn that year it merged with ropsx Eskimo Foods Led, which had ial bean formed by the merger of hee Rozen fod produce. Flloing it rationalization ft production and ofthe brand ae (inating ll ate indus Trad), the company achieved sm 18 marker share "The tcond challenger to Bir Eye was Kos Group, a lng- ‘tabled fab mercanting burner that had entered the Geosen ‘ed busine in the 1940 In 195, Rem Grp acquired Young’ | fem specaning in fer and Goren setts by 1963, the evo ampanie gee accounted fo about 8% otal salex and 12% catering pack ale 196, Reus Group we neguired by Imperial ‘Group as part ofthe tobacco firm's drive ite the fod aed drink ‘Siavaar ana ma arsora Sa nthe concent psig oto te Smedley Brand itil cre gt ea ia ra ac re a nonand Finkonhee ogee ere errs lb eet ca ene sere tae, es i Oo ft ra ed a nen rt tee seme ar ne ety im a ce a ee iterate ere fot cy aa a a seer cate claw aco Sc manent ne eee a ee a ieenee stares le Faced at ti ce craic mec eae a sgn ea ee or tet mrt Soencrmnt a ee nt ae See an in st ec es tenn epe De ems ma Fee sei Indo the rte intents fo prices generally Bids ye’ return on copltal employe, ar etiated bythe MDC, fl fom 22.295 in 196? to 15.95 in 1974 (or manficturng Indoury at» whole, te tate of return oer these pred rove from 12.0% 17-4). rugs Eye profit were ling, Bowever, ia mala competion: were faring wore ga, The Commision sued pie compart by remarking "Fue and Rove Foods have conatently sieve lower retsrm on expt employed (nan store cost bas) haat Birds Eye The low poftality of Rom Foods and Pind ed fa vo the cn avantages derived by irs Rye om economies of lca datibuion,advertiog nnd slag expenses" (MMC 1976, f-G),in 1974, fr ceample while Birds Byeszetur ox capil tod ISQ9, Pn eamed 6% (Fonen bad ony), whe Ros Foods ‘aed 439% (ll operation), By the eal 1702 had Become ear {hat the challenge to inde y's paiton offered by Ros a Findus ‘war alinited one, Unilever (va Br Bye andthe very sl Tempo Company) stained 60%,-61% share etl ae, as agrint 10% fer Find and 8% br Rose espe het welldevloped dssibtion syste! bh Ros and induced considerable diay in obtaining splay space la ‘etal outs. In Jay 197, Ron ods watet research data indicted he the Rove brand wasrepeeentedin oly 3% of roeesy tnt, compare e319 fr Fld sed 70% or Birds Bye Te utero tee events was dat Rost gan foe fom the xy {70s onward the nowt sear Anew but growing eget ‘Soup the by uy Rom Fos opted pay awn > ‘cl nas wa. pp ome f= ‘eet rtm aie oy er eae bri ue ‘en Tht ong i Raed Barak Tetra pm enn en (Sg Resend er Bie uy Or nen, eh ompan Eafe eu prnemm ‘sity png lg ects ee net ‘rsa le et ones yan oy Sikes gum sedi chery es te rey Ste amr ase pio eeeoar the UK, marker was developing conmmer instal homne osttn so pureed tltvly ge bome esse” packs ually ein petbe sew!" Rou’ ern, fom 1974, was largely forged toward cis bina. Fecadverg expenditures thei Thee" ding the 19705 _austate te differences been thet respetve tego: In 197, Bs Byeseapenitue on nverUsing as ales promoton ative apevenageot otal elrstod at 8.6%. Theequvaent gure or owt oads wae 2.1% alone at we offering fr the ote Booternibmatie) and abou 0% for Young, Row’ ster Repay, Huy on decided tocat back on adverthingin the aly ToT advertising nd sles promotion fl rom 19, fs 1978 toes than 1% 197% Tha the pattern of eompetiion ding the 1970s between Bid [yero the tne hand avd Roa Findus om the other, covey Parl the competion between fixie and vecondtier produces PeIRe UGS marke Goring ho 1880 (re 6.1). While smal fies ‘cnc alms exclvly on he noneetall marc even Ress at ‘indus expend in that sex), the dillerence in race between TREAT al onrtall segment gan to arden. In 1674, Bic Bye ‘Simo uaa oeral solani share athe U.K. rare hud fen m0 inte ate 15s to fn 1970 and 89%, i 1974, Tn the Toetnhet however in 1974ieetained a volume share of 12% Seb aueshare of over Bids Eye's value share the catering cee was probably le than 80%, a he sme period (MMC 1996, p19). ‘The Third Phate “The major rend that has shaped the market between the mid19708 I telaig180De ws the ie retain’ own abel, Food retaing IMME Unit Kingdom i highly concentrated, wth » hand of viajr cnr secountng or he larger part f fod sl, Theemet~ aera oth a ese major ean groups, by Saisbury’, Te Tuono me apt ae en age i TER pe erase pci hen cer te ent sac ot ry a, SSTESE iceman 0a eo Pe pend ea er ee cgi om at re eco neve pong Marts and Spence, and Tic, has ben scampi by the ie Cesing nrengh ef ter own label produce rave (o leading ‘ands Own el also nen fad accounted ir a ere 6% of {eral alesn 1972 by the i100, accounted 39%, By he Inter pete laget ofthe rete own brands hd aes i lento thor oflendingmanucrrersSaasbury' with over 10% ‘the market ostel both Row and Find "Thin growih i elabel sls, above al, pt prewureom the smart ener fr the 1700 oar, By 1967, Bir e's share ad fallen to it oer 25% otal reall let Te nether ‘mae song aces al een, ig i endiogpoion in iy one set (losen potuina where nternsonl mart lade MicCuin hada rong poston, Fndin afro meat heavy oer the decade siping fom wcond pion oer hed, while Rom ‘maintained 09 share The Big Thre i ty thr postions {aly Bird ye maintained its high adering lvl in a attempt {fo prcerve i brand mage vides neresingly pestigoae cr inhly wile atamptngtcomaaty nda ew proc, por teaany in newer higeniseadded ices Asin he US. rnthet, ‘hough oa dramas lever degree, the leding brandshave fe Tester in these ghee aes oxen pepe mel fr ‘ramp Bide Eye retain 97% share of realli (able 6, "Ac the eter end of the product spectrum, dhe market leaders have fred lem well Yn the Gore pote rex of fonenvegstable, eva ow thes alimentos, we Bir Byes shace av fllen tote over a fh (abe 83). “The deline nae as le the major a ometheg of dilemma regarding advertng expendtoes. Given the eterallen enjoyed bythe major setae, whore label products te hgh wilevite segmena i elativly high. Inthe United Kingdom, the Tow Tovel afoverll concentration roc quite a diferent phenomenon the ead growth fetal’ wn labels hs gta ally raed the pon ofthe market ender acrw the Boar "Thus, the recent hoy of he to soarkats haere eather sharply at to which we return atthe end ofthe ape On the ‘ter hand the ery history of hese wo nds shay remake thie inlay of erperence, Tm ench cave, a new and weal grow: | ngmaret bots attracted a wave of new eran and sinlated ‘umber of leading ema to ecalate ther adverthng owayt. Te | mer came to's bend as milder fle fund Sncreaaighy Unprobtable co vie with the industry lenders In centiog sueeetUl Feu brands The pote edd, each ext, withthe emergence w dic age etl nth abe of any aveiing sport ad tove tess cent wel eae vv ing ray E Mt raponei onto ajrin th es of aecnng wl wigan hich ed at aroma 23% inthe te 90, “Gere craven betwen group lean rand aed SECURE Sr eling, i ole of ie weakening postion of! | tarot {Scud gods dive ompani, weve, had rented in vey a {trent aye ding he dead, Beda Eye response was omar - ‘tetera high versingee ra hal maret ae SSIESite SU iooty eterna Seco 196, ac eased rng ofl enn dade: n 184, fs share ‘Einloy adeog lbw neal ir tert ine (o 2%). in orton ry tale stl shvey ing oat verge ud ren Thioaty wong image was ootmers. Despite ing eo tid Utara en toned conte bod lage svertser oh earn Birds yin cuin neering the 190 ii cncng segment of the mht wich acomnts i oly coe orto tl nen od ts in he United Kingdom, eSed soty eleinpreance om the mi oe ‘tenon Bl year etn catengeent renlned ona, Ui Row leeds rence Fads decided que Segment comply inte 1300 ‘As totes Summary Af glance, the US and U.K. rs both pee ae SSERUE iw afconenrtn nen compre wear eel fee Tape sty aac me SES ERE Crna, Te og ce ow ove vel sree te United Sc canbe raed to the ft seers scromegment concent 24 Prosen Feed in France, Germany, aly In thi section, we tur oa group of connie in whieh the market developatr by ths jnceore, experience leaned by leaing rt Inthe US and UK. markets may bave played = je part fn Infuncing the rather diferent pater of event. The beginning of the moder fone indy ouch of Continental Borope betraced wo then 196 when bath Unilever ana Neale Hod) ‘egen operation in several eountie In Tely, Nee remained ‘challenged unt 1958, hen Unilever entered wih its Langnae Tp band and mounted vigorous adver campalga under the slogan "Lats take Gozea ood seouly.” Wh a year, the two ‘companies had pooled ther nterntinTaly and Geran by way fa join ventre, in which Unilever held 739% sake and Nese 2 253 share Doing the 1980s, Unilever bought out New interests Under the terms of the agreement, Unilever veaied the Finds | brand name fn Ty, where the brand was relatively strong, and © Neat eqeed not tal under the Findus label ora five-year pesiod (0806-1091) within Cenany, where Unilever mackew onder i im Langue brand |The eceplion o this pattern of evens arco in Wrncs, where the fetes ood market wat relatively sow to develop. Flowing am ‘loc eavly aompt io enor ia the ee cenn market, Ulverremained inactive inthe market fr sme Une, and Nev bit op einen pation hat etl enjoys. Although tht events jacnpeed any exclatnn of averting oy inc that und ithe Untied Sats and the Uaited Kingom, they i ot protect ‘lencwmarketlade, neler ene om ter lanes ofwaekahare ededtumane Smee exent 10 wich this onceed, however ‘wor quite diferent a each county Ialy Jo Lay th ec of ter nan heme ws ea Hut ict mare, Une tilowed stay ig, vod uorrang wich stowed tore ston aston Sr ae A waeporeseubsteenUversatreng IES ha te met compte eet et ‘Se met ar she ens ai comin mre cet inte ih ae ed rete a cere! ent ood and EK Teno neve epee stot at 9% Senet cet nde x numb feet eign render 07 Sel 7 AGE Tee, ean now SLBA. Arn) ad Bree Ding Sens feriad tare ocetng mem exenely satan 190 opps 052800 87) ‘Ribueunjs ot sey eran aed wily, Aron eed ‘irAarc od iene alr pine broad one Page ce gro fac pcb ny oye en Sy i ee ne wr een en ‘Sa mn Cen on genic tn SESE ace oa tp ch al tn tt ee Ea en aoe natal cunated west eta teen 45 epi el SCENE RTE dittennn tn taieerew rman eens, a ee i en tat care yi ad age "Sia he wes i mo cin pn bn coe, eprom ria a SRSA tee npn oh SITE tee npn a wo ‘teatonton onthe Goren poultry segment and i major wrength ‘il i that aren, Surely on the other hand, st out wo fr & Brond range of Hosen feds fom the out. Nove of the fi Ihowere, ceeded In etablihing s postion commensurate Witt ‘Unleversn the retail mare. The catering markt, which aecoute ‘rove quarter of rata ithe domain of medion ims Unilever rank ur inthe segment, beind thee medium ‘companies The onmlabal segment, mean maine vnimpor {hot inthe Kalin marke The ony maorretaer with lange ending own label acanghs, which etrodseed Brad i be sia." Germany Unite’ reatvy strong postion o dhe Talia market conta witht much weker poston vive a an eval the German Darke, This ference is atlas arly de to the greater role played Germany by meiumalue domestic prodacen, whose an ‘Rregth ee inthe catering arab whote product ae alo sd tretllwhere they have fn se ener coed in eating ‘ong markt poston, (Nonrtal ales sceoontor 79 of otal ken in Getmany and 82% in Tay) S Unilever remains s lear market leader witla the reall are wheres ahare mands at around $59, while is dhee major Heals tach have deren the 10% 1795 range. Tis st important va, ‘Batt, es private company whore funder began by selling ar ‘produce and which grew tothe point where by the id-100, ‘perted a et of 00 rebigerted raisin national ibution ‘network Within he high valu aed seady mals segent, Bolt ‘Bow thelnding slr (ce tale 88), ‘Unilever sec vain the eal ngment an, ‘owned by anageeaturalecopraive, which manufacture ream Si fone pari, Tt buye in ether fone food nes om = ‘umber of wares, incuding Hania Tiefhhimens. The ato the “hig Four” in reting the Octer Gropp, idly divered German fo rn wi a stong uals image, Unlike Dolor and ‘iva, operates nly on te Yeti maret It heen company hd ne cg 15-87 pa fora keg aye mleee cee Toit cnting nn ne) Femina earl men Germany aig _ = Gp a tac 2 ae Utes) cd ut os atone ea Se ce an rein: nd wala aera ae cobra wea essen oe Sate ate mnt octet een er ae grieve teas seecnmaractiatneatftnierr ats Si eee rich ebb Some lee new ae et in rt et Sorin mines aedamanc [Same wc gy a lS a me we Fh BS et ti nana tc) bo cttw bi garni a te rue Lage. ee oe ‘Getta i ute ptt res a aaa car ln ongntr ceory a te aco, somal ‘prams cin wo Abo Thre et Sec oe este ea om Egan tent ase mae ee ‘Unieer ist entered the French nen fod masket byway of he lon rltd ioe cream mate ait in several ther Boreas Conve, a tbe cae ofthe Freach markt, ower eft ‘entre proved ale and it withdrew trom te markt in 1964 Daring the T9Eds and 1070s, the French market developed slowly. "The caed fod indy, alredy in deine In many counties, emalned ver srogin France anda wide variety ofpeparl mea bream valle a eaned form. Many ener choo rege (et fr) fds ar anlternativetocanning them nd theimagectTezon foods ufleted fora time. On the other hand nding canes mich 1s Honducle could develop wellsegated fezen fod fines onthe ‘rength ofa long-established trend image in canned ed seas only 197D that Unilever rentered the mare, ja a ‘lately dow and tentative manne, operating by way ote Belgian fabsany Twas not wl 197, with ts acqliton of tee ream ‘ake Mit, that estaba oe ana major preence he Inarke, Throughout the 198 it main face wat om ting tones operation inthe fer eum marke, tnd il ron fod Interest payed a secondary role “Agata is background, Ne fboed mach weaker competion ‘tn Unilever within roe fod, Ne entered the mart he 196 by way ofthe Ie ream actor, purchasing the Gerais busi ‘cs New bl pits pation Ja the Bonen od industry a he Inert developed slowly dough the 1960s and 197Om a compe ton with he leaing canning companies, which remain among ‘main compettar tay. Nes main competr in dhe Feeuch Shark i he ee erent waker OtirAdka The hit large po- ducers theleading canned good produer, Bonduel whose market ‘are alighdyoxcats hat of Unilever. 85 Concluding Comments “The sin sim of Ue chaper has been wo explore the Men that 2 sipernchanim prea thepnincetaftagmented race Spee Ret rn, et hethin avetnginensve indie, The notion ha 8 gb TOY diner meciunony involving the compettve eels o reg ada ot workin thine repent cna Meth slain of cncetaon fn the fren fo dy Ufireadtu thuseatonofharnshenimn at work andiaboseve reece the eucrence of alse midst o hs a hen ie hata on ig pple yt ood vison een higher “Salers. Within the thon, a noted a chapter 3, ch & maaNGhioecoerges an equim outers ome vt cn ‘Soi and ome fon of bayer have a ely Tow de sr.etealvenan to aivertsng snaye Beyond thee general weer tute tomever he spl tae mode og eSB ntformatve, Ao the dynamin ofinity eRe lentes tates pen A wie vasety oda ore, sen with he mode old te formulated he ru, Bo ert depend dtcil on the auntion made near SPT incevmta in thorn and sheet oe et zane here cms be interpreted paul, i ater tone a nana, oe serpnding ee Sia ole eve Wit he Unted Sic sd he United King, where he mat Tt developed, ale er of ms alee very fw pol Tenses Sal pase hy ed for eval a ce wp Finan. Sach sts may easy be aoa by pot reese winner wl chee logan profi Ren Be au ou dy tat ig a ma sn i Bore on ch nea it wih pope nal in eng Te ei peepee ety ha al SISSIES Stn ntey ive ia EPEeaE MGs intrest oe pt oder pre care tana temple he cso ii, ow (on od ‘erty notte css en Ur Se eden oder clan ce eae ak tian being cae nt ‘er thon age" btm te ster Caplan heme ‘eto Arte nn ala » cover thet loses, In other words, dh intemedite phase ofthe Indanny hiory ha someting ofthe character of ding pene Sate tttdon i whch me nope shororen ln the targa eal othe expected longterm gun be shied by ‘waning ‘Noneteeauch ganc hana lt “pions im chare sce wre way cold be fond a ignalng who the event ‘winner wil be, bos by al partes cal be avoid by moving Inmet} woe equi configura. 1 argu at leas, tha thsi ening relevant tan andertnding ee sery Aiteret experienc ofthe German nnd Tain ind Tn oh ‘aus, the evo extabised mulinaonal voled an ecalaon of Sverige, wile wo domesie idle ero fr emerged ‘ocdallnge thom fit Tnded nat x dome rms care 0 there, they eid o by mayo low accretion ofrepatation in the Sen eer "Te diference in expeience between the United State and the aiid Kington on the ont hand aod the Continental Earopeas tuarktson he other extend iosrerl ther ind. Inca ae theproduct was fat esublibed in the Ualed Sates andthe United ngiom, and hemlet developed ony later in rence, Germany, ‘day Tnseverl uch ees oth pet fod anf TE cee), ike ror sro ofthe sla brand genre ie tcongnignaltodter ay major chalege iow inigenon predates in he tnd ety dyn. I ach ess, the teptaon he ‘alton Br) mayo al be cient tallow (he) fo ‘tabla aden poston witost any coy csiton foe (big culpa, is dea tea tha ot mover advantages ay play an Inpoean leis determining the dynamics of htelatera- on Tes toh top that we tra the neat chapter SIRE a etc ett