The Food Distribution System and Food Stamp Program In Puerto Rico (1975)

THE FOOD DISTRIBUTION SYSTEM AND FOOD STAMP PROGRAM IN PUERTO RICO `7U.S. DtPARTMt...T

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Parimal Choudhury Project Director

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THE FOOD DISTRIBUTION SYSTEM AND FOOD STAMP PROGRAM IN PUERTO RICO

A Joint Research Project: U.S. Department of Agriculture Food and Nutrition Service and the Commonwealth of Puerto Rico Department of Social Services

PARIMAL CHOUDHURY Project Director Executive Press, Inc. San Juan, Puerto Rico

Library of Congress Catalog Card Number 75-45522

This study may not be reproduced in whole or in part without written permission of the Food and Nutrition Service , U.S. Department of Agriculture and the Department of Social Services, Commonwealth of Puerto Rico.

FOREWORD

The Food Stamp Program was initiated in the United States in 1961 on an experimental basis, and the Food Stamp Act was passed by the United States Congress three years later in 1964. Since then the Program has continued to gain popularity, and by 1973 its coverage was extended to the entire continental United States. The Program was extended to Puerto Rico in 1971, the planning machinery for its operation was authorized in August 1973, and the first stamps were issued in July 1974. The Program was implemented in three stages. The first stage covered five municipalities in the northwestern part of the Island. The second stage of implementation began in September 1974 with the issuance of food stamps in 36 additional municipalities. The third stage of the operation commenced in November 1974, by which time the Food Stamp Program encompassed thw whole island. The operation of the Food Stamp Program began at a time when the Puerto Rican economy was experiencing a period of stagnation with declining levels of income combined with a high rate of inflation. The Program, therefore, has been instrumental in improving the basic nutritional level of our needy families. Since the magnitude of the Program will be close to $800 million a year when it is in full operation,it is likely to have a sizeable impact upon the economy of Puerto Rico. Due to the size of the Food Stamp Program in Puerto Rico, it is crucial to ascertain the additional growth of demand for food and non-food products generated by such a program and find out whether our marketing system is capable of & commodating this additional demand. Though we do not anticipate any severe disruption of the local market structure as a consequence of the Program, appropriate steps will have to be taken in order to cope with the probable impact once it is verified. The purpose of this project is to unveil the probable consequences of the Program for the economy so that guidelines can be set up for the formulation of appropriate public policies. The project is a joint venture of the Food and Nutrition Service of the United States Department of Agriculture and the Commonwealth of Puerto Rico. Ramón García Santiago Secretary Department of Social Services Commonwealth of Puerto Rico

PREFACE

This study is the first in a series contemplated to assess the impact of the Food Stamp Program on consumer behavior and the food marketing system in Puerto Rico. It has been carried out in compliance with Agreement Number 12-35-600-137 between the United States Department of Agriculture, Food and Nutrition Service and the Commonwealth of Puerto Rico. It presents a brief description of the Program, analyzes in detail the structure of the food market at the retail and wholesale level, and provides an estimate of its possible impact on demand for food and its implications for sources of supply. A summary of the conclusions and some recommendations are given at the outset. The main authors of the study are Dr. Parimal Choudhury, professor of the University of Puerto Rico, Dr. James Hauk of the Interamerican University, and professor Práxedes Rodríguez, also of the University of Puerto Rico. Dr. Choudhury, in addition to being the director of the project, is the author of Chapters I, II, III, and VI; Chapter IV is the work of Dr. Hauk, who collaborated with Prof. Rodríguez on Chapter V. However, all chapters were read, discussed, and commented upon by all contributors. Undoubtedly, the study would not have been possible without the effective contribution of several agencies of the Government of Puerto Rico as well as many individuals who dedicated their valuable time, made useful suggestions, and gave their undivided attention to endless queries. Among the agencies are the Department of Social Services, Department of Commerce, Department of Agriculture, Department of Labor, the Planning Board, Cooperative Development Administration, and the University of Puerto Rico. Our thanks are due to their staff for facilitating information and assisting in every revelant phase of the study to make it a success. First and foremost we are grateful to Mr. Ramón García Santiago, Secretary of Social Services, who organized the study group initially and gave it his full support and encouragement throughout. Our special thanks are due to Mr. Rafael García Ortega, Undersecretary of Commerce, for being instrumental in organizing the project and for his invaluable guidance during the initial stages. Mr. Fernando Collazo, also from the Department of Commerce, contributed particularly to sections of the study relating to the public institutions engaged in food marketing. The study could not have been carried out without the assistance of Mr. Luis Davis Flores, Assistant Secretary of Commerce, who devoted much of his time to discussions on the subject matter, helped plan iii

the work, and made resources available. No expression of gratitude can adequately measure the dedicated effort put in by Mr. Luis Del Toro'of the Department of Social Services in making all the computations, preparing the tables, and assisting in every conceivable chore related to putting the work together as a coherent whole. Our special appreciation is extended to Dr. Stephen J. Hiemstra of the Food and Nutrition Service for his continuous support and valuable comments, as well as to Dr. J. C. Chai, also of the Food and Nutrition Service, for his personal assistance in the preparation of some of the quantitative estimates. Finally our acknowledgement is due our secretaries, María Esther Rodríguez and Luz María Cruz for their endless patience in typing and retyping the manuscript. San Juan, Puerto Rico July 1975

Parimal Choudhury

Note: All reference to years, in the text as well as tables and figures, are fiscal years from July 1 to June 30, unless otherwise indicated. iv

TABLE OF CONTENTS Foreword Preface List of Tables List of Figures Chapter I: Summary, Conclusions and Recommendations A. Food Consumption B. Retail Marketing System C. Wholesale Marketing System D. Impact of the Food Stamp Program E. Recommendations Chapter II: Brief Description of the Food Stamp Program in Puerto Rico Chapter III: Size of the Food Market A. Introduction B. Estimation of the Market Size 1. The model 2. The data a. Consumption by Major Food Groups b. Inshipments versus Domestic Production c. Food Produced and Consumed on the Farm d. USDA Donations Chapter IV: Structure of the Food Marketing System: Retail A. Introduction 1. The Food Marketing System within the Overall System Complex. 2. The Components of the Food Marketing System 3. Inputs and Outputs of the Food Marketing System B. Retail Food Marketing in Puerto Rico 1. Retail Outlets a. The Number of Food Stores b. Size and Type of Food Stores i—Annual Sales Volume ii—Store Space iii—Capacity iv —Employment 2.Market Plazas 3.Shopping Centers V

i ii i vii xi 1 1 2 3 5 7 9 14 14 15 15 17 17 24 27 29 32 32 32 32 34 34 34 35 35 35 42 42 50 50 56

Chapter V: Structure of the Food Marketing System: Wholesale A. Distribution of Wholesalers B. Ownership and Organization C. Size of Wholesalers 1. Sales 2. Employment D. Degree of Modernization 1. Mechanization 2. Utilization of Capacity E. Time Required to Market 1. Measurement Models a. Inventory Time b. Flow-through Time: Channel Structure 2. Results of the Survey a. "Regional" Wholesalers b. Importing Wholesalers c. Total Flow-through Time F. Ability to Increase Capacity in the Short Run 1. The Model 2. The Data 3. Results G. Domestic Agricultural Marketing H. The Trucking Wholesaler I. Projections for 1975: Employment and Sales Chapter VI: Impact of the Food Stamp Program A. Number of Participants and Size of Benefits B. Impact of the Food Stamp Program Benefits 1. The Demand Analysis 2. The Supply Adjustment Analysis C. Impact on Food Marketing Structure 1. Wholesale Marketing 2. Retail Marketing a. Price Effect b. Multiplier Effect APPENDIX I: Government Agencies Related to the Food Distribution System APPENDIX II: Detailed Tables

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LIST OF TABLES

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Table Number Title Page II-1 Monthly Stamp Quotas and Maximum Monthly Allowable Income, Food Stamp Program, Puerto Rico, July 1, 1974 11 II-2 Monthly Stamp Quotas and Maximum Monthly Alowable Income, Food Stamp Program, Puerto Rico, January 1, 1975 12 II-3 Family Income Distribution, Puerto Rico, 1970 12 III-1 Total and Per Capita Consumption of Major Food Groups, 1951-1973 (Farm Equivalent) 18 III-2 Value of Food Consumption in Puerto Rico, 1963-1973 22 111-3 Retail Value of Food Consumption Ranked by Product Category, 1972 25 III-4 Origin and Disposition of Major Food Groups in Terms of Retail Weight of Farm Equivalent, 1973 26 III-5 Domestic Production as a Ratio of Inshipments, 1973 26 III-6 Value of Inshipments and Outshipments, Classified by Product Category, 1971 27 III-7 Production Consumed on the Farm, Classified by Product, as a Percent of Total Product Consumption and as a Percent of Domestic Production, 1973 30 III-8 Consumption from Home Production as a Percent of Home Production for Five Product Categories, 1972 31 111-9 USDA Donations and Consumption, 1973 31 IV-1 Number of Food Retailers by Type of Store, Selected Years 36 IV-2 Annual Food Store Sales by Type of Retailer, Selected Years 39 IV-3 Number of Supermarkets and Their Annual Sales Volume, Selected Years . 43 IV-4 Available Floor Space by Type of Food Retailer 1972 and 1975 44 IV-5 Sales per square foot by Type of Retailer and Region, 1972 and 1975 46 IV-6 Level of Employment in Retail Food Outlets, Selected Years 47 IV-7 Number of Establishments and Store Areas in Retail Outlets in 52 Market Plazas, 1973 IV-8 Retail Sales of Food Products in Market Plazas by Type of Product, 53 1973 IV-9 Food Sales per square foot and Average Sales per Food Store in 54 Market Plazas, 1973 1V 55 Percentage Distribution of Sales in Market Plazas , 1973 IV-11 Employment and Payroll', Retail Food Outlets in Market Plazas by 56 Type of Store, 1973 VII

IV-12 Number of Establishments and Store Area in Shopping Centers by Type of Operation, 1973 57 IV-13 Distribution of Sales, Geographic Areas and Type of Operation in Shopping Centers, 1973 59 IV-14 Annual Sales of Food Products per square foot and Average Sales in Shopping Centers, 1973 59 IV-15 Direct Employment in Shopping Centers, 1973 60 IV-16 Wages and Salaries Paid in Shopping Centers by Geographic Area, 1973 60 IV-17 Salaried Employment in Shopping Centers, 1973 61 V-1 Number of Establishments by Type of Wholesaler and by Region, 1973 65 V-2 Composition of the Food Wholesalers by Ownership and Organizationl Form, 1973 66 V-3 Distribution of Food Wholesalers and their Annual Sales in San Juan Metropolitan Area and Puerto Rico by Size of Sales, 1973 68 V-4 Total Sales and Sales on Credit by Food Wholesaler by Region, 1973 ' 69 Number of Food Wholesalers and Employment, 1967-1973 V-5 71 V-6 Food Wholesalers by Level of Employment, 1973 71 V-7 Number of Establishments, Employment and Annual Payroll, by Type of Food Wholesaler and by Region, 1973 72 V-8 Percentage Distribution of Establishments, Employment, and Annual Payroll, by Type of Food Wholesaler and by Region, 1973 73 V-9 Degree of Modernization of Food Wholesalers, 1973 75 V-10 Capacity of Wholesale Storage Facilities by Region, 1973 77 V-11 Sales per square foot by Size of Sales, 1973 77 V-12 Number of Food Wholesalers, Annual Sales, Warehouse Facilites, Stage I Food Stamp Program, by Municipalities, March 1974 . . . . 77 V-13 Storage Capacity Developed by the Commercial Development Corporation as of 1974 79 V-14 Illustration of the Relationship Between Order Cycle, Time Between the Placement of Orders,and Time Between Receipt of Deliveries . . 83 V-15 Estimated Time Food Products are Held in Inventory by Regional Wholesalers, Classified by Product 89 V-16 Time Food Products are Held in Inventory, Classified by Type of Wholesaler and by Product 90 V-17 Estimated Time Imported Food Products are Held in Inventory by the Importing Wholesalers, Classified by Product 91 V-18 Estimated Time Food Products are Held in Inventory at the Retail Level, Classified by Product, March 1974 94 V-19 Average Number of Days Taken to Move Food Products Through the Marketing System, Classified by Product and Activity (Long Distribution Channels in the Import of Food) 95 96 V-20 Flow-through Time Classified by Product and Channel V-21 Storage Space of the Sampled Food Wholesalers by Region and Type of Storage 100 V-22 Storage Space of All Food Wholesalers by Region and Type of Storage 101 Storage .

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Storage Space Utilized by Food Wholesalers, Classified by Region and Type of Storage 101 V-24 Current Excess Storage Capacity of All Food Wholesalers, Classified by Region and Type of Storage 102 V-25 Estimated Short-Run Storage Space Expansion Feasibilty of Food Wholesalers, Classified by Region and Type of Storage 102 V-26 Summary of Wholesale Food Storage Space and Excess Capacity, Classified by Region 103 V-27 Estimated Food Wholesale Storage Space and Excess Storage Capacity, Classified by Region 104 V-28 Estimated Actual and Feasible Delivery Frequency for Food Wholesalers, Classified by Product 105 V-29 Food Wholesaler Distribution Capacity with No Expansion in Storage Facilities, Classified by Region 107 V-30 Food Wholesaler Distribution Capacity with Feasible Expansion in Storage Capacity, Classified by Region 108 V-31 Maximum-Minimum Estimates of Food Wholesaler Capacity to Increase Volume in a Year, Classified by Region, March 1974 . 109 V-32 Total Sales, Seven Largest Market Plazas, Puerto Rico, by Type of Product, 1973 111 V-33 Number of Trucking Wholesaler Arrivals at the Principal Market Plazas, 1973 112 VII Number of Families by Level of Income and Family Size, 1969 . . 117 VI-2 Percentage Distribution of Number of Families by Level of Income and Family Size, 1969 118 VI-3 Annual Benefits Under the Food Stamp Program, Assuming 100 Percent Participation, Classified by Family Size, 1970 120 VI-4 Annual Benefits Under the Food Stamp Program, Assuming 100 Percent Participation, Classified by Family Size, 1974 121 VI-5 Annual Benefits Under the Food Stamp Program, Assuming 100 Percent Participation, Classified by Family Size, 1975 122 VI-6 Annual Benefits Under the Food Stamp Program, Assuming 75 Percent Participation, Classified by Family Size, 1970 124 VI-7 Annual Benefits Under the Food Stamp Program, Assuming 75 Percent Participation, Classified by Family Size, 1974 125 VI-8 Annual Benefits Under the Food Stamp Program, Assuming 75 Percent Participation, Classified by Family Size, 1975 126 VI-9 Growth of Demand for Food Products Assuming 75 Percent Participation, 1975 128 VI-10 Growth of Demand for Food Products Taking into Consideration Recent Trend of Decreasing Disposable Income, 1975 and 1976 . . 130 VI-11 Food Consumption in Puerto Rico by Source of Origin, 1951-1973 131 VI-12 Impact of the Food Stamp Program on Wholesale Food Marketing, 1975 154 VI-13 Impact of the Food Stamp Program on Warehouse Space, Stage I, 156 1975 158 VI-14 Pattern of Price Controls in Puerto Rico VI-15 Market Concentration of Imports of Selected Food Products, 1973 160 ix

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Nominal Value, Purchase Requirements, and Net Bonus of Food Stamps, 50 States and the District of Columbia, 1971 and 1972 . . 166 Supply of Food Products by Major Food Categories, Puerto Rico, 170 1951-1973 Local Production of Food by Major Food Categories, Puerto Rico 174 1951-1973 Source and Use of the Food Supply, Major Food Groups at Retail Level in Pounds of Farm Equivalent, 1970 178 Source and Use of the Food Supply, Major Food Groups at Retail 179 Level in Pounds of Farm Equivalent, 1971 Source and Use of the Food Supply, Major Food Groups at Retail 180 Level in Pounds of Farm Equivalent, 1972 Food Consumption and USDA Donations at the Retail Level in 181 Pounds of Farm Equivalent, 1972 182 Individual Components of the 21 Major Food Categories

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LIST OF FIGURES Figure Number Title Page II-1 The Food Stamp Program in Puerto Rico, by Stage and Municipality 10 III-1 A Model for Estimating Food Consumption in Region X 16 III-2 Food Consumption as a Percent of Personal Disposable Income (at current prices), 1951-1973 23 III-3 Food Inshipments as a Percent of Farm Production, 1966-1971 28 111-4 Domestic Farm Production as a Ratio of Food Consumption, 1966-1971 28 IV-1 Food Marketing as a Subsystem 33 IV-2 Distribution of Market Plazas and Shopping Centers by Municipalities, March 1974 51 V-1 Distribution Pattern of Food Marketing 63 V-2 Flow-through Time Components in the Physical Supply of Food 80 Relationship Between Average Time in Inventory and Inventory Turnover V-3 Turnover 81 V-4 Overlap Between Order Cycle Time and Time in Inventory 83 V-5 Structure of the Marketing System, Imported Food Products Ready for Consumption 85 V=6 Flow-through Time Alternatives 85 V-7 Estimated Channel Flows for Food and Related Products in Puerto 86 Rico V-8 Structure of the Marketing System (Locally Produced Food Products) 88 V-9 Sales Forecast for Food Products at the Wholesale Level for Puerto Rico and the Metropolitan Areas of San Juan, Ponce, and Mayagüez, 1954-1972 and Projection for 1975 113 V-10 Employment and the Number of Food Wholesalers, 1967-1973 and 114 Projection for 1975 VI-1 Rate of Growth of Demand, Local Production, and Import of Starchy Vegetables, 1956-1973 132 VI-2 Rate of Growth of Demand, Local Production, and Import of Cereals, 1956-1973 133 VI-3 Rate of Growth of Demand, Local Production, and Import of Green Vegetables, 1956-1973 134 VI-4 Rate of Growth of Demand, Local Production, and Import of 135 Legumes, 1956-1973 VI-5 Rate of Growth of Demand, Local Production, and Import of 136 Spices, 1956-1973 xi

Rate of Growth of Demand, Local Production, and Import of 137 Soups, 1956-1973 VI-7 Rate of Growth of Demand, Local Production, and Import of Fresh 138 Fruits, 1956-1973 VI-8 Rate of Growth of Demand, Local Production, and Import of 139 Processed Fruits, 1956-1973 VI-9 Rate of Growth of Demand, Local Production, and Import of Dried 140 and Frozen Fruit, 1956-1973 VI-10 Rate of Growth of Demand, Local Production, and Import of Beef 141 and Veal, 1956-1973 VI-11 Rate of Growth of Demand, Local Production, and Import of Pork, 1956-1973 142 VI-12 Rate of Growth of Demand, Local Production, and Import of 142 Poultry, 1956-1973 VI-13 Rate of Growth of Demand, Local Production, and Import of Other 143 Meats, 1956-1973 VI-14 Rate of Growth of Demand, Local Production, and Import of 144 Entrails, 1956-1973 VI-15 Rate of Growth of Demand, Local Production, and Import of Fresh 145 and Frozen Fish and Seafood, 1956-1973 VI-16 Rate of Growth of Demand, Local Production, and Import of 146 Processed Fish and Seafood, 1956-1973 VI-17 Rate of Growth of Demand, Local Production, and Import of Milk, 147 1956-1973 VI-18 Rate of Growth of Demand, Local Production, and Import of Dairy 148 Products, 1956-1973 VI-19 Rate of Growth of Demand, Local Production, and Import of Eggs, 149 1956.19733 VI-20 Rate of Growth of Demand, Local Production, and Import of Fats 150 and Oils, 1956-1973 Vl21 Rate of Growth of Demand, Local Production, and Import of 151 Coffee, Chocolate and Tea, 1956-1973 VI-22 Rate of Growth of Demand, Local Production, and Import of All 152 Food Products, 1956-1973 VI-23 Indexof Food Prices, Puerto Rico, 1965-1974 (1967=100) . . . 157 VI-24 A Model of Dissemination of Food Stamp Expenditures Through 161 the Food Marketing System VI-6

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Chapter I

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS

The purpose of the present study is to assess, albeit in global terms, the probable impact of the Food Stamp Program on the food distribution system of Puerto Rico. Undoubtedly, the impact of the Program will be felt on the non-food sector as well. Nevertheless, it is to be expected that the greatest implications will be in the food sector, particularly on demand and supply of food products and the capacity of the marketing system to handle larger amounts of distribution. A. Food Consumption 1. Total food consumption is estimated to have reached 3.9 billion lbs. (in terms of farm equivalent) in 1973, one year prior to the introduction of the Food Stamp Program. The highest consumption is of dairy products (890 million lbs.), followed by cereals (718 million lbs.), starchy vegetables (607 million lbs.), and meats 464 million lbs.). These four major categories make up more than two-thirds of all food consumed on the island. Cereals are totally imported; domestic production of meats is about one-third of imports; the island produces about 3.5 times as much starchy vegetables and 6.7 times as much of dairy products as it imports. In value terms, total retail expenditures on food are estimated to be around $1.1-$1.2 billion for the same year with meat and meat products accounting for $310 million (26.9 percent), fresh milk and dairy products for $186 million (16.2 percent) and vegetables and preparations for $180 million (15.6 percent). Although food consumption has been rising in absolute terms, expenditures on food as a percentage of income have been declining (from about 35 percent in 1951 to about 22 percent in 1973). 2. In the aggregate, food produced and consumed on the farm constitutes a very small proportion of total consumption (about 4 percent); however, the importance of consumption on the farm varies greatly with the food item in question. Measured in terms of pounds, consumption can be as high as bU percent or more for some products (plantains and bananas) or as low as 2 percent for others (tomatoes). But the products whose consumption on the farm is relatively high do not necessarily constitute a very high percentage of total food consumption. Hence the overall insignificance of the value of food produced and consumed on the farm in total food expenditures. 3. Total USDA donations amounted to about 5 percent of total food consumption in 1973. This ratio rises to 8 percent if these donations are valued 1

at the retail level. Since the Food Stamp Program replaces these federal donations, the impact of the Program will have to be considered net of such donations. B. Retail Marketing System 1. The number of retail food outlets (supermarkets, grocery stores, and other) in Puerto Rico is estimated to have reached 14,629 in 1972, which represents an increase of 40 percent over 1954. It is expected that this number will have reached 14,783 in 1975. It is interesting to note that despite its population growth, the number of retail outlets has declined in the municipality of San Juan. This is explained by the emergence of supermarkets with exceedingly large annual sales\ volume, which can efficiently cater to an ever growing urban population with higher per capita income. In fact, retail food sales are estimated to amount to $725.1 million in 1972 in Puerto Rico, which is an increase of more than 4.5 times over 1954, and retail sales in San Juan have increased at the same rate as total sales on the island. In other words a very much larger amount of sales is being attended to by a smaller number of retail outlets. The San Juan Metropolitan Area accounted for approximately 49 percent of the supermarkets in the island, 57 percent of the annual sales of the supermarkets, and 23 percent of total food sales in Puerot Rico. It is estimated that total retail food sales, excluding institutional sales, will amount to $888.1 million in 1975 not counting the effect of the Food Stamp Program. Institutional sales can add up to $600 million to this amount bringing total sales to $1.5 billion in 1974 prices (again excluding the impact of the Food Stamp Program). 2. Total available floor space in retail outlets was 9,806,464 sq. ft. in 1972. Nine major municipalities accounted for 69 percent of the available space of supermarkets with the San Juan Metropolitan Area alone accounting for 33 percent of total available supermarket space. These figures corroborate the statements in B.1. 3. Many areas of Puerto Rico contain food stores which lack modernized business practices relative to most parts of the continental United States. This suggests shortcomings with respect to both the capacity to physically distribute food as well as the broader concept of marketing capacity. Sales per sq. ft. of space, classified by region and kind of store provide some numerical evidence. Supermarkets in urban areas in general, had the highest sales per sq. ft. of physical space. Although this might suggest a lesser degree of excess capacity to distribute, this need not be the case, since specialized methods might enable them to operate more efficiently than other retailers. 4. Total employment in retail outlets was estimated to be 34,486 for Puerto Rico as a whole. Supermarkets employed 5,666 persons (16.4 percent), grocery stores 24,089 (69.9 percent) and other stores employed 4,731 (13.7 percent). The total number of employed represents an increase of 80 percent over 1954, which is a rate of increase twice as high as that of the number of the retail outlets. Obviously, the increase in employment has not been as fast as the increase in sales, hence sales per employee have risen from $8,015 to $21,018 over the period in question. 5. Traditionally, market plazas have played a significant role in food marketing in Puerto Rico, particularly in the field of locally produced food. Lately, the magnitude of their economic activity has diminished because of the influx of population from rural to urban areas and to new suburban housing 2

developments. Market plazas still continue, however, to occupy some place in retail food sales. In 1973 there were 30 of them in operation over the island, with total food sales of over $18 million; these account for about 2 percent of the total sales of food in that year. Not all the space of the plazas is dedicated to food sales. Of the total of 1,086 retail outlets in the plazas in 1973, food retailers accounted for 786 or 72.4 percent; and of a total area of 214,264 sq. ft., 119,490 sq. ft. (55.8 percent) pertained to food retailing. Average area per food retail outlet accounted for 152 sq. ft. Food sales amounted to $18.2 million with fruits and vegetables accounting for the highest percentage (45.9); meat and fish ranked second with 33.8 percent of the total sales. Average food sales per sq. ft. were $152; employment totalled 1,040 persons with an annual payroll of $835,600. 6. With the growth of urban and suburban communities, shopping centers have gained popularity in Puerto Rico as one of the major retail outlets. Currently there are 150 such centers. Of these, 109 are located in the San Juan Metropolitan Area. A 1973 survey indicates that there are 369 food retailers in the shopping centers of which 326 are located in the shopping centers of the San Juan Metropolitan Area. Food stores account for 21.6 percent of their space, but 46.0 percent of their total sales. Employment in food retail outlets located in such, centers totalled 4,717 persons with an annual payroll of $16.3 million. The payment per employee is thus more than four times as high as that in market plazas. C. Wholesale Marketing System The findings on the wholesale marketing system of Puerto Rico are based on a random survey of 146 food wholesalers out of a population of 373, carried out in March, 1974. 1. Two hundred and sixteen (approximately 58 percent) of food wholesalers in Puerto Rico are classified as groceries-general line, and 157 (about 42 percent) as limited line or specialized. Sixty-four percent of the general line wholesalers are concentrated outside the San Juan Metropolitan Area, while 60 percent of the specialized food wholesalers are located in the San Juan area. The San Juan Regio' understandably has an overwhelming importance in the wholesale marketing and distribution of food on the island. 2. The independent wholesaler (sole proprietorship,family corporation, and partnership) is the most important food distributor in Puerto Rico. Close to nine-tenths of food distributors were independent wholesalers, 35 percent of these being organized as sole proprietorships and 47 percent being family owned. This is in strong contrast to the United States where corporate chains constitute close to two-thirds of food wholesalers. In Puerto Rico corporate chains account for only 6 per cent of total food wholesalers. Moreover, because of the paramount importance of food imports, importers play an exceptionally significant role in wholesale food distribution, most of whom are agents acting as limited line wholesalers. 3. The degree of concentration among wholesalers is extremely high, regionally as well as by size. Seven percent of all food wholesaling firms with annual sales of less than $250,000 accounted for 0.4 percent of the sales, while 56.0 percent of the firms with annual sales of $1 million or more transacted 90.3 percent of the sales. Two-thirds of these were located in the San Juan Region, indicating the overwhelming high degree of regional concentration. The San Juan Region accounted for 71 percent of total food wholesales in 1973. The 3

importance of large size is also indicated by the finding that 35 percent of food wholesale establishments employed more than 10 persons, with San Juan Region accounting for close to one-half of them. It also accounted for 53.9 percent of total employment and 63.3 percent of the total payroll. 4. Judged by the criteria of degree of modernization, adequacy of loading and unloading facilities, existence of palletized handling, and type of construction of warehouses, the wholesale food distribution system is about 50 percent obsolete, with 10 percent of the wholesalers being in the process of being modernized, and therefore about 40 percent having relatively modern warehousing operations. About 75 percent of all wholesalers outside the San Juan area have no physical space for loading and unloading merchandise. In most cases they perform their loading and unloading operations in the public streets. 5. Wholesale food transactions amounted to $1,003.1 million in 1973. Given total food warehousing capacity of 3.6 million sq. ft., sales per sq. ft. amount to $278. Undoubtedly, efficiency of the usage of space increases with the size of sales but at a decreasing rate. Wholesalers with annual sales of less than $50,000 had $24 of sales per sq. ft. while those with annual sales of $1 million or more had sales of $314 per sq. ft. It is interesting to note that this figure is higher than that quoted for the United States. Currently the wholesale storage capacity appears to be sufficient to handle the present volume of business, but the present trend of increase in sales volume, accompanied by the added impact of the Food Stamp Program could create difficulties in adequately servicing retailers and other marketing institutions. Undoubtedly, food wholesaling facilities in Puerto Rico have improved over the years, and the Department of Commerce, through its Commercial Development Company, has been instrumental in this improvement. But it is hard to determine whether the private sector of the wholesale food distribution system can absorb the possible impact of the Food Stamp Program. It appears that only one region -Caguas— has the capacity to increase the volume of goods distributed by more than 13 percent (52 percent). The potential increase ranked by region is as follows: Feasible Increase in Volume Region (Percent) Caguas 52 San Juan 13 Ponce 12 Bayamón 9 Arecibo 8 Mayaguez 7 Aguadilla 3 Guayama 2 Fajardo 1 6. The long-flow-channel —the importing wholesale retail subsystem— is responsible for the delivery of a majority of the food products in Puerto Rico. This is associated with the large share (52 percent) of imported items in total food consumption. Goods, therefore, move through two wholesale levels. Order cycle time from external supply source, plus internal flow time varies from 51 days in the case of fresh vegetables to over one year for all other processed food. The weighted mean time for the channel is 119 days or approximately four months. The average flow-through time for locally produced food products 4

which move through regional wholesalers is estimated to be 75 days. This is shorter than the average flow through time for imported goods moving through two wholesale levels, but longer than for imported goods moving from the dock, or importing wholesale warehouse, directly to the retailer. 7. Available evidence indicates that a not inconsiderable portion of domestic production sold in Puerto Rico is distributed by way of wholesale/retail central markets (market plazas). Approximately $15.5 million was sold through these market plazas in 1973. Admittedly, this is a small part of total food consumption on the island; however, their importance lies in the fact that a significant percentage of consumers in these places is likely to be Food Stamp recipients.

t3. Impact of the Food Stamp Program 1. It is estimated that Puerto Rico will have 726,193 families by the end of fiscal year 1975. Of these 498,739 (69 percent) would be eligible to receive food stamps assuming a 100 percent rate of participation. Their yearly quota would amount to $846.2 million with purchase requirements of $350.8 million, an estimated annual net bonus per family of $1,225 and of $306 per person. The largest percentage of eligible families is found either in the smallest size of family (one member) or in those families with six or more members. The indication is that poverty is positively correlated with the size of the family and that one-member families largely consist of those receiving welfare payments and social assistance. 2. Not all eligible families are likely to participate in the Program. Since r iith a given family size the benefit per person decreases with increasing income, and with a given income the net benefit per family increases with family size, a lower participation rate is expected among higher income-families as well as small size families. It is estimated that 75 percent of the eligible families or about 52 percent of the total families will participate in the Program. At this rate of family participation and with benefit specifications in effect from July to December 1974 and those in effect as of January 1, 1975, the nominal value of the Food Stamp Program is expected to reach $640.6 million in 1975 with purchase requirements of $198.3 million and a global net impact on the economy of $442.3 million. At this rate of participation the net bonus per family and per person is estimated to be $1,473 and $367 respectively. 3. In the absence of the Program (and assuming no downturn in the economy arising from the current depressing conditions all over the world) overall demand for food is expected to rise by 5.25 percent in 1975, with some food categories (such as poultry) projected to have demand increases three times as high as the overall rate. The implementation of the Food Stamp Program is projected to raise the rate of growth of demand for food by 19.10 percentage points yielding an overall growth of 24.35 percent. Naturally the combined (normal plus the Program) rates of increase in the demand for individual items of food vary from item to item. The greatest increases in demand —adjusted for differences in income elasticities of individual food categories— are estimated to occur in poultry (57.02 percent), entrails (48.95 percent), fresh and frozen fish and seafood (45.54 percent), dried and frozen fruits (39.64 percent), beef and veal (38.70 percent), eggs (33.12 percent), and milk (27.84 percent). These are sizeable increases indeed, and raise the legitimate question whether supply (domestic or foreign) will be in a position to meet such increases without inflationary implications. This is especially relevant since in almost all items, 5

except for fresh milk,limports are higher than local production (in some cases overwhelmingly so, such as beef, pork, and chicken), and are continuing to rise at a faster rate than domestic production. Thus the impact of the Food Stamp Program is not solely a matter of increased capacity to market and distributed the greater volume of food items in demand, but also a matter of whether imports, together with domestic production, can meet this increased demand without the undersirable effects of price increases. 4. With the prevailing pessimistic outlook on the economy and the expectation of a decline in personal disposable income, in current dollars, by 1.01 percent in 1975, the normal growth of demand for food is estimated to decline to 2.42 percent from the previous estimate of 5.25 percent. With the same rate of Program impact, the overall rate of demand growth would decline to 21.52 percent (from the previous estimate of 24.35 percent). The demand for those items which have high income elasticities of demand is expected either to decline sharply or increase at a lower rate. Personal income in constant prices is expected to decline'by 15.98 percent in 1975 but to rise by 1.63 percent in 1976. If so, the normal growth of demand can be expected to decline by 4.68 percent in 1.975 (but increase by 3.67 percent in 1976) with corresponding negative rates of growth in the demand for individual food items. But the implementation of the Food Stamp Program would help alleviate the slack in the economy by preventing a decline in demand, for there could occur an increase by about 11.5 percent in overall demand for food products, even if only 75 percent of eligible families were to participate in the Program. 5. As incomes rose over the past decade in Puerto Rico, a greater portion of the increase in demand for food has been met out of imports; local production has not been responsive to increased prices or demand. Therefore, the food importing system has to cope not only with increases in demand, but also has to counteract erratic fluctuations in local food production. But imports themselves have not moved rationally in the past, causing occasional shortages and/or severe price increases in the absence of price controls. In most cases shortages were not caused by short supply at the source of imports, but were generated .by the imperfections in the distribution channels, arising from the high degree of market concentration of food importers. 6. Should the Food Stamp Program generate a 15 percent increase in demand for food in 1975, the increase in the wholesale distribution of food could amount to $169.1 million. This would require additional warehousing space of 1,041,034 sq. ft. (28.9 percent of available space in 1973), generate additional employment of 1,460 (26.7 percent of employment in food wholesaling in 1973), and increase payroll by $8.4 million. A 20 percent impact of the Program would imply additional sales of $225.7 million, space expansion by 1,243,024 sq. ft. (34.5 percent), employment generation of 1,762 persons (32.2 percent), and additional payroll of $10.1 million. It can be noted that the additional employment of 1,762 persons represents a little over two per thousand of the aggregate employment of 1974. 7. The main effect of the Food Stamp Program could be on the price level. The past history of food retailing in Puerto Rico is characterized by a substancial increase in food prices along with increases in consumption. The food price index in 1974 was 160.3 (1967=100). The boost in food prices

resulting from the implementation of the Food Stamp Program is expected to be 22.56 index points in 1975 and 12.42 index points in 1976, representing annual 6

price increases of 14.07 percent and 6.79 percent respectively. The increase may not be as great, however, since the prices of most basic food items are either controlled or frozen, and are permitted to rise only as changes in costs of production and acquisition allow. 8. Because of the quasi-monopolistic nature of import trade in food products, it is not unlikely that the price effect may get translated into shortages. Other things being equal, there is a greater possibility, especially in the shortrun, that shortages may develop among food products whose income elasticities do not significantly deviate from zero, as compared to items whose income elasticities are close to or higher than one. The following food items can be expected not to be in short supply in the local economy: soups and spices; dried and frozen fruits; beef and veal; poultry; other meats (excl. pork); entrails; fresh and frozen fish; dairy products; milk; and eggs. The remaining products have low income elasticities and some degree of disruption in their marketing can be expected. E. Recommendations The Commonwealth Government recognizes that the private sector will have to play the major role in the food distribution system in he future as in the past; nevertheless participation by government cannot be dismissed as a factor to improve the system of distribution. The Department of Consumer Services and the Importation and Distribution Corporation have been dealing with the price stabilization program in the past and are preparing to cope with the impact of the Food Stamp Program. The Department of Commerce along with the Commercial Development Company have been helping the private sector of the economy through training programs, credit extensions, and construction of warehouses and other facilities in order to improve the food distribution system in the island. Considering the limited capacity of the wholesalers to improve facilities to cope with increased demand, it is recommended that: 1. The Commonwealth Department of Commerce accelerate the development of a full line wholesale operation to serve the food retail industry and to counteract the quasi-monopolistic marketing structure of food importer, wholesalers, and distributors of the island. 2. The Department of Justice through its Anti-monopoly Division acts against the non-competitive structure of many food distributors of the island. 3. Production and marketing cooperatives be encouraged by the government to strengthen competition and to create a more balanced marketing structure. This, in the long run, will result in higher operational efficiency, lower marketing costs, and favorable prices for consumers. Development of market centers for proper distribution of locally produced food products should be initiated by the government. 4. A Food Research Center be established without delay which will continually conduct research in food marketing, including identification of food products which are likely to be in short supply, and the development of a signal system to forewarn the private sector. This proposed Center should be made responsible for developing strategies to increase local farm production. Information regarding comparative prices at the source of supply and in the local market should be published regularly for consumer education and to facilitate identification of problems requiring government action. The development of further programs of consumer education should also be within the realm of 7

responsibilities of the proposed Research Center. 5. The Department of Consumer Services and the Importation and Distribution Corporation develop a policy of price stabilization to cope with the probable increase in prices as a result of the additional demand expected to be generated by the Food Stamp Program. 6. The Importation and Distribution Corporation investigate the possibility of importing food from new supply sources in the United States and foreign countries to counter the fluctuations in imports and provide regular supply of food. 7. Private enterprise be encouraged by the government to develop proper facilities to accommodate the present volume and to prepare for the future adequately. Financial aid to food retailers and wholesalers should be provided for expansion of their physical facilities and for additional working capital. This can be done in coordination with the Government Development Bank. 8. A broad program of technical assistance be directed to food retailers and wholesalers regarding purchasing, inventory control, advertising, accounting, and general marketing procedures.

8

Chapter II

A BRIEF DESCRIPTION OF THE FOOD STAMP PROGRAM IN PUERTO RICO

This study originated as a result of the introduction of the Food Stamp Program in Puerto Rico. The Food Stamp Program was first enacted in the United States in 1964 (Public Law 88-525, 78 Stat. 703), and the extension of the program to Puerto Rico was the result of an amendment made to the above mentioned law in 1973. The actual implementation of the program in Puerto Rico commenced on July 1, 1974. To facilitate implementation and operation, the Program was introduced in three stages. The first stage, which commenced on July 1, 1974, covered five municipalities in the northwestern part of the island. The second stage which covered 36 additional municipalities in the western part of the island, commenced on September 1, 1974. When the third phase of the Program was introduced on November 1, 1974, the whole island was then covered by the Food Stamp Program. Figure I shows the stages of operation of the Food Stamp Program in Puerto Rico. The purpose of the Program was to promote general welfare and raise the levels of nutrition in low income households. It was also hoped that the increase in food consumption would strengthen domestic agricultural production and result in a more orderly marketing and distribution of food. Eligibility for the Program is determined through a mechanism which takes into consideration the size of the family, the type and the level of income. 1 The face value of the stamps to be issued to each family depends on the size of the family, while the amount of money that they have to pay for them depends on the level of income. A net income figure is utilized in the determination of the amount of money to be paid for the stamps, so as to compensate for cost of living differences between the different regions of the United States. The amount of stamps to be issued according to family size also varies according to the region in which they are issued. These stamp allotments are adjusted periodically to reflect changes in food prices. The original monthly stamp quotas and maximum monthly allowable incomes, as applicable to Puerto Rico, are given in Table II-1. 1

See USDA, Food and Nutrition Service, Food Stamp Program (Current as of July 1, 1974). Title 7-Agriculture, Chapter II, paragraph 271.3.

9

Figure II-1

THE FOOD STAMP PROGRAM IN PUERTO RICO BY STAGE AND MUNICIPALITY

ATLANTIC OCEAN

~ O

CARIBBEAN SEA

Stage I Stage II Stage III

Table II-1

Monthly Stamp Quotas and Maximum Monthly Allowable Income, Food Stamp Program, Puerto Rico, July 1, 1974

Family Size 1 2 3 4 5 6 7 8 Each additional member

Monthly Quota $ 44.00 80.00 114.00 144.00 172.00 196.00 222.00 246.00 20.00

Maximum Monthly Allowable Income $194.00 267.00 380.00 480.00 575.00 653.00 740.00 820.00 67.00

Source: United States Department of Agriculture, Food and Nutrition Service

The first revision of the monthly quota and maximum allowable monthly income requirements was made on January 1, 1975, after the Program had been in operation for six months. The revised figures are given in Table 11-2. The implementation of the Food Stamp Program meant the elimination of the Food Distribution Program which had previously provided food items donated by the Federal Government to poor households, but all former recipients of free food were automatically included in the Food Stamp Program. Other types of welfare grants provided to needy persons were not affected by the introduction of food stamps. The elimination of the Food Distribution Program meant that over 600,000 persons in Puerto Rico would stop receiving free food. In 1974 these persons received about $72 million worth of food as compared with approximately $62 million in 1973. Under the Food Distribution Program, the average monthly benefit per recipient was only about $10.00 in 1974, as compared with an estimated Food Stamp Program average net monthly benefit per person of about $25. This estimate of Food Stamp Program benefits takes into consideration all of the persons that qualify for the program. The average benefit from the Food Stamp Program being received by former participants in the Food Distribution Program is undoubtedly higher due to the lower income of this group. The implementation of the Food Stamp Program is of great significance to Puerto Rico. The way the Program is structured, the potential benefits for needy Puerto Rican families are sizeable. The latest estimates made by the Office of the Food Stamp Marketing Study show that 521,497 or 73.7 percent of the 707,382 families in Puerto Rico at the end of fiscal year 1974 were eligible to receive food stamps. According to the Office of the Food Stamp Program, as of April 4, 11

Table 11-2 Monthly Stamp Quotas and Maximum Monthly Allowable Income, Food Stamp Program, Puerto Rico, January 1,1975 Maximum Monthly Allowable Income $194.00 273.00 393.00 500.00 593.00 680.00 767.00 853.00 73.00

Monthly Quota Family Size 1 $ 46.00 82.00 2 118.00 3 150.00 4 178.00 5 204.00 6 7 230.00 8 256.00 Each additional member 22.00

Source: United States Department of Agriculture, Food and Nutrition Service,

Table II-3 Family Income Distribution, Puerto Rico, 1970

Level of Income Less than $1,000 $1,000-$1,999 2,000 - 2,999 3,000 - 3,999 4,000 - 4,999 5,000- 7,499 7,500 - 9,999 10,000 - 12,499 12,500 - 14,999 15,500 - 19,999 20,000 or more

Number of Families 44,568 69,955 74,469 71,648 66,570 117,344 53,031 30,015 13,989 4,727 17,839

Percentage Distribution 7.9 12.4 13.2 12.7 11.8 20.8 9.4 5.3 2.5 0.8 3.2

Total

564,155

100.0

Cumulative Distribution 7.9 20.3 33.5 46.2 58.0 78.8 88.2 93.5 96.0 96.8 100.0

1 Excluding one-member families.

Source:

Commonwealth of Puerto Rico, Planning Board, Bureau of Economic Planning 1t

1975, 1,625,403 persons were already participating in the Programs with a monthly average net benefit per person of $24.00. This means that approximately 55.48 percent of the island population of 2,929,457 were already participating in the Program. No state in the Union has a greater absolute number of persons participating in the Food Stamp Program, including those states with large populations such as Texas, California, and New York.2 The high rate of eligibility and eventual participation of Puerto Ricans in the Food Stamp Program can be primarily attributed to the pattern of income distribution in the island. This is shown in Table 11-3 for the year 1969. Not only are income levels low in Puerto Rico, but also the families are concentrated in the lower brackets. The table shows that 58 percent of Puerto Rican families received annual incomes of less than $5,000 and 78.8 percent received less than $7,500. Another factor that lends great significance to the implementation of the Food Stamp Program in Puerto Rico is the greater size of the estimated total net benefit of the Program as compared to total public expenditures on social welfare. In 1974 total government expenditures on welfare amounted to $137.2 million, while total annual net benefits from the Food Stamp Program are estimated to reach $532.9 million. Given a program of such great magnitude, it was deemed very important to determine its probable impact on the local economy. It was necessary to investigate the additional growth of demand for food and non-food products emanating from such a program and the nature of the adjustment of supply to such growth. It was also deemed important to evaluate the present structure of the local food distribution system to determine its capability to accommodate additional demand that may be generated by the Food Stamp Program and to identify those food products that are likely to be in short supply. Should supply, either through imports or through local production or through imperfections in the marketing system, not be able to fully accommodate the additional demand, it is to be expected that the Program would have its impact also on the price of food products. Hence an evaluation of this aspect of the problem was also made. In cognizance of the importance of the potential consequences of the Program, the Food and Nutrition Service of the USDA in collaboration with the Government of Puerto Rico has undertaken this study to aid in the formulation of public policy dealing with the impact of the Food Stamp Program in Puerto Rico.

1 Figures indicate issuance of Authorization to Purchase. 2 USDA, Food and Nutrition Service, "Food Stamp Program, Statistical Summary of Operations", Washington, DC, May 1974. 13

Chapter III

SIZE OF THE FOOD MARKET

A. Introduction The primary objective of this study is to estimate the impact of the Food Stamp Program on the supply and demand for food, taking into consideration that the USDA financed Food Distribution Program will come to an end once the Food Stamp Program is initiated. In order to estimate the said impact, we first have to have some idea as to what the size of the market is, and second we have to know its structure, i.e. the types of establishments and channels through which food is distributed on the island. This chapter deals with the size of the market. The structure is discussed in chapters IV and V. Data requirements: a. The total size of the market, since the ultimate aim is to determine the global impact of the program; b. Size of the market by product categories, since the Food Stamp Program will have a different impact upon various food items depending upon the "market basket" consumed as well as the kind of food products distributed under USDA donations. c. The trend in market size over time, since to estimate the impact of the Program, which began to be implemented on July 1, 1974, we should project current data through 1975. The market size can be measured in physical quantitites (lbs.) or in dollar values. The relevant data on total food consumption in terms of pounds of farm equivalent was provided by the Commonwealth Department of Agriculture. Here "farm equivalent" refers to the number of pounds of each agricultural item (as it emerges from the farm) that is contained in the final product sold to the consumer. Thus orange marmalade, for example, contains the ingredients of orange and sugar as well as other agricultural items. The Department estimates the weight of each such component contained in the jar of marmalade sold at the retail level. The Planning Board of Puerto Rico, on the other hand, provides estimates of the dollar value of total food consumption. Since dollar estimates include the value of marketing and processing as well as the value of agricultural products consumed, they form a basis for measuring the impact of the Food Stamp Program on all components of the aggregate food marketing system. Analysis in terms of pounds of farm equivalent, on the other hand, has greatest relative value in evaluating directly the impact of the Food Stamp 14

Program upon agricultural production requirements, since it focuses on the agricultural components of each food item purchased by the consumer, reflecting the marketing functions only in so far as they are pertinent to weight lost or gained by an agricultural item on its route between the farm and the consumer. In the present chapter both pound and dollar data have been used in depicting the supply-demand features of the Puerto Rican food market. The market concept utilized is an economic one which considers both supply and demand forces. A market is regarded as consisting of demand by users as well as those producers and other organizations which supply the given demand. However, in the businessman's view a market is regarded as all present and prospective customers for a product, or alternatively as a composition of demand forces. The present discussion will use both perspectives. From a demand point of view, we should estimate consumer demand for food classified by product category. From a supply point of view we should know the source of this supply. It is only then that we can establish a basis from which to estimate the effect the Food Stamp Program is likely to have upon various sectors of food production as well as upon food marketing structure. B. Estimation of the Market Size 1. The model One model for estimating the magnitude of consumer demand or total consumption utilizes data on the supply made available during a given time period from domestic and imported sources. Total available supply is arrived at by adding inshipments (imports) to domestic production and deducting outshipments (exports) from the total. Then consumption is determined by certain adjustments, the principal one being changes in inventory. 1 Expressed symbolically the model is as follows: C=P+I—EEO i Where C = consumption P = domestic I =imports (inshipments) E= exports (outshipments) d i = change in inventory Figure III-1 depicts the supply of food by domestic farm producers and processors as well as from external sources. The latter two might be conceived of as part of a broader marketing system which also includes wholesalers, retailers, transportation agencies, freight forwarders, market research firms and any other organizations which help connect the producer of agricultural products with the final consumer.2 t

If inventory of the product increases during the time period under consideration the amount of the increase must be deducted from P f I to estimate actual consumption, while if inventory decreases the amount of the decrease should be added to P--I.

2 This is not meant to imply that growing food or processing it are marketing activities. 15

Figure III-1

A Model for Estimating Food Consumption in Region X

Food Processing

Outshipments

External Supply Farm Production in X

Food Consumption in X

Inshipments

Sources

Outshipments Intraregional Marketing

Inter-regional and International Marketing

Figure III-1 also shows that farm production can be channeled to the consumer by way of the processing sector, or in the form in which the product emerges from the farm. Some of the domestically produced and processed food may also be channeled to the outside world as outshipments. The model, using dollar values, is complex and calls for many estimates not available from published sources. To give but one example: in dealing with inshipments, marketing costs of the supply from the outside world to Puerto Rico must be estimated,since the most appropriate import data (from the United States Department of Commerce) refer to values at the port of embarcation. Moreover, the proportion of these inshipments in food processing for consumption as well as the value added by processor and marketing organizations will have to be estimated, or at least reflected in the methods used. 2. The Data a. Consumption by Major Food Groups The time series data on consumption per capita for the following major food groups for the period covering the years 1951 to 1973 as wel l as by finer classifications was obtained from the Commonwealth Department of Agriculture. 1. Meats 2. Milk & Dairy Products 3. Eggs 4. Fish & Other Sea Food 5. Fats & Oils 6. Starchy Vegetables

7. Other Non-starchy Vegetables 8. Cereals 9. Fruits 10. Sugar 11. Coffee & Cocoa 12. Soups, Spices & Canned Goods

Aggregate data for fiscal year 1973 are given in Table III-4. Accordingly, total market size, measured as total consumption in pounds of farm equivalent, is estimated to be 3.9 billion pounds. The highest ranking group is dairy products followed by cereals, starchy vegetables and meats, in that order. Table III-1 provides total and per capita consumption data for a more specific classification by 21 product groups for the period 1951-1973. Because of unavailability of information, the data do not consider "consumption away from home", exports, or changes in inventory. Nevertheless, it can be seen that all categories of food demonstrated a positive trend of consumption over the period, with the exception of starchy vegetables, leafy vegetables, and processed fish. The Planning Board, within the system of national accounts it publishes, estimates personal consumption expenditures in the aggregate as well as by detailed components, one of them being food. An examination of the data indicates that although food consumption has been rising in absolute terms, its

Instead it is meant to suggest that the marketing system extends from the farm, through the processing sector and then to the consumer. It includes all exchange, trade and physical distribution activities conducted by farmers, processors and other organizations in getting food from the point of original production to the final consumer, in the form which the latter desires it, and at the time he desires it, and at any price necessary to cover the cost of efficient operations plus a reasonable profit.

17

Table 111-1 Total and Per Capita Consumption of Major Food Groups, 1951-1973 (Farm Equivalent) Year

1951 1952 1953 1954 1955 1956 1957 1958 ~ 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973

Starchy Vegetables Total Per Capita (cvvt.) (lbs.) 6,895,070 6,923,006 6,421,118 5,863,516 6,175,022 6,059,884 4,433,186 5,324,111 5,369,726 5,477,708 5,274,666 5,241,997 5,270,739 5,518,737 5,121,967 5,533,472 5,335,700 5,059,402 5,196,406 5,205,600 6,143,496 5,551,292 6,067,247

309.6 310.3 289.8 265.4 276.7 269.3 196.6 233.5 232.4 235.6 221.3 215.9 213.1 218.7 199.5 212.6 202.9 190.6 193.3 191.7 223.7 197.1 209.7

Total (cwt.)

Cereals Per Capita

4,673,720 4,506,554 4,691,330 4,393,401 4,728,197 4,706,816 4,779,360 4,756,639 5,112,863 5,340,433 4,793,836 4,578,856 5,329,400 4,840,024 5,891,031 5,162,000 5,052,593 5,257,166 6,505,906 6,413,128 6,315,421 7,451,978 7,180,067

(lbs.) 209.9 202.0 211.7 198.9 211.8 209.2 211.9 208.6 221.2 229.7 197.4 188.5 215.5 191.8 229.4 198.3 192.1 198.1 242.0 236.1 230.0 264.6 248.2

Green Vegetables Total Per Capita (lbs.) (cvvt.) 1,170,518 1,215,914 1,190,924 1,259,461 1,352,574 1,529,371 1,663,949 1,684,052 1,557,779 1,721,261 1,723,286 1,808,067 1,894,143 1,965,055 2,171,400 2,121,631 2,050,995 2,334,318 2,541,309 2,363,980 2,235,157 2,355,660 2,502,309

52.6 54.5 53.7 53.0 60.6 68.0 73.8 73.9 67.4 74.0 72.3 78.0 79.5 77.9 84.6 81.5 78.0 88.0 94.5 87.0 81.4 83.6 86.5

Total (cwt.)

Legumes Per Capita (lbs.)

821,372 741,421 745,674 671,492 789,401 810,891 729,804 750,469 853,303 774,328 742,259 844,978 777,481 846,587 786,276 781,215 797,473 792,200 803,780 679,684 802,569 804,600 704,781

36.9 33.2 33.6 30.4 35.3 36.0 32.4 32.9 36.9 33.3 31.1 34.8 31.4 35.6 30.6 30.0 30.3 29.8 29.9 25.0 29.2 28.6 24.4

Spices Per Capita Total (cwt.) (lbs.) 57,698 38,324 32,702 59,370 66,698 80,103 71,950 75,502 78,381 92,548 98,011 97,703 116,621 134,717 124,418 142,571 141,534 147,304 172,797 150,841 158,743 151,867 152,710

2.6 1.7 1.5 2.7 3.0 3.6 3.2 3.3 3.4 3.4 4.1 4.0 4.7 5.4 4.8 5.5 5.4 5.6 6.4 5.6 5.8 5.4 5.3

Table III-1 (Contd.) Soups Per Capita (lbs.)

Year

Total (cwt.)

1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973

55,958 65,450 57,718 79,497 79,589 81,053 89,182 93,198 92,670 109,066 122,620 65,382 144,128 146,110 156,681 150,362 179,242 179,158 172,689 136,738 165,989 134,773 144,550

2.5 2.9 2.6 3.5 3.6 3.6 4.0 4.1 4.0 4.7 5.1 2.7 5.8 5.8 6.1 5.8 6.8 6.8 6.4 5.0 6.0 4.5 5.0

Fresh Fruits Total Per Capita (lbs.) (cwt.) 1,869,946 1,785,488 1,408,150 1,587,839 1,725,371 1,726,022 1,326,929 1,776,102 1,724,957 2,117,684 2,023,243 2,097,096 2,108,110 2,159,911 2,207,256 2,264,063 2,236,229 2,045,455 1,963,186 1,943,329 2,113,636 2,175,961 2,280,206

84.0 80.0 63.5 71.9 77.3 76.7 58.8 77.9 74.6 91.1 84.9 86.4 85.2 85.6 86.0 87.0 85.0 77.1 73.0 71.6 77.0 77.3 78.8

Processed Fruits Total Per Capita (cwt.) (lbs.) 355,459 290,426 578,326 505,995 497,228 594,781 604,654 680,865 486,547 572,846 610,620 602,028 883,282 96,083 1,136,156 849,491 78,867 892,438 855,489 757,067 1,019,945 1,125,795 1,106,947

16.0 13.0 26.1 22.9 22.3 26.4 25.8 29.9 21.0 24.6 25.6 24.8 35.7 35.5 44.2 32.6 29.6 33.6 31.8 27.9 32.1 40.0 38.3

Dried & Frozen Fruits Total Per Capita (cwt.) (lbs.) 14,583 11,411 12,009 12,987 18,182 15,850 19,876 18,511 14,643 16,501 16,766 17,302 17,688 19,383 24,592 34,590 63,629 53,749 55,373 46,406 73,159 40,683 33,890

.7 .5 .5 .6 .8 .7 .9 .8 .6 .7 .7 .7 .7 .8 1.0 1.3 2.4 2.0 2.1 1.7 2.7 1.4 1.2

Beef & Veal Total Per Capita (cwt.) (lbs.)

305,041 254,526 295,696 325,438 351,772 414,521 417,269 434,973 461,432 477,231 515,967 589,217 681,455 704,008 839,038 878,330 1,026,911 895,740 1,007,124 1,033,311 1,077,143 1,195,565 1,122,490

13.7 11.4 13.3 14.7 15.8 18.4 18.5 19.1 20.0 20.5 21.6 24.3 27.6 27.9 32.8 33.7 39.1 33.8 37.5 38.1 39.2 42.5 38.8

i anee III-1 (Conta.l

Year

1951 1952 1953 1954 1955 1956 1957 1958 ^~ 0 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973

Pork Meat Total Per Capita (cwt.) (lbs.) 495,469 586,638 622,141 609,818 650,581 690,487 689,618 704,196 752,587 798,363 817,292 851,815 848,093 923,169 940,463 952,689 1,016,646 1,143,368 1,041,539 1,113,295 1,321,235 1,441,770 1,420,465

22.2 26.3 28.1 27.6 29.2 30.7 30.9 30.9 32.6 34.3 34.3 35.1 34.3 36.6 36.6 36.6 38.7 43.1 38.8 41.0 48.1 51.2 49.1

Poultry Total Per Capita (cwt.) (lbs.) 151,726 160,470 177,396 187,284 191,968 204,489 238,538 254,542 310,782 347,319 380,795 459,256 532,732 627,586 685,809 780,432 847,611 923,230 955,517 ,019,544 1,152,079 1,186,573 1,265,278

6.8 7.2 8.0 8.5 8.6 9.1 10.6 11.2 3.5 14.9 16.0 18.9 21.5 24.9 26.7 30.0 32.2 34.8 35.6 37.5 42.0 42.1 43.7

Other Meats Total Per Capital (lbs.) (cwt.) 12,145 11,636 17,045 21,750 24,205 27,066 20,309 26,109 31,712 33,948 36,327 45.400 47,166 32,476 35,482 36,644 39,099 42,193 54,527 62,368 671,717 717,244 628,991

.5 .5 .8 .9 1.8 1.2 .9 1.2 1.4 1.5 1.5 1.9 1.9 1.3 1.4 1.4 1.5 1.6 2.0 2.3 24.5 25.5 21.7

Entrails Per Capital Total (lbs.) (cwt.) 29,317 30,907 28,363 27,190 29,244 32,604 33,239 40,815 51,299 50,558 52,002 54,154 57,431 68,743 89,241 79,806 85,485 124,998 99,772 132,128 150,679 189,604 202,554

1.3 1.4 1.3 1.2 1.3 1.5 1.5 1.8 2.2 2.3 2.2 2.2 2.3 2.7 3.5 3.0 3.3 4.7 3.7 4.9 5.5 6.7 7.0

Fresh & Frozen Fish & Seafood Total Per Capita (cwt•) (lbs.) 23,179 25,619 28,172 29,104 33,229 33,459 36,511 35,641 40,443 39,201 34,220 34,930 59,349 66,164 77,610 75,458 83,926 94,051 92,736 109,868 96,364 153,132 179,917

1.0 1.1 1.3 1.3 1.5 1.5 1.6 1.6 1.8 1.7 1.4 1.4 2.4 2.6 3.0 2.9 3.2 3.5 3.5 4.0 3.5 5.4 6.2

Table 111-t — (Contd.)

Year

1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973

Processed Fish & Sea Food Total Per Capita (cwt.) (lbs.) 317,824 296,639 311,601 292,564 285,355 284,302 307,434 586,549 299,707 218,973 307,304 289,114 286,565 296,962 281,320 276,517 297,271 272,903 280,476 272,386 245,174 293,026 258,420

14.3 13.3 14.1 13.2 12.8 12.6 13.6 25.7 13.0 9.4 12.9 11.8 11.9 11.8 11.0 10.6 11.3 10.3 10.4 10.0 8.9 10.4 8.9

Milk Milk Products Per Capita Total Per Capita Total (lbs.) (cwt.) (lbs.) (cwt.) 2,971,600 3,102,900 3,373,272 3,754,104 4,030,559 4,405,934 4,675,414 5,022,289 5,376,948 6,107,430 6,269,617 6,716,253 7,168,807 7,404,054 7,769,606 7,902,671 8,024,247 8,317,253 8,380,395 8,274,448 8,551,027 8,653,695 8,580,079

133.4 139.1 152.2 699.9 180.6 195.8 207.3 220.3 232.7 262.7 263.0 276.6 289.9 293.5 302.6 303.6 305.1 313.4 311.8 304.7 311.4 307.3 296.6

146,291 147,905 158,676 175,240 186,427 166,409 205,066 227,474 233,766 224,196 229,117 242,737 288,198 370,482 360,673 281,476 246,937 333,933 353,397 320,465 307,491 328,422 319,189

6.6 6.6 7.2 7.9 8.4 7.4 9.1 10.0 10.1 9.6 9.6 10.0 11.7 14.7 14.0 10.8 9.4 12.6 13.1 11.8 11.2 11.7 11.0

Eggs Total Per Capita (lbs.) (cwt.) 196,421 183,165 204,758 214,494 261,814 255,825 274,885 284,316 302,972 299,693 307,774 368,570 400,131 434,965 470,458 497,954 552,300 609,693 560,986 570,360 638,798 643,979 617,221

8.8 8.2 9.2 9.7 11.7 11.4 12.2 12.5 13.1 12.9 12.9 15.2 16.2 17.2 18.3 19.1 21.0 23.0 20.9 21.0 23.3 22.9 21.3

Fats & Oils Total Per Capita (cwt.) (lbs.) 613,778 659,322 663,818 666,200 742,462 695,183 783,314 758,281 909,228 856,088 863,508 1,011,952 981,322 1,067,769 968,913 1,132,945 1,288,170 1,193,913 1,158,560 1,150,913 1,160,316 1,499,662 1,435,304

Source: Commonwealth of Puerto Rico, Plannina Board, Departments of Agriculture and Commerce

27.6 29.5 30.0 30.2 33.3 30.9 34.7 33.3 39.3 36.8 36.2 41.7 39.7 42.3 37.7 43.5 49.0 45.0 43.1 42.4 53.2 53.3 49.6

Coffee, Chocolate, Tea, Other Total Per Capita (lbs.) (cwt) 219,331 222,370 218,822 230,890 229,240 211,351 202,535 276,465 272,725 263,256 264,809 254,823 268,704 294,494 298,337 329,925 341,473 351,493 379,508 398,695 432,649 429,291 471,695

9.8 10.0 9.9 10.5 10.3 9.4 9.0 12.1 11.8 11.3 11.1 10.5 10.9 11.7 11.6 12.7 13.0 13.2 14.1 14.7 15.8 15.2 16.3

Table III-2 Value of Food Consumption in Puerto Rico, 1963-1973 (in thousands of dollars)

Year

Ñ

1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973

Food Furnished to Food Produced Govt. and Dairy and Consumed Private on Farms Employees Products 37,448 36,581 35,818 35,752 34,992 36,365 37,548 37,169 40,060 44,223 47,139

11,124 11,835 12,812 13,789 14,312 14,949 14,909 16,287 17,286 18,969 21,093

86,518 94,850 98,760 98,370 98,447 117,283 122,766 121,789 136,549 155,606 160,785

Other Food Consumption Meat

All Other

Total

122,451 136,931 149,763 179,367 190,806 202,050 210,925 255,133 294,007 324,699 356,646

227,419 244,746 269,141 281,753 298,413 332,820 350,065 367,063 413,484 493,434 515,771

484,960 524,943 566,294 609,031 636,970 703,467 736,213 797,441 901,386 1,036,931 1,101,434

Source: Planning Board, Commonwealth of Puerto Rico. These data are actually referred to by the Planning Board as "Personal Consumption Expenditures." They exclude, however, the cost of food purchased by restaurants, the government and non-profit institutions as well as the value added by such institutions. If an adjustment is made for such exclusions, as discussed in the text of this section, the value of food consumption for fiscal year 1973 could be estimated at $1,251,433,000.

Food Consumption as a Percent of Personal Disposable Income

(at

Figure III-2

Current Prices), 1951-1974.

Percent 40

35-

30

25_

20 .

o

I I I I I I 1 L__ _• _L I r I 1._ I_ I I • 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 19731974

Source: Commonwealth of Puerto Rico, Planning Board and Department of Commerce

relative significance within disposable income has been declining from about 35 percent in 1951 to about 24.3percent in 1974 (see Figure 111-2). In addition, the Planning Board classifiés its time series data on the value of total food consumption in three major groups: Dairy products, Meat, and "Vegetables and all other". These are given in Table III-2, according to which total food expenditures for 1973 are estimated to be around $1.1 billion. The estimates include food produced and consumed on the farm and food furnished to government and private employees. But they do not include the cost of food purchased by restaurants, the government or non-profit institutions, or the value added by such institutions. The cost of such purchases is estimated to be around $50 million. Assuming a value added ratio of two to one (that is assuming that the cost of food purchased by restaurants amounts to one third of its sales value) the market value of the item excluded would amount to $150,000,000 and total food consumption for 1973 would then be $1,251,433,000. In addition, a special study was conducted through the Planning Board to estimate food consumption classified by product categories. This study was done for the fiscal year 1972 rather than 1973. The results are shown in Table 111-3. Meat and meat products accounted for 26.9 percent of total food consumption, fresh milk and dairy products for 16.2 percent, vegetables and preparation for 15.6 percent and fruits and preparations for 5.7 percent. Other food groups ranked according to importance in the consumer's food budget are also shown in Table III-3. b. Inshipments versus Domestic Production Table III-4 separates inshipments classified by major food groups from domestic production for 1973. Table III-5 gives the ratios of local production to inshipments for each product category, ranked according to their magnitude. Obviously, the higher the ratio, the larger is domestic production with respect to inshipments in that particular food category. The significance of such ratio rankings becomes apparent when they are combined with the importance of each product category in the consumer's food expenditure pattern, because they can indicate the probable impact of the Food Stamp Program upon the marketing of locally produced products vs. the marketing of imported products. Table 111-6 gives the dollar value of inshipments and outshipments, by broad product categories for 1971. Meat and meat preparations ranked highest as a proportion of total inshipments while fish and fish preparations ranked highest as a proportion of total outshipments. Care should be used in interpreting such data, however, particularly with regard to fish and fish preparations. A very high percentage of total fish imported and exported is tuna which is processed in Puerto Rico and then sold in the continental United States. This is reflected in the dollar value of total imports, as well as exports. Figure III-3 indicates that inshipments as a percent of farm production rose from 156 percent in 1966 to 286 percent in 1971. This is an indication of the growing significance of imports in total consumption which is corroborated by Figure III-4 which shows that farm production as a ratio of food consumption (measured in dollars) dropped from 34.7 percent in 1966 to 18.3 percent in 1971. 24

Table III-3 Retail Value of Food Consumption Ranked by Product Category, 1972

Product Category Meat & Meat Products Fresh Milk & Dairy Products Vegetables & Preparations Fruits & Preparations Bottled Soft Drinks, Beverages

Consumption ($000)

Percent of Total Consumption

310,075

26.9

186,487

16.2

179,899

15.6

65,832

5.7

46,552

4.0

Rice Fish & Fish Products

45,063

3.9

39,367

3.4

Bread

35,043

3.0

Fats & Oils

34,410

2.9

Coffee

34,282

2.9

32,821

2.8

30,055

2.6

27,649

2.4

19,356

1.7

Grains & Preparations Confectionery, Related Articles of Sugar Eggs Macaroni, Spaghetti, Crackers, Biscuits

Source: Derived from data developed by the Commonwealth of Puerto Rico, Planning Board. Data excludes food furnished to government and private employees. Percentages do not total to 100 percent since all food product categories have not been included.

25

Table 111-4 Origin and Disposition of Major Food Groups in Terms of Retail Weight of Farm Equivalent, 1973 (cwt.) Food Groups Cereals Starchy Vegetables Legumes & Green Vegetables Fruits Meats Fish & Seafood Eggs Dairy Products Fats & Oils Sugar Coffee, Chocolate, Tea, Others Soups & Spices

Production

Total

Inshipments 7,586,988 1,387,125

4,716,696 627,990 2,532,191 1,037,794 41,679 323,080 7,782,530

Outshipments Consumption 7,180,067 406,921 36,574 6,067,247

2,752,131

2,859,867 1,721,773 3,934,591 404,706 301,768 1,158,351 1,482,882 345,762

280,767 832,921 332,607 8,048 7,627 41,613 47,578 124,420

3,207,090 3,421,043 4,639,778 438,337 617,221 8,899,268 1,435,304 2,973,473

224,294 13,131

260,950 319,103

13,549 34,974

471,695 297,260

20,051,516

21,763,866

2,167,599

39,647,783

Source: Commonwealth of Puerto Rico, Department of Agriculture

Table III-5 Domestic Production as a Ratio of Inshipments, 1973

Sugar Dairy Products Starchy Vegetables Fruits Eggs Coffee, Chocolate, Tea Meats Legumes & Green Vegetables Fish & Seafood Soups & Spices Cereals Fats & Oils

7,96 6,72 3.40 1.47 1.07 .86 ,26 .22 .10 ,04

Source: Table III-4

26

Table III-6 Value of Inshipments and Outshipments, Classified by Product Category, 1971

PRODUCT

Product Inshipments as Percent Outshipments of total ($) Inshipments

Product Outshipments as percent of total outshipments

CATEGORY

Inshipments ($)

Meat & Meat Preparations

148,457,810

31.26

2,801,794

1.68

Dairy Products & Eggs

58,472,905

12.31

538,081

.32

Fish & Fish Preparations

64,916,597

13.68

98,989,770

59.28

Cereals & Preparations

69,204,128

14.57

1,865,422

1.12

Fruits & Vegetables

65,516,897

13.80

9,224,200

5.54

Sugar & Sugar Preparations

9,224,498

1.94

45,525,906

27.26

Other Food Products

59,086,872

12.44

8,031,709

4.80

Total

474,885,707

100.00

166,996,882

100.00

Source: Commonwealth of Puerto Rico, Planning Board.

c. Food Produced and Consumed on the Farm The term "food produced and consumed on the farm" refers to the amount of food which is not marketed but is consumed by those who produce the food. If, for example, the people on a farm produce ten bushels of tomatoes, consuming three of the ten produced and selling the other seven in the commercial market, then the consumption on the farm of this particular product is three bushels of tomatoes. Information from the Department of Agriculture separates total food consumption into commercial and "other consumption" on eleven agricultural products. This "other consumption" is said to be that which is consumed on the farm. The commodities included are: bananas, cassava, plantains, yams, sweet potatoes, taniers, avocados, tomatoes, peppers, pumpkins, and sweet green peppers. 27

Figure 111-3

Food Inshipments as a Percent of Farm Production, 1966-1971

Figure 111-4

Domestic Farm Production as a Ratio of Food Consumption, 1966-1971

250

240

230

270

710

200

190

I'.tli]

196N

19fi9

19]0

19]I 1966

Source: Commonwealth of Puerto Rico. Planning Board and Department of Agriculture.

195]

1968

1969

19)0

191t v,

Source: Commonwealth of Puerto Rico, Planning Board and Department of Agriculture.

Table III-7 shows that for these eleven products the consumption on the farm amounted to 45.6 percent of their total consumption in Puerto Rico during 1973 and that total consumption on the farm was 54 percent of the domestic production. The percentage varies greatly with the product. Only 7.4 percent of the local production of tomatoes was consumed by the producer while about 65 percent of all cassava produced domestically was so consumed. The high ratio of food consumed on the farm for most of the products probably reflects some product spoilage on the farm as well as personal consumption per se. Moreover, some of the output is sold by way of roadside stands, which is not reflected in the data of the Department of Agriculture. Planning Board data show that the total value of food produced and consumed on the farm was $47,139,000 in 1973 (see Table III-2). This represents only about 4 percent of total food consumption. Although this amount has increased by about 37 percent over the last ten years, the increase is not real since the price index for food has increased by more than 37 percent during the same period. The Planning Board data (see Table 111-8) also show that consumption from home production in the case of dairy products, coffee and meat is not as significant a proportion of total home production as is the case generally with fieldcrops as is shown in Table III-7. For instance, fresh milk consumed on the farm is about 14 per cent of total home production; the percentage in the case of eggs is as low as 5.6 percent. d. USDA Donations The data on food donated by USDA in the Food Distribution and School Lunch Programs for the period 1970 to 1973, classified by major food groups were obtained from the Department of Agriculture. The proportion which these donations represent has been determined on the basis of their physical volume rather than their monetary value. In 1973 total USDA donations amounted to 208 million pounds and represented 5.24 percent of total consumption (see Table III-9). But there is a wide variation by product, ranging from zero in the case of sugar and derivatives, coffee, chocolate, tea and soups, to 12.4 percent in the case of cereals. Fats and oils also ranked high at 8.5 percent. The dollar value of USDA donations amounted to $62 million in 1973 according to the Department of Agriculture of Puerto Rico. We have seen, however, that after making all the adjustments the value of total food consumption was estimated to be $1,251.4 million in the same year (see page 24 above). USDA donations represent 5 percent of this amount, which is very close to the physical quantity ratio mentioned above. However, since food stamps will have an impact upon retail food store sales, a more appropriate base for comparison is USDA donations as a ratio of consumer expenditures for food at the retail food store level. The data provided above at least permit an "adjusted consumption estimate" which might approximate food sales: CA-c—(F+R+G- D) where CA= adjusted dollar value of food store sales C = total consumer expenditure F - food produced and consumed on farms 29

R=

the estimated sales value of food purchases by the government, restaurants and non-profit institutions G = food furnished to government and private employees D = USDA donations thus CA =$1,251,433,000 —($47,139,000 + $150,000,000 -- $21,093,000 + $63,100,000 CA = $970,101,000 Then USDA donations constitute 6.5 percent of the adjusted value of food store sales. But $970 million appears to be a high estimate compared to the estimations of retail food store sales made elsewhere in this Report. Retail food sales have been actually estimated to be $725.1 million in 1972 (see Table IV-2, page 40). If it is assumed that in 1973 such sales would have risen to $800 million, the USDA donations would constitute 7.89 percent of this amount.

Table III-7 Production Consumed on the Farm, Classified by Product, as a Percent of Total Product Consumption and as a Percent of Domestic Production, 1973

Product

a

Plantains Cassava Sweet potatoes Tomatoes Bananas Peppers Pumpkins Yams Sweet green peppers Taniers Avocados Total

Production Consumed on the Farm (cwt.) 140,876 61,635 103,210 7,241 477,133 13,756 171,023 119,104 1,233 124,177 7,042 1,226,430

Percent of Local Percent of the Total Consumption Production of the Product of the Product 59.9 56.7 49.3 2.3 63.1 10.3 56.3 44.0 10.7 39.2 24.2 45.6 a

61.3 64.9 66.6 7.4 63.1 14.8 60.0 41.5 10.7 48.7 27.9 53.5 a

Total percentage data represented total production consumed on the farm for all eleven products divided by total consumption (or total local production) for all eleven products.

Source: Commonwealth of Puerto Rico, Department of Agriculture.

30

Table 111-8 Consumption from Home Production as a Percent of Home Production for Five Product Categories, 1972

Product Fresh Milk Coffee Eggs Poultry Meat & Meat Products

Consumption from Home Production ($000)

Percentage of Home Production

11,442 1,679 4,489 2,281

14.3 10.5 5.6 15.9

8,545

20.3

Source: "dollar value of consumption from home production" was secured from the Planning Board. "Home production" data, upon which the percentage figures are based were secured from the Department of Agriculture of Puerto Rico.

Table III-9 USDA Donations and Consumption, 1973 (cwt. of farm equivalent)

Food Group Cereals Starchy Vegetables Green Vegetables & Legumes Fruits Meats Fish & Seafood Eggs Dairy Products t Fats & Oils Sugar & Derivatives Coffee Chocolate, Tea & Others Soups & Spices Total

Total Consumption

Donations by US Department of Agriculture

Donations as Percent of Total Consumption

7,180,067 6,067,247

864,422 71,314

12.04 1.18

3,207,090 3,421,043 4,639,778 438,337 617,221 8,899,268 1,435,307 2,973,473 314,738

76,852 164,433 216,903

2.40 4.81 4.67

18,548 428,585 116,949

3.00 4.82 8.15

2,078,411

5.24

156,957 297,260 39,647,783

t Does not include butter which is included in the fats and oils.

Source: Commonwealth of Puerto Rico, Departments of Agriculture, Social Services, and Education; US Department of Agriculture. 31

Chapter IV

STRUCTURE OF THE FOOD MARKETING SYSTEM: RETAIL

A. Introduction 1. The Food Marketing System Within the Overall System Complex The food marketing system in a theoretical sense is a component of a broader system concerned with the marketing of all goods and services, and the latter in turn is part of a broader social and economic system (Figure IV-1). It is a significánt component as indicated by the fact that about 22 percent of consumer expenditures in Puerto Rico are made for food. It is also related to the other components of the overall economic system. This interrelationship introduced complexities to the present study in that available data often reflect a mixture of food and non-food products. Every specific system is composed of several sub-systems which are interdependent. In the case of food marketing these subsystems might be divided in a number of ways, one of which is as follows: a. The US Chain—Warehouse Subsystem. b. The Importing Wholesale-Retail Subsystem. c. The Marketing of Locally Produced Farm Products. Each of these subsystems changes in importance over time and each is affected differently by a shift from the donated foodprogram to the Food Stamp Program. 2. The Components of the Food Marketing System The food marketing system itself also contains components. These include: a. Retailers b. Regional wholesalers c. Freight forwarders d. Importing brokers e. Processors, including restaurants f. Trucking and shipping companies g. Communications specialists, advertising agencies and market research firms h. Dock facil ities, equipment and warehouse i. The ultimate consumer j. Government agencies 32

Figure IV-1 Food Marketing as a Subsystem

Subsystem n Subsystem 3. Marketing of Locally Produced Farm Products Subsystem 2. Import Wholesale Retail

Subsystem 1. US Chain Warehouse

Food Marketing System

The Marketing System The Economic System

Some of these components are concerned primarily with food marketing and/or processing while others are concerned with the marketing of all goods and services. Moreover, the contribution of each to the capacity of the overall system is different. In this chapter we shall concentrate only on those which are most critical to the analysis of the Food Stamp Program. Attention should also be given to the functions and activities of marketing which tie together the various components including buying, selling, transportation, inventory management, order processing, credit extension, market research, advertising and physical handling.

3. Inputs and Outputs of the Rood Marketing System The food marketing system is an "open system" in that it receives inputs from the environment and "exports" outputs to the environment. The environment in turn is everything outside the system. It includes: a. Geographical variables such as island status, small size, mountainous terrain, tropical location, proximity to continental U.S. and proximity to Latin America. b. Culture, including language, educational levels, customs, habits, etc. c. Per capita income, the level, rate of growth and distribution of which is important in determining the size of the food market. d. Thé' political environment: Since the Food Stamp Program will be administered by the government, the political system of Puerto Rico is also very important. This includes not only the broad nature of the system, but also many specific variables including the kinds of subdivisions available to manage the program. The present study will single out those components, subsystem and environmental variables which are felt to be most critical and which can be investigated in a scientific manner with the time and resources available. B. Retail Food Marketing in Puerto Rico t The analysis of retail food marketing in Puerto Rico is performed at three levels: retail outlets, market plazas, and shopping centers. 1. Retail Outlets Three types of retail outlets are distinguished: 2 a. Supermarkets: Any food retail store whose annual sales volume is $1,000,000 or more. b. Grocery stores: Stores commonly known as food stores, including fresh vegetables, fruits, and dry grain venders; grocery stores and delicatessen stores, primarily engaged in retail sales, including various kinds of canned foods and dry goods, either packaged orinbulk, such as dry beans, coffee, spices, sugar and flour; and frequently fresh, smoked and prepared meats, fish and poultry, with an annual sales volume of less than $1,000,000. 1

Projections for this part do not take into consideration the probable effect of the Food Stamp Program.

2 The definition of each follows the Standard Industrial Classification (SIC) Manual. 34

c. Other food stores: Primarily specialized retailers, such as meat and fish markets, fruits stores, and vegetable stores, candy, nut, confectionery stores, dairy product stores, retail bakeries, and all other retail food stores not elsewhere specified. Information on these retail outlets in Puerto Rico was collected for 1954, 1958, 1963 and 1967 and estimated for 1972 (except supermarkets) and 1975. The information was further classified by urban and rural zones. (Supermarkets were automatically assumed to be urban). a. The Number of Stores The number of rural and urban retail outlets for the years in question is presented in Table IV-1. The estimates of the number of stores for 1972 and 1975, v~ere obtained by projecting the average change in number of these stores between the census years of 1963 and 1967. The number of supermarkets for 1972 was obtained from a study conducted by the Department of Commerce from data made available by Fomento Cooperativo, and from a mail questionnaire survey of the Lucky Seven grocery chain. Those grocery stores whose annual sales were $600,000 or more in 1972 were considered as supermarkets in 1975 on the assumption that their sales would have increased substantially over the years to make them fall within the definition of supermarkets. Moreover, one supermarket was added for each of the new shopping centers under construction at the time with an expected floor space of 35,000 sq. ft. or more. Though the actual analysis was made for each of the 78 municipalities, information on nine of the most important municipalities was listed separately and the remaining municipalities were grouped as "All Other." The significance of these municipalities can be observed from the figures: 64 percent of the supermarkets, 50 percent of the urban grocery stores, and 47 percent of the urban "other stores" were operating in these nine mejor municipalities in 1972. b. Size and Type of Food Stores The size of the individual food retail outlet has been viewed from four different angles; annual sales volume; available store space measured in square feet; capacity; and employment. i. Annual Sales Volume The volume of annual sales by the food retailers was analyzed by types of outlets and zones. Table IV-2 presents the annual sales volume by type of store for the years 1954, 1958, 1963, 1967 and gives the estimates for 1972 and 1975. Supermarket data are grouped with grocery stores from 1954 to 1967 due to nonavailability of data on supermarkets separately by municipalities for these years. This information is separated for 1972 and estimated separately for 1975. The information on number of stores and sales volume was, however, available for supermarkets in three regional groups: in the San Juan Metropolitan Area, Rest of the Island, and Puerto Rico as a whole from 1954 to 1972; this is presented in Table IV-3. It can be observed that the San Juan Metropolitan Area accounted for approximately 49 per cent of the number of supermarkets in the island, while it accounted for 57 per cent of the. annual sales of the supermarkets, and 23 per cent of total sales of food in Puerto Rico. Total supermarket sales accounted for 41 per cent of total retail sales of food in the 35

Table IV-1 Number of Food Retailers by Type of Store, Selected Years

Municipalities

Grocery Stores 1 Urban Rural

Other 2 Rural Urban

Total

3,917 119 118 81 144 65 64 322 351 1,073 1,580

3,933 96 153 65 70 17 45 112 72 - 3,303

2,236 54 91 60 84 51 46 151 277 650 772

10,456 278 385 220 303 142 160 596 707 1,723 5,942

4,414 129 133 121 159 68 64 327 392 1,114 1,907

4,518 303 172 97 76 18 45 114 81

2,196 29 67 67 74 21 28 189 237 727 757

1954 370 9 23 14 5 9 5 11 7 --

Puerto Rico, Total Aguadilla Arecibo Bayamón Caguas Fajardo Guayama Mayagüez Ponce San Juani 3 All Other

287

3,812

36

427 5 22 15 7 6 5 13 10 --

Puerto Rico, Total Aguadilla Arecibo Bayamón Caguas Fajardo Guayama Mayagüez Ponce San Juan' 3 All Other

--

1958

344

11,555 266 394 300 316 113 142 643 720 1,841 6,820

Table IV-1 (Contd.)

Municipalities

Grocery Stores 1 Urban Rural

Other 2 Urban Rural

Total

1963 5,250 113 197 137 85 18 45 116 91 4,448

1,935 34 65 71 66 39 31 133 190 551 755

5,529 150 167 210 191 74 63 337 485 1,206 2,646

5,843 122 216 169 93 20 45 118 100 — — 4,960

1,679 82 55 52 61 41 61 112 102 339 774

598 8 6 52 13 6 11 8 28 466

12,824 296 420 430 341 135 151 591 753 1,716 7,991

564 7 13 37 12 7 22 8 15 — — 443

13,615 472 340 468 357 142 191 575 702 1,545 8,823

--

5,041 141 152 170 177 72 64 334 444 1,165 2,322

--

Puerto Rico; Total Aguadilla Arecibo Bayamón Caguas Fajardo Guayama Mayagüez Ponce San Juan 3 I All Other 1967 Puerto Rico, Total Aguadilla Arecibo Bayamón Caguas Fajardo r iayama yagüez ice San Juan 3 All Other

37

Table IV-1 (Contd.)

Municipalities

Supermarkets 4 Grocery Stores 1 Urban Rural Urban

Other 2 Urban Rural

Total

1972 5,664 148 171 235 191 70 55 317 493 1,150 2,834

6,587 133 240 209 103 22 45 121 111

137 3 3 11 7 2 4 5 11 36 55

5,243 136 160 230 175 63 47 278 458 1,031 2,665

7,209 140 254 233 109 24 45 122 118

5,603

1,692 81 103 74 55 44 98 86 104 176 871

585 19 8 24 11 8 36 8 --

Ponce San Juana All Other

101 3 3 9 4 1 3 4 9 29 36

--

Puerto Rico, Total Aguadilla Arecibo Bayamón Caguas Fajardo Guayama Mayagúez

1,355 471

14,629 384 525 551 364 145 237 536 717 9,815

5,984

635 23 9 16 10 9 44 8 --

1,739 97 116 78 51 45 121 70 71 125 965

--

Puerto Rico, Total Aguadilla Arecibo Bayamón Caguas Fajardo Guayama Mayagúez Ponce San Juan 3 All Other

--

1975

516

14,783 399 542 568 352 143 261 483 658 1,192 10,185

t Grocery Stores (S.I.C. 541): establishments primarily selling a wide variety of canned or

frozen foods, dry groceries, either packaged or in bulk, and other processed food and nonedible grocery items. Establishments commonly known as supermarkets, food stores, and delicatessen are included in this classification if receipts from sales of groceries and food items are 50 percent or more of total sales. After 1967 this classification does not include grocery stores with annual sales of $1,000,000 or more. 2 Other specialized food stores (S.LC. 542-549) include meat and fish markets, fruits and vegetable markets, candy, nut confectionery stores, dairy products stores, retail bakeries and other food stores. 3 The municipality of San Juan only, and not the San Juan Metropolitan Area. 4 Grocery stores with annual sales of $1,000,000 or more. NOTE: For lack of information the data related to supermarkets could not be shown for 1954 to 1967. All data refer to calendar years. Source: Census of Business, Puerto Rico, 1945, 1958, 1963 and 1967, United States Department of Commerce, Washington, D.C. Commonwealth of Puerto Rico, Department of Commerce.

38

Table IV-2 Annual Food Store Sales by Type of Retailer , Selected Years

Municipalities

Grocery Stores 1 Urban Rural ($000) ($000)

Urban 2 Urban Rural ($000) ($000)

Total ($000)

1954 32,632.2 715.1 1,378.5 613.0 632.5 93.9 731.8 1,172.4 1,111.4

163,595.8 2,004.7 5,197.4 8,862.0 7,336.6 2,460.1 3,232.1 8,465.5 16,088.2 56,889.0 53,060.2

56,106.9 1,200.2 2,074.4 2,150.1 1,109.4 119.3 950.8 1,885.2 1,607.1

26,183.6

17,467.4 177.6 754.1 378.7 440.3 130.0 199.4 924.2 1,572.5 8,352.5 4,583.1

1,958.3 11.3 25.3 149.4 13.4 10.6 8.3 19.0 12.7 --

101,002.7 1,194.4 3,453.9 2,526.6 4,182.8 1,936.5 2,487.8 5,264.6 11,126.0 35,493.4 33,336.8

--

Puerto Rico, Total Aguadilla Arecibo Bayamón Caguas Fajardo Guayama Mayagüez Ponce San Juan s All Other

1,708.3

153,060.6 2,098.4 5,611.8 3,667.6 5,269.0 2,171.0 3,427.3 7,380.2 13,822.6 43,845.9 65,766.8

45,010.4

39

18,863.5 127.7 1,009.8 522.6 918.0 109.0 200.7 1,114.5 1,172.1 8,314.6 4,874.5

1,154.7 9.3 34.6 42.2 70.1 15.0 4.5 32.1 22.8 --

Puerto Rico, Total Aguadilla Arecibo Bayamón Caguas Fajardo Guayama Mayagüez Ponce San Juan a All Other

--

1958

924.1

239,720.9 3,341.9 8,316.2 11,576.9 9,434.1 2,703.4 4,388.1 11,497.3 19,390.2 65.203.6 103,869.2

Table IV-2 (Contd.)

Municipalities

Grocery Stores Urban Rural

Other2 Urban Rural

Total

($000)

($000)

($000)

($000)

($000)

241,386.5 3,017.5 7,376.8 16,781.3 11,278.9 3,144.7 4,162.6 12,466.6 22,291.0 83,633.0 77,264.1

85,754.5 1,806.7 2,944.2 4,071.6 1,720.0 151.0 1,224.4 2,776.2 2,226.6 68,833.8

25,976.7 211.4 1,009.8 805.0 1,029.7 262.2 233.3 1,942.6 2,458.3 12,502.0 5,522.4

2,528.1 43.8 56.6 360.5 32.7 17.4 31.5 87.9 416.6 -1,481.1

355,645.8 5,079.4 11,387.4 22,018.4 14,061.3 3,545.3 5,651.8 17,273.3 27,392.5 96,135.0 153,101.4

303,844.2 109,216.6 2,294.2 3,827.8 3,640.6 9,121.4 5,608.8 23,116.2 2,182.2 14,432.8 176.6 3,640.4 1,443.8 4,908.2 3,486.1 15,656.9 2,722.0 27.251.0 105,046.0 96,843.5 87,662.3

29,923.7 462.3 1,252.1 1,266.9 1,867.2 458.7 554.4 2,122.5 1,457.7 11,308.0 9,163.9

4,187.3 94.7 65.9 569.1 57.8 29.3 75.6 88.5 237.3 -2,969.1

447.171.8 6,679.0 14,080.0 30,561.0 18,540.0 4,305.0 6,982.0 21,354.0 31,668.0 116,354.0 196,648.0

1963 Puerto Rico, Total Aguadilla Arecibo Bayamón Caguas Fajardo Guayama Mayagüez Ponce San Juan 3 All Other 1967 Puerto Rico, Total Aguadilla Arecibo Bayamón Caguas Fajardo Guayama Mayagüez Ponce San Juan 3 All Other

40

Table IV-2 (Contd.)

Municipalities

Supermarkets 4 Grocery Stores t Urban Urban Rural ($000)

($000)

($000)

Other 2 Rural Urban

Total

($000)

($000)

($000)

1972 Puerto Rico, Total 296,899.5 5,837.8 Aguadilla 8,080.4 Arecibo 34,404.5 Bayamón 13,760.6 Caguas 4,467.5 Fajardo 7,618.0 Guayama 11,039.3 Mayagüez 28,033.5 Ponce 102,009.5 San Juan 3 81,648.4 All Other

300,458.0 71,310.5 7,659.0 1,469.5 19,409.6 3,543.4 18,267.8 3,684.1 11,297.2 1,428.1 5,198.0 756.6 11,687.8 1,103.8 16,525.2 2,097.3 10,666.3 1,704.1 85,660.6 114,086.5 55,523.6

47,826.1 8,635.7 725,129.8 1,321.1 262.5 16,549.9 2,806.5 137.8 33,977.7 2,168.3 246.5 58,771.2 5,377.2 152.0 32,015.1 1,297.9 54.8 11,774.8 1,844.2 201.4 22,455.2 5,564.7 229.3 35,455.8 4,309.1 44,713.0 3,062.9 190,733.0 20,074.2 7,351.4 278,684.1

302,285.0 81,512.8 7,768.7 1,690.4 19,588.1 3,814.5 18,439.4 4,289.1 11,426.4 1,611.4 5,290.3 786.9 11,849.6 1,579.8 16,686.1 2,346.0 10,791.6 1,966.8 86,241.9 114,203.2 63,427.9

55,064.0 10,681.0 888,092.8 1,605.4 368.4 20,203.9 3,085.9 175.2 38,504.6 199.9 76,781.7 2.,981.5 210.1 39,855.1 6,433.9 76.7 14,309.9 1,578.0 352.0 27,975.8 2,792.1 6,598.7 314.3 42,171.5 59,253.3 -5,271.2 -- 240,932.8 3,829.7 20,887.6 8,984.4 328,104.2

1975 Puerto Rico, Total 438,550.0 Aguadilla 8,771.0 11,840.9 Arecibo Bayamón 50,871.8 20,173.3 Caguas 6,578.3 Fajardo 11,402.3 Guayama 16,226.4 Mayagüez 41,223.7 Ponce 150,861.2 San Juan 3 120,601.1 All Other

1 Grocery Stores (S.I.C. 541): establ ishments primarily selling a wide variety of canned or frozen foods, dry groceries, either packaged or in bulk, and other processed food and nonedible grocery items. Establishments commonly known as supermarkets, food stores, and delicatessen are included in this classification if receipts from sales of groceries and food items are 50 percent or more of total sales. After 1967 this classification does not include grocery stores with annual sales of $1,000,000 or more. 2 Other specialized food stores (S.I.C. 542-549) include meat and fish markets, fruits and vegetable markets, candy, nut, confectionery stores, dairy products stores, retail bakeries and other food stores. 3 The municipality of San Juan only, and not the San Juan Metropolitan Area. 4 Grocery stores with annual sales of $1,000,000 or more. Note: For lack of information the data related to supermarkets could not be shown for 1954 to 1967. All data refer to calendar year.

Source: Census of Business, Puerto Rico, 1954, 1958, 1963 and 1967, United States, Department of Commerce, Washington, D.C. Commonwealth of Puerto Rico, Department of Commerce. 41

island (not counting consumption away from home) in 1972. Sales by grocery and other food stores were obtained by determining the proportion of sales to the adjusted internal income of each municipality in 1967. These proportions were applied to the adjusted income of each municipality in 1972. Data for this analysis were obtained from the Commonwealth Planning Board. In those municipalities where supermarkets operate, sales data were obtained by means of an index of sales per sq. ft. and number of employees per store. The information was obtained from prior studies that had been performed for these municipalities by the Commonwealth Department of Commerce. The data for Puerto Rico as a whole are also presented in the respective tables. This aggregation may be more realistic than presentation of data for the 78 municipalities separately, when viewed in relation to population and personal income of the respective areas, since some degree of intermunicipality overlap exists among these variables. ii. Store Space The data on store space in the urban zones for each municipality were estimated from studies performed by the Office of Economics and Planning of the Commonwealth Department of Commerce. Information on store areas for the rural zones was estimated from a sample survey conducted by the same agency for selected municipalities. Table IV-4 presents the information on store space for the nine major municipalities, the rest of the island, and Puerto Rico as a whole for three categories of stores dividing them into urban and rural zones. Projections for 1975 are also presented in the table. Data on store space are not available for any period before 1972. Hence, no estimate could be made as to its growth in relation to increased sales by the food stores in Puerto Rico. It can be observed that the nine major municipalities accounted for 69 per cent of the available space of supermarkets in Puerto Rico. San Juan municipality alone accounted for 33 per cent of total available supermarket space. The nine major municipalities accounted also for 44 per cent of "other" store space in the urban zones and 38 per cent in the rural zones. The volume of sales per sq. ft. is presented in a later section. iii. Capacity Because of resource limitations little could be done to measure the current degree of excess capacity in food retailing. By observation, however, we know that areas of Puerto Rico contain many food stores which lack modernized business practices relative to most parts of the continental United States. This suggests shortcomings with respect to both the capacity to physically distribute food as well as the broader concept of marketing capacity. Even in city areas where modern chain units exist, there are often too many customers seeking food in too little space. Sales per sq. ft, of space, classified by region and kind of store provide some numerical evidence. (Table IV-5 'provides such data for 1972 and projections for 1975). Supermarkets in urban areas, in general, had the highest sales per sq, ft. of physical space. Although this might suggest a lesser degree of excess capacity to distribute, this need not be the case, since mechanized and 1 Defined as domestic product of the municipality adjusted for payments received from the Federal Government and profit, dividend, and interest payments made.

42

Table IV-3 Number of Supermarkets and Their Annual Sales Volume. Selected Years.

Year

1954 1958 1963 1967 1972 1975 a

Puerto Rico Number Annual of Sales Stores ($000) 3 16 29 55 101 137

3,799.3 29,818.4 68,709.6 137,314.0 296,899.5 438,550.0

San Juan Metropolitan Area Number Annual of Sales Stores ($000) 2 11 21 35 49 60

2,532.8 a 22,856.3 54,541.2 93,681.0 169,083.5 249,973.4

Rest of the Island Number Annual of Sales Stores ($000) 1 5 8 20 52 77

1,266.5 a 6,962.1 14,168.4 43,633.0 127,816.0 188,576.6

Estimated on the basis of average sales per establishment in Puerto Rico.

Note: All data refer to calendar years. Source: Census of Business, Puerto Rico, 1954-1967, U.S. Department of Commerce, Washington, D.C.; Commonwealth of Puerto Rico, Department of Commerce

Table IV-4

Available Floor Space by Type of Food Retailer, 1972 and 1975 (in square feet)

1972

5,640,795 170,200 406,980 194,110 244,098 86,800 176,550 267,548 239,105 1,075,250 2,780,154

1,982,486 73,912 177,169 84,336 106,052 37,831 77,040 116,043 103,971 1,206,132

711,133 37,260 58,813 16,798 27,280 25,388 49,980 20,124 31,824 48,576 395,090

Rural

Total

70,273 4,250 6,708 3,792 3,111 2,896 5,700 2,295

9,806,464 317,871 691,960 442,269 446,088 174,915 330,323 481,407 487,737 1,581,588 4,852,306

--

1,401,777 32,249 42,290 143,243 65,547 22,000 21,053 75,397 112,837 457,762 429,409

Other 3 Urban

--

Puerto Rico, Total Aguadilla Arecibo Bayamón Caguas Fajardo Guayama Mayagüez Ponce San Juan4 All Other

Grocery Store2 Rural Urban

--

Municipalities

Supermarket Urban

41,521

Table IV-4

(Contd.) 1975 Grocery Stores 2 Rural Urban

Other 3 Urban

Puerto Rico, Total Aguadilla Arecibo Bayamón Caguas Fajardo Guayama Mayaguez Ponce San Juan 4 All Other

2,042,131 32,249 42,290 175,063 129,208 44,000 36,284 104,246 147,911 608,930 721,950

6,328,938 189,750 461,720 230,454 270,936 94,240 182,970 285,272 269,660 1,170,620 3,173,316

754,550 44,620 66,236 17,706 25,296 25,965 61,710 16,380 21,726 34,500 440,411

t

--

2,134,831 78,590 190,723 97,440 113,850 39,344 79,652 117,760 111,862 1,305,610

Rural

Total

77,594 5,089 7,554 2,272 2,885 2,961 7,038 1,868

11,338,044 350,298 768,523 522,935 542,175 206,510 367,654 525,526 551,159 1,814,050 5,689,214

--

Supermarket t Urban

--

Municipalities

47,927

Grocery Stores with annual sales of $1,000,000 or more.

2

Grocery Stores with annual sales of $1,000,000 or less. 3 Other specialized food stores IS.I.C. 542-5491. Includes stores such as meat and fish markets: fruits and vegetables markets; candy, nut and confectionery stores; dairy products stores; retail bakeries and other food stores. 4 The Municipality of San Juan only and not the San Juan Metropolitan Area.

Note: All data refer to calendar years. Source: Commonwealth of Puerto Rico, Department of Commerce

Table IV-5

Region

Sales per square foot by Type of Retailer and Region, 1972-1975 (dollars) Other

Grocery Store Urban Rural

Urban

Rural

Total

212 181 191 240 210 203 362 146 248 223 190

53 45 48 94 46 60 66 62 45 80 41

67 35 48 129 197 51 37 277 135 63 51

123 62 21 65 49 19 35 100

74 52 49 133 72 67 68 74 92 121 57

215 272 280 291 156 150 314 156 279 248 167

48 41 42 80 42 56 65 58 40 74 36

73 36 47 168 254 61 45 403 243 111 47

138 72 23 88 73 26 50 168

Supermarket Urban

36 20 20 44 13 20 14 18 16 --

Puerto Rico, Total Aguadilla Arecibo Bayamón Caguas Fajardo Guayama Mayaguez Ponce San Juan All Other

46

--

1972

177

49

--

38 22 20 44 14 20 20 20 18 --

Puerto Rico, Total Aguadilla Arecibo Bayamón Caguas Fajardo Guayama Mayaguez Ponce San Juan All Other

--

1975

187

Note: All data refer to calendar year. Source: Commonwealth of Puerto Rico, Department of Commerce

46

78 58 50 147 74 69 76 80 108 133 58

Table IV-6

Employment in Retail Food Outlets, Selected Years

Municipalities

Grocery Stores Rural Urban

Other2 Rural Urban

Total

3,240 67 118 93 122 66 59 185 324 1,121 1,085

19,058 421 550 441 576 243 337 943 1,286 4,040 10,221

1954 6,462 147 171 108 105 21 86 224 145

10,053 216 287 349 400 145 186 584 897 3,157 3,832

7,645 161 206 192 124 21 85 254 168

5,455

580 11 23 43 7 11 5 18 11 --

8,776 196 238 197 342 145 187 516 806 2,919 3,230

--

Puerto Rico, Total Aguadilla Arecibo Bayamón Caguas Fajardo Guayama Mayaguez Ponce San Juan 3 All Other

451

1958

6,434

47

590 5 35 20 14 11 7 18 12 --

3,266 37 135 105 115 30 38 225 307 1,173 1,101

--

Puerto Rico, Total Aguadilla Arecibo Bayamón Caguas Fajardo Guayama Mayaguez Ponce San Juan 3 All Other

468

21,554 419 663 666 653 207 316 1,081 1,384 4,330 11,835

Table IV-6

(contd.)

Municipalities

Grocery Stores Urban Rural

Other 2 Rural Urban

Total

3,503 47 113 120 135 71 42 225 342 1,305 1,103

857 13 10 81 21 11 11 12 58

25,039 480 720 1,037 775 247 322 1,197 1,581 4,760 13,920

3,127 80 114 117 144 45 81 211 168 847 1,320

924 23 10 78 23 15 26 12 27

11,668 240 348 540 474 144 184 669 994 3,455 4,620

9,011 180 249 296 145 21 85 291 187

12,976 260 396 692 532 143 183 736 1,102 3,695 5,237

10,120 195 285 380 164 21 84 319 206

--

Puerto Rico, Total Aguadilla Arecibo Bayamón Caguas Fajardo Guayama Mayaguez Ponce San Juana All Other

7,557

--

1963

640

8,466

48

--

Puerto Rico, Total Aquadilla Arecibo Bayamón Caguas Fajardo Guayama Mayaguez Ponce San Juana All Other

--

1967

710

27,147 558 805 1,267 863 224 374 1,278 1,503 4,542 15,733

Table IV-6 (Contd.)

Municipalities

Supermarkets° Grocery Stores Urban Urban Rural

Otherz Rural

Urban

Total

1972 Puerto Rico, Total

5,666

Aguadilla

120

Arecibo Bayamón

150 661

Caguas

270 72 136 192

Fajardo

12,673 174

11,416 213

3,299

1,432

34,486

132

403

312

168

56 18

695 1,051

402

460 185

76 155

29 35

1,628 1,114

22 86 327

56 148 188 191

469 180

20 70 19

359 552 1,475 1,785

518

112 749 843

1,922

3,070

All Other

1,625

6,271

9,578

1,674

1,176

Puerto Rico, Total Aguadilla

6,483

15,891

139

12,215 224

4,096 195

171 757 307 82 158 218 591 2,202 1,858

330 513 196 24 86 329 248

236

1,585 68 22

40,270 785

Arecibo Bayamón Caguas Fajardo Guayama Mayaguez Ponce San Juana All Other

159 334

17 32 32 88 21

1,717 1,091 370 638 1,347 1,705 5,116 26,408

--

511

--

233

--

Guayama Mayaguez Ponce San Juana

5,503 20,324

10,265

--

80 175 73 227 191 167 451 2,301

--

350 381 159 79 588 699 2,463 10,679

--

1975

1,305

1,093

1 Grocery Stores (S.I.C. 5411: establishments primarily selling a wide variety of canned or frozen foods, dry groceries, either packaged or in bulk, and other processed food and nonedible grocery items. Establishments commonly known as supermarkets, food stores, and delicatessen are included in this classification if receipts from sales of groceries and food items are 50 percent or more of total sales. After 1967 this classification does not include grocery stores with annual sales of $1,000,000 or more. 2 Other specialized food stores (SIC. 542-549) include meat and fish markets, fruits and vegetable markets, candy, nut, confectionery stores, dairy products stores, retail bakeries and other food stores. 3The municipality of San Juan only, and not the San Juan Metropolitan Area. 4 Grocery stores with annual sales of $1,000,000 or more. Note: For lack of information the data related to supermarkets could not be shown for 1954 to 1967. All data refer to calendar year. Source:

Census of Business, Puerto Rico, 1954, 1958, 1963 and 1967, United

States, Department of Commerce, Washington, D.C. Commonwealth of Puerto Rico, Department of Commerce.

49

specialized methods of operation might enable them to sell more in a given space than other kinds of retailers. Obviously, analysis in terms of sales per sq. ft. has weaknesses in estimating excess capacity. The measure is strictly physical and does not reflect the knowledge and capability of management and employees, their willingness to work, store hours, or a multitude of other factors which are pertinent to the ability to satisfy the consumer's demand for food at the right time and place with appropriate services surrounding the sale. iv. Employment The total number of persons employed in grocery and other food stores was obtained on the basis of average employment per store in each municipality as estimated in the 1967 Census. For the supermarkets a ratio of sales to employment was used in order to make projections for the year 1975. Table IV-6 presents the level of employment in food retail outlets in Puerto Rico for selected years from 1954 to 1967, and gives the estimate for 1972 and 1975 (except for supermarkets for which actual data for 1972 were obtained). The data are divided into urban and rural outlets for each year separately, except for supermarkets which are located in urban areas in all cases. It can be observed that of the total employment of 34,486 for Puerto Rico as a whole in 1972, supermarkets employed 5,666 persons (16.4 percent), grocery stores employed 24,089 (69.9 percent), and other stores employed 4,731 (13.7 percent) respectively. 2. Market Plazas Traditionally, market plazas have played a significant role in food marketing in Puerto Rico, particularly in the field of locally produced food. The magnitude of their economic activity has diminished lately because of the influx of population from rural to urban areas and to new suburban housing developments. They still continue, however, to occupy an important place, and consequently, the Government of Puerto Rico plans to increase their number in the island. At present there are 30 market plazas in operation in different municipalities of the island. Figure IV-2 shows the distribution of market plazas and shopping centers in Puerto Rico by municipalities. The Department of Commerce has conducted a blanket survey of all the market plazas in operation on the island in 1973. Table IV-7 presents the number of establishments and store areas for food and other retailers for each of the market plazas separately. Of the total of 1,086 retail outlets in the plazas, food retailers accounted for 786 or 72.38 percent while all other outlets accounted for 300 or 27.62 percent of the total. Store space on the other hand registered a total area of 214,264 sq. ft. of which only 119,490 sq. ft. or 55.77 percent pertain to food retailing. Average area per food retail outlet accounts for 152 sq. ft. as opposed to 316 sq. ft. for others. Total sales volume amounted to $26,302,392 of which food products accounted for $18,166,785 or 69.1 percent. Table IV-8 gives a breakdown of the sales value of all food products sold in the Market Plazas. Fruits and vegetables account for the highest percentage with 45.9, while meat and fish rank second with 33.8 percent of the total sales. Sales of food products per sq. ft. of food retail stores in market plazas is presented in Table IV-9. The percentage distribution of sales in market plazas by type of operation is given in Table IV-10. 50

Figure IV-2

Distribution of Market Plazas and Shopping Centers by Municipalities, March 1974

ATLANTIC OCEAN Cataño

CARIBBEAN SEA

SC

=

MP -

SHOPPING CENTER MARKET PLAZA

Source: Commonwealth of Puerto Rico, Department of Commerce

Number of Establishments and Store Area of Retail Outlets in Market Plazas, 1973.

1,086 156 226 65 40 60 77 21 37 18 22 14 22 10 40 31 31 22 11 9 6 10 13 7 38 17 10 7 19 47

Establishments Other Food Retailers

786 123 135 42 25 41 67 18 31 9 11 9 9 8 32 26 28 21 9 9 6 10 13 7 38 9 8 6 4 32

300 33 91 23 15 19 10 3 6 9 11 5 13 2 8 5 3 1 2 8 2 1 15 15

Store Area— Square Feet Total Food Others Retailers

214,264 18,905 33,431 11,542 6,476 45,446 12,178 4,985 4,933 8,816 3,969 3,189 3,336 2,179 6,564 6,129 5,307 2,874 2,400 916 1,658 856 1,340 850 3,832 3,639 1,824 656 9,283 6,751

119,490 14,743 19,097 7,292 3,702 12,457 8,953 2,907 4,232 2,160 1,663 1,679 1,440 1,309 5,557 5,346 4,952 2,779 1,644 916 1,658 856 1,340 850 3,832 1,325 1,248 512 972 4,699

94,774 4,162 14,334 4,250 3,404 32,989 3,225 2,078 701 6,656 2,306 1,510 1,896 870 1,007 783 355 95 756 --

N

Puerto Rico, Total Río Piedras Ponce Bayamón Caguas Arecibo Mayaguez Aguadilla Santurce Vega Baja Lares Naguabo Juana Díaz Sabana Grande Humacao Cabo Rojo San Germán Cayey Yabucoa Lajas Ciales Guayama Camuy Río Grande Manatí Isabela Salinas Guayanilla Utuado Vauco

Total

--

Municipality

--

Table IV-7

2,314 576 144 8,311 2,052

Source: Commonwealth of Puerto Rico, Department of Commerce

Average Store Area Total

Food Retailers

197 121 148 178 161 757 158 237 146 490 180 581 151 218 164 198 178 131 218 101 176 86 103 121 101 214 182 94 489 143

152 120 141 174 123 304 134 162 137 240 152 187 160 164 174 206 177 132 183 102 276 86 103 121 101 147 156 85 243 147

Other

316 126 157 185 227 1,736 323 693 194 740 210 1,292 146 435 126 157 192 95 92

289 288 144 554 137

Table IV-8 — Retail Sales of Food Products in Market Plazas by Type of Product, 1973

Sales Type of Products

l$1

Fruits & Vegetables

8,345,346

45.9

Meat & Fish

6,137,845

33.8

Grocery

2,823,305

15.6

Other Provision & Supplies

786,232

4.3

Bakery Products

47,268

0.3

Candies & Confectionery

26,788

0.1

18,166,785

100.0

Total Food Sales

Percent of Total

Source: Commonwealth of Puerto Rico, Department of Commerce

53

Table IV-9 Food Sales per sq. ft. and Average Sales Per Food Store in Market Plazas, 1973 (in dollars).

Municipality

Sales/Sq.Ft. ($)

Average Sales Per Store ($)

Bayamón Río Piedras Santurce Cayey Mayagüez Juana Díaz Sabana Grande Guayanilla _ Ponce Caguas Guayama Utuado Humacao Yabucoa Yauco Vega Baja Isabela Río Grande Cabo Rojo Mant í Aguadi lla Lajas Camuy Ciales Naguabo San Germán Arecibo Salinas Lares Average

340.81 276.04 214.03 197.06 189.93 178.03 169.82 143.55 140.65 134.76 130.61 127.24 118.48 110.75 104.36 98.54 95.17 93.71 91.45 90.47 84.58 83.73 86.46 83.39 82.84 81.61 59.00 66.42 38.72 152.04

59,171 33,086 29,219 26,077 25,380 28,484 27,788 12,250 19,896 16,560 11,180 30,920 20,575 20,230 15,324 23,650 14,011 11,380 18,803 9,123 13,660 8,522 8,603 23,043 15,456 14,433 17,921 8,801 5,853 23,113

Source: Commonwealth of Puerto Rico, Department of Commerce

54

Table IV-10 Percentage Distribution of Sales in Market Plazas by Municipality, 1973.

Municipality Río Piedras Ponce Bayamón Mayagüez Santurce Arecibo Humacao Cayey Cabo Rojo Yauco Caguas San Germán Manatí Juana Díaz Aguadilla Vega Baja Sabana Grande Yabucoa Naguabo Ciales Utuado Isabela Guayama Camuy Salinas Guayanilla Lajas Río Grande Lares Total

Food Products 22.4 14.8 13.7 9.4 5.0 4.0 3.6 3.0 2.7 2.7 2.3 2.2 1.9 1.4 1.3 1.2 1.2 1.0 .8 .8 .7 .7 .6 .6 .4 .4 .4 .4 .4 100.0

Others 9.4 19.1 6.8 4.3 1.0 29.5 .7 .4 .3 1.2 1.8 .2 -1.4 .1 .4 .4 .4 .4 18.4 1.3 --.2 .1

1.2 100.0

Total 18.4 16.1 11.6 7.8 3.8 11.9 2.7 2.2 2.0 2.2 2.1 1.6 1.3 1.4 1.0 1.2 1.0 .8 .7 •5 6.2 .9 .4 .4 .3 .3 .3 .3 .6 100.0

Source: Commonwealth of Puerto Rico, Department of Commerce

55

The data on employment at the market plazas were also obtained through a special study conducted by the Commonwealth Department of Commerce. Table IV-11 shows that in 1973, food retail outlets located in the market plazas employed a total of 1,040 persons with an annual payroll of $835,600.

Table IV-11 — Employment and Payroll, Food Retail Outlets in Market Plazas by Type of Store, 1973

Type of Store

Total Employment (Number)

Annual Payroll ($000)

162 74 2 227 518 4 3 50

76.2 236.0 307.2 186.8

1,040

835.6

Grocery Stores Supermarkets Grocery & Drinking Places Meat & Seafood Stores Fruit & Vegetables Stores Candy & Confectionery Stores Pastry & Bakery Stores Other Grocery Stores Total

29.4

Source: Commonwealth of Puerto Rico, Department of Commerce 3. Shopping Centers With the growth of urban and suburban communities during the last decade, organized shopping centers have gained popularity in Puerto Rico as one of the major retail outlets. In a typical shopping center, a supermarket or a superette, a pharmacy, a department store and a number of various service centers can be found. They are very modern in structure with ample parking places available for the shoppers. At present there are 150 shopping centers in operation in Puerto Rico. Of these, 109 are located in the San Juan Metropolitan Area and the rest are located in various other municipalities of the island (see Figure IV-2). For the purpose of this study a survey was conducted by the Commonwealth Department of Commerce covering all the shopping centers. Table IV-12 presents the number of retail outlets in the shopping centers by type of operation. Of the total of 1,839 retail outlets, the San Juan Metropolitan Area alone accounts for 1,437 outlets or 78.14 percent. There are 369 food retailers in the shopping centers of which 326 are located in the shopping centers of the San Juan Metropolitan Area. Of the total of 6,377,641 sq. ft. of store space, food stores account for 1,379,724 sq. ft. or 21.63 percent. Table IV-13 presents the distribution of annual sales volume by type of operation for the year 1973. Total sales volume of the shopping centers amounted to $486.4 56

Table IV-12 Number of Establishments and Store Area in Shopping Centers by Type of Operation, 1973

Puerto Rico, Total

Number of Establishments Total Food Stores Others 369 1,470 1,839

Commercial Area (sq. ft.) Total Others Food Stores 6,377,641 1,379,724 4,997,917

San Juan Metropolitan Area

1,437

326

1,111

4,517,484

915,432

3,602,052

Bayamón Carolina Guaynabo Hato Rey Río Piedras Santurce Toa Baja Trujillo Alto Rest of the Island

185 179 134 267 543 74 30 25 402

121 101 13 13 56 13 6 3 43

64 78 121 254 487 61 24 22 359

926,043 422,889 434,881 1,064,584 1,347,850 194,578 90,449 36,210 1,860,157

202,360 124,229 70,480 97,634 318,115 37,515 46,986 18,113 1,464,292

723,783 298,660 364,401 966,950 1,029,735 157,063 43,463 18,097 1,395,865

Geographic Area

Table IV-12 (Contd.)

Puerto Rico, Total

Total 3,468

Average Size (sq. ft.) Others Food Stores 3,400 3,739

San Juan Metropolitan Area

3,144

2,808

3,242

Bayamón Carolina Guaynabo Hato Rey Río Piedras Santurce Toa Baja Trujillo Alto Rest of the Island

5,006 2,363 3,245 3,987 2,482 2,629 3,015 1,448 4,627

1,672 1,230 5,422 7,510 5,680 2,886 7,831 6,038 10,797

11,308 3,829 3,012 3,807 2,114 2,575 1,811 823 3,888

Geographic Area

Source: Commonwealth of Puerto Rico, Department of Commerce

Table IV-13 Distribution of Sales by Geographic Area and Type of Operation in Shopping Centers, 1973

Total Sales

Food Stores Sales ($000)

Percent of Total

Geographic Area Puerto Rico, Total

486,413.7 100.0

San Juan Metropolitan Area

375,705.8

Bayamón Carolina Guaynabo Hato Rey Río Piedras Santurce Toa Baja Trujillo Alto Rest of the Island

79,468.7 27,663.7 39,786.9 101,486.7 91,988.0 23,382.2 9,210.2 2,719.4 110,707.4

Percent of Total

Sales of Other Stores ($000)

Percent of Total

23,811.0 100.0

262,602.7 100.0

77.3

155,587.8

69.5

220,118.0

83.8

16.3 5.7 8.2 20.9 18.9 4.8 1.9 .6 22.7

32,411.4 15,984.1 18,586.7 17,322.7 49,559.5 11,560.7 7,885.0 2,277.7 68,223.2

14.5 7.1 8.3 7.7 22.1 5.2 3.5 1.0 30.5

47,057.3 11,679.6 21,200.2 84,164.0 42,428.5 11,821.5 1,325.2 441.7 42,484.7

17.9 4.4 8.1 32.1 16.2 4.5 .5 .2 16.2

Source: Commonwealth of Puerto Rico, Department of Commerce.

Table IV-14 Annual Sales of Food Products per square foot and Average Sales in Shopping Centers, 1973 (in dollars) Average Sales ($)

Puerto Rico, Total

Sales Per sq. ft. ($) 162.21

San Juan Metropol itan Area

169.96

1,030,383

Bayamón Carolina Guaynabo Hato Rey Río Piedras Santurce Toa Baja Trujillo Alto

160.16 128.66 263.71 177.42 155.79 308.16 167.81 125.74

1,296,456 726,551 1,429,752 1,332,512 884,992 889,285 1,314,158 759,217

Rest of the Island

146.94

1,624,359

Geographic Area

1,159,641

Source: Commonwealth of Puerto Rico, Department of Commerce.

59

Table IV-15

Direct Employment Generated by Shopping Centers, 1973

Geographic Area

Puerto Rico, Total San Juan Metropolitan Area Bayamón Carolina Guaynabo Hato Rey Río Piedras Santurce Toa Baja Trujillo Alto Rest of the Island

Percentage Total Employment Distribution

Food Retailers

Percentage Distribution

14,966

100.00

4,717

100.0

10,923 1,444 960 1,209 3,015 3,327 619 253 96 4,043

73.0 9.7 6.4 8.1 20.1 22.2 4.1 1.7 .6 27.0

3,358 686 373 455 331 1,046 213 201 52 1,359

71.2 14.5 7.9 9.6 7.0 22.2 4.5 4.3 1.1 28.8

Source: Commonwealth of Puerto Rico, Department of Commerce.

Table IV-16 Wages and Salaries Paid in Shopping Centers by Geographic Area, 1973

Geographic Area Puerto Rico, Total San Juan Metropolitan Area Bayamón Carolina Guaynabo Hato Rey Río Piedras Santurce Toa Baja Trujillo Alto Rest of the Island

Food Retailers

Total Payroll ($) 41,317,580

Percentage Distribution 100.0

($)

Percentage Distribution

16,314,840

100.0

35,624,264 6,307,652 3,238,248 3,937,856 10,125,596 8,929,596 1,948,648 801,112 335,556 5,693,316

86.2 15.3 7.8 9.5 24.5 21.6 4.8 1.9 .8 13.8

11,553,256 2,569,060 1,238,172 1,349,972 1,134,172 3,738,176 718,328 640,016 165,360 4,761,584

70.8 15.7 7.6 8.3 7.0 22.9 ,4.4 3.9 1.0 29.2

Source: Commonwealth of Puerto Rico, Department of Commerce

60

million in 1973 of which food sales accounted for $223.8 million or 46.01 per cent, of which the San Juan Metropolitan Area accounted for about 70 percent. Table IV-14 presents the annual sales per sq. ft. of food stores in the shopping centers. With some exceptions, the sales volume per sq. ft, of store area in both market plazas (Table IV-9) and shopping centers is fairly comparable though average size of the food store varies substantially. The data on employment and payroll of retail food outlets located in shopping centers were obtained through a special study conducted by the Commonwealth Department of Commerce. Table IV-15 presents the total direct employment generated by the shopping centers, Table IV-16 wages and salaries paid, and Table IV-17 salaried employment. Accordingly, food retail outlets employed a total of 4,717 persons in 1973 or about 32 percent of the total while paying a sum of $16.3 million or 39 percent of the payroll.

Table IV-17 Salaried Employment in Shopping Centers, 1973

Total

Percentage Distribution

Food Retailers

Percentage Distribution

(Number)

Geographic Area

13,958

(Percent) 100.0

(Number)

Puerto Rico, Total

4,435

(Percent) 100.0

San Juan Metropolitan Area Bayamón Carolina Guaynabo Hato Rey Río Piedras Santurce Toa Baja Trujillo Alto Rest of the Island

10,164 1,120 863 1,154 2,873 3,246 586 240 82 3,794

72.8 8.0 6.2 8.3 20.6 23.3 4.2 1.7 .6 27.2

3,143 579 357 442 183 1,134 200 197 51 1,292

70.7 13.1 8.0 10.0 4.1 25.6 4.5 4.4 1.2 29.1

Source: Commonwealth of Puerto Rico, Department of Commerce.

61

Chapter V

STRUCTURE OF THE FOOD MARKETING SYSTEM: WHOLESALE

The wholesaling function is a very significant element in the performance of any marketing system, but especially so in the food marketing system of Puerto Rico, since more than half of the food supply is imported. Figure V-1 draws the distribution chart of food marketing and pinpoints the position of the wholesaler in the total system. The purpose of this chapter is to describe and analyze the structure of this significant distribution element. To be able to do this, primary data sources were obtained from a random sample of 146 out of 373 wholesalers in nine geographic regions operating in Puerto Rico as of March 1973, as reported by the Employment Security Bureau (ESB) of the Commonwealth of Puerto Rico.2 A. Distribution of Wholesalers The SIC Manual classifies food wholesalers as: 1. Groceries, general wholesalers. These are primarily engaged in the wholesale distribution of general line of groceries (SIC 5042). 2. Limited Line Food Wholesalers. These are primarily engaged in the distribution of a given product line such as: dairy, fresh produce, fish and sea foods and others. The total number of food wholesalers was reported by the ESB, to be 373; of these 216 (58 percent) were classified as groceries-general line, and 157 (42 percent) as limited line or specialized food wholesalers. Their regional distribution and the relative importance of each region in the wholesale

t

See Table VI-11.

2 The ESB figure differs from that reported by the Consumer Affairs Department (DACO) which is 462 wholesalers. The difference is probably caused by the fact that ESB classifies some wholesalers selling also to the ultimate consumers as retailers and does not register those self-employed wholesalers who do not report employees.

62

Figure V-1 Distribution Pattern of Food Marketing

Food Manufacturing Agricultural Producers (U.S., P.R. and other Countries( Brokers, and Agents

Corporate Chains

1 Voluntary Wholesalers

Importers Exclusive Agents Limited Line Wholesalers,

Independent Wholesalers

(Usually under the same ownership)

Truckers Market Plaza Wholesalers ~

Institutions Restaurants-Hospitals and Other

Independent and Affiliated Retailers, and Market Plazas

Ultimate Consumer

Pueblo Grand Union Amigo Co-op Uni-Coop Bargain Town Corporate Chain Retailers Cash & Carry

marketing of food on the island are .given in Table V-1. Accordingly, 63.89 per cent of the general line wholesalers are concentrated outside of the San Juan Region, while 59.24 percent of the limited line or specialized food wholesalers are located in the San Juan Area. The San Juan Region and Bayamón Region together account for 72.61 percent of all the specialized food wholesalers. The importance of San Juan Region in the wholesale marketing and distribution of food on the island is indicated also by the fact that it contains 45.84 percent of all the food wholesalers operating in the island. More wholesalers were located in the principal urban centers of the regions other than San Juan. B. Ownership and Organization Food Wholesalers can be classified into four groups according to organizational form and ownership: voluntary wholesalers; cooperative wholesalers; independent wholesalers; and the corporate chain. The latter are multi-unit food stores which consist of 11 or more retail stores owned and operated by a single corporation which do their own wholesaling. For the purposes of this study they have not been classified as wholesalers although their relative importance in total sales is shown in Table V-2. Voluntary Wholesalers are general line wholesalers with whom a group of retailers voluntarily affiliate themselves by a contract agreement. The stores affiliated may operate under a common name and depend on the wholesaler for their merchandise requirements. The wholesaler tries to obtain the best possible price and promotional allowances from suppliers and passes these savings on to the members. In 1973 three voluntary wholesalers and ten other affiliated wholesalers were operating on the Island. They accounted for a very small share (5 percent ) of the distribution of food (see Table V-2). In the United States, in contrast, voluntary groups of wholesalers, cooperatives and other affiliated independents account for approximately 50 percent of food sales. Independent wholesalers are classified in three categories: sole proprietorships; family corporations; and partnerships. The independent wholesalers buy and store goods in their own warehouses, and deliver goods to the independent retailers. They also extend credit to their clients. Because of the special requirements for storing, handling, and transporting frozen foods they usually specialize in either dry groceries or frozen foods, although some handle both types. According to the survey, the independent wholesaler is still very important in Puerto Rico, Of the 146 food wholesalers interviewed, 89 percent were independent wholesalers. It is very significant that 47 percent of these were family owned, and 35 percent were sole proprietorships In the United States, by contrast, the traditional family owned and sole proprietorship food wholesalers have been declining in numbers. Statistics show that corporate chains constituted 61 percent of the food wholesalers in the U.S. in 1970. In Puerto Rico, however, corporate chains account for only 6 percent of total food wholesales. An additional point to consider in the organization of food marketing in Puerto Rico is the role of the importer. As was pointed out right at the outset, food imports are of paramount importance. Branded food products produced in the United States are usually marketed in Puerto Rico through an exclusive agent. Importers get a commission on all shipments, sales, advertising collections, 64

Table V-1

Number of Establishments by Type of Wholesaler and by Region, 1973 Groceries, General Line Wholesalers

100.00 3.24 9.26 9.72 12.04 1.85 2.32 11.57 13.89 36.11

57.91 1.88 5.36 5.63 6.97 1.07 1.34 6.70 8.04 20.91

157 4 1 21 13

100.00 2.55 0.64 13.37 8.28

(Number)

(Percent)

373 11 21 42 39 4 6 34 45 171

100.00 2.95 5.63 11.26 10.46 1.07 1.61 9.12 12.06 45.84

42.09 1.07 .27 5.63 3.49 --

216 7 20 21 26 4 5 25 30 78

Total Wholesalers Establishments

--

Total Aguadilla Arecibo Bayamón Caguas Fajardo Guayama Mayagüez Ponce San Juan

--

Regions

Limited Line or Specialized Wholesalers Percent Percent of Establishments Establishments of Total Total (Number) (Percent) Establishments (Number) (Percent) Establishments

1 9 15 93

0.64 5.73 9.55 59.24

.27 2.41 4.02 24.93

Source: Commonwealth of Puerto Rico, Department of Labor, Employment Security Bureau.

and claims. Most of them are agents who act as limited line wholesalers,' since they buy on their own account, store and resell to other wholesalers and retailers.2 Because he has a contract with the manufacturer, the agent is sometimes the only person who can buy merchandise from that manufacturer. A warehouse serving retailers must have several suppliers and must buy through them.3

Table V-2

Composition of the Food Wholesalers by Ownership and Organizational Form, 1973

Form of Organization

Number

Sole Proprietorship

133

Sales ($)

Percent of Total Sales

351,092,312

Partnership

28

70,218,462

35 7

Family Corporation

176

471,466,818

47

Corporate Chains

23

60,187,253

6

Voluntary

3

10,031,209

1

10 373

40,124,836

4

1,003,120,890

100

Others Total

Source: Food Wholesalers Survey conducted by the Food Stamp Research Team in conjunction with the Department of Commerce, Commonwealth of Puerto Rico, March 1974.

1 They sell between 10 and 500 items. 2 For example, Pueblo's warehouse is used as a distribution center for their supermarkets. The Uni-Coop warehouse was converted, recently, to a center of distribution for the superettes and supermarkets affiliated. 3 Undoubtedly, this additional step in the distribution channel increases the food cost at the retail level. (It is estimated that the consumer can save 5-10 percent with an efficient distribution system). The solution may be found in the organization of full line wholesalers such that independent retailers and others could buy all necessary items from one source of supply. The Department of Commerce in its 1974-78 four year plan has included as number one priority, the development of this type of wholesaler. The government has fostered and encouraged a full line grocery warehouse in the past, evidently with no positive results.

66

Sometimes the importers act as a drop-shipment type of wholesaler. They make purchasing arrangements with retailers or other wholesalers. They do the billing and charge a fee for the purchasing service rendered. In Puerto Rico there are over one hundred (100) companies acting as independent importers.

C. Size of Food Wholesalers 1. Sales: Table V-3 classifies food wholesalers into six groups according to annual sales volume. The classification is given for total Puerto Rico, for the San Juan Metropolitan Area and for the rest of the island. In Puerto Rico as a whole, only 2.4 percent of the food wholesalers had annual sales less than $500,000 in 1973. These represented about 20 percent of the total number of the firms. At the other extreme 56 percent of the food wholesalers had annual sales of $1 million or more, their sales representing 90.35 percent of total sales. Earlier studies of marketing in Puerto Rico indicate that in the fifties averagesalesiper wholesaler was $423,000.1 Our survey shows that by 1973 average sales had increased to $2,689,342. Even after allowing for price changes, there still appears to be a shift toward larger wholesalers. In the San Juan Metropolitan Area there were 132 food wholesalers with annual sales of $1 million or more. These represented 68 percent of the food wholesalers of the region and accounted for 96 percent of the total sales. A little over 14 percent of the firms had sales of less than $500,000 representing 1 percent of total sales. Obviously, firms with larger sales were concentrated in this area.On the rest of the island 43 percent of the food wholesalers had sales of $1 million or more which represented 76 percent of total sales. The overwhelming concentration of wholesalers in the San Juan Region is also visible from Table V-4. The Region accounted for 71 percent of total sales followed by Bayamón (6 percent), Mayagüez (6 percent), and Ponce (5.4 percent). At the other limit, Fajardo and Aguadilla accounted for only 0.33 percent and 0.65 percent respectively. Table V-4 also shows sales on credit by regions. Traditionally, retailers purchase on credit from the wholesalers on a 30-60 day basis, sometimes on a 90 day basis. In the 1950's and 1960's sales on credit by the food wholesalers of the island was almost universal. The results of our survey indicate a move away from this tradition, for on the average only 67.4 percent oftheirtotal food wholesales was transacted on credit. Fajardo and San Juan accounted for higher than average percentage of sales on credit; 84.84 percent and 84.24 percent respectively. Aguadilla had the lowest percentage (46.84 percent).

1 See e.g. John K. Galbraith and Richard Holton. Marketing Efficiency in Puerto Rico. Cambridge: Harvard Univ. Press, 1955.

67

Table V-3

Distribution of Food Wholesalers and their Annual Sales in San Juan Metropolitan Area, Rest of the Island and Puerto Rico by Size of Sales, 1973

SAN JUAN METROPOLITAN AREA Annual Sales Less than 50,000 50,000 - 99,000 100,000- 249,999 250,000 - 499,999 500,000 - 999,999 1,000,000 or more Total

(Number)

Firms (Percent)

Sales ($)

(Percent)

1.55 1.55 5.15 6.19 17.53 68.04 100.00

144,077 200,624 2,017,072 4,826,565 21,899,639 691,294,894 720,382,871

0.02 0.03 0.28 0.67 3.04 95.96 100.00

4

2.23

156,859

0.06

8 33 57 77 179

4.46 18.44 31.84 43.02 100.00

1,293,227 15,436,477 50,826,626 215,024,830 282,738,019

0.46 5.46 17.97 76.05 100.00

7 3 18 45 91 209 373

1.88 0.80 4.83 12.06 24.40 56.03 100.00

300,936 200,624 3,310,299 20,263,042 72,726,265 906,319,724 1,003, 120,890

0.03. 0.02 0.33 2.02 7.25 90.35 100.00

3 3 10 12 34 132 194

REST'OF THE ISLAND Less than 50,000 50,000 - 99,000 100,000 - 249,999 250,000 - 499,999 500,000 - 999,999 1,000,000 or more Total PUERTO RICO Less than 50,000 50,000 - 99,000 100,000- 249,999 250,000 - 499,999 500,000 - 999,999 1,000,000 or more Total

Source: Food Wholesalers Survey conducted by the Food Stamp Research Team in conjunction with the Department of Commerce, Commonwealth of Puerto Rico. March, 1974.

68

Table V-4 Total Sales and Sales on Credit by Food Wholesaler by Region, 1973

Regions

t°

Wholesalers Interviewed (number)

San Juan Metropolitan Area 171 Rest of the Island 11 Aguadilla 21 Arecibo Bayamón 42 Caguas 39 4 Fajardo Guayama 6 Mayagüez 34 Ponce 45 Sub Total 202 Puerto Rico, Total 373

Total Sales ($)

Average Sales ($)

Percent of Total Sales

Sales on Credit

($)

Percent of Sales on Credit

713,526,550

4,172,670

71.13

601,080,083

84.24

6,486,000 42,201,000 60,477,000 55,134,040 3,330,700 7,496,400 59,873,520 54,595,680 289,594,340 1,003,120,890

589,636 2,009,571 1,439,929 1,413,693 832,675 1,249,400 1,760,986 1,213,237 1,433,635 2,689,332

0.65 4.21 6.03 5.50 0.33 0.74 5.97 5.44 28.87 100.00

3,038,475 23,728,757 37,192,200 34,038,021 2,825,800 4,789,800 43,594,651 35,671,192 181,627,058 676,232,567

46.84 56.22 61.49 61.73 84.84 63.89 72.81 65.34 62.72 67.41

Source: Food Wholesalers Survey conducted by the Food Stamp Program Research Team in conjunction with the Department of Commerce, Commonwealth of Puerto Rico, March 1974.

2. Employment Food wholesaling employed 5,471 people in 1973. The change in the number of food wholesalers and their employees since 1967 is given in Table V-5. Accordingly, employment in food wholesaling has increased more proportionately than the number of wholesalers. In 1972 there were 6,459 employees as opposed to 4,393 in 1967; this represents an increase of 47 percent. On theother hand, the number of food wholesalers rose from 326 in 1967 to 385 in 1972, which represents an increase of 18 percent. However, when the number of food wholesalers declined by abount 6 percent to 373 in 1973, employment declined by 16 percent to 5,471. What is more interesting is the classification of food wholesalers by type of wholesaler and by the number of employees. This is indicated in Table V-6. Of the total number of food wholesalers, 43 percent employed 1-5 persons and 35 percent employed more than 10. The San Juan Region again indicated the overwhelming importance of large size. It accounted for 46 percent of those who employed 6 to 10 employees, and for 50 percent of those with more than 10 employees. Sixty-two percent of the food wholesalers employing 1-5 persons were located in the rest of the island.Tables V-7 and V-8 analyze employment by food wholesalers and their payroll by region. It is once again evident that small food wholesalers generally operate outside the San Juan Area, and medium and large food wholesalers generally operate in the San Juan region. The 373 food wholesalers in the island employed 5,471 persons in 1973 with a total payroll of $31,489,532. The region of San Juan accounted for more than half of the number of persons employed (53.9 percent). The San Juan region also accounted for 63.3 percent of the total payroll, followed by Ponce with 16.5 percent of the total number of persons employed, and 13.0 percent of the total payroll.

D. Degree of Modernization The degree of modernization in handling and marketing food can be measured by the use of mechanized procedures, the extent of the utilization of capacity, and the time element involved in keeping and moving inventories and in chanelling the distribution of the product. We shall take up each aspect individually.

70

Table V-5

Year 1967 1968 1969 1970 1971 1972 1973

Number of Food Wholesalers and Employment, 1967-1973

Number of Wholesalers 326 353 389 396 398 385 373

Number of Employees (1st. quarter, March 31) 4,393 4,534 5,128 5,327 6,159 6,459 5,471

Source: Commonwealth of Puerto Rico, Department of Labor, Employment Security Bureau.

Table V-6

Food Wholesalers by Level of Employment, 1973

Limited Line Groceries General Line Total Food Wholesalers Wholesalers Wholesalers (Number) (Percent) (Number) (Percent) (Number) (Percent) 1 —5 100 45 60 38 160 43 6-10 46 21 36 22 82 22 More than 10 34 70 61 40 131 35

Employment Level

Total

216

100

157

100

373

100

Source: Commonwealth of Puerto Rico, Department of Labor, Employment Security Bureau.

71

Table V-7

Number of Establishments, Employment and Annual Payroll, by Type of Food Wholesaler and by Region, 1973

Regions Groceries: General Line Puerto Rico, Total Aguadilla Arecibo Bayamón Caguas Fajardo Guayama Mayagüez Ponce San Juan

Establishments

Employment

Payroll

(Number)

(Number)

($►

216 7 20 21 26 4 5 25 30 78

2,945 31 198 242 203 31 28 796 283 1,633

17,086,064 110,372 800,944 1,113,736 908,896 121,392 91,484 1,340,132 1,151,424 11,447,684

157 4 1 21 13

2,526 5 1 216 252

14,403,468 9,104 2,656 1,294,344 1,185,256

1 9 15 93

10 122 609 1,311

29,528 635,480 2,764,848 8,482,252

373 11 21 42 39 4 6 34 45 171

5,471 36 199 458 455 31 38 405 905 2,944

31,489,532 119,476 803,600 2,408,080 2,094,152 121,392 121,012 1,786,904 4,104,980 19,929,936

Specialized Food Wholesalers Puerto Rico, Total Aguadi l la Arecibo Bayamón Caguas Fajardo Guayama Mayagüez Ponce San Juan Total Puerto Rico, Total Aguadi l la Arecibo Bayamón Caguas Fajardo Guayama Mayagüez Ponce San Juan

Source: Commonwealth of Puerto Rico, Department of Labor, Employment Security Bureau 72

Table V-8 Percentage Distribution of Establishments, Employment, and Annual Payroll by Type of Food Wholesaler and by Region, 1973.

Regions

Establishment

Employment

Payroll

100.0 3.2 9.2 9.7 12.0 1.8 2.3 11.6 13.9 36.3

100.0 1.0 6.7 8.2 6.9 1.0 1.0 9.6 10.0 55.6

100.0 0.6 4.7 6.5 5.3 0.7 0.5 6.7 7.8 67.2

100.0 2.5 0.6 13.4 8.3

100.0 0.2 8.6 10.0

100.0 0.6 0.02 9.0 8.2

0.6 5.7 9.6 59.3

0.4 4.8 24.1 51.9

0.2 4.4 19.2 59.0

100.0 2.9 5.6 11.3 10.4 1.1 1.6 9.1 12.1 45.9

100.0 0.6 3.6 8.4 8.3 0.6 0.7 7.4 16.5 53.9

100.0 0.4 2.6 7.6 6.6 0.4 0.4 5.7 13.0 63.3

Groceries: General Line Puerto Rico, Total Aguadilla Arecibo Bayamón Caguas Fajardo Guayama Mayagüez Ponce San Juan Specialized Food Wholesalers Puerto Rico, Total Aguadilla Arecibo Bayamón Caguas Fajardo Guayama Mayagüez Ponce San Juan Total Puerto Rico, Total Aguadi lla Arecibo Bayamón Caguas Fajardo Guayama Mayagüez Ponce San Juan

Source: Commonwealth of Puerto Rico, Department of Labor, Employment Security Bureau.

73

1. Mechanization Mechanization refers to the physical distribution of the merchandise by power equipment. It is thus one of the basic components of modern warehousing. In a non-mechanized warehousing operation all work is performed by hand from trucks and trailers, and stacked on hand trucks; from the receiving dock they are taken to storage areas, where they are restacked. From the storage areas, they are selected directly. The selector after loading his hand truck moves it to the shipping area, where one or two men load the delivery trucks by hand. In the process of being modernized, food wholesaler warehouses change from a manual to a mechanized operation and improve their physical facilities. This improvement takes the form of: using trailervans for loading and unloading faci lities; using a palletized system with' fork lift trucks, since items can move more easily creating a great advantage in warehouse efficiency; designing aisles wide enough and ceilings high enough so as not to sacrifice power equipment speed; and designing warehouse construction so as to eliminate columns to facilitate better mobility of equipment. The Survey showed that: i. The San Juan Region accounts for 43 percent of the food wholesalers' facilities for loading and unloading from two to four trailervans. Twenty-five percent of the wholesalers of the San Juan region and seventy five percent of the food wholesalers of the rest of the island were using the streets for loading and unloading merchandise due to lack of adequate facilities. ii. Eighty-two point seven per cent of food wholesalers who are not using the palletized system, and are, therefore, storing merchandise on the floor, are located outside the San Juan region. Only 17.3 percent of the wholesalers storing merchandise on the floor were located in the San Juan region. Forty six percent of the food wholesalers using modern metallic racks are located in San Juan, and 69.1 percent of the food .wholesalers still using wood racks are located outside the San Juan region. iii. The San Juan region accounted for 66 percent of the food wholesalers with aisles of seven or more feet, while 78 percent of the food wholesalers in the rest of the island had aisles of less than seven feet. iv. Fifty per cent of the food wholesalers with ceilings over 18 feet or more were located in the San Juan region, while the rest of the island accounted for 74.5 percent of the food wholesalers with ceilings of less than 18 feet. v. Forty per cent of the buildings were constructed of reinforced steel with no columns while 25 percent of the buildings were constructed of zinc and wood or zinc and cement. The former were considered modern, while the latter were considered obsolete. The results are given in Table V-9. They show that approximately 40 percent of food wholesalers have modern warehousing operations; approximately 10 percent are in process of being modernized; and that approximately 50 percent are obsolete, by the criteria set up to judge the degree of modernization. 74

Table V-9 Degree of Modernization of Food Wholesalers. 1973 Physical Facilities Warehouse Buildings Constructed of

Use of Palletized System

Degree of Modernization

Ceilings

Modern

(18 feet or (7 feet or more) more)

Structural Steel)

(Using)

140a

149

149

Obsolete

In Process of Being Modernized

Aisles

134

196a

202

Zi nc-wood-93; Cement not adequate for use of power equipment-94) 187

37a

37

37

(Less than (Less than 7 feet) 18 feet)

Loading and Unloading Facilities

Percent of Total Wholesalers salers

(Capacity for more than 2 Trailer-vans 170

39.7

(No facilities) (Not Using) 187

166

50.3

37

37

9.9

a All such figures indicate number of wholesalers.

Source: Food Wholesalers Survey conducted by the Food Stamp Research Team in conjunction with the Department of Commerce, Commonwealth of Puerto Rico, March 1974.

is

2. Utilization of Capacity Annual sales per sq. ft. is an indicator of the degree of efficiency with which warehousing space is utilized, and hence an indirect indicator of the degree of modernization. The total food wholesale warehouse capacity on the island was 3,604,746 sq. ft. in 1973.1 Of this total, refrigeration space accounted for 8.07 percent and non-refrigerated space for 91.93 percent (see Table V-10). The survey had shown that wholesale food sales had amounted to $1,003,120,890 in 1973 (see Table V-4). Sales per sq. ft. were, therefore, $278.00. This is a global figure and requires qualification of the usage of space by size of sales. Table V-11 indicated that efficiency of the usage of space increases with the size of sales but at a decreasing rate. Wholesalers with annual sales of $50,000 or less had $24 of sales per sq, ft, while the space utilization of those with sales of $1 million or more rose to $314 per sq. ft. which is higher than the average figure for the island. Both figures are higher than those quoted for the United States where average sales per sq. ft. were $153.30 and sales for wholesalers with sales of $1-$10 million fluctuated between $128 and $215 per sq. ft. The wholesale storage capacity on the island can be considered sufficient for handling the present volume of business. But if the present trend of increase in sales volume continues, in all probability the food wholesalers of the island will be in a difficult position to adequately service the retailers and other marketing institutions in the future. Food sales at current prices are predicted to be in the neighborhood of $1,080,000,000 in 1974.2 With no change in actual storage capacity, average sales per sq. ft. would then increase to $305.00. The regional distribution of available warehousing space is given in Table V-10. The three urban centers of San Juan, Ponce, and Mayaguez account for 79.60 percent of the total space. Once again San Juan has the highest warehousing capacity (40 percent). With respect to its relevance to the first stage of the Food Stamp Program, the availability of warehousing space was also analyzed for the five municipalities of Aguada, Aguadilla, Añasco, Moca, and Rincón. Average sales per sq. ft. of the 20 wholesalers servicing the retailers, restaurants, etc. in those municipalities (see Table V-12) amount to $242.00. This figure has been taken as a base for measuring the present utilization of available space in those municipalities. The analysis revealed that the food wholesalers in these municipalities appear to have enough capacity for handling the present volume of sales. But there was no information on whether the wholesalers were servicing the retailers and other clients at the right time, with the right merchandise, the right price, and the right quality. In addition to the availability of regular warehousing facilities, two aspects deserve attention. One is the relocation of food wholesalers to new market facilities developed by the Commercial Development Company (CDC) of the Commonwealth of Puerto Rico; the other the warehousing facilities of importers.

t or 75,035,495 cub. ft, or 937,940 tons. 2 Projection made based on historical sales data. 76

Table V-10

Capacity of Wholesale Storage Facilities by Region, 1973 (in square feet)

Region

Dry Groceries

Refrigerated (coolers and freezers)

San Juan Aguadilla Arecibo Bayamón Caguas Fajardo Guayama Mayagüez Ponce Total (Percent)

1,309,238 79,466 156,936 193,057 204,227 33,132 29,848 598,433 709,437 3,313,774 (91.93)

117,047 2,907 13,627 21,852 13,370 1,091 2,780 46,040 72,258 290,972 (8.07)

Total Storage Capacity

Percent of Total

1,426,285 82,373 170,563 214,909 217,597 34,223 32,628 644,473 781,695 3,604,746 (100.00)

40.00 2.40 4.20 5.90 6.01 0.95 0.94 18.80 20.80 100.00

Source: Food Wholesalers Survey conducted by the Food Stamp Research Team in conjunction with the Departament of Commerce, Commonwealth of Puerto Rico, March 1974. Table V-11 Sales per square foot classified by Size of Sales, 1973 Annual Sales ($)

Total Sales ($)

Less than 50,000 50,000 to 99,999 100,000 to 249,999 250,000 to 499,999 500,000 to 999,999 1,000,000 or more Total

300,936 200,624 3,310,299 20,263,042 72,726,265 906,319,724 1,003,120,890

Total Sq. Ft.

12,617 5,047 33,164 53,562 512,595 2,887,761 3,604,746

Sales Per Sq. Ft. ($) 24 40 100 132 142 314 278

Source: Food Wholesalers Survey conducted by the Food Stamp Research Team in conjunction with the Department of Commerce, Commonwealth of Puerto Rico. March , 1974. Table V-12 Number of Food Wholesalers, Annual Sales, Warehouse Facilities, Stage 1 Food Stamp Program, by Municipalities, March 1974. Sales ($)

Warehouse Facilities (sq. ft.)

Sales per sq. ft. ($)

1,356,000 4,108,077 1,808,000 904,000 904,000 9,080,077

5,764 18,681 4,973 4,148 3,934 37,500

235 220 364 217 230 242

Food Wholesalers (Number) Municipality Aguada Aguadilla Añasco Moca Rincón Total

3 9 4 2 2 20

Source: Food Wholesalers Survey conducted by the Food Stamp Research Team in conjunction with the Department of Commerce, Commonwealth of Puerto Rico. March, 1974. 77

The CDC has constructed new market facilities in San Juan, Ponte, and Mayaguez with the aim of moving wholesale operations out of the historical zones of these cities. The process of relocating food wholesalers into the new facilities was initiated in 1966 in San Juan and in 1972 in Ponce and Mayagüez. By March, 1974, thirty food wholesalers were operating in the new facilities in San Juan, ten in Ponce and 22 in Mayaguez. Since 1964, the CDC has developed 39.27 percent of the total sq. ft. of storage space available. Table V-13 shows the total storage capacity the CDC has developed to the present.. Total occupied storage space is 903,681 sq. ft., (i. e. 65.70 percent) of the total space developed. There are still 485,746 sq. ft. of warehouse space vacant in the central markets of Ponce and Mayaguez and the process of relocation continues. E. Time Required to Market Food The time it takes for food to be delivered from the farm to the ultimate consumer is important in any study of food marketing, especially so if a donation program is to be substituted by a purchase program. Delivery time is part of the capacity of a food marketing system. Other things being equal, long flow-through time is associated with low capacity, including lack of capacity to adjust to sharp changes in consumer demand. It is also a determinant of marketing cost and the quality of food delivered to the consumer. The latter is particularly relevant in Puerto Rico which is characterized by a tropical climate and where most food must be imported. There are other special problems. Imported food must nearly always be brought in by ocean transportation, which is relatively slow, and then transferred to land transportation. Even when transfer to land is used in conjunction with trailer ship operations, the process adds a complicating element to food marketing in Puerto Rico. The determinants of flow-through time include the effectiveness of order processing and inventory control; the channels of distribution used; the availability of efficient retailers, wholesalers and trucking companies; and the general structure of the marketing system within Puerto Rico. Clearly dock strikes, trucker's strikes and other such critical and disturbing events will also affect flow through time. 1. Measurement Models The problem under analysis has two aspects: a. Given that inventories do exist in the system, as is ordinar1v the case, how long does food stay in inventory on the average? b. How long does it take to move food through the marketing system? It should be recognized that the flow-through time will vary according to the subsystem, channel of distribution, and according to the product under consideration. The basis components used in measurement for imported products is shown in Figure V-2. This includes order cycle time with external supply source, plus internal inventory and transport time. Moreover, as suggested in Figure V-2, the importing wholesalers may sell to other wholesalers or directly to retailers. Once goods arrive at the port they may thus move to the importer's warehouse or directly to his customers. Clearly the time required is a function of logistics as well as of distribution channels employed. 78

Table V-13

Storage Capacity Developed by the Commercial Development Corporation as of 1974, (in square feet)

Central Market Location

Dry Groceries Storage Number of Capacity Wholesalers

Refrigerated Storage Capacity

Total Storage Capacity

Occupied Storage Space

Vacant Space

Percent of Total

San Juan

30

541,973

22,678

564,651

564,651

Ponce

10

459,648

46,280

505,728

46,958

436,594

30.8

Mayaguez

22

314,496

31,680

346,176

292,072

49,152

3.5

Total

62

1,315,917

100,638

1,416,555

903,681

485,746

34.3

Source: Commonwealth of Puerto Rico, Department of Commerce, Commercial Development Corporation.

Figure V-2

Flow-through Time Components in the Physical Supply of Food 1

2

3

Order Cycle Time from External Source

Unload at Port, Storage at Port

Transfer to Wholesale Warehouse

/1//!/t/~

q

///////r

Inventory Time Wholesale Level

~ ~ ~ a

Unload, Store at Retail Level

7

~

Load, Transport to Retailer

6

á..///////

/,

10

Load, Transfer to Home

///////// '

Unload, Store at Household

////////, I

Unload, Store at Wholesale

Load, Transport to Regional Wholesaler

11

12

Prepare for Consumption

/////ii/r

Consumption

a. Inventory Time The time goods are held in inventory in most cases is the major component of internal time requirements, particularly in Puerto Rico, a small island which can be circled in one day by automobile or truck. Inventory time is a function of stock turnover, the order cycle, and of the delivery and order frequency. Ideally all records should be examined for each product distributed and at each level in the marketing structure in order to measure inventory time correctly. In view of time and financial restraints to carry out the study, however, this approach was found unfeasible. Instead the following estimation procedures were used. The procedure of estimating the stock turnover is indicated in Figure V-3. Let us take a simplified case where the wholesaler has a sales rate of 2,000 units per year and purchases four times per year, receiving four deliveries of 500 units per delivery. With constant sales rates in conjunction with the given purchase inventory control procedure, his average inventory would amount to 250 units and his stock turnover would be eight times per year as follows: stock turnover

Net sales Average Inventory 2.000 250 ='8

Given the stock turnover, an estimate can be made of the time which the average unit is held in inventory. In the present example this would be 45.5 days: 364 Time Held in Inventory Stock turnover 364

= 45.5

8 Figure V-3 Turnover

Relationship Between Average Time in Inventory and Inventory

Delivery No. 4

Delivery No. 2 5

Time in Inventory

.Average Inventory = 250

Days

81

364

The order cycle is defined as the time period between the placement of an order by the customer and the receipt of the good by the customer. It includes the time associated with preparing the order, transmittting it to the supplier, the preparation of the good for shipment by the supplier, arranging for transportation and the physical movement to the buyer's location. In many cases transportation time is a small part of the total period. The overlap between order cycle time and time in inventory is suggested in Figure V-4 which shows three inventory points in the channel (A, B, C). When A places an order with B, the order cycle time (1 plus 2) includes part of the inventory time at point B, namely that time period within which units are held in inventory subsequent to the time that the order is received by B from A and prior to the time that the units are shipped from B to A. For this reason the sum of order cycle time in the marketing channel, when added to inventory time, will not equal flow-through time. However, order cycles are crucial to marketing efficiency, service and the capacity of the system to adjust to sharp changes in consumer demand. Order cycle should be distinguished from order frequency and the latter should be distinguished from delivery frequency. It might take 30 days between the time the buyer places an order and the time he receives the goods (order cycle) but he might still place an order every seven days in which case order frequency would amount to seven days. Moreover, even though the buyer orders every week he will not necessarily receive one delivery from the supplier every week, since order cycle time with a given supplier is not necessarily constant. Moreover, in certain cases the supplier accumulates orders to the point where economical shipment is feasible. As shown in Table V-14 a particular wholesaler places an order on January 1 and the goods are received on January 20, thus giving an order cycle of 19 days. He then places another order on January 15 and a third order on February 2, both orders being filled by the supplier on February 15. For the series of orders placed between January 1 and April 5, the mean time between the placement of orders (order frequency) is 15.7 days, the mean time between the receipt of shipments (delivery frequency) is 25.5 days and the mean time between the placement of orders and their receipt (order cycle) is 22.3 days. The frequency with which goods are ordered and delivered is very pertinent to inventory time. Holding sales rates constant, infrequent delivery means that goods must be purchased in large quantities per order and stored for long periods. Frequent delivery by suppliers on the other hand enables small quantity purchases, small inventories and thus short inventory holding time. Order and delivery frequency are closely correlated with inventóry turnover, the basic measure used here for estimating the time various products are held in inventory. b. Flow-'through Time: Channel Structure An understanding of channel and logistics structure is particularly important to flow-through time requirements. It should be recognized that channels vary by subsystem and thus we would expect that flow-through time will also vary by subsystem. One subsystem is the importing wholesale-retail sector. Figure V-5 pictures, on a very broad basis, the importing of food products ready for consumption. It indicates a concentration-dispersion process whereby food is 82

Table V-14 Illustration of the Relationship Between Order Cycle, Time Between the Placement of Orders, and Time Between Receipt of Deliveries.

Date of Order

Time Between Placement of Orders (days)

Jan. 1

Date Goods Received

Time Between Receipt of Shipments (days)

Jan 20 14

Jan. 15

Order Cycle

19 s

26

Feb. 15

31

18 Feb. 2

Feb. 15

13 23

20 Mar. 10

Feb. 22 Mar. 10

16 31

16 April 10

Mar. 20

31 20

10 April 30

21

April 30

25

16 April 5

25.5

15.7

22.3

X

Figure V-4 — Overlap Between Order Cycle Time and Time in Inventory

83

brought in from the "outside world" converging at the port, and then moved to a wholesale storage point or perhaps direct to retailers. In certain cases the importing wholesalers sell to "regional wholesalers" who in turn sell to retailers. The dispersion process from the port involves distribution to about15,000 retail food stores who in turn sell to consumers. Figure V-6 is a variation of Figure V-5, placing emphasis upon the various inventory nodal points involved in moving goods from the port to the consumer under alternative channel arrangements. Both are over simplifacations, however, since they do not show all institutions involved in the marketing channel such as freight forwarders, transport companies, market research firms, etc. Figure V-7 is another way of depicting the channel structure. The 1967 U.S. Census of Business(1) shows that the sales of all food wholesalers in Puerto Rico amounted to $515,200,000. Of this total $282,600,000 are shown as being sold directly to retail food stores and $120,900,000 to other wholesalers. Excluding consideration of commission sales, this means about 55 percent of all food wholesale. Restaurant sales to consumers are depicted as about $91,000,000. Another subsystem for which, flow-through time requirements are pertinent is for the marketing of locally produced farm products, which will surely have a slower flow-through time than for the importing wholesaler retail subsystem. Figure V-8 shows the concentration-dispersion process involved, based on existing knowledge. "Camioneros" (trucking wholesalers) collect agricultural products from farms, selling and delivering to market plazas, processors and various kinds of retail stores. Market plazas serve both a wholesale and a retail function, selling to other retailers and to consumers.

in

2. Results of the Survey The research to measure the time element in the food marketing system of Puerto Rico concentrated mainly on the subsystem which is believed to have the longest flow-through time, namely the importing wholesale-retail subsystem. The justification of the emphasis lies the fact that this long flow channel, or a variation of it, is responsible for the delivery of a majority of the food products in Puerto Rico The results, therefore, refer to this subsystem, although reference is also made to the alternatives. Since short time requirements are associated with a greater marketing capacity than are long time requirements, placing emphasis upon the channel with long flow-through time is a conservative approach. However, if the time taken by this channel is found to be satisfactory to handle the possible shock associated with the introduction of food stamps then, other things being equal, the other channels should be capable of doing so as well.

t U.S. Department of Commerce. Business Census, Puerto Rico 1967. Washington, D.C. Government Printing Office. Dec. 1970.

84

Figure V-5

Structure of the Marketing System, Imported Food Products Ready for Consumption.

Figure V-6

Flow Through Time Alternatives

Transport, Order Cycle

Processors Restaurants

Order Cycle (External Source)

T" me at Port 1-6 Days

Importing Wholesale Inventory Time

Regional Wholesale Inventory Time

Importer to Retailer Transport

Port to Retailer Shipments (Short Flow•through Time)

85

Retail Inventory Time

Consu mer

Figure V-7 — Estimated Channel Flows for Food and Related Products (in millions of dollars)

1 Other is primarily commission sales.

2 Total sales of restaurants to consumers.

Source: U.S. Bureau of the Census, Census of Business, Puerto Rico, 1967 Washington, D.C.: Government Printing Office, 1970.

a. "Regional" Wholesalers Table V-15 shows the estimated time various food products are held in stock by "regional" wholesalers defined as any wholesaler who purchases all (100 percent) of the food handled from sources of supply located within Puerto Rico. The weighted mean time for all product categories covered in the Survey was about 58 days, or almost two months. This varied, however, from 7.58 days in the case of fresh fruit to 112 days in the case of frozen meat and 164 days (5.5 months) in the case of "all other processed food". It should be noted that the turnover rates, and thus the time in inventory estimates are broken down according to the products which were believed to be important in the diet of the Puerto Rican families who are likely to be Food Stamp recipients (i.e. the market basket consumed by the poor). Grouping other food products and the cost of purchasing them under an "all other" category tends therefore, to distort the mean stock turnover and mean time held in inventory.

b. Importing Wholesalers Table V-16 compares the time various food products are held in inventory by importing wholesalers and regional wholesalers. In the Survey the percentage of total purchases made from external supply sources by importing wholesalers ranged from 46 percent to 88 percent of total purchases. But in order to estimate flow-through time for those products purchased from external supply sources, and then moving through long channels within Puerto Rico, we had to separate inventory time on imported products from inventory time on locally purchased goods. This is done in Table V-17. The magnitudes of the variables needed to determine this time period are also shown in the table. Actually, stock turnover should be calculated by dividing cost of goods sold by average inventory at cost, but because of time limitations and the difficulty of examining wholesaler records we had to use the cost of purchases during the year as estimated by the wholesalers interviewed. Moreover, the "average inventory" shown throughout the analysis is simply the inventory size at the time of the Survey and as estimated by the wholesalers. In view of the research procedures used, the results should be regarded as rough estimates. Use of cost of purchases as opposed to cost of goods can result in either an over estimate or an underestimate of stock turnover. The same is true with respect to the use of inventory held at the time of interview as opposed to average inventory during the year. In Table V-17 the weighted mean has been computed using as weights the average yearly cost of purchase of the product. It shows that the average time all imported food products were held in inventory by importing wholesalers was 18.58 days or slightly more than one half of a month. This period varied by product, however. Fresh meat and seafood are held only five or six days on the average while frozen meat is held about three weeks on the average, and "all other processed food products" 112 days (or somewhat less than four months). Another qualification with regard to data should be noted: the Wholesale Survey secured the inventory in stock by each food product, but it did not differentiate between the inventory of imported goods versus goods purchased 87

Produced Food Figure V-8 — Structure of the Marketing System (Locally Products)

~

~ ~ ~ Colmados

Farms

Camioneros (Trucking Wholesalers)

Market Plazas

x x x x x x x x

Supermarkets

x x

Roadside Stands

x x

(Wholesal -Retail(

x x

x x x x X

Consumers

Table V-15 Estimated Time Food Products are Held in Inventory by Regional Wholesalers, Classified by Product.

Product

Mean Average Inventory valued at cost ($)

Inventory Turnover

Estimated Time in Inventory (In Days)

175,000 42,000 283,000 98,000 85,000 81,000 17,000 9,000 48,000 67,000 31,000 89,000 55,000 56,000

20,000 9,000 87,000 10,000 5,000 6,000 1,000 1,000 1,000 7,000 4,000 7,000 3,000 15,000

8.75 4.67 3.25 9.80 17.00 13.50 17.00 9.00 48.00 9.57 7.75 12.71 18.33 3.73

41.55 77.78 111.66 37.14 21.41 26.96 21.46 40.44 7.58 38.00 46.91 28.62 19.85 97.33

195,000 131,000 70,000 245,000 487,000

88,000 28,000 10,000 25,000 25,000

2.22 4.68 7.00 9.80 19.48

163.96 77.78 52.00 37.14 18.69

$2,264,000

$352,000

10.61a

57.97a

Average Yearly Cost of Purchase Per Wholesaler ($)

All Meat Products Fresh Meat Frozen Meats Processed Meat Fish and Sea Food Fresh Vegetables Starchy Vegetables Legumes Fresh Fruits Milk & Derivatives Eggs Fats & Oils Processed Cereals Processed Vegetables Other Processed Products Rice Beans Onions & Garlic Non-Food Products

a

Total

Weighted mean (weighted by cost of purchases for each products)

Source: Food Wholesalers Survey, March 1974.

89

Table V.16 Time Food Products are Held in Inventory, Classified by Type of Wholesaler and by Product

Product Category

Regional Wholesaler Time in Inventory Stock ( Days) turnover

Importing Wholesaler Time in Inventory Stock turnover ( Days)

All Meat Products Fresh Meat Frozen Meats Processed Meat Fish and Sea Food Fresh Vegetables Starchy Vegetables Legumes Fresh Fruits Milk & Derivatives Eggs Fats & Oils Processed Cereals Processed Vegetables Other Processed Food Products Rice Beans Onions and Garlic Non Food Product

8.75 4.67 3.25 9.80 17.00 13.50 17.00 9.00 48.00 9.57 7.75 12.71 18.33 3.73

41.55 77.78 111.66 37.14 21.41 26.96 21.41 40.44 7.58 38.00 46.91 28.62 19.85 97.33

63.38 80.33 22.48 53.04 80.81 65.10 N.A. N.A. N.A. 26.10 N.A. 63.40 923.00 23.32

5.74 4.53 16.19 6.86 4.50 5.59 N.A. N.A. N.A. 13.95 N.A. 5.74 .40 15.61

2.22 4.68 7.00 9.80 19.48

163.96 77.78 52.00 37.14 18.69

3.91 22.42 23.92 53.14 17.77

92.86 16.24 15.22 6.85 20.47

Meana

10.61

57.97

73.55

17.24

a Mean for regional wholesalers weighted by cost of purchase of regional wholesalers. Mean for importing wholesalers weighted by cost of purchases of importing wholesalers. N.A. Not available.

Source: Food Wholesaler Survey, March 1974.

90

Table V-17

Estimated Time Imported Food Products are Held in Inventory by the Importing Wholesalers, Classified by Product Average Yearly Cost of Purchase per Wholesaler ($)

Product

co

Average Inventory Valued at Cost ($)

Inventory Turnover

Estimated Time in Inventory (In Days)

977,000 3,250,000 841,000 2,054,000 1,117,000 2,415,000 2,677,000 630,000 N.D.A 635,000 1,218,000 1,345,000 164,000 216,000 876,000.

19,000 49,000 45,000 46,000 17,000 26,000 123,000 12,000 N.A. 33,000 374,000 72,000 8,000 5,000 59,000

51.42 66.33 18.69 44.65 65.71 54.42 21.76 52.50 N.A. 19.24 3.26 18.68 20.50 43.20 14.85

7.08 5.49 19.47 8.15 5.54 6.69 16.73 6.94 N.A. 18.92 111.66 19.49 17.76 8.43 24.50

$17,415,000

$888,000

39.22a

18.61a

All Meat Products Fresh Meat Frozen Meat Processed Meat Fish & Seafod Fresh Vegetables Milk & Derivatives Fats and Oils Processed Cereals Processed Vegetables Other Processed Food Rice Beans Onions & Garlic Non Food Products

Total N.A.

a

Not available.

Weighted Mean

Source: Food Wholesalers Survey, March 1974.

from local supply sources. Thus the inventory of imported goods was estimated by the following procedures: I. =

(1.20)

(I) (CI ) CI + CL l i = inventory of imported goods Ii = inventory as revealed by the Wholesale Survey CI =

the cost of imported goods purchased

CL _

the cost of the goods purchased from local supply sources to importing wholesalers

Where

The constant 1.20 was used under the assumption that imported goods inventory will tend to be larger per dollar of sales because of longer cycle periods. CI -- (CI t C L ) ranged from 46 percent to 88 percent, as pointed out previously. c. Total Flow-through Time The total time period involved in moving food through the entire wholesale marketing system, classified by product, and with imported goods moving through long channels, can be estimated as follows: F = O + Tw1 + TW 2 + t + 1.40 (Tw) = O

where

364 + 364 + t + 1.40 (Tw) S~ S2

F

= total flow-through time in days

O

= average order cycle time in dealing with external supply sources

T, 1 = average time the imported product is held in inventory by the importing wholesaler TW2

average time the product is held in inventory by regional wholesaler

t

= internal transport time

S1

= stock turnover of imported food products purchased by importing wholesalers

S2

stock turnover of regional wholesaler

TW

average time goods are held in inventory by all food wholesalers

Since a retail survey could not be conducted, some other method had to be used for estimating time in inventory at the retail level. The expression 1.40 (TW ) in the above equations was the method used. It involves the following two assumptions: i. The relative stock turnover rates at the retail level, by product, are about the same as the relative rates at the wholesale level (for example, meat products turn over twice as fast as do vegetables at the wholesale level, they also turn over about twice as fast at the retail level). ii. Retail stock turnover rates in general are 40 percent faster than at the wholesale level. The 40 percent adjustment is conservative in that available evidence 92

indicates that the retail turnover is about 65 percent faster than at wholesale (conservative in the sense that it yields a longer time in inventory estimate than would a 65 percent adjustment). Table V-18 shows the stock turnover for all wholesalers in the survey, the estimated stock turnover at the retail level, and the estimated time in inventory at the retail level employing the above model and assumptions. The weighted mean average time in inventory is 14.4 days, varing from about four days in the case of fresh meat to 78 days in the case of "all other processed food". This information, used in conjunction with the wholesale data (and transport time plus order cycle time as revealed in the wholesale survey), gives the total flow-through time and is indicated in Table V-19 by product and activity. The weighted mean flow- through time for long distribution channels is 118.9 days, (or about four months), varying from 51 days in the case of fresh vegetables to 379 days (or over one year) in the case of "all other processed food". Table V-20 then compares the time taken by the long channel as compared to: (1) the importing wholesale direct to retail channel and (2) the dock-direct to retail channel. The weighted mean time for the direct channel is 39.4, for the importing wholesale retail channel, 57.6 days, and for the long channel which involves two wholesale levels, it is 118.9 days. Estimates can also be made from the data regarding the marketing of locally produced farm products. Assuming that these products move from the farm by way of trucking wholesalers to regional wholesalers and then to retailers, the mean of the various time components can be estimated as follows: Time Component Camioneros (truck wholesalers) Collection and Delivery

Time in Days 2.0

Average Regional Wholesale Inventory Time

57.9

Transport to Retailer

1.0

Average Retail Inventory Time

14.4

Total Flow-through Time

75.3

This is considerably shorter than imported products moving through two wholesale levels, but longer than imported products moving from the importing wholesalers direct to the retailer. Of course, flow-through time in the marketing of locally produced farm products will vary by products. It should be pointed out that one major channel has not been taken into account in the above analysis, namely the transfer of food products from the external source (or local farm) to processors and then to the consumer. Lack of research resources and time prevented a scientific analysis of this problem.

93

Table V-18 Estimated Time Food Products are Held in Inventory at the Retail Level, Classified by Product (in days).

Products

Stock Turnover All Food Wholesalers

Estimated Stock Turnover All Retailers

Estimated Time in Inventory at Retail Level

All Meat Products Fresh Meat Frozen Meat Processed Meat Fish and Seafood Fresh Vegetables Starchy Vegetables Fresh Fruit Milk & Derivatives Fats & Oils Processed Cereals Processed Vegetables Other Processed Food Rice Beans Onions & Garlic Non Food

28.17 68.55 8.95 43.51 45.01 55.81 17.00 48.00 23.54 7.59 18.33 8.72

39.44 95.97 12.53 61.00 63.01 78.13 23.80 67.20 32.96 52.63 25.66 12.21

9.23 3.79 29.08 5.97 5.78 4.66 15.30 5.42 11.05 6.92 14.19 29.79

3.36 10.33 8.85 11.30 8.77

4.70 14.46 12.39 15.82 26.28

77.45 25.18 29.36 23.01 13.85

Weighted Mean

33.07

46.30

t Weighted by cost of purchase of products imported by food wholesalers.

Source: Food Wholesalers Survey, March 1974

94

14.44 1

Table V-19 Average Number of Days Taken to Move Food Products Through the Marketing System, Classified by Product and Activity (Long Distribution Channels for Imported Food)

Product

Order Cycle Time

All Meat Products Fresh Meat Frozen Meat Processed Meat Fish & Seafood Fresh Vegetables Starchy Vegetables Legumes Fresh Fruit Milk & Derivatives Eggs Fats & Oils Processed Cereals Processed Vegetables Other Processed Food Rice Beans Onions & Garlic Non-Food Weighted Mean

Inventory Time Inventory Inventory Total FlowInternal Time Wholesalers, Through Transport Time Regional Imported Time (Retailers) Time Wholesalers Products

14 12 18 26 37 11 N.A. N.A. N.A. 27 N.A. 33 N.A. 37

7.08 5.49 19.47 8.15 5.54 6.69 N.A. N.A. N.A. 16.73 N.A. 6.94 N.A. 18.92

41.55 77.78 111.66 37.14 21.41 26.96 21.41 40.44 7.58 38.00 46.91 28.62 19.85 97.33

2 2 2 2 2 2 2 2 2 2 2 2 2 2

9.23 3.79 29.03 5.97 5.78 4.66 15.30 N.A. 5.42 11.05 N.A. 6.92 14.19 29.79

73.86 101.06 180.16 79.26 71.73 51.31 N.A. N.A. N.A. 94.78 N.A. 77.48 N.A. 185.04

24 20 28 38 35

111.66 19.46 17.76 8.43 24.50

163.96 77.78 52.00 37.14 18.69

2 2 2 2 2

77.45 25.18 29.36 23.01 13.85

379.07 144.45 129.12 108.58 94.04

22.64

18.61

57.97

2

14.44

118.90

N. A, Not available

Source: Food Wholesalers Survey, March 1974.

95

Table V-20 — Flow-Through Time Classified by Product and Channel (Average Number of Days)

Product

Flow-through Time Flow-through Time Flow-through .Time (long Channels, Importing Wholesaler Dock to Retailers Imported Food)

All Meat Products Fresh Meat Frozen Meat Processed Meat Fish & Seafood Fresh Vegetables Starchy Vegetables Legumes Fresh Fruits Milk & Derivatives Eggs Fats & Oils Processed Cereals Processed Vegetables Other Processed Food Rice Beans Onions & Garlic Non-Food

73.86 101.06 80.16 79.26 71.73 51.31 N.A. N.A. N.A. 94.78 N.A. 77.48 N.A. 185.04 379.07 144.45 129.12 108.58 94.04

31.31 22.28 67.50 41.12 49.32 23.35 N.A. N.A. N.A. 55.78 N.A. 47.86 N.A. 86.71 214.11 65.67 76.12 70.44 74.35

24.23 16.79 48.03 32.97 43.78 16.66 N.A. N.A. N.A. 39.05 N.A. 40.92 N.A. 67.79 102.45 46.18 58.36 62.01 49.85

Weighted Mean

118.90

57.64

39.38

N.A. Not available.

Source: Food Wholesalers Survey, March 1974.

96

F. Ability to Increase Capacity in the Short Run Marketing capacity is a broad and complex concept, almost impossible to measure with much precision. It can at best be defined as the efficient satisfaction of the consumer's food desires, including his nutritional requirements. This means the delivery of the right kind of food, according to the consumer's time and place needs, in the correct quantity and quality under sanitary conditions and with desired services surrounding the sale. The extent to which this capacity can be increased depends upon whether currently excess capacity exists, and whether new resources can be utilized with great ease. Excess capacity is the difference between the current loading capability of the marketing system and the actual volume of food distribution, i.e. between capacity and marketing load. This difference varies by subsystem within the overall system, by geographic region and by product. The chain subsystem has one capacity to distribute, the importing wholesale retail sector another, and the segments involved in marketing locally produced farm products a third. Clearly, all three subsystems are interrelated. The absolute capability to distribute at a given time with given storage space, given number of employees, and given degree of mechanization depends on how efficiently these resources are used. With passage of time resources can be added, some rather quickly, some over a considerable period of time. Thus capacity would expand with the utilization of additional resources, within as well as without the system. Obviously, at a given time, capacity will depend not only on the number and size of physical facilities, but also on the methods of storage and communication, and technical know-how and efficiency of the personnel; and the capacity of one subsystem will be constrained by the capacities of others. Since the overall purpose of the study is to evaluate the impact of the Food Stamp Program on the marketing system, what interests us is not only the "current degree of excess capacity" but also the capability of the marketing system to expand quickly enough to handle the said impact. 1. The Model of Measurement Two critical variables that determine the ability of the wholesale food marketing system are storage capacity or the ability to expand the amount carried in inventory; and the ability to move goods through the marketing system. If, for example, the demand for food were to increase 50 percent , this increase might be satisfied in either or both of two ways: a. Retailers could buy150 percent more per order from wholesalers and the latter could buy 50 percent more per order from producers. This would result in a larger quantity of goods carried in retail and wholesale inventory, which in turn might require an increase in storage space. b. Retailers could hold order quantity constant and buy with increased frequency from wholesalers, the latter following a similar practice in dealing with producers. This would involve an increase in the rate at which food flows through the marketing channel and might necessitate no increase in inventory holding requirements or storage space. Three critical elements can be distinguished in the model: current monthly utilization; the currently available excess; and the amount by which current storage space can be increased in the short run. The formula by which to estimate the volume which could be distributed with a given possibility of storage space increase in the short run and assuming 97

no increase in delivery frequency can be expressed as: t D, (S+P) O3 = I Where

D3

= the volume of distribution = presently utilized storage capacity

S

= currently available storage capacity

P

= the amount by which total storage space can be increased over the short run.

The volume of goods which might be distributed, given the current excess storage capacity, and holding order quantity constant can be expressed as fol Iows: 2 D2

= 01 ~. I

1 The formula is arrived at as follows: short run capacity can be written as Cs =SP = I +E-4-P, where I +E =S; I, S, and P are as defined in text. E is the current excess storage capacity. Assuming a proportionate relationship between the amount of storage space and the quantity of goods which can be distributed, we can write I _ S S+ P D1 D2 O3 Where D1 =current volume being distributed, D2 =the volume which could be distributed if all current storage were utilized and delivery frequency were held constant. O3 = the volume which could be distributed in view of the increase in storage space possible in the short run, assuming no increase in delivery frequency. Thus: I

_ S+P

D1

D3

D3_ D t

and

(S+P) I

2 The formula is arrived at as follows: I D1

_

I+ E D2

O2.1 = D1 (I+E) O2 _ Di (1-E) I

Í

98

The volume of goods that could be distributed if delivery frequency were increased and no excess storage capacity existed is given by: t D2

=

Dt . d2 di

Where

dt

= present frequency of delivery (number of deliveries per year)

d2

= feasible delivery frequency

Combining the above equations we can secure a general model which reflects both storage capacity and delivery frequency, first utilizing the current degree excess storage capacity as a base: D (li-E) Di Di (d2) 2

_—

t

I With short run excess storage capacity as a base the model is as follows: dt

D3 `

_ Dt

(d2) t

D1

(S+P) I

dt

Thus the "degree of current excess capacity" to distribute (E~J is: Ec

) Dt _ Dt I — d(d2 +

((1-1-E)

— 2D1

1

And the "degree of current short run excess capacity" (Es) is: Es

Dt

(S-j-P)

Dt

(d2 )

=

+

2 01 I

dt

2. The Data from the Survey Table V-21 indicates the total storage space, classified by region and kind of storage for all food wholesalers in the sample. Table V-22 is the extrapolation to the universe, using as weight the ratio of the number of food wholesalers in each region to the number of food wholesalers in the sample for each region. An additional weighting was necessary to take account of the three kinds of storage,

t The formula is arrived at as follows: assuming a proportionate relationship between the capacity to distribute and the increase in delivery frequency which is feasible: d~

—

Dt

d2

then,

02 Dt

D2 .

dt

=D 1 . d2 ;

.

D2 _ dt

99

d2

namely the ratio of the number of wholesalers with a particular kind of storage (freezers for example) to the total number of food wholesalers in the samples who responded. Table V-24 is derived from Tables V22 and V-23 by subtracting from the figures of Table V-22 those of Table V-23. Table V-24, therefore gives excess storage capacity by region . Table V-25 shows the amount by which storage space could be increased in a period of three months. The same weighting process as above was used. The summary is presented in Table V-26, which shows "short run excess storage capacity" as a sum of "current excess" and "feasible expansion over a three month period" (percentage figures are presented in Table V-27). Actual and feasible delivery frequency, classified by product is shown in Table V-28. The frequencies are expressed as the number of days between the receipt of shipments (actual and feasible), and in terms of minimum, maximum, and mean. A weighted mean for all product categories has been calculated. The weights are the cost of purchases for each product category. The weighted mean for estimated feasible delivery frequency is 6.65 days.

Table V-21 Storage Space of the Sampled Food Wholesalers by Region and Type of Storage (in cubic feet)

Region

Dry Goods

Freezers

Coolers

Aguadilla Arecibo Bayamón Caguas Fajardo Guayama Mayagüez Ponce San Juan Total

701,406 1,181,552 1,380,288 3,237,505 768,230 150,340 2,509,755 1,916,946 10,253,694 22,099,716

16,936 53,900 121,240 60,384 1,664 45,810 10,566 292,422 2,480,072 3,083,494

30,294 9,250 103,236 46,018 5,392 13,565 71,080 39,627 994,752 1,313,214

Source: Food Wholesalers Survey, March 1974

100

Total 748,636 1,244,702 1,605,264 3,343,902 775,285 209,715 2,591,401 2,248,995 13,728,518 26,495,424

Table V-22 Storage Space of all Food Wholesalers by Region and Type of Storage (in cubic feet).

Region

Dry Goods

Freezers

Coolers

Aguadilla Arecibo Bayamón Caguas Fajardo Guayama Mayaguez Ponce San Juan Total

855,715 1,547,833 4,831,008 6,636,885 1,536,460 180,408 5,697,144 4,792,365 40,809,702 66,887,520

18,389 44,484 213,045 77,986 3,328 54,972 14,391 526,360 6,415,946 7,368,901

24,762 7,634 209,569 69,809 10,784 16,278 85,516 49,534 3,048,517 3,522,403

Total

898,866 1,599,951 5,253,622 6,784,680 1,550,572 251,658 5,797,051 5,368,259 50,274,165 77,778,824

Source: Food Wholesalers Survey, March 1974

Table V-23 — Storage space Utilized by Food Wholesalers Classified by Region and Type of Storage (in cubic feet)

Region

Dry Goods

Freezers

Coolers

Aguadilla Arecibo Bayamón Caguas Fajardo Guayama Mayagüez Ponce San Juan Total

812,929 1,408,528 4,251,287 3,517,755 1,521,095 174,996 5,070,458 3,929,739 34,280,150 54,966,937

16,366 4,004 149,132 60,829 3,295 54,422 13,240 484,251 4,747,800 5,533,339

23,524 229 148,794 53,753 10,676 15,464 81,240 44,085 2,164,447 2,542,212

Source: Food Wholesalers Survey, March 1974.

101

Total 852,819 1,412,761 4,549,213 3,632,337 1,535,066 244,882 5,164,938 4,458,075 41,192,397 63,042,488

Table V-24 Current Excess Storage Capacity of All Food Wholesalers, Classified by Region and Type of Storage (in cubic feet)

Region

Dry Goods

Freezers

Coolers

Total

Aguadilla Arecibo Bayamón Caguas Fajardo Guayama Mayagüez Ponce San Juan Total

42,786 139,305 579,721 3,119,130 15,365 5,412 626,686 862,626 6,529,552 11,920,583

2,023 40,480 63,913 17,157 33 550 1,151 42,109 1,668,146 1,835,562

1,238 7,405 60,775 16,056 108 814 4,276 5,449 884,070 980,191

46,042 187,190 704,409 3,152,343 15,506 6,776 632,113 910,184 9,081,768 14,736,336

Source: Food Wholesalers Survey, March 1974

Table V-25 Estimated Short-run Storage Space Expansion Feasibility of Food Wholesalers, Classified by Region and Type of Storage (in cubic feet)

Region

Dry Goods

Freezers

Coolers

Total

Aguadilla Arecibo Bayamón Caguas Fajardo Guayama Mayaguez Ponce San Juan Total

50,829 442,061 778,758 1,231,142 384,115 54,122 1,358,769 912,466 6,243,884 11,456,146

1,912 1,601 73,501 2,948 832 6,597 5,785 105,325 469,006 667,507

842 92 38,819 2,639 2,696 1,953 36,096 6,935 329,240 419,312

53,583 443,754 891,078 1,236,729 387,643 62,672 1,400,650 1,024,726 7,042,130 12,542,965

Source: Food Wholesalers Survey, March 1974.

102

Table V-26 Summary of Wholesale Food Storage Space and Excess Capacity, Classified by Region (in cubic feet)

Region

Total Storage Space

Storage Space Utilized

Current Excess Capacity

Expansion Feasibility in Short run

Short Run Excess Capacityt

Aguadilla Arecibo Bayamón Caguas Fajardo Guayama Mayaguez Ponce San Juan Total

898,866 1,599,951 5,253,622 6,784,680 1,550,572 251,658 5,797,051 5,368,259 50,274,165 77,778,824

852,819 1,412,761 4,549,213 3,632,337 1,535,066 244,882 5,164,938 4,458,075 41,192,397 63,042,488

46,047 187,190 704,409 3,152,343 15,506 6,776 632,113 910,184 9,031,768 14,736,336

53,583 443,754 891,078 1,236,729 387,643 62,672 1,400,650 1,024,726 7,042,130 12,542,965

99,630 630,944 1,595,487 4,389,072 403,149 69,448 2,032,763 1,934,910 16,123,898 27,279,301

t "Short run excess capacity", as defined in the text of this study is current excess capacity expansion feasible in the short run.

Source: Food Wholesalers Survey, March 1974.

Table V-27 Estimated Wholesale Food Storage and Excess Storage Capacity, Classified by Region (percent)

Region

Storage Space Utilized

Current Excess Storage Capacity1

Aguadilla Arecibo Bayamón Caguas Fajardo Guayama Mayaguez Ponce San Juan

94.88 88.30 86.59 53.54 99.00 97.00 89.10 83.05 81.94

5.12 11.70 13.41 46.46 1.00 2.69 10.90 16.95 18.06

1

Expansion Feasible in the Short Run1 5.96 27.74 16.96 18.23 25.00 24.90 24.16 19.09 14.01

Short Run Excess Storage Capacity2 11.08 39.44 30.37 64.69 26.00 27.59 35.06 36.04 32.07

Using total storage space as a base. Thus 5.12 percent for Aguadilla means that of all excess food storage space of food wholesalers in Puerto Rico, 5.12 percent is in Aguadilla.

2 Sum of current excess and expansion feasibility.

Source: Food Wholesalers Survey, March 1974.

Table V-28 Estimated Actual and Feasible Delivery Frequency for Food Wholesalers, Classified by Product (in days)

All Meat Products Fresh Meat Frozen Meat Processed Meat Fish & Sea Food Fresh Vegetables Starchy Vegetables Legumes Fresh Fruit Milk & Derivatives Eggs Fats & Oils Processed Cereals Processed Vegetables Other Processed Food Rice Beans Onion & Garlic Non Food Products Arithmetic Mean Weighted Mean N.A.

Actual Delivery Frequency

Estimated Feasible Delivery

Minimum Maximum Mean 6.6 30 1 30 10.8 5 6.3 1 30 10.9 1 30 12.1 1 90 30 8.1 1 10.3 30 1 30 11.2 3 7.5 30 1 11.3 1 100 9.3 100 1 10.3 1 60 12.9 33 1 14.6 60 1 35 12.0 1 30 9.2 1 12.4 1 70 14.6 N.A. 1 18.7 1 180 11.01

Minimum 1 2 1 1 1 1 1 2 1 N.A. N.A. 1 1 1 1 1 1 N.A. 1

--

Product

10.10

Not available.

Source: Food Wholesalers Survey, March 1974

105

Maximum 15 15 15 15 60 15 30 5 15 N.A. N.A. 60 30 30 30 30 30 N.A. 90

Mean 5.5 7.2 4.4 7.2 8.8 4.2 6.1 3.6 4.8 N.A. N.A. 7.6 10.0 12.5 9.4 6.2 7.4 N.A. 13.3 7.39 6.65

3. Results The results of the application of the general model are given in Tables V-29 and V-30. Table V-29 indicates the current capacity to distribute with no expansion in storage capacity and by carrying delivery frequency to its feasible limit. It also shows current excess capacity to distribute as well as the latter expressed as a proportion of total capacity. There is a regional variation in this ratio from 52.9 percent .to 138.7 percent. The weighted mean for all regions is 75.2 percent (the weights beiñg the percentages of wholesales in each region) Table V-30 shows the estimates of the "short run capacity to distribute", valued in 1973 dollars, as well as the short run excess, and the latter as a proportion of the former. This ratio varied from 63.6 percent to 172.7 percent The weighted mean for all regions is 95.2 percent . This suggests that food wholesalers for Puerto Rico as a whole have the capacity to increase the quantity of food distributed on the average by 95 percent if delivery frequency is carried to its estimated feasible limit, all excess storage capacity is utilized, and storage space is expanded in the short run by the amount food wholesalers believe is feasible. If we assume that the data of Tables V-28 and V-29 represent a maximum capacity to distribute; that storage space utilization rates are underestimated by 50 percent; that food wholesalers overestimated the ability to increase storage space by 30 percent ; and that no increase in delivery frequency is actually feasible, our estimates would be on the conservative side. These assumptions can be justified on a number of counts. Utilization of space at peak periods of demand per month may be more pertinent to the capacity to distribute than is average utilization per month, but it was the latter which was used in the wholesale survey. Moreover, an individual wholesaler might be able to expand his storage space 20 percent , for example, in a period of three months, as he estimates, but if all wholesalers tried to expand simultaneously there is reason to believe that they could not achieve what they think to be reasonable (when judged independently of other attempts). Interviewing errors, sampling errors and other misjudgments by wholesalers might also cause inaccurate estimates. The assumption that delivery frequency cannot (or will not) be increased also has some justification in terms of arriving at a more conservative. estimate. Wholesalers may not actually know what their suppliers can and will do by way of delivery; in addition wholesalers may not in fact be willing to incur the cost necessary to secure more frequent or faster delivery (use of air transport or loss of quantity discounts associated with many small orders for example). Given the assumption above, maximum and minimum feasible percentage increase in distribution volume is estimated in Table V-31 under two alternatives: (1) expansion of storage space and (2) no expansion in storage space. The first alternative indicates a possibility of increase in goods distribution by 24.7 percent , the percentage being 6.7 percent in Aguadilla and 68.9 percent in Caguas. The second more conservative alternative suggests that the food wholesaling system in general might be able (or willing) to increase the real volume of goods distributed by only 14 per cent during the forthcoming year. This too varies greatly by region amounting to 52 percent in Caguas, only 1.66 106

Table V-29 Food Wholesaler Distribution Capacity with no Expansion in Storage Facilities, Classified by Region

Region

Aguadilla Arecibo Bayamón Caguas Fajardo Guayama Mayagüez Ponce San Juan Total

$

Current Sales Volume

6,486,000 42,201,000 60,477,000 55,134,040 3,330,700 7,496,400 59,873,520 54,595,680 713, 526, 550 $1,003,120,890

Current Excess Total Distribution Capacity to DisCapacity tribute (Valued (Valued in 1973 in 1973 Dollars) Dollars)

3,715,121 27,485,360 40,739,662 76,451,744 1,761,601 4,096,538 38,389,847 39,470,616 527,488,016 $754,898,066

a Weighted mean (weighted by current sales volume) Source: Food Wholesalers Survey, March 1974

10,201,121 69,686,360 101,216,662 131,585,784 5,092,301 11,592,938 98,263,367 94,066,296 1, 241,014, 566 $1,758,018,956

Current Excess Capacity as a Percent of Current Sales

57.29 65.13 67.36 138.67 52.89 54.65 64.12 72.30 73.93 75.25a

Table V-30 Food Wholesaler Distribution with Feasible Expansion in Storage Capacity, Classified by Region (in dollars)

Region

Current Sales Volume

Short Run Total Distribution Excess Capacity Capacity Valued in to Distribute 1973 Dollars

Short Run Excess as a Percent of Current Sales

Aguadilla Arecibo Bayamón Caguas Fajardo Guayama Mayaguez Ponce San Juan

6,486,000 42,201,000 60,477,000 55,134,040 3,330,700 7,496,400 59,873,520 54,595,680 713,526,550

4,122,640 40,740,866 52,585,607 95,223,596 2,602,687 6,015,072 54,626,604 52,019,892 649,470,399

10,608,640 82,941,866 113,062,607 150,357,636 5,933,387 13,511,472 114,500,124 106,615, 572 1,362,996,949

63.56 96.64 86.95 172.71 78.14 80.24 91.24 95.28 91 .02

Total

$1,003,120,890

$954,479,501

$1,957,600,391

95.15 a

a Weighted mean (weighted by current sales volume) Source: Food Wholesalers Survey, March 1974

Table V-31 Maximum-Minimum Estimates of Food Wholesaler Capacity to Increase Volume in a Year, Classified by Region, March 1974

Region Aguadilla Arecibo Bayamón Caguas Fajardo Guayama Mayaguez Ponce San Juan Total

Percentage Increase in Distribution Volume Feasible With Increase in Storage Capacity With Existing Storage Capacity Maximum Minimum Maximum Minimum 63.56 6.66 57.28 3.24 96.54 25.46 65.13 7.95 86.95 19.99 67.36 9.29 172.71 68.87 138.67 52.07 78.14 0.61 14.97 52.89 80.24 16.17 54.65 1.66 91.24 22.44 64.12 7.34 95.28 24.74 72.30 12.25 91.02 22.31 73.93 13.23 14.03a 95.15 24.66 75.25

t As pointed out in the text the minimum estimates assume that utilization rates are underestimated by 50 percent, that the ability to increase storage space over the short run is over estimated by 30 percent, and that no increase in delivery frequency is feasible.

a Weighted mean. Source: Food Wholesalers Survey, March 1974,

percent in Guayama and only .61 percent in Fajardo. It should be added that the data refer only to the private sector of wholesale food marketing.

G. Domestic Agricultural Marketing Research on the capacity to distribute domestically produced agricultural products has been initiated with data provided by the Department of Agriculture of the Commonwealth of Puerto Rico as well as other sources. Certain basic elements important to measuring excess capacity which have to do primarily with the present distribution load should be noted. Available evidence indicates that a not inconsiderable portion of domestic production sold in Puerto Rico is distributed by way of wholesale-retail central markets (market plazas). Information has been obtained on volume of sales, classified by the seven largest market plazas in Puerto Rico and by type of product (Table V-32). Approximately $15.5 million was sold through these seven market plazas in 1973. Assuming 50 percent of these sales were made to outside retailers, and that the latter appl ied a markup of 20 percent, total retail sales would be approximately $17.45 million. Whi le this is a small part of total food consumption in Puerto Rico, a significant percentage of consumers buying through the Plazas, or in retail units served by them are likely to be Food Stamp Program. 109

H. The Trucking Wholesaler A major part of the agricultural output in Puerto Rico which is locally consumed is collected by "camioneros" (trucking wholesalers) who in turn sell to central markets, retailers, and other buyers. There were a total of 42,547 trucking wholesaler arrivals at the seven principal market plazas in 1973 (Table V-33). The average monthly arrivals were 3,546. A degree of seasonality is indicated with July, August, and September constituting the high arrival months. Some indications of excess capacity is provided by such data. While we do not at present know the extent to which the number of arrivals could be increased over the short run at peak supply periods, a 35 percent increase appears possible on the average and a 66 percent increase during the low delivery months. This suggests that excess capacity does exist in the trucking wholesaler segment of the marketing system, varying by month of the year. I. Projections for 1975: Employment and Sales Information on the number of food wholesalers reporting to the Employment Security Bureau since 1967 was considered for projecting the number of employees for 1975 (see Table V-8). Statistics indicate a sharp decline in the number of employees from 1972 to 1973. This decline is probably connected with two large wholesalers; J.R. Nieves & Co., who closed operations, and UNI-COOP, who converted its operations to a distribution center. It is also probably related to the number of food wholesalers who are changing from a traditional system to a cash and carry operation. Wholesalers who use the cash and carry system restrict their services; they do not have to send salesmen to retailers to solicit orders or offer credit and delivery. By restricting these services they require less employees and they lower their operational cost. Due to the steady increase of the Federal minimum wage in this industry, it is expected that the number of cash and carry wholesalers will keep growing in coming years. The Department of Commerce reported that during the period 1970-1973 it had promoted fifteen cash and carry food wholesalers. In addition, some wholesalers had managerial and financial problems. It is also quite likely that some wholesalers did not report to the ESB. It is nevertheless predicted that by 1975 the number of food wholesalers will rise to approximately 410; most of them, in all likelihood, will be of the cash-and-carry type. The annual sales per employee is important in determining the overall productivity of each employee of any food wholesaler. The analysis of eighty-six wholesalers that responded to this question, shows that average annual sales per employee was $164,642.00. However, for the entire population average annual sales per employee was $187,008 in 1973. This average was superior to the United States sales per employee ratio of 1970. In the United States annual sales per employee of food wholesalers with annual sales ranging from $1 to $10 million fluctuated between $140,000.00 and $170,000.00. The analysis also found a one-to-one ratio between administrative and non-administrative employees (i.e. dispatchers, selectors). The average number of employees was 14; this gave seven administrative and seven non-administrative employees. Sales were predicted for 1975 at current and constant prices for Puerto Rico and the metropolitan areas of San Juan, Ponce, and Mayaguez. Average percentage of growth on sales was obtained from the Census of Business for the years 1954, 1958, 1963, 1967. This information was used for forecasting 110

Table V-32 — Total Sales, Seven Largest Market Plazas by Type of Product, 1973 (in dollars)

Product

Río Piedras

Ponce

Bayamón

Mayaguez

Starchy Vegetables

2,336,000

1,416,000

1,668,000

769,000

Grains & Cereals

165,000

148,000

62,000

Fruits

1,056,000

693,000

Vegetables

1,794,000

Chickens & Eggs

Arecibo

Santurce

Total

662,000

659,000

253,000

7,763,000

125,000

9,000

44,000

690,000

272,000

236,000

92,000

327,000

3,366,000

661,000

293,000

575,000

109,000

162,000

12,000

3,606,000

23,000

47,000

94,000

6,000

5,000

23,000

68,000

266,000

Other

32,000

13,000

16,000

24,000

1,000

6,000

2,000

20,000

Total

5,406,000

2,978,000

2,823,000

1,771,000

1,022,000

986,000

662,000

15,648,000

Source: Commonwealth of Puerto Rico, Department of Agriculture

Caguas

553,000

Table V-33 — Number of Trucking Wholesaler Arrivals at the Principal Market Plazas, 1973

Month

ry

Río Piedras

Santurce

Ponce

Mayagüez

Arecibo

Bayamón

Caguas

Total

July August September October

571 836 755 746

71 92 104 126

785 938 992 877

661 784 575 411

671 924 777 642

837 1,061 981 914

137 169 144 148

3,733 4,804 4,328 3,864

November December January February

574 629 749 491

55 37 84 102

716 882 602 779

366 573 512 434

442 497 553 485

674 722 740 638

69 91 88 86

2,896 3,431 3,328 3,015

March April May June

682 542 564 758

64 63 47 54

830 818 762 833

493 296 429 407

688 683 616 772

722 423 513 670

105 102 74 138

3,584 2,927 3,005 3,632

Total Monthly Average

7,897

899

9,814

5,941

7,750

8,895

1,351

42,547

658

75

818

495

646

741

113

3,546

Source: Commonwealth of Puerto Rico, Department of Agriculture.

Figure V-9 Sales Forecast for Food Products at the Wholesale Level for Puerto Rico and the Metropolitan Areas of San Juan, Ponce, and Mayagüez, 1954-1972 and Projection for 1975

$

1,050,000 .

(1) Puerto Rico, Current Prices (2) San Juan, Current Prices (3) Puerto Rico, Constant Prices (4) San Juan, Constant Prices (5) Ponce, Current Prices (6) Ponce, Constant Prices (7) Mayaguez, Current Prices (8) Mayaguez, Constant Prices

(1)

900,000 .

750,000 .

(2)

(3) 600,000 .

450,000.... — — —— ' ------

— —~

(4)

~

300,000,.

150,000..

(5) (6) — -- --•—

0 1954

~ 1958

►

1963

———

. (7)

) 1967

1972

1975

Source: U.S. Bureau of the Census, Census of Business, (Puerto Rico) for the years 1954, 1958, 1963, and 1967. Washington, D.C.: Government Printing Office, and Commonwealth of Puerto Rico, Department of Commerce. 113

Figure V-101

Employment and the Number of Food Wholesalers, 1967-1913, and Projection for 1975.

Employment 6,000 —

Historical

5,000

Assuming Food Stamp — — — _— Impact of 15 Percent Assuming Food Stamp — — _ Impact of 10 Percent

4,000

_ _

—

I

I 389 _

Number of Food Wholesalers 398 396

410 385

373

352 326

1967

1968

1969

1970

1971

1972

1973

1975

Source: Commonwealth of Puerto Rico, Department of Labor, Employment Security Bureau.

114

purposes. The average annual percentage sales growth was 6 per cent. Figure V-9 shows that total food wholesaler sales in Puerto Rico will probably increase to approximately $1,080,000,000 in 1974. In the San Juan Metropolitan area, sales will increase to approximately $825,000,000. In the Ponce and Mayaguez metropolitan areas sales will increase to approximately $150,000,000 and $75,000,000 respectively. Sales at current prices were deflated to constant prices to show the price change effect throughout the years. Figure V-10 charts the historical series of the number of food wholesalers and their employment. It also indicates the projections for 1975. It is expected that the number of food wholesalers will rise to410 by 1975. With a 15 percent impact on sales that might be caused by the Food Stamp Program, employment could reach a level of about 6,500, the 1972 employment level.

115

Chapter VI

IMPACT OF THE FOOD STAMP PROGRAM

A.Number of Participants and Size of Benefits The phases of the implementation of the Food Stamp Program in Puerto Rico were explained in Chapter II. The Program was initiated partially beginning with specified municipalities on July 1, 1974. The full impact of the Program would not be felt, therefore, until the year 1975. and only partially so in 1974. To measure the impact of the Program on the economy globally as well as by families and income levels, it was necessary to estimate the number of participants and the benefits to be paid to them for 1974 as well as 1975. The estimations were made for three years: 1970, 1974 and 1975. First, the number of participant families and the benefits that would accrue to them were estimated by income levels during 1970 with the patterns of income distribution prevalent in 1969 (see Tables VI-1 and VI-2). This gave an estimate of what the size and structure of the program would have been, had it been implemented in 1970. Second, the income distribution pattern for 1975 was projected by the Planning Board of Puerto Rico, and the 1974 pattern was interpolated using the Census information for 1970 and the projected pattern for 1975. The number of participants and the size of benefits were then estimated for these two years. An adjustment had to be made for the underlying concept of family income while making the estimations. The size distributions of income are based on gross family income, while the income concept used to determine the eligibility for the Food Stamp Program is a net one. To bring the two on a comparable basis, 500 families were selected at random from all families effectively participating in the Program in November 1974, and ratios were established between gross and net incomes for different family sizes, and the gross family incomes were adjusted accordingly. The number of eligible families by level of income and family size were determined thereafter. Total benefits (or the nominal value)for eligible families were determined as the product of the total number of families in each family size and their corresponding annual quota. The net benefit was then calculated as the difference between the nominal value and purchase requirements by income level and family size. 116

Table VI-1 —Number of Families by Level of Income and Family Size, 1969.

V

Level of Income Total ($) 0 1,000 164,398 86,819 2,000 1,000 85,473 2,000 3,000 67,731 4,000 3,000 48,550 5,000 4,000 77,325 5,000 7,500 42,333 7,500 - 10,000 36,403 10,000 - 15,000 15,000 - or more 23,073 Total

632,105

1 43,595 9,078 5,702 3,475 1,701 1,771 737 784 511

2 33,783 16,783 13,661 9,365 6,573 10,101 5,334 4,381 3,081

3 22,287 14,028 14,050 11,771 8,941 14,481 7,764 6,028 3,841

4 19,764 12,865 15,054 13,274 10,152 17,388 10,103 8,640 5,402

Family Size 6 14,310 10,233 10,264 7,196 12,273 8,199 10,761 7,086 7,864 5,332 13,586 8,461 7,730 4,532 7,062 4,362 4,499 2,924

7

8

9

10 or more

9,428 6,626 7,705 6,196 3,842 5,793 3,175 2,869 1,725

3,775 3,170 2,900 1,940 1,421 2,130 1,107 893 456

2,691 2,461 1,860 1,520 933 1,362 719 534 291

4,532 4,348 4,069 2,343 1,791 2,252 1,132 850 343

67,354

103,062

103,191

112,642

88,349

47,359

17,792

12,371

21,660

5

58,325

Source: U.S. Bureau of the Census; Census of Population: 1970. General Social and Economic Characteristics, Final. Report PC (1) —053 Puerto Rico, U.S. Government Printing Office, Washington, DC, 1972.

Table VI-2

Percentage Distribution of Number of Families by Level of Income and Family Size, 1969

Family Size Level of Income ($) O 1,000 2,000 3,000 4,000 5,000 7,500 10,000 15,000 -

1,000 2,000 3,000 4,000 5,000 7,500 10,000 15,000 or more

Tota! 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

1 26.5 10.5 6.7 5.1 3.5 2.3 1.7 2.2 2.2

2 20.6 19.3 16.0 13.8 13.5 13.1 12.6 12.0 13.3

3 13.6 16.2 16.4 17.4 18.4 18.7 18.3 16.6 16.6

4 12.0 14.8 17.6 19.6 20.9 22.5 23.9 23.7 23.4

5

6

7

8

9

8.7 11.8 14.3 15.9 16.2 17.6 18.3 19.4 19.5

6.2 8.3 9.6 10.5 11.0 10.9 10.7 12.0 12.7

5.7 7.6 9.0 9.1 7.9 7.5 7.5 7.9 7.5

2.3 3.7 3.4 2.9 2.9 2.8 2.6 2.4 2.0

1.6 2.8 2.2 2.2 2.0 1.7 1.7 1.5 1.3

Source: U.S. Bureau of the Census; Census of Population: 1970. General Social andEconomic Characteristics, Final Report PC (1) - C53 Puerto Rico. U.S. Government Printing Office, Washington, D.C., 1972.

10 or more 2.8 5.0 4.8 3.5 3.7 2.9 2.7 2.3 1.5

Tables VI-3, VI-4, and VI-5, give the estimated benefits of the Food Stamp Program for fiscal years 1970, 1974, and 1975, if all eligible families were to participate in the Program. The quota and purchase requirements for 1970 and 1974 are based on the scale effective as of July 1, 1974. The estimates for 1975 take into consideration the revised scale effective on January 1, 1975, for the second half of the fiscal year. According to Table VI-3 there would have been 519,863 families eligible for the Program in 1970, if the Program were in operation at the time. These represent 82.2 percent of all families. The yearly quota would have amounted to $914.7 million with yearly purchase requirements of $276.1 million. This would have amounted to a net benefit of $1,369 per family and of $337 per person, on the basis of weighted average, and $1,223 and $284 respectively on the basis of simple average.1 The greatest percentage of eligible families is found either in the smallest size of the family (one member) or in those families with six or more members. The indication is that poverty is positively correlated with the size of the family and that one-member tamiliés largely consist of those receiving welfare payments or social assistance. Clearly, therefore, the net benefit received per dollar paid varies in the same direction. Over the years the pattern remains the same, but with a decline in the number of eligible families and consequently of the total net benefits. Calculations for 1974 indicate that there would be 521,497 eligible families with total annual net benefits of $532.9 million an average benefit of $1,233 per family and $308 per person, on the basis of weighted average and $1,022 and $248 respectively on the basis of simple average. The estimates for 1975 are 498,739 eligible families with a net benefit of $1,225 per family and $306 per person on the basis of weighted average and $993 and $245 respectively on the basis of simple average. As previously mentioned, the calculations of Tabies Vl-3, VI-4, and VI-5 are based on the assumption that all families eligible under the Program will actually participate in it. This may turn out to be an unlikely assumption. since with a given family size the benefit per person decreases with increasing income, and with a given income the bonus (or net benefit) per family increases with family size, a lower participation rate might be expected among higher income families as well as small size families. In other words, large families with low income are likely to have a higher participation rate than small families with high income. Therefore, estimates were made for the same three years with the added assumption that, on the average,75 percent of the families would effectively take advantage of the Program. The 75 percent participation rate is justified from the experience derived from the implementation of the Food Stamp Program. There are indications to the effect that since the inception of the Program on July 1, 1974, on the average, 75 percent of the eligible families have participated in it. The new

t In reality actual net benefit may be somewhere in between simple and weighted average.

119

Table VI-3

Annual Benefits under the Food Stamp Program, Assuming 100 Percent Participation, Classified by Family Size, 197Oa Family Size

FACTOR

N C

Number of eligible families Number of eligible persons Yearly quota ($000) Yearly purchase requirements ($000) Total net benefits ($000) Net benefit per family 1$) Net benefit per person ($1 Net benefit per family 1$) Net benefit per person ($1 Net benefit received per dollar 1$) paid as purchase requirements Total number of families Eligible families as percent of total families

1

2

3

5

6

7

8

3

519,863 2,238,978 914,707 279,062 635,645 1,369e 337° 1,223` 284v

59,141 59,141 31,227 6,349 24,878 421 421

74,587 149,174 71,604 19,654 51,950 697 348

76,864 230,592 105,150 35,511 69,639 906 302

89,877 359,508 155,308 57,113 98,195 1,093 273

74,407 372,035 153,576 54,049 99,527 1,338 268

51,141 306,846 120,283 38,462 81,821 1,600 267

43,620 305,340 116,204 31,820 84,384 1,935 276

16,958 135,664 50,060 12,332 37,728 2,225 278

12,002 108,018 38,310 8,630 29,680 2,473 275

21,266 212,660 72,985 15,142 57,843 2,720 272

2.28 632,105

3.92 67,354

2.64 103,062

1.96 103,191

1.72 112,642

1.84 88,349

2.13 58,325

2.65 47,359

3.06 17,792

3.44 12,371

3.82 21,660

82.2

87.8

72.4

74.5

79.8

84.2

87.7

92.1

95.3

97.1

98.2

Total

4

a The quota and purchase requirements correspond to the scale effective July 1, 1974. b Weighted average for all eligible families and persons on the Food Stamp Program.

Simple average for all eligible families and persons (total net benefit divided by total eligible families and persons). In reality, actual net benefit may be somewhere in between simple and weighted average. Note; The distribution of income for the fiscal year 197O is assumed to have remained the same as that of the census year of 1969.

10 or more

Table VI-4 Annual Benefits under the Food Stamp Program, Assuming 100 Percent Participation, Classified by Family Size, 19i4

Family Size FACTOR

N

Number of eligible families Number of eligible persons Yearly quota ($000) Yearly purchase requirements ($000) Total net benefits ($000) Net benefits per family ($1 Net benefits per person 1$) Net benefit per family ($) Net benefit per person 1$) Net benefit received per ($1 dollar paid as purchase requirements Total number of families Eligible families as percent of total families

Total

1

2

5

6

7

8

9

521,497 2,150,794 888,956 356,023 532.933 1,233b 308b 1,022` 248`

53,449 53,449 28,221 7,781 20,440 382 382

84,554 169,108 81,172 28,490 52,682 623 312

84,089 252,267 115,034 50,510 64,524 767 256

101,603 406,412 175,570 82,423 93,147 917 229

76,545 382,725 157,989 70,216 87,773 1,147 229

42,873 257,238 100,837 40,397 60,440 1,410 235

38,800 271,600 103,363 36,878 66,485 1,714 245

14,033 112,264 41,425 14,285 27,140 1,934 242

9,779 88,011 31,215 9,890 21,325 2,181 242

15,772 157,720 54,130 15,153 38,977 2,471 247

1.50 707,382

2.63 65,541

1.85 144,260

1.28 128,624

1.13 139,765

1.25 92,269

1.50 52,237

1.80 43,247

1.90 15,073

2.16 10,254

2.57 16,112

73.7

81.6

58.6

65.4

72.7

83.0

82.1

89.7

93.1

95.4

97.9

3

4

a The quota and purchase requirements correspond to the scale effective July 1, 1974 b Weighted average for all families and persons eligible for the Food Stamp Program. o Simple average for all eligible families and persons (total net benefit divided by total eligible families and persons). In reality, actual net benefit per family and per person may be somewhere in between simple and weighted average,

10 or more

Annual Benefits under the Food Stamp Program, Assuming Size, 1975a

FACTOR Number of eligible families Number of eligible persons Yearly quota ($000) Yearly purchase requirements ($000) Total net benefits ($000) Net benefit per family 1$) Netbenefit per person 1$) Netbenefit per family 1$) Netbenefit per person ($1 Netbenefit received per 1$) dollar paid as purchase requirements Total number of families Eligible families as percent of total families

7 37,975 265,825 102,527

8

9

10 or more

91,534 274,602 123,534

Family Size 6 5 51,896 41,417 259,480 248,502 98,694 108,982

13,403 107,224 40,228

9,306 83,754 30,273

14,128 141,280 49,307

32,073 50,472 575 288

57,794 65,740 718 239

88,986 95,407 913 228

41,359 67,623 1,303 261

41,582 57,112 1,379 230

40,227 62,300 1,641 234

14,929 25,299 1,888 236

10,347 19,926 2,141 238

14,957 34,350 2,431 243

2.13 65,088

1.55 154,554

1.14 134,982

1.07 (146,545

1.64 93,248

1.37 50,715

1.55 42,217

1.69 14,392

1.93 9,727

2.30 14,725

71.9

56.8

67.8

71.3

55.7

81.7

90.0

93.1

95.7

96.0

2

3

46,799 46,799 25,272

87,750 175,500 83,027

350,809 495,428 1,225 b 306 b 993 C 245 C

8,073 17,199 367 367

1.41 726,193 68.7

498,739 2,021,090 846,237

Percent Participation, Classified by Family

4 104,531 418,124 184,393

1

Total

loo

Table VI-5

a For the first semester the original scale effective July 1, 1974, and for the second semester the revised scale effective January 1, 1975, was utilized. b Weighted average for all eligible families and persons on the Food Stamp Program. c Simple average for all eligible families and persons (total net benefit divided by total eligible families and persons). In reality, actual net benefit may be somewhere in between simple and weighted average.

estimates are given in Tables VI-6, VI-7, and VI-8.1 Accordingly, a global net bonus of $442.3 million is expected in 1975. The number of eligible families, yearly purchase requirements, and total annual net benefits are reduced; but the net benefit per family is higher in all the three years ($1,618 in 1970; $1,475 in 1974, and $1,473 in 1975 on the basis of weighted average and $1,430, $1,212, and $1,182 respectively on the basis of simple average); so is the net benefit received per capita ($397 in 1970, $367 in 1974 and 1975 on the basis of weighted average, and $332, $294 and $292 respectively on the basis of simple average). B. Impact of the Food Stamp Program Benefits 1. The Demand Analysis We have seen that the nominal value of the Food Stamp Program, when it is implemented island-wide will be approximately $640.6 million assuming a participation rate of 75 percent by eligible families. The corresponding purchase requirements are $198.3 million and total net benefits $442.3 million. To arrive at a more specific estimate of the impact of the Program we have calculated the total increase in demand in major food categories that could possibly have occurred in the absence of the Program. This was contrasted with the increase in demand that could be expected to arise from the implementation of the Program, assuming a participation rate of 75 percent. The estimates of demand for food products were obtained via regression analysis using information provided by the Department of Agriculture and by the Planning Board of the Commonwealth of Puerto Rico for the years 1954 to 1973. The regression equations relating quantities consumed of individual food items and personal disposable income in constant dollars yielded the income elasticities for 21 food categories, which represent all food items consumed in Puerto Rico except sugar.2 The elasticity coefficients are given in the first column of Table VI-9. The projected growth of demand for 1975 in the absence of the Program is given in the second column of the same table for individual categories of food. These rates of growth were arrived at by the use of the equation.3 =ptEi .Y D¡ where

Di

= rate of growth of demand of the ith category

p

= rate of growth of population

Ei

= income elasticity of demand for the ith category

Y

rate of growth of per capita income

is

1 In arriving at the new estimates first the total number of eligible families in every family size was reduced by 25 percent. Then in each family size group the number of families in the upper income groups with their corresponding incomes was cumulatively eliminated until 25 percent of the total families in that family size were accounted For; the rest were left intact. Consequently not every family size group has the same weighting for the same income level. Undoubtedly this an arbitrary procedure; but in the absence of any information that would indicate the likely rate of participation by different size families with different income levels, any other assumption would not have yielded a greater degree of reliability. 2 The components of each major food category are given in Appendix Table A-8. 3 See John W. Mellor, The Economics of Agricultural Development. Ithaca: Cornell Univ. Press, 1966, p.75. 123

Table VI-6 Annual Benefits under the Food Stamp Program, Assuming 75 Percent Participation, Classified by Family Size, 1970 Family Size FACTOR Number of el igible families Number of eligible persons Yearly quota ($000) Yearly purchase requirements ($000) Total net benefits ($000) Net benefit per family ($) Net benefit per person ($) Net benefit per family ($) Net benefit per person (5) Net benefit received per dollar (5) paid as purchase requirements Total number of families Eligible families as percent of total families

Total

1

2

3

4

5

6

7

8

9

10 or more

389,899 1,679,248 686,033 128,326 557,707 1,618a 397 1,430' 332'

44,356 44,356 23,420 2,019 21,401 482 482

55,940 11,880 53,702 8,235 45,467 813 406

57,648 172,944 78,862 16,697 62,165 1,078 359

67,408 269,632 116,481 27,280 88,661 1,315 329

55,805 279,025 115,182 26,126 89,056 1,596 319

38,356 230,136 90,213 17,893 72,230 1,886 314

32,715 229,005 87,153 14,246 72,907 2,229 318

12,719 101,752 37,546 5,286 32,260 2,536 317

9,002 81,018 28,734 3,625 25,109 2,789 310

15,950 159,500 54,740 6,379 48,361 3,032 303

4.35 632,105

10.60 67,354

5.52 103,062

3.72 103,191

3.19 112,642

3.41 88,349

4.04 58,325

5.12 47,359

6.10 17,792

6.93 12,371

7.58 21,660

61.7

65.9

54.3

55.9

59.8

63.2

65.8

69.1

71.5

72.8

73.6

8 Weighted average for all eligible families and persons on the Food Stamp Program.

b Simple average for all eligible families and persons (total net benefit divided by total eligible families and persons. In rejlity, actual net benefit may be somewhere in between simple and weighted average.

Table VI-7

Annual Benefits under the Food Stamp Program, Assuming 75 Percent Participation, Classified by Family Size, 1974 Family Size

FACTOR

N

Number of eligible families Number of eligible persons Yearly quota ($000) Yearly purchase requirements ($000) Total net benefits ($000) Net benefit per family 1$) Net benefit per person (5) Net benefit per family ($1 Net benefit per person (5) Net benefit received per (5) dollar paid as purchase requirements Total number of families Eligible families as percent of total families

1

2

3

4

5

6

7

8

9

10 or more

391,123 1,613,097 666,717 192,815 473,902 1,475a 367a 1,2126 2946

40,087 40,087 21,166 2,849 18,317 457 457

63,415 126,830 60,878 14,433 46,445 732 366

63,067 189,201 86,276 27,832 58,444 927 309

76,202 304,808 131,677 46,497 85,180 1,118 279

57,409 287,045 118,492 39,869 78,623 1,370 274

32,155 192,930 75,629 21,840 53,789 1,673 279

29,100 203,700 77,522 19,345 58,177 1,999 286

10,525 84,200 31,070 7,575 23,495 2,232 279

7,334 66,006 23,410 2,135 18,275 2,492 277

11,829 118,290 40,597 7,440 33,157 2,803 280

2.46 707,382

6.43 65,541

3.22 144,260

2.10 128,624

1.83 139,765

1.97 92,269

2.46 52,237

3.01 43,247

3.10 15,073

3.56 10,254

4.46 16,112

55.3

61.2

44.0

49.0

54.5

62.2

61.6

67.3

69.8

71.5

73.4

Total

a Weighted average for all eligible families and persons on the Food Stamp Program. In b Simple average for all eligible families and persons (total net benefit divided by total eligible families and persons).

reality, actual net benefit may be somewhere in between simple and weighted average.

Table VI-8

Annual Benefits Under the Food Stamp Program, Assuming 75 Percent Rate of Participation, Classified by Family Size, 1975a

Family Size Total

FACTOR

T

Number of eligible families Number of eligible persons Yearly quota ($000) Yearly purchase requirements ($000) Total net benefits ($000) Net benefit per family (5) Net benefit per person (Sl Net benefit per family (5) Net benefit per person (5) Net benefit received per (5) dollar paid as purchase requirements Total number of families Eligible families as percent of total families

1

2

3

5

6

7

8

9

10 or more

374,056 1,515,829 640,626 198,309 442,317 1,473 v 367° 1,182` 292`

35,099 35,099 18,954 3,472 15,482 441 441

65,813 131,626 63,970 18,605 45,365 689 345

68,651 205,953 95,562 34,935 60,627 883 294

78,398 313,592 138,294 51,481 86,813 1,107 277

38,922 94,610 81,736 21,880 59,856 1,538 308

31,063 186,378 74,551 23,575 50,976 1,641 274

28,481 199,367 77,240 22,771 54,469 1,912 273

10,053 80,424 30,280 8,378 21,902 2,179 272

6,980 62,820 22,783 5,688 17,095 2,499 272

10,596 105,960 37,256 7,524 29,732 2,806 281

2.23 726,193

4.46 65,088

2.44 154,554

1.74 134,982

1.69 146,545

2.74 93,248

2.16 50,715

2.39 42,217

2.61 14,392

3.01 9,727

3.95 14,725

51.51

53.93

42.58

50.86

53.50

41.74

61.25

67.46

69.85

71.76

71.96

4

a For the first semester the original scale effective July 1, 1974, and for the second semester the revised scale effective January 1, 1975, was utilized. b Weighted average for all eligible families and persons on the Food Stamp Program, C Simple

average for all eligible families and persons (total net benefit dividid by total eligible families and persons). In reality, actual net benefit may be somewhere in between and weighted average.

t Although other meats registered the highest rise in demand (69.8 percent), in reality this

an insignificant item in the consumer's food budget. 127

is

in

The rates assume not only the absence of the Food Stamp Program, but that the economy will not experience a downturn as it is likely to do. We shall return to this point subsequently. Accordingly, the normal rate of growth for all food categories was estimated to be 5.25 percent in 1975, with demand for some food categories expected to rise by rates three times as high (e.g. poultry). Column 3 of Table VI-9 gives the estimate of the growth expected to occur from the implementation of the Food Stamp Program. Note that the figure is the same for all categories. This is so, because this rate was estimated for global demand on the assumption that the part of the disposable personal income spent on food prior to the implementation of the Food Stamp Program would not all be spent on food, but would be partly allocated toward purchases of other items. The portion of the released disposable personal income spent on food was assumed to be sixty percent. The overall rate of growth of 19.10 obtained thereby was then added to the rates of growth of demand for the different food categories. The results are given in Column 4 of Table VI-J. The overall rate of growth of demand increased substantially to 24.35. Naturally the demand for poultry which was estimated to grow at a high rate in the absence of the Program indicated a very high rate of growth of 34.88 with the introduction of the Program. Undoubtedly, the calculations make it clear that the Program will have a very large impact on demand, assuming normal growth of the economy. The figures in Column 4 represent rates of growth in demand which do not account for the differences income elasticities of the individual categories of food and their deviation from the mean income elasticity. If the growth rates are adjusted for this deviation,the impact of the Food Stamp Program is reduced for some items and increased for the others. The results are given in Column 5. Figures in this column, added to the rates of normal demand growth, yield the rates of growth in demand given in Column 6.The greatest increases in demand are estimated to occur in poultry (57.02), entrails (48.95), fresh and frozen fish and seafood (45.54), dried and frozen fruits (39.64), beef and veal (38.70), eggs (33.12), and milk (27.84).1 These are sizeable increases, indeed, and raise the legitimate question whether supply (domestic and/or foreign) will be in a position to meet such increases without inflationary implications. The pessimistic outlook on the economy introduces certain changes into the picture. The expectations are that personal disposable: income in current dollars might decline by 1.01 percent in the fiscal year 1975 and then rise by 5.01 percent in 1976. If so the overall normal growth of demand for food products would amount to 2.42 percent (instead of 5.25) and 5.28 percent respectively. If the overall impact of the Program is assumed to remain at 19.10 percent, growth of demand with the Program would amount to 21.52 percent and 24.38, respectively. Naturally with a decline in personal income, the demand for those food products which have a high income elasticity would increase at a lower rate than with a normal growth in income. Such is the case for poultryand entrails, for example. If the analysis is carried out with variables in constant

Table VI-9 Growth of Demand for Food Products, Assuming 75 Percent Participation, 1975

Food Product Starchy Vegetables Cereals Green Vegetables Legumes Spices Soups Fresh Fruits Processed Fruits Dried & Frozen Fruits Beef & Veal Pork Poultry Other Meats Entrails Fish and Seafood (fresh and frozen) Fish and Seafood (processed) Milk Milk Products Eggs Fats & Oils Coffee, Chocolate, Tea, and others Weighted average3

Normal Growth Income Elasticity of of Demand Demand -.09 .73 .31 3.93 .59 6.18 .01 1.54 1.06 9.94 .82 8.02 .26 3.53 .76 7.53

Not adjusted for Adjusted for elasticity elasticity Growth due Growth due to1 Food Total tot Total Stamps Growth Food Stamps Growth 19.10 19.83 2.07 -1.34 19.10 23.03 7.14 11.07 19.10 25.28 13.59 19.77 20.64 19.10 .23 1.77 29.04 24.42 19.10 34.36 19.10 27.12 18.89 26.91 22.63 19.10 5.99 9.52 26.63 17.51 19.10 25.04

1.23 1.20 .69 1.79 2.21 1.53

11.30 11.05 6.98 15.78 19.74 13.70

19.10 19.10 19.10 19.10 19.10 19.10

30.40 30.15 26.08 34.88 38.24 32.80

28.34 27.65 15.90 41.24 50.92 35.25

39.64 38.70 22.88 57.02 70.06 48.95

1.42

12.82

19.10

31.92

32.72

45.54

—.15 .85 .66 1.02 .66

.27 8.26 6.70 9.62 6.73

19.10 19.10 19.10 19.10 19.10

19.37 27.36 25.80 28.72 25.83

-3.46 19.58 15.21 23.50 15.21

-3.19 27.84 21.91 33.12 21.94

.58 .47

6.10 5.25

19.10 19.10

25.20 24.35

13.36 19.10

19.46 24.35

t Assuming 60 percent of expenditure on food products from total bonus in addition to Food Stamp. z Using deviation from simple average of elasticities of individual food categories. 3 The quantity of each individual item used as weight.

Source: Estimated from data provided by Commonwealth of Puerto Rico, Department of Agriculture.

128

prices, personal income in 1967 dollars► is expected to decline by 15.98 percent in 1975 but to rise by 1.63 percent in the subsequent year. These figures imply, with the same income elasticities given in Table Vl-9, and in the absence of the Food Stamp Program, a decline in demand by 4.68 percent in 1975 but an increase of 3.67 percent in 1976. Accordingly, the demand for almost all food products (except for starchy vegetables, legumes, and processed fish and seafood) is expected to decline. The implementation of the Food Stamp Program would, consequently, help alleviate the slack in the economy by preventing a decline in demand, for the net' bonus, deflated by the 1975 price index could pull the demand up by 16.2 percent causing a net overall increase of 11.5 percent, even if only 75 percent of eligible families were to participate in the Program. Current and constant price estimates of changes in the demand for individual food categories are given in Table VI-10.

2. The Supply Adjustment Analysis The analysis of the previous section indicates that an overall positive impact of the magnitude of around 15 percent on demand for food products can be expected from the implementation of the Food Stamp Program. We now turn our attention to the supply aspect of the problem. The source of the supply of food products consumed in Puerto Rico is almost equally divided between domestic and foreign sources (from any origin outside of Puerto Rico). In 1973, for example, 48 percent of food products consumed in the island came from local sources and the other 52 percent were imported. The share of the total consumption of food items produced in Puerto Rico declined almost steadily from 61 percent in 1951 to 48 percent in 1973, while the share of imports increased from 39 percent to 52 percent during the same period (see Table VI-11). Obviously as incomes rose over the past decade, a greater portion of the increased demand for food has been met out of imports. The adjustment of supply from imports and domestic production to the normal growth of demand in Puerto Rico has been analyzed for all the 21 food categories for the period 1956 to 1973. The results are presented in Figures VI-1 through VI-21 and for all food products in Figure VI-22. They indicate that in the past two decades demand for food products has increased fairly steadily, but that local food production has not been responsive to increased prices or demand. The elaborate research necessary to prove this hypothesis has not been undertaken. Neverthless, the declining share of local production within total consumption is an indication to that effect. It stands to reason, therefore, that the food importing system not only has to cope with increases in demand, but also has to counteract erratic fluctuations in local food production.

t

Deflated by the food component of the consumer price index prepared by the Department of Labor of the Commonwealth of Puerto Rico. 129

Table VI-10 Growth of Demand for Food Products Taking into Consideration Recent Trend of Decreasing Disposable Income, 1975 and 1976. Estimates in Current Prices 1975 Item Personal Disposable Income Population Starchy Vegetables Cereals Green Vegetables Legumes Spices Soups Fresh Fruits Processed Fruits Dried & Frozen Fruits Beef & Veal Pork Poultry Other Meats Entrails Fish & Seafood (fresh or frozen) Fish & Seafood (processed) Milk Milk Products Eggs Fats & Oils Coffee, Chocolate, Tea & Others Weighted Average 1

1976

Estimates in Constant Prices 1975

j

Normal Total Normal Normal Total Growth Growth1:Growth Growth Growth'1 —1.01 5.01 -15.98 -2.90 -2.90 2.90 - 4.34 2.54 2.99 0.92 2.45 2.59 9.73 4.45 4.01 -2.05 2.31 15.90 5.86 -6.53 5.00 2.74 2.94 2.89 3.12 2.95 1.83 26.25 8.21 -14.04 6.67 2.07 7.01 -10.20 20.96 5.82 2.64 8.63 4.20 -1.25 3.83 2.13 19.64 6.71 -9.24 5.61 1.66 30.00 9.06 -16.75 7.28 29.34 1.69 8.91 -16.28 7.17 2.20 18.10 6.36 -8.13 5.35 1.09 42.33 11.87 -25.70 9.28 0.67 51.59 13.97 -32.41 10.77 1.36 36.61 10.57 -21.55 8.35 1.47 34.19 10.02 -19.79 7.96 -0.41 3.05 2.15 5.30 2.37 2.04 21.62 7.16 -10.68 5.93 17.44 6.21 2.23 -7.65 5.25 1.87 25.37 8.01 -13.40 6.53 2.23 17.44 6.21 —7.65 5.25 5.81 2.32 15.68 —6.37 4.96 2.42 21.52 5.28 —4.68 11.52

Equals normal growth plus growth due to Food Stamps which is not shown in this Table.

130

Table VI-11 Food Consumption in Puerto Rico by Source of Origin, 1951-1973a

Year 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973

Percentage of Total Consumption Local Production Net Import 61 59 57 60 58 55 53 57 56 58 59 60 59 60 56 58 56 53 52 56 51 48 48

39 41 43 40 42 45 47 43 44 42 41 40 41 40 44 42 44 47 48 44 49 52 52

a Estimate does not include sugar. Over 90 percent of local consumption comes fom local production. Source: Commonwealth of Puerto Rico, Department of Agriculture.

131

Figure VI-1 Rate of Growth of Demand, Local Production and Import of Starchy Vegetables, 1956-1973

(Percentage Change over Previous Year)

Percent loo

Demand-- _D

0.73

Q M

10.06 7.28

local Production Net Import

80

~ II

II II I t I I I I I I

60 _

I

I

I

I I I

I , I

I I I

I A '

20

I

I

_ /~

,~

~ 1

I

1 7

11

v

I

I

I

1

II II

I

1 /~ 1 i V

71 I

20

I I

I I -

\- -

~V~ `\ /i

¡

/ /

\

~

1

i \

/

\

I I

I

I ,1

~

II

'

I

40 1 1

t I

I I I I ~I

I, II

J 40

I 1956

I 1 I 1957 1958 1959

I 1

I 1960

I 1961

I 1 1962 1963

I í I I 1964, 1965, 1966 1967

I 1968

1969

I 1 1970 1971

I 1972

T 1973

Source: Commonwealth of Puerto Rico, Departments of Agriculture and Commerce

132

Figure VI-2 Rate of Growth of Demand, Local Production and Import of Cereals, 1956-1973 (Percentage Change over Previous Year)

Percent

Demand____— Local Production Q Net Import --------M

30

=

393

=

10.91

=

2.93

'4

I'

20

I1

II

~ 1

I1 'I

I

1

I

I

,

1 10

7 I

\

I \\

I

o

t

I

I

I

I

1I

I

A

i

I

'

,

~

I L.

t— r

, i1

I 1

I

1

.

1

~/

ir

r~

I

/

,

I

L _ .,1

, 1 I

10

7

V

20

30 I 1 I 1956 1957 1956 1959 1960 1961

I 1962 1963 1964 1965

Demand

=

Local Production

O =

3.93 10.91

Net Import

~A =

2.93

. . I I 1966 1967 1968 1969

. . . 1970 1971 1972 1973

Source: Commonwealth of Puerto Rico, Departments of Agriculture and Commerce

133

Figure VI-3 Rate of Growth of Demand, Local Production, and Import of Green Vegetables, 1956-1973

(Percentage Change over Previous Year)

Percent

Demand--30

'0

nl /

/

1 1

~ —

/ /

— ~

1

\I/

/

5.32

1

i

1

/

\` \

~.r ^

.SJ

\

/

/

\

/

o

0.84

M =

/

t

0

/

6.18

N r/ 1

3 I

=

Q =

I

Local Production Net Import

I

.

.

St_

/

1964

7 1965

1 1966

r 1967

— 1 1

/

.

.

T 1969

1970

'

~

V

10

20 1956

1957 1958

1959

1960

1961

1962

963

1968

T 1971

1972

1973

Source: Commonwealth of Puerto Rico, Departments of Agriculture and Commerce. .

134

Figure VI-4 Rate of Growth of Demand, Local Production, and Import of Legumes, 1956-1973 Percent

(Percentage Change over Previous Year)

Demand--Local Production Net Import

30

6 = 1.54 Q = 3.98 M = 0.79

20_

30 1956 1957

1958 1959 1960 1961 1962 1963

1 I 1964 1965 1966

1 1 1967 1968

I I i 1 1 1969 1970 1971 1972 1973

Source: Commonwealth of Puerto Rico, Departments of Agriculture and Commerce.

135

Figure VI-5 Rate of Growth of Demand, Local Production, and Import of Spices, 1956-1973 (Percentage Change over Previous Year)

Percent

6 =

Demand--Local Production 60

Q = M =

Net Import

6.15 9.94 5.64

40

20

0 1 1 / ' / 1 I V

, I

~ V

20

40

r 1956 1957

1958 1959 1960

1961 1962 1963 1964 1965 1966

1967 1968 1969 1970 1971

1972

1973

Source: Commonwealth of Puerto Rico, Departments of Agriculture and Commerce.

136

Figure VI-6 Rate of Growth of Demand, Local Production, and Import of Soups, 1956-1973 (Percentage Change over Previous Year)

Percent

Demand —

—

= =

— .i

Net Import_

8.02 7,16

120

20,

I

I

~

'S

~ 55

I

l 1

II

I

lo-

I~ /

_

•____5,A

`S

~

I

5.-.---\ ~ I

\S 1

T

I

t

T ~ t

/

T

\

I

T ~,li

1

20_

I

1

I

1

1 1 T I, I

~` ~ 1

I 1 I

1

I

lo -

I

1

I

I I

I

r

1 I `1,I

~

1

II

I I 1 1 I Y

~

I I I

I I

I tr

5

I

I

1 195

I 196b

I I I I 1 1961 1962 1963 1964 1965

1 1966

I I I I r 1967 1968 1969 1970 1971

r 1972 1972

Source: Commonwealth of Puerto Rico, Departments of Agriculture and Commerce. 137

Figure VI-7 Rate of Growth of Demand, Local Production, and Import of Fresh Fruits, 1956-1973 (Percentage Change over Previous Year)

Percent

=

3.53

Local Production

Q

=

0.57

Net Import

bbl

= 14.60

Demand —

—

—ó

40_ ~ ~

I I ~ I

30_

20_

10_

1'

~

I 1 I ~

I I

I

I I l l

I I

I1

II I I

i II I 1 I

~

1

I I I I I I I

I I

/

i t

/~

I

I

I I I

I I

10_ I I 1 I /

u

20_

30 I I -I r I I I I I I I 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966

I 1 I I 1 I 1 1967 1968 1969 1970 1971 1972 1973

1

Source: Commonwealth of Puerto Rico, Departments of Agriculture and Commerce. 138

Figure VI-8 Rate of Growth of Demand, Local Production, and Import of Processed Fruits, 1956-1973

(Percentage Change over Previous Year)

Percent

Í

I 134.21 percent

140 Demand---

D = Q = IVI

Local Production Net Import

!, >

7.53 5.48 12.58

( ) I ~ I I I ' I I

t

I

I

I

I

I I

I

I

I I I

I 1 I

1 I

I I

1 1

I

I

I

1

I .' I► I ' I

~

~ t

,1

1 1

I

II

I

¡ ~

I

—1—

I

~ I

I

1 I

►

, ~ \

I

/

II 7

I I I

I I

I

I~I I I

rl I I I I '

¡

-

-

; '

I

1

Ii

I— I

I I I I 1

II I,

Y

r I I 1956 1957

I

I

I I 1958 1959 1960 1961

I I 1962 1963

I 1964 1965

I I I ~ I 1966. 1967 1968 1969 1970 1971

, 1972

I 1973

Source: Commonwealth of Puerto Rico, Departments of Agriculture and Commerce. 139

Figure VI-9

Rate of Growth of Demand, Local Production, and Import of Dried and Frozen Fruits, 1956-1973

(Percentage Change over Previous Year)

Percent 100

80

60

40

20

0

1 I

20

40 45

I 1 1 1 1 1 1 1956 1957 1958. 1959. 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971

1972 1973

Source: Commonwealth of Puerto Rico, Departments of Agriculture and Commerce. 140

Figure VI-10 Rate of Growth of Demand, Local Production, and Import of Beef and Veal, 1956-1973

(Percentage Change over Previous Year)

Percent

Demand —

40

—

D =

—

11.05

Local Production

Q =

4.39

Net Import

M =

9.12

30

I1

~

~ 1I

M1 1 ~

r,

I ~

20

1

1 I / ~

10

1

i

/

1

1 1

\\ /~ —

^

'5

~

~ ~

I ~

"-S~

1

11

11

V

o

1

I I I I I I ~ I I I %~ I I

~ i, 1 1

I

I ~ 1

I

I

I

I

,I I I I

1 A — —~ —F —

1

1

' s /•

1

1 Il ~ I

I , I I~ I

10

I I

II

I

20

1 I I 1956 1957 1958

* 1 1 1 1959 1960 1961 1962

i ' 1963 1964

, 1 1965 1966 1967 1968 1969 1970 1971 1972

I 1973

Source: Commonwealth of Puerto Rico, Departments of Agriculture and Commerce. 141

Figure VI-11 Rate of Growth of Demand, Local Production, and Import of Pork, 1956-1973 Percent

(Percentage Change over Previous Year)

30

D = 6.98 Q = 2.97 M = 5.61

Demand --Local Production Net Import

20

/S

S / Y

10

--~

/ ~

-~

I 0

/

/

, ~

/

I

I

I `I~

10 15

r I I I 1956 1957 1958 I959 1960 1961

1 r I I 1 1967 1963. 1964. 1965. /966. 1967 1968. 1969, 1970 1971 1972. 1973

Source: Commonwealth of Puerto Rico, Departments of Agriculture and Commerce. Figure VI-12 Rate of Growth of Demand, Local Production, and Import of Poultry, 1956-1973 (Percentage Change over Previous Year)

Source;

Commonwealth

of

Puerto

Rico,

Commerce. 142

Departments

of

Agriculture and

Figure VI-13 Rate of Growth of Demand, Local Production, and Import of Other Meats, 1956-1973

Percent

(Percentage Change over Previous Year)

Demand---

1956. 1957 1958. 1959. 1960. 1961. 1962. 1963. 1964. 1965 1966 1967 1968

D

= 19.14 1.07 9.10

Q = M =

Local Production Net Import

1969

1970 1971 1972 1973

Source: Commonwealth of Puerto Rico, Departments of Agriculture and Commerce.

143

Figure VI-14 Rate of Growth of Demand, Local Production, and Import of Entrails, 1956-1973 (Percentage Change over Previous Year)

Percent 180 t

I 1 I I

150

Demand __ Local Production Net Import

I 120

D =

13.70

Q = M =

33.50

3.60

I

I 1

I

r

II r~

90

~ ; I

I

r ,

I

I

I I

PO

i r r

I

~ I

3

1

I

i ~

I 1 I

I

' I

—

1r 1

~---~

1

I

I

I

h

, ~ r —I n —

~

I I i • —. —

I

2 ~ —

I

T

I

I ' r Ir

u

:0

l0

I I I I i I 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965. 1966 1967 1968 1969 1970 1971 1972 1973

Source: Commonwealth of Puerto Rico, Departments of Agriculture and Commerce.

144

Figure VI-15 Rate of Growth of Demand, Local Production, and Import of Fresh and Frozen Fish and Seafood, 1956-1973 (Percentage Change over Previous Year)

Percent

240

90

12.82

Demand

D =

Local Production

Q —

0.97

Net Import

M =

24;38

I

I

I

I ¡ 'It

I I I I

60_

30_ n

I

I

//

/

T

~ ,

i ` ¡ I ./

A~ ~ `

—

I ~ I

1 I

30_ 40

/ /

I'

I I

I I I

~

/

I ~

I

^

I~ /

/

\\

I I

A T

\ \ —/.

~'/

.. /' ~ \ V~ /'\ /

V

I I

r

— —

I

1

\I \1

/

\ t I

I

t

r

I

1956 1957 1958 1959 1960

T 1961 1962 1963

. 1964 1965 1966

I

I

r

1967 1968 1969

I 1970

I

I

1

1971 1972 1973

Source: Commonwealth of Puerto Rico, Departments of Agriculture and Commerce.

145 I

Figure VI-16 Rate of Growth of Demand, Local Production, and Import of Processed Fish and Seafood, 1956-1973 (Percentage Change over Previous Year)

Percent 50

!I'

40.

II II I I I I

30.

0.27

=

= 14.51 M = 0.09

Q

I I

I~ I I I

20.

D

Demand---Local Production Net Import

I 1 t

I I I I

10.

1 ~

FI

I 1

~ i

I

t

I I I I i

10_

'

I

I I 1I

I I

I

~

I

Í

I

r

i~

II

,

.'

1

// \

V

j

► 1

,, ~

,I I ~I ~

~ ~

,`

'

11,

I

' I 1

I

~

1 I

\i~

t I

L

I I ~ 1 \ 1 ' I \I ~

1 I 1 I I

I

I I

I I I

20.

1t 1 II

I

30

I

I

I

1956. 1957 1958

I

I

I

1959 1960 1961

-,

,

I

1962 1963 1964

I

I

I

i

I

1965 1966 1967, 1968 1969

I

I

I

I

1970 1971 , 1972. 1973.

Source: Commonwealth of Puerto Rico, Departments of Agriculture and Commerce.

146

Figure VI-17 Rate of Growth of Demand, Local Production, and Import of Milk, 1956-1973

(Percentage Change over Previous Year)

Percent

30 I; Demand

D =

Local Production

Q = M =

Net Import

8.26 4.82

1 1 1 1

4.00

1

20_

I ~~

1 I 1

I \~

\ 10_

`

~I~ ~

~

1\

1

1\

~

\

I I I

~,

Y

i~

~

/

~

— .—

ñ

~

I

~

~ ~~

~

~

~

' I

I

~

`

I

/ \

\

I I

\

/

'./

/'

~

/ •

\

I I

1

1I ~'.

10_

I

I

T

I

i

1

I

I

I

I

I

I

1

1

I

I

I

I

1956 1957. 1958 1959, 1960. 1961 1962. 1963. 1964 1965 1966 1967. 1968. 1969. 1970 1971 1972. 197.

Source: Commonwealth of Puerto Rico, Departments of Agriculture and Commerce.

Figure V1-18 Rate of Growth of Demand, Local Production, and Import of Dairy Products, 1956-1973 (Percentage Change over Previous Year)

Percent

Demand----Local Production Net Import

I I

I

t

I

I

t

T

I

1956 1957 1958 1959 1960 1961 1962

Source:

Commonwealth of Puerto

1963

D =

6.30

Q = M =

1.49 5.12

I 1 1971 1972

I 1973

V

I I I i i 1 f 1964 1965 1966 1967 1968 196) 1970

Rico, Departments of Agriculture and Commerce.

Figure VI-19 Rate of Growth of Demand, Local Production, and Import of Eggs, 1956-1973

(Percentage Change over Previous Year)

Percent

Demand

40_

D =

—

9.62

Q = 4.62 M = 6.18

Local Production Net Import

~

30

II1 I I I 1 I 1 I

1 1 I 1

20

'

10_

1

I

I

~

~

\ ~~T.I

/

1 I I

~ I

lo -

I I 1 ~

l

1 1 1

I l

1

I

I I

' /

I

_

i ~ ~ ',

I

I1

-

t~

~1 ~ 1 I

• /

F

1

~

\I

I I

I 1 il

I

I I

I I I

/

11

k 20_

I

I

1956 1957

I 1958

1

I

I

I

1959 1960 1961 1962

I

I

I

I

1963 1964 1965 1966

I

I

I

1967 1968 1969

I 1970

I

I

I

1971 1972

197.

Source: Commonwealth of Puerto Rico, Departments of Agriculture and Commerce.

149

Figure VI-20 Rate of Growth of Demand, Local Production, and Import of Fats and Oils, 1956-1973 (Percentage Change over Previous Year)

Percent

D = 6.73 M = 3.28

Demand __ Net Import ___ 30

JI ,1 I '

20 ll ^

10

I

'

;1

~ 1

0

' '

1

`11 V

~

Y ~

//

1

1 1

I

1 1 ,'' V

,

~..1_ ~f'~ I I 1

1

I

1'

, ~ ~

1

I

I

I

' 1 I

l

l". ^ ,

A

t 1

1

I(~i' /.

~

4`

~ /

'_

1 1

_

1 1

— ,

I

( ; l ; ~ 1 ~

f

1

1

:

I 1 '1 1

1_.i

1

~ 1 `\ 1

I1 ~~ ,_

~

V '1

10

► I 1 1 1 I I I 1 I I I 1 1956. 1957. 1958. 1959, 1960. 1961, 1962, 1963 1964 1965 1966. 1967 1968

I

I

1969 1970

1

1

Source: Commonwealth of Puerto Rico, Departments of Agriculture and Commerce.

150

1

1971, 1972. 1973.

Figure VI-21 Rate of Growth of Demand, Local Production, and Import of Coffee, Chocolate, and Tea, 1956-1973 (Percentage Change over Previous Year)

Percent 90

Demand---

80

Local Production Net Import

D =

6.10

Q = M =

5.06 9.36

I~ II I I I I I 1 1 I 1

60

I

I

40

20

0

I

I \ 1

I . ¡II 1 ~

/

/

1

20

I/ '.1

i S'

I ~

I 1 I ,` I

~

11

V

SJ

,

1

,/ 'I 40 ~ 50 ~

I

1

1956 1957 1958

I

I

1959 1960

I 1961

I

I

I

1962 1963 1964

I

I

I

1965 1966 1967

I

I

1968 1969

I

I

I

1970 1971

1972

1973-

I

Source: Commonwealth of Puerto Rico, Departments of Agriculture and Commerce.

151

Figure VI-22 Rate of Growth of Demand, Local Production, and Import of All Food Products, 1956-1973

(Percentage Change over Previous Year)

Percent

30 ■

Demand

D =

5.35

Local Production

= MVl =

1.72

Net Import

4.19

20

10

A

1 1

~ , o

I

I

r

~~

1

/

\,

'I 10

I I I I I I 1956 1957 1958 1959 1960 1961

I I I I I 1962 1963 1964, 1965 1966

I I I I 1967 1968, 1969, 197Q

I I I 1971, 1972 1973

Source: Commonwealth of Puerto Rico, Departments of Agriculture and Commerce.

Under normal circumstances, this would have been the case: when demand increases and local production also increases but at a lesser pace, imports should increase, and vice-versa; when local production decreases and demand increases, imports should rise at an even more rapid rate. However, in the past imports have not moved rationally, causing occasional shortages and/or severe price increases in the absence of price controls. Since in most cases shortages were not caused by short supply at the source of imports, it can be concluded that shortages of food in Puerto Rico were generated due to imperfection in the channels of distribution. The most likely explanation for this imperfection is market concentration of food importers and consequent lack of adequate competition (see Table VI-15). To measure the probable impact of the Food Stamp Program on the wholesale distribution system the results of the survey of the food wholesalers in Puerto Rico were used as presented in Chapter V: C. Impact on Food Marketing Structure 1. Wholesale Marketing The following assumptions were made. a. Food wholesaler sales will continue their annual average normal trend of growth, of approximately 6 percent , in the absence of the Program. b. Food wholesalers sales will have to increase between 15 percent and 20 percent over and above the normal annual growth, because of the acceleration effect of the increase in retail sales on wholesale. c. Annual food wholesales per sq. ft. cannot exceed $279.000. Above this level, service to retailers and other institutions is assumed to be unfavorably affected. d. Annual sales per employee cannot, for similar reasons, exceed S187,000. e. Average annual salary per employee is $5,756. Table VI-12 calculates the impact of the Program upon this food distribution system for the alternatives of 15 percent and 20 percent growth with the further assumption of a fixed order cycle. Thus, wholesales will increase by S169.1 million and 5225.4 million to $1,296.2 million, and $1,352.5 million, respectively. The corresponding additional warehousing space required is 1,0 1,034 and 1,243,024 sq. ft. The increase in employment is 1,460 and 1,762 persons. Assuming that the average annual employee compensation remains unchanged at S5,756, the probable increase in payroll would amount to $8.4 million and to S10.1 million, respectively. The analysis of the probable impact of the Food Stamp Program on sales and warehousing capacity at the wholesale level in the municipalities included in its first phase is summarized in Table VI-13. Under the same assumption of normal sales growth and Program impact, total sales of the food wholesalers in those municipalities would probably increase by 1975 to $11.7 million and S12.2 million, respectively, for which 10.982 and 13,090 additional sq. ft. of warehouse space would be required.

153

Table VI-12

Impact of the Food Stamp Program on Wholesale Food Marketing, 1975a

Item

15 Percent Sales Impact

20 Percent Sales Impact

Total Sales, 1973 ($)

1,003,120,890

1,003,120,890

Normal trend of annual growth of 6 percent ($)

123,985,742

123,985,742

1,127,106,632

1,127,106,632

Impact of program ($)

169,065,995

225,421,326

Predicted sales, 1975 ($)

1,296,172,627

1,352,527,958

279

279

Total space required, 1975 (sq. ft.)

4,645,780

4,847,770

Available space, 1973 (sq. ft.)

3,604,746

3,604,746

Additional space required (sq. ft.)

1,041,034

1,243,024

Maximum permissible sales per employee ($)

187,000

187,000

Total number of employees required, 1975

6,931

7,233

Number of employees, 1973

5,471

5,471

Additional number of employees required 1975

1,460

1,762

Estimate total sales, 1975 ($)

Maximum permissible sales per sq. ft. ($)

a Assuming fixed order cycle

Source: Food Wholesalers Survey conducted by the Food Stamp Research Team, in conjunction with the Department of Commerce, Commonwealth of Puerto Rico. March, 1974.

154

It has been estimated that 14 new employees will be needed to handle the additional sales volume of $2,652,654 with a 15 percent sales impact, and 17 new employees will be needed to handle the additional sales volume of $3,162,773 with a 20 percent sales impact. Thus the impact on direct employment in the region of the first phase would be negligible; but the overall impact could amount to an employment increase in wholesaling of between 1,460 to 1,762 persons (see Table VI-12). 2. Retail Marketing In contrast to the case of wholesale marketing, it was not possible to conduct a survey of the retail food outlets to determine their capacity to handle additional supply of food. However, discussions with merchants and government officials involved in retail food marketing in Puerto Rico reveal that handling of increased food supply at the retail level will probably not pose too serious a problem. Two significant effects, nevertheless, can be expected from the Program: (a) the changes it may bring about in the price level and (b) the multiplier effect it may have on the economy. a. Price Effect The past history of food retailing in the local market is characterized by a substantial increase in food prices along with an increase in consumption. Figure VI-23 shows the index of food prices in Puerto Rico from 1965 to 1974 (1967-100). The increase in the index has been substantial. With the implementation of the Food Stamp Program a further boost in food prices can be expected over and above this rate of increase. The increase may not be as great, however, since the prices of most of the basic food items are either controlled or frozen, and are permitted to rise only as changes in costs of production allow. Food products whose prices are either controlled or frozen are given in Table VI-14 with the corresponding dates of entry into effect of the controls. In order to estimate the price effect on retai l sales that may be expected from the Food Stamp Program, we have utilized a single equation linear regression model with data from 1951 to 1974. The result is given as: Ppr = —24.5512 4- 0.6490 (Pus ) i - 15.3730 (Q pr ) + 0.0098 (9.4170)

Where

(5.9527)

(Ypr ► (2.1155)

Ppr = food price level for Puerto Rico Pus = food price level for the United States Qpr = quantity of food consumed in Puerto Rico Ypr - per capita income for Puerto Rico

with d = 1.6873, R 2 = 0.9943, and the figures in parentheses referring to (t) values. (A (d) value of 1.6873 indicates the absence of autocorrelation in the calculated residuals). 155

Table VI-13

Impact of the Food Stamp Program, on Warehouse Space, Stage I 1975a

Item

15 Percent Sales Impact

20 Percent Sales Impact

Total sales, 1973 ($)

9,080,077

9,080,077

Normal trend of annual growth of 6 percent ($) Estimated total sales, 1975 ($)

1,122,298

1,122,298

10,202,375

10,202,375

Impact of program ($)

1,530,356

2,040,475

Predicted sales, 1975 ($)

11,732,731

12,242,850

242

242

Total space required (sq. ft.)

48,482

50,590

Available space (sq. ft.)

37,500

37,500

Additional space required (sq. ft.)

10,982

13,090

Average sales/sq. ft. ($)

a Assuming fixed order cycle Source: Food Wholesalers Survey conducted by the Food Stamp Research Team in conjunction with the Department of Commerce, Commonwealth of Puerto Rico, March 1974.

166

Figure VI-23 Index of Food Prices, 1965-1974 (1967 =100) Percent 160

Total of Food Prices --Locally Produced Food

150_

Imported Food

140.

130-

120

110_

100_

90_

A. 0~

I

I

I

I

I

I

I

1965

1966

1967

1968

1969

1970

1971

1 972

1973

Source: Commonwealth of Puerto Rico, Department of Labor, Bureau of Labor Statistics.

157

197]

Table VI-14

Pattern of Price Controls in Puerto Rico Date of implementation of controlled pricer

Product Rice Lard Tomato Sauce Export Soda Crackérs Canned Beans Beef, Pork & Poultry Baby Food Plantains & Yams Vegetable & Corn Oil Oleomargarine Codfish Fillet Potatoes Butter Dry Beans Refined Sugar Evaporated & Powdered Milk Bread Salt Coffee Dry Codfish Cornmeal Wheat Flour Small Vienna Sausage Bologna Sausage (salami) Malt Cola Other Carbonated Drinks Sardines Ketchup Jelly Pineapple Juice Canned Green Pigeon Peas Grapefruit Juice Fruit Cocktail Guava Paste Spaghetti Bacon Corned Beef Edam Cheese Powdered Chocolate Vinegar Spaghetti in sauce Corn Flakes Instant Coffee White Cheese Tuna Canned Soups Luncheon Meat

Date of implementation of frozen prices2

February 1971 March 1971 April 1G73 April 1973 April 1973 November 1972 November 1972 January 1972 November 1971 October 1971 October 1971 October 1971 September 1971 March 1971 May 1964 February 1971 August 1969 January 1963 June 1953 February 1971 March 1973 March 1973 March 1973 March 1973 March 1973 March 1973 March 1973 March 1973 March 1973 March 1973 March 1973 March 1973 March 1973 March 1973 March 1973 March 1973 March 1973 March 1973 March 1973 March 1973 March 1973 March 1973 March 1973 March 1973 March 1973 March 1973 March 1973 March 1973

1Controlled price:

Sets prices for different levels of distribution, allowing increases or decreases according to the varying cost of distribution at different levels.

2Frozen price:

Maintains the same price for the food product in question at each level of distribution, allowing equal variations at all levels in accordance with the changing costs of the distributors.

Source: Commonwealth of Puerto Rico, Department of Consumer Affairs.

158

To estimate the price levels for 1975 and 1976, estimates of the U.S. price index are necessary, together with estimates of (Opr ) and (Ypr ) for these two years. The estimates of the United State price level were obtained form USDA, Food and Nutrition Service. Then (Y r ) was estimated for 1975 and 1976 as the effective per capita income.1 The fast item ,to estimate was the percentage increase in (Opr ) for 1975 and 1976. We have seen that this has been estimated to be 21.52 in 1975 (see Table VI-10) assuming the benefit of the program during the year has not exceeded 60 percent of its full operation and recent decrease in real income as experienced by the economy. Since the Program did not go into effect until July 1974 and was introduced in stages, the full benefit was not realized in 1975. Calculations made taking into consideration the partial application of the Program revealed an estimated increase in quantity demanded of 19.10 percent for 1975. The increase for 1976 was 5.28 percent.2 Inserting these values and the projected U.S. food price index (Pus) and the per capita income for Puerto Rico (Ypr ) for the corresponding years into the price equation the food price index levels for 1975 and 1976 were estimated to reach 182.86 and 195.28 respectively.3 The figures represent and increase in the price index of 22.56 index points in 1975 with respect to 1974 and 12.42 index points in 1976 with respect to 1975, under the prevailing circumstances. These represent annual price increases of 14.07 percent and 6.79 percent respectively. Because of the quasi-monopolistic nature of import trade in food products, it is not unlikely that the price effect may get translated into shortages, in the absence of free movement of prices through market forces. Other things remaining equal, there is a greater possibility, especially in the short run, that shortages may develop among food products whose income elasticities do not significantly deviate from zero, as compared to items whose income elasticities are close to or higher than one.4 Accordingly, the following food items can be Effective per capita income is defined as the projected per capita personal income in the national accounts sense, plus per capita net benefit of the Food Stamp Program, plus that portion of released disposable income not spent on food, plus an amount that is income to per capita food consumption obtained by multiplying the ratio of per by the net benefit of the Food Stamp Program. 2 These percentages assumed no downturn in the economy, 3 At the time of going to the printers, the food price index for fiscal year 1975 was announced to be 190.6, about 4 percent higher than our estimation. The reason for this small discrepancy can be explained by the use of observations relating to a long period to forecast short term developments. In the absence of even quarterly data regarding national accounts and various other statistics, there was no other alternative on which to base the forecasts. 4 The reason is that the supplier would be encouraged to shift his resources away from the income-inelastic product towards the income-elastic one, since the increased food purchasing power would cause a greater upward shift in the demand for the latter than for the former, and the marginal profit per additional unit of income-elastic product sold can be expected to be greater than the marginal profit per unit of the income-inelastic product. The magnitude of the scarcity would depend upon the relative size of the coefficients of elasticity, the impact of increased scale on the unit cost of operation of the food importers, the degree of collusion among them, etc. Moreover, to equate the marginal returns on the two types of commodities, the supplier would tend to raise the price of the income inelastic one. Given the system of price control prevalent in Puerto Rico he would be barred from taking such an action and all the more encouraged to supply the income-elastic commodity. 1

159

Table VI-15

Market Concentration of Imports of Selected Food Products, -1973

Products Rice Potatoes (fresh) Milk Beef round (frozen) Lard Evaporated Milk Vegetable Oil Corn Oil Wheat Flour Onions (fresh) Oats Whole Milk Breakfast Cereal Baby Food Corn Meal Bread Red Canned Beans in Salt and Water

Number of Sellers

Percent of Total Sales

1 2 5 10 5 1 1 1 1 4 1 2 1 3 1 1

65 77 77 55 95 75 84 84 70 59 99 85 70 100 86 85

1

68

Source: Commonwealth of Puerto Rico, Department of Consumer Affairs.

160

Figure VI-24 — A Model of the Dissemination of Food Stamp Expenditures Through the Food Marketing System.

Tin Cans, Credit, etc. i

/

1

/'

`` 5 Wages, Light, etc. $25

Food Processing

~

z $100 Food Stamps

Retail Food Stores

$75

Food Wholesaler

Farm Production

$W 1

$65

$20 ~

Other Marketing Organization

V

Transport, Storage, etc.

SY

expected not to be in short supply in the local economy: 1. Soups and spices 6. Entrails 2. Dried and frozen fruits 7. Fresh and frozen fish 3. Beef and veal 8. Dairy products 4. Poultry 9. Milk 5. Other meats not including pork 10. Eggs The remaining food products have low income elasticities and can be expected to experience some degree of disruption or shortage in their local supply. These statements assume that market concentration exists in the local economy, particularly in food retailing, and will continue to do so in the foreseeable future. The fact that it is quite substantial currently can be observed from Table VI-15: the marketing of some products are a virtual monopoly with only one importer. b. Multiplier effect The multiplier effect of food retailing is obvious. When $100 of food stamps, for example, are spent at the retail level the magnitude of the impact upon farm production depends upon the proportion of the $100 that flows to retailers, wholesalers, processors, transportation agencies, and other organization in providing the services of getting the food from the farm to the consumer in the form in which it is desired (Figure VI-24). Thus, $25 of the original $100 expenditures deducted by the retailer to pay employees, lights, rent, and to cover other operating costs as well as to provide for profits represent an impact upon food retailing, since part of this amount will in turn be spent on food, thereby providing a multiplier effect. The effect is expected to be larger for locally produced food than for the imported food, since part of the spending on food leaks out in the form of imports. No attempt has been made to estimate the size of the multiplier effect of food consumption. The Department of Agriculture of the Commonwealth of Puerto Rico estimates the magnitude of the multiplier effect to be around two for the entire agricultural sector. With respect to the export of agricultural products, this agency estimates the multiplier effect to be 1.54 percent.1

1) Commonwealth of Puerto Rico, Department of Agriculture, Ingreso Agrícola de Puerto Rico, 1971/72 — 1972/73, Santurce, Puerto Rico. August, 1973. 162

APPENDIX I

GOVERNMENT AGENCIES RELATED TO THE FOOD DISTRIBUTION SYSTEM

Importation and Distribution Corporation The Importation and Distribution Corporation is public corporation created on April 23, 1973, by the Legislature of Puerto Rico to develop policies of price stabilization for the effective control of prices and living costs. The main objective of the Corporation is to negotiate in an open market in order to obtain low prices for consumer products. Cooperative Development Administration The Cooperative Development Administration, together with the Cooperative Supermarkets and Superettes, has started a program to encourage active and effective participation in the Food Stamp Program. This program includes the establishment of new supermarkets with proper planning and evaluation of food distribution in different urban and rural communities. It also stimulates the integration of cooperative movements and helps in the promotion of new distribution systems and consumer cooperatives. Commonwealth Department of Agriculture To stimulate local production of food, the Department of Agriculture has initiated plans for an increase in milk production by 55 million quarts in a period of three years. It has been preparing a program providing credits for the establishment of new farms and the expansion of existing local dairy farm production. It has also developed a program to improve the quality control of commercial dairy production. It is sponsoring the construction of new slaughter houses to help improve the marketing system and thus stimulate local production. Measures are also being taken to increase crop production. A program is in operation to provide the farmers with credit facilities and training in new technologies for commecial production of farm products. Commonwealth Department of Commerce The Department of Commerce is coordinating a program with the Government Development Bank to provide financial aid to those retailers and wholesalers who would like to participate in the Food Stamp Program. The financial aid would be used to modernize existing facilities and to increase inventory to cope with the increased demand due to the Food Stamp Program. 163

The Department of Commerce is already preparing to sponsor a series of seminars during the years 1974-75, directed to the private retailers and wholesalers around the island. The seminars will include information concerning the mechanics and probable impact of the Food Stamp Program. Commercial Development Company The Commercial Development Company was created in 1962 under the auspices of the Department of Commerce to improve wholesale food distribution in Puerto Rico. The first project of the Company was the relocation of the Food Wholesalers in Old San Juan to an area known as the San Juan Central Market. These new facilities are located in the southern part of the San Juan harbor close to dock facilities with parking areas, and with proximity to the main highways of the metropolitan area. The new facilities include four buildings with an area for modern handling equipment, refrigeration facilities for perishable commodities, and extensive areas for food warehouses. A similar site was developed in the city of Ponce with an area of 376,320 sq. ft. and another in Mayaguez with an area of 347,244 sq. ft. San Juan, Ponce, and Mayaguez are the major centers of supply for the wholesale food industry. The Commercial Development Company's efforts and projections for the four years, 1974-1978, include the organization of a General Food Wholesalers Warehouse which will provide additional storage capacity to help cope with the impact of the Food Stamp Program.

164

APPENDIX II Detailed Tables

165

Table A-1

Nominal Value, Purchase Requirements, and Net Bonus of Food Stamps, 50 States and the District of Columbia, 1971 and 1972

1971 Total

States

Alabama Alaska Arizona Arkansas California Colorado _ Connecticut Delaware Dist. of Columbia Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan

Nominal Value of Food Stamps

Per Person

Payment

Net Bonus

($000)

($000)

Number of Participants (000)

52,995 9,719 269 55,684 340,171 3,745 36,632 ---

16,851 1,652 129 17,937 164,975 14,982 19,705 ---

36,144 8,067 140 37,747 175,196 22,493 16,927 ---

25,169 17,367 62,113 8,103 3,185 144,747 39,136 30,855 5,816 76,780 123,974 3,275 47,484 5,776 141,035

10,400 4,552 24,180 4,724 1,423 77,956 14,468 13,168 3,186 22,849 36,813 1,400 18,399 3,400 66,508

14,769 12,815 37,933 3,379 1,762 66,791 24,708 17,687 2,630 53,931 87,161 1,875 29,085 2,376 74,527

166

Nominal Value of Food Stamps

Payment

Net Bonus

($)

($)

l$1

199 28 8 193 1,363 135 143 --

266 347 34 289 250 278 256

84 59 16 93 121 111 138

182 288 18 196 129 167 118

94 131 251 30 10 629 155 110 22 283 443 12 185 24 543

268 133 247 270 318 230 253 281 264 271 280 273 257 241 260

111 35 96 157 142 124 94 120 144 80 83 117 100 142 123

157 98 151 113 176 106 159 161 120 191 197 160 157 99 137

Table A-1

(contd.) 1971 Total

States

Nominal Value of Food Stamps ($000)

39,959 Minnesota Mississippi 87,843 Missouri 34,635 7,605 Montana 15,070 Nebraska Nevada New Hampshire --New Jersey 78,128 New México 35,622 New York 305,692 North Carolina 48,992 North Dakota 5,909 153,667 Ohio Oklahoma --Oregon 12,968 Pennsylvania 137,369 Rhode Island 16,942 South Carolina 75,261 South Dakota 7,258 Tennessee 92,045 Texas 60,390 Utah 10,823 7,004 Vermont Virginia 39,436 Washington 78,966 65,551 West Virginia Wisconsin 24,955 3,383 Wyoming

a

TOTAL

Per Person

Payment

Net Bonus

($000)

($000)

20,168 21,759 12,034 3,222 6,275

19,791 66,084 22,601 4,383 8,795 ---

47,363 10,822 195,963 15,431 2,157 64,542

30,765 24,800 109,729 33,561 3,752 89,125 --7,737 57,464 `7,662 58,023 4,166 63,993 43,976 6,211 3,202 23,569 44,411 45,384 13,316 2,106

5,231 79,905 9,280 17,238 3,092 28,052 16,414 4,612 3,802 15,867 34,555 20,167 11,639 1,277

2,713,273 1,190,524 1,522,749

Average

167

Number of Participants (000)

Nominal Value of Food Stamps l$1

159 308 128 26 55 ----316 124 1,270 176 21 587

251 285 271 293 274

127 70 94 124 114

124 215 177 169 160

247 287 241 278 281 262

150 87 195 87 102 110

97 200 86 191 179 152

52 558 65 297 26 314 250 39 31 158 265 223 96 14

249 246 261 253 279 293 242 278 226 250 298 294 260 242

100 143 143 58 119 89 66 119 123 101 130 90 121 92

149 103 118 195 160 204 176 159 103 149 168 204 139 150

10,549

257a

113a

144a

Payment

($)

Net Bonus ($1

Table A-1

(Contd.) 1972 Per Person

Total

States

Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware Dist. of Columbia Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan

Nominal Value of Food Stamps ($000)

($000)

($000)

Number of Participants (000)

58,023 8,620 4,627 58,604 432,510 36,832 39,786

18,452 1,529 1,830 20,428 219,075 15,837 22,076 ---

39,571 7,091 2,797 38,176 213,435 20,995 17,710 ---

197 24 22 200 1,386 123 132 ---

295 359 210 293 312 299 301 --

94 64 83 102 158 128 167

201 295 127 191 154 171

31,829 64,513 75,855 14,060 3,970 211,581 50,148 33,204 4,217 89,419 130,772 3,616 67,283 6,352 160,579

14,570 18,386 31,173 7,392 1,684 114,802 19,010 14,418 3,694 27,130 39,535 1,606 26,375 4,074 83,966

17,259 46,127 44,682 6,668 2,286 96,779 31,138 18,786 3,523 62,289 91,237 2,010 40,908 2,278 76,613

111 451 281 39 13 712 1162 107 25 300 478 11 225 23 581

287 143 270 361 305 297 310 310 289 298 274 329 299 276 276

132 41 111 190 129 161 118 134 148 90 83 146 117 177 144

155 102 159 171 176 136 192 176 141 208 191 183 182 99 132

Payment

Net Bonus

168

Nominal Value of Food Stamps

($)

Payment

($)

Net Bonus

($)

Table A-1

(Contd.) 1972 Total

States

Nominal Value of Food Stamps ($000) 45,227 88,071 46,765 8,938 15,201

Payment

Net Bonus

($000) 23,670 25,565 16,693 3,553 6,722

($000) 21,557 62,506 30,072 5,385 8,479

Number of Participants (000) 145 330 174 28 42

--56,187 11,199 252,559 18,174 2,333 79,127 --9,962 106,900 11,545 23,650 3,845 29,782 22,806 6,143 4,884 20,346 34,630 20,992 14,637 1,317

-37,892 27,198 125,414 35,476 3,722 114,263 --15,482 77,349 8,570 69,125 5,523 61,244 57,467 7,046 3,843 27,033 42,508 50,687 14,565 1,949

328 124 1,325 207 21 689 --96 644 73 367 42 310 279 49 33 160 228 255 105 11

3,310,976 1,514,263 1,796,713

11,668

Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire --New Jersey 94,079 New México 38,397 New York 377,973 North Carolina 53,650 North Dakota 6,055 Ohio 193,390 Oklahoma Oregon 25,444 Pennsylvania 184,249 Rhode Island 20,115 South Carolina 92,775 9,368 South Dakota Tennessee 91,026 Texas 80,273 Utah 13,189 Vermont 8,727 Virginia 47,379 Washington 77,138 West Virginia 71,679 Wisconsin 29,202 Wyoming 3,266 TOTAL

Per Person Nominal Value of Food Stamps

Payment

($)

($)

($)

312 267 269 319 362

163 78 96 127 160

149 189 173 192 202

287 310 285 259 288 281

171 91 190 88 111 115

116 219 95 171 177 166

265 286 276 253 223 294 288 269 264 296 338 281 278 297

104 166 159 65 91 96 82 125 148 127 152 82 139 120

161 120 117 188 132 198 206 144 116 169 186 199 139 177

284

130

154

Source: US Department of Commerce, Statistical Abstract of the United States, 1973

169

Net Bonus

Table A-2 Supply of Food Products by Major Food Categories, Puerto Rico, 1951-1973 (Weight at the retail level in cwt.) t

Year

Starchy Vegetables

Cereals

Green Vegetables

Legumes

Spices

Soups

1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973

16,895,070 6,923,006 6,421,118 5,863,516 6,175,022 6,059,884 4,433,186 5,324,111 5,369,726 5,477,708 5,274,666 5,241,997 5,270,739 5,518,737 5,121,967 5,533,472 5,335,700 5,059,402 5,196,406 5,205,600 6,143,496 5,551,292 6,067,247

4,673,720 4,506,554 4,691,330 4,393,401 4,728,197 4,706,816 4,779,360 4,756,639 5,112,863 5,340,433 4,793,836 4,578,856 5,329,400 4,840,024 5,891,031 5,162,000 5,052,593 5,257,166 6,505,906 6,413,128 6,315,421 7,451,978 7,180,067

1,170,518 1,215,914 1,190,924 1,259,461 1,352,574 1,529,371 1,663,949 1,684,052 1,557,779 1,721,261 1,723,286 1,808,067 1,894,143 1,965,055 2,171,400 2,121,631 2,050,995 2,334,318 2,541,309 2,363,980 2,235,157 2,355,660 2,502,309

821,372 741,421 745,674 671,492 789,401 810,891 729,804 750,469 853,303 774,328 742,259 844,978 777,481 846,587 786,276 781,215 797,473 792,200 803,780 679,684 802,569 804,600 704,781

57,698 38,324 32,702 59,370 66,698 80,103 71,950 75,502 78,381 92,548 98,011 97,703 116,621 134,717 124,418 142,571 141,534 147,304 172,793 150,841 163,775 199,423 162,263

55,958 65,450 57,718 79,457 79,589 81,053 89,182 93,198 92,670 109,066 122,620 65,382 144,128 146,110 156,681 150,362 179,242 179,158 172,689 136,738 165,989 134,773 144,550

1

Local production plus imports minus exports

Table A-2

~ ~

(Contd.)

Year

Fresh Fruits

Processed Fruits

Dried & Frozen Fruits

Beef & Veal

Pork

Poultry

1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973

1,869,946 1,785,488 1,408,150 1,587,839 1,725,371 1,726,022 1,326,929 1,776,102 1,724,957 2,117,684 2,023,243 2,097,096 2,108,110 2,159,911 2,207,256 2,264,063 2,236,229 2,045,455 1,963,186 1,943,329 2,113,636 2,175,961 2,280,206

355,459 290,426 578,326 505,995 497,228 594,781 604,654 680,865 486,547 572,846 610,620 602,028 883,282 896,083 1,136,156 849,491 778,867 892,438 855,489 757,067 1,019,945 1,125,795 1,106,947

14,583 11,411 12,009 12,987 18,182 15,850 19,876 18,511 14,643 16,501 16,766 17,302 17,688 19,383 24,592 34,590 63,629 53,749 55,373 46,406 73,159 40,683 33,890

305,041 254,526 295,696 325,438 351,772 414,521 417,269 434,973 461,432 477,231 515,967 589,216 681,455 704,008 839,038 878,330 1,026,911 895,740 1,007,124 1,033,311 1,077,143 1,195,565 1,122,490

495,469 586,638 622,141 609,818 650,581 690,487 689,618 704,196 752,587 798,363 817,292 851,815 848,093 923,169 940,463 952,689 1,016,646 1,143,368 1,041,539 1,113,295 1,321,235 1,441,770 1,420,465

151,726 160,470 177,396 187,284 191,968 204,489 238,538 254,542 310,782 347,319 380,795 459,256 532,732 627,586 685,809 780,432 847,611 923,230 955,517 1,019,544 1,152,079 1,186,573 1,265,278

~ Ñ

Table A-2

(contd.)

Year

Other Meats

Entrails

1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973

12,145 11,636 17,045 21,750 24,205 27,066 20,309 26,109 31,712 33,948 36,327 45,400 47,166 32,476 35,482 36,644 39,099 42,193 54,527 62,368 74,229 69,995 51,541

29,317 30,907 28,363 27,190 29,244 32,604 33,239 40,815 51,299 50,558 52,002 54,154 57,431 68,743 89,241 79,086 85,485 124,998 99,772 132,128 150,679 189,604 202,554

Fish & Sea Food Fish & Sea Food Fresh & Frozen Processed 23,179 25,619 28,172 29,104 33,229 33,459 36,511 35,641 40,443 39,201 34,220 34,934 59,349 66,164 77,610 75,458 83,926 94,051 92,736 109,868 96,364 153,132 179,917

317,824 269,639 311,601 292,564 285,355 284,302 307,434 586,549 299,707 218,973 307,304 289,114 286,565 296,962 281,320 276,517 297,271 272,908 280,476 272,386 245,174 293,026 254,420

Milk

Dairy Products

2,971,600 3,102,900 3,373,272 3,754,104 4,030,559 4,405,934 4,675,414 5,022,289 5,376,948 6,107,430 6,269,617 6,716,253 7,168,807 7,404,054 7,769,606 7,902,671 8,024,247 8,317,253 8,380,395 8,274,448 8,551,027 8,653,695 8,580,079

146,291 147,905 158,676 175,240 186,427 166,409 205,066 227,474 233,766 224,196 229,117 242,737 288,198 370,482 360,763 281,476 246,937 333,933 357,397 320,465 307,491 328,422 319,189

Table A-2

~ w

(Contd.)

Year

Eggs

Fats & Oils

Coffee, Chocolate, Tea, and Others

Total

1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973

196,421 183,165 204,758 214,494 261,814 255,825 274,885 284,316 302,972 299,693 307,774 368,570 400,131 434,965 470,458 497,954 552,300 609,093 560,986 570,360 638,798 643,979 617,221

613,778 658,322 663,818 666,200 742,462 695,183 783,314 758,281 909,228 856,088 863,508 1,011,952 981,322 1,067,769 968,913 1,132,945 1,288,170 1,193,913 1,158,560 1,150,913 1,460,316 1,499,662 1,435,304

219,331 222,370 218,822 230,890 229,240 211,351 202,535 276,465 272,725 263,256 264,809 254,823 268,704 292,494 298,337 329,925 341,473 351,493 379,508 398,695 432,649 429,291 471,695

21,396,446 21,259,091 21,237,711 20,967,594 22,449,118 23,026,401 21,603,022 23,811,099 24,334,470 25,939,631 25,484,039 26,271,633 28,161,545 28,817,479 30,436,817 30,263,522 30,486,338 31,063,363 32,635,468 32,154,554 34,540,401 35,924,878 36,102,413

Source: Commonwealth of Puerto Rico, Department of Agriculture

Table A-3

.~ ~

Local Production of Food by Major Food Categories, 1951-1973 (Weight at the retail level in cwt.)

Year

Starchy Vegetables

1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973

6,076,266 6,241,929 5,764,274 5,361,163 5,484,333 5,343,635 3,626,176 4,770,068 4,616,737 4,692,272 4,538,260 4,479,114 4,606,780 4,784,472 4,271,808 4,724,356 4,558,215 4,146,338 4,465,352 4,506,866 4,839,778 4,701,365 4,716,696

Cereals 36,700 53,488 36,300 22,645 33,418 35,964 32,282 34,400 28,900 21,760 19,950 18,620 17,290 13,680 9,800 9,800

Green Vegetables

Legumes

Spices

545,285 483,723 460,929 492,384 523,004 647,212 601,500 632,550 598,718 713,815 659,320 653,867 783,425 744,868 805,971 770,168 679,739 682,470 599,852 647,837 634,597 669,280 543,229

224,060 211,269 151,209 198,674 200,893 185,606 191,567 195,788 216,600 181,012 176,544 178,676 167,008 162,540 127,457 151,432 127,807 132,082 124,557 88,732 97,229 91,332 84,761

9,868 11,204 10,406 11,002 11,635 17,608 14,131 16,982 18,097 20,148 19,949 18,441 24,187 28,762 31,240 42,102 27,902 30,717 29,495 26,383 24,229 24,994 22,258

Soups

j ~

Table A-3

(Contd.)

Year

Fresh Fruits

Processed Fruits

1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973

2,251,807 2,125,529 1,810,778 2,045,903 2,141,245 2,175,488 1,620,173 2,056,733 2,037,750 2,554,609 2,480,934 2,566.835 2,457,463 2,659,351 2,553,585 2,512,701 2,386,169 2,363,229 2,288,373 2,263,294 2,426,722 2,140,741 2,112,921

205,421 133,267 127,993 186,473 210,354 234,053 253,586 373,957 332,512 370,183 457,712 451,797 658,699 682,357 810,252 728,764 631,614 547,560 448,217 368,249 360,077 402,282 419,270

Dried & Frozen Fruits -

-

Beef & Veal

Pork

Poultry

172,760 183,498 146,214 151,417 170,968 205,256 213,621 234,911 248,021 210,201 218,106 222,106 246,035 263,815 301,336 331,021 332,441 314,572 296,719 296,771 330,902 340,569 350,979

151,041 175,166 175,463 177,788 182,131 185,888 184,261 189,766 195,997 201,038 216,467 223,423 235,309 233,058 249,147 250,672 250,849 261,051 286,012 269,430 274,350 291,090 305,263

124,140 125,710 122,390 129,640 127,690 129,410 135,750 149,650 168,420 176,750 205,640 233,330 243,390 255,120 229,040 238,000 244,500 250,780 253,670 276,520 300,000 304,000 319,600

Table A-3

(Contd.)

Year

Other Meats

Entrails

1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973

9,496 10,146 9,416 9,754 9,532 9,532 9,505 9,986 9,656 9,265 9,229 9,247 9,149 7,503 7,351 7,396 7,316 7,485 7,351 7,440 7,120 7,743 7,752

27,162 29,917 26,524 27,190 29,244 32,604 33,239 35,589 37,194 34,120 35,940 36,804 39,809 41,124 45,653 48,442 48,577 47,714 47,893 46,711 50,116 52,240 54,200

Fish & Sea Food Fish & Sea Fresh & Frozen Food Processed 21,113 21,458 21,804 22,150 22,495 22,840 23,186 23,532 23,877 24,223 24,568 24,914 25,259 25,606 25,951 26,296 26,642 26,987 27,338 27,353 28,560 26,989 26,679

1,000 1,824 2,648 3,472 4,296 5,120 5,944 6,768 7,592 8,416 9,240 10,064 10,888 11,712 12,536 13,360 14,184 15,000 15,000 15,000

Milk 2,613,153 2,718,890 2,990,521 3,339,208 3,570,011 3,888,684 4,168,442 4,423,346 4,767,797 5,424,837 5,594,365 6,038,039 6,469,952 6,654,745 7,003,260 7,076,446 7,220,590 7,466,477 7,536,739 7,511,412 7,559,422 7,713,469 7,710,094

Dairy Products 55,369 55,496 55,097 54,950 55,521 55,970 56,068 56,716 57,462 58,208 58,332 59,402 60,672 62,063 63,358 64,178 64,502 64,899 66,019 67,313 68,333 70,271 72,436

Table A-3

(Contd.)

Year

Eggs

1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973

119,367 125,828 131,187 129,889 145,303 148,950 161,458 168,036 176,792 186,233 197,157 224,347 257,934 263,149 265,018 280,603 286,933 290,348 289,489 294,686 291,531 308,672 323,080

Fats & Oils

Coffee, Chocolate, Tea and Others

Total

170,994 248,605 141,992 299,325 185,304 247,201 139,992 229,631 207,864 286,596 214,416 243,172 242,692 331,349 343,833 240,660 189,052 212,844 255,791 184,532 247,425 200,944 224,294

13,144,302 12,583,270 12,182,497 12,660,609 13,104,905 12,568,549 11,468,409 13,605,937 13,747,514 15,171,214 15,133,657 15,689,726 16,553,466 17,222,802 17,154,124 17,513,925 17,103,610 16,858,089 17,036,227 17,897,713 17,555,373 17,361,382 17,305,508

Source: Commonwealth of Puerto Rico, Department of Agriculture

Table A-4

Source and Use of the Food Supply, Major Food Groups at Retail Level in Pounds of Farm Equivalent, 1970a (cwtJ

Food Group Cereals • Starchy Vegetables Legumes Green Vegetables Fruits Meats Fish & Sea Food Eggs Dairy Products Fats & Oils Sugar Coffee Soups & Spices

a

Total t

Inshipments2

Outshipments

Consumption3

125,515 184,532 26,383

6,686,764 798,789 618,627 1,942,638 1,117,204 2,598,398 350,370 310,370 1,067,230 1,168,499 435,466 228,131 273,489

273,636 100,055 27,675 226,495 1,001,945 134,624 9,653 9,472 51,042 17,586 262,781 13,968 12,293

6,413,128 5,205,600 679,684 2,363,980 2,746,802 3,360,646 382,254 611,953 8,594,913 1,150,913 298,200 398,695 287,579

17,039,597

17,595,975

2,141,225

32,494,347

Production

4,506,866 88,732 674,837 2,631,543 896,872 41,537 311,055 7,578,725

Retail weight excludes package and containers. Production includes consumption from home production. (i.e. includes food consumed by those farms or households which produce it).

2 Inshipments include USDA donations. 3 Consumption estimates do not take into account change in inventory. It was actually referred to by the Department of Agriculture as "Abasto Disponible", ("Available Supply"). Deterioration and other utility destruction is included.

Source: Commonwealth of Puerto Rico, Department of Agriculture.

Table A-5

Source and Use of the Food Supply, Major Food Groups at Retail Level in Pounds of Farm Equivalent, 1971 (cwt.)

Food Group

Cereals Starchy Vegetables Legumes & Green Vegetables Fruits Meats Fish & Sea Food Eggs Dairy Products Fats & Oils Sugar Coffee, Chocolate, Tea and Others Soups & Spices Total

Production

Inshipments2

Outshipments

Consumption

4,938,778

6,676,590 1,379,712

361,169 75,994

6,315,421 6,143,496

2,404,041

2,50,404 1,320,710 3,653,667 337,251 357,285 1,255,852 1,492,486 391,266

202,504 950,769 243,302 39,273 10,018 25,089 32,170 129,790

3,037,726 3,206,740 4,372,853 341,538 638,798 8,858,518 1,460,316 2,665,517

247,425 19,757

198,056 324,362

12,832 19,387

432,032 324,732

19,954,960

19,945,641

2,102,297

37,798,304

731,826 2,786,799 962,488 43,560 291,531 7,627,755

1 Production includes consumption from home production. (i.e. includes food consumed by those farms or households which produce it). z Irrshipments includes USDA donations.

Source: Commonwealth of Puerto, Department of Agriculture, Office of Agricultural Statistics and Economic Studies.

Table A-6

Source and Use of the Food Supply, Major Food Groups at Retail Level in Pounds of Farm Equivalent, 1972

Food Group Cereals Starchy Vegetables Legumes & Green Vegetables Fruits Meats Fish & Sea Food Eggs Dairy Products Fats & Oils Sugar Coffee, Chocolate, Tea and Others Soups & Spices Total

Production

Inshipments2

Outshipments

Consumption

4,701,365

7,703,531 891,776

251,553 41,849

7,451,978 5,551,292

2,583,180

2,598,702 1,428,998 4,009,971 420,821 343,848 1,237,217 1,514,824 314,149

199,054 629,582 274,857 16,651 8,541 38,840 75,162 93,827

3,160,260 3,342,439 4,730,756 446,158 643,979 8,982,117 1,499,662 2,803,502

200,944 17,438

235,766 293,952

7,419 24,750

429,998 286,640

19,936,605

21,053,554

1,662,085

39,328,074

760,612 2,543,023 995,642 41,989 308,672 7,783,740

t Production includes consumption from home production (i.e. includes food consumed by those farms or households that produce it). 2 Inshipments include USDA donations.

Source: Commonwealth of Puerto Rico, Department of Agriculture

Table A-7 Food Consumption and USDA Donations at the Retail Level in Pounds of Farm Equivalent, 1972

Food Group

Total Consumption (cwt.)

Donations by USDA (cwt.)

Donations as Percent of Total Consumption

Cereals Starchy Vegetables Green Vegetables & Legumes Fruits Meats Fish & Sea Food Eggs Dairy Products1 Fats & Oils Sugar & Derivatives Coffee Chocolate, Tea & Others Soups & Spices

7,451,978 5,551,292

535,051 55,860

7.18 1.01

3,160,260 3,342,439 4,730,756 446,158 643,979 8,982,117 1,499,662 2,803,502 297,292

234,927 160,633 175,840

7.43 4.81 3.72

30,229 390,514 105,032

4.69 4.35 7.00

Total

39,328,074

1,688,087

4.29

131,999 286,640

11 Does not include butter which is included in the Fats and Oils Group. Source: Commonwealth of Puerto Rico, Departments of Agriculture of Puerto Rico, Social Services and Education; U.S. Department of Agriculture.

Table A-8

w

Individual Components of the 21 Major Food Categories

Starchy Vegetables

Cereals

Green Vegetables

Legumes

celeriac potatoes green bananas plantains tanniers yam sweet potatoes dasheens casava bread fruit

corn rice wheat oats

sweet corn string beans sweet peppers cucumber okra celery watercress asparagus onions peppers tomatoes pumpkin lettuce egg-plant vegetable pear

beans pigeon peas peas french beans lentil lima beans

Processed Fish and Seafood herring codfish

Milk fresh milk cream whole powdered milk non fat powdered milk evaporated condensed

Table A-8

(Contd.) Coffee, Chocolate Tea, and Others

Milk Products

Eggs

Fats & Oils

cheese butter milk shake other milk products infant dietetic food other milk products

fresh processed

corn oil coffee peanut oil cocoa soybean oil chocolate lard tea "mate" mayonnaise oleomargarine olive oil

Spices

Fresh Fruits

Soups

garlic cinnamon spices cloves pepper vinegar mustard anise seeds marjoram coriander yeast seasoning paprika cumin capers monosodiaum glutamate (ajinomoto) sweet marjoram bay leaves

bananas mangoes avocado pineapple grapefruit oranges citron guavas lemons watermelon genips pa paw tamarind coconuts nuts

dehydrated canned

Table A-8

(Contd.)

Processed Fruits

Juice

Dried and frozen fruits

peaches fruit cocktail pear pineapple grapefruit peanut guava paste and pulp prepared and preserved fruits preserves jellies pastes candied and glow nut fruits apple and apple sauce cherries apricot prunes and plums

orange grapefruit peaches pear citrics vegetables

figs prunes and grapes plums apricots peaches pears

Beef and Veal

Source: Commonwealth of Puerto Rico, Department of Agriculture.

Pork

Poultry

Other Meats

Entrails

goats rabbit lamb

tongue kidney heart intestine liver

Fresh and frozen fish and seafood shrimps crabs lobsters

Printed by: Executive Press, Inc. San Juan, Puerto Rico, December, 1975

ERRATA Page 52

Table IV-7

Should read Location instead of Municipalities

Page 54

Table IV-9

Should read Location instead of Municipalities

Page 55

Table 1V -l 0

Should read Location instead of Municipalities

Page 83

Table V-14

X in lower left corner should read X

Page 128

Table VI-9

First line of table: 2.07 should read --2.07

r;