Evening star., 1947-10-06
Food Companies Show
Same Unit Sales Profit
Today as Years Ago
Margin Of Profit Is Seen
Even Under SO Levels
In Bank Letter Survey
Bv Davfd Laaerence


who have been crying "profiteer,"
but the latest available data on the
earnings Of food companies show,
on analysis, that the profit margins
per sale are actually no higher than
they were 10 years ago and in some
instances are even narrower.
The National City Bank letter,
which every month brings out sig
nificant analyses Of economic
trends, presents this time table
showing the annual profit margins
per sales dollar of leading food COM
panies since 1896. Thus, in the bak-
ing business the margin was 6!6 cents
per dollar In 1886. In the first half
Of 1947, 1t was only So cents.
In dairy products, too, the margin
In the first six months of 1947 was
81 cents as compared with 3.5 cents
in 1886. The data show meat pack
ing at IL cents In 1916 as compared
with 1.3 in 1886. The comparison in
sugar Is 6 cents in 1946 as against
S.5 cents 10 years before.
Grocery Chain Figures.
Most interesting is the tabulation
on retail grocery chains. 1t shows
is cents in 1916 and is cents for the
first half OF 1947 as compared with
is cents in 1886.
Where, then, have all the proflts
gone or rather where is the higher
cost to the consumer coming from?
Maybe the answer is in the revela-
ton that the farmer in the years be-
tween 1885 and 1899 averaged only
40 per cent of the retail value OF his
products and by May 1947 this had
risen to 50 per cent. But the farmer
has to buy city-made and union
made products and equipment for
his farm and for his own use, so ne
now must have higher share in
money out of the retail price OF what
he produces.
It Is significant that the market
ing charges-which include all labor
costs and other expenses In food
processing, fuel and supplies, pack
aging, handling, transportation, etor-
age, taxes, insurance, advertising,
etc, and profits-show a decline
from go per cent Of the rental price
in 1886 to 48 per cent today.
Small Profit Is Seen.
Along with this data. attention Is
called to the report issued by the
congressional joint committees staff
To-. nT1fe
hearings. which says:
This table clearly demonstrates
how a relatively small increase in
profit per dollar of sales Is accentu-
ated in rate OF income on net worth.
Most of the dollar increase in profits
Is accounted for by increased volume
of business rather than by Increased
profits per dollar of sales"
This means that profits are at
tributable to large volume, and, OF
course, there Is no assurance OF
fixed volume. The price indexes,
too. show that from the 1858 av-
erage to May 1947, retail prices OF
farm food products rose IS per cent,
wholesale prices rose 102 per cent,
and prices received by the farmers
went up 139 per cent.
Spiral Has Several Starts.
It is apparent, therefore, that IN
an inflationary era the spiral can
start either with the high cost OF
foods or the high cost Of wages or
clothing, rents or other items OF
household necessity. 1t is difficult
to tell where the impetus really be-
gins In a postwar period when
shortages OF food are so pronounced
and weather conditions tend to bring
on scarcity and higher price.
The news that the high price OF
food is not being and cannot be ab-
sorbed by the food dealers will dis
appoint those in the union-labor
arena who insist that all wage In
creases can be absorbed without any
price relief to the employer. Nor Is
the answer to be found In restoration
of Government controls, because de-
mand and supply follow inexor-
able practices. This means "black
marketing" or else lack OF incentive
to produce when controls are ap-
piled.
The world evidently has to muddle
through an inflationary era. produc-
ing more and more all the time I'M
til supply and demand are balanced
and until surpluses appear and there
is a downward curve In the whole
price level.
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