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Cedar Rapids Gazette (Newspaper) - July 3, 1974, Cedar Rapids, Iowa Food Middlemen Claim Profits Eroding By Louise t ook Associated Press Writer The middleman in the chain that brings beef from the ranch to the shopping cart is getting more of your dollar than ever before. But he says his profit is being gnawed away by everything from higher labor costs to more expensive meat saws. Industry spokesmen say wages and fringe benefits are IO to 15 percent higher than last year; the light hill is anywhere from Third of a series IO to OO percent higher; paper bags and other packaging are up 25 percent or more; and those meat saws are almost IO percent more expensive than they were last year Packing Houses Elias Paul is president of John Morrell Co. one of the nation’s largest packing houses. He buys the steer at the feedlot, slaughters it and sells it to. the supermarket which sells it to you The latest agriculture department market basket showed the price of farm-produced food increased 0.3 percent in May. That meant that on an annual basis, it cost $1,733 to feed a hypothetical family of 3 2 persons — up $5 from April. The government said that if middlemen had passed along the savings resulting from lower prices paid to farmers, the consumer would have saved $34 on an annual basis. Morrell, a part of United Brands, had 1973 sales of $1.25 billion. Profits, said Paul, were “less than I percent . . . The company has never made as much as a cent per pound ” The packer got 7.4 cents of the dollar you spent for beef this April, compared to 6.2 cents a year ago. The industry claims the money is going for increased costs. “Caught in Spiral” “We’re all caught in this inflationary price spiral." Paul said. “We use an awful lot of fuel. We’re a labor intensive business.” Paul said he could not provide specific expense figures for the beginning of 1974 compared to previous years. He said that 75 cents out of every dollar that Morrell spends to produce the meat for shipment to supermarkets goes for the meat itself. Half of the rest, he said, goes for labor, adding that wages and fringe benefits for some employes have risen $1 an hour in the past year. The average industry wage is $8.29. compared to $7.41 last year. Paul said earnings for the beginning of 1974 are below last year, but he declined to give the figures. The animal that Morrell slaughters is sold to supermarkets like Pantry Pride-Eood Fair, the nation’s fourth-largest chain in terms of sales. Supermarkets are getting 30.6 cents of your beef dollar, compared to 26 7 cents last year. Clarence Adamy, head of the National Assn. of Food Chains, recently urged all retail stores to feature beef, to offer more specials, to move the meat to the consumer, creating a greater demand, getting rid of the oversupply arid pushing up wholesale prices. Bringing Down The supermarkets say they already have been bringing down the price of meat, even it the consumer doesn't think so. They argue that government figures don’t take into account the time lag between a drop at the wholesale level and a decline at the supermarket counter. “We have made sure that consumers do get the benefit of lower wholesale prices by lowering our retail meat prices.” said Harold Friedland, vice-president of Pantry Pride-Food Fair Pantry Pride had a net profit of just over $2 million last year, about 0.1 percent. One reason for the below average figures was the closing of unprofitable stores and the loss of $4 million in assets. This year, the chain expects sales of $2.3 billion and increased profits. John Kevaleski is the manager of a Pantry Pride supermarket in Newark, N J. He presides over a $6 to $7 million business a year, but says he has virtually no autonomy. Claims Find of Rocks From Core of Earth ITHACA, N Y. (UPI) - The first reaction of many of their colleagues seems to be skepticism, but a group of Cornell university researchers believe they have discovered some rocks that came from the core of the Earth. If they are right, the rocks — sold as curios in Oregon since the turn of the century — would be the first identified samples of the core. Serious Objection “We haven’t received a criticism that we haven’t thought about previously, or that is a serious objection against what we are saying,” said Prof. John Bird, one of the group that presented findings to a meeting of the American Geophysical Union. “The people who know the most haven’t been able to come up with an explanation. “Most of the people who have reacted to this have said this is a mineral that’s already known and is a product of a known process. We’re saying we have good strong elements to show it crystallized at the core-mantle boundary. This is what surprises the hell out of geologists. They can’t believe this is possible.” Essentially, Bird and his colleagues — Dr. George Morrison, a chemistry professor,- and graduate students Robert Botte and Maura Weathers — have employed relatively new geological theories and the peculiar structure and composition of the mottled grayish lr on-nickel nick to support their claim. Thunderstorm In a manner similar to the convection currents in a thunderstorm but at a rate of about “five feet a year,” Bird said, “plumes” of molten rock from the Earth’s core moved upward carrying the rocks to the crust Indow the Pacific ocean 150 million years ago Then using a theory of plate i tectonics developed in the late 1960s, the four hypothesize the rocks were scraped off as the giant plate of the crust under the Pacific moved eastward against the crustal plate of North America, bringing the rocks to the surface. Bird said they first began exploring the origin of the rock, known as Josephinite because it comes from Oregon’s Josephine county, when Bottu found some of the curious material in Cornell’s mineral collection. “We started analyzing things and found they were very strange rocks,” Bird said. “Among the things they found was that it’s a naturally occurring alloy of iron.and nickel.” He said the concentrations “follow patterns similar to meteorites” in which the iron-mckel crystallized as a result of a melt rather than through reduction. Outside of a meteorite, Bird said, “the only logical place for an iron-nickel melt system” is inside the Earth, where the pressure is more than a million times that of the surface. The structural aspects of the rocks are much different from those of a meteorite. One of the tests with which the scientists hope to cement their claim is a search for “primitive lead” in the sample. Such lead, different in atomic weight from common lead, “had to bt* present at the formation of the Earth,” Bird said. “Most of the people I’ve talked to say, 'If you guys can find that primitive lead, PII buy your story.’ ” Expert 3-DAY Service on * Watch and Jewelry Repair HUI Waltov Speciolizing in Diamond Remoonhntf and Diamond Appraisals Muling •h’trvlfr* Kovaleski does not have the power to set the price on any item — unless it is perishable and will not last the night. The shipments he gets are billed at retail prices. He's told what his gross profit is, but doesn’t know the net figures. Those figures all are kept at company headquarters in Philadelphia and chain spokesmen do not give out dollars and cents estimates. They do say, however, that labor costs wert up 18.4 percent over the past year; light and power 38.6 percent; paper bags 31.5 percent; interest rates 55 percent; and laundry costs 40 percent. Kovaleski gets a profit quota for each department, telling him how much money he should make overall. It runs about Ii percent for meat. He says he doesn’t know how much money is left after operating costs and other expenses come out of that 17 percent. Low Profit The gross profit margin for the meat department of all Pantry Pride stores is about 18 to 22 percent, a spokesman said Meat, he added, is a traditionally low profit item. How docs he know0 What are the specific figures for the meat money? Supermarket executives are reluctant to discuss specifics A. I). Davis, chairman of the board of Winn-Dixie Stores, a chain based in Jacksonville. Fla., reels off figures to show that meat prices have declined sharply since the start of the year Sirloin steak, $1.49 a pound at a Winn-Dixie in Atlanta com pared to $1 99 in January; chuck roast, 69 cents compared to 89 cents In January; ground beef, 69 cents compared to $1 09 in January. Davis said labor accounted for about 50 percent of hts overall costs last year; now, he said, it is 65 percent. “Paper bags have doubled in price, polyethylene wrap has doubled, so have the trays you put the meat on ...” Electricity Rates It is not unusual for the electric bill at a Winn-Dixie in Jacksonville t i run $4,000 a month, Davis said. l>ast year, it wus $2,000 or $2,500, he said. Most increases, he admitted, have not been so severe. Electricity rates in Jacksonville have soared above the average because of fuel adjustment charges that reflected the increased cost of imported crude oil. Davis said the supermarkets suffered during last year’s price freeze on the wholesale and retail price of meat. Last August, he said, Winn-Dixie was paying 561/i cents a pound for certain cuts of meat; the ceiling price that the store was allowed to charge was figured on a base period when the store was paying 40 cents a pound for the same meat. “We were barely making our payroll costs,” Davis said. lf costs are down, why aren’t people buying? “The consumer got ripped off last year,” said Davis, adding that boycotts, freezes, shortages, withholding actions contributed to customer confusion. “Now we have to win them back.” Next: W here is it all headed? AP Wirephoto John Kovaleski looked at a cut of meat recently at the Newark, NJ., Pantry Pride chain store he manages. He said that although the store does a $6 to $7 million annual business, he does not set most prices and said he does not know the net profit on meat sold at his store after operating costs and other expenses ane deducted from his I 7 percent quota of profit above cost. Save today and spark up your 4th of July holiday! 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