Mr. UNTERBERG. I mean you got the cent off; that is a reduction of the cost of the product. Mr. McINTIRE. That is right. Mr. UNTERBERG. Yes, sir. That is the basic idea of this whole setup. Mr. McINTIRE. That retailer was giving me an election as to whether I was going to take stamps or whether I would take a cent off. Mr. UNTERBERG. You will find gasoline stations and druggists who will-who don't have the close markup that the retailers of food have. This is the big problem. Most of them work on a 1-percent margin and you have a 2-percent cost. Other retailers, like druggists and gasoline stations, have 17 percent or even more. They can readily absorb that cost without too much interference with their actual cost of taking a loss, but not so with food. Mr. McINTIRE. The average housewife who goes into the grocery store today, isn't she inclined to pay a little more for the housekeeping services in that project than she is in relation to stamps or anything else? In other words, she has some money in her pocket; she is buying. Do you think they buy that close when you see all of the services which are built into food today? It seems to me that they are demanding services which they are willing to pay for, and that these other costs are not the controlling factor in the picture. She wants service. Mr. UNTERBERG. I think, like you, if the average housewife was given an opportunity with a $20 bill to take an 8-percent reduction in cash to their family they would go along with that rather than take a stamp which even if redeemed and they have to purchase $130 worth of merchandise to get one book—and that book, after accumulating all of these books means they go to a redemption center which redeems normally at manufacturer's list price and you will find that if they made that saving from food costs they can get that same item at a discount house perhaps 50 percent cheaper, and they would make the saving both ways. First, the food bill and, second, they would still get the item and still put money in the bank. Mr. McINTIRE. That is all. Mr. JENNINGS. First of all, I believe you said you represented something other than the Associated Stores. Mr. UNTERBERG. Yes, sir. Mr. JENNINGS. Do any of your stores give trading stamps? Mr. UNTERBERG. Well, we represent Associated Food Stores which does not. Mr. JENNINGS. Do any of the others? Mr. UNTERBERG. In the Food Industry Alliance some of them do, but they would like to see the discontinuance of it. Mr. JENNINGS. How do those who do not give stamps meet the competition of those who give stamps? Mr. UNTERBERG. Just by selling the food at cheaper prices. Mr. JENNINGS. Do they advertise the fact that they are selling cheaper? Mr. UNTERBERG. They are selling food and not stamps. Mr. JENNINGS. Do they advertise they are selling food and not stamps? Mr. UNTERBERG. There are many advertisements that go into a paper to that effect. It is very effective. Mr. JENNINGS. That answers my question. Mr. ANFUSO. One more question. You said you represented the Food Industry Alliance. How many members does it comprise? Mr. UNTERBERG. They have approximately 23 members. Mr. ANFUSO. Do you know what is usually spent for advertising by business-is it about 1 percent? Mr. UNTERBERG. Offhand I would not know the exact percentage. If you have the information on that I will accept it. I could add this: all of these features that you are talking about— the advertising, special services-these continue. These have to continue. This represents an added cost which has to be absorbed by the retailer and has to be passed on. The costs are increased by the addition of the double stamps, the riple stamps, and the fact of what they are doing now of giving away the free gifts is going back to the same setup. The competitive value of stamps is lost and today they are merely representative of an additional cost of doing business. Mr. ANFUSO. You are a very eminent attorney in this city. Your reputation follows you. We will allow you to conclude in 3 to 5 minutes your essential argument. Mr. UNTERBERG. To sum it up, in relationship-and we are talking now only in connection with the matters before this committee-regarding increased costs-food merchants all over the country have one desire; that is to sell food, not stamps, not gimmicks, nothing else. It is in the interest of the country at large to have food costs at the lowest possible margin, so that the country as a whole may maintain its present state of health, its nutritional value, and also its basic economy. If any factor that has been injected into this whole stream of food distribution which is not related, which is abnormal in the cost of food distribution and continually increases the cost of food prices as this stamp system is where the retailers have been paying over $700 million, taken out of the stream of commerce and distribution of food this I say is one of the prime factors to the large continuous increase in cost of food. Mrs. KNUTSON. If you took those stamps away would we have a guaranty of taking away all kinds of advertising gimmicks like the cedar chests and fur coats-would you want to take that away, Have they mentioned that? too? Mr. UNTERBERG. They have not mentioned that because we find now that they are doing, because of the saturation factor-they are doing the same thing in addition. They have to, because the value of the stamps as a competitive thing has ceased. Incidentally, all over the country now retailers are reevaluating it because they cannot exist. The smaller retailers are being compelled to go out of the business because t t absorb that cost. So you have a two-prong attack. Where your biggest stores are able to give additional promotional gimmicks aside from the cost, they are the ones who are forcing out the small retailers who cannot function with an additional promotional force. I will say this: Your food industry, despite the supermarket operations and small retailers, the independent supermarket operations, is a factor in our food distribution system. It is to the benefit of the housewife to know and be familiar with the fact that the retailers have to absorb these costs, and they are not going to operate at a loss. These costs are passed on. Mr. ANFUSO. Thank you very much. Is there anything else you would like to say? Mr. UNTERBERG. Yes. I just received a note on something I neglected to bring up that I should like to mention at this time. You asked the question before about prohibition and free enterprise. I think this, that with the Federal legislation on the statutes today, there are adequate ways in which this trading system can be regulated. I say that with the disclosures of the cost and values so that the housewife going in will know how much she is paying for food and how much she is paying for the gift should be available and let her form her own judgment as to whether she wants to trade in the store that is giving stamps or food at its real cost. If this Federal legislation can be enforced, I say, we might have the free enterprise. In other words, there may not be anything illegal about the stamp business per se, but we may accomplish the factors we are talking about and those who want the stamps may have the stamps providing they know what they are paying for. Mr. ANFUSO. Then your final conclusion is that you are not totally opposed to trading stamps, but you believe in some form of regulation? Mr. UNTERBERG. To make them aware of what the costs are so that the food costs are known. I don't want to agree with you that I am not totally opposed. I am opposed to food stamps per se because they add extra costs to retailing. This is a burden which the retailers cannot meet. Mr. ANFUSO. You are opposed, but you are offering an alternative? Mr. UNTERBERG. Right. Mr. ANFUSO. Thank you very much. Mr. COOLEY. If you eliminated stamps, would you not have to go further and eliminate all such things as gifts and sales promotional schemes? Mr. UNTERBERG. Mr. Cooley, the choice of giving a gift or a promotional scheme will depend upon the individual retailer in his area. Once a retailer signs a contract with a stamp company, he is locked in. He cannot discontinue it, because if he discontinues it, then with the competitive advantage there is, he goes to the other people in the area. However, on the promotion or gift that goes for a limited period of time, you have a 30-day period, so that he knows, he can evaluate his costs. It is not a drain on his business. But with stamps day in and day out, he has to pay in advance 2 percent of his sales to have these stamps on hand continuously. Mr. COOLEY. You think that most of the people who are using stamps are doing it involuntarily. Mr. UNTERBERG. Definitely. That has been established in innumerable retail conferences all over the country. Recently, Governor Harriman's hearings of retail groups established that fact. I would say that if the retailer was given a choice today there would be an overwhelming response, "Take this 2-percent cost off my shoulders. I want to sell food and not stamps." Mr. COOLEY. Thank you. Mr. ANFUSO. Thank you very much. Without objection, a copy of the brief submitted by the witness, in the matter of the Sperry & Hutchinson Co., and others, will be made a part of the files of the committee on these hearings. (The document referred to will be found in the files of the committee.) Mr. ANFUSO. We have been talking about a very hot subject. Mr. Adams, who was supposed to be here this afternoon, has been kind enough to come this morning. He has a very important engagement, I am going to ask him to speak now. His testimony will be very brief. Please identify yourself for the record. STATEMENT OF JOHN Q. ADAMS, MANHATTAN REFRIGERATION CO., NEW YORK, N. Y. Mr. ADAMS. I brought a copy of the stationery of the outfit. I am John Q. Adams of the coordinating committee of the food industries. Mr. ANFUSO. We have your address? Mr. ADAMS. Yes. Mr. ANFUSO. Mr. Adams, you are also an officer of the Manhattan Refrigeration Co., are you not? Mr. ADAMS. Yes, I am. Mr. ANFUSO. I understand that you have a statement to make before the committee. We will be glad to hear it. Mr. ADAMS. I am very pleased that you ladies and gentlemen have had occasion to come and at least look at one of the food markets here. This coordinating committee was established a few years ago and one of the principles was to find out what could be done with these markets, these wholesale markets. We were almost in despair. We tried to support Mr. Crow's various bills to get more attention, more appropriations for this new market activity on the part of agriculture but we seemed to have opposition. We could not get people to go down there Mr. ANFUSO. If I may interrupt-we have another distinguished Member of Congress, Eugene J. Keogh, of New York. Mr. ADAMS. Glad to know you, sir. It seems that the opposition to these new markets, marketing improvement bills, came from people who just did not seem to comprehend the importance to the farmer, to the consumer of modern, progressive wholesale markets. So we undertook in this area, at least to educate the city, State, and other officials and also, the Department of Agriculture in which we are fortunate that we had a very sympathetic group there headed by Mr. Crow. Our target was really in New York City to get the food people and the public-minded citizens and businessmen and the city officials to at least give recognition to this very miserable situation of the wholesale markets and we were successful over a period of years in getting considerable support for this problem. We have had many difficulties, though, because the large number of people with vested interests, real estate holders, transportation companies, and others, just did not seem to think that we should change the status quo, no matter how old, or decrepit the markets were, no matter how much the traffic and other things became congested. But rather than tell you of all the problems that we had, I think I could summarize this in a moment or two by telling you that in our opinion the present administration in New York City, with one or two exceptions, is the first to go all out to give attention to the problem of the food markets. Mr. ANFUSO. Let me interrupt you. I know the job that you have done, you and your committee, to try and correct what you have just described, a miserable wholesale market. The committee is very much Mr. ADAMS. Plural markets. Mr. ANFUSO. Yes; markets. The committee is very much interested in that. We would like to have your conclusions, and what you think ought to be done. Mr. ADAMS. I was starting to say in my conclusion of my statement, Mr. Chairman, that one of the recommendations I have is somewhat the same as the conclusion. I think that over a period of 5 or 6 years we have been trying to persuade the city administration to take an interest in this problem. They have taken the interest and they have appointed a committee now to work this matter out with the food industries involved. So, No. 1, in answer to your question, Mr. Chairman, I think the first thing that has to be done in any city, particularly in New York, because that is where we are, is to get the city administration unanimously in support of improving the marketing facilities. In our opinion that has been accomplished in New York. Mr. ADAMS. In this particular case. In a hearing at the borough president's office in Brooklyn, the deputy commissioner of traffic, and others, agreed unanimously to undertake to improve the fish market or if they could not improve it, with a reasonable amount of money expended, they were ready to recommend its replacement or relocation. That is concrete evidence. That shows that the city administration does realize the importance of it. I might as well admit that with one or two exceptions that has not been the case over the years. We have wasted our money and time and efforts. If we cannot get the city administration behind a project like this— you don't go to the citizens, the people-you have to get the city administration. |