from the deceptive, misleading, and unfair packaging, labeling, or pricing of products that have been practiced in the past by the unscrupulous few. There are many others scheduled to testify before the Senate Commerce Committee in opposition to this bill on these general grounds. Therefore, the purpose of this letter is to provide the committee with the benefit of this company's experience in the manufacture of our principal product lines-snack foods. The following examples are used to illustrate the reasons Frito-Lay opposes bill S. 985, in particular its section 3(c) (1), (2), and (3), which permits the Secretary of Health, Education, and Welfare to promulgate regulations establishing weight, quantity, size, shape, and dimensional standards of product containers and packages. Frito-Lay must manufacture and distribute its snack foods close to its market areas due to the perishable nature of the products and the careful handling they require. It is our experience in this business, which is quite local in nature, that package sizes and prices are affected by consumer preference and by labor and material costs, all of which vary from area to area at any given time. Consumer preferences vary Consumers have shown price preferences for packages of snack foods. Any attempt by a manufacturer to alter these local preferences results in sacrificed sales. 1. On the west coast, consumers have shown they prefer 29-, 49-, and 69-cent priced packages. 2. In the Southwest, this preference is for 29-, 49-, and 59-cent package prices. 3. The consumer in the Midwest supports packages priced at 29, 39, and 59 cents. 4. Eastern consumers show a strong preference for packages priced at 39, 59, and 79 cents. 5. The nickel-priced bag is the most popular throughout the country. Labor costs vary 1. Labor rates in the company's Los Angeles plant are 29 percent higher than in its Dallas plant. 2. The Stockton, Calif., plant's labor rates are 12 percent higher than that of the Los Angeles plant. Prices for corn vary This is a comparison of some 1964 examples: 1. The cost of corn was 35 percent higher in Los Angeles than in Indianapolis. 2. It was 21 percent higher in Los Angeles than in Dallas. 3. It was 8 percent higher in San Jose, Calif., than in Los Angeles. Prices for potatoes vary This is a comparison of some examples of the 1964 annual average in different communities: 1. Los Angles potato costs were 20 percent higher than those in Madison, Wis. 2. Los Angeles was 15 percent higher than Fall River, Mass. 3. Atlanta, Ga., was 8 percent higher than Los Angeles. Prices for packaging material vary 1. The cost of unfinished cellophane is 10 percent higher in the West than in the East. 2. The cost of prefabricated cellophane bags is 15 percent higher in the West than in the East. Prices of snack packages, therefore, are set by consumer preference. The volume of products placed within these packages is determined by the labor and material costs within the particular region in which they are manufactured. The high degree of competitive pressure within any market area forces all snack manufacturers in that area to pack as much volume or weight of product in each priced package as is possible and still permit a fair profit per sale. An examination of Frito-Lay's regional variations of potato chip package volume would be helpful here. The universally accepted nickel bag of potato chips in 1964 contained a half ounce of chips in the West, and five-eighths of an ounce in the East. This variation extended throughout all price brackets in those areas. Frito-Lay's profit on a nickel bag is extremely low, and in some cases is praetically nonexistent, but the company continues to supply this size because the consumer wants it, and it helps broaden consumer experience with our product, hopefully resulting in stimulated sales of the more profitable higher priced packages. An established nationwide standard weight for this size would eliminate the nickel bag from the marketplace. For example, a %-ounce nickel bag of potato chips increased to 1 ounce would raise the cost of that item by approximately 48 percent. The retail price of the resulting 1-ounce package would have to be 8 cents to meet the increased cost. In market tests, consumers have shown they will not purchase this priced package. As another example, should a weight of 4 ounces be established for a 29-cents potato chip package, now containing 31⁄2 ounces on the west coast, the package would have to be sold for 44 cents to recover the 25 percent increased cost of added packaging material, ingredients, and labor involved in such a weight revision. Findings from the study conducted by Colonial Stores and Progressive Grocer magazine and released last year, help substantiate the previous statements concerning consumer preference. They also illustrate that consumers are far more alert, more intelligent, and more observing, than the authors of bill S. 985 seem to believe. Here are some of the findings from this study that illustrate the consumer preference for purchasing in multiples and their keen ability to determine the actual price of their purchases. 1. It was found that 74 percent of consumers prefer to purchase in multiples. 2. A popular brand of peas lost 58 percent of its normal sales volume when the price changed from two for 45 cents to 23 cents each, a price increase of only a half cent per item. 3. The most popular brand of applesauce in a store lost 41 percent of its sales volume when the price of two for 33 cents changed to 17 cents each, another case of adding only a half cent to the price of one package of the product. 4. When the price for a can of deviled ham changed from 21 cents to two for 41 cents, sales increased from 63 to 92 units per week, a 46-percent increase in sales, due to the savings of a half cent per can. 5. The savings of one-third of a cent per item was sufficient to increase sales of a No. 211 size can of pineapple juice by 159 percent when the price changed from three for 25 cents to six for 49 cents. 6. But the consumer is not fooled by multiple pricing. No measurable sales increase was achieved when the price of a 34-ounce package of meat changed from two for 25 cents to six for 75 cents, or no savings in price. The one factor that has not been considered here and the one factor that does not seem to have been considered in bill S. 985 is product quality. Although there is existing legislation establishing minimum standards for product quality, it remains to be the most significant factor that establishes the price of a particular brand of product or the volume given priced package of that product can contain. Under the existing free enterprise system, consumers can demand increased quality. Successful manufacturers must supply that demand, knowing the consumer determines the success or failure of a product. The quality of a purchased product is remembered by the consumer long after the price and weight are forgotten. It is the consumer that determines how much the manufacturer must invest in increased quality to deserve him as a customer. The consumer also has shown his willingness to invest in increased quality by paying a higher cost for a higher quality brand of a particular product. However, if weights and package sizes are legislated, and since consumers have established price preferences in given market areas, then, so is a quality limit legislated. Any increase in quality has resulted only through an increase in the manufacturer's investment in his product, an increase that must be passed along to the consumer either by an increased price per volume of product or through some increase in operating efficiency. Federal regulations standardizing packaging that would result from the passage of bill S. 985 would remove one approach to increasing this investment in quality. The free enterprise system also provides a free market where manufacturers may apply ingenuity, take risks, and compete freely for the consumer's loyalty. This free market must be maintained, in contrast to the less productive economic systems of many other countries where industry is controlled by the government and the consumer has little or no opportunity to choose between one product and another. It is this company's purpose, then, to oppose bill S. 985; to support more, not less, freedom, for the preservation of the free enterprise system now enjoyed in this country. Sincerely, HERMAN W. LAY, CHESEBROUGH-POND'S, INC., Hon. W. G. MAGNUSON, Chairman, Commerce Committee, U.S. Senate, Washington, D.C. DEAR SIR: Having carefully read the contents of S. 985 on which your committee will hold hearings shortly, we find ourselves strongly opposed to it. The bill, if enacted into law, could have a detrimental effect on our business individually as well as, we think, the American business system generally. While much of the first part of the bill merely restates existing law, either State or Federal, section 3(a)(5) introduces a novel prohibition which can fundamentally affect our company. This section enjoins any statement on a package that the product "is offered for retail sale at a price lower than the ordinary and customary retail sale price"-whether or not the statement is true. It is common practice in the food, cosmetics, and toiletries industries for a consumerproducts manufacturer to reduce his prices to the trade occasionally or temporarily and at the same time imprint on his packages an indication of the reduction in price the retailer will make to the consumer. Because the price reduction is printed on the package sold to the consumer, and because the dealer's customary profit margin is generally preserved, the retailer will virtually always pass such "cents" savings on to the consumer. We particularly urge rejection of section 3(a) (5) for the following reasons: 1. It is unreasonable to prohibit relevant nondeceptive statements in selling the consumer.-We believe that where manufacturers imprint a "cents off" legend on their packages the savings represented are passed on to the consumer. The consumer, accordingly, is in no way being confused-she thinks she is getting a certain price advantage, and she actually gets it. To condemn this as illegal seems to abandon logic in favor of whimsy. 2. It deprives the manufacturer of a useful sales approach.-Surveys show that women prefer the "cents off" type promotion over all others. A manufacturer using the promotion then benefits because new customers will try the product and because the increased sales volume generated compensates him for the lower price he charges. 3. It will deprive the consumer of actual cash savings.—It is apparent that no manufacturer will deliberately reduce his prices to the trade on an item which is meeting otherwise satisfactory sales acceptance unless this price cut can be promoted at point of sale. Consumers' savings formerly created by manufacturers' price reductions will disappear if this bill becomes law. 4. Popular consumer attractions like combination offers and premiums will be prohibited. The statute certainly is broad enough to cover combination sales such as shaving cream with razor blades or hand cream with cold cream. These are generally offered at a price reduction and commonsense dictates that the consumer be made aware of this. To prohibit advising the consumer of the saving is in effect to prohibit the combination sale, since the manufacturer's incentive has been destroyed. The effect of this bill on premiums is less clear but potentially of much wider import. 5. It discriminates against the small chain and independent store. The seetion permits a retailer with a private-label product to engage in the practices otherwise forbidden to manufacturers. Smaller drug and grocery units cannot afford private brands, and must rely on manufacturers for their products. The second part of the bill (sec. 3(c)) also seriously affects our company since it could permit rigid restrictions on package design. Section 3(e) (1) in particular could greatly increase our costs without any commensurate tangible benefit to the consumer. This section would permit the Government to stipulate the net weight of a package designed for sale to the consumer. The stated pur pose is to do away with "odd" fractions of ounces which make it difficult for consumers to compare competing products on a cost-per-ounce basis. Even assuming there is a tiny percentage of women who buy cosmetics and toiletries on a basis of comparative price per ounce, the convenience provided them would be more than outweighed by the overall increase in cost arising from necessary introduction of new jars, bottles, etc. At the present time, Chesebrough-Pond's, Inc., markets a moderately priced line of creams for cosmetic purposes. Included are cold cream, vanishing cream, dry skin cream, moisture base, and hand cream. Each category shares at least one jar with another category, and three jars are shared by three categories. Nevertheless, because of the different density of each product, net content is different in each case. For example, the jar used in our medium size Pond's vanishing cream contains exactly 4 ounces; the same jar used for cold cream has 3.5 ounces; yet for Pond's moisture base, it holds 4.1 ounces. To require us to change to three different jars just to make ounces come out even strikes us as absurd, when it is recognized that the hundreds of thousands of dollars of additional costs would have to be passed on to the consumers the bill is intended to benefit. In conclusion, we believe the committee should consider the extent to which it will be delegating legislative power under this bill and the scope of the bill's potential interference with the free competitive market. A significant percentage of the country's gross national product would be covered (everything from toothpicks to refrigerators); many of the most important facets of marketing would come under absolute control (packaging, labeling, and promotional activity); and all this would be carried out on what could be an utterly arbitrary basis. The bill provides that agency regulations should be written in the interests of facilitating rational comparison by consumers-a somewhat elusive concept. We strongly urge you therefore not to report this bill from your committee. We would appreciate your entering this letter in the minutes of your hearings. Very truly yours, JEROME A. STRAKA, President. NATIONAL FROZEN FOOD ASSOCIATION, INC., New York, N.Y., June 3, 1965. CLERK OF THE COMMERCE COMMITTEE, Washington, D.C. DEAR SIR: We respectfully request that you incorporate as a part of the record of public hearings concerning S. 985 the attached resolution adopted at the recent meeting of the board of directors of the National Frozen Food Association, individually assembled from 25 States, and acting in behalf of their 1,200 member companies and their more than 100 million consumers who would be ill-served by poorly conceived, straitjacketing legislation that would block the advance of this progressive industry. Sincerely yours, A RESOLUTION HARRY K. SCHAUFFLER. Whereas the board of directors of the National Frozen Food Association in meeting assembled at Colorado Springs, Colo., May 21, 1965, is greatly perturbed and genuinely disturbed about the antibusiness provisions of S. 985 now pending in the Senate of the United States; and Whereas this bill is euphemistically cited as the "Fair Packaging and Labeling Act" instead of "an act to straitjacket, retard and restrict American business from exercising intelligent ingenuity and originality in presenting food products to the consuming public in attractive, appealing, and various sized packages"; and Whereas the said S. 985 would adversely affect the sale of all packaged food products including frozen foods; and Whereas S. 985 would relegate all American business into a pattern of conformity and uniformity; would provide bureaucratic governmental control of all package merchandising and advertising; would destroy initiative, free enterprise, and the right of the producer, packer, and processor to experiment with new techniques, new methods, new packaging, and new and improved presentation of foods to the American housewife unless there were long drawn-out, involved, complex, and expensive governmental bureaucratic hearings; and Whereas the directors of the National Frozen Food Association resent and condemn the assumption that all American businessmen engaged in the food packaging industry are dishonest, deceitful, and fraudulent; and Whereas the directors of the National Frozen Food Association resent and condemn the assumption that the consuming public of America, including American housewives, are ignorant, uneducated, gullible, and incompetent to determine for themselves what packaged foods they should or should not purchase; and 48-222-65--51 Whereas the directors of the National Frozen Food Association resent and condemn the assumption that governmental functionaries, agents, and employees should undertake to substitute their judgment for the judgment of successful packers, processors, and manufacturers of food products when in truth and in fact American business has made Americans the best fed, the best nourished, the highest standard of living people in the entire world: Therefore be it Resolved, That the Congress be urged to defeat S. 985 as being impractical, unworkable, and contrary to the spirit of free enterprise and individual initiative which has always proceeded on the proposition that a citizen has the right to experiment and devise new and better methods of packaging and presenting food products to the American consuming public; be it further Resolved, That the board of directors of the National Frozen Food Association express its conviction that only proper packaging and labeling as practiced by legitimate American business makes repeat business and insures business success, and there is no necessity for the Government to interfere in this field of endeavor; Resolved, further, That a copy of this resolution be forwarded to the clerk of the Commerce Committee of the U.S. Senate with the request that it be made a part of the records of public hearings concerning S. 985; that copies be provided to other trade associations concerned with the frozen food business generally; and that each member of the National Frozen Food Association be furnished a copy of this resolution with the request that he immediately contact his Senators and Congressmen expressing opposition to S. 895. W. F. STRAUB & Co., Chicago, Ill., April 20, 1965. Hon. W. G. MAGNUSON, Chairman, Commerce Committee, DEAR SENATOR MAGNUSON: I would like to testify at the hearings regarding Senate bill 985, the so-called packaging and labeling bill. Unfortunately, I will be unable to do so during the month of May, which may make it impossible for me to testify. However, if the hearings continue into the month of June I would like to be heard and would speak as the head of a small manufacturing concern. Actually, this bill would have little, or no, direct effect on our company's operations in the near future. I am concerned, however, at the power "to make and write recipes" which is involved in this legislation. Our principal product is honey, which is a heavy liquid. It is not too much heavier than sirup which is measured in fluid ounces. Is honey then to be sold by the fluid ounce or, as by custom, continue to be sold by the pound. A few years ago, Mr. Chairman, we went through extensive hearings at the Food and Drug Administration when standards of identity were established for prune juice. The Administration was not going to allow us to include a small amount of honey in the juice as an additive (a natural food) but still would allow the attition of chemical citric acid. The basis at that time was that "they did not feel there was a need for it." It cost us a great deal of money to prove otherwise. It caused the Food and Drug Administration serious embarrassment because they conducted a biased investigation. This bill would involve this kind of partiality where Mr. Big will continue to push Mr. Small around. It is this problem I would most like to speak of. Sincerely, JOHN W. STRAUB, President. SIBERIAN FISH PRODUCTS CO., REN G. MAGNUSON, ate of Washington, Seattle, Wash., April 19, 1965. R: We as a small manufacturer in your State, have been increasingly with the implications of the proposed Hart packaging and labeling 85-not only as it could affect our small business but in consideration manufacturers and canners in our country. |