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Show face Four i THE DRAGERTON TRIBUNE Tuesday, July During the first "milk price truce requested by Governor Lee, Safeway presented full cost and profit figures to Utahs Milk Study Committee . These figures included: A analysis of costs and profits in milk for the 4 week period ending June IB, 1955. per-qua- rt Net profit earned by the Lucerne Milk Company, selling to Safeway, in 1954 totalling $137,326.00 a little over 26.11 on its Investment. could cut plant and delivery costs all along the line. Like any sound business operation, Lucerne is set up with an eye to tomorrow set up to handle greater volume with little increase in cost so that the per quart plant cost of handling milk would be lower. AND WHAT ABOUT PROFITS? Lucerne's net profit earned through the first 20 weeks in 1955 totalling $5?, 575.03. The substantial profit figures showed that Safeway could sell milk for less, continue to pay top market prices and and still earn a reasonquality bonuses to dairy farmers able profit and good return on its investment. To fully appreciate how this could be done you should know how costs and profits are figured in milk. Like any business concern, Safeway works toward increased business through greater volume and lower costs. As Safeways overall milk business increases per quart profits can be reduced and the difference passed on to you in lower milk prices. In the four week period (shown below) Safeways Lucerne plant profits were cents per quart. Safeway Stores cents per quart a for store and compensation handling profit. Lucernes May 21 report for the preceding 4 week period showed Lucerne's cents per quart. The higher profit for the profit of came from increased volume and lower costs. June period received the standard margin of HERE ARE THE SIX BASIC COSTS: 1. The costs of the raw milk itself; . 2. The costs of picking it up; 3. The costs of pasteurizing, homogenizing, testing and packaging the milk; 4. Administrative costs; 5. Delivery costs; and ' 6. Advertising costs. is the Of these costs, the most important and biggest price paid dairy farmers for milk. This price comes to almost 12 cents a quart on the milk you buy at Safeway. t SHOULD THE PRICE PAID DAIRY While these per quart profits seem low, they are substantial when based on volume. The 4 week period ending June 18, for example, brought Lucernes net profit for the first 24 weeks this year up to $68,205.65. So you can see how, in the future, Safeway could make a reasonable overall profit while still reducing its per quart profit, and passing the reduction on to you in lower milk prices. This, Safeway believes, is a sound way for milk bottlers and retailers to compete for your business. And it cannot hurt Utahs dairy farmers If the price they are paid for milk is protected. Unfortunately neither the Milk Study Committee nor the Legislative Council has recommended any positive action to protect dairy farmers. FARMERS BE REDUCED? SAFEVJAY'S Cost on Safeway says NO! Dairy farmers are essential to the welfare of Utahs citizens. They must have fair prices to stay in business, and those fair prices must be constant. For this reason, it is HOW, TIHEN, Quart of Milk Safewas policy (never violated) PLUS bonuses for lo pay top market prices for milk quality. But as you can see this is a tempting place to cut costs and thats a way "price wars begin. Thats why Safeway presented witnesses to Utahs Milk Study Committee witnesses who testified, from experience, that where the price paid dairy farmers for milk is protected (by law or other regulation), price wars do not occur. For then, bottlers and retailers cannot pass the costs of competitive pricing back the easy way to dairy farmers. AUDITED FIGURES FOR By reducing processing, delivery, and other service costs through greater efficiency and better methods of operation. f FOR EXAMPLE: Safeway developed a method of welding its milk plant pipe lines so that the work (and costs) of taking the lines apart each day for cleaning would be eliminated and the cleaning job would be more complete more sanitary. This helps to reduce plant costs. Safeway has also gained efficiency through sale of milk through stores. Any other processor or distributor who wants to concentrate on this method of store sales of milk and it is done in many parts of the United States can have the same kind of efficient operation as Safeway. cash-and-car- ry Safeway is confident that in the future it will find many new ways to reduce costs. And, of course, any increase in volume sales (and thats 'hat any competitive businessman or concern works. toward) PERIOD EK ENDING JUNE 18, 1955 1. 2. 3. Price paid dairy farmers, including quality bonuses 32100 Cents All plant costs, including 4 Administrative costs 5. Delivery expense, including labor, trucks, ice, etc 6. Cents 1 Cost of picking up milk from farms, fat loss, finished produce loss laboratory, cartons, union labor, machinery, overhead and maintenance CAN THE COSTS IN MIIK BE REDUCED? a Cents 00 18100 Cents 71100 Cents 49100 Cents Advertising costs Profit to Lucerne To Safeway Retail Stores Cents 00 Cents WHY SAFEWAY IS PUBLISHING THIS STATEMENT Safeway was born in neighboring idaho. We have a big stake in Utah and a citizen's concern for Utah's wellbeing. We believe we have a responsibility to the public, our employees, suppliers, and stockholders to publish 'z record of our testimony to the Milk Study Committee. Watch for these reports in this newspaper. 12, 1955 |