1) Why did Birds Eye develop as a vertically-integrated producer?
In early 1940s, shortly after Birds Eye started its business, there were some difficulties in the frozen food industry. In order to keep the quality of the food high, it had to be frozen quickly. Even if the food is frozen right away, it had to be kept frozen until it gets to customers. First of all, to secure high quality raw materials, Birds Eye had annual contracts with farmers and had control over the materials. For fish, it had contracts that give it the right to buy certain percentage of the catch with some price agreements. That is, Birds Eye exercised a backward vertical integration by securing its suppliers. Next, Birds Eye had to establish a national distribution system. In the beginning, it was really hard for Birds Eye to make its relailers to install refrigerated cabinets even though the return on investment was quite high. However, Birds Eye succeeded in convincing two refregerator producers to start producing “open top” display cabinets. And Birds Eye decided to seek business only with the retailers who installed these cabinets. By doing this, Birds Eye achieved a forward vertical integration and established a nation-wide distribution network. These two things had to be done for Birds Eye to be successful in the industry because they were both critical in 1940s as mentioned in the beginning.
2a) Why did specialized intermediaries emerge?
Capital needed. The first reason why specialized intermediaries emerged is because some smaller companies that focused on one segment or even one product emerged. Since these small producers do not have enough capitals for distribution, there was a need for specialized intermediaries such as Christian Salvesen and Union Cold Storage. Not only those smaller food producers but also some maeketing-only companies emerged. They bought frozen food from producers and made their own brand name. In this case, there was also demand for specialist firms...
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