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that grocery stores are classed as SIC 5411 (See page 274 reproduced in Exhibit <br />"M; however, they are not correct when they state that category 5411 is <br />synonymous with supermarkets. The four digit category has four components: <br />convenience food stores/no gas (SIC 541120), convenience food stores with gas <br />(SIC 541130), delicatessens (SIC 541140) and grocery stores (SIC 541110). Thus <br />the four digit industry "grocery stores" has a six digit store type with exactly the <br />same name: "grocery stores". Those six digit grocery stores are mutually exclusive <br />from delicatessens and convenience stores. Just as all grocery stores are not <br />warehouse stores, all grocery stores are not supermarkets. Moreover the <br />definition of the six digit "grocery store" given in the industry and product <br />classification manual, as reproduced in Exhibit "C" is: <br />These are retail stores commonly known as supermarkets, food stores, grocery <br />stores and warehouse stores, which are primarily engaged in the sale of all kinds <br />of canned foods and dry good, other packages or in bulk, such as tea, coffee, <br />spices, sugar, flour, fresh fruits and vegetables. They may also sell fresh <br />and/or frozen meats, fish, poultry, eggs, and bakery and dairy products. <br />Grocery stores, with or Supermarkets <br />without fresh meat -retail Warehouse stores <br />Food market -retail <br />One can see that even at the six digit level where one has winnowed convenience <br />stores and delis out, the "grocery store" category still includes separate store types, <br />e.g. grocery stores, with or without fresh meat, supermarkets and warehouse <br />stores. Moreover the Census definition strictly speaking contains an error. The <br />first sentence should read "... grocery stores or warehouse stores." In fact if one <br />examines the 1992 Census of Retail Trade - Food Survey Instrument (Exhibit <br />"C' , item 7 asks the retailer to identify an exact six digit SIC store type and <br />among the choices are "Grocery Store - SIC 541111" and "Food Supermarket - <br />SIC 541112". So the SIC Code in its most detailed form defines supermarkets <br />and grocery stores as mutually exclusive and distinct use categories. I conclude <br />that the SIC classification system at no level of aggregation, considers grocery <br />stores to be synonymous with supermarkets. <br />7. Note that the Bureau of Census does not define a supermarket. The accepted <br />industry definition is a store that carries at least fresh meat, fresh produce and <br />fresh dairy products as well as dry grocery products and is above a specified sales <br />volume. Progressive Grocer requires annual sales of more than 2 million, but has <br />not adjusted this cutoff for inflation over the past 15 years. USDA has done the <br />adjustment and uses a 3.3 million (1992 Dollars) cutoff.' A.C. Neilsen, a leading <br />Market Research Group, uses a 4.0 million dollar cut off. More than scale is <br />involved when a supermarket increases in size, product mix changes Analysts <br />commonly identify sit different supermarket formats: the conventional <br />supermarket (less than 30,000 square feet), the superstore (more than 30,000 <br />square feet, with substantial nonfood and specialty departments), the combination <br />store (a superstore with a complete drug store in it, 60,000 - 80,000 square feet), a <br />warehouseAimited assortment supermarket (less than 30,000 square feet), a super <br />warehouse supermarket (over 30,000 square feet) and a hypermarket <br />(supermarket with over 40% nonfood over 100,000 square feet and often over <br />200,000 square feet).` <br />'Doris J. Newton, "Nontraditional Retailers Challenge the Supermarket Industry", Fob <br />Review, Vol. 16, No. 1, USDA, Washington D.C., Jan. - April 1993, p. 3. <br />°Ronald W. Cotterill, "Food Retailing: Mergers, Leveraged Buyouts and Performance" in L. <br />Duestch,lndustry Studies, Prentice Hall; Englewood Cliffs, 1993, p. 467-168. <br />411 <br />July 12, 1994 <br />MY <br />