The National Food Exchange was established to provide a standard pricing
platform for the grocery wholesale industry.
Historically, prices that large retail supermarket chains pay
for their goods have varied, sometimes greatly, from chain
to chain. This is because it is to the manufacturer's advantage to charge
as much money as possible for their products. They achieve this goal by
creating disorder amongst grocery buyers at the chains using a costing
system based on 'list price' minus confusing discount vehicles
with code names such as 'accruals' 'scan deals' and 'bill-backs' which
purport to save the chains money on the cost of their goods. In fact this
system and these 'programs' serve simply to fool buyers and their
managers at the chains into either not knowing what they are actually
paying for goods or by being so complex that the buyers
become too tired or too overwhelmed to care.
In the 1960's from this environment evolved a
multibillion-dollar industry known to grocery insiders as the 'diverting'
industry. Grocery diverting has done its best to even out inefficiencies
in the supply chain of grocery products whereby a network of small,
privately held companies (diverters) buy truckloads of product from
supermarket chains in one part of the country where the price is low
and sell to chains in another part of the country where the price is high.
Although diverting has done its best to keep manufacturers
from gouging retailers it has been limited for a couple of reasons. One
is the desire of manufacturers reps to perpetuate personal, often
self-serving relationships with grocery buyers. This comes at the expense
of the very supermarket chains they are supposed to serve, and ultimately
the consumer, who pays for this inefficiency at the checkout line. Another
was the limited capacity for diverters to share cost information with
chains prior to the Internet. With the advent of The National Food Exchange
the veil of pricing secrecy has been lifted and the power is in the hands
of the buyers.
The National Food Exchange centralizes, normalizes and
reduces wholesale grocery prices.