National cereal manufacturers receive high margins for many of their cereals, often ranging from 60-75 percent. By contrast, the large retail grocery chains (Kroger, Safeway, etc.) that sell cereal make much smaller margins. What would explain this divergence in margins?
Let's say you manufacture Fruity Pebbles. If a grocery store wants to carry Fruity Pebbles, there is only ONE place to get it because they hold the secret recipe and the process for making it. So, you have pricing power because you are the only source for the cereal. My ...
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