June, 1992

Fruits of Thought

Accidental Wholesaler

When the Hunts Point market opened in 1967, my family had a single unit. By last month, when my father and brother decided to divest their wholesale operations, they had 10 units, on the two busiest platforms in the market.

Selling the wholesale operation was, in a sense, an emotionally wrenching decision. After all, my family’s heritage is in wholesaling. When my great-grandfather, Jacob Prevor, settled in America after abandoning the old world, he set up a wholesale operation on the Wallabout market in Brooklyn. And my grandfather, Harry, though for most of his professional life an auction buyer, would also come to own and operate a produce wholesale company.

But my father, Michael Prevor, is a different man. And in the unique manner that brilliant men have for seeing trends before they happen, my father understood that the two great trends that would alter the produce industry during his professional lifetime were the growth in international trade and the introduction of outside capital into the produce industry.

Standing from where we stand today, it is difficult to appreciate the enormity of these insights. This was a time when the biggest import from Chile was onions. And the export business consisted principally of small nations, as in the Caribbean, who couldn’t grow most items, and an occasional order from Europe when there was a drought or a freeze.

In fact, my father was truly an “accidental wholesaler.” He was minding his own business building my family’s export/import operation from an office on New York’s now-disappeared Washington Street Market. Then the city announced the market was to be closed and would move to new quarters in the Bronx. When the papers came, my father saw that the rent for an office alone was almost the same as for a warehouse unit with an office above it. So he figured it would pay to take a warehouse/office unit and use the warehouse to wholesale the overflow from railcars and vans he had bought principally for export.

Of course, it wasn’t to stop there. My dad was purchasing trailer after trailer for export shipment, and so, it was just natural that some of those shippers who are getting good export business would ask if my father couldn’t help them move some product on Hunts Point.

The truth is that selling the wholesale business doesn’t really matter that much. It accounted for less than 35 percent of the firm’s sales and less than 10 percent of its profit. Yet I confess it leaves me a little melancholy. Many families earned their living working in those units, many farmers earned their whole annual profit on those units, many stores and restaurants brought good produce to the consumer from their purchases on those units.

Yet divesting the wholesale division almost surely makes good sense for my family. After all, wholesaling is a unique business, even within produce. It is, in fact, the last bastion of pure family business. Nobody but a family has ever successfully operated a terminal market-type wholesaler for an extended period of time. And it’s not for lack of trying. The old Bud made a massive move into wholesaling that failed miserably; Duda tried it in L.A. with no success. For a while Polly Peck bought my family’s company and couldn’t make it work.

People get deceived because there are a number of large wholesale companies and so, to an outsider, it looks as if they must have a management structure that keeps the place running, that sets prices, purchase quantities, etc. But looks can be deceptive. Many of the large wholesalers are really consortiums of many smaller companies, with each division being run by a brother or cousin or son.

They may legally operate as one company but, in fact, they are organized as if each family member has his own business. In fact, the typical reason a wholesaler expands is not to seize new business opportunity or even to make more money. Typically the expansion comes about because a successful wholesaler has a bunch of kids (still usually sons) coming into the business.

The wholesaler may have a good business that makes him a good living, but he doesn’t have such a good business that he can make a good living for himself and his four sons. So the decision is made to expand, and a tomato division is opened, a tropical division — all in the cause of making a living for everyone in the family. And when everyone in the family is making a good living, the company stops expanding. If no new family members come into the business, it will stabilize until the old family members lose interest and the company will decline or fail.

I guess my father believes in getting out while things are in their prime and not waiting for the decline or failure. The bottom line is that almost all of the successful terminal market wholesalers have family members down on the walk, taking orders, watching out for theft, keeping employee productivity high. If you are busy talking to Europe in the morning and buying from the West Coast in the afternoon, you’re not likely to be inspired to do the night shift down on the walk.

So, as with all things in life, there is a time for everything. And if the founding family wishes to market in Rotterdam, rather than Riverside, then that’s the direction the business is guided in.

I wonder what my grandfather or great-grandfather would say if they saw the sale of the wholesale operations. Would there be tears in their eyes as the sign that says Prevor comes down? I think so, but just one tear, because then my brother and my father could take them upstairs to the offices they are leasing and show them the old map on the wall. They might take out a pen and draw in the new countries coming from the old Soviet Union and talk about a world of opportunities.

They would see the methods may change, the customers may vary, but today the whole world is a customer, and the need of the industry to market worldwide is pressing. And as they look down, they would see that other wholesalers had already moved to fill up the gaps, carefully channeling those twin horsemen of capitalism, supply and demand.  pb