April, 1988

Fruits of Thought

La Cosecha

I’m fortunate that I grew up in a family which, over the years, has been involved in practically every aspect of the produce industry — growing, wholesaling, importing, exporting, retailing and a lot more. But although I worked in many divisions of my family’s business, I really learned about produce working in a small chain of produce stores my family had opened in Puerto Rico. The name of the stores was La Cosecha, Spanish for “The Harvest,” and I think about my experience in those stores whenever I receive a request, which I often do, to write an article attacking retailers for making excessive markups.

One’s heart has to go out to growers who work hard on their farms and still can’t make a profit. But before they attack the retailers, they should work a few months in a retail store. At La Cosecha, I would pull some baskets of mushrooms from the cooler and carefully rush them to our refrigerated display case. The customers would see what I was doing with those mushrooms and would easily buy half the basket in five minutes. Then, after the first five minutes, no one would take the mushrooms and, literally, before my eyes I could see them turn brown. I had no choice but to dump them.

Or there was my friend the melon lady. When we had a melon that had some flaw in it, we would cut it up and wrap it and put it on a discount table. One day a very nice middle-aged woman came up to me and pointed out that she had found a cantaloupe with a hole in it. She offered to buy it if I would give her a discount. Knowing how much it cost to cut and wrap these things, I said “thank you,” gave her the discount and went on to other things. It was a matter of days, not weeks, before I had half a dozen other women in the store making holes in the cantaloupes and asking me for discounts.

Then there was Uncle Sydney and the battle of the small oranges. See, my Uncle Sydney was the big boss of our operations in Puerto Rico and he had developed the concept for La Cosecha. We used to sell the oranges by the piece, and every day we were left with the small oranges. Uncle Sydney figured the customers were being shrewd shoppers for value, so he changed the orange pricing to a per pound rate, figuring that now the customers wouldn’t be so concerned about size. But we found that we could price by the piece or by the pound, and they still took the big oranges!

Rotation was not an easy thing to manage either. We had a big walk-in cooler in each store, and we kept it nice and cold to keep the produce fresh. But the employees didn’t enjoy spending much time in that freezing cooler, and when new produce would come in, careful management was required to ensure that it was rotated properly. And if I had to be in the office or on the floor occupied with customers, the produce never seemed to get rotated properly. So I was left with rotten produce sitting in the cooler.

Then we had the lunchers. No, we didn’t have a salad bar or a take-out gourmet meal counter, but lots of grapes and cherries seemed to get eaten every day around noon.

And the squeezers. These people tell if tomatoes, peaches etc. are ripe by squeezing a few until they are unsalable. Then they buy another one, or none at all.

And the shakers. These people believe that the appropriate way to buy grapes is to shake a bunch as hard as possible to see if any will fall off.

The point of all this is that there is a big gap between what retailers charge for produce and what they actually wind up getting. The shrink factor can be enormous. Combine this with theft and high operating costs to secure key locations and provide needed customer service, and the retail price margins start not to look so high.

Now it is true that when prices fall on the F.O.B. level, retailers tend to be slow to adjust to that change. There are a lot of reasons for this. The F.O.B. is only a percentage of the cost of handling an item. Transportation, warehousing, merchandising, advertising etc. don’t necessarily drop because the F.O.B. does. This tends to significantly reduce fluctuations in price. The other thing is that retail prices don’t rise as fast as F.O.B. prices either.

Some growers also lament the fact that even when they are having a very bad, losing year, the retailers continue to make a profit. But this is inherent in the nature of the different businesses. Growing is a high-risk, high-reward occupation. Growers are subject to the vicissitudes of nature and of markets. But if you have iceberg lettuce when others have white flies, or you have peppers when Florida has been frozen, you have major profit potential. Of course, if you have poor quality, or a commodity where every growing region had good weather, you can have substantial losses. On the other hand, supermarkets had better make a little profit every year because they never have the opportunity to make a killing. It’s simply too easy for a consumer to drive to another store.

One of the problems the produce industry has is that it is a complicated business. What if one of the trade associations explored the possibility of running an intern program in which the sons and daughters of people in the business could get summer and part-time jobs with people in the other facets of the business? Let the grower’s son work a summer with a retailer. Let a broker’s daughter work with a wholesaler. And a wholesaler’s son with a grower. This type of program might lead to an industry richer in understanding. This might provide the opportunity for more informed solutions to the industry’s problems.  pb