January, 1998

Fruits of Thought

Asian Eye Opener For All

International trade is big business, and the expanded produce industry is a great example of the impact of expanded trade. The massive increases in U.S. consumption of fresh produce during the last half century have been fueled by expanding domestic growing seasons and enhanced storage capabilities. In no small part, however, the huge increase in consumption of fresh produce has its roots in the imports of bananas and counter-seasonal produce. Produce departments, once almost barren save for some root crops during the winter months, now teem year-round with nature’s bounty.

Export, of course, has simply become essential for U.S. growers. Growers of Florida grapefruit, Washington apples, and much of the U.S. produce industry would wallow in surplus if they didn’t export product.

The industry knows the importance of international trade. Yet, very often, different segments of the trade are myopic on the point. Progressive domestic shippers follow carefully the opportunities for export, and U.S. buyers are always on the lookout for the new imported item. Yet, the world is so closely linked today that only a comprehensive view of international trade can keep one abreast of all the opportunities.

The unrest in Asian financial markets is a case in point. Already, shippers are nervous and follow events with great interest. After all, these are major markets for U.S. produce and, generally speaking, vulnerable ones as U.S. produce is often a luxury item. Hopefully, the current scare will encourage exporters dependent on any one region of the world to broaden their scope. It is a tough thing to do, especially as, almost always, it involves accepting reduced short-term returns, but it is really essential for shippers to look to maintain market share all over the world.

This means making an allocation of product for each market – a certain percentage for Scandinavia, a certain percentage for the Mideast, a certain percentage for Japan, etc. – even if one could sell everything at a higher price to one particular market. This is very difficult for U.S. shippers because they usually represent growers whose personal interest is served by maximizing short-run returns.

The focus of many West Coast growers and shippers on Asia has often been a simple matter of convenience. The customers were there, the ports were there, the business was there. Why knock one’s self out to find smaller, harder to reach markets where the reception wasn’t as promising anyway? Well, we are experiencing the why as Asian orders drop. One needs to market to the world at large because no one market is ever guaranteed. Let us hope the lesson is learned through these travails and that we start seeing sales and promotion efforts exerted in developed and developing markets across the globe.

Retailers and other buyers, if they are sharp, may turn out to be big beneficiaries of the turmoil in Asian markets. I remember visiting a cherry picking operation in the state of Washington as the first cherries rolled down the line. None of those cherries went to domestic buyers; they had been bought and paid for months in advance by Japanese buyers. The airplane containers were sitting at the shed ready to be loaded and fly that premium fruit to Japanese consumers. In fact, at that particular packing operation, all during the season the really top-notch fruit was reserved for the few top-paying foreign customers.

Well, if those customers aren’t top-paying, or aren’t even customers anymore, that means that primo product – the first and the best – formerly tied up on contract, suddenly is a free agent. Good buyers should be on the phone asking suppliers if they have anything special to offer which, previously, might have been committed to Asian buyers.

We are at the intersection of a lot of different things when we look at the situation: In the push for 5 a Day, precious little attention has been paid to the awful, indeed tasteless, state of a lot of U.S. produce sold to U.S. consumers. Urging people to increase consumption of produce is going to be an uphill battle if the product is often tasteless or of poor quality in other ways.

Although growers and shippers have been wary of retail consolidation, it may turn out to offer unexpected opportunities. There is no Japanese trading company, for example, in a stronger financial position than, say, Wal-Mart. Somebody simply has to make a convincing case that it is advantageous for a big retailer or distributor to tie up the very best product through contracts and advance payments…and these buyers know how to write a check. But nobody will do it unless they see themselves buying a competitive edge for their operations.

Money is a powerful force, especially when dealing with cash-poor growers. For many years my family imported produce from around the world, especially Chile, Central America and the Caribbean. For decades it was a business done based on consignment. We sold the product, produced an account sale, and paid what was due. The business grew every year based solely on the returns we gave the growers. They would compare with one another and, because we managed to earn a little better return than average, we would pick up additional growers every year while our existing growers gave us larger and larger portions of their crop.

In time, however, it became a big business and bigger companies came into play and started offering to advance growers money. First it was for the seed, and then fertilizer, then the boxes, and so forth. It became harder and harder to attract growers, even though we were providing superior returns. The lure of the cash was just too strong. In time, the big companies got shrewd. They started offering a lot of cash, minimum guarantees and even outright purchases for the key early fruit, especially the real quality stuff. So when an import deal began we found it difficult to supply our customers.

How far-fetched is it to think that a chain buyer, one not trapped in old ways of thinking, might think it advantageous to tie up, in advance, the early fruit, or the top quality fruit, or the largest size fruit? The American economy is riding high today, as the Japanese did in the 80’s. In this moment of flux, maybe a U.S. buyer will emerge to create a new paradigm for produce purchasing in the U.S.  pb