May, 2003

Fruits of Thought

Back To Square One

Change is in the air in the very structure of the produce trade.

Most of those who work in produce spend their days attending to their jobs. They toil only vaguely aware that the environment in which they work has been made receptive to their efforts only by the tremendous efforts exerted by all kinds of industry institutions.

National trade associations, regional groups, commodity-specific groups, even trade publications all work hard to influence the environment in which the industry conducts its business. It is not uncommon for a beneficial government regulation to be a function of decades of work at all different levels coming to fruition.

One of the big institutional supports to the industry has been the commodity promotion groups. It seems highly likely that most of these groups, if they continue to exist at all, will do so only in a highly attenuated form. It has been decided at the Supreme Court level that compelling people to contribute to these boards in order to fund most marketing functions is an unconstitutional abridgement of the freedom of speech, as it compels people to support speech with which they may disagree.

It is possible that the groups will survive, focusing on research, perhaps working on certain export programs, but they will likely have a fraction of the budget these programs formerly had. Discretionary funds and staff members will be scarce.

The loss of the marketing function of commodity groups will be a source of debate for a long time. Much depends, of course, on how individual growers and shippers spend money when freed of mandatory assessments.

But one thing is certain: the institutional strength that these organizations contributed to the trade will be lost. Some of it is financial. When the industry needed to raise money to launch 5 A Day, for example, the first place leaders went was to these commodity groups. In addition, many industry organizations are funded indirectly by the mandatory assessments. The Washington Apple Commission, for example, provides the bulk of the budget for groups such as the US Apple Association and Northwest Horticultural Council.

Together these types of groups are an enormous repository of expertise and energy available for the industry. A lot of this expertise exists in private companies as well, but accessing it is difficult, and you certainly lose the institutional memory that comes from having a dedicated group dealing with these issues.

In all likelihood the collapse of the commodity promotion boards is likely to lead to the industry relying more heavily on its national trade associations, the Produce Marketing Association (PMA) and the United Fresh Fruit and Vegetable Association.

Change is afoot with these associations as well. United has announced that it will be co-locating its annual conference and trade show with the supermarket industry show, the annual Food Marketing Institute (FMI) event located each May in Chicago.

It is, of course, unknown how successful this will turn out to be. FMI had for many years attempted to build up a produce pavilion, and many produce companies spent fortunes trying it out. Virtually all of those produce companies stopped exhibiting because the event just didn’t attract enough produce executives to make it worthwhile, and the supermarket CEOs who were there didn’t usually care enough to spend a lot of time chatting with a celery grower.

Although a more extensive produce program will help a bit in attracting attendees and United will charge less for booths than FMI does, Chicago is fundamentally an expensive union town and it is not going to be easy to attract the attendees necessary to make the co-location more successful than the produce pavilion.

Of course the whole effort raises fundamental questions about the relationship between PMA and United and the issue of how industry money is spent.

For many years PMA and United had an adversarial relationship. For over a decade shippers were complaining that they bore the cost of exhibiting at two shows, when one national show would do. But the shows were important parts of the financial underpinnings of these organizations and nobody wanted to pull the rug out from under United, which had the far weaker show.

Eventually, though, the two organizations reached an entente of sorts and they have worked together productively to help the industry. However, that understanding only became possible when United made a change in its trade show to no longer focus on selling produce. A focus on technology and equipment sold to growers, packers, shippers and wholesalers was sufficiently different from what PMA did in serving produce buying organizations. This enabled industry leaders to see the organizations as non-competitive.

Not surprisingly, once that kind of industry harmony was established, many on the buying end who had been shying away from United extended support to the organization on the grounds that this was non-competitive with PMA and an important support organization for their produce suppliers.

FMI, however, is a retail show, and FMI has declared that it will work with its members, supermarket CEOs, to encourage them to send their produce executives to Chicago.

So now we are back at square one. United is going after the exact same attendees PMA seeks and will also attempt to get the exact same exhibiting companies. Which means PMA and its supporters can no longer be supportive or even indifferent as to the future of United. Which means we are back to an adversarial relationship.

At a time, however, when resources are strained and institutional capabilities are already being lost, do industry members really want to fund both sides in a new war of the associations?  pb