January, 1994

Fruits of Thought

Buyer Study Flawed

The retail produce buyer is getting industry attention through the release of a new study: Fresh Fruit and Vegetable Procurement Dynamics: The Role of the Supermarket Buyer. The study was conducted by Edward W. McLaughlin and Debra J. Perosio of the Food Industry Management Program at Cornell University and was partially funded by the Produce Marketing Association (though the conclusions are those of the authors and not PMA).

Everyone involved in the study gets an A for effort. Buyers and the buying process are among the least studied and least understood portions of the produce marketing chain, and this study is filled with vital information that has never been gathered before.

At the same time, the study is just a beginning, and much research remains to be done. The weakness of this study is that it suffers from being an “outside looking in” portrait of the retail produce buyer rather than a study of the buyer himself. The core of the study is a survey returned by 100 supermarket chains including most large ones. But instead of surveying all the buyers of these chains, the respondents to the survey were mostly produce directors and merchandisers. In fact only 19 respondents seem to be head buyers or senior buyers.

As such, the study is more a picture of what the chains’ buying policies are, or what management’s perception of buying activity is, rather than a survey of what buyers are doing and thinking. Unfortunately the survey was limited to one response per company. It would have been useful to have individual buyers surveyed and see what is being done and how consistently policies are carried out across a given chain.

The study combines the survey with information gleaned from interviews with industry personnel, trade publications, USDA statistics, etc., to create a great deal of interesting material. But a lot of this is what I call “interesting if true” material. I don’t, for example, see any indication that department size will grow anything like 1/3 in the next two to five years as the respondents to the survey report.

Assertions are made in the report without adequate grounding. For example, in discussing field buyers, the authors, though admitting statistical corroboration is lacking, say that “…it is probable that such practices result over time in slightly lower overall price to organization with field buyers.” I know of absolutely no evidence to this effect, and being that chains with field buyers are almost always the largest chains, I am not even sure how you would distinguish the effects of field buying on price from the effects of being among the largest of buyers.

Still other claims are made with a very skimpy statistical basis. For example, in discussing F.O.B. versus delivered sales, the authors claim that delivered sales are more prevalent in the upper Midwest than in the rest of the country. In a survey returned by 100 people, one person equals a percentage point; how many respondents could they have had from the upper Midwest to make an assertion such as this valid?

Some points leave one wondering where to go with them. The authors point out that “Supermarket buying offices located near a major terminal market tended to purchase more of their total produce needs from the terminal than other buying offices.” And I assume that supermarket buying offices in Salinas purchase more of their produce from Salinas than offices located far away. But what does this all prove?

Parts of the study are frustratingly banal. In a discussion of price negotiation during periods when product is short or long, the authors point out, “Many produce marketers have learned that taking undue advantage of a customer or supplier during periods of unfavorable market conditions is apt to be detrimental in future marketing cycles.” This is undoubtedly true, but sort of begging the question. After all, exactly how much advantage is “due” in a situation such as this?

My experience has been that buyers and their bosses deal with things a lot differently than this study lets on:

  1. Quality doesn’t really enter into the day-to-day negotiating cycle. A chain decides what minimum quality it wants to carry and the negotiating revolves almost exclusively around price and delivery.
  2. Buyers are becoming less important in buying because big-dollar deals have entered produce. So far this is particularly true in bananas. You have companies that write checks for hundreds of thousands of dollars to get an exclusive or other deal in a big chain. The buyer often isn’t informed of the deal; he is just told to transmit the order.
  3. Bribery is still a concern among many produce directors when looking at their buyers. One of the reasons it is so tough for trade associations to get real buyers to their conventions is that produce directors often prefer to keep buyers and sellers apart. The last thing many produce directors want is for buyers to have a lot of social time with suppliers.
  4. Most people do things because it is easy, pleasurable and safe for them. Most buyers are no different. All these studies that ask buyers to list buying criteria in order of importance say more about what buyers think they should say than what they actually do.
  5. Many buyers are resentful because the salespeople they deal with often get paid substantially more than they do. Few buyers can earn large bonuses or commissions no matter how good a job they do at buying.
  6. Management is confusing buyers as they talk about partnerships, category management, ECR and other things. Most buyers are not trained in any of these areas and are not really prepared to be a category manager. Buyers would do a better job if their roles were clarified.
  7. Buyers in produce are the key to everything. For all the talk about consumer brands in produce, the fact remains that it is the retail buyer who selects the one brand that consumers in his store will get the chance to buy. If you are not in with the buyer, you are not in at all. That is a long-time truth in produce and one that suppliers forget at their peril.  pb