July, 1990

Fruits of Thought

Wholesaler Or Scapegoat?

Terminal market wholesalers often seem like the Rodney Dangerfields of the produce industry: They just don’t get any respect. In fact, it’s hard to go to an industry function without listening to some industry member dump on the terminal markets. This is senseless because the reality is that wholesalers on the terminal markets are a vital ally of all growers, shippers, retailers, foodservice distributors and commodity promotion boards in the battle to distribute produce while making a buck.

Horror stories abound. Shippers often curse the markets. Who hasn’t heard some shipper’s horror story of low returns? “They killed me” is about the most printable comment. But over and over again, if you look at what really happened, you find shippers sold everyone in the world every box they could get them to buy; then, when there was no one left to sell to, they took everything they had left and shipped it off on consignment to a wholesaler somewhere. Almost always, the reality behind the shipper’s screams of anguish is that the terminal market wholesaler did nothing less than get the shipper some money for produce that would have been left to rot. Often this money is the crucial difference between a profit and a loss for the shipper and grower. Some shippers, of course, have been very successful in setting up regular programs with individual wholesalers, marketing consistently and building a trade. But many other shippers treat wholesalers like prostitutes to be used when needed and then forgotten.

Of course there are crooks on the markets, just as there are crooks in all walks of life. But many shippers are quick to criticize without knowledge. The “high prices” the wholesalers may be selling for may not be that high after all. Maybe the wholesaler is jobbing out the load in ones and twos to get the best price. The expenses of doing this, especially with high priced union labor, are astronomical.

Retailers don’t always give the markets their due either. Buying direct has an important place, but many retailers have wound up pushing old produce on consumers because they over-ordered. Intelligent and conservative direct buying and planning to use the market for a decent percentage of sales often results in better quality produce in the stores at no more cost. Funny thing is that it is not unusual for terminal markets to have items for less than they could be bought and delivered from an F.O.B. point. Intelligent buyers look for these opportunities to maximize their store’s profits.

Commodity promotion boards often mistreat the wholesale community. The sales destined for retail off most terminal markets go to smaller retailers. In a city like New York, a substantial volume goes to individual Korean greengrocers. Yet almost all of the programs, from ad allowances to merchandising support, are unavailable or inapplicable to these small retailers. In a practical sense, what happens is that large supermarket chains that buy direct get all kinds of support. The customers of the wholesalers are left to fend for themselves.

Terminal markets and independent wholesalers in general are a resource that the industry is not fully utilizing to expand distribution of produce. In these times of financial pressure, the industry must try to maximize the sales generated through every outlet.

So let me suggest a few things that various facets of the industry should try as a way of helping independent wholesalers to help the industry:

  1. Shippers need to develop more consistent programs to work with wholesalers. The constant feast and famine pattern whereby shippers inundate wholesalers with produce when markets are bad and deprive them of shipments when markets are good is, in the long run, destructive of good commercial relations. Much as shippers supply their best retail customers week in and week out, regardless of market prices, shippers should look to allocate appropriate portions of their production to key wholesalers in important markets and be prepared to ride those markets in partnership with the wholesalers.
  2. Retailers who do most of their buying direct would be wise to set up project groups to explore working more closely with the terminal markets. By establishing consistent relationships with reputable wholesalers, retailers may gain a flexibility that enables them to keep their stores stocked with fresher produce at better prices than buying all direct.
  3. Commodity promotion groups should sit down with the markets to determine how they can best support their sales efforts. In a city like New York, for example, you might be able to fund consumer advertising in print, on radio, and TV urging people to buy a certain type of produce and pointing out that it is available at their local greengrocer or independent market. Perhaps it would even be possible to arrange a city-wide sale on an item and promote it with consumer advertising.

Of course, for all that the other groups should do, the main burden has to fall on the terminal markets themselves. These markets are extremely under-marketed. Phil Montgomery, officer-in-charge of the U.S.D.A. office on Hunts Point, estimates that the Hunts Point market handles 1.1 million tons of produce each year. If the wholesalers were to assess themselves just one dollar per ton, they could have a million dollar marketing program. Other markets could run marketing programs on a smaller basis.

Nobody can expect others to do their promotion for them. But to get the respect and the business they deserve, the markets are going to have to start tooting their own horn.  pb