Although the issues confronting the produce indust

Although the issues confronting the produce industry have never been greater or more complex than in the past 12 months, Steve Junquiero, director of produce for the 100-store Save Mart Corp. (Modesto, Calif.), isn't the least bit discouraged. "It's a great time to be in the produce industry," he says, maintaining that steadily increasing consumption levels eclipse the challenges with a wealth of additional opportunities to drive the growth of produce even further.

"Sure, there's some hurdles, but there's an awful lot of good things to say about our industry," foremost being consumers' increased awareness of the nutritional value of fresh produce. "We are poised to move forward by taking advantage of the unprecedented popularity of fresh produce in a variety of ways," says Junquiero.

Supermarket produce sales in 1998 rose to $38.66 billion, 5.6 percent above the $36.62 billion of 1997, according to Supermarket Business' 12th Annual Produce Operations Review. Notwithstanding that produce is, and always will be, subject to the unpredictable behavior of Mother Nature, the abnormal weather patterns across the country during the past nine months have come as close to wreaking havoc on the industry as in perhaps any other year in recent memory.

"This year's weather has been the wholesalers' biggest nightmare in trying to determine how to best market available commodities against the phenomena the weather has caused," says Ron Carkoski, senior vice president of Four Seasons Produce (Denver, Pa.). The abnormal weather patterns prevailing throughout the year in the country's key growing regions greatly impacted harvesting patterns, Carkoski explains, and affected harvests of grapes and other commodities. "We had to find other items that were available to sell in place of those commodities. The weather caused continuous problems, with an unusually cool late winter/early spring in California, which put crops way behind. California tree fruit and grapes suffered dramatically as a result. We faced a late start in the season, and we're now facing a late end in the season. The variety just never caught up."

From his vantage point, Bryan Silbermann, president of the Newark, Del.-based Produce Marketing Association, says the year was further impacted by a continued oversupply of many commodities, which has translated into high quality and low prices with the high supply of the majority of available items hailing from California. Describing "the paradox of the produce industry," Silbermann believes "ours is probably the only industry I know where the better the quality, the lower the price. But as we know, that's just the way it works."



Consolidated Concerns

From the supply side, consolidation continues to be a primary concern for all facets of the produce industry, says Silbermann, whose organization will reveal findings of a yearlong study conducted in conjunction with Cornell University at its upcoming annual convention. FreshTrack '99, the convention's featured general session, will focus heavily on the issue of consolidation overall, and the tremendous changes and implications affecting the buyer-seller relationship in particular.

Consolidation in the produce industry has taken on many forms such as mergers, joint operating relationships, joint marketing, co-packing, and strategic alliances, Silbermann explains. "But the issue of consolidation doesn't necessarily mean there will be fewer produce buyers around, because with a few exceptions, nobody has really shown clearly that a centralized national buying approach for produce is an effective way of improving the bottom line."

Mike Rempe, vice president of produce for C.H. Robinson (Eden Prairie, Minn.), says that as consolidation activity continues, "It is clear that retailers are looking at us for solutions to problems that have become considerably larger in recent years. We are applying a lot of energy to growing our business in a couple of different areas," he adds. "On the logistics side, the challenge to eliminate unnecessary costs with unique and different ways to transport and distribute produce has required everybody to look for ways to strengthen and leverage what they do to raise efficiencies with customized programs."



Side by Side

Rempe says category management has evolved side by side with improved logistics strategies at his organization. "We maintain a lot of interaction with our retailers by taking their data to determine what sells and how profitably it sells to help them create merchandising layouts and recommendations in order to maximize either sales or profits or both, depending upon their specific goals." In general, Rempe notes, the produce industry's strides with category management have improved a bit; however, data access and statistical quality represent the biggest hurdles, Rempe explains, "since there are very few out there who are actually comparing data with their competitors."

Considerable attention continues to focus on the food safety issue, which has mandated that the produce industry do a much better job of self-policing to curtail continuing threats of regulatory involvement. Referencing PMA's internal research, which pinpoints foodborne illness as a prominent concern of the organization's membership, "The spotlight shines almost exclusively on the rising tide of what to do about pathogenic contamination of all foods," says Silbermann. As a result, the industry has been forced to absorb steep research and development and quality assurance costs, as well as the high costs associated with re-equipping facilities with the latest technologies.

Since nothing can damage a product's or store's reputation faster than a food safety scare, PMA has urged its members to formulate an action plan before a crisis hits. The industry is gradually beginning to conform to a "food safety first" mindset, where businesses reward safe handling practices through incentives and compensation, Silbermann says.

The 5 A Day program continues to play an important role in the industry's mission to increase consumption. In conjunction with those efforts, PMA is also working hard to change the U.S. dietary guidelines currently under revision for the year 2000 to enable produce to become recognized as a separate classification on the pyramid.

As consumption rises and the percentage of business from the produce department continues to grow, Save Mart's Junquiero says, "We are definitely taking advantage of this fact by remodeling our older stores and building newer stores with substantially expanded produce and fresh departments. We're also doing a few more exciting things to drive the category even further," he adds, pointing to a new Sunday morning televised cooking show that has been extremely successful during its recent three-month debut. The educational show is set directly in the field or orchard, where a different guest chef demonstrates selection, preparation and serving techniques of a particular commodity weekly.

In spite of the fluctuating and fast-paced nature of the produce business, relationships have remained the constant on which many produce buyers and sellers have long based their decisions. But this, too, is about to change. Targeting the $98 billion produce industry, buyproduce.com is one of the first companies to initiate live transactions through an Internet Web site, http:// www.buyproduce.com, which will link buyers and sellers through a business-to-business digital marketplace focused on the unique requirements of the produce industry. Buyproduce.com will offer customers real-time quotes, on-line ordering and shipping information. The start-up company is led by a team of industry experts who envision that their new digital marketplace will eliminate inefficiencies through a streamlined transaction process that uses a highly secure, fault-tolerant system with excellent performance and scalability.

A question on the minds of many is: Can and will virtual trading communities work? As Patterson sees it: "I think that anybody who sits by idly and thinks that this kind of marketing and selling isn't going to affect our industry is making a huge mistake." Pointing to the tremendous success of many electronic and traditional retailers' Web sites, Patterson is confident that e-commerce produce trading will be a good thing for the industry as a whole but potentially threatening for wholesalers. With the help of digital cameras, video conferencing and real-time cameras, "Electronic data will be right there in your hands. It will be bird-dogged, graded and priced. The faster I can get information, the easier it is to process."



Acceptable Quality

Electronic produce communities, says Carkoski, are only going to be as successful as acceptance of product. "Anybody would be foolish to believe e-commerce will have no impact on our industry," he says. "But the first time something doesn't deliver in the acceptable quality level, the receiver will have nobody on the other end of the phone as instant backup. Our business was built on trust, ethical actions and an understanding that produce is not a science but is something that requires swift reaction timing to keep the receiver profitable and in the loop."

Junquiero envisions the use of electronic commerce as a powerful means of improving communication with vendors. "Yes, I believe in strong relationships, but that doesn't mean we won't develop new ones either," he says. "I always want my buyers to be looking for variety and quality, and as long as our suppliers can deliver, we're happy. But we owe it to our consumers to find suppliers that will use information better."

The intertwined issues of labor and training remain a perennial concern for the produce industry, which is at an even greater disadvantage with the strong economy and low unemployment rate. "The lack of ability to get people to work in an industry that offers jobs in positions that are often damp and cold has been a challenge for everyone," says Carkoski.

Yet Dick's Supermarket has faced the challenge of controlling turnover head-on with extensive computer-based training and safety certification program for its produce managers, line clerks, store directors and assistant store directors. The program, which has been in place for over a year, speaks to Patterson's belief that training and education is not a luxury or a quick place to cut when the bottom line doesn't look so good.