There is more to this relationship than filling supply gaps.
The dance between wholesalers and retailers is at the heart of moving produce from the fields through the distribution chain and to the consumer quickly, reliably and efficiently.
Although a certain amount of haggling over price is built into this meeting of sellers and buyers, this essential part of the food distribution system is based on trust and mutual dependence built over time.
“The relationship between wholesalers and retailers should be good,” says Peter Carcione, president of Carcione Fresh Produce, South San Francisco, CA. “The farmers and the cowboys have to get along.”
Carcione Fresh Produce continues a tradition of wholesaling fruits and vegetables from California farms that began when Carcione’s grandfather opened shop nearly a century ago. Today the employee-owned business supplies produce to more than 400 stores throughout the state.
In this new age, when the largest retailers have their own distribution centers and supply chains based on direct relations with grower-shippers, only the nimble among wholesalers can thrive.
“The strong have gotten stronger, and the weak have gone out of business, or are barely staying in business,” says Nate Stone, special projects director and former chief operating officer of Ben B. Schwartz & Sons, Detroit.
Ben B. Schwartz & Sons began more than a century ago when Lithuanian immigrants Ben and Belle Schwartz opened a modest produce store in Cadillac Square. Today the fourth generation of this family business continues to expand its space at the Detroit Terminal Market.
Suppliers who survive and thrive in the changed produce business do far more to hold up their end of the relationship than step into the breach when supplies come up short.Here is a list of six important ways wholesalers help retailers, or should, that includes filling the gap when supply is short and a lot more.
One: Wholesalers Make Small Chains Large
Because small chains and independents do not have the resources or connections of corporate retailers, they may not be able to access the full array of produce on a regular basis. This is where an established wholesale operation can step in and lend its connections to relatively small retailers.
“We give them the opportunities the large retailers have,” says Ron Carkoski, president and chief executive of Earth Source Trading/Four Seasons, Ephrata, PA. “We develop a relationship between the growers and the smaller chains, or independent retailers. We add value to the transaction. We help establish the relations with growers and branded products that the big chains already have.”
In addition to organic and conventional fruits and vegetables from around the world, Earth Source Trading offers help developing forecasts and strategic plans. If smaller retailers are able to add produce items from the larger shippers by going through a wholesaler, it is important for them to hold up their end of the bargain by showing loyalty to their suppliers. “Retailers need to promote successfully, and have a sense of loyalty to a brand,” says Carkoski.
Wholesaler connections are most important for the smallest group of produce buyers, the family owned restaurants, but the larger operations at the terminal markets are flexible enough to serve customers of all sizes.
“The chain stores, small retailers and restaurants receive tremendous benefits from the terminal market,” says Steven Piazza, president of Community-Suffolk, Everett, MA. “We sell across the board, from the Stop and Shop chain to an Asian restaurant a family just opened. And we treat them all the same.”
“We sell across the board, from the Stop and Shop chain to an Asian restaurant a family just opened. And we treat them all the same.”
— Steven Piazza, Community-Suffolk
Community-Suffolk is a third generation family operation that has been wholesaling produce in the greater Boston area for more than 75 years, and sources fruits and vegetables from long distances for its outlets at both the Boston Terminal Market and the New England Produce Center.
“We need everybody among the retailers; there are different kinds of retailers,” says Ben B. Schwartz’s Stone. “Our relationships with the growers let us help the independents do promotions.”
Building the relationship among the retailer, shippers and wholesaler is an ongoing process. “Our business with a retailer is pretty much every week of the year,” says Carkoski. “If we’re working with somebody new who doesn’t know us, we have to establish our credibility. Sometimes it’s easier, sometimes it’s harder.”
This role of expanding retailers’ potential variety of products keeps getting more complex. “There are many more products than there were 20 years ago,” says Dominic Russo, buyer and salesman at the family owned Russo Rocky Produce, Detroit. “More things are grown and packaged differently, or marketed differently.”
Two: Wholesalers Know the Territory
Good wholesalers have a team of buyers who deal in nothing but produce. Their knowledge can be invaluable in assessing future supplies of important fruits or vegetables.
“Quality wholesalers who service retailers are effectively an extension of that retailer’s buying team,” says Dominic Riggio, president of Riggio Distribution, Detroit. “Produce wholesalers provide market information, industry trends, weather reports, ad plans, holiday/seasonal buys and a range of other information that play a role in selling produce. A good wholesaler becomes an intricate part of their customers’ business.”
In some situations the wholesaler has even more information than the retailer about a particular line of crops.
“We are a sounding board on promotions that are coming up,” says Mike Maxwell, president of Procacci Brothers Sales Corp., Philadelphia. “They move buyers around a lot. We have the information they don’t have the time to search for. It’s our job to tell them what’s available, what should be promoted and what shouldn’t be.”
Since Joe and Mike Procacci began wholesaling from a makeshift office in their parents’ cellar in 1948, Procacci Brothers has grown into a major fruit, vegetable and floral operation that includes many specialty and ethnic items.
“With Procacci Brothers, there is no limit to where we will go to bring you the world’s best produce,” the company’s website says. This knowledge can be particularly helpful for retailers who are too small or too new to have a team of experienced buyers with produce savvy.
“A lot of the chain buyers have been around a long time,” says Earth Source Trading’s Carkoski. “We need to educate some of the retailers about what the commodities and growing regions are going through at a particular time. We put out a weekly bulletin with that information for both organic and conventional produce.”
Even the major chains may find, however, that their buyers are frequently stretched too thin to match the specialized knowledge of some of the sharper wholesalers.
“Most retail buyers work with 80 to 100 items,” says Community-Suffolk’s Piazza. “Most wholesale sales teams, including ours, concentrate on a half dozen. We can give them forecasts, sales projections and value. We also have the inventory. We keep customers by being better at the business.”
Three: Wholesalers Have Produce so Fresh, You Can Taste It
Wholesalers are uniquely situated to let their potential buyers see and taste the produce before they buy, but after it has endured the trip from fields in far-away places in California, Florida, Mexico or Chile.
“We give retailers the ability to see the produce, feel it, touch it and taste it before they buy,” says Carcione Fresh Produce’s Carcione. “Before you buy a peach in January, you should taste it.”
This intimate connection with the fresh fruits and vegetables is most attractive to the independents and family restaurants that rely on wholesalers for their supply. “You fit in with the retail chains because of your volume, but you fit in with the independents because that guy walks the market every day to pick out the best produce possible,” says Stone.
Stone notices a change in the backgrounds of the buyers who work for the corporate retailers. “These chain store buyers are well educated people these days,” says Stone. “It used to be if you were a bagger, you could come up through the ranks and become a buyer. These days it takes so much education, and the technology has changed.”
“With the independent retailer it’s a tradition to get up early and pick the best and freshest produce.”
— Nate Stone, Ben B. Schwartz & Sons
The hands-on approach to produce survives, however, with the independents, and even with some of the largest retailers. “The buyers walk through the market every morning,” says Carcione. “They represent their own store, or maybe two or three stores.”
Stone, too, notices that the old ways of connecting personally with the produce are still at the terminal markets. “With the independent retailer it’s a tradition to get up early and pick the best and freshest produce,” says Stone. “Nine of 10 buyers have someone on the market floor to look at the produce in person. Kroger had an office right here in the Terminal Market until recently. Our quality control is equal to, or better, than the best I’ve ever seen in 40 years in the business. The owner, who is 64 years old, jumps up on pallet stacks to look at the produce.”
Four: Wholesalers Let Retailers Avoid Oversupply
Photo courtesy of Earth Source Trading/Four Seasons
The second to last thing a retailer wants to do is throw produce out because he had more than he could sell before it went bad. The last thing a retailer wants to do is run out of an item consumers expect to find, or come so close to running out that the shelves look empty and uninviting.
This is where wholesalers come in. Because they can bail retailers out if they run short, wholesalers can be a little more relaxed about how large a buffer they build into their stocks.
“We provide good product at a good price,” says Joel Fierman, president of Fierman Produce Exchange, Bronx, NY. “We’re always actively seeking new customers, retailers or anybody else. They come to me because I’m convenient; they don’t have to over-source. They don’t come to us when they don’t need us.”
It’s the wholesaler’s job to find items on short notice if retailers are going to run out, and they usually take pride in their ability to do that part of the job well.
“We have an incredible team of industry professionals that are very dedicated to their work,” says Julian Sarraino vice president for sales and marketing at Fresh Taste Produce Ltd., Toronto, Canada. “Our team is very knowledgeable of the markets, which keeps us nimble. Therefore, although we can’t avoid shortages, we have unique and effective reaction mechanisms in place to help during shortages.”
Fresh Taste Produce is an importer with a wholesale division at the Ontario Food Terminal. The company smoothes out logistic and supply issues by taking ownership of the fruits and vegetables long before they are harvested at locations around the world.
“Our ability to offer a gamut of fresh fruit and vegetable to our retail customers on a perpetual basis is the most important thing we do for our customers,” says Sarraino. “This allows the customer to promote different products at different times.”
Five: Wholesalers Listen to Your Problems
Because of their great experience in the produce business, wholesalers can offer retailers and their buyers an intangible but indispensable service: They provide a knowing set of ears when things are not going smoothly.
“If you listen to their problems and come up with solutions, you can make things easier for them,” says Procacci Brothers’ Maxwell. “They have different issues, and we talk to them daily. You have to be an asset to them.”
They will listen because wholesalers understand that this is a relationship, and their own business depends on the health of their retailer customers. “You’re only in as good of shape as your customers are,” says Earth Source Trading’s Carkoski. “We felt 2008 and 2009 because our customers felt it; but we have both a strong organic business and a strong conventional business.”
“I believe that customers recognize and respect the ‘old school’ values. I believe retail customers want to do business with wholesalers who demonstrate these values.”
— Dominic Riggio, Riggio Distribution
These conversations are a core part of the relationships built over time on old-fashioned values. “Although the produce industry has changed a lot over the decades my family has been working in it, some things remain the same,” says Riggio Distribution’s Riggio. “Some of the core values we have learned from previous generations still hold true in today’s business climate. Honesty — always say what you can do, and do what you say you can. Sometimes it’s even a matter of giving a conservative estimate — better to under promise and over deliver. Respect — treating the customer with respect, regardless of the size, goes a long way. Everyone takes notice when you show respect. Hard work — in our industry you quickly realize that there is no such thing as “part time.” The secret is that there is no secret and hard work is mandatory. I believe that customers recognize and respect the ‘old school’ values. I believe retail customers want to do business with wholesalers who demonstrate these values.”
Six: Wholesalers Will Be There When Stocks are Short
This is when wholesalers are put to the test, and show retailers they can come through when most needed. “When supplies are tight or short, the relationship between wholesaler and retailer is put to the test,” says Riggio. “This is when a retailer will rely heavily on a wholesaler, and the relationship that has been built will help said retailer secure their portion of supply. Most wholesalers will tell you that they thrive on consistency; buying on speculation can be a challenge, so the more consistent the customer is, the better they can be serviced.”
The core function of wholesalers in the modern mainstream distribution system, where major retailers do their own sourcing, is stepping into the breach when supplies are short.
“Wholesalers provide support to retailers when they are out of stock on certain products, especially on ad items,” says Andrew Scott, vice president for business development and marketing at Nickey Gregory Company, with offices in Atlanta and Miami. “We offer our customers a similar item at a comparable cost so they keep their produce departments well stocked.”
Nickey Gregory sources more than 300 produce items from the United States, Mexico, Canada and Holland. This function is at the core of most relationships between produce wholesalers and the retailers who count them to be there in an emergency.
“When they don’t really need us, we offer them specials and value-added items,” says Scott. “We work with most chain stores around the southeast. In Atlanta, Kroger, Publix, Wal-Mart, Aldi, Food Depot, an independent, and Ingles are the major chains.”
When asked why retailers need wholesalers when they already have a distribution network, Fierman Produce Exchange’s Fierman asked, “Why does a housewife need a supermarket when she already has the farmers market?” The ability to come up with supply, especially when the market gets disrupted, will make a wholesalers’ reputation.
“We’re always looking for new customers; but we don’t really go looking for them,” says Community-Suffolk’s Piazza. “Somebody opens a restaurant or new store and they come looking for us at the Boston Terminal Market or the New England Produce Center because they’ve heard about us.”
The ability of the wholesalers to come through when supplies are short enables the largest retailers to keep their margins as thin as possible.
“Chain stores are handling their inventory so much better, it gives the right wholesalers an opportunity to fill in the gaps,” says B. Schwartz’s Stone. “They’re protecting themselves against shrink, and they want somebody who can fill in at the end of a deal. It has to be a wholesaler who is big enough to provide a truckload or two. The chain stores are not worried about coming up a pallet short. We think we provide a nimble — and nimble might be the key word — service. We do it quite well.”
When there are no shorts, savvy wholesalers keep the door open for other opportunities. “With the big stores, we’re handling the shorts,” says Rocky Produce’s Russo. “When there are no shorts, we’re always planting seeds and letting them know what we have to offer. If they find it interesting, that can open up an opportunity.”
New Breed of Wholesalers Adapt to the Times
Wholesalers have been forced to adapt to a different produce world created in the past quarter century as the major retailers shifted toward buying direct from major grower-shippers.
“The Safeways and Lucky’s used to buy from us,” says Peter Carcione, president of Carcione Fresh Produce, South San Francisco, CA. “With advances in hydrocooling and vacuum cooling, the large chains now have excellent warehouses. Occasionally, the large chains will come to us when they have shorts, but usually they go to their own suppliers. They are less than 5 percent of our business today, but 30 years ago it could have been 25 percent.”
Improved technology made it easier for retailers to maintain their own coolers, but the major supermarkets also grew large enough within a region to buy full truckloads of major produce items.
“It started probably 30 years ago and accelerated as the chains got larger and could use a full load,” says Dick Spezzano, who has a private consulting business in Los Angeles after a career as president for produce and floral at Von’s Supermarkets, and a stint as chair of the Produce Marketing Association. “When they were 50 stores they couldn’t, but once they hit 100 stores, they could buy in quantity.”
This change in how the largest retailers got their produce forced wholesalers to also develop new ways of doing business.
“If you look at the landscape, the strong wholesalers, brokers and distributors did well, but the weak did not survive if they did not have the financial resources or mindset to change,” says Spezzano. “The wholesalers had to align their model to suit their customers. A lot of wholesalers made investments with growers so they could go to the retailers as a grower-shipper. If you are a wholesaler, broker, distributor and a grower-shipper, then the retailers will take your call. It wouldn’t surprise me if 25 percent of the wholesalers now are also grower-shippers.”
Progressive Produce of Los Angeles is one wholesaler that has done well in this new landscape by becoming a grower-shipper and wholesaler.
“We’re doing more with the large chains than we used to,” says Jack Gyben, vice president of Progressive. “The chains have moved more toward buying direct from growers, and we’ve become growers with acreage in the United States, Mexico and Peru.”
Progressive saw the changes coming and reinvented itself to fit the times in the past decade or so. “We’re not just wholesalers like we were before,” says Gyben. “In the past 10 to 15 years, we became growers of potatoes, onions and asparagus. We also have more relationships with other growers on things we do not grow. We have relationships with those who do regular business with us, and see us as partners.”
These other growers regularly add six or seven categories of fruits and vegetables to the Progressive supply. “We do still help to fill gaps, but there are complicating factors,” says Gyben. “We focus more on food safety and qualifying other suppliers. We do not fill gaps with produce from just anybody. Our retailer customers see us as a company that takes their reputation for food safety seriously. The business has changed and we have tried to anticipate that and emphasize quality, direct sourcing and food safety.”
Wholesalers that have not become grower-shippers can take heart and find opportunities created by the trend toward increased produce consumption. “The doctors are talking about fresh fruits and vegetables, and people are eating healthier,” says Carcione. “Produce is more in demand than ever.”
Some wholesalers have kept the same customer base while adapting to changes in produce demand and distribution. “Our customer base is pretty similar to what it was 20 years ago,” says Dominic Russo, buyer and salesman at the family owned Russo Rocky Produce in Detroit. “They have grown, and we have grown with them. It’s a combination of the chain stores and a large sector of independent markets. We serve all of them.”
One market wholesalers are serving is among the increasing number of stores in small chains serving growing ethnic populations. “You can tie in with some of the restaurants or the independents,” says Spezzano. “Those are increasing as the Hispanic and Asian populations increase. In the Los Angeles area we have 25 Hispanic chains with five to 50 stores, and 15 Asian chains with three to 20 stores. They buy from distributors or wholesalers.”
