February, 1999
By Geraldine Warner
Good Fruit Grower
Consolidations continue in the retail business. It's been forecast that
within a decade, just ten companies will control as much as 80% of the retail
outlets across the country.
This will put a lot of power in a few hands and will likely make it tougher
for the smaller tree fruit sales companies and agencies to compete, according
to Bill Knight at Sun Chief Marketing, Wenatchee, Wash., the sales arm of
the cooperative Chief Wenatchee.
"I don't feel we've had much control and power as an industry, and
we're getting even less as these consolidations occur," he said. "We
are a very fragmented industry."
Large retailers like to deal with one, or perhaps two, suppliers who can
meet all their needs, he explained to members of the Washington Tree Fruit
Industry Task Force at its November meeting. The goal of retailers is to
buy the best fruit they can find in the grade and size they require for
the least amount of money.
"If you're not lined up with those folks right now, as the fences are
being built, then you're going to be on the outside looking in," he
said. "It's difficult to break into these megaretailers."
To be competitive, producers need a large volume of high quality, consistent
fruit at low cost, which is a tall order. And that's what's driving mergers
on the production and marketing end.
Stemilt Growers, Inc., has formed alliances with two smaller Wenatchee-district
packers, Peshastin Hi-Up and Orondo Fruit Company. Stemilt's president,
Tom Mathison, said the company is looking to form more alliances to expand
its market presence.
The tree fruit cooperative Blue Bird, of Peshastin, recently reached an
agreement with Dovex Fruit Company, Wenatchee, to market their fruit together.
And Chief Wenatchee has been negotiating with Metropolitan Life Insurance
Company to buy the two packing operations, Johnny Appleseed of Brewster
and CRO Fruit Company, East Wenatchee.
Knight said there are too many marketers in the Washington State tree fruit
industry today.
"There are too many of us selling fruit in a fragmented manner,"
he said. "It's not a unified effort. That causes unnecessary erosion
of the f.o.b. price. What needs to happen is continued consolidation."
He acknowledged that it is not always easy to bring different entities together.
"There are a lot of things to consider. Egos. Politics. There are lots
of reasons why people think they should not be working with other people,"
he said.
But if the Washington industry wants to capture the business, it must do
so in a unified way, he added. "I'm not saying there should be four
to five market entities in the apple deal, but there has to be less than
the 50 to 60 we have now. Alliances need to happen, but they need to be
thought out from a manifest standpoint and strength standpoint. It's the
opinion of a lot of people in my situation that there needs to be less of
us. I don't want to be cutting my own throat, but we're not all needed.
"There are people who are good at marketing fruit that will rise to
the top and stay in the industry, and the people who are average and not
quite what we need will find something else to do.
"The hope is we will be more successful in getting more pennies per
pound back to the grower. You can't go on like this for very much longer
with this fragmented marketing effort."
Brian Birdsall, president of Chief Wenatchee, said the large number of marketers
leads to a situation where there are more people quoting prices. If one
marketer needs to move some fruit, perhaps because of a concern about condition,
and quotes a lower price, that price then gets used against all the other
marketers. If there were fewer marketers that had steady programs with retailers,
that would be less likely to happen.
Knight said packers have to become larger to create efficiencies, and control
their costs. They are going to have to be flexible enough to offer different
types of packaging, and be aware of food safety issues. And above all, they
need to offer quality fruit.
"We live and die by repeat sales," he said. "We have to make
sure fruit has quality at retail."
Holly Douglas, sales manager at Douglas Fruit Company, Pasco, and a member
of the task force, said that's where the grower fits in. "As a grower,
you do have impact, and you do have a vote. If you're delivering the right
kind of product, you need to figure out a way to force the warehouse to
deliver quality fruit to the retailer."
The Fruit Growers
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