Pundit’s Mailbag —
Fear Of Losing Market Share
Jim Prevor’s Perishable Pundit, April 16, 2008
We ran a piece entitled, Just Say No: The New Dynamic Of Producer/Buyer Relations, and followed it up with an extended discussion of transition at a large Salinas Valley based firm entitled, Tanimura & Antle Changes…A Sign Of The Times.
There is a lot of pressure on the Salinas Valley, plenty of quiet layoffs. Yet the issue of obtaining profitability for producers goes well beyond leafy greens. The articles brought several letters including one from a stalwart of the potato industry:
Your article, Just Say No: The New Dynamic Of Producer/Buyer Relations , was “Right On” or “Spot On” as our UK brothers would say.
Too many producers in the potato industry have an extreme fear of losing market share, and unless their sales people don’t have product to sell, are afraid to raise prices to a profitable level. I will send a link from your article out to the industry.
Keep up the good work.
— John S. Cross
Newell Potato Cooperative, Inc.
We appreciate the kind words and the “bonus distribution” — there is little question that with the rising cost of inputs, it will be impossible to sustain a company that insists on selling unprofitably to boost market share. In this sense, we suspect Tanimura & Antle is a model for what is to come. It doesn’t work for a producer to just say it will hang tight; it has to bring production in line with the demand of profitable customers.
In the course of this discussion, we also ran a piece by produce luminary, Ted Campbell. We described Ted this way:
Ted Campbell has served the industry in numerous capacities, including as Chairman of the Board of Directors of the Produce Marketing Association and as President of the Produce for Better Health Foundation.. He has held many positions in the industry, including Corporate Director of Produce for Supervalu and Vice President of Sales and Marketing for Kerry’s Bromeliad Nursery. He currently works on a consulting basis.
In the piece, Ted articulated a vision of procurement:
During my years at SUPERVALU and AWG, I spent many days training young buyers that their key responsibility was securing the “best” source for products rather than the apparently cheapest source. As you well know, it is critical to have consistent supply, superior quality, product safety, innovative items, and numerous other attributes — none of which happen fortuitously (they almost always cost more).
The second leap of faith in this training exercise was to develop their understanding that these premier suppliers deserved adequate return on investment and thus should receive a “fair premium” over general market pricing.
Finally to really make their heads spin, I always told them that a reasonable pricing premium returned dividends at retail because better stuff just simply sells better: more eye appealing, better eating quality/customer satisfaction, less shrink & labor, usually better margin, better repeat sales with positive customer referrals, etc. No one makes money until the product goes through the cash register, so I wanted items to fly off the shelves (and the financial advantages of rapid inventory turns are often overlooked).
To us the advice sounded timeless, but we heard from many producers that believers in Ted’s philosophy are few and far between these days.
You can read the whole piece; it is called Pundit’s Mailbag — ‘Little Tolerance For Dictatorial Buyers’
Of course, buyers can only buy what someone is willing to sell, and it is hard to blame buyers for bargaining hard, but producers have to know their cost structure and use contracts to mitigate risk.
If growers don’t care enough about themselves to change with the times, it is hard to imagine that buyers will care enough to save them.
Many thanks to John S. Cross at the Newell Potato Cooperative for the generous letter.