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Produce Business

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THIRTEEN VOICES: Industry Leaders Weigh In On United/PMA Merger

The issue of one national trade association for the produce industry and thus possible merger between PMA and United has long haunted the produce trade.

The recent effort was the most extensive and professional ever undertaken and came closer than ever before to a unified association.  So those who think having one association is important despair at the inability of industry leadership to make it happen.

We’ve been attempting to analyze the situation, see what can and should be salvaged from this effort that with direct expenses, plus staff and leadership time, certainly has cost the industry over a million dollars.

First, we provided the industry with a review and analysis of the issues surrounding merger in a piece titled, PMA And United: To Merge Or Not To Merge? That Is The Question.

Second, we attempted to understand the cause of the breakdown of the talks in a piece titled, The United/PMA Fiasco: THE SPIN IS JUST HALF THE STORY — Lessons Learned: Open Up To Industry Input And Focus On Big Things First.

Third, our July 21 Pundits dealt with four important letters from industry leaders addressing the merger issue.

Fourth, we suggested a specific manner in which the key obstacle, naming a CEO for the new association, could be breached: A Modest Proposal For Reviving The Merger Of PMA And United.

Fifth, as our thinking on the matter has evolved, we came to believe that the notion that everything was resolved, save the CEO choice, was only half true and that the battle for the CEO had become a battle to define the new association. We dealt with this issue in a piece we titled, United/PMA Impasse More Than Just A Decision About A CEO – It Is A Battle For The Soul Of The New Association.

Today, in our July 30, 2012 Edition, we have selected out a  Baker’s Dozen of industry letters to give the trade an opportunity to speak out on this important issue.

In our commentary, we also developed “A Modest Proposal” Take-2 — an alternative way to avoid duplication while meeting industry needs.

This all, of course, in addition to decades of writing on the subject in both the Pundit and sister publication, PRODUCE BUSINESS.  You can see many of these pieces here.

We appreciate all the time and effort our correspondents have invested to help advance the industry. We also thank those who have reached out privately to help us do a better job in clarifying these issues for the trade.




Without Change, The Question Will Not Be Who Will Survive, But Rather Can Either Survive? “A Modest Proposal” Take-2 From The Pundit

We have received a series of important letters on the topic of the collapsed PMA/United merger effort. Our July 21 edition featured four of these letters. This one we thought deserved careful attention:

I appreciate your thoughts and efforts you have made to keep this process moving. It is very clear to me that neither organization’s management or boards are in favor of merging because they do not know why they should merge, and each wants to maintain their legacy programs.

It is baffling to think that any proposal would include maintaining two trade shows and not immediately merge redundant programs, so not being able to agree on who will be boss is understandable. Hopefully I can articulate what Industry Ownership is saying.

· One national marketing trade show is enough.

· The mere size and number of attendees is not a way to measure a trade show’s success. Given the ever-increasing number of exhibitors and buyer consolidation, the show floor is comprised of mostly other exhibitors checking out their competition.

· Trade organizations depend on their trade shows for operating revenue. Ironically the Trade Organization receives less than 20% of the dollars spent by exhibitors attending a trade show.

· One trade organization, in particular, whose board is comprised primarily of buyers, continues to increase its costs of exhibiting and sponsorships while at the same time buyers are expecting lower costs of goods from their vendors.

With this said, I believe both the PMA and United need to retreat and re-evaluate. I do not believe that it is possible to have a single organization given the profound differences upon which each organization was founded. The problem is that the missions and objectives have become blurred.

There is no room for one-upmanship between these two outstanding organizations, and each must focus on its roots and strengths. If the management of the PMA and United cannot agree how to co-exist with a single national marketing trade show and elimination of redundant programs and advocacy, the question will not be who will survive, but rather can either survive?

— Rick Antle
CEO and President
Tanimura & Antle
Salinas, California

We appreciate this thoughtful and articulate letter because it points to so many of the thoughts whirling through the industry.

It is hard to express how flabbergasted many supporters of merger are when they learn that the plan was to continue with two trade shows for at least four years! Now, in fairness, the plan was to try to reorient one of the shows toward equipment and technology — a plan that has been tried in the past without great success.

There also is the fact that this decision was probably motivated by cancellation penalties in facility and hotel contracts. We are not privy to exactly how much those are or if it would have been worth paying them to end the second show right now, or if aggressive negotiations could have allowed us to reduce or repurpose those penalties, but it points to the difficulty of unwinding activities.

Then, of course, there is the business fact that the two national trade shows exist because both are profitable. Typically the organization of things such as this are not determined by an analysis of needs but by the activities of people and businesses. Do we need two national newspapers in the industry? Probably not, especially with the web now being the focus of so much news. But people support these publications and so they continue. Do we need two carrot shippers? Probably not. Logistically it might be more efficient to just have one. But many buyers think having two shippers keeps costs lower and ensures better service than just having one.

We can only speculate, but our money is on this proposition: In four years, if the new association has two profitable events, this will prove that the industry wants the two events and the new association will continue them.

It is really a conflict of visions. One views the trade shows as an occasion to support the associations and one views it as a business opportunity presented by the associations. Of course, as Rick points out, if one’s goal is to support an association financially, exhibiting is an inefficient way to do so. One is much better off just making a donation or buying a sponsorship.

Even the issue of redundant programs is tricky. Some have said we don’t need Robert Guenther, Senior Vice President Public Policy at United, and Kathy Means, Vice President Government Relations & Public Affairs at PMA — but that is not 100% clear. Maybe one person walks the halls of Capitol Hill, button-holing Congressional aides, and one works the phones with regulatory agencies.

Do we need both David Gombas, Senior Vice President Food Safety & Technology at United, and Bob Whitaker, Chief Science & Technology Officer at PMA? We don’t have the schedule of each to compare but it is a big industry, there are lot of groups to speak to and a lot of work to do, and maybe we need to have a backup in case one quits or gets sick? If you only have one food safety expert and he, God forbid, gets in a car accident the day of the next spinach crisis, doesn’t that leave the industry very vulnerable?

Rick is 100% correct that the mission and objectives of these associations have become blurred. The problem is that there are real reasons for the blurring.

On United’s side, it engages in marketing-related activities — say the trade show with FMI — to get money to fund its priority activities. One of the points established during the strategic planning program the Pundit ran for United back in the 1990s was that United had to move to get a higher percentage of its revenues from dues, and United has worked hard to do that over the past two decades.

It is always the case that very small companies are expensive to solicit as members. So the problem is that the very large companies in the industry have not shown that they value government relations enough to pay sufficiently higher dues to support the association. United’s top dues category is $25,745, so if a company has $5 billion in fresh produce sales, it will pay $25,745. Now admittedly these large companies tend to be the ones that do a lot of sponsorships and show support in other ways. Still, there is not much evidence that the big companies want to pay dramatically higher dues.

It is worth noting that this is not the case in other industries. In the association for the magazine industry, there is no trade show and dues are a set percentage of revenue. Every company pays the same percentagethe only cap is a rule that no company should pay more than 1/6th of the total budget of the association. The largest publisher pays dues of $1 million annually. There is just no indication that the big boys in produce want to take on that kind of obligation.

So, in effect, United has to go into marketing mode in order to raise the money to support its activities. Thus two trade shows.

PMA has a different situation. It has over 1,500 companies that are PMA members but are not United members. This creates a dynamic whereby PMA feels compelled to respond. These members view PMA as their association and expect it to be able to help them in DC or with scientific and technical matters.

In recent days, as word of the failure of merger talks has sunk in, many in the industry have responded by saying that if we are going to have two associations, we better make sure we rationalize their structure and goals to avoid duplication and waste.

Yet because of the realities of financial need and unduplicated membership, merely admonishing the associations not to compete is not likely to work. We need a structural solution that changes these realities and incentives.

With that in mind, we would like to suggest a structure that actually would work.

Many associations have local chapters and when one joins and pays dues, one automatically becomes a member of a local chapter, and a set amount of the dues goes to fund the local chapter. Why can’t the produce industry do the same thing but with PMA and United? Here is how it would work.

1) We go back to the four “cornerstones” defined in the merger agreement — Global Networking, Advocacy, Business Solutions and Marketing/ Consumption. PMA will do Global Networking and Marketing/Consumption. United will do Advocacy. Business Solutions, which is mostly education and food safety, will be jointly branded or done by a joint charitable foundation.

2) PMA’s board of directors will always have a majority of its membership from the buying sectors of the industry in order to sustain PMA’s successful business model.

3) United’s board of directors will always have a majority from the grower/shipper segment of the industry in order to make it a legitimate national voice for grower/shippers.

4) When one joins the new association, one automatically becomes a member of both associations.

5) A set percentage of dues and profits from other activities automatically goes to United to be used for advocacy purposes.

Now United would have no need to get involved in marketing because its funding needs would be taken care of by PMA’s marketing activities. PMA would no longer have a need to get into advocacy since all its members would also be members of PMA, and such needs could easily be referred to the sister association.

Grower/shippers need not fear that their voice would be lost, because they have a majority on the board of United. Yet, since they are also members of PMA, they can take advantage of all the networking opportunities etc.

Retailers and foodservice operators need not worry that their association will get bogged down in the minutia of government relations for growers. By being members and allowing for a revenue share, they are doing their bit for the supply base

Because all this would be contractually defined, the United board could take what advocacy positions it wished without fear that its funding would be cut off.

PMA would be saved from dealing with divisive issues such as NAFTA, the PACA Trust etc., and could thus proceed to even greater success in its core competencies.

Merger seems increasingly difficult to make work because the different associations have different priorities. Yet the industry must avoid duplication and waste. This proposal should allow for the efficient pursuit of all four “cornerstones” that were to be the basis of the new association.

Many thanks to Rick Antle for leading us to think through this important issue.

****

For those who are looking for more background on the issue, we have now run six Pundit editions related to this issue:

PMA And United: To Merge Or Not To Merge? That Is The Question gave a basic review of the issues surrounding merger.

The United/PMA Fiasco: THE SPIN IS JUST HALF THE STORY — Lessons Learned: Open Up To Industry Input And Focus On Big Things First assessed why the talks failed.

July 21 Pundits dealt with four important industry letters addressing the merger issue.

A Modest Proposal For Reviving The Merger Of PMA And United laid out a practical way a business decision can be reached when the parties are at an impasse, with a specific proposal for how to choose a CEO.

United/PMA Impasse More Than Just A Decision About A CEO – It Is A Battle For The Soul Of The New Association explained that the failure of the merger agreement to clearly define, in a binding manner, the priorities of the newly proposed trade association raised the stakes enormously as to who would be the CEO.

July 30 Pundits included a Baker’s Dozen of Letters from industry leaders and included “A Modest Proposal Take 2” – in which we suggested an alternative organization that could serve the trade’s interests while avoiding duplication.

For those wanting more background, we have been writing about the subject for many years.

 




As Association Staff Feels The Strain, Would Wall Street M&A Group Provide Quick Solution To Merger? 

A former chairman of United and experienced helmsman of several produce companies recently weighed in on the United/PMA merger:

The approach of the two associations trying to get this done has been going on in some form for years, with the same end result.

A lot of bright people, as we saw recently, worked very hard on the project but it is human nature for the individuals to have some partiality for either Bryan or Tom or the association they are on the board of.

Very difficult to be totally impartial.

Most companies trying to take on a task of this magnitude do it through third-party consultants as you are suggesting. The process that both associations just went through had to play its toll on the staff of both organizations and probably still is creating anxiety about their future.

Would it surprise anyone if the talent in both organizations have their antennas up for other job opportunities?

Give this assignment to a Wall Street M&A group and they would have it fixed in about a week, with no emotion involved, just a sound business decision.

Think you are on the right track to try in getting closure on this.

— Al Vangelos
Co-founder & Principal

Novelle Consulting, LLC
Laguna Beach, California

Former President/CEO, Sun World Inc.
Former CEO Calavo Growers, California
Chairman BC Hothouse Foods, Inc.
Former Chairman United Fresh Fruit and Vegetable Association 1991

Al is very right about the danger of a drawn-out process on staff morale and retention. Although, at the end, PMA was probably a little too aggressive in the way it gave an ultimatum to United, the process had gone on for a ridiculously long time.

There are consequences to this. People look to get more secure jobs as Al points out, and new hires are hard to attract with things in such flux.

Al’s idea about bringing in an investment banker is surely the way to go if you want the transaction to happen. Instead, in order to facilitate the negotiations between PMA and United, the boards brought in Jerry Jacobs, an attorney at Pillsbury Winthrop Shaw Pitman LLP. Mr. Jacobs heads up the firm’s Nonprofit Organizations Practice and is widely recognized as a leading expert in this area of law.

Part of the problem is that you have to know how to use lawyers. At one point in the negotiations, PMA actually agreed to a co-CEO arrangement for a year, as long as it was agreed that Bryan would then become CEO. This wasn’t much of a sacrifice as the nature of the transaction, which involved setting up a new association and closing down the existing two associations after transferring assets, would have probably taken six months to effectuate anyway.

It is not clear that United would have accepted this but, in any case, the issue became moot when the lawyer declared that there was no way to bind some future board to appoint anyone as CEO.

This is true, but the answer you get depends on the question you ask. You never ask a lawyer if something is legal or not; you tell a lawyer what you wish to accomplish and let him develop a legal strategy that will get you there.

So, no, a future board can’t be bound legally. But a contract can be entered into giving a person a million dollars in severance if he is not appointed CEO — which, as a practical matter, means he will be appointed CEO.

The other issue, though, is that in this case, not everyone wanted to do the transaction, and those who were skeptical lost faith in Mr. Jacobs. Some felt he was looking forward to his firm making a lot of money on legal work setting up the new association and dissolving the old ones.

Others felt he wanted a notch on his belt. Several people mentioned that we should note the first matter listed on his web site as an accomplishment: Merged two major national trade associations in the financial services industry, each with competing programs and complex structures, into one large association.

Rightly or wrongly, these board members felt he wanted the merger to happen and so he lost the ability to serve as impartial broker when disputes arouse.

Would an investment banker have done better? Maybe. Though they, of course, bias toward completing the deal as well.

If you know you want a merger, the investment bankers would have a lot of credibility on evaluating cash flows etc., but the disputes here aren’t business disputes; they are disputes over what is important.

Should a new association prioritize government relations or global networking? Should growers dominate governance or buyers? These strike us as not really business issues at all, so we question whether any business expert could get us to a solution.

Or, more precisely, the M&A guys could get us to the optimal business outcome, but whether it is the association the industry wants is an open question.

Many thanks to Al Vangelos for helping us wrestle with this important question.




Where’s The Face Of The Industry?
Is It The Face Of A PMA Or United Executive Or A Volunteer Leader?

Furthering the conversation on the United/PMA merger breakdown, a person who knows of what she speaks points out that the CEO question — Bryan or Tom — really should not be the question at all:

The soul of any association is its members – those of us born into the produce industry or those who found themselves touched by the passion it brings.

This is about running a business of an association for its members, and if a business would duplicate so many programs, compete for the same membership dollars and bank on an exposition which is a dying business model... just look at FMI. Look at NRA.

I have been on boards of both associations, PMA Foodservice Board and now the United Fresh-Cut Board, and I think combining the best of both associations would be the best for their members and the industry. We all know their strengths and weaknesses.

The CEO issue at hand is a non-issue in my mind. Both CEO’s are going to be retired in 10 years or less, so why not open this up to others? And to be honest, I think limiting an association’s President to 10-year terms would keep the associations from becoming a “Bryan Silbermann Marketing Association” or a “Tom Stenzel United Fresh.”

Where’s the face of the industry? A few of us thought Matt McInerney from Western Growers would be a great candidate.

Look at Mann Packing Company and what we’ve overcome with major tragedy and change in leadership. You’re going to tell me that both of these men are irreplaceable? Because they’re not. No one is.

At Mann Packing, we have a favorite “Darwinism” we share: It’s not the strongest or smartest species that survive; it’s the species that best adapts to change.

We can either embrace it, and plan for it. Or wait for it to come. But it’s coming.

— Gina Nucci
Director of Healthy Culinary Innovation
Mann Packing Co., Inc.
Salinas, California

When Gina writes, her words carry the weight of experience. Along with her sister Lorri Koster, she has lived the whirlwind. In the wake of the death of their brother, Joe, and their father, Don, the Nuccis and the Ramseys — and all the team at Mann Packing — pulled together and the company has, to paraphrase William Faulkner, not merely endured; it has prevailed.

How anyone can look Gina or Lorri in the eye and insist upon any particular man as CEO is beyond us. For their lives provide evidence that though each person contributes uniquely, all are replaceable in business.

This was our position when we wrote A Modest Proposal For Reviving The Merger Of PMA And United, which provided a technical solution for how to pick a CEO when the parties couldn’t agree. We had discussions with many industry leaders, and that proposal was widely accepted as a good technique to pick a leader.

But after everything collapsed, a good percentage of our mail was saying a pox on both their houses, fire both Bryan and Tom and hire a new CEO for the new association.

Then as we detailed in our piece, United/PMA Impasse More Than Just A Decision About A CEO — It Is A Battle For The Soul Of The New Association, it became clear that the whole battle over the CEO was something of a misnomer. Although it was said that everything was agreed to except who should be CEO, in fact the agreement left many things undefined and so the CEO choice became a crucial way of defining what the association would actually become.

That is probably no less true if we picked a third person, but that person would at least come into office without the legacy of being on one side or the other of an industry divide.

Term limits such as Gina suggests are an interesting option. The losses are clear — less experienced CEOs, fewer applicants for a job that can’t be a lifelong career, etc. — but there are benefits as well — fresh blood, new ideas and something that bothers many in the industry that Gina puts her hand on.

The associations have become big businesses, and they are now always marketing themselves. This means they tend to feature staff in high profile ways, often speaking at conferences around the world to show off their expertise, polish and to promote the knowledge they can thus lend to members. The staff is generally excellent and so these presentations are mostly of high quality.

Still, one could argue that the staffs, and especially the CEOs, should take a back seat to the membership, not because the members will necessarily do it better, but because the very opportunity to present at a workshop or general session is educational and part of executive development. The reputational enhancement that comes from such opportunities could accrue to the membership as opposed to the association itself.

Thomas Jefferson famously greeted guests to the White House in his bathrobe as if to say: “I am no grand and mighty monarch. I’m merely the man the people of the United States have hired to administer certain of their affairs.” Such humility won him support but one shouldn’t expect the pajamas to break out in DC or Newark any time soon.

Many thanks to Gina for speaking so profoundly on an issue of such importance.




How Much Duplication Is There?

Another thoughtful letter on the PMA/United imbroglio came our way:

I disagree with those who claim we have two national organizations duplicating efforts. The PMA is a large national organization that serves as a window through which everyday more foreign companies access the US produce scene. 

For most of the trade, mention ”the PMA” and they think Fresh Summit.   United Fresh is the shared Washington, DC office of the regional grower groups like the California Grape and Tree Fruit League.  The staffs feel totally different. United Fresh feels like a legislative office, and PMA feels like an embassy in a friendly country.  The missions are different so the staffs have evolved differently.

The Florida tomato industry is preparing for a trade war with the Sinaloa growers.  Could Bryan Silbermann summon Jorge Ibarra and Reggie Brown to a Camp David-like retreat on the Delaware seashore and broker a peace deal?  If the FMI and NGA aggressively united to eliminate Country of Origin Labeling, what would PMA do?  

A word about the two conventions: it astounds me how many view the primary benefit of a merger being the elimination of redundant conventions.  It shows the shallow level of engagement of our industry to think the most important thing these organizations do is host their respective trade shows.

With regards to the business model, PMA’s Fresh Summit has been successful based on large sponsorships and a trade show with every year more tangential attendees.  The trend for trade show attendance overall is down. Lots of buyers and sellers is what is promoted at Fresh Summit.  But buyers and sellers of what?

I used to be an exhibitor under the mistaken idea I was a seller.  I was paying to be a captive buyer.  If the large grower-shipper organizations with the big booths, dozens of attendees and the high level sponsorships pull out the way the large beer and soft drink companies pulled out of the FMI show, what happens?     

What happens in a world where the Fresh Summit doesn’t generate the huge surpluses?

— John Pandol
Director of Special Projects
Pandol Bros.
Delano, California

We appreciate this letter that deals with four important issues in the debate over the future of United/PMA:

1)  How much duplication is there?

This is a key question, and the answer is not clear. Some programs may do similar things — say United’s program with Cornell and PMA’s newer program with Thunderbird — but these are relatively small programs. The Cornell program tops out at 40 registrants. It is a big industry and the industry can fill many programs, each different in various ways. Even duplicative programs done at different times and in different geographies can appeal to different audiences. So there doesn’t seem to be any industry outcry to eliminate these types of programs.

Even government relations is questionable. Sometimes two slightly different associations can each have better success at attracting different allies. Maybe PMA can attract FMI and NRA to ally on some issues where United might have better success with various non-produce growing farming associations fighting for issues such as immigration reform.

We can say this: When the two associations just went through a whole process that included creating a pro forma budget, they found almost nothing that was so obviously duplicative that it had to be obviously zeroed out.

2)  How to handle issues where buyers disagree with sellers or different growing regions or commodity groups disagree with each other.

As John points out, the idea of unity is all fine — right up to the point where there is something to disagree about. If the retailers hate the PACA Trust and grower-shippers love it, then a single association would either alienate a portion of its membership or punt and not take a position at all. The question here is whether it really makes sense for a vertical association to have advocacy as a key component.

Of course, even an all grower association confronts these issues. When NAFTA was hot, the interests of Washington apple growers — looking for markets to sell to — and Florida tomato shippers — looking to block entry of winter tomatoes — conflicted. The reality is that the produce industry is composed of crops and regions with many disparate interests, so making government relations the kingpin of any association in this industry requires great skill to effectuate.

3)  Are two conventions too many?

There is little question that lots of people see the primary benefit of a merger of the two trade association as getting rid of one convention — though the merger plan doesn’t contemplate doing so for at least four years.

The real question is why is this even an issue? If businesspeople don’t find value in a convention, you would think they would stop exhibiting or attending.

As we detailed in our piece, Three Possible Reasons For The Collapse Of The United/PMA Merger Talks, the problem is more complicated:

The issue our letter-writer alludes to is that big companies spend a lot of money with the associations that they would rather not spend. They spin this as supporting the associations and, doubtless, sometimes, that is true. For the most part, though, it is marketing by another name. So if a big buyer asks for a sponsorship, the vendor feels it is in its interest to say yes. Or the vendor doesn’t want bad publicity, say trade press reports that the failure of Company X to renew its booth has led to a collapse of exhibitor numbers at one show and threatens its viability.

There is a lot of evidence that the large well established tobacco companies became more profitable when cigarette advertising was banned. They saved on the expenditure, and new entrants couldn’t easily challenge their dominant market share. Equally, if a law was passed against trade shows or publications, these giants might be more profitable. In other words, if trade shows were banned in the produce industry, it might well help the profitability of major players as it would reduce their marketing costs while preventing smaller players from building market share — but that doesn’t mean the overall industry would be larger or more prosperous.

So many large companies do not want to drop out of the second show; they want to negotiate it into non-existence.

4)  Future of trade shows/sustainable business model.

When we wrote our piece, PMA And United: To Merge Or Not To Merge? That Is The Question, prior to the talks collapsing, we detailed the various issues surrounding a merger. One part we neglected to write about was the danger of projecting the present state of things into the future.

All businesses have lifecycles, and nobody can be 100% certain of the future for any business. Certainly consolidation has put pressure on trade show attendance — it has also increased the value of each buyer attending. PMA’s move into the global marketplace provides buyers of value to many fruit shippers, but makes large portions of the attendee base irrelevant to many vegetable producers.

PMA’s success is intricately tied up with the trade show. One reason PMA’s membership numbers are so high, with so many members who do not belong to United, is that these companies get discounts on participating in Fresh Summit by being a member. One wonders how many would bother joining if the price of exhibiting or attending was the same whether one were a member or not?

There has been notable consolidation by some of the big Salinas-based shippers at the trade shows, which has been more than compensated for by expanding international participation. But this could all collapse. The foreign participation in trade shows is often government subsidized and such budgets are under strain. There is now a plethora of regional alternatives for marketers and attendees. Video conferencing also has been advancing enormously.

For better or worse, the industry has been able to have its cake and eat it too. It could attend and exhibit at a trade show that was presumably profitable for all concerned — and then generate such a surplus that it could fund all kinds of projects, from the Produce for Better Health Foundation to the Center for Produce Safety. One wonders if individual companies actually had to write checks for these purposes, how much of all this would the industry desire to explicitly pay for?

Many thanks to John Pandol for helping us think through such an important issue.




United/PMA Merger Comes Down To Philosophy And Function

Our piece, United/PMA Impasse More Than Just A Decision About A CEO – It Is A Battle For The Soul Of The New Association, brought many comments including this letter:

A very thoughtful article. 

I believe the industry wants one association, primarily because of financial reasons, and I believe one association is really just a matter of time.  However, as you pointed out, philosophy and function are really unresolved issues.

— Jim Carr
President / CEO
Produce Reporter Company
Carol Stream, Illinois

There is little question that if you did a survey, it would overwhelmingly show a preference for one association. If you weighted the survey by produce volume sold, it would be even more so.

Yet, we are not fully persuaded that this means anything at all. It reminds us of surveys that ask whether Americans would like a strong national defense. Yes, overwhelmingly so.

Of course, this doesn’t answer the question as to whether we should keep producing the F-22 Raptor fighter jet, maintain a 600-ship Navy or if we need the capability to defend not only Taiwan proper, but also Quemoy and Matsu — yet making the decision to have a strong defense is, in fact, the making of decisions about things such as this.

Equally, saying one wants one association is fine, but the devil is in the details. This is especially so in the produce industry.

One of the unusual characteristics of the produce industry is that it has vertical associations. The voting membership can run from a farmer to a packer to a shipper to a wholesaler to a retailer or restaurant.  The chairman of the associations can include people such as a representative from a buying organization such as a hotel chain.

This is quite unusual. If you think about FMI, NRA or WGA, these are all horizontal associations with membership defined by business classification.

When Jim Ratliff of Hilton was Chairman of PMA in 1993, it was uneventful. After all, Joe Brennan of Marriott had been chairman back in 1984, yet that was quite extraordinary. Yes, hotels buy produce but they also buy mattresses, and yet it would be hard to imagine the chairman of the mattress association being from a hotel chain.

So, although a representative of a foodservice operator and a grower-shipper may both agree they want one association — the one they each want is likely to be very different from the one the other wants.

If the details are laid out — they just might decide they want two.

Many thanks to Jim Carr for weighing in on this important industry issue.




Neither United Nor PMA Represent Production Agriculture

A line in our piece United/PMA Impasse More Than Just A Decision About A CEO — It Is A Battle For The Soul Of The New Association caught the eye of a frequent Pundit contributor:

"United is perceived as the organization with the core responsibility for lobbying on behalf of the production agriculture base of the produce industry in Washington, DC."

Very interesting comment. My perception of both organizations has always been that neither had much membership from, nor understood/represented very well, the needs of production agriculture, in Washington or elsewhere.

The "base" of both are represented much more by wholesale selling/shipping and retail segments of the industry than by farmers/producers.

Richard W. VanVranken
Agricultural Agent
County Extension Department Head
Rutgers Cooperative Extension
of Atlantic County

Rutgers University
Mays Landing, New Jersey

Rick has contributed to many pieces including these:

Pundit Mailbag — Getting A Handle On Direct-to-Consumer Programs

Pundit’s Mailbag — Letters Pour In On CSPI’s Highly Deceptive Riskiest Foods List

Troublesome Traceability Letters From PMA Veiled As Being Sent From Buyers

In the produce industry, there are many growers and, numerically, few of these are members of any national trade association.

Typically the membership begins at the packer-shipper level. However, the largest growers tend to also do their own packing and marketing. So a company such as Paramount Citrus owns, cultivates and harvests more than 42,000 acres of fresh citrus. In other words, these associations can have few grower members and still represent a big chunk of grower acreage.

Even in those cases where the packer-shipper does not actually farm — say a co-op such as Sunkist – it is reasonable to think that the co-op is using its participation in the national associations to look out for the interests of its growers.

There are also crop-specific or regional associations — say the California Grape & Tree Fruit League or the Northwest Horticultural Council — that engage actively with the national associations specifically to make sure that the priorities of their members are given a voice on the national stage.

In general, the issues that are generic to many types of farming get a lot of focus from the State Farm Bureaus, and issues that are more specific to produce growers often get the attention of the produce associations at regional, state and national levels.

Still when it comes to advocacy, it is a bit of sticky wicket. The national associations are representing the interests of many growers who are not actually members of the associations.

Think of it as a kind of indirect democracy. Just as before the adoption of the Seventeenth Amendment, senators were not directly elected by the people but, instead, were elected by each state’s legislature. So the packer-shippers are representing their growers.

Of course, if the issue is a dispute between packer-shippers and their growers, such an issue can be problematic for the national associations.

Many thanks to Rick VanVranken for his eagle eye.




Do We Have To Wait Another Seven To Ten Years To Make A Merger Happen?

Our piece, A Modest Proposal For Reviving The Merger Of PMA And Unitedwas an attempt to identify a strategy for selecting a new CEO for the new combined PMA and United, since, technically at least, this was the hang up that was identified publicly as the reason the merger could not go through. We have dealt with some of the responses we received in separate pieces in this edition of the Pundit; here is some additional feedback received:

This came from one who works with both Bryan and Tom:

Wouldn’t it be a good idea to ask Tom and Bryan to come out of the closet and agree at least on a personal basis to your proposal even if they cannot speak officially for their boards?

I am sure a lot of people are worried about taking responsibility for risking the job of one or the other. The two people most involved should declare themselves willing to follow this method. That could help a lot to get things moving.

A good deal — assuming it is a good one — cannot be allowed to collapse on the grounds of the personal interests of two (very nice, very capable and very professional) individuals. And if one has to go, he should of course be amply compensated and — as you say — if possible be kept on as a (very) well-paid consultant.

We have spoken to many board members and many staff members, and we have good reason to believe that at least one of the CEOs involved would have no problem if the industry decided to adopt a fair and unbiased mechanism, and, further, that the specific mechanism we suggested in the piece would be acceptable to them as fair and unbiased.

We suspect that if the industry’s leaders wanted to make it clear — say by having the top ten financial contributors to the associations write a letter saying that they wanted the merger to go through and they wanted to resolve the CEO question by adopting a fair and objective process such as we defined in the Pundit — the leaders could probably get the board of one association to endorse the concept and that would put great pressure on the other board to do the same.

After all, what would they be holding out for — an unfair and biased process?

The big problem now is that, as we mentioned in a subsequent piece titled, United/PMA Impasse More Than Just A Decision About A CEO — It Is A Battle For The Soul Of The New Associationit may be only technically true that all the issues were resolved and only the CEO issue remained. The very fact that the issue of the CEO has risen to such importance strikes us as proof that the “constitution” of the new association is too vague.

The agreement to form the new association needs to define its priorities — then you can make a technocratic management decision as to the top staff position.

A former Chairman of the Board of PMA also weighed in on this issue:

I have always been uncomfortable with a merger due to the make up and different core values of each association, and as you know I currently serve on boards or committees of both. In a merger, I felt if the stronger, financially more sound, and larger association (PMA) would impose its will, the grower/shipper and transportation issues may suffer.

I was the Chairman of the PMA during the 90's when merger discussion came up, and after lengthy discussions (not as lengthy and professionally led as this one), we agreed the divide was too wide to bridge. I have also stated that if there was a time for a merger it was now as many of those issues that divided us are now shared equally with the production and the “sell part” of the business — those issues being food safety, food security, consumption increases, food recall standards, and the whole ID process from ground to retail shelf.

From everything that was reported, I was pleasantly surprised that the two associations were able to work through those issues and come up with compromise and agreement.  I am sure this is credited to the really fine Chairmen of both Associations, the strong merger teams, and the general make-up of both boards.

I am disappointed that the issue of CEO was pushed "down the road" and couldn't be resolved. When you have a merger of such magnitude, there is often found a way to use the talents of both and, in this case, they each have different skill sets. 

If there is not room for the current outstanding CEO's of each in some manner or the other and on a temporary basis (1-3 years) and it has to come down to a choice, I am in favor of what you have recommended.  However, with no disrespect intended, I would be comfortable with your choices or an alternative set of choices for the committee.

— Dick Spezzano
Spezzano Consulting Service, Inc.
Monrovia, California

Yes, of course, the key point is that there are mechanisms for making a decision. Our choice of whom and how many people should serve on such a committee could, of course, be altered or changed. We appreciate Dick’s vote of confidence that our recommendations for the committee were good ones.

We certainly can defend our choices, but there are many people who would surely be acceptable. The world is filled with critics who contribute nothing; at least we put out a real proposal that is actionable if the industry wants to identify a CEO for the new association.

A former Chairman of United’s Business Development Council joins Spezzano in endorsing the Pundit’s proposal:

Having served in various capacities within both associations, I firmly believe that the two associations should indeed merge and be led by one CEO. 

I embrace the proposal you offer here today, and having the great fortune to have worked with all parties identified in your article, believe they are outstanding choices.  It’s time to put the “Egonomics” aside and focus on the economics of what is best for the industry.

— Mike Kemp
VP of Brand Development

Market Fresh Produce, LLC
Springfield, Missouri

Another industry veteran was prepared to accept the Pundit’s proposal to choose a CEO because he saw the merger as imperative:

Together we stand strong, divided we don't fall but are much weaker.

—Bill Schaefer
President & COO
Fresh King, Inc.
Homestead, Florida

An important industry leader says the concept of a search committee is a good one but wants the search to go beyond the current CEOs:

The CEO of the larger organization isn't necessarily the best candidate. 

Let the search be far and wide, beyond the two current CEO's. 

Remember, these organizations, and a combined one for that matter, belong to the produce industry. The CEO works for us. His or her position is to be a spokesperson for the industry and lead the day-to-day operations of the organization.

The CEO answers to each and every member at every step along the way.

Take the emotion out of this process, and the entire industry will end up as the winner.

— Mike Martin
President
Rio Queen Citrus, Inc.
Mission, Texas

An executive at an important importer thinks we need both a mechanism to select the CEO and a rallying cry for the industry::

Well thought out and reasoned as usual. I applaud your perseverance.

Hopefully reason will prevail and both organizations will get this issue resolved for the long term interests of the produce business. 

In addition to your efforts, I recommend some kind of industry-wide rallying cry to get these parties back to the negotiating table — how about "One Voice - United & PMA"? 

— Craig Padover
Account and Category Manager

Jac. Vandenberg Inc.
Yonkers, New York

Craig’s letter reminds us of a song in Les Misérables, the musical, titled Red and Black:

We need a sign
To rally the people
To call them to arms
To bring them in line!

The student revolutionaries were seeking a symbol to summon the people to join their small band against the national guard.

We are all in favor of a slogan, but, alas, in Les Mis, at least, the “people” never came.

We wonder how engaging this issue actually is to more than, at most, a hundred companies. These are the big companies that pay out significant amounts to the associations. For most, if they don’t like two trade shows, they only go to one; if they don’t like two dues, they only join one. The question really comes down to whether the big players want to push this through.

Another correspondent laments that this may all just be a lesson for history:

Great commentary on the collapse of the PMA/United matter. Agree that a more public forum would have helped, but there are those few from each board who do tend to make it difficult.

We need one organization, and I can see both “divisions” playing a major role for their stakeholders under the guidance of one organization with one CEO.

Wish they could have agreed with your suggestion in your commentary of a seven-person executive committee with that seventh person not being a member of either group (a qualified professional, of course, related to these kinds of decisions). Oh well, guess we have to wait another 7-10 years for this discussion to come up again and hopefully they will then remember what George Santayana wrote, “Those who do not learn from history are doomed to repeat it.”

— Bruno Dispoto
Purchasing Director
Grower’s Organic Inc.
Denver, Colorado

To some extent, the point of all these discussions is that those who Rick Antle, in his letter, called the “ownership” don’t, in fact, have to wait. FMI killed its trade show a few years back because the CEOs of the big supermarket chains got together and said that they wanted this ended.

We have now provided one mechanism to choose a CEO if the industry wishes to implement the merger as negotiated.

We have also provided an alternative plan that we could argue might more perfectly allow for an expression of industry will.

In general, we would say that the boards would feel a need to respond if 10 or 20 top players wrote a letter urging the boards to act in accordance with the spirit of either of these proposals.

What we are about to learn is the degree to which those who advocate for merger are willing to actually push for it.

If not, as Bruno points out, we write for history. The archives here at the Pundit are forever, and hopefully someone will have the good sense to review them should this issue not be resolved now and arise again at some undetermined date in the future.

It strikes us that this would be sad. The conditions for merger, as Dick Spezzano points out in his letter above, are as close to perfect as they are ever likely to be. Individual companies can serve their own interests while also serving the greater industry interest, and we can do it now. Why should we falter?

As Hillel the Elder, in the Pirkei Avot or “Chapters of the Fathers,” taught us, “If I am not for myself, then who will be for me? And if I am only for myself, then what am I? And if not now, when?”

When indeed.

We thank Bruno Dispoto and all our letter-writers for contributing to this important discourse that may help define the produce industry for years to come.

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