Pundit’s Mailbag —
More On PMA/United Merger
Jim Prevor’s Perishable Pundit, November 15, 2006
The issue of whether it makes sense for PMA and United to merge still percolates. We’ve been dealing with the issue of possible merger of PMA and United here, here, here, here, here and here. Now, Jim Allen, President/CEO of the New York Apple Association, weighs in:
Jim Allen and the Pundit are both experts at governance, as we had the opportunity to study Fidel Castro up close when we were both in Cuba at a trade show set up to promote food sales to Cuba. With Castro now believed to be quite ill, we can say it may take longer to deal with relationships between the produce associations than it will to normalize relations with Cuba.
Jim’s letter is very representative of what we have heard from many. Note that the Northeast has no strong regional group, such as Western Growers Association, to represent it in Washington, so they depend heavily on United to fulfill that role. We find United’s strongest support among growers who do not have state or regional groups that represent them in D.C.
Although the issue was brought up to the Pundit at the PMA convention in San Diego by people who felt that a divided presence in Washington did the industry no good during the spinach crisis, it is not necessary to think United did or is doing a “bad job” to think that a merger is desirable.
Let us posit that United does a great job at government relations; the question is whether the state of affairs Jim Allen describes is actually sustainable.
Jim summarizes his letter by saying: “With respect to the fine job that PMA is doing with marketing issues and the retail sector, PMA should build upon this and allow United to do what they do best.” By which Jim means government relations and public policy issues.
A few years ago, there was the tacit agreement between the associations. United had evolved its trade show into primarily a venue for selling technology and equipment to growers, packers and wholesalers. PMA had a show to sell produce and related items primarily to retailers and foodservice operators and their wholesalers.
PMA had contact with the regulatory agencies, but no senior staffer was dedicated to government relations and it did no lobbying on the Hill.
This was the basic entente between the associations. It is much what Jim describes — PMA focuses on marketing; United focuses on government relations.
Then United made the decision to end that entente by launching a trade show, co-located with FMI, the supermarket industry association, for the purpose of selling produce to retailers. In other words, United took direct aim at PMA and its marketing function.
In the Pundit’s sister publication, PRODUCE BUSINESS, we wrote at the time that United’s decision to go into direct competition with PMA on the marketing side would compel PMA to respond.
One way PMA responded was to study its own membership and, it turned out, that for many, it didn’t matter what United was doing because well over half of the members of PMA are not even members of United, although a much higher percentage of United members are members of PMA.
This recognition, combined with United’s decision to launch the show, led the board of PMA to basically decide that, though it would be mindful of duplication and waste, it had to serve its own membership and couldn’t rely on a “separate sphere” philosophy, now that United was back in PMA’s sphere.
Of course the board of United seized the opportunity that FMI was offering in part because United needed additional sources of revenue.
Tom Stenzel recognized when he joined the association that its finances had to be stabilized. He shrewdly arranged a deal by which United sold its valuable headquarters in Alexandria, Virginia, and moved to rented quarters in Washington D.C. This both moved the association geographically closer to its lobbying job and freed up cash.
But you can only sell a building once.
Long term United has a dilemma: Government relations costs money.
If, as an industry, we divide up marketing functions such as great trade shows that can produce a surplus in one association, and government relations, which is not remunerative, in another association, the industry will be putting its “income” in one association and its “expenditures” in another association — which doesn’t seem sustainable.
This explains why it is PMA that just dedicated a million dollars to food safety issues.
The assessment of how the industry ought to organize its government relations is, in part, an assessment of how we can make funds available for that purpose.
We could, of course, assess dues for the purpose of supporting the associations, and United has effectively raised its dues over the years for that exact purpose.
But there is sort of a catch-22 here: The biggest growers most able to pay dues to support government relations tend to value United least, as these growers are the ones with strong regional associations that engage in government relations.
United wound up hitching its wagon to the FMI star, and with FMI’s announcement that they are going to an every-other-year-show format, with a conference on alternate years, it is not clear the whole FMI show won’t collapse.
So the question becomes simple: How will we organize and fund the government relations programs of the industry?
The answer to this simple question is what this debate we have been conducting is all about.
Many thanks to Jim Allen and the New York Apple Association for helping the industry think through these questions.
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