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Pundit’s Mailbag — Finding The Right Answers For Possible PMA And United Merger

Our piece, An Industry Discussion: Pros And Cons Of A PMA/United Merger, brought a torrent of comments that we will be dealing with for some time to come. We thought, however, that we could profitably begin our discussions with these two letters. The first from a respected retailer:

“Begin with the end in mind”, I recall from a noted business course. As a retailer, my primary concern is my customer. As I go to market everyday, I have an obligation and expectation from our vendor partners that they are taking care of everything on their end to ensure my (our customers) are safe and satisfied ( yes, it appears the burden is one sided but this is reality).

Any organization representing this industry should have this as a common goal. The people in our industry need to value this representation as more than just an annual trade show that gives them a break from the daily routine. There should be one voice that represents the multitude of complex concerns this industry faces.

More than one voice is confusing to its members and the public at large. I have to believe there is a business model from another industry that has figured this out. Obviously the past has shown this is not an easy task, but I applaud the effort of both PMA and United for bringing it to the forefront again.

— Dick McKellogg
Lowes Food Stores

In his best selling book, The Seven Habits of Highly Effective People, Stephen R. Covey did urge us to “Begin with the end in mind” and, in a sense, this is the argument for a marketing and supply-chain-driven association.

One could argue it is the only argument for a vertically integrated association — that we all share the ultimate consumer and thus all are committed to delivering value to that consumer.

Yet Dick’s reference to the business model of other industries is telling. Because, by far, most industries do not have vertically integrated associations; they have horizontal associations.

In other words, FMI, the supermarket association, and NRA, the restaurant association, do not attempt to give a unified voice to the supply chain. They just represent their members. There is nobody from, say, Coca-Cola or Kraft on the board of FMI or NRA.

The crux of the problem with regard to PMA and United is really a matter of industry expectations. On the one hand, PMA, as the larger association, surveys its members who may not be members of United and it gets feedback saying, “PMA should represent us in Washington.”

On the other hand, United, although more focused than in the past, having defined its representation function as the representation of vendors of produce sold in commercial quantities, is not quite prepared to make a complete break with its vertical past. That is why it has retailers on its board. That is why it did its deal with FMI on the trade show side.

One conceivable solution to the industry’s dilemma would be for PMA to be the marketing and supply chain vertical association and for United to take on a horizontal role representing growers or growers and packers before government.

But these things are easy to say and hard to do. What about United’s wholesale members? Just abandon them? What about the new processors United just merged with — do they get tossed aside?

To say it is to realize how unlikely any of these things are to happen.

And United has great programs. People love the annual leadership class, and United got great reviews for its Cornell executive development program. These are not specifically “grower-shipper” programs, and they are only vaguely related to government relations.

In an industry as diverse as ours, where issues such as PACA separate buyers and sellers and issues such as NAFTA separate growers in one state from growers in another, there are issues and times when we need to be united and speak with one voice, and there are issues and times where we need to disagree and fight it out with each other. We need industry mechanisms flexible enough to do both.

Many thanks to Dick for his thought provoking letter.

Our second letter comes from a well-known industry leader who has worked the inside of this issue for some time:

Regarding your column published July 20, 2007:

Allow me to quibble with one paragraph that particularly bothered me. You wrote, “For one thing, this is a far more professional process. In the past, industry members have met together and tried to ‘make a deal,’ but few had any experience in creating new association structures, merging associations or starting new associations. This time United and PMA voted to bring in a professional in this area to help facilitate discussions. They brought in a neutral party, experienced in these matters, being paid by both sides who can help structure the process, keep emotions in check and help organize needed information — a person who does not feel the weight of history in every decision.”

“This ‘professionalization’ of the process in and of itself significantly improves the likelihood of a successful conclusion to the process.”

Having been on a previous committee representing PMA in merger discussions, I can attest that the entire process was extremely professional and deferential. At no time were we there to “make a deal”. That statement is a disservice to me and to all the other volunteers who spent countless weeks thoroughly examining this issue and going through an exhaustive process of analyzing everyone’s input. Was there some concern over “turf” among the professional staff? Of course. Was there some distrust over some of the hidden agendas? Of course. However, I can assure you that the volunteer leaders of both PMA and UFFVA were very candid with each other.

Never did “emotions” dictate the outcome. The vast amount of time was spent discussing member needs and how these could be met by either merging or by realigning priorities. The bottom line always was maximizing member benefits and what would serve our great industry the best. True that we did not use a professional facilitator, but our objective was not to reach “a successful conclusion to the process”. In fact, we took a strategic rather that tactical approach to the question of whether a merger was in the best interests of the majority of our respective memberships.

As your article explained, then, as it is now, the reasons for having two organizations grossly outweighed merging the two. In fact, the only overwhelming reason given to merge at that time was to serve the short-term financial needs of the very largest exhibiting companies who had redundant booths at the respective trade shows. However, by reviewing the varied needs of a vertically integrated industry, it became rapidly apparent that the varied responsibilities of government relations coupled with the multiplicity of opinions in the industry were anathema to a merger.

This process also begged the question in my own mind: Is there a need for a national lobbying organization? I don’t pretend to have that answer, but I will say that there are plenty of questions in my mind. Is a large, effective organization speaking with a united voice critical during a crisis; whether it be food safety or Alar or immigration or whatever a good thing? Absolutely. However, I question whether you can fund such an organization on any basis other than on an ad hoc basis because we have so many players with so many contrary agendas playing.

As your article says, Florida tomatoes and Washington apples have competing agendas on NAFTA. That’s only one of a myriad of instances where key players who would/should fund such a national lobbying organization will naturally split on issues. You can’t have it both ways to be buddies on one issue and enemies on another. Thus, an ad hoc approach is probably the only way of doing things. We both know that this is incredibly inefficient and expensive. So what to do?

The easy answer always was for PMA to “give” a large donation to United to cover their lobbying expenses. As you say, what if that effort was to protect PACA and there was a retailer Chairman who’s CEO was on the FMI board that was funding knocking PACA out? (That’s a real life example, by the way.) Do you think that this would provide some anxious moments for the PMA Chairman? Might not some very large players start questioning why their money might be spent lobbying an issue that is contrary to the best interest of that same large player.

Like any organization, the 80/20 rule applies to trade associations, whereby 20% of the firms account for 80% of the net revenues that fund association activities. Thus, you would have a handful of stakeholders that would exercise outsized influence on United because they would have such a large stake in deciding what issues got lobbied and which ones were watered down.

Additionally, when there are multiple agendas at play, the resulting product becomes muddled into a meaningless mess. You see examples of this coming out every day from various trade organizations.

I don’t have any quick answers for you, but you have pretty well identified the conundrum faced by the volunteer leadership of both organizations.

Many thanks for this “insider’s view” and a Pundit apology for any implication that previous negotiations were unprofessional. That wasn’t our intent. Our point was only that a professional facilitator, with experience in merger talks between trade associations, has been brought into this process and that this may change the dynamic. It may not. We will all see.

Our correspondent raises an interesting point regarding the need and feasibility for a national lobbying group:

This process also begged the question in my own mind, is there a need for a national lobbying organization? I don’t pretend to have that answer, but I will say that there are plenty of questions in my mind. Is a large, effective organization speaking with a united voice critical during a crisis; whether it be food safety or Alar or immigration or whatever a good thing? Absolutely. However, I question whether you can fund such an organization on any basis other than on an ad hoc basis because we have so many players with so many contrary agendas playing.

Bruce Peterson would often address questions regarding the associations this way: If this association did not exist, would we create it now?

And this is the core issue on United’s lobbying efforts. Clearly growers feel a need for a lobbying group, but most large growers seem vested in their local groups if, like WGA or FFVA, they are large enough to handle D.C. representation. Our letters at the Pundit consistently show that the most passionate United support will come from produce growers and shippers in states too small in the industry to have a well-funded national lobbying presence.

But these are small states, and if California and Florida growers don’t want to fund a national effort, it is hard to imagine that enough funds will be raised in smaller states.

Our correspondent also points out how problematic it is for an association to give money to another association to fund lobbying it may not, itself, agree with.

In the end, those who want to be represented in D.C. probably should pay for it themselves, and they should do so explicitly, funding government relations efforts.

Our first letter-writer today spoke of other industry business models and, truth be told, in most industries the big companies fund trade association government relations efforts because they feel it more effective to do lobbying through an association than directly.

In other words, are there vital issues that, in the produce trade, would justify large companies each spending a million dollars a year on lobbying but they would rather have a national produce trade association perform the lobbying because they want 20 small farmers brought up before Congress to testify rather than one agricultural behemoth?

It seems not. Which indicates our second letter-writer may be on to something. We may have to rethink what it means for “the produce industry” to be represented in Washington, D.C.

Considering this issue has been dealt with for decades, we shouldn’t expect quick answers. The goal, after all, is to find the right answers, not the fast ones.

Many thanks to our two correspondents today.

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