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Terminal market concept drives St. Louis

ST. LOUIS -- The ongoing success of the St. Louis Produce Market is a tribute to the terminal market concept.

Summarizing the comments of others on the market, Jim Heimos, president, Heimos Produce Co. Inc., said the market remains important because it is the focus of customers from near and far who come to St. Louis to buy produce. "This still works for most of us," Heimos said. "There is an advantage for us all to be here. We are competitors but the market does draw. Especially in the summertime."2011-StThe St. Louis Produce Market is located several blocks north of downtown St. Louis. This is a 2011 aerial shot courtesy of the market.

The St. Louis Produce Market opened in February 1953.

The design structure is basically unchanged in 61 years. The market's merchants have individually upgraded and modernized their refrigeration. The market organization manages security and maintains the facility, including a current effort to replace the roof of the two long docks.

The competitive environment still works as it has for centuries. Competitors group together to give buyers a central location to compare products and prices. It is an efficient operation for the buyers as sellers are forced to offer price and value. The sellers, of course, benefit from a high concentration of buyers to provide the needed environment to offer an array of products. Or, in this case, produce.

In St. Louis, the strongest demand for produce is in the summer months, with farmers markets and similar operations coming to shop from a wide Midwestern ring.

Winters on the market are slower. This winter was brutal in St. Louis, as it was in much of the country.

John Pollaci, president of Sunfarm Food Service Inc., said his business was recovering as the calendar moved toward March. "January was very difficult. Schools, which are a good part of our business, were out for four days in January. People hole up when the weather is that bad. And they spend money on child care. The schools bought less."

Heimos indicated that for the St. Louis produce industry, "It's been a tough winter. There were a lot of transportation issues." But, "there were a lot of good markets because the growing areas had issues. It was hard to function but it created shortages for the certain items."

Providing a historical perspective on the St. Louis Produce Market is stlouisproducemarket.com. "In the early days of St. Louis, when it was still a growing Western town, most of the fruit and vegetables consumed here came to the city on the Mississippi river. In order to be near the source of supply, wholesale merchants set up their businesses near the river, and the first St. Louis produce market grew up at Wharf Street on the bank of the Mississippi.

"As river traffic grew the vegetable dealers moved about a block from the old area. The move was believed to have taken place about 1874, when the Eads Bridge was completed. The industry expanded and the market spread until it covered a 36-acre area where for 75 years it continued to operate. Old Commission Row is now made up of shabby old buildings, most of them pre-dating the Civil War.

In 1947 it became obvious the market would have to move due to the development of the Third Street Inter-Regional Highway and the East St. Louis Bridge. This development would wipe out a large part of the existing market. The Department of Agriculture conducted a survey and made recommendations concerning the construction of a new market. Four sites were suggested for the new market, from which the present one at North Market and Second was chosen.

The project was financed by the St. Louis Fruit & Produce Association, made up of some of the produce merchants. In August 1950, work had begun by the Robinson Construction Co."

The website noted, "From the rear of the produce market, fruits and vegetables were unloaded from freight cars directly to the dealers."

Those tracks are still available to the St. Louis produce merchants today.

Industry professionals working diligently on ways to ease the high and increasing cost of transportation

Increasing costs of production are affecting the entire produce industry today, but one issue that is causing a huge upset that may intensify tremendously is the cost and tenuousness supplies of fuel and trucking regulations that have most growers, shippers and even end users on the nervous edge of their seats.

There are several issues currently at hand that are contributing to the problem. The war in Iraq has already had a major effect on the cost of fuel in the U.S., and it stands to become much worse as the conflict there intensifies.Jim-DiMennaJim DiMenna

According to the Energy Information Administration, Iraq is the third-largest exporter of oil in the world and has the fifth-largest crude reserves.

A story BY Bruce Kennedy on CBS Money Watch [www.cbsnews.com/news/as-iraq-fighting-rages-gas-prices-climb] on June 14 stated that the hike in gas costs follows the battlefield successes of the Islamic State in Iraq and Syria [ISIS], an al Qaeda breakaway group backed by Sunni fighters and other groups in northern Iraq.

The article further stated that the cost of crude rose Friday [June 13] afternoon to nearly $107, a 10-month high, amid fears that the mounting insurgency there could lead to major disruptions of oil shipments.

Brent crude futures, an international benchmark, climbed 54 cents to $112.96. And prices at the gas pumps have risen for four weeks in a row, with no relief in sight.

There are, however, proposed changes to Federal laws that may allow triple tractor-trailer trucks, longer doubles and longer, heavier single trucks on the Nation's Federal highways.

This action has its obvious strong opponents who fear increased fatal highway accidents and damage to roads and bridges.

Supporters say the measures would increase productivity, reduce truck traffic, and actually make roads safer. Opponents, however, say they would increase fatal crashes and damage roads and bridges

A May 4 press release from the Coalition for Transportation Productivity stated that there is substantial evidence that improving trucking industry productivity through carefully constructed higher vehicle weight limits on federal highways will save lives by making highways safer and less congested.

The release also stated that the Coalition is asking Congress to address this issue now before America's highways become even more congested.

Like most new legislations, the final decisions on these issues may take years and therefore can't offer relief for what producer-shippers are facing today.

Jim DiMenna, president of JemD Farms, headquartered in Kingsville, ON, told The Produce News that transportation and logistics is a constantly growing factor affecting greenhouse growers and shippers.

"We are doing everything possible to coordinate orders with trucks to make sure we fill them to the maximum so that the cost per case is reduced or at least maintained," said DiMenna. "Part loads are getting more and more costly, and so we are continually focusing strongly on working with our retail partners to make sure that we keep costs down as low as possible. Consolidation is absolutely key."

Together with its business partners and friends, DiMenna met at the United Fresh expo and plans to again at the PMA Foodservice show and all other venues where opportunities allow, to continue to work on ways to ease the high and rising cost of shipping greenhouse and even field produce so that everyone along the chain can benefit.

"To ship a partial load of produce increases the cost per box by five times," said DiMenna. "But we know that many clients cannot take full loads. As a group we are working toward strategic partnering--particularly in the produce sector because of the cold chain requirements-to ship full loads that can be broken down at a delivery point that is convenient to all receivers involved."

DiMenna added that the group sees great opportunities to develop strong relationships even among competing companies because everyone understands the potential advantages.

"If I'm shipping a load of 15 pallets, and another company has an order for an additional 15 pallets there are two trucks on the road," he said. "If we combine those pallets-even if the receivers are different companies-the savings can be tremendous and trickle all the way to the consumer. Our goal is to be able to a create system that monitors availability, shipment history, tracking and clients' orders, including their demands as to what carriers we use, we can create a system that can help to offset the high and rising costs of transporting fresh produce. This is a reachable goal, and one that we are striving to accomplish in as short a time period as possible."

United Fresh partners with National Association of Convenience Stores

The United Fresh Produce Association and the National Association of Convenience Stores announced a new partnership to significantly increase the sales of fresh produce in convenience stores. A new task force of members of both groups met during the United Fresh 2014 convention in Chicago last week.

As leading associations representing produce suppliers and convenience store customers, United Fresh and NACS have formed the partnership to identify best practices that can be shared across the industry to assist convenience store operators in developing their own fresh produce supply chains and in-store management.

With more than 151,000 locations across the country, convenience stores are increasingly seen as a convenient destination for consumers to buy fruit and vegetables. In 2013, produce sales at convenience stores were up 16.7 percent, more than doubling the overall 7.3 percent growth rate of produce in the United States.

“The business opportunities for convenience stores that manage fresh produce well are vast, for direct sales as well as enhancing the image of stores as a provider of fresh and healthy food options," Tom Stenzel, United Fresh president and chief executive officer, said in a press release. "Fresh-cut fruit and vegetables, ready-to-eat meals and snack products, and even whole commodities can deliver attractive margins and new customer segments to retailers."

“Consumers are increasingly seeking grab-and-go convenient options for their produce needs," Henry Armour, NACS president and CEO, said in the release. "Convenience stores present a tremendously underdeveloped source of produce sales in communities. We are excited to work with United Fresh to give retailers the tools to affordably acquire merchandise and sell produce in their communities as part of our broader nutrition initiative.”

At its initial meeting in Chicago, the task force reviewed current challenges in supply chain management, in-store handling and merchandising, and other barriers to produce success for convenience retailers. The task force also began identifying best practices in meeting each of these challenges, learning from those retailers and produce suppliers who are finding the greatest success today. The associations plan to develop tools and services to share best practices and successes with the broader memberships of NACS and United Fresh.

Convenience store sales of produce reached $328 million in 2013, and the groups believe that sales can increase dramatically over the next five years from this task force’s efforts.

Safeway launches new salad kits

Safeway has launched a new line of chopped salads. The "Safeway Farms" kits are available in five varieties, each containing greens, toppings and dressing.

"We work closely with our growers to make sure every ingredient is always fresh and delicious and grown with the highest standards," the company states on its website.

The Asian Sesame salad kit contains Napa cabbage, carrots, celery, green onions, cilantro, garlic ginger wonton strips and peanuts and tangy sesame ginger dressing.

Bacon & Bleu contains Romaine, iceberg and cabbage blend, broccoli, celery, carrots, radishes, cauliflower, bacon and blue cheese crumbles, and bleu cheese dressing.

Safeways' Kale Cranberry Pecan salad kit contains kale, cabbage, radicchio, broccoli, carrots, candied pecans, dried cranberries, herb seasoned crouton topper and country Dijon mustard dressing.

The fourth option, Italian, is comprised of Romaine, iceberg and radicchio blend, parsley, radishes, salami and parmesan cheese, and a roasted red Bell pepper vinaigrette dressing.

The fifth new salad kit is Mediterranean, and it is made up of escarole, endive, radicchio, cabbage, broccoli, carrots, cauliflower, flatbread strips, feta cheese and a basil balsamic vinaigrette dressing.

Organics continue double digit growth

While organic products in the marketplace continue to experience double digit growth, they still only represent a small percentage of overall business, meaning there is much room for more growth.

That was the take away message delivered by a trio of speakers at a workshop sessions during the United Fresh Produce Association convention in Chicago, June 10-12.

Laura Batcha, executive director and CEO of the Organic Trade Association, led the discussion and kicked off the session with some numbers about the growth of the category. In 2002, when the USDA came out with quantifiable organic standards and the USDA organic seal, the sector had gross sales in the United States of about $3 billion. Those standards, Batcha said, "created a platform for huge expansion."

By 2013, the market had grown 10-fold and now there are sales of $35 billion, with fruits and vegetables leading the category by representing 36 percent of those sales. It is not only the largest sector within that category but it's the fastest growing, according to the OTA executive.

Elaborating on the impact in the fresh produce industry were panelists Todd Linsky, vice president of organic sales for Grimmway Farms/Cal-Organic Farms, and Michael Hollister, senior vice president of sales and marketing for Driscoll Strawberry Associates Inc. Those two were respectively representing the top selling fruit and vegetable in the category: carrots and berries. Both confirmed that organic sales continue to increase.

Linsky said carrots generate a high velocity of organic sales year round. "They are doing very well," he added.

Hollister said the great thing about shoppers who buy organic berries and other organic items, is they are "super heavy consumers" buying 25 percent more fruits and vegetables per store visit than their non-organic buying counterparts.

While there are heavy buyers of organic produce and other organic items, Batcha said penetration of organic products runs deep. An annual survey of 1,200 households that OTA has been conducting for the past seven years, reveals 80 percent say they have purchased at least one organic item in the past year. "The vast, vast majority (of households) are aware of organics and participate in some way."

Batcha said what separates an organic shopper from a conventional one is that the organic shopper is much more likely to associate making a healthy choice with her food buying decisions.

Linsky said this emotional connection that most organic food shoppers associate with the purchase of these products is why he believes the potential for growth continues to be sky high. He said the value of that emotional connection in their food buying choices "is huge."

Hollister agreed stating that many organic shoppers see a relationship between their food shopping behavior and their lifestyle. It is the urban/cosmopolitan resident that is more likely to be an organic shopper and is currently driving increased sales in the category.

Underscoring that connection, Batcha said the typical organic shopper is much more likely to diversify their buying habits, shopping at three different stores or more a week, presumably searching for the exact items they want. They are a younger buyer and their average spend in a store is $125 per visit compared to $110 for a non-organic shopper.

But she said the vast majority of organic fruit and vegetable shoppers will buy conventional product if organic is not available. The OTA research shows that 91 percent still make a purchase if an organic item that they are looking for is not available, with a majority of those buying the conventional option but almost 40 percent picking a different organic option.

Linsky believes the shopping at many stores and changing purchases at the grocery store because of lack of availability of the organic option points to the huge potential that remains for the category and retailers. He said no one appears to be offering the organic consumer exactly what they want at one place. Retailers should embrace that heavy produce-shopping consumers and "get her back in your store," said the carrot salesman.

Hollister reiterated that the organic shopper is a very valuable customer. Natural food stores cater to those customers and if traditional supermarkets want more of that businesses they should find a way to communicate better with that consumer, he said.

Both Hollister and Linsky pointed out that keeping up with the demand for organic fruits and vegetables is one of their biggest challenges from the supply side. The Driscoll executive said they are seeing 20 percent year over year growth in their organic sales but getting the land to increase their production in that amount is difficult. For a grower, it takes three years to transition conventional land to organic production. "It's a huge investment; it doesn't happen overnight."

Linsky concurred. "Ground is a huge challenge," he said. "And it will continue to be a challenge."

A question from the audience about Walmart's contention that the nation's largest retailer plans to bring organics into the marketplace at a cheaper price brought a warning from Hollister. He indicated that type of talk creates an expectation that is hard to meet. He said growing organic produce is an expensive proposition and it can't always be delivered at that cheap price that Walmart is noted for. But he added that they love the attention the announcement brings to the category "and we'd love to have that conversation with them."