The Top 7 Ways Wholesalers Serve Retailers

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In order to accommodate today’s retailers, wholesalers are becoming chameleons.

In the wake of recent acquisitions and consolidations, along with efficiencies brought on by distribution and transport technologies, large chains have even more buying power to order directly from grower-shippers.

So why have North America’s produce wholesalers not only survived but thrived when the forces to eliminate the middlemen grew stronger? To survive, wholesalers have not only diversified with a broader range of products and services, they became smarter and more nimble in their ability to adapt to today’s ever-changing environment.

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Photo Courtesy of Four Seasons Produce

Testament to this is a thriving U.S. fresh produce wholesale industry that generates an annual revenue of $80 billion, according to a January 11, 2016-released report from First Research, a division of Hoover’s Inc., located in Austin, TX.

What’s more, gross margins for fresh produce wholesalers rose from 17.9 percent in 1997 to 21.1 percent in 2007, based on the September 2015-released report, Produce Industry Procurement: Changing Preferences and Practices, from Cornell University’s College of Agriculture and Life Sciences’ Charles H. Dyson School of Applied Economics and Management. It is these earnings that paid for the increased number of value-added services wholesalers today offer to their retail customers, according to the Cornell authors.

“The landscape is ever-changing, and our main focus is on flexibility; providing an ongoing service of efficient solutions,” says Julian Sarraino, vice president of sales and marketing for Fresh Taste, located on the Ontario Food Terminal, in Toronto, ON. “The efficiency has to translate all the way through the supply chain. Providing additional benefits in every facet of the product can play an important role in what we provide.”

Expertise in the fresh produce industry gives you permission to play as a wholesaler, but to be successful nowadays you need to be full-service, according to Jonathan Steffy, director of sales and retail services for Four Seasons Produce, Inc., in Ephrata, PA. “This means everything from covering shorts to logistics and merchandising.

1. Brain Trust: Knowledge & Relationships

Gone are the days when retail buyers walked the market daily for their pick of produce. Today, purchasing means orders placed by phone, email, website or other electronic media. Yet, the need remains for tangible information about the timing, quality and pricing of crops.

“Market expertise is what we bring to the table,” says Christian Comito, president and chief executive of Capital City Fruit, in Norwalk, IA. “Suppliers

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Four Seasons works with independent and chain retailers to expand inventory and merchandise product according to the consumer demographics.

don’t have staff in most major markets — we do. In addition, we keep customers abreast of consumer trends like organic and locally-grown and support them in meeting this demand.”

Decades-old relationships forged over time enables wholesalers to amass a wealth of information that can be passed on to customers.

“We established a history of trustworthiness and mutual respect with many of the largest and best suppliers in all growing areas. In turn, these growers provide us with up-to-the-minute information on weather, crops and what, where and when the new deals are coming in,” explains Tommy Piazza, potato salesman and third-generation wholesaler for Community Suffolk, Inc., located on the Boston Terminal Market in Everett, MA. “Retailers, on the other hand, tend to not be as familiar with all the different growing areas. There’s a loss of personality with national buying groups and that can negatively affect produce consistency and quality.”

Local knowledge is something wholesalers can often better supply to retailers than grower-shippers — especially if the latter is 3,000 miles away from the market.

“We are well positioned to more thoroughly understand our customer’s demographics and product preferences than someone working at a shipping point,” says John Vena, owner of John Vena, Inc., based on the Philadelphia Wholesale Produce Market in Philadelphia.

Many wholesalers give retail customers the benefits of walking the market or fields in a virtual manner. For Procacci Brothers Sales Corp., headquartered in Philadelphia, this means sharing real-time photos with retailers.

Four Seasons Produce accomplishes this via its market news, which is emailed weekly. “This provides specific information on threats and opportunities for conventional and organic produce. For example, if mini sweet peppers are coming on strong, we’ll say it’s a great time to promote,” says Steffy.

Wholesalers serve as a knowledge resource beyond the supply chain.

“Our retail-training guides help teach trimming and other handling techniques to increase shelf life and decrease shrink,” says Jin Ju Wilder, director of corporate strategy for Valley Fruit & Produce Co., based on the Los Angeles Wholesale Produce Market in Los Angeles.

2. Covering ‘Shorts’

Supplying ‘shorts’ (or fill-in orders) is a primary role wholesalers fill for large retailers.

“We use wholesalers to replace refusals, or if we have a truck that is unable to make a shipment,” says Brian Coates, senior produce buyer at Meijer, a Grand Rapids, MI-based retailer that operates more than 200 supercenters and grocery stores in six Midwest states.

Jeff Fairchild, produce director at New Seasons Markets, an 18-store chain based in Portland, OR, purchases 75 percent of his produce directly from suppliers. However, Fairchild utilizes a wholesaler for certain items as well as a distribution center. “We do need to horse trade with them when we’re short. That’s what they get out of the relationship.”

Inventory coverage is a steady business for wholesalers. “We do business with multiple customers like chain stores, independents and foodservice in 11 states,” says Charles Gallagher Sr., chairman of the board of United Fruit & Produce, located on the St. Louis Produce Market, in St. Louis, MO. “Someone is always going to be short of produce. We have a large warehouse with $2 million-worth of inventory daily and the ability to get it to a customer in less than 24 hours. When retailers need something, they need it now, not three days from now from California. It may be a little more expensive, but it gets the job done. After all, if it’s not on the shelf, it’s a lost sale and maybe a lost customer.”

Good wholesale buyers anticipate this constant demand for fill-in orders.

“There’s always four to five extra loads on hand,” explains Nate Stone, general manager and chief operations officer at Ben B. Schwartz & Sons, Inc., on the Detroit Produce Terminal in Detroit. “That’s how we’re always able to say ‘yes’ when a customer calls. If they don’t call, we call them. That’s how we stay so far ahead of the competition.”

National chains do rely on wholesalers as a primary supplier for certain items. “A good example is bitter melon,” says Valley Fruit & Produce’s Wilder. “This is an item that’s usually needed in a small volume and an item where growers are fragmented. It’s a value-add for them if we can supply. On our side, we have many retailers that want this item, so it’s easy for us to source and buy in volume.”

3. Supply & Sourcing

Most independent supermarkets and small regional chains rely on wholesalers as a primary produce supply source. “The most important service we offer to retailers is supply. This is our core business. Everything else we do supports this function,” says Matthew D’Arrigo, vice president of procurement at D’Arrigo Brothers Company of New York, on the Hunts Point Produce Market, in Bronx, NY.

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“We established a history of trustworthiness and mutual respect with many of the largest and best suppliers in all growing areas. In turn, these growers provide us with up-to-the-minute information on weather, crops and what, where and when the new deals are coming in,” explains Tommy Piazza, potato salesman and third generation wholesaler for Community Suffolk.

Independent grocers are on the rise in some areas. “In the past six months, with the demise of A&P, there’s been an opportunity and we’ve seen a lot more independent retailers supplying these neighborhoods,” says Four Seasons’ Steffy. Consolidations have also left empty units in the wake that have been snapped up by independent retailers. “We help the little guy compete like a big guy by making a full gambit of produce for any demographic available to them at a competitive price,” says Mike Maxwell, president of Procacci. The independents do well this way. After consolidation, larger chains usually have higher mark-ups.”

Small and prospering regional chains look to wholesalers for produce procurement and supply chain management. “Consolidation didn’t happen here in the Midwest to the extent it did on the Coasts,” says Capital City Fruit’s Comito. “As a result, the traditional regional chains are still growing. They have their minds on new markets, real estate, staffing, remodeling and revamping layouts as well as adding servings like banking. They don’t want to have to worry about perishable produce, they just want to make sure it’s always there — that’s where we come in.”

Sourcing is a much bigger job than in the past. “There were 40 items to sell back in the 1950s, and you were in the big leagues with 10 truckloads of lettuce,” recalls United Fruit & Produce’s Gallagher. “Now, you’re lucky to get a call for one whole truck of lettuce. Mixed loads are the norm since retailers carry more than 400 SKUs, including exotics like mangoes and avocados.” The most popular retail service John Vena currently offers is pre-conditioning fruit, particularly Hass avocados, mangos and plantains. “We are able to offer these products to order for our customers. In addition, we offer a line of bulk-packed specialties, such as chilies, ginger and garlic in small cartons based on a retailer’s need,” says Vena.

Large wholesalers provide buying power to small retailers. “We can leverage our size to procure lower-volume items like herbs and microgreens for our retailers,” says Greg Cessna, chief executive officer and president of Consumers Fresh Produce Co, Inc., based in Pittsburgh, and supplying customers in five states. “We also worked hard to source and supply more specialty and ethnic produce, especially for underserved demographics in the markets we serve.”

A wholesaler’s diverse customer base creates distinct sourcing advantages for retailers that they might not be able to accomplish as easily on their own.

For example, Valley Fruit & Produce can take an order that a grower is long in and get an order that is either short or short in a certain spec for a particular retail customer. “That’s because we have so many channels we sell through and so many outlets in our area. We have a customer for everything,” says Valley Fruit & Produce’s Wilder, whose customers range from chains like Bristol Farms and Gelson’s to Hispanic, Asian and Middle Eastern independents and foodservice operators.

Trends for locally grown created sourcing opportunities for wholesalers. “Local has been a huge focus for us in the past five to six years. Local growers need to be GAP-certified, so we help them to curate this process. We also work with the local farmers on what retailers want and how much to grow,” explains Four Seasons’ Steffy.

4. Transportation Logistics

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Photo Courtesy of Four Seasons Produce

Wholesalers play a principal part in the transport segment of a retailer’s produce supply chain. “The logistics model is a huge part of what makes us successful. Our sister company, Sunrise Transport, owns its own set of trucks with CDL [commercial driver licenses] drivers. That means we can deliver store-door from Washington, D.C. to New York City and to warehouses from Boston to North Carolina,” says Four Seasons’ Steffy.

Availability 24/7, load-or-less-than-truckload quantities, forward distribution, just-in-time delivery, and last-mile delivery that allows a retailer to keep its inventory light and fresher are key capabilities of many wholesalers. “I look to the wholesaler we use to provide the logistics of a distribution center in terms of delivering produce to our stores,” says New Seasons Markets’ Fairchild.

Timeliness is essential — especially in fresh produce. “Best laid plans can run into glitches. It’s what happens next — a contingency plan — that separates us from our competitors,” says Stone of Ben B. Schwartz, whose company increased its delivery range into Canada and augmented its terminal market place to accommodate the added transient inventory.

5. Packaging & Re-Packing

Packaging and re-packing moved onto many wholesalers’ list of services in recent years. “Packaging produce is a big part of our business,” says Stone.

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Photo Courtesy of Valley Fruit & Produce Co.

“It’s what makes us more valuable to retailers. For example, if we get 40-pound cases of jicama in, and a retailer only needs a 10- or 20-pound, we package it that way for them. We’re capable of providing all types of packaging.”

Wholesalers can create value opportunities for retailers. “If oranges come in cases, and a retailer wants bags because they sell better, they’ll ship the fruit to us, we’ll bag it and send it back to them,” says Consumers Produce’s Cessna. “Or, if they want to create a unique offering to differentiate themselves, like private label or a certain quality, size or price point, we provide these services as well. It’s all about offering pack styles and options that enables them to merchandise the produce more effectively.” Extra grading is something suppliers often can’t or won’t do. “It may be USDA No. 1, but it’s not to their [the retailers] spec. We will do the extra work to take it to that level,” says Four Season’s Steffy.

6. Ad Planning & Pricing

Volume buys let wholesalers pass on significant price breaks on produce to retailers. In addition, a wholesale buyer’s ability to astutely forecast can help retailers to develop an effective ad program.

“Now, organics are accessible in many more channels, so these stores need to be introduced to tried-and-true merchandising techniques to up their game. We help them, for example, to set their produce departments to maximize gross-profit opportunities and decrease shrink.”

— Jonathan Steffy, Four Seasons Produce

“We start ad planning six to eight weeks out with our retailers, then at four weeks and again at two weeks. The market is often a moving target, and we use our expertise to get customers the best items for ad at the best price,” says Stone of Ben B. Schwartz.

Successful ads often necessitate greater stock. “We will work with our supply chain and broker a load to retailers to help them cover an ad,” explains Consumer Produce’s Cessna.

Retail ads are no longer relegated to newspaper circulars. “In the past five years, we worked with retailers on ad planning to include everything from in-store specials to mass mailings, web-based ads and social media,” says Steffy.

7. Merchandising Support

Store-level merchandising is a service wholesalers strengthened in recent years. For example, Procacci Bros has 12 retail merchandisers on staff as well as a dozen produce buyers.

“We study demographics by zip codes to help retailers with assortment, pricing strategy, in-store display and merchandising, weekly ads, manager’s special, setting up a promotional calendar and orchestrating events (such as tent or sidewalk sales/demos). In turn, wholesalers serve as a gateway to retailers for suppliers,” says Valley Fruit & Produce’s Wilder. One of the latest merchandising needs is in the area of organics.

“Natural food stores and organic co-ops traditionally didn’t need to do any merchandising,” says Steffy. “Now, organics are accessible in many more channels, so these stores need to be introduced to tried-and-true merchandising techniques to up their game. We help them, for example, to set their produce departments to maximize gross-profit opportunities and decrease shrink.”

In addition, Steffy says Four Seasons works with conventional retailers that historically didn’t have organic-focused customers to expand inventory as well as advertise and promote organic merchandise effectively. “It’s one of the many ways we nimbly take advantage of new opportunities,” says Steffy.