Onions under glass? It may be a possibility

06/14/2013 11:26:00 AM
Chris Koger

Chris Koger, News EditorChris Koger, News EditorMcCALL, Idaho — As a consultant, Ronnie De La Cruz has spent several decades helping companies throughout the supply chain to focus on the big picture.

His company, De La Cruz Consulting & Training, Salinas, Calif., has worked with grower-shippers, retailers, wholesalers and foodservice operators.

Speaking at the Idaho-Oregon Fruit and Vegetable Association’s annual conference June 7, he focused on how the onion, cherry and apple company representatives there should reposition themselves in the marketplace to differentiate their products.

A key to that process is shoring up support for what De La Cruz calls “flagship” products — a company’s core items — while seeking niche varieties/packs.

Other considerations include seeking out new domestic and export markets, paying attention to commodities with expanding shelf space at retail (robbing space from other products), and researching the potential for value-added products.

Grower-shippers need to do some soul searching to evaluate their identity in the market, or, as De La Cruz explains it: Explore the value proposition by market segment. What can a shipper offer to a retailer versus a foodservice operator? Only after this evaluation should shippers target specific customers.

That’s a different approach to doing business, but it wasn’t the most novel suggestion De La Cruz presented.

He spoke about a project he worked on for a European multi-national seed company. An executive of the company told him a gram of its hybrid tomato seed was worth more than a gram of gold.

“How could that be?” De La Cruz asked.

The answer: protected agriculture, everything from sophisticated glass structures to shadehouses and even plastic hoop tunnels.

Seems far-fetched, but De La Cruz laid out a convincing argument that one day some growers will find buyers for onions, cherries and apples that are grown in a protected environment.

On a worldwide scale, about 8% of vegetables are grown using protected agriculture methods, he said, but the returns are 20% of overall profits for those companies.

The average gross margin for retailers on protected culture items is 80%, and production of greenhouse vegetables is increasing by about 10% a year, he said.

“Where do you think seed companies are putting their investment dollars?” De La Cruz said.

That includes research on varieties that fit consumer preferences for flavor, size, consistency and availability.

Although he didn’t mention the recent tomato suspension agreement that sets higher floor prices for Mexican tomatoes entering the U.S. — including a specific category for protected culture — De La Cruz’s comments highlight the shift to greenhouse- and shadehouse-grown tomatoes in Mexico.

Field-grown tomatoes have seen a 68% erosion in market share in less than a decade, and those gassed green tomatoes won’t be getting that market back, he said.

Look for more protected culture items in the produce department, including personal watermelons, leafy greens and berries ... and yes, even onions, at some point.

Wal-Mart produce

De La Cruz also spoke briefly about Wal-Mart, which recently announced several initiatives involving fresh produce suppliers. The company is focusing on a “100% money-back guarantee” for fresh produce satisfaction, is shifting 80% of fruit and vegetable purchases to a direct-buy model and is requiring all suppliers to establish the Produce Traceability Initiative at their companies.

Suppliers are no doubt scrambling to find out where they are in the PTI process, and companies that continue to sell to Wal-Mart must look at this as a learning process.

“If you deal with Wal-Mart as a supplier successfully, it will make you a better company,” he said. “The question is, do you leverage those best practices with your other customers? If you don’t, you’ve lost the benefit of the advantage you should gain as having Wal-Mart as a customer.”

Wal-Mart supplier or not, companies must prepare for PTI compliance, even though it is a voluntary program.

“It will become a barrier to business if you don’t have that in place,” De La Cruz said.

He’s right. At some point, companies that cling to the notion that PTI is not mandatory will find they’re losing retail customers.

ckoger@thepacker.com

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