Nobody says produce business is going through the roof in the Los Angeles area this summer, but nobody is saying the floor has dropped out, either.
Most distributors report modest gains over the past year, and many say they’ve tightened their credit requirements to make sure they don’t fall victim to their customers’ financial misfortunes.
At Fruit Distributing Corp. of California, Commerce, business is “probably up this year” compared with last year, said Jeff Weisfeld, owner and president.
Sean Villa, president of Great West Produce in Commerce, also seemed optimistic.
“Business has been better over the last six to 12 months, partly driven by good markets,” he said.
Business in general seems OK at Consolidated West Distributing Inc. in Commerce, said Joel Young, an owner of the company.
“All of the wholesalers are working harder at their business to maintain their customer count and figuring out how to make a profit as their costs go up,” he said.
Young said he senses “renewed energy” from some of the smaller supermarket chains, sparked by more aggressive moves to grab market share on the part of some of the major chains.
Perimeter Sales & Merchandising, Los Alamitos, Calif., continues to grow solidly, said president Brad Martin.
“Retail food business is very good,” he said.
He believes he sees a trend toward consumers coming back to traditional supermarkets.
“It seems like the Wal-Marts and the Targets of the world have lost their luster,” he said.
“Our same-store sales for the chains are up — nicely,” Martin said. “That’s what we’re hearing from everybody else, as well.”
Five major companies declared bankruptcy during the past year, but Fruit Distributing Corp. was fortunate enough to have missed them all, Weisfeld said.
“We successfully screened out potential poor risks,” he said.
The pendulum may be swinging upward, he said, but the risk is far from over.
“The danger (of a customer going bankrupt) is as strong as it ever was,” he said.
For the first time, Great West Produce has put credit limits on all of its customers, said chief executive officer Paul Villa.
“We noticed a trend to slower pay,” he said.
The company also invested in some upgrades to its point-of-sale computer program to better track where customers are in terms of their credit, Sean Villa said.
“We basically judge the creditworthiness of each customer,” Paul Villa said.
The company has been burned over the years, he said, and because the firm works on such a fine margin, it could not risk a customer’s bankruptcy.
The credit policy at Consolidated West always has been tough, Young said.
“We’re not obnoxious about our policy, but we’re pretty frank about it,” he said.
The company knows the status of the customers it deals with.
“No produce company can be a banker and produce company at the same time,” he said.
Steve Cantor, director of sales and produce and partner in Produce International on the Los Angeles Wholesale Produce Market, said his business partner, Steve Kiwano, does a good job minding the company’s finances.
“I’ve got a partner who’s very tough on issuing credit around the market,” he said. “We’re a lean and mean company. We run a tight ship.”
Paul Vogel, managing member of QSI LLC, Los Angeles, said the marketplace is transitioning from a traditional physical model to a digital one.
“The globalization of our economy combined with the explosion of technology has inverted the distribution model,” he said.
Smartphones have empowered consumers, and advances and expansion in the logistics industry provide direct access to the consumer from unlimited sources.
“The impact of these changes on the Los Angeles Wholesale Produce Market and our industry are significant,” Vogel said. “The role of the traditional middleman is outdated.”
Companies that don’t adapt to the fundamental shifts in the industry and the economy will find themselves “going the way of kerosene lanterns in the age of electricity,” he said.