Economic pain lingers for Chicago produce merchants

12/10/2010 02:54:21 PM
Bruce Blythe

CHICAGO — Economists declared the longest U.S. recession since World War II officially over in mid-2009, but for many in the fresh produce business around Chicago, the pain has lingered throughout 2010.

Food retailers struggled to boost sales as unemployment remained near a three-decade high, and consumers tightened their budgets. Restaurants slumped as people dined out less.

For Chicago produce suppliers, profit margins were squeezed as stiff competition made it difficult to raise prices even as costs for some items, such as apples, surged.

Add it all together, and Chicago produce merchants such as Rich Domagala, vice president with Evergreen International Inc., are looking forward to flipping the calendar to 2011.

“It’s been a rough year with the economy,” Domagala said Nov. 23. “I never thought with the recession, the food industry would be hit as much as it got hit. I see the economy hitting the stores pretty good.”

Evergreen is one of about 18 companies at the Chicago International Produce Market, one of the largest fresh fruit and vegetable distribution centers in the country. Domagala said Evergreen’s sales are running about 20% below 2009 levels.

Five of seven merchants on the market surveyed in late November said they expected 2010 sales to be little-changed to down from 2009. Two merchants anticipated increases.

Economic difficulties in Chicago, the third-largest U.S. city, mirror the rest of the country. While joblessness in the Chicago region fell in 2010, it was still historically high.

In October, the unemployment rate for the Chicago metropolitan area was 9.7%, compared to 10.9% for the same month a year earlier. For the entire U.S., unemployment was 9.6% in October.

Amid high unemployment, fruit and vegetable sales in the Chicago area may be faring worse than other parts of the country, according to some research.

Retail fruit sales in Chicago and surrounding suburbs totaled $536.9 million during the 52 weeks ending Sept. 25, down about 1% from the same period a year earlier, according to the Perishables Group, a market researcher. For vegetables, retail sales fell 4.2%, to $465.8 million.

Nationwide, retail fruit sales rose 2% to $19.3 billion during that period, while vegetable sales rose 1.2% to $19.9 billion, according to Perishables Group. The figures do not include Wal-Mart, club stores or small independent chains.

The retail environment has grown increasingly competitive as large discount chains joined traditional supermarkets in a battle for cash-strapped consumers, market merchants said.

Many retailers are buying fresh produce on a hand-to-mouth basis, said TJ Fleming, vice president of vegetables with Strube Celery and Vegetable Co.

Strube, like many of the Chicago terminal market’s merchants, relies on retailers for the majority of its business.

“The economy forced them to change their buying patterns,” Fleming said of retailers. “They don’t have to fill coolers any more. They’re not going to overbuy. They’re letting themselves run out, not buying as freely as a few years ago.”

Some merchants see brighter days in 2011, citing increasing transportation costs among signs the economy is improving.

Steve Loulousis, a sales manager with Michael J. Navilio & Son Inc., said he expects sales to rise 10% next year as his company boosts shipments and targets high-growth ethnic food markets.

“Everybody here on the terminal market, we’re all pursuing the same people,” Loulousis said. “Everyone is very price conscious today. It’s tougher to pass higher prices through. To make a profit, you have to move volume. That’s what we’re going to be focusing on.”



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