Suppliers work through recession, competition

05/22/2009 03:37:08 PM
Ashley Bentley

The Twin Cities market took a turn for the worse around fall 2008 and has yet to recover, suppliers said.

“There was a big blow-down last fall. We really saw stores slowing down this winter. At the beginning of the year, the trend was that same-store sales were down,” said Adam Gamble, general manager of the North Country Produce division of distributor Russ Davis Wholesale, Inver Grove Heights.

“What we do find in the co-op sector is a lot of price shopping going on, “said Tom Rodmyre, warehouse manager for Co-op Partners Warehouse, the distribution arm of The Wedge, Minneapolis. “They’re comparing between two to four distributors and shopping based on price. There’s less of a focus on quality.”

Although it can save buyers money, Phillip Brooks, chief executive officer of Brighton, Minn.-based H. Brooks & Co., warns that a focus on price can be dangerous for competitiveness.

"I think our business has really been hurting for years because of the takeover by big corporations, so we had already trimmed our ship pretty good."

 

- Paul Piazza Sr.

 

“You can make a decision based on price, but you could lose quality, and once that happens, you’re no longer differentiated,” Brooks said.

Rodmyre said he noticed the market changing around November of last year. The increase in price shopping started the summer before, though, he said. The company’s volumes have been down for five or six months, he said.

“It was all related to the fuel surcharge,” Rodmyre said. “All through the summer last year, trucks were running around at $4.25 a gallon, people started adjusting their prices, and at the stores all started shopping by price, just because of all the money they’d paid for fuel surcharges put on by distributors.”

On the contrary, Paul Piazza Sr., president of Minnesota Produce Inc., Minneapolis, said he has found it difficult to get potential buyers to price shop.

“If people were really shopping, there would be more business with independents,” Piazza said. “The marketplace is more about corporate royalties. Customers tell us over and over again, they’re just order placers, and they don’t shop around.”

Piazza said his concern is that there aren’t enough out there who do shop around anymore. Minnesota Produce stays competitive by using its skills of knowing the market and finding values, he said.

“I think our business has really been hurting for years because of the takeover by big corporations, so we had already trimmed our ship pretty good. So when things shook down last fall, we were pretty acclimated,” Piazza said.

Minnesota Produce serves mostly the foodservice sector because there’s little opportunity in retail with a giant like Supervalu in the market, he said.

“This market has been very competitive,” said Doug Strandquist, produce manager for Upper Lakes Foods, Cloquet, Minn. “There are a lot of players, a lot of sellers, and the restaurant industry has shrunk a little bit, so it’s gotten more competitive.”

Suppliers are cutting their margins to keep cases moving, Strandquist said.

Rodmyre said he started to see a turnaround by mid-April.

“It was starting to rebound a little bit. Since Easter it’s looking better. Volumes are up, and we’re almost to the point we were last year,” he said. “Demand from consumers seems to be on the rebound.”

With the spring comes hope for the market.

“April gave a lot of people hope,” Gamble said. “April was better than March. January and February were bad.”

“It’s good to have a sense of demand. We haven’t had that from our customers all winter,” Piazza said.

Dean Schladweiler, produce manager for The Wedge Co-op in Minneapolis, said he hasn’t seen a pick back up but that the market has stabilized.

“In the beginning it was slowing and we weren’t sure where the market was going to go,” Schladweiler said. “We have definitely leveled off where the rate of growth has slowed down.”

Regardless of what happens this spring and summer, only the fall and winter will tell how the market is really shaping up.

“It’s hard to tell because everything’s seasonal,” Gamble said. “In the winter, people don’t use as much produce.”

Most businesses are just trying to ride out the storm.

“Right now we’re just trying to be as efficient as we can,” said Dean Balzum, produce director for Kowalski’s Markets, Woodbury. “The economy, it’s affecting everybody. There are weeks where you think you’re good, then you’re not again. So it gets good, but it’s not sustainable.”

Balzum said he takes solace in being a part of the produce industry.

“I feel good about being in produce because they value here is going to stay,” he said. “Produce in general is probably above store trends now and probably has been. People see value in produce, and it still is a really good value. If they’re making cuts, they’re making them on the side of chips and pop.”



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