To the surprise of few in the Texas onion business, foodservice sales took a dive with the national economy.
“Statistics prove that foodservice business is down,” said Mike Martin, president of Mission, Texas-based Rio Queen Citrus Inc.
“We are hoping that as the economy turns, and there are some early indications that it is starting to, we will see foodservice business start to recover.
“We try to have a mix of various types of customers, including foodservice, wholesalers and retailers. We can’t insulate ourselves from economic factors, but we can try to diversify our business to lessen the effects,” Martin said.
Curtis DeBerry, owner of Boerne, Texas-based Progreso Produce, said his company’s foodservice receipts had slipped, as well.
He and other shippers noted that the news wasn’t all bad.
“We noticed our foodservice side seems to be down a little, but our retail side seems to be up,” DeBerry said.
Don Ed Holmes, owner of The Onion House in Weslaco, Texas, noticed similar results.
“Probably, our foodservice business is off by about the same amount that the retail business is up,” Holmes said. “People eat onions, whether they’re 30 cents a pound or 80 cents a pound.”
The difference, he said, is that more people eat onions at home during a recession than when the economy is perking along.
“What we are seeing is if people eat more at home, your retail sales go up,” he said.
“One seems to offset the other. In good times, your foodservice business is better. In bad times, your retail business is better.
“It has probably hurt the supercolossal. That deal is probably off a bit because people aren’t frequenting restaurants like they normally do,” Holmes said.
There was an upward blip in foodservice sales late in 2009, however, Holmes pointed out.
“We do see the last month our foodservice business has picked back up. I don’t know if that’s a seasonal deal that has to do with the holidays, or things are getting better,” he said.
The dive in restaurant sales had a less serious effect on David K. DeBerry Inc. in Edinburg, Texas, according to president David DeBerry.
“First of all, foodservice is probably the smallest business category in our mix,” he said.
“There’s a lot of reasons for that. There’s some great foodservice business out there, no doubt. But the foodservice guys tend to have less value-added.
“We’d rather do the extra work and profit what little there is on the value-added stuff, the retail consumer packages. We specialize more in the value-added side.”
The company still does enough foodservice business to have noticed the downturn, David DeBerry said.
“Foodservice business has suffered in the last12 months, and we know that,” he said. “It’s probably the single biggest factor affecting all the markets of all commodities.”
Onions, he said, fall into that category.
“The items that have the longest shelf life tend to be the items that get prices suppressed the most and longest,” he said.
“It doesn’t take a lot of technology or capital investment that will store potatoes and onions. That’s why cantaloupes and watermelons tend to have so wide price swings. You can’t sit on them for 30 days. Onions, you can.”
He said a downturn in any single category can cascade over the entire market.
“The foodservice deal, their lack of business affects the total market,” he said.
The foodservice business is a mixed bag, said Tracy Fowler, general manager of potatoes and onions for L&M Cos. Inc., Raleigh, N.C., which ships onions from Texas.
“Everybody’s watching their money, obviously,” Fowler said.
“Foodservice is down a little bit, but some of our business is about the same as it was the year before at the same period.
“Despite all the national information, some guys are doing better than others, obviously. We get those reports week in and week out, and we’re trying to watch that. The news doesn’t always reflect nationally what they’re saying,” Fowler said.
There are exceptions to the downturn, however. Chris Eddy, sales and operations director for Edinburg-based Frontera Produce LLC, said his company was one of them.
“Strangely enough, our foodservice business has responded surprisingly well this past year,” Eddy said.
“Overall, with all the stuff we do, the foodservice customers have done really well. We had a good year. The business we did in that segment grew over the previous years. We look to continue to grow.”