Costs are up throughout the supply chain with inflation, tariffs, fuel and fertilizer price increases, and throughout the fresh produce industry, consumers have become more cost-conscious.
But there’s a bright spot, says Jordan Grainger, vice president of sales and business development for Ben B. Schwartz & Sons in Detroit, Mich.
“There will always be demand for premium produce, and rarely do we see customers willing to sacrifice on quality and freshness,” he says.
Jamie Sanfillipo, co-owner and president of Sanfillipo Produce in Columbus, Ohio, says his family’s business has not seen much of a change in demand with the company’s foodservice customers.
“The white-tablecloth places are still ordering what their customers would expect,” he says.
And with markets in the West and Southeast being high, there isn’t much room for substitution, he says.
“We have picked up new business because people need more service and more delivery days than the big foodservice companies can offer,” he says.
Dominic Russo, buying and sales director and logistics coordinator for Rocky Produce Inc. in Detroit, says he has also seen strong demand from foodservice customers.
“Our foodservice guys that we have are thriving and doing very well,” he says. “We’re not seeing any decreases whatsoever. We’re actually seeing the opposite — increases in the foodservice side of the business.”
Russo says that while there are reports that foodservice is down, with summer officially underway, more people are likely to be outside enjoying the Midwestern weather.
“Everybody wants to be out and very active,” he says. “There’s a lot of activity this time of year for people enjoying the warm seasons.”
Shifting Consumer Habits and Budget-Friendly Commodities
Grainger says consumers’ shopping habits might change in the future to stretch their dollars at the grocery store.
“Consumers might pull back on buying prepackaged and prepared produce, such as pre-cut, which is usually more expensive than buying a commodity as-is,” he says. “Consumers may also lean more into commodities that have a longer shelf life, such as potatoes, apples, root vegetables and citrus, and those that can be used in a variety of ways to maximize their budget.”
Russo says some commodities have had a higher price all year, and that is likely to “slow down people that are not willing to pay the extra over and above premium.”
But, he says, there’s always a time to promote.
“When that happens, then we have the kind of customer base that can go out and double and triple their sales when they can get that opportunity,” he says.
Strategic Advantage of Local Independent Grocers
It’s no secret that independent grocers are a vital part of Michigan and local communities within the state. While having leaner operating costs, smaller staff and store footprints, Grainger says location and walkability may help offset some of the transportation costs customers would have to spend to drive to larger retailers.
“Independent grocers compete on consistent quality and lean into other advantages, such as local sourcing and smaller inventory they can quickly turn over to reduce pricing up front, as well as curating their offerings to what their customers buy most often,” Grainger says.
Sanfillipo says he expects the focus to turn to more regional and local produce as freight rates continue to increase.
Grainger agrees, noting that locally grown produce offers shorter transport and thus a more economical option for retailers and foodservice.
“For the Midwest specifically, we’re entering peak season for a number of commodities grown in the area and we expect buyers will want to take advantage,” he says. “However, it’s always important to have a broad network of growers around the country and the world to make sure you can get any commodity at any time, so there will be a continued balance of local, regional and international produce.”
Grainger says that as Midwest fruits and vegetables hit peak season, commodities such as potatoes, onions, cherries and apples continue to hold steady.
“This year’s growing conditions and the current freight rates are impacting pricing, however, such as for colored potatoes and onions, so demand for these commodities may dip slightly,” he says.
Russo says that his customers buy seasonally but also look to local produce
“People always want local if it’s good quality and good pricing,” he says.
Navigating the Cross-Country Freight Crunch
Sanfillipo says reefer shortages have been an issue since the global pandemic but have been exacerbated by restrictive electronic logbooks, rising fuel costs and more, which have meant there are simply fewer trucks on the road.
“Last week a one-pick-one-drop from California to Ohio was $14,000,” he says. “When fobs are less than freight per case there is something wrong in the market.”
Grainger says labor shortages and rising fuel costs have hit at a time when fresh produce is reaching its busiest season. He says the fresh produce industry also has to compete with an unlikely industry: technology and infrastructure for data centers, as refrigerated trucks transport equipment for AI data center builds.
“As a wholesale distributor, we mitigate this friction before it happens by having an expansive network of shippers and accurate forecasting,” he says. “We always evaluate our operations in real time as well, and find ways to optimize routes, improve load efficiency and reduce dock times to make things as streamlined and cost-effective as possible.”
Russo says rising freight costs are cyclical, and there are some spot rates that have been high for some time; he says regardless of the cost, the fundamentals have to stay the same.
“The service and the timing and all the details that go into logistics have to be there,” he says.
Deploying Tech and Midwest Wholesaler Collaboration
Technology also plays a vital role for produce suppliers. Grainger says Ben B. Schwartz & Sons has a custom ERP platform to help streamline orders, track shipments and utilize data to better manage inventories and deliveries.
“We’re also always looking for ways to incorporate AI to help automate where we can, so we can focus on our customer relationships and being the best partner possible,” he says.
Grainger says this helps reduce waste and keep only what’s needed on hand. To help mitigate waste, Ben B. Schwartz also deploys discounts for items nearing expiration and will donate anything unsold to Sharing Excess.
Sanfillipo, too, uses an in-house ordering app to help customers view its portfolio and allows customers to add items to an existing order for better efficiency.
“We are using other wholesalers to help manage inventory. We do business with wholesalers in Detroit, Louisville, Cincinnati, Cleveland and Pittsburgh along with buying direct from all areas of the country to help us keep fresh product in-house daily,” Sanfillipo says.
