The following article, from The Packer’s “A Century of Produce,” was published in 1993.
As The Packer prepares to publish our 125th-anniversary edition later this year, we are posting some of the writing from previous anniversary publications.
This story was penned by Donna Vestal, consulting editor and chief researcher for the publication.
The Making of a Deal
Growers and shippers forge -- and endure -- countless changes in the evolution of their business
By Donna Vestal
Gil Papazian was 19, unsure of the lettuce business and suddenly in charge of Lucky Strike Brokerage, South San Francisco, because his father had suffered a nervous breakdown. Those were the facts when, in 1949, he found himself driving around Watsonville, not knowing what to do next.
It was then that he saw lettuce being packed in fiberboard cartons out in a field.
“Holy mackerel, what’s going on?” he thought to himself, knowing that for decades the lettuce industry had carted lettuce to the shed and packed four dozen heads in a crate, with ice. “Who can I talk to about this?”
He stopped and asked a crew member, who told him the man he needed to talk to was Bud Antle -- Mister Bud Antle.
Scared to death, Papazian showed up at Antle’s office, not quite sure what he was going to say.
“I really like what you people are doing,” he told the sales manager in the outer office. Suddenly, a “humongous” guy stood in the doorway and a voice boomed, “You bums from San Francisco are no good.”
“I guess you’re Mr. Antle,” Papazian said, trying to hold back tears. He mustered some courage and told Antle -- not in the most gentlemanly of terms -- that he didn’t need him.
The big man then put his arm around the young man’s shoulders and said, “Armenian, come with me.” Antle then took the young man out to the fields and showed him how all produce grew. And that would continue through the years.
With those words, Papazian became part of a revolutionary development in the growing and shipping of fresh produce. And he also benefited from the notion of partnering -- an important concept in the growth of the produce industry.
“I didn’t know anything. Bud put me in business,” Papazian recalls today. “He was the lettuce business.”
What Antle and other pioneers in the Salinas lettuce business of the 1940s and ’50s managed to do was make technology work for the grower-shipper quickly and profitably.
Prior to that time, not a single carload of lettuce left a shed’s loading dock without being top-iced for the long trek eastward. More than a million tons of ice, either crushed, blown or in block form for bunker use, was manufactured in the Salinas Valley for the cooling of vegetables while in transit during 1950.
With the advent of vacuum cooling, the shipper delivered the packed cartons to a central plant, which vacuum-cooled and loaded all of the various shippers’ products. The shed ice pack, which was criticized by retailers as being too heavy and messy and often damaged, rapidly became a thing of the past. By 1954, 75 percent of all lettuce grown and harvested in the Salinas-Watsonville district was vacuum-cooled.
“Vacuum cooling was so great,” said David Stidolph of Mann Packing Co. Inc., Salinas. “The introduction was so unbelievable that it replaced the second largest ice industry in America, which was the Salinas Valley ice industry, second only to the city of New York.”
Hand in hand with vacuum cooling came the fiberboard cartons, which allowed growers to move the packing process out to the field.
This new packing process also enabled newcomers to enter the lettuce shipping business with merely a stitcher truck and a cutting and packing crew. Suddenly, large lettuce acreages were produced in previously unheard of districts. Vacuum cooling tubes could be moved in to accommodate short deals in out-of-the-way places. Huge crews of field packers could be temporarily moved into these new districts, and it was not unusual for shipments to suddenly jump by as much as 100 carlot equivalents per day -- with demoralizing market reaction.
The more things change, the more they stay the same. Vacuum cooling technology and the spread of field packing may have changed the way product was handled, it could not change the dynamics of supply and demand.
But that’s the story of the growing and shipping of fresh fruits and vegetables.
A deal’s a deal
By the late 1960s, California, Florida, Texas and Arizona accounted for 60 percent of the total fresh vegetable production in the United States. This was a huge change from 60 years earlier, when the major deals were local ones like tomatoes in Mississippi and Tennessee, strawberries in Louisiana, apples in Missouri and vegetables in Michigan.
These and many other deals were the focal point of produce buyers through the early to middle part of the 20th century. Distribution often meant the farmer simply trucking his product to the farmers market in the nearest city. The rails whistled through and carried produce from the bigger deals into carlot receivers in the distribution centers across the country, such as Chicago, New York, Cincinnati and Kansas City.
The grower-shipper, responsible for all freight charges, shouldered nearly all the market risk in sending his product east to a commission merchant. Sometimes the price received didn’t even cover the freight.
“Those were the days when they would pack crates of lettuce, put it into the railcar, and then shovel tons of ice on top of it and see if they could get that car to market before the ice melted and the lettuce deteriorated,” said Bruce Taylor, chairman of Fresh International Corp. “There were no mechanical refrigeration systems, virtually no precooling technology at that time.”
The grower-shipper also had no reliable source of market information except from the dealers in the markets. Growers did not know which market was offering the best price, nor when would be the best time to take their commodities there.
The Market News Service, established in 1915, helped provide that information. But it was no easy task in the days before computers and fax machines.
“We had men in the markets early in the morning gathering data from the dealers and farmers,” recalled Clarence Kitchen, who was closely involved with the service’s inception. “By noon, this information was telegraphed to Washington where it was compiled along with reports from other offices. These cumulative reports were then sent out to the field offices where they were mimeographed and distributed to the newspapers. We also telegraphed the report to anyone who was willing to pay for the charges.”
Most of the early reports were weekly, and some appeared only once a month. But this still was a major breakthrough for the grower.
The government had to get involved in growers’ survival in other ways, too. The Perishable Agricultural Commodities Act helped rein in problem dealers. Marketing orders arose out of the 1930s farmers’ cooperative movement aimed at combating low prices and chaotic marketing conditions.
The cooperatives tried to raise prices by voluntarily cutting sales and setting quality standards. But most cooperative attempts failed because nonparticipating producers benefited from the higher prices without restricting marketing or observing the quality standards.
As a result, Congress in 1937 enacted legislation authorizing marketing orders for certain commodities, giving growers unprecedented market power. Quality standards, such as those for Florida and Texas citrus, required fruit to meet minimum ripeness requirements. Other orders, such as those for California and Arizona citrus, regulated the flow of product to market.
Marketing orders were necessary because of the growth in production, most notably in California, but also in developing regions in Florida, Texas and Washington state. To compete effectively, producers needed to have some control over their marketing situations.
In the 1940s, the true potential of the Western produce industry was revealed. Despite a manpower shortage, war was a tremendous boost for the West as the government urged increased production and the West complied. The lettuce companies in the Salinas Valley especially benefited from the Japanese evacuation because they were able to instantly enlarge their operations and profit during World War II. Large grower-shippers grew from family proprietorships to corporations.
Bernie Egan of D-N-E World Fruit Sales, Fort Pierce, Fla., recalled in 1993 that price ceilings during the war forced some people into direct buying from sources of supply.
“Afterward, larger jobbers and chains had gotten a taste of it and continued on,” he said.
The retail chains consolidated and got bigger, with more of them exploring the advantages of buying produce direct, with their own representatives checking quality and availability. Field-buying operations quickly became part of the produce jargon.
While this trend increased the volume demand for product, it also resulted in a concentration of buying power, which placed the grower-shipper of perishable products, already at the weather’s mercy, at a disadvantage price-wise. Big buying organizations could dictate price, terms and conditions to thousands of growers and shippers of perishable produce.
“It was a case of the tail wagging the dog, and the ‘tail’ was having a field day taking advantage of the situation,” recalled California lettuce shipper Jim Brock in his memoirs. “If the shipper demanded federal inspection at destination to verify the buyers’ claims, he would very likely be punished by not being able to do business with them again. The shipper was over a barrel and if he complained too much, there were many other shippers with whom the powerful buyers could do business.”
For these growers, the worries about retail buying power were exemplified in “guaranteed prices” -- that were only guaranteed for the buyer -- and rejected carloads. Grower-shippers worked together through cooperatives, regional associations and less-formal efforts to attain their own power level.
Tom Merrill of Merrill Farms, Salinas, noted a lack of success with group marketing efforts, outside of Sunkist Growers Inc. “I guess we’re too independent,” he said in the early 1990s.
He added that the industry hadn’t really progressed very much in its sales or marketing practices, with sales often made at cost.
So what has changed for the growing-shipping community?
Jay Holford, chief executive officer of Seald-Sweet Growers, Vero Beach Fla., first went to work for Sunkist Growers in 1960.
“We had as many complications in those days as we have today, probably just a different form,” he said in 1993, pointing out that most fruit was shipped by rail cars up until the 1970s. Also, most packing houses were located along railroad tracks.
“Packing houses picked all day, packed the next day, loaded rail cars, shipped them north or shipped them east, depending on the source, and the fruit essentially was inventoried in rail cars headed for terminal markets,” Holford recalled.
Much of the fruit was sold through auctions.
“The fruit sold on these auctions set the market and through telephone and wire services in those days, everybody knew what fruit they received on the auctions, and this was the method by which the price was set,” Holford said.
He also noted that over the years, the warehousing of citrus revolved backward to the source, to the packing house.
Industry veteran Joe Obucina said he has seen tremendous strides in all aspects in quality. “The industry became quality minded,” he said, pointing to packaging and variety improvements as most noteworthy in the early 1990s, along with machine harvesting of some products.
Those improvements, like the California lettuce industry’s use of field and vacuum packing, came in answer to problems in getting a marketable product to receivers. Along those same lines came innovations across the country in bin shipping, retail and consumer packs and foodservice packs.
First and foremost among the growers’ problems, of course, has been Mother Nature. From freezes to droughts to pounding hurricanes to pesky pests to crop diseases, she has thrown a wrench into the best-laid plans of producers from the Salinas Valley to Prince Edward Island.
Egan of D-N-E can recall more than 10 serious freezes since the late 1950s in Florida.
Merrill notes that, unfortunately, somebody has to have a little bad luck for the market to be at break-even or above.
“Usually when you have a bumper crop, your best crop, it is the cheapest. There’s a surplus,” Merrill said. “That hasn’t changed; this is a feast-or-famine industry.”
But, he added, grower-shippers seem to thrive on adversity.
Talk about adversity: Transportation, from the horse-drawn carriage to the rails to the trucks, always has been a major problem for the grower-shipper. At times through the last 100 years, grower-shippers have feared their livelihood would be at an end because of limited equipment, high freight rates, service snafus, you name it.
“Several hundred carloads of apples will either go to the cider, vinegar or canning plants or will be dumped unless there is a material difference in freight rates,” protested C.W. McCullagh of Hood River, Ore., in 1921.
Eventually, the railroads gave up on the produce industry, Merrill said. “It got to where service in the 1970s was not what they were delivering in the 1930s and 1940s.”
Along with transportation, refrigeration (actually just ice in the beginning) was crucial to the development of the fresh fruit and vegetable industry. Not only did refrigeration improvements aid the quality of products while in transit, but cold-storage facilities helped prolong the marketing season. As early as 1900, cold storage was an important factor in the apple market, allowing some market maneuvering room for shippers. Facilities were erected in terminal markets across the country.
The ability to store product added an increased element of speculation to the shipper’s business. Sell now or wait for the market to climb? These options were never available before.
Another important development was centralized packing. Take apples: Because of the heavy spray and pesticide residues (from natural products like arsenic) left on fruit prior to the development of DDT in the 1940s, apples had to be literally cooked in a hot bath to remove these potentially harmful deposits. The individual apple grower could not afford to install the necessary equipment, but could pool his harvest with those of his neighbors in a central bathing and packing facility.
In the fields themselves, important advances included:
- Irrigation, the effect of which is rather self-explanatory. Suffice it to say that without irrigation many of our most productive growing areas -- like the Wenatchee Valley -- would not exist.
- Improvements in seed varieties. “The lettuce business used to be one where you would cut 200 or 300 cartons to the acre, and you thought you were doing pretty well,” said Taylor of Fresh International Corp in 1993. “With some pioneering seed technology and seed breeding programs, the lettuce business now is one where you cut between 700 and 800 cartons per acre. And so you get much more product off the same amount of ground. And fortunately, the market has grown with that.” Holford of Seald-Sweet noted that in the early 1990s, a number of new varieties came into the citrus industry, particularly with grapefruit. “Where for so many years it was totally white grapefruit that was grown and marketed in this country, we’ve seen the ruby red become the dominant variety domestically,” he said in 1993.
- Agricultural chemicals, which helped bring about an explosion in food production. For centuries, farmers relied on natural poisons such as arsenic, lead and copper. Fruits and vegetables sometimes would come to market dusted with these pesticides. In 1926, there was an “Arsenic on American Apples” scare in England, which resulted in widespread publicity. Then came DDT, the first widely used synthetic pesticide. It was sprayed by the U.S. Army during World War II to prevent the spread of malaria by killing mosquitoes. It was so effective that by the end of the war, American farmers had begun applying it to their crops. Once farmers had DDT, which worked faster and killed more insects than any chemical they’d ever used, they rapidly abandoned arsenic and other age-old pesticides. The use of synthetic chemicals rapidly improved yield and quality.
But even in the 1950s, the industry was acutely aware of the need for care in the use of chemicals, said Alan Mills, who worked for the California Grape & Tree Fruit League for 27 years. The league, in fact, had an integrated pest management research project in the early 50s, before the EPA was ever thought of. The industry members collected voluntary funds from growers and funded an integrated pest management study at the University of California.
“These concerns about the safety of chemicals prompted the industry to want to handle the chemical carefully, and we at the Grape & Tree Fruit League wrote a manual on the proper use of chemicals and we had the growers maintain a history of their use so that they would know that there wouldn’t be residues, and that was long before EPA and long before Rachel Carson (author of Silent Spring) wrote her book,” Mills said. “The growers have always been aware of the need for caution in the use of chemicals. They didn’t have to wait until somebody pointed it out.”
Carson, in her 1962 book, cited the detrimental effects of the misuse and misapplication of insecticides. She attacked the too-free use of pesticidal chemicals. The media, and a large percentage of the public, rendered a verdict of guilty in the case of toxic chemicals.
The Packer warned: “Let’s not panic, but all concerned, including growers and chemical men, should be braced for stormy weather through the fall months, on this particular subject. The situation calls for the utmost care in preventing another crisis similar to the cranberry scare in 1959, but one that could be of far greater proportions.”
The Packer in 1966 noted that the Calif.-Ariz. vegetable industry was in the midst of a quiet revolution: expanding use of chemical control for weeds was slashing into the basic need for field labor. Chemicals were becoming the accepted method of weed control and were being used liberally.
This controversy continued, eventually culminating in the Alar scare of 1989, which resulted in huge losses for apple growers. Many growers, like California’s Tanimura & Antle, then looked into reducing pesticide use and organic growing.
Labor and business
Another problem for grower-shippers through the years has been labor. The business of growing fruits and vegetables often has rested economically on the availability of an abundance of cheap labor.
During World War II, the industry faced an emergency labor shortage. The U.S. government worked out the temporary immigration to the United States of Mexican and Bahamian nationals under contract. More than 4,000 were admitted in 1942 under what became known as the “bracero” program.
The foreign labor program proved to be the savior of the Western produce industry during the war. There was a hiatus right after World War II when the program was allowed to die. But, a massive surge of illegal immigrants convinced the U.S. government of the need for continuance, and in the late 40s, it was re-established under Public Law 78. The bracero program ultimately outlived the war by some 20 years and became a fixed feature of the agricultural economy in many western states.
When the bracero program was discontinued in the 1960s, the produce industry panicked, envisioning labor scarcity and rising labor rates.
Merrill, in 1993, recalled that when the government terminated the Bracero program, the growers were taken by surprise.
“They just said you’re not going to have braceros,” Merrill said. “We didn’t know whether to plant a crop or not.”
Despite the hoopla, the same people who had worked in the area before showed up with green cards, he said, noting there was always a certain amount of forged green cards. “Forged green cards got to be an industry in itself,” Merrill said, adding that even in the early 1990s, the government never was able to control its southern borders.
“From the late 1970s until today, there has been a generally plentiful labor around,” he said in 1993.
Labor also has placed the growing community in a glaring spotlight through the years.
Cesar Chavez and the United Farm Workers union, for example, were household words in the 1970s.
Strikes on California grape growers in the 1960s, along with the much-publicized support of Robert Kennedy and other notables, brought the plight of the poor farm worker into the mainstream.
“When he first appeared on the scene, we didn’t know who (Chavez) was,” recalled Mills, then with the California Grape & Tree Fruit League. “We found he was a social revolutionary, with the goal of elevating the status of Hispanics in the United States.”
He noted that the grape industry had Chavez on their backs for years before the press got involved.
But when the press got involved, the industry found itself under intense scrutiny.
“Chavez would have the American public think that all grape growers are somewhat akin to feudal lords, overseeing vast estates,” complained Walter M. Tindall, general manager of Blue Anchor Inc., in 1970.
And Chavez was successful with his message -- for a time, at least. Through much of the 1970s, the UFW’s strikes, secondary boycotts and the accompanying violence were regular front-pages stories for The Packer. For the grower, there was fear, a sense of helplessness and anger.
“We had a tough time getting our side of the story presented,” recalled Merrill of Merrill Farms. The issues were complex and unfortunately did not simply come down to a question of working conditions and pay.
“Many of the workers were very happy and didn’t want to sign up with the union,” recalled Robert Reinecke, who at the time was a vice president for Heggblade-Marguleas Inc. Chavez, however, worked to commit growers to signing with the UFW, and he opposed secret ballots for the farm workers.
Also, the Teamsters union rivaled the UFW in the early 1970s.
“It isn’t a question of unionization,” Daryl Arnold said in 1971 about the California labor situation concerning lettuce. “People must understand first off that this is a jurisdictional dispute.”
Arnold, the northern division manager of Freshpict Foods Inc., was directly involved in negotiations between that firm and the UFW Organizing Committee. When, on Oct. 8, 1970, Freshpict was forced to sign a UFW contract under the threat of a secondary boycott of its parent firm’s (Purex) product line, Arnold resigned his position.
He then became president of the Free Marketing Council, which was established in 1970 by western agricultural leaders to combat a secondary boycott being leveled against western lettuce growers and shippers.
Secondary boycotts, picketing, arson, violence and other scare tactics all became rather routine news stories for The Packer. The secondary boycott, however, put the real whammy on the industry as retailers were forced to not carry products. In the end, California was forced to accept unionization and the inherent management problems that followed. Other areas, such as Texas and Florida, were not hit by unionization, but the threat of such a system forced them to do a better job of paying and serving workers.
By the 1990s, few shippers were union shops. So what did all this strife accomplish?
The history books note that after years of struggle, the UFW, headed by soft-spoken and charismatic Chavez, succeeded in improving work conditions for the mostly Chicano “stoop laborers” who followed the cycle of planting and harvesting across the American West. He was their hero.
For the grower, there is no talk of heroism in the history books, although agriculture certainly acted courageously. Because of that courage, laborers and growers now have the ability to work together toward a common goal.
Noted Reinecke: “It was hard for the grower to work under the rules of a labor union, but they found they could survive and get along.”
Another threat to traditional methods of growing and shipping produce emerged in the 1970s in the form of conglomerates -- or corporate farming.
Against a back drop of rising inflation and land speculation there was a rising fear among shippers that big-money corporations would come to control agriculture.
“Everyone feared that big oil companies -- like Tenneco and Superior, which did get involved -- would come out to California,” said Reinecke, who, in the 1970s, was the president of Tenneco West, a agriculture subsidiary of Tenneco.
“Everybody feared that they would make money in oil and not care if produce made money,” he said.
But the big companies found, instead, that economic forces of the time made farming an expensive proposition. Mechanization trends, labor, escalating energy costs and diminishing water resources all complicated the picture and all most could do was lose money. They soon retreated.
Nevertheless, corporate farming did come to produce as most large family operations incorporated. In this way, they limited their personal liabilities and created the mechanisms for passing the firm from generation to generation.
Customer needs
Survival for the grower-shippers and marketers has come to mean truly understanding customer needs.
“The way this industry operated in the 1950s, typically you had four, five or six people around a desk with telephones selling, basically, commodities. Most of them did not have too much grasp of merchandising, chain stores, modern-day marketing and advertising and selling,” said Bruce Paschal, vice president of sales in the early 1990s for A. Duda & Sons Inc., Oviedo, Fla. “Some of that still exists to this day.”
But overall, the grower-shipper is much more aware of the needs of the end user -- be it the chain, the independent grocer or foodservice operator, said David Stidolph, another longtime produce man.
Noted Taylor in 1993: “It used to be you could put 24 heads of lettuce in a carton and ship it east and that would satisfy all the requirements of any of the customers. Today the markets have become fragmented into various niches. You’ve got the foodservice niche with the processed; you’ve got the retail markets, which want wrapped lettuce and salad mixes; and you’ve got the wholesale market, which wants something that’s flexible between the foodservice and the retail side.”
Obucina marvels at the young people in the industry today.
“Their thinking is so far ahead of mine 25 years ago,” he said in 1993. “They look deeper in to the future. When we started out, it was the basics.”
Obucina said building business on partnerships is not a new concept for the produce industry.
“We had those 40, 50 years ago. There was a bond, a trust,” he said. “You stayed with people. Just because somebody was a penny cheaper, you didn’t go with them.”
Papazian, still at Lucky Strike Brokerage, though his son runs the place, also is amazed at what the second and third generation individuals are accomplishing today. But he still yearns for the pioneering days after World War II, with the likes of Bruce Church, Ken Nutting and yes, Bud Antle.
Put simply, he says: “These people knew their craft.”
