Vegetable Production and Marketing News
MARCH 2000 - VOLUME 10, NUMBER 3

Edited by
Frank J. Dainello, Ph.D.
Extension Horticulturist - Commercial Vegetable Crops
The Texas A&M University System
College Station, Texas 77843-2134

Appearing Within . . .
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Why Not In Texas?
By Frank J. Dainello

The following discussion of fresh-cut onions for food service is adapted from an article by the same title appearing in “Onion World,” September/October 1999. The article describes a successful attempt by a conventional onion farm to expand into the fresh-cut business . . .

After launching Gill’s Onions in 1983 to supply food manufacturers with peeled onions, Steve and David Gill are expanding both their plant and their product line to take advantage of a ‘big opportunity’ in food service. The brothers didn’t have processing in mind in 1979 when they and their father, Allen, established a farming operation on the banks of the Salinas River near San Lucas [California]. Around that time, national food manufacturers like La Victoria Foods were just beginning to seek out fresh ingredients as a way to improve the quality and texture of their products. La Victoria wanted to buy fresh, peeled onions for their salsas and sauces, and Steve and David recognized an opportunity, and said, “We can do that.”

They opened Gill’s Onions in Oxnard [California], centrally located among various growing regions, where Steve was overseeing one of the growing operations. The processing plant grew about 30 percent per year into the 1990s, and still hasn’t shown signs of slackening its pace, according to Steve.

He indicates a ‘huge’ potential for peeled and fresh-cut onions in the food-service arena. “We offer a variety of cuts to meet customer demand,” say Susan Schmidt, sales manager for Gill’s. “If we get a request for a custom cut, we will work with the customer to meet that need. We’re also open to the idea of co-packing for people under their labels. The new products are being offered in cases of either two or four 5-pound bags, determined to be the most popular pack sizes requested by food-service operators we surveyed. Over the years, we’ve had inquiries about diced and sliced onions for food service.”

“We’re solely focused on processing onions,” Gill explains. “That’s all we do. Other processors are producing up to 60 produce items or more. They can’t focus on one. We’re vertically integrated, and control our product from field to table. We feel with that kind of focus, we have better products.”

Susan Schmidt agrees. “It’s a matter of people picking their supplier. Our strength is quality, control of supplies, traceability, and consistency, backed with an excellent food-safety program. Our new products are opening a whole new market for us. The potential is there for fresh-cut onions, and there’s still a lot of room to grow. There are many people peeling their own onions, and we have a better way.”

. . . . . . The above success story is a good example of how integration has enabled a basic farming operation to become more competitive and profitable in the environment that is molding today’s produce industry. With the trend toward more convenience-oriented food items and the consolidation of retail food outlets, vertical integration of specialty products as well as unique packaging and distribution techniques into conventional farming operations may offer a means of survival for many Texas vegetable producers in the decade ahead.

It is without question that Texas has an abundance of excellent vegetable growers. However, it is becoming painfully clear that just being a good grower is insufficient to insure success in the changing produce climate of the twenty-first century. The same way of producing and marketing vegetables utilized in past decades just won’t cut it in the future. Only visionary growers who are able to interpret emerging trends and adapt their operations to accommodate consumer preferences, such as the Gill brothers of California, will survive in the initial decades of the new millennium.

As pointed out by the Gills, the food-service industry offers a tremendous potential to market produce and specialty items. Producers, both large and small, need to take every opportunity to develop this industry as a primary market for their products. The success of the Gills with peeled and diced onions makes one wonder why some of our onion producers haven’t taken advantage of this opportunity, considering the fact that we produce perhaps the highest quality onion in the U. S. There are many other different ways of processing, packaging, and marketing Texas vegetables that have not been explored. Some marketing strategies I believe are worth considering are: pre-cut of full-ship or fully mature honeydew melons for distribution in Texas; snack-pak baby cantaloupes; small seedless watermelons packed in individual totes for easier handling; and packaged mixed green salads, to mention a few.

Unfortunately, the Texas produce industry can be characterized as a catch-up industry rather than an industry leader. Why is that? Perhaps our unstable climate or the size of our individual farming operations, or the type of financing available to our producers are the real causes for our catch-up characteristic. Whatever the cause, over the last ten years, it has resulted in our industry falling from the third leading state to barely hold onto fifth place. If we continue to play catch-up, we will ultimately lose as a major player in the nation’s produce game.

Growers Must Learn to Think Like Marketers
This article by Tracy Rosselle appeared in “The Packer,” May 17, 1999.

An old journalism professor of mine liked to ask a simple question of his new students: “What’s the purpose of a newspaper?” The naive responses flowed freely. “To report the news.” “To be the watchdog of government.” “To chronicle the events of a community.” The professor took much pride in setting straight a classroom full of idealists. “The purpose of a newspaper,” he’d say, “is to make money.”

Invariably, this revelation came as quite a shock. His students, after all, were not working toward their degrees in business administration. It was a telling commentary that the bottom-line concept of profit went so unexamined by generally literate, educated people.

I think profit remains an under-appreciated concept by more than a few folks on the supply side of the fresh-produce industry. If pressed on the subject, of course, we all would acknowledge the basic fact that any company in any industry must record more revenues than expenses in order to stay in business. But the day-to-day language of many growers and shippers implies a parochial and slightly skewed understanding of how and why profits are generated throughout the fresh-produce industry. A couple of brief stories will illustrate this.

A shipper once took issue with something I reported that had the potential to hurt his sales. I reported that health officials in Florida were publicly blaming a fresh-produce item for some food-borne illnesses in that state. The shipper was one of the few suppliers of this particular niche item. He called to tell me how unhappy he was, and furthermore, he couldn’t understand why I’d report anything ‘negative’ about the fresh-produce industry. I should be ‘pro’ industry.

I told him something he should have understood: The industry, at its most basic level, is composed of both buyers and sellers – and they don’t have the same interests. One wants to sell high, the other wants to buy low (and then turn around and sell high). If health officials – rightly or wrongly – are saying bad things about fresh produce, then that’s important news. Wholesalers in Houston know this all too well, since many of them were stuck with thousands of dollars worth of strawberries when local officials erroneously advised Houstonians not to eat the fruit during the summer of 1996. Shippers in California were hurt even more during the scare.

Just as the aforementioned disgruntled shipper (who was worried about his own sales) didn’t understand that his buyers might actually have a similar profit motive, the vegetable grower who plants acreage purely on speculation (and then complains about poor f.o.b. prices) doesn’t fully appreciate how profits are generated beyond his 100-acre tract of land.

An industry veteran, speaking from the shipper’s perspective, once told me this: “Poor prices have always been caused by one and only on thing – over-production.”

Too simple an explanation? Maybe. But that statement’s essential truth becomes evident when growers wax nostalgic about the way things used to be. Once upon a time, it was sufficient to grow a good crop, to always strive for better yields. The sales and marketing took care of itself. The grower didn’t have to worry about it. He got his boots dirty, worked with his hands, lived the quintessential American life down on the farm.

There are plenty of growers who wish it were still so. Some of them continue to resist the marketplace, refusing to listen to the messages they must eventually – inevitably – take to heart. They don’t want to form alliances, they don’t want to think of themselves as marketers. They want to keep the dirt under their nails, and keep doing things the way they’ve always done them, which is precisely the way their fathers did before them.

Meanwhile, the people selling their produce hope for another El Nino; 1998 was a heck of a year for trying to grow crops in many parts of the United States, but it turns out the year was generally pretty good for the bottom-line profits returned to growers. The wonders of supply and demand.

E-Commerce Applications and the Produce Industry
By Dr. Charles R. Hall and Lance D. Pate

E-commerce is poised to reshape the way producers, end consumers, and every intermediary in between will do business in the near future.

Many know of some type of e-commerce, most notably electronic data interchange (EDI), but due to the success of firms on the Internet, new possibilities are being explored in the produce industry. Firms operating in Texas have a tremendous opportunity waiting within our state borders.

The Texas Comptroller of Public Accounts and Matrix Information and Directory Service have recently released some very promising numbers concerning Texas and the use of the Internet. According to a recent publication, the number of computers in Texas that are connected to the Internet has reached over 1 and 1/2 million. This number is almost 10 times what it was in 1995, when a little more than 160,000 computers were connected to the Internet. Also, Texas has the second largest number of Internet users in the United States with 4,600,000. However, Texas ranks 19th in the percent of users. Austin leads the nation in percentage of wired residents. Dallas, Houston, and San Antonio ranked 8th, 24th, and 44th respectively.

A question may arise as to what this information has to do with growers of fresh fruit and vegetables. It has been stated that in the future, there might be immense opportunities for suppliers with unique or high-quality products to use the Internet to market directly to the consumer. Although these opportunities are, no doubt, down the road a bit, there are still vast opportunities today to use e-commerce tools to reach greater numbers of customers within the current procurement system.

Currently, a few retailers have begun to use the Internet as a way to provide extra services for consumers. Albertsons allows consumers to make purchases over the Internet, and Food Lion’s site provides ‘Web Bucks’, which consumers can use to purchase anything they want on their next trip to one of the retail stores. Wholesale companies within the produce industry doing business over the Internet are beginning to surface, including ProduceOnline.com and Buyproduce.com. These companies offer produce companies the opportunity to conduct electronic transactions with other companies, regardless of whether any of the companies involved use EDI. EDI is also being used between wholesalers and retailers as a standard interface for transmitting data – in the case of produce sales, this means purchase orders, shipping orders, and the like – from one computer to another.

EDI has proven to possess three distinct advantages. First, it is a standards-based platform that enforces uniform data flows; second, it makes use of digitized data that eliminates mistakes made when re-keying data; and third, it is accepted in the industry. However, EDI has disadvantages that include: the cost of dealing with proprietary systems for each company, the fact that not a lot of companies are currently using it, and the data mapping of all products between the databases of buyers and sellers.

Recently, information has been published concerning the use of hybrid systems to bring even larger numbers of produce companies into the electronic age. E-commerce is an all-inclusive term that includes both EDI and the newer Internet-based solutions. The possibilities for produce applications for e-commerce are wide open, and one solution may not be appropriate for everyone. Several companies have had success with EDI, but others may find Internet solutions or hybrids more feasible.

There was a panel discussion covering this topic in October at a workshop during the Produce Marketing Association’s ‘FreshTech’99' conference. It was concluded that a hybridization of EDI and Internet-based solutions might be the best form of electronic commerce for the produce industry.

The Internet is a network, and each connection in the network represents the possibility of a relationship. The Internet provides the opportunity for customers to gain easy access to suppliers and goods simultaneously. With the possibility of hybrid systems waiting to be explored, there will no doubt be significant changes in the way the produce industry’s procurement system is structured and utilized. In Texas, there is significant willingness on the part of wholesalers, retailers, and consumers to quickly adapt to the technological changes that are taking place within the fruit and vegetable industry. Texas growers who choose to participate in e-commerce stand to gain substantially by using EDI, Internet-based solutions, or some type of hybrid.

True story: Earlier this year, I asked a tomato marketer in Florida if yellow-leaf-curl virus was threatening yields. The guy said no, but he wished it were. “We could use a little more virus. We could use some bad weather. We need something, because everybody’s got too many damn tomatoes.”

Of course, he wasn’t for unilateral disarmament. He wished the same on Mexican growers. Honest words indeed.

Now it’s time for all those growers out there who resist change solely as a matter of principle to get honest with themselves. Are strong f.o.b.s a God-given right? If not, then growers need to ask themselves what they plan to do about boosting demand. It’s not the buyer’s job alone to create more demand for fresh fruits and vegetables. It’s the buyer’s job, primarily, to buy cheap and sell for as much as he can get. Growers must understand this rather blunt fact. Promotions are great, but cheap consumer prices only work if they create more demand in the long run.

Growers, meanwhile, can’t simply concern themselves with just the supply side of the equation – not in 1999, and certainly not in the 21st century. Unless, that is, they’re content to moan about overproduction.

INS Searches: Know Your Rights
This article appeared in “The Grower,” September 1998.

With agriculture a ‘target industry’ for the Immigration and Naturalization Service, it pays for growers to know what you can and cannot do in response to a request by INS officials to search your property. Generally, the INS may search your operation only if its officers have either a search warrant or consent of the property owner ( or “other person in control of the site to be inspected”).

David M. Kresock, a farm labor attorney with Harter, Secrest & Emery, LLP, Rochester, New York has developed a checklist of issues for growers to consider should the INS visit your property:

  • Stay calm
    INS officials may attempt to use intimidation to gain access to your premises. The best way to respond to any such intimidation is to calmly speak to INS officers about your rights as a property owner.

  • Ask if the INS officers have a valid search warrant
    Generally, INS officers may not search private property without either a warrant or consent. An INS search warrant usually takes the form of a court order signed by a U. S. magistrate or judge. A valid warrant states:

    1. agency or officers are authorized to conduct the search;
    2. the location to be searched;
    3. whether the search will take place in daylight hours;
    4. the specific items or individuals to be seized (if known); and
    5. an expiration date for the court order.

    Examine the warrant carefully. If it appears valid, you must permit the authorized officers to have access to the premises indicated in the warrant.

  • If no warrant exists, then decide whether to consent to a search
    If the INS does not have a search warrant, then the property owner (or other person in control of the site) has the discretion to deny access to any or all areas of the site. You may refuse to consent to a search, but the INS has the authority (and resources) to return in the future with a warrant.

    You do not have to grant unlimited consent. If you decide to consent to a search, you may negotiate with INS officials over the areas that you will allow them to search and the number of INS officers allowed on the premises. Before granting access, reach a specific agreement with INS officials as to the locations to be searched.

  • Identify INS officials conducting the inspection
    Record the names and identification numbers of INS officials conducting the inspection. Do this in a way that does not interfere with INS activities.

  • Assign a supervisor to accompany INS officials
    Make note of any INS officials that:

    • badger or intimidate employees or use abusive language;
    • display badges, handguns, or batons in a threatening manner; question only foreign-speaking employees;
    • repeatedly question the same employee;
    • use aggressive behavior (pushing and shoving of employees);
    • spend an unreasonable length of time to conduct the search; or
    • unreasonably interfere with your operations.

  • Record your observations
    Memories quickly fade, and you should promptly make a record of what you observed during the inspection, and preserve all notes taken.

  • Other key points to consider during an inspection:

    Access to locked areas
    Frequently, search warrants will specify that INS officials are authorized to have access to locked areas. If a key is not provided, the INS may decide to break into the area. Again, however, if the warrant does not grant the INS access to a locked area, then they generally have no right of access to the area without consent.

    Answering INS questions
    During a site inspection (with or without a search warrant), the INS cannot compel you to answer questions about the location of company records, buildings, or structural layouts. You have the right to refuse to speak to INS officials. Likewise, although the INS has the right to question an employee about his or her immigration status, the employee does not have to respond.

    Operating your business during an inspection
    The INS may not unreasonably interfere with your business operation or harass you or your employees. You do not have to stop your production and/or business during an inspection.

    Responsibility for a violation if the INS discovers an unauthorized employee
    If you have properly completed and retained an I-9 for the unauthorized employee, and reviewed the required documents, then you can be held responsible for hiring an unauthorized alien only if you had actual knowledge of the employee’s unauthorized status.

    Conduct that may constitute illegally harboring or shielding aliens
    You may be subject to criminal prosecution for illegally harboring or shielding aliens if you tell employees to run and hide because INS officials are present; help employees escape by car; hide employees in closets, hidden stairwells, or behind false paneling; or lock-out an agent to prevent him from arresting employees.

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