We’ve been running a series of pieces discussing what the best options are for the produce industry in terms of the organization, or re-organization, of its national trade associations. We ‘ve discussed this issue, literally, for more than a quarter century, and you can see some of that discussion here.
Now, as the pandemic started we raised the question in a different way:
Then we received a note from a former Chairman of one of the two large national associations, which led to this piece:
The situation has moved ahead. Both associations depend heavily on events for income, and with the live versions of United’s convention, the PMA foodservice event and PMA’s annual Fresh Summit, all cancelled this year, there is financial pressure on both associations.
PMA has laid off substantial numbers of long-tenured employees. This is not surprising. When your business disappears, layoffs are to be expected. And, of course, PMA is a very financially strong association with millions in reserves, substantial real estate assets via ownership of its headquarters and other assets. So PMA can handle this type of situation.
Still, revenue lost is revenue lost. And looking ahead, many parts of the industry — say, the foodservice sector — may take years to get back to a situation where they can or will support industry associations in the way they once did.
Now we received a letter from Bruce Peterson, who, of course, built Walmart’s produce program virtually from scratch and made it the largest in the world. He also was always active in industry associations, including becoming chairman of PMA. Bruce shared with us some thoughts:
With respects to PMA, United, and trade organizations, in general, I think a few questions need to be answered.
Aside from what you mentioned, I would add: What is it that the industry wants (needs) to do, and who is going to pay for it?
In the case of PMA, the mission was always: to bring buyers and sellers together. And the trade show (Fresh Summit) was the pinnacle of that mission. It was also the cash cow that amounted for over 50% of PMA’s operating budget.
But it also did something else. It brought the major industry leaders, especially on the buy side, together on task forces and boards to accomplish broad industry issues.
Industry icons, such as Dick Spezzano, Bob DiPiazza, Dick Mead, Ted Campbell, Tim York, Grant Hunt, Claude Moldenhauer, and a host of others were not only willing to surface and discuss issues, but actually had the clout in their own companies to make things happen. Standardized pallets, PLU’s, computer-based training, RPC’s, PBH, and other initiatives… these all became possible because of industry leadership. And with respect to United, Reggie Griffin was tremendously influential during the Country of Origin discussions.
So two questions beg to be asked: What are the pressing industry issues today? And where is the leadership that has the clout to make things happen?
While I admire the staffs and CEO’s of both PMA and United, they can’t make ANYTHING happen without the support of the major retailers and suppliers. And that was the magic of both of these organizations historically. Yes, it was fun to go to the trade shows and catch up with friends and colleagues (if walls could talk!). But the revenue generated from these events enabled industry dialogue and ACTION to occur.
So it brings us back to the question: What is needed from an association standpoint to serve broad industry initiatives? These can be marketing issues, food safety/traceability issues, trade issues, or regulatory issues. But these issues need to be identified, prioritized, and communicated.
And who pays for it? With so many national and regional shows, funds continue to get fragmented. Does anyone remotely think this can continue? And while the pandemic has forced United and PMA to go virtual, does anyone think this can raise the same revenue as live trade shows? And more importantly, it’s a reflection of how today’s buyer goes about his or her business (a whole other discussion).
The point of strategic dialogue is to keep choices in FRONT of you. If the industry doesn’t have serious discussion of the future of trade organizations and how they are funded, I fear that decisions will be forced upon them. And that is NEVER the best outcome.
Indeed, Bruce is asking many of the questions that need to be asked.
We think it is a very problematic situation for the produce industry and the future of its associations.
What people who don’t study these things often do not realize is that the design of produce industry associations is very unusual. In produce, we have vertical associations that reach down through the supply chain, thus representing the entire produce industry. In contrast, it is common for industry associations in other industries to be horizontal, meaning they represent a particular tranche of the supply chain.
Some may allow outside vendors or customers on the board, but there is no doubt who that association represents. So, at the Food Marketing Institute (FMI), for example, they may put a Coca-Cola representative on the Board. FMI does this so they can get financial resources from vendors; they do this so really powerful and knowledgeable companies such as Coca-Cola can share research and knowledge. They do it for a lot of reasons, but there is no thought that the association is representing Coca-Cola. It represents the supermarket retailers.
Increasingly, though, consolidation among retailers means that the vertical model of produce industry associations is fraying. For years, PMA had a policy that over 50% of its board had to be from the buy-side. That has fallen by the wayside. The fastest growing segments in produce retailing are deep discounters — Aldi, Lidl, the various dollar stores. Not one of these are represented on PMA’s board.
When Bruce Peterson was chairman of PMA, he was the Senior Vice President of Perishables for Walmart. To put that heft in perspective, he was in charge of more sales than Safeway had, in total, of all groceries at that time. Walmart still has a representative on PMA’s board, Laura Himes. By all accounts, she is a great person and a valued contributor to the board, but she is many, many slots down from carrying the internal heft of being in charge of all perishables at Walmart.
After almost disappearing when its trade show shrunk due to the prominence of PMA, we sense United has gained in strength and support over the years. This is mostly because the industry recognizes the importance of government relations. Somewhat ironically, the decline of United’s trade show made industry members think long and hard about what was important and what they were willing to pay for.
The long-term decline of United’s trade show led to a more committed membership, one willing to pay to support United and its important work in government relations. (As an aside, when the Pundit was growing up, the United show was, by far, the largest trade show in the industry, and we would listen to the Pundit parents discussing with excitement their winter trip to the convention; we still remember the Pundit Mom’s excitement when one year they held the convention in Hawaii!)
In this pandemic moment, PMA has done webinars and town hall meetings, and they are mostly very good. But they are nothing the industry needs an association to do. For a long time, PMA’s powerful trade show has distorted what the industry really wants. By offering deep discounts on the show to companies that are PMA members, PMA has obscured the question as to how many people would actually want to pay to support PMA and for how much money.
Bruce Peterson is saying that we shouldn’t be on automatic pilot. What are we, as an industry, trying to accomplish by establishing and maintaining associations?
How are we measuring whether we are achieving these goals?
And is it possible we might achieve our goals better with one consolidated organization?
In our discussions with industry leaders, we are hearing an increasing interest in a merger not only of PMA and United, but also of bringing the Produce for Better Health Foundation into the fold. There is a growing consensus that government relations and consumer-focused efforts to increase consumption are the two most important priorities for produce industry organizations.
PMA did fantastic work starting engagement with overseas produce companies. Back in the day when Jack Pandol was leading PMA’s International Trade Symposium, it was a fantastic thing. But now international trade is half the supply chain.
PMA remains the trade’s primary resource in terms of financial support. The industry needs to pay attention to the questions that Bruce Peterson poses.
If you feel you have thoughts that could help the industry to advance, please let us know here.