Doing Business in the Windy City

Chicago remains a top market for fresh produce.

Originally printed in the June 2023 issue of Produce Business.

Chicago remains a vibrant market, even as it continues to shake off the effects of the COVID-19 pandemic and subsequent challenges. The produce sector is recovering and even taking new strides at the wholesale, retail and foodservice levels.

The official population tally for the Windy City is 2.7 million residents, according to City of Chicago figures. The city recognizes 100 neighborhoods, which divide about 7,300 restaurants, including seven that are AAA Diamond-rated and 26 that have won Michelin stars.

The pandemic had a huge impact on Chicago, particularly the tourism sector. In 2019, the city had about 57 million visitors, according to Choose Chicago, the city’s tourism organization, which cited STR, Inc./DK Shiffet/Tourism Economics. In 2020, that number fell to about 16 million, as the pandemic took hold across the U.S. Yet Chicago began rebounding quickly, with 30 million visitors in 2021, the last year for which Choose Chicago provided numbers.

Of course, Chicagoland, as the metropolitan area is commonly called, is a larger entity. As defined by Statista, which incorporates the Chicago, Naperville and Elgin vicinities in its definition, the metropolitan area included 9.5 million people in 2021, down slightly from the 9.6 million in 2020, with the population remaining relatively consistent over the period from 2010.

EVOLVING RESTAURANT SCENE

Sam Toia, president and chief executive, Illinois Restaurant Association, Chicago, says the restaurant business is coming back, but is also evolving. As such he says, sidewalk and rooftop foodservice have become bigger than ever. Pickup and delivery, too, have become more critical to the foodservice industry.

Supply chain and labor problems have been made more complicated by local regulatory changes, particularly as regards how foodservice workers are paid. However, the range and depth of foodservice operations make the restaurant scene compelling. Trends such as fusion are prominent, and the ethnic eating scene remains dynamic.

Chicago is a city of neighborhoods, Toia says, and while communities such as Lincoln Park are driven by the trends involving younger, techier patrons who want to have full-blown eating experiences, ethnic neighborhoods offer diners a guaranteed authenticity.

“There are lots of choices in Chicago,” Toia says.

Plant-based menu items are becoming more prominent in Chicago restaurants, too, he says, despite menus trimmed to cope with higher food costs and a tight labor market.

Even though farm to fork was a trend before the pandemic, Toia says local produce has become a more prominent element in Chicago eating, with restaurants drawing from growers in Michigan and Indiana, as well as Illinois.

Although the city is gaining momentum, a key complaint is the lagging recovery of the core business district, which has not seen a full return to offices, and this hits foodservice.

INDEPENDENT RETAIL

Chicagoland features a large contingent of independent retailers who operate diverse concepts, and the independent retail market in Chicago constantly updates and refreshes itself, even when things get difficult.

Vince Mastromauro, director of produce, Sunset Foods, Highland Park, IL, says when the effects of the COVID-19 pandemic waned, Chicagoland began to advance again, as business conditions improved, even if labor costs and inflation created complications. However, he says Sunset is positioned to deal with the circumstances because of its established reputation as an upscale, quality-focused grocery operation. So, while he works to keep prices in line, his customers still focus on quality, even at some greater cost.

“We’ll always put quality in front of the customer first,” he says.

The pandemic did have some longer-term effects on Sunset Foods’ production operation. Sunset had to close its salad bars, but responded by replacing them with fresh-cut displays. Although customers didn’t necessarily demand packaged produce as a replacement for bulk displays, Sunset’s shift from salad bar space to grab-and-go fresh-cuts, made both in-house and brought in from Sunset’s main produce supplier, won them over.

“The fresh-cut program blew salad bars away,” Mastromauro says.

Local produce, which Sunset has long offered, has grown lately, too. Today, the company is backing up local produce displays with social media marketing, as the season begins taking off in early summer.

In late 2021, Sunset acquired Grand Food Center, with stores in Glencoe and Winnetka, IL. Although Sunset operates five stores total, the main Highland Park location has been a critical focus for the company. One significant advantage of the Grand Food acquisition was that the two stores operate immediately south of the Highland Park store, increasing Sunset’s presence in its main market.

“Like us, Grand Food is upscale and basically eight and 10 miles beyond our main store in Highland Park,” Mastromauro says. “It was a perfect fit.”

Chicago is, of course, a city where tradition and innovation walk hand-in-hand, and Dom’s Kitchen & Market is an example. Developed by founders who come from the families that began renown Chicago supermarkets Dominick’s and Mariano’s, the concept was to revive a retail tradition.

Dom’s launched during 2021 in the fashionable Lincoln Park neighborhood, taking just under 18,000 square feet of space.

“It’s like an old Chicago corner store,” says Steve Jarzombek, Dom’s chief merchandising officer. “That’s what we were trying to accomplish, and we did.”

The modern version of the Chicago corner store is based around a curated assortment of produce, cheeses, meat and seafood, however, the operation includes a cafe that offers wine tastings and sommelier dinners as well as a range of items from breakfast sandwiches to pastries and cheese boards developed by an in-house chef.

The store has the kind of experiential format a lot of consumers want today. With various events, convenience foodservice and carefully considered perishables, Dom’s in Lincoln Park, as well as its second location in Old Town, are stores where people take their time shopping and have a good time doing it, Jarzombek says.

“It’s really about walking in and getting really great food,” he adds. “It’s curated food. It’s good-for-you food. It’s gluten free. It’s natural. There are a lot of local products, a lot of minority-owned and women-owned companies. It’s about the local experience.”

Jarzombek spent a long career in produce at Roundy’s and Dominick’s and was at one point on the board of directors of United Fresh, he says.

“We have beautiful produce departments,” Jarzombek says. “They’re first up as you come into the store. That’s by design. They’re represented by a lot of local companies. We have a very good organic program. I could safely say we have about 550 SKUs in produce. We carry a lot of variety.”

Jarzombek says quality is key, but featuring some nice prices is part of the strategy.

“I am a fanatic about the quality and the size and the dollar to quality proposition to the consumer,” he says. “In our stores, we carry a 32- to a 36-size avocado. We carry a nine-size cantaloupe. We don’t fudge on the size, we don’t fudge on the grade. If you were to walk in our store, you will find a 36-count avocado this week for 99 cents.”

WHOLESALE REBOUND

The past three years have been problematic for Chicago wholesalers as well as retailers, between the pandemic and challenging economy that proceeded from its peak. However, recently, the market has recovered some consistency.

The Chicago International Produce Market (CIPM) is an institution in Chicago and feeds both tourists and residents. Chicagoland wholesalers experienced a rapid shift in business, as the hotel and restaurant trade declined during the pandemic, but the retail business picked up with people sheltering at home. The CIPM is home to 22 wholesale and related businesses, as the market’s cipm.org site relates.

“Our business is pretty steady,” says Robert Strube, president, Strube Celery & Vegetable Co., Chicago. “We’ve had our ups and down in 2020 and 2021, with Chicago getting shut down. Now we’re doing more foodservice.”

Strube says recent challenges with freight, fuel and commodity costs are more familiar to wholesalers and are factors they can accommodate.

“You just roll with the punches on the wholesale market,” he says.

Mark Pappas, president of Cooseman Chicago, says business is “somewhat back to normal, but I don’t know if it will ever be normal like pre-COVID. We still have more people working at home, especially downtown.”

For Cooseman, with more of a foodservice orientation, lower office attendance downtown is a concern, but Pappas says things are trending in the right direction.

“It’s a new normal, but slowly building month to month,” he says. “We did pick up some new items and found enough customers, so we did come out of COVID well, and established more retail business.”

Francine Cossyleon, chief communications officer, La Galera Produce, Chicago, says business is solid today, despite all that’s happened since the depths of the pandemic and the higher costs that have plagued the past year.

“It’s been consistent,” she says. “We have really good relations with our shoppers, so we’ve been able to remain steady.”

To get through the pandemic, she says La Galera had to be flexible with payment terms when working with its foodservice customers until the worst was over and eateries began to open up again.

“We focused on relationships and trust and integrity to support them,” she says. “We had to see those customers through, and they are rebounding back.”

Ryan Dietz, president, Heartland Produce Co., Kenosha, WI, says he continues to see inflationary pressures on the business and throughout the supply chain. “However, we are starting to see a lot of price resistance at the retail level. This is putting a unique strain on the entire supply chain that ultimately affects growers in a negative way.”

Under such conditions, consumers are changing at least some of their habits. “As the economy gets weaker and as consumers’ wallets get pinched by the higher cost of goods, they will be looking to the value of a home-cooked meal.”

Heartland was in the midst of planning for the construction of a new facility as the COVID pandemic shut the world down, Dietz says. “It created some challenges, but we were able to work through them. The labor market has been a challenge over the last few years, but we’re lucky to have a good team and a good culture here that seem to attract talent.”

Strube has employed a business development specialist, as it continues to follow the philosophy of continually finding new business and capitalizing on the opportunities in a market of almost 10 million people.

Overall, getting labor internal to their own operations has not been a huge issue among Chicago wholesalers.

“Labor has never been an issue,” Pappas says. “We’re union, and they make good wages and great benefits. We’ve had shippers not growing niche items, though, because they don’t have the labor to do that.”

Strube says beyond the outside influences on the market, demands in regards to food safety have affected everyone on the CIPM, despite the difficulties inherent in ensuring adherence to safe practices in an open market. He adds the variety of product he and others on the market offer today is broad. Deliveries have made trucking a bigger issue, and the difficulty of finding and keeping drivers is a reality, with Chicago having less ability to use independents than some other markets in a strong Teamsters territory.