Windy City is Midwest Capital of Global Produce Economy

L to R: Nick and Sam Gaglione, D&K Chicago

The contrast between the modern Chicago International Produce Market opened on South Wolcott Avenue on the city’s West Side in 2003 and the old South Water Street Market — first established on the south bank of the Chicago River in the 1870s — mirrors the old and the new in the city’s produce distribution system.

The South Water Street Market, located on what was once dubbed “the busiest street in the world,” was a gathering place for Chicago residents to meet local produce merchants, and each other. For decades efforts were made to tear it down because it brought too much congestion to the area.

The perfecters among the city fathers eventually succeeded in leveling this venerable produce hallowed ground to make room for condominiums, and chose land a mile away from the heartbeat of the city for a modern facility that today is a meeting place only for those in the business of produce.

The new market has everything a wholesaler could want — 1 million cubic feet of refrigerated space, custom repacking and packaging facilities, cross-docking and even a ripening room on site.

Since Fred Strube started his wholesale produce business in 1913, Strube Celery & Vegetable Co.,in Chicago, it has grown to be the largest in the Midwest.

“In the Old Market we were the largest wholesaler,” says Robert (Rob) Strube III, president of Strube Celery & Vegetable Co. “The new market made it a more level playing field. It gave the smaller wholesalers more room. It did give us more temperature control, which made it easier.”

Strube brings a full line of fruits and vegetables into Chicago year-round from a global network of growers developed over the past century.

Nick Gaglione, president of D&K Chicago, has been in Chicago produce sourcing specialty fruits from the far corners of the world since the 1970s. Following in his father’s footsteps, he has experienced first-hand the contrast between the modern International Produce Market and the 20^th century incarnation of the old South Water Street facility. “I was in the Old Market,” says Gaglione. “Most of the equipment and the building are more modern and up-to-date than the stuff that was built in the 1920s. It’s cleaner and there is more room to operate. There is only one floor here, too.”

While the Old Market backed up to the Chicago River for easy access by boat for produce from farms throughout the Midwest, the modern market is close to the Damen exit from Interstate 55, and just a few miles from Midway Airport for fruits and vegetables from around the world.

One of Gaglione’s neighbors at the Chicago International Produce Market is the Chicago division of Coosemans, an international produce shipper started in the 1970s when entrepreneur Herman Van den Broeck would pick up Belgian endive at Los Angeles International Airport and sell it to high-end local restaurants out of the back of his Cadillac.

“They come to us for shorts and new commodities that they didn’t want to have as line items in their warehouses,” says Mark Pappas, president of Coosemans Chicago. “Things like dragon fruit and rhubarb.”

The Terminal Market is less a place for Illinois farmers to peddle their produce than a receiving station for fruits and vegetables shipped from around the country, and even the far sides of the world for consumption by Greater Chicago-area consumers.

“We get Washington apples, California soft fruit and citrus, and a little out of Florida, and some out of Chile and Peru,” says Gaglione. “There’s not much out of Illinois or Michigan. Ninety-five percent of our produce is sold in Illinois, and the rest is just over the border.”

Even Strube, which has historic connections with local agriculture, is only able to source vegetables from nearby a few months of the year. “We do a lot of locally grown; our family has always been huge into local produce,” says T.J. Fleming, director of sales and marketing at Strube. But, he adds, “It’s all seasonal.”

Strube estimates that nearby Midwestern farmers only have an abundant supply of fresh vegetables about three months of the year. “The three months the local farmers are in season, we get as much as we can,” he says. “But we source all over the place. We sell everything from apples to zucchini, but not bananas.”

Fresh fruits and vegetables for Chicago neighbors are low on the crops list. Pumpkins are among the leading produce crop, with annual revenue of $20 million.

Rooftop Gardens

Dean (Deke) Pappas, Panama Banana

Most of the produce eaten by the city folk comes to them through wholesalers like Gaglione and Pappas, or the distribution centers of corporate retailers.

Many Chicagoans are bridging this distance by joining the thriving movement of rooftop and greenhouse gardeners.

Homestead on the Roof, an alfresco farm-to-table restaurant in the city’s Ukrainian Village/East Village neighborhood, is situated next to its rooftop garden. The restaurant seats 85 and is located next to its 3,000-square-foot organic rooftop garden, which includes two massive vertical hanging gardens and dozens of planter boxes filled with vegetables, fruits and herbs. Homestead also has a 65-seat indoor second-story space, which is open year-round.

“People are looking for better quality, and a few more are looking for organic,” says Gaglione.

Whole Foods and Trader Joe’s both have presence in the Chicagoland area to rank among the top organics retailers, and conventional markets are finding increased interest in organics.

“The organic volume has increased,” says Bill Dietz Jr., president of Heartland Produce, Kenosha, WI. “Retailers have increased their organic sections, and they even run organics on ad. The organic has been a slow growth for some years, but in the past four or five years, everybody has been talking about it.”

Many wholesalers are noticing a marked shift in the demand for organic produce in the greater Chicago area.

“The organic thing is coming around,” says Strube. “We tried it 12 or 13 years ago, but we were too soon.”

In addition to Whole Foods, which has nearly a 4 percent market share in the metropolitan area, Chicago is the center for a new organic produce-oriented chain that has blossomed overnight.

Four years ago, Chris Sherrell, former Sunflower Farmers Market president and chief executive, and a group of co-workers created Fresh Thyme Farmers Market with the ambitious goal of growing to 48 Midwestern stores in five years. The first store opened in the Chicago suburb of Mount Prospect in 2014. The company is so passionate about produce, it made it the nucleus of the store, ensuring the bounty of fruits and vegetables is visible from all other departments.

“We’re going to start really focused on culture and getting involved in local. Granted, with the expectation that 25 percent of our sales is going to be produce, we know the Midwest limits the ability of produce from a seasonal standpoint. But throughout that season, we’ll absolutely support it,” Sherrell says in a statement on the Fresh Thyme website. “We’re looking at an everyday natural farmers’ market where 40 percent to 50 percent of our sales are going to be in perishable departments — produce, meat and some of the other health foodservice areas — but not really as high profile a foodservice area as Whole Foods may have.”

The formula is working. The company has opened 62 stores in nine Midwestern states and Kentucky, and has an additional 18 stores scheduled to open by the end of 2018.

Modern Urban Ethnic Mix

The sprawling metropolitan area — Chicago and the surrounding suburbs — is nearly two-thirds Anglo and around one-sixth Black, according to a report from Chain Store Guide. But the city proper of 2.7 million residents is roughly equally divided among Anglos, Blacks and Hispanics. “Chicago has always been diverse ethnically,” says Coosemans’ Pappas.

From its coolers a few blocks off Lake Michigan, La Hacienda finds markets for its selection of Mexican produce among many of the larger mainstream supermarkets. “We sell to some independents, but the majority is to big markets with more than 10 stores,” says Adolfo Vega, president of La Hacienda, Chicago. “A lot of them buy their produce direct because they can get cheap prices, but there are some items they can’t get direct. We sell papayas because they won’t get a full load. We sell limes, peppers and tomatoes out of Mexico, too.”

Mainstream interest in Mexican fruits and vegetables has allowed La Hacienda to find a niche in competitive produce markets dominated by a smaller number of larger players. “Overall, the demand for Mexican produce is more than it used to be; there are more people eating it,” says Vega. “Some of the old customers went out of business; there’s more chain stores. There’s a lot of competition, so the prices are tough.”

Panama Banana opened for business in the late 1920s at the old South Water Market and today wholesales bananas, mangos, pineapples, avocados, tomatoes, melons and citrus from its spacious five-unit facility at the Chicago International Produce Market.

“In the last decade the Chicago market has become more and more diversified as the city itself has as well,” says Tommy Durante, buyer/seller in the fruit department at Panama Banana. “As new ethnic groups have moved into the area, the market has adjusted. Each ethnicity uses distinctly different produce items, and it’s up to the market to carry these products. New businesses sprouted up as specialty houses and existing houses have adapted their product lines to cater to the new customers. At Panama Banana, we have expanded our product lines dramatically.”

The city is large enough to benefit as a hub, shipping ethnic fruits and vegetables to smaller markets throughout the Midwest.

“Buyers from outside the Chicagoland area have discovered the volume and diversity of our market and realized they can get better deals here than they can from various outside brokers and even from some shippers directly,” says Durante. “This is partly due to the longstanding relationships we have with our suppliers. Panama supplies many companies that are out of state, often selling full truckloads of products to them.”

Like most of the country, Chicagoans increasingly buy their fruits and vegetables from a small number of corporate supermarket chains that reign supreme with produce sourced from places far and wide. Jewell-Osco, Wal-Mart, Sam’s Club and Costco sell roughly half the fruits and vegetables, according to the Chain Store Guide report, while no other retailer has more than a 5 percent market share.

“There are not as many smaller customers as there were; they got bigger or consolidated,” says D&K Chicago’s Gaglione.

Wholesalers who remained afloat during this transition to more consolidated markets had to survive tough competition.

“It’s competitive,” says Coosemans’ Pappas. “When I first started, there were specialty houses down here. There still are, but now everyone carries everything. It’s probably 70 percent different customers than it was 21 years ago. It’s attrition with new people starting, or people combining. We do the medium-sized market chains like Pete’s, Garden Fresh, Treasure Island and a little Roundy’s.”

Strube also finds a relatively stable customer base among the independents, some of whom are not that small. “We sell mainly to independents, but some of them have up to 15 stores,” he says. “There hasn’t been all that much consolidation in Chicago; we still have so many independents.”

Strube finds the buyers have become sharper, more knowledgeable about produce market conditions around the country. “One of the big changes is all the customers know what’s going on in terms of the market,” he says. “The buyers are more educated, and that makes it harder.”

Heartland’s Dietz says the Chicago market has become more competitive as industry leader Jewell-Osco, an Albertsons subsidiary, has consolidated its position. “Jewell is doing well, and everybody’s got to work a little harder. We deal with most of the independents, and do ‘shorts’ business with chains like Jewell. When a Jewell comes to us, it’s a short buy for something on ad, or a truck is late, or they rejected a load. It’s mostly shorts.”

Wholesalers find retail consolidation has left them no choice but to become more efficient and imaginative to survive.

“On the store level, growth has been the name of the game,” says Panama Banana’s Durante. “Independents have grown to small chains, each with their own warehouses. These facilities allow buyers to purchase for several stores and make better deals for themselves through volume. This forces the market businesses to sharpen their pencils and often act as brokers, delivering full loads directly to the warehouses. Adapting to the changing environment has kept the Chicago Market and Panama Banana lucrative.”

In the modern city, however, diversity frequently means ethnic and economic segregation that is reflected in limited produce options for residents of large areas of the city.

“The West and South Sides are food deserts,” says Lauralyn Clawson, youth program manager for Growing Power in Chicago, a national non-profit organization and land trust supporting people from diverse backgrounds and the environments in which they live, by helping to provide equal access to healthy, high-quality, safe and affordable food for people in all communities.

“We have six farms in Chicago ranging in size from a quarter acre to seven acres,” says Clawson. “We sell the fruits and vegetables at farmers markets, farm stands, restaurants and a mobile produce bus, the Fresh Moves Mobile Market.”

Today, Growing Power in Chicago employs 300 young people, nearly all of them from neighborhoods where it is difficult to find fresh produce, let alone grow it. The program also includes farmers who grow 200 crops on 300 acres.

Sustainable Blending

Restaurants are big business in Illinois, as 561,000 people work in 27,000 establishments that generate more than $25 billion in revenue. Chicago, with more than 11,000 of those eating places, is at the center of the industry.

“We are the culinary capital of the United States,” says Sam Toia, president and chief executive of the Illinois Restaurant Association, Chicago. “We have the James Beard Awards, the Oscars of the restaurant industry, at the beginning of May; the National Restaurant Association show in May fills our hotels with more than 70,000 visitors.”

Toia believes the city still has an economic advantage over rival culinary cities when it comes to attracting the most talented young chefs looking for a spot to open a restaurant. When they can, Chicago restaurants look to nearby farms for produce; and when they can’t, there is a growing interest in sourcing food sustainably.

“Many restaurants look at the local Midwest farmers,” says Toia. “We also see a big trend toward sustainably sourced ingredients. A lot of young chefs come to Chicago because it’s still affordable compared to New York and San Francisco.”

Tourism is a major industry in Chicago, as the city has gone from 39 million visitors a year in 2011, when Rahm Emanuel took the helm as mayor, to 54 million in 2016. Toia is convinced the restaurants are a major reason. “Forty percent of people who travel look to see who the chefs are,” he says. “The Millennials grew up with the Food Network, and they’re all about which chefs are in town.”