Originally printed in the August 2018 issue of Produce Business.

This capital city is well-positioned to grow its offerings of fruits and vegetables

There’s a long-held observation trends start on the coasts and work their way to the Midwest last.

True or not, Des Moines today is certainly in tune with the latest food scene. Located a little more than 1,100 miles from New York City and a little less than 1,700 miles from Los Angeles, Iowa’s capital and largest city by land area and population sits nearly in the middle of the nation. Two major interstates, the east-west Route 80 and north-south Route 35, intersect here, meaning Des Moines is easily accessible by land to domestically grown produce as well as coastal ports and international borders for global imports.

Fueled by a robust economy driven by the insurance and financial sectors, rising ethnic diversity led by immigrants principally from Mexico, Asia and Eastern Europe and a relatively young median age of residents of 35 years, it is understandable to see why U.S. News & World Report ranked Des Moines fourth in its “Best Places to Live in the U.S.” in 2018. All these factors influence what residents want when it comes to fresh fruits and vegetables at retail and restaurants.

“When everyone comes here, they want to see a cornfield,” says Brendan Comito, chief operating officer Capital City Fruit, Inc., a 1949-started, family-owned produce shipper, repacker and distributor headquartered in nearby Norwalk, IA. “They don’t really think of the city as having a James Beard-nominated chef, but that’s what Des Moines’ food scene offers nowadays.”

MARKET SNAPSHOT

Des Moines, founded in 1851, was named after a tributary of the Mississippi, the Des Moines River. The Port of Des Moines today is more an entertainment rather than cargo complex. Highways, and, to a much-lesser extent, rail and air are the chief transport for food products. An estimated 217,521 people call Des Moines home, according to the U.S. Census Bureau, up 6.5 perfect from the last official tally in 2010. This makes the city the 104th largest in the nation and 19th most-populated state capital. A little more than three-fourths of residents (77.1 percent) are Caucasian, followed by Hispanic (12.6 percent), African-American (11.0 percent) and Asian (5.5 percent).

“We’re seeing greater demand for a diverse mix of fruits and vegetables such as avocados, mangos, tomatillos, cilantro and a number of pepper varieties,” says James ‘Jimmy’ DeMatteis, president and chief executive of the Norwalk, IA-based Des Moines Truck Brokers, Inc., a full-service, third-party transportation logistics provider that specializes in fresh produce. It delivered more than 10,000 loads last year. “This stems on one hand from a downtown revitalization effort started more than a decade ago that now attracts Millennials to restaurants offering a variety of cuisines. At the same time, local retailers have broadened their offerings, and supermarkets such as Hy-Vee are even hosting events like Hatch chile roastings.”

“Iowa is fortunate to be home base for several major grocery retailers, along with a wide variety of strong independent grocers,” says Michelle Hurd, president of the Iowa Grocery Industry Association (IGIA), in Urbandale, IA. “There has been an influx of specialty stores in Iowa over the past decade, which mirrors the national trend. Whole Foods, Trader Joe’s and Natural Grocers are among those specialty retailers that operate in the Des Moines area.”

The three supermarkets that collectively represent two-thirds of retail market share in Des Moines are Hy-Vee (34.9 percent), Walmart (17.6 percent) and Fareway (11.7). Add Des Moines Grocery Stores (DGS) under the Kansas City, MO-headquartered Price Chopper banner, and share from these four is nearly three-fourths (73 percent) of the market. Hy-Vee and Fareway both have been in the Des Moines market since the 1930s, while Walmart entered more recently in the early 1980s. DGS began in 2015, after owners purchased six of seven locations formerly owned by the Dahl’s Food Stores, which went bankrupt three years ago. Other retailers listed by descending market share include Sam’s Club, Costco Wholesale, Super Target, Whole Foods, Aldi, Dollar General, Trader Joe’s, Dollar Tree, Fresh Thyme, Home Town Foods, and others such as the upscale, single-store Gateway Market.

“Consolidation has definitely reduced the number of buyers in this market, as efficiencies are implemented once a retail company has been acquired,” says Brent Addison, director of sales and marketing for Capital City Fruit, Norwalk, IA. “Associated Wholesale Growers’ (AWG) (of which Des Moines Price Chopper and banner stores are members) recent acquisition of Affiliated Foods and acquisition of some of Central Grocer’s customers significantly reduced the number of buyers.”

OTHER OUTLETS

While buyer’s numbers have dwindled in Des Moines, retail shopper demands have increased and diversified.

“The desire to eat healthfully — to know and understand where our food comes from, and to be aware of how it is raised — is becoming increasingly more important to Iowans, and the state’s grocers continually strive to meet the changing needs of our consumers,” says the IGIA’s Hurd. “As a result, the amount of space in store allotted to produce, meats, cheese, dairy, local wines and brews is growing. The variety of produce has definitely increased. There is also a greater effort to educate consumers about food and to help consumers in their desire to be healthy. Many stores employ dietitians, hold cooking classes, sell everything from fresh-cut fruits and vegetables to freshly prepared meals to heat and eat. Many more grocers are offering online ordering and grocery delivery, as well.”

There is no statistic on how many Des Moines-area restaurants are chains or independently operated, according to the West Des Moines, IA-based Iowa Restaurant Association. However, across the state, about two-thirds of the 6,000-plus restaurants/bars/taverns are independently owned. Organization professionals estimate about 60 percent of restaurants in Des Moines are independently owned versus 40 percent chain.

Of these, the “2018 Best of Des Moines” awards published by Johnsonville, IA-based news magazine CityView include everything from Australian- to American-style steaks, seafoods and burgers, plus Italian, Latin and several Asian cuisines such as Chinese, Japanese, Thai and Vietnamese. Joe Tripp, chef and co-owner of Harbinger, an Asian-inspired and vegetable-focused small plates restaurant, was named a semifinalist for Best Midwest Chef by the James Beard Foundation for the third year in a row.

“The Des Moines restaurant scene is very much on track with national trends,” says Katelyn Adams, public relations specialist for the Iowa Restaurant Association. “Gen Xers and Millennials are controlling the climate and are demanding healthy menu options. Fresh produce, fresh fruit and a farm-to-table/local-sourcing mentality are all highly sought after by consumers. With so much incredible farmland spanning the state, our consumers are in luck. Farm-to-table and locally sourced products are often right in our backyard.”

WHOLESALE OPPORTUNITIES

The closest terminal produce market is five hours and 330 miles away in Chicago. Des Moines does have its Downtown Farmers’ Market, which is open every Saturday from early May to the end of October. It features more than 300 farmers including those selling fresh produce, spans nine city blocks of the Historic Court District and welcomes some 25,000 shoppers each weekend. Quantities here are not large. Instead, retailers and restaurateurs look to other sources such as the region’s wholesalers and delivery services.

“Large retailers look for partners to assist with the harder commodities and with mixed loads, so they can spend time on the many SKUs they manage day to day,” says Capital City Fruit’s Addison. “Providing value in the supply chain is what we do. We supply key items that take a lot of time and effort and supply value-added products, making it convenient for their shoppers who are on the go.”

“Small chains normally have fewer resources and less buying power than a company like us. We help these retailers to be successful by supplying them with consistent quality items that turn quickly and in turn helps reduce their shrink. Smaller-pack sizes for some items they are unable to sell in full-case volume allows them to lower shrink and actually increase sales. We work closely with our customers to understand each one’s individual needs and customize a solution that exactly meets their needs.”

Since Des Moines is not a highly populated area compared with nearby communities such as Minneapolis, Kansas City, St. Louis and Chicago, Addison says the company’s success lies more on providing supply chain management solutions rather than purchasing produce on the open market and then trying to sell it to its customers. This reduces waste, he says, and allows for a better value offering to customers that demand consistency and quality above everything else. One of the biggest challenges for suppliers in, and to, the Des Moines market is transportation.

“Transportation is a hot topic,” says Ron Petersen, owner and president of Summertime Potato Company, a Des Moines, IA-based grower, packer and shipper of local and Midwest regional potatoes. “We don’t have to traverse the entirety of coast to coast, but then again we do have to bring most products, domestic or imported, into the market.”

Capital City Fruit’s Addison agrees but says, “Des Moines has a significant disadvantage when it comes to freight. Being in the Midwest, it is many times more challenging to obtain the freight capacity needed to keep transportation costs down. The recent hours of service and electronic driver log changes have caused a lot of issues in this area. We are fortunate to have a long-term partnership with key carriers who understand the up-and-down nature of freight rates and work with us to be fair and consistent at all times.”

One of the biggest opportunities lies in locally and regionally grown produce.

“Local produce has continued to be a large buying factor,” says Chris Boothe, vice president of produce purchasing for Fareway Stores. “The confidence to purchase fresh produce is greater knowing it is local and where it is sourced from. Organics also continue to grow in the market. We are seeing more local growers providing organics. Value-added produce items continue to be relevant with consumers. We are also exploring fresh, convenient items, that customers are looking for; with HelloFresh coming to area stores this summer.”

LOCAL LEANINGS IN THE HEARTLAND

The Des Moines-West Des Moines metropolitan statistical area, as well as surrounding cities and towns, comprises 2,912 square miles. Here, major industries include insurance, financial services and publishing, with Fortune 500 companies among them.

Tech companies such as Microsoft and Facebook have built facilities here in recent years. In fact, NBC’s “Today Show” ranked Des Moines the ‘Wealthiest City in America’ in 2014 based on its benchmarks. However, the median household income in Des Moines in 2016 was roughly $48,000, according to the U.S. Census Bureau, about $12,000 less than the national average.

Agriculture, including hunting, fishing and forestry, contributed only 6.4 percent to Iowa’s gross domestic product in 2015, according to the U.S. Bureau of Economic Analysis. Iowa ranks 42nd in the nation in the production of vegetables, melons, potatoes and sweet potatoes as well as fruit, tree nuts and berries.

These specialty crops make up less than 0.1 percent of the total market value of agricultural products sold, according to the USDA’s Census of Agriculture 2012 for Iowa.

Yet, like much of the United States, Iowa shoppers are increasingly interested in locally grown produce. This is something the area’s retailers cater to. For example, Hy-Vee, a West Des Moines, IA-headquartered chain with 245 stores in eight Midwest states, offers its Homegrown program for produce grown within 200 miles of that store. Product sourcing decisions for these items are made at store level and include some 257 local growers in the chain’s eight-state operating area. Similarly, two core values of Fareway Stores, a 121-store chain based in Boone, IA, are “providing fresh, high-quality meat and produce” and “supporting and partnering with local businesses, communities and farmers.”

GRASS ROOTS DELIVERY

Local, organic and value-added is the type of product procured and delivered by FarmTable Delivery, a Harlan, IA-based company started by grower and restaurateur, Ellen Walsh-Rosmann in 2013.

“The East and West Coasts have the advantage of lots of little trucks that bounce around to collect and deliver produce, but not here in the Midwest,” says Walsh-Rosmann. “We do this with our refrigerated truck. Pickups are on Wednesdays — from eight to 10 growers in Iowa, and one in Nebraska — and then we take the produce back to our 6,000-square-foot facility to pack the orders. Mostly it’s vegetables like collards, kale, chard and tomatoes, grapes, slicers and heirlooms for retail. Some growers will plant heirloom tomatoes in high tunnels in February to sell in May before the market is flooded. We don’t sell too much fruit. The margin for fruit is so thin growers do better selling it at their own stand or the Farmers’ Market. The chefs want more unique items like squash blossoms, pea tendrils, anise, hyssop and aronia berries in the fall.”

FarmTable makes deliveries to retailers and restaurants in Des Moines on Thursdays and Omaha on Fridays. The company has an active social media presence and tags the name of these establishments after a delivery to let the public know what’s in-store or on the menu and where.

In the next year, Walsh-Rosmann hopes to add a loading dock, as well as equipment for washing and packaging produce and a kitchen for value-added fresh cuts.

“Our retail consumers like Hy-Vee, Fareway and Gateway are always looking for something that adds convenience and value for their customers. Therefore, we’ve started offering new easy-to-merchandise items like three heads of garlic in a bag, a 2.5-pound bag of finger potatoes and washed, bunched and bagged greens. In the future, we plan to add products like coined carrots and French fry-cut sweet potatoes,” says Walsh-Rosmann.

The Des Moines-based Iowa Department of Agriculture and Land Stewardship does not have a statewide marketing brand for its fruits and vegetables.

“This is something a group of us are working on,” says Walsh-Rosmann.