Originally printed in the March 2018 issue of Produce Business.
Retail operations can run more efficiently and profitably by knowing where and how to take advantage of offerings.
Even in the new age of retail formats, wholesalers remain a vital link for many as consumers demand more from their stores. “The modern consumer is incredibly demanding and there is no room for error, particularly in produce,” says Emily Kohlhas, director of marketing at John Vena Inc. in Philadelphia. “Consumers insist on exceptional quality, competitive promotions, creative services and a forward-thinking product mix. There is enough choice in the market that if retailers don’t deliver, they’ll be left in the dust.”
Kohlhas notes it’s a scary and exciting time for retailers right now. “With non-conventional retail formats continuing to claim market share and tech companies throwing all their resources into breaking down barriers to online grocery and produce delivery, brick-and-mortar retailers must be nimble, innovative, and responsive to survive, let alone grow,” she says. “You’ve got to be out there listening to the customer and responding quickly and efficiently. As a wholesaler, we help our retail clients to do just that.”
Wholesalers support a wide range of retail size and format. “We are often the main vendor for smaller retailers and supermarkets,” says Gabriela D’Arrigo, vice president of marketing and communications for D’Arrigo New York in Bronx, NY. “However, we supply larger chains as well. Our elasticity allows us to be a safety net as well as a go-to.”
Wholesalers also reap indirect business from new types of store formats such as Aldi or Lidl, reporting sales to distributors serving these types of discounters. “We do work with retailers to compete with such stores, but we also provide support to these stores as well within certain regions,” says D’Arrigo.
Independent stores particularly rely on wholesalers to stay competitive. “Many independent retailers depend on us,” says Dominic Russo, buying and sales director/logistics coordinator with Rocky Produce in Detroit. “We count on their business, and they count on us to have the freshest produce all the time.”
“They make us look good and keep us out of trouble. I can’t imagine how any retailer could not have a few good reliable wholesalers they depend on every week.”
– Richard Stiles, Redner’s Markets
Rob Strube III, president of Strube Celery and Vegetable Co. in Chicago, forecasts store size will shrink in the near future, making wholesalers even more relevant. “We’re going to see an increase in smaller stores concentrated on produce. The best way to service these focused stores is through local wholesalers.”
Redner’s Markets in Reading, PA, with 44 stores, considers wholesalers an integral part of its sourcing model. “They’re always there to help us if we didn’t order enough or if they came upon a good deal with their suppliers,” says Richard Stiles, director of produce and floral. “They make us look good and keep us out of trouble. I can’t imagine how any retailer could not have a few good reliable wholesalers they depend on every week.”
Brian Gibbons, produce director for Highland Park Market in Farmington, CT, says a good wholesaler should be committed to working with supermarkets to help them grow. “If our business grows or shrinks then their business reflects that, so they should be highly vested in working with us.”
As the retail environment continues to evolve, Bob Corey, advisor/ambassador to Corey Brothers in Charleston, WV, says stores must be reminded of the benefits of wholesale product, programs, freshness, quality, consistency and service. “Great opportunities are available for wholesalers to back up and supplement retail mainliner warehouse programs by offering logistics advantages and taking pressure off of chain warehousing, especially with procurement, storage, and delivery of locally grown and/or processed products.”
Cost Versus Benefit
Though some may view any middleman as adding expense, wholesalers perceive themselves as adding value and encourage stores to analyze their full cost-benefit.
“We are game-changers,” says Shelly Nathel, vice president of Nathel & Nathel in Bronx, NY. “I can say to a store ‘if you’re doing $20,000 a week and we start doing your produce — you’ll be able to do $40,000’.”
Russo explains his company works on slim margins but add value to the supply chain through their knowledge. “We’re experts at what we do, and we provide solutions for our customers,” he says. “Customers know when they call us we’ll have something good for them. As long as we’re able to do that, we’ll always have a place in their business.”
Gibbons agrees most of the wholesalers Highland Park deals with try to keep the costs as low as possible. “This allows us to have aggressive sales plans and run some quality EDLP’s (every day low price) in the store,” he says.
Retailers benefit from the wholesalers’ ability to work the market. “There are always good deals on items we can take advantage of for our customers,” says Stiles.
Strube touts the advantage of quick action on good pricing. “If we get a good deal in the morning, our independents can have it in their stores and at a lower price than the larger chains that afternoon,” he says.
And, wholesalers can employ various methods to ensure customers get the pricing they need. “When working out of a market there are times cost is up and times when cost is down,” says Nathel. “One thing we do with several customers is work on a cost-plus basis. They know what price they need. We do all their trucking, buying and refrigeration.”
“We are game-changers. I can say to a store ‘if you’re doing $20,000 a week and we start doing your produce — you’ll be able to do $40,000’.”
– Shelly Nathel, Nathel & Nathel
Larger retailers and chain stores who may do more direct contracting can still take advantage of value-added opportunity buys or assistance if they’re in short supply, according to Russo. “We’ve grown long-standing relationships with all of the large chains because of our consistency, quality and ability to expedite orders and facilitate needs quickly,” he says.
Gibbons reports many wholesalers offer Block Buys and Weekly or Daily specials not in their sales planner. “These can help you run some additional great in-store specials and help your departments add some additional sales while hitting gross margin,” he says.
Constant, Quality Supply
Stores also can look to wholesalers for assurance of must-have products at all times. “Consistency and availability are big challenges, but we work with hundreds of suppliers to patch together year-long programs so our customers don’t have to,” says Dan Vena, director of sales at John Vena Inc. “And, we are a second pair of eyes on quality for retail buyers so produce managers aren’t faced with nasty surprises unloading trucks. Ordering direct may save a dollar per case, but those savings get chipped away when you factor in over-ordering, lost sales and waste due to quality issues the supplier can’t address right away.”
Stefanie Katzman, executive manager at S. Katzman Produce in Bronx, NY, credits relationships with farmers dating back many years as adding consistency to Katzman’s business model. “We have the ability to sell extra volume when Mother Nature blows predicted production out the window,” she says. “And in turn, we have a little more flexibility on pricing than a contracted retailer does. When product is short and growers are not going to have the yield they planned on, we help them get more money for what they produced so they’ll be in business next year.”
“We have the ability to sell extra volume when Mother Nature blows predicted production out the window.”
– Stefanie Katzman, S. Katzman Produce
Stores can turn to local wholesalers as well to ensure consistency with promotions. “Our wholesalers cover us with ad items when we’ve bought a little short,” says Redner’s Stiles. “And, they get us product quickly.”
Retail operations can utilize wholesalers for consistency in specialty lines of products. “So many wholesalers carry lines of organics now and help promote new items we may not be familiar with,” says Stiles. “This may be a situation where we only use one skid and they’re buying truckloads.”
Vena’s program offers decades of expertise to any size retailer. “We know what items are trending and how to impress a foodie or satisfy the produce needs of a particular ethnic group,” says Vena’s Kohlhas. “Retailers have a real opportunity to set themselves apart with a culinary-centric product mix appealing to the chef in all of us. As a wholesaler, we can support this innovation with mixed pallets, just-in-time delivery and flexibility.”
“We know what food items are trending and how to impress a foodie or satisfy the produce needs of a particular ethnic group.”
– Emily Kohlas, John Vena Inc.
Corey recommends wholesalers and retailers meet to detail areas for improvement and then design a customized program to satisfy those needs. “The premise of the meeting is not for us to sell what we want but to define customer needs,” he says. “The objective is to negotiate a benefit for both wholesaler and retailer. The value must be measurable to contribute to increased produce distribution, greater gross profit dollars, reduced shrink, and/or greater customer satisfaction resulting in increased customer loyalty and repeat purchases.”
Make Them Your Warehouse
Another benefit for many retailers is the ability to use wholesalers as a warehouse. “The warehouse function of wholesalers is crucial for many independent stores,” says Russo of Rocky Produce. “It allows them to be nimble and adjust pricing, volume and merchandising based on the markets.”
Katzman notes especially in the New York area, where rents are so high most retailers cannot afford to use space for storage, wholesale storage serves as a fundamental part of the retail business model. “We are basically an extended storage unit for unique or small-format retailers,” she says. “We deliver to them or have them pick up daily so they can refill their stores at night.”
A wholesaler’s ability to fill orders at the drop of a hat affords flexibility to clients, according to Vena. “Our retail customers can cut lead times and use just-in-time inventory management to streamline operations and minimize shrink,” he says. “We take on the risk of holding inventory — not the retailer.”
Beyond simple warehousing, Strube offers some customers direct buying as well. “These customers will buy a pallet of oranges from us and if they like them, then they’ll ask for more via a direct deal,” he reports. “We serve as their warehouse and bring the product in directly for them. They don’t need big refrigeration units in their building anymore. This allows our customers greater flexibility in working the market — they can buy a few boxes or a pallet or a truckload, depending on their needs or the market.”
D’Arrigo notes the company’s elasticity has and always will give them a leg up on other suppliers. “We are more capable of being the ‘jack-of-all-trades’ than most others,” she says.
Focus On The Relationship
Effective wholesalers and their retailers focus on ensuring a win-win relationship. “It’s simple really…everybody has to make money,” says Katzman. “The grower, the transportation companies, the wholesalers, and the retailers. We all need each other every day to do business.”
For Strube, it’s a trust factor. “Do our customers trust us?” he says. “If the market is $20 on Monday and will be $10 on Friday, do we try to stick them on $20? No, we are honest and try to guide them. I’ve told customers to buy 10 boxes every day until the market settles, or in a low market to stockpile. They need to know you’re not going to do anything on purpose to hurt them. Sometimes the market falls fast and you can’t control it, but it comes down to integrity and trying to do the best thing for the customer.”
Vena’s Kohlhas advocates two-way communication. “If wholesalers are not out there listening to the needs of retail partners, there’s no way they can stay relevant,” she says. “In return, we ask our retail partners to communicate openly with us. A strong, long-term relationship that drives growth for both parties can only be built on a foundation of honesty and trust.”
Retailers and wholesalers are encouraged to build solutions together. “We like to say we don’t just sell fruits and vegetables, we sell the customer experience,” says Katzman. “Whether that customer experience is a last-minute delivery, sourcing a brand new product from around the world or just always being there to deliver and support customers in what they need. We view our growers and our customers as partners in this business, and we always take care of our partners.”
Look For Missed Opportunity
Despite all the noted wholesale advantages, companies still report untapped potential within the segment for all-size retailers. Russo recommends using wholesalers even more to take full advantage of the ability to buy when it makes the most sense. “When the markets are rising, you have the chance to buy extra,” he says. “When the markets are falling you can hold off and wait and buy at a cheaper price. That flexibility allows retailers to do what’s best for them at the retail level. It helps the whole supply chain stay lean.”
“Questions about the market price on items arise almost daily. As wholesalers, it is our job to know the true value of an item at any given time. We are in the trenches every single day.”
– Gabriela D’Arrigo, D’Arrigo Bros.
Nathel suggests a huge opportunity for buying short. “Retailers should be buying short more and using the wholesale markets,” he says. “They need to partner up more and use us as their refrigerator. If they need two skids of peaches, then why buy six for the week? They should instead buy two and then buy four more from me if they need them. Stores should really think about taking advantage of the flexibility a wholesaler offers. Our retailers report flexibility in buying from wholesalers is crucial to their profitability.”
Retail should also tap wholesalers for expertise on pricing and market movement. “Questions about the market price on items arise almost daily,” says D’Arrigo. “As wholesalers, it is our job to know the true value of an item at any given time. We are in the trenches every single day. This is something both retailers and vendors can utilize more.”
According to Katzman, wholesalers take pride in being experts in their field. “That means knowing what is going on in the growing areas, with transportation across the country and from around the world, and what retailers are planning in their stores,” she says. “The best things we can provide are information and service. We know what products are coming on strong and would make a great sale item. We know what is coming into season and what will taste great. We can help with planning for both the upcoming weekend and the next few months.”
Training of retail produce personnel is another need in both large chains as well as independents, according to Corey. “Wholesalers can assist with training and developing expertise including merchandising, display building, seasonal sets and consumer knowledge,” he says. “These are key areas where a wholesaler retail counselor can be beneficial.”
Though many chains have their own training programs, Corey notes the programs can be deficient in developing a trainee’s consumer produce knowledge. He points to tools such as Corey Brothers’ “Produce Corner with Bob Corey” web video training. “Such tools can be used at no cost, and it’s just the type of information consumers are interested in knowing,” he says. “It’s a great refresher for veteran produce folks and a plethora of produce knowledge to help new folks.”
