Nogales Deal Meets The Future Head-On

Photo Courtesy of Fresh Produce Association of the Americas

Nogales, AZ, reigns as a powerhouse port for Mexican produce entering the U.S. According USDA’s Market News, the port of entry logged a total of 5.6 billion pounds of fresh produce during the 2014-15 season and industry forecasts continued future growth.

“The Nogales industry will remain vital to the U.S. market when it comes to fresh produce,” says Paula Beemer, communications coordinator for the Fresh Produce Association of the Americas (FPAA) in Nogales.

Produce imports and exports via Nogales are substantial, and companies operating on the border envision a growing role. “Nogales continues to serve as a major port of entry for produce moving into both the U.S. and Mexico,” says Sabrina Hallman, president and chief executive for Sierra Seed Company, Nogales.

“An important takeaway is the fact that Nogales has been involved in fresh produce trade for over a century,” says Sandra Aguilar, marketing and strategic planning for Rio Rico, AZ-based Ciruli Brothers. “The area is rich in culture, history and industry knowhow. Close proximity to the border in a recently renovated port of entry has only enabled Nogales shippers to be more efficient, allowing inbound loads to be expedited quicker, and consequently, making fresher arrivals to customers’ doors and consumers’ plates.”

Paul Guy, owner of PDG Produce, notes the importance of Nogales as a hub. “I see Nogales’ role in produce increasing,” he says. “There are so many different areas in Mexico growing, and Nogales is an easy, convenient consolidation point for many of the areas and items.”

Mike Smith, president and chief executive of Sigma Sales in Nogales, credits the experience of the city’s produce industry to the success of the Nogales deal.

“Nogales is a complex deal in a lot of ways,” he explains. “It is many deals within the deal incorporating multiple growing regions and multiple growing types including hothouse, open-field and now organic. It takes someone who has been around for a while to really understand it and translate it for the customer.”

Beemer notes how individual and combined experience in the Nogales industry leads to trust, quality, efficiency and competitiveness.

“Buyers can rely on members for their knowledge and commitment to provide products that meet the high standards of food safety and match the consumers’ demands,” she explains.

Companies such as Omega Produce Corporation in Rio Rico, AZ, in business since 1951, epitomize the Nogales industry.

“Our customers know they can count on us, because we’ve been here for so long,” says Celida Gotsis Fujiwara, Omega’s president. “We are ready to serve buyers and ensure we meet their requirements now and in the future. Transitions are not easy, but we will meet future changes head-on. We have the potential and heart to move forward with success.”

Photo Courtesy of Fresh Produce Association of the Americas

Malena Produce Inc. in Rio Rico, AZ, expanded its program across the board. “Eggplant is now a year-round item for us out of three different shipping locations in Mexico,” reports Peter Hayes, vice president sales and marketing. “We’ve also increased our volumes of Italian squash, yellow straightneck, colored and green bell peppers, slicer and euro cucumbers and tomatoes — both Roma and round.”

John McDaniel, sales and operations director for L&M in Nogales, AZ, envisions Nogales will continue to play a very important role in the industry.

“This is due to the great volume crossing through the Nogales border and logistic opportunities available here,” he explains. “Some of the benefits the Nogales industry offers include consistency, quality and variety of produce and infrastructure for logistics.”

Nogales’ close proximity to Mexico presents an added advantage according to Hallman. “Having our growers just across the border in Sonora provides hands-on opportunities for us to literally walk the fields, see the product and still be home in time for supper,” she says. “In addition, the shared border community of Nogales transcends the ‘border’ issues found in so many other areas.”

Though Nogales has a solid foundation, Beemer asserts companies in Nogales are not content to stay the same year to year. “They are always looking to innovate and bring new successes to the market,” she says. “Nogales has innovative marketers as well as simple F.O.B. sellers. There is something for every buyer in Nogales.”

Expanding Variety

Beemer notes a combination of elements contribute to the continued rise of Nogales — one of which is increasing produce consumption. “Higher demand for fresh produce in the U.S. affects our trade,” she explains. “It is reasonable to think this comes with today’s better understanding of how food consumption impacts our health. Starting at an early age, children now learn about it with initiatives such as First Lady Michelle Obama’s educational program ‘Let’s Move’ that promotes a healthy and nutritional diet that includes the whole array of fresh produce.”

One crucial result of continued demand is the increasing variety of products moving through Nogales. The Nogales Produce Import Report 2014-2015 put out by the FPAA states approximately two thirds of the total imported volume of Mexican produce imported through Nogales is fresh vegetables, and one-third is fresh fruit. The USDA-FAS recognizes more than 50 items currently crossing from Mexico include more traditional items such as tomatoes all the way to jicama and other specialties.

Photo Courtesy of Ciruli Brothers

The industry reports seeing a diversification of items into wet vegetable and specialties. “From a product mix perspective, we are seeing a trend toward more tropical items and citrus,” says Beemer. “This is very small compared to vegetables, such as cucumbers and bell peppers, but it represents an important new category segment. At the same time, we are starting to see lettuce, broccoli, carrots and onions through Nogales. Five years ago, this [produce selection] would have been an anomaly. More than anything, Nogales is becoming more of a one-stop-shop for buyers.”

Hallman observes growth among unique vegetable products. “The eggplant market is growing as well, and we are seeing an increase in Brussels sprouts,” she adds.

IPR Fresh in Rio Rico, AZ, will continue to increase its colored bell pepper program in both conventional and organic. “We will also start our second season of offering European cucumbers and slicer cucumbers,” says Jose Luis Obregon, president of IPR. “Both peppers and cucumbers will be packed under the Fresh Republic label.”

“We are expanding and preparing for increased volume in bell peppers, hot peppers, tomatillos, watermelon, summer and winter squash between Sonora, Sinaloa, Morelos and Zacatecas,” says Ciruli’s Aguilar.

“We are also adding commodities to our product mix that we have not typically grown, such as cabbage and onion. I expect we will continue to reassess and fine-tune our product line depending on our customers’ needs,” she adds.

Increasing Volume And Seasons

For many Nogales companies, significantly increasing volumes in key categories presents major opportunity. “Particularly the grape deal has become huge,” states Smith. “When I first started buying grapes, we were a little tiny deal. Now we’re 18 to million packages a year and growing.”

Omega reports trying to export more avocados as well as handling more greenhouse and organic produce. “Companies are expanding business not only with what we grow but also with other products,” says Gotsis Fujiwara. “For example, I’m going to Yuma to meet with new growers there. I’m looking for new products to expand our line and have more volume. We are expanding our organic offering, because Japan is interested in organic.”

Organic products present expanding opportunity for Mexico and Nogales. “The organic category is getting bigger,” says Smith. “It is growing as demand is growing, and Mexico does an excellent job with organic.”

The seasons for Nogales product also continue to evolve. FPAA reports now seeing a big April to June second peak after the traditional January to March peak. “The seasons continue to start a week or so earlier every year, and we are stretching later as well,” adds Beemer. “There are more opportunities to take advantage of earlier market windows in October than in June, when many U.S. produce deals are gearing up.”

Hallman notices seasons growing longer and longer as access throughout Mexico continues to grow. “The highways and ports south of the border are modern and efficient in the movement of goods,” she explains.

The increase in product from Sonora is cited by Smith as another crucial aspect for Nogales’ future. “Sonora is growing a lot more vegetables, and it is expanding season-wise with hothouse and shade-house operations,” he says. “Sonora product will continue to come through Nogales exclusively, because geographically, it doesn’t make sense for it to enter anywhere else.”

Going The Extra Mile

Not satisfied to rest on laurels, Nogales companies continue to innovate in the areas of services offered to customers. “All of our companies work to improve services be it in the variety of goods offered, transportation services or government relations — both nationally and internationally,” says Hallman.

To better serve customers through improved space, PDG added 20,000 square feet to its warehouse capability. “We now have 73,000 square feet of warehouse space,” says Guy. “It better enables us to consolidate product for our customers.”

The ability to consolidate is becoming an ever more demanded requirement from buyers. “The buyer doesn’t have to make six phone calls or send a truck to six different warehouses,” says Guy. “Consolidating saves time and money.”

IPR plans to continue increasing its consolidation services. “Providing loads carrying a full mix of products out of Nogales rather than a straight load of

Photos Courtesy of Ciruli Brothers

only one product optimizes the buyers’ time as well as transportation,” says Obregon. “This one-stop shopping is becoming more popular.”

The rise in construction improvements bodes well for the evolving deal as Smith points out how such improvements relate to the ability to maintain proper temperature. “It’s important to have a facility with temperature flexibility to handle different products,” he points out. “Nogales started as a tomato deal, but now the wider range of product demands variable temperature capacity. At our facility, we have 50,000 square feet with four different coolers, so we can handle a variety of products.”

Companies also look to offer specialized marketing programs. “Shippers continue to diversify their marketing mix,” says Beemer. “For example, they look at the role of delivered contract pricing within their marketing and sales presence.”

L&M maintains the success of one of its niche programs. “For about three seasons, L&M has been servicing the mature green tomato industry, and every year we have more customers,” says McDaniel. “They have been very satisfied with our services.”

The online arena is another area for Nogales companies to differentiate themselves. This past April, PDG launched a new website. “Our website helps our customers understand what we can do,” explains PDG’s Guy. “We are looking toward the future and seeing how we can better fit the needs of our customers online as well as in the physical world.”

Partnering For The Greater Good

The Nogales industry takes food safety very seriously and reports it has been working hard for years to ensure compliance with upcoming food safety standards. “Everybody has a great responsibility when providing food for the public; but even more so, we as importers almost have an added responsibility,” claims Smith. “It’s a privilege to be able to do what we do and supply this product from Mexico to U.S. and Canadian consumers. But with that privilege comes great responsibility to be sure everything is done properly. Individual companies, and the industry as a whole, have been ramping up for more stringent food safety regulations for awhile, and we’re ready.”

The pending implementation of the Food Safety and Modernization Act (FSMA) has been a topic of concern for several years now, according to Hallman. “Safety practices and policies were generated and put into place at all of our companies,” she states. “Labeling, traceability, and open transparency have become a way of life — not only in our warehouse on this side of the border but throughout the fields and packing sheds of our partners to the south. Response-time issues are critical, and rapid deployment strategies are in place should a food safety issue become a concern. We truly work together to assist in the isolation and rapid containment of any issue that may arise.”

McDaniel agrees the industry has been ready for FSMA for a long period of time. “There have been many investments in farms and buildings in both Mexico and Nogales, AZ,” he says.

Obregon affirms the FPAA has been proactive in providing Nogales companies with information seminars and workshops regarding FSMA, helping them improve their methods to guarantee safety and quality in their products.

FPAA reports continuing to offer workshops, seminars and webinars to help its members maintain compliance with all new regulations. “There are some aspects of FSMA that are very specific to importers, and this is where FPAA will show its value as a trade association,” says Beemer. “We will be rolling out these seminars later this year.”

Omega emphasizes its commitment to sending employees to take classes on certification. “There is a movement of trying to improve everything — even though we’re already doing well,” says Gotsis Fujiwara. “This includes everyone from our office staff, to the foreman, to those who work in the warehouse. We are always looking toward the future and aiming to do things even better.”

Continued efforts to facilitate legal commercial trade conditions between Mexico and Arizona hold even greater promise for Nogales business in the future. “There is great interest and government support to invest in road infrastructure and inspection efficiencies,” explains Beemer.

Gotsis Fujiwara sees more efforts to share information. “We see greater cooperation between government and industry to discuss how we can improve movement of trucks,” she points out. “The Sonoran government is emphasizing greater education and collaboration with the Nogales community. They are sending representatives from the growing areas to get to know the importers better and discuss needs and windows of opportunity.”

“We’ve had long-term relationships with most of our growers and we constantly have a steady flow of communication back and forth,” says Malena’s Hayes. “We discuss what customers are looking for and expecting or we’re working on different types of cartons or packaging to make things easier for the grower and to meet customer needs. And, our customers also educate us on such things as new varieties coming on or how we can get better pack-out or prolong shelf life.”

As the deal moves forward, the Nogales produce industry is positioned to persist in its vital role. “Our industry through the FPAA will continue to advocate for the importation of Mexican fresh fruit and vegetables into the U.S.,” says IPR’s Obregon. “FPAA provides support for its member companies in various aspects of the business, including education, sustainability and infrastructure.”

Enhancing Movement

Cucumbers from a Ciruli Brothers’ grower in Culiacan, Sinaloa.

Outstanding improvements in the supply chain in Mexico and on the border are another contributing factor according to Paula Beemer, communications coordinator for the Fresh Produce Association of the Americas (FPAA) in Nogales.

“This includes better technology, food safety, social responsibility, infrastructure and the fact that today agriculture in Mexico is providing more resources to Mexico than oil or tourism, according to a statement made by Mexico’s Secretary of Agriculture José Calzada,” she notes.

Infrastructure in Nogales, AZ, received significant impetus as well. In 2014, the Mariposa Port of Entry underwent substantial reconstruction, increasing the U.S. capability to process commercial trucking with a potential reach of 4,000 trucks a day. The SR189 [highway expansion] was allocated $25 million in the state budget and the project applied for a $25 million TIGER grant as well, according to FPAA.

(The Transportation Investment Generating Economic Recovery grant program provides opportunity for the U.S. Department of Transportation to invest in road, rail, transit and port projects that promise to achieve national objectives.)

“The crossing of goods has become more efficient,” states Beemer.

Obregon has seen the new port facilities expediting the importation of produce by reducing crossing times, and Hallman notes easy access to interstates, rail and air allows rapid and on-time delivery to all points of service. “Now that the Mariposa port has been expanded, the improvements to SR189 will enhance truck travel in accessing the interstates,” she explains.

Additionally, initiatives to improve Interstate 11 are progressing. “This highway will connect the growing regions of Mexico to the U.S., across our country and up to the Canadian Border,” says Sabrina Hallman, president and chief executive for Sierra Seed Company, Nogales.

Beemer reports the designation of Interstate 11, considered Arizona’s Key Commerce Corridors transportation plan, will connect the state to regional and international markets.

“It will make the distribution of goods from Nogales to the rest of the West Coast efficient and more cost effective,” she says.