Ten Ways Wholesalers Are Adapting

Much more than just buy-and-sell operations, modern wholesalers reinvent what it means to be in the middle of the supply chain.

Originally printed in the October 2021 issue of Produce Business.

Wholesalers have long served as a crucial cog in the fresh produce machine, providing many distribution channels for growers, packers and shippers in the industry.

In fact, at one time, wholesalers were the major source of supply, but then direct-buy and consolidation threatened the model. However, a variety of factors are shifting business back to innovative wholesalers.

“There was a time when it made sense for retailers to cut out some of the middleman expense,” explains Larry Davidson, president of North American Produce Buyers in Toronto, Canada. “But the pendulum has swung back. Sourcing and distribution have become more of a nuisance for some buyers. Our buyers want the produce when and how they say, and want us to deal with the problems.”

Successful wholesalers adapt to meet the challenges of today’s business landscape and supply chain. “Wholesalers serve multiple customer groups or segments and often there are different pieces unique to each partnership,” says Daniel Corsaro, president of Indianapolis Fruit Company in Indianapolis, IN. “There is constant pressure to innovate and introduce new opportunities in each of those relationships.”

It’s basic business, adds Cary Rubin, vice president at Rubin Bros. Produce Corporation in Bronx, NY. “You can’t stand still. The world is changing around us, so if we don’t continue to change with it, we’ll be left behind.”

Stefanie Katzman, executive vice president at S. Katzman Produce in New York, NY, considers wholesalers an extension of growers and customers — constantly changing with the seasons, economy, etc.

“We are moving toward being a full-service fruit distribution house. We want to be a one-stop solution for customers’ high-end fresh fruit needs.”

— Larry Davidson, North American Produce

“We’re responsible for driving a lot of the changes and evolution you see from growers and customers,” she says. “Our unique vantage point in the center of the supply chain provides us access to information, data, and insights from our industry partners worldwide.”

Wholesale companies that can shift to meet the needs of new and emerging produce sales channels will always be relevant, asserts Jonathan Steffy, vice president and general manager at Four Seasons Produce in Ephrata, PA. “This is easy to say, yet can be hard to do,” he says.

Here are 10 ways wholesalers can pivot to remain relevant in today’s market.

1. Broaden Your Scope

Historically, wholesalers specialized in a just few items — one house was a potato and onion house, another a tomato house. Now, many wholesalers are expanding product categories to adjust to the way buyers purchase, explains Steffy. “Adding more offerings to be convenient and valuable to buyers and take advantage of capacity and capability is especially prevalent if the wholesaler has technology, distribution and logistics to offer.”

John Vena, president of John Vena Inc. (JVI) in Philadelphia, PA, explains when he started in the industry “in ancient times,” everyone was a specialist of one kind or another. “Buyers on our market had limited vendors to choose from on many items, but those vendors were the experts and carried a range of price points and pack sizes.

“We spent the last 35 years developing our expertise in a broadening line of ‘specialty’ produce. Many of those items have now moved to commodity status and, naturally, other merchants have adopted them. As a result, we have seen product lines increasingly overlap among competitors.”

S. Katzman offers a full line of fruits and vegetables to customers because it saves them time and also helps with logistics, states Katzman. “Like many businesses in the market, our company started off specializing in just a few items,” she says. “As time went on, our customers began to ask for additional products. It’s our job to give our customers what they want, so we changed our business model to accommodate their needs.”

Rubin Bros. also had a particular focus when it started in the 1940s. “We were considered a vegetable house, more a wet house,” says Rubin. “Our first major expansion was into California western vegetables. Today, we are very diverse. We sell everything from fruits to vegetables to tropicals and do big business with prepackaged salads.”

In its 23 years in the business, North American Produce has increasingly focused on stone fruit, then grapes, then apples, citrus and pears, says Davidson. “We are moving toward being a full-service fruit distribution house,” he says. “We want to be a one-stop solution for customers’ high-end fresh fruit needs.”

Indianapolis Fruit lives on line extension, says Corsaro, constantly adding complementary items or additional SKUs that allow its retail partners to build sales. “It’s often cumbersome for certain distributors to add items, but we have made a very successful living off it because we feel variety and differentiation on the retail sales floor allow our customers to be competitive for foot traffic in an ultra-competitive market.”

Rick Feighery, vice president of sales for Procacci Brothers Sales Corporation in Philadelphia, PA, notes the challenge of being a full-service house. “At times, it’s difficult when 80% of the business is 20% of the items, but you have to have all of them to make it work,” he says.

2. Merge, Consolidate and Collaborate

Acquisitions, mergers and collaboration often facilitate line extensions, says John Vena, but the real driver seems to be a desire to be all things to all customers. “Over the past few years, we have been growing selected commodity lines,” he says. “We’re trying to be intentional about matching new product lines to customer demand.”

Davidson reports seeing more mergers and acquisitions on the wholesale side, as companies look to expand lines, and expects wholesale mergers and acquisitions to “really ramp up in the next 12 to 18 months in Canada.”

This past year, G&G on the Philly wholesale market joined the Ryeco family as Ryeco sought deeper space in tomatoes. “G&G represents an excellent tomato operation,” says Filindo Colace, Ryeco vice president operations. “Although we carried tomatoes, it’s an item we wanted more of a presence within the market, and that’s why our two companies joined forces.”

Gabriela D’Arrigo, vice president of marketing and communications for D’Arrigo New York on the Hunts Point Market, says in some areas of the country produce wholesalers have expanded into nonproduce items, such as dairy or meat, as a result of the pandemic and food boxes. “Potentially in the future, we could see more collaboration between the different sectors and markets.”

3. Differentiate With Specialty and Imports

Wholesalers add value to their operations by focusing on import programs, specialty or ethnic items. The category of specialty is one of the fastest growing for Indianapolis Fruit, says Corsaro. “We handle all the multicultural items seen in the more traditional retail setting,” he says. “This line is growing exponentially for us. A lot of retailers don’t know there is a market for these items in their stores; we have the data to help them see the opportunity.”

D’Arrigo New York is also offering more ethnic and specialty items. “This is a necessity as a company, to have a future in reaching certain customer segments,” says D’Arrigo.

“A lot of retailers don’t know there is a market for these items in their stores; we have the data to help them see the opportunity.”

— Daniel Corsaro, Indianapolis Fruit Company

Procacci has added programs in floral, organics and tropicals. “These items are typically more difficult for a retailer to deal with because the volume may not support a buy-direct program or the logistics and management of them are more difficult,” says Feighery.

“Wholesalers are often first to market with new products, as it is a very easy and efficient way to for suppliers to get their items into customers’ hands,” says Dominic Riggio, president of Riggio Distribution in Detroit, MI.

Specialty items create opportunity for sales growth and differentiation, yet Steffy cautions they also present margin risk and a potential drop to operational efficiency. “Finding a sustainable balance of risk-reward and supporting the marketing of specialty products is key for wholesalers,” he says.

Challenges on the import side have increased the value of wholesalers specializing in this arena.

“In the last six months, import challenges, especially logistics, have become much more burdensome,” says John Vena. “For JVI, it took years to build the knowledge and relationships to be successful. We have been importing since 1988, and we’re constantly adjusting our product mix and processes to remain competitive. We recently brought on additional staff to grow our existing programs.”

North American Produce developed its import program to offer solutions and service problem-solving, says Davidson. “Over two decades, we’ve developed a network of growers and have our own grower relations and quality control departments,” he says. The company also has two wholly owned logistics operations to support the import program.

4. Embrace Organic

Wholesalers are expanding organic options as demand continues to increase. “Organic is a fast-growing category at Indianapolis Fruit,” says Corsaro. “It’s accelerated by the growth of the salad space and innovative items. We also see pure availability driving success. The industry supported growth by creating more acreage, which helped overall supply and made pricing more consistent while lowering the cost gap.”

Four Seasons Produce has found success in offering a higher proportion of specialty items in organic versus conventional to reach an overlap of market receptiveness. “Why offer conventional and organic honeynut squash when you can funnel all the demand into the organic option,” says Steffy. “Around half of our sales are generated from organic produce, so it’s a very important part of our business and that of our customers.”

D’Arrigo New York recently hired an organic division director to develop its organic line after seeing more of its smaller, independent retailers transitioning into organic, says D’Arrigo. “Since they don’t have the shelf space, they can’t do both, and so are putting more organic-only in.”

5. Invest In Conditioning Facilities

Ripening programs have exploded among wholesalers, with bananas topping the ripening list in volume and avocados in dollars. Other fruits such as mangoes and pears are also being conditioned. Steffy says modern pressurized ripening rooms treat commodities such as avocados with applications that slow ripening, or hold the fruit at a specific stage for a longer period of time.

“As the technology for conditioning has become more efficient and nimble, more wholesale facilities are incorporating conditioning into existing warehouses,” says Riggio.

JVI didn’t follow the conventional route to fruit pre-conditioning, explains Dan Vena, director of sales. “When we installed our ripening rooms, we planned primarily for avocados,” he says. “We have since branched out into plantains, then mangos. We only ripen Cavendish bananas to order. We’ve even experimented with papayas for color development and have done honeydews in the off-shore season.”

Indianapolis Fruit ripens bananas, avocados, mangos and melons, and Corsaro describes it as a value-added art. “Ripening and conditioning is delicate and our programs are proprietary to our own house offerings,” he says, although the company does have programs it executes on behalf of specific customers. “Retailers are realizing consumers care about enjoying more of their fresh products closer to the day of purchase. Numbers show consumers are buying less more often, so near-market ripening fits this trend.”

D’Arrigo anticipates seeing more collaboration on conditioning. “Ripening is something you can’t dabble in,” she says. “We’re seeing more and more people who previously dabbled in it asking us to take it over as a service for them.”

6. Offer More Services

Service wholesaling has become a buzz phrase, as wholesalers add greater responsibility in supplying retailers and serving suppliers. “People on both sides are trying to eliminate parts of the workflow,” says Corsaro. “With that void comes an opportunity the wholesaler can fill. Most of the pain points the wholesaler can solve or mitigate are the same pain points for multiple customers. As the supply chain continues to get more complex and more fractured and fragmented in certain areas, distributors will have the opportunity to provide more services.”

D’Arrigo says her company is being tasked to fill customers’ labor void. “We are seeing more and more requests for multiple deliveries, as well as cross-docking and consolidation.”

“We are seeing more and more requests for multiple deliveries, as well as cross-docking and consolidation.”

— Gabriela D’Arrigo, D’Arrigo New York

Wholesalers are looking at new ways to service accounts and create more value than the traditional wholesaler / customer relationship, adds Riggio. “Any wholesaler that can offer a service to help customers sell more product and cut down on labor is a winning combination,” he says.

Katzman sees her company’s role as more than just buying and selling produce. “We’re a service business and what really sets us apart is the quality of our service,” she says. “We are the marketing arm of the growers — promoting their brand, working with them through under- and over-supplied markets, and streaming of information up and down the supply chain. We are also the supplier and warehouse for many of our retailers. We make sure they have a full product line available. We receive, consolidate and deliver product daily to keep inventory fresh and partner on ad programs.”

Nickey Gregory Company in Atlanta, GA, provides processing and fresh-cut in its own facility, Family Fresh Foods. It also performs repacking, cross-docking, consolidation and logistics from two large locations on the Atlanta State Farmer’s Market, says Andrew Scott, director of business development and marketing.

North American Produce acts as a service provider for suppliers to retailers. “For example, we have a program with a Peruvian blueberry grower for whom we already distribute,” says Davidson. “But, one particular retailer prefers to deal directly with the grower. So the retailer builds the program directly with the grower and we do the logistics and service. As logistics get more complex, I expect more direct-buy retailers may look for these types of arrangements.”

Rubin reports Rubin Bros. customers are learning the advantage of using a wholesaler versus going out on their own. “Our consolidation abilities and large buying power ultimately benefit them,” he says. “If it’s an item we don’t have in inventory, we procure it on the open market. Customers don’t have to put trucks on the road or handle other logistics. Sometimes actually selling produce is the easiest part of the job these days.”

7. Provide Expertise

Service wholesaling is all about solving problems for customers and suppliers by doing more than just the buy-sell, says Steffy. “Merchandising, ad planning, reporting analysis, department resets, display contests and more are all a part of Four Seasons’ offerings.”

Feighery explains wholesalers such as Procacci act more as a sales agent by including ad planning, merchandising support, order management and co-management of commodities, depending on the customer need. “There’s a lot of different puzzle pieces in every relationship,” he adds.

From developing ads to planograms for independent stores, Procacci works hand-in-hand helping retailers succeed, adds George Binck, chief operations officer of Procacci. “We see requests for this growing, more so than in years past,” he says.

“Customers want merchandising support for resets, they want to plan ads weeks out and they want advice and help on how to best utilize and market their produce,” says Feighery. “Also, a store operator may not know where to go for refrigeration equipment or new racks, so we provide information and references. Our goal is to help them operate more efficiently and be competitive in their marketplace.”

Wholesalers fill a crucial expertise gap for both customers and suppliers. “Wholesalers are critical to the exchange of information and ideas that help our growers and customers succeed,” says Katzman. “We have access to consumer trends, shopping habits and overall demand that help our growers determine how much to grow of which items, and which R&D innovations to bring to market. Similarly, in the other direction of the supply chain, wholesalers share information from our wide set of growers with our customers so they can source the right quality and pricing to best meet their shoppers’ needs.”

D’Arrigo New York finds customers increasingly rely on them for nutritional information expertise. “We assist our customers as the product experts, and our role as a grower comes in handy here,” says D’Arrigo. “Customers don’t have time to do the research. They come to us because we really do know best.”

8. Add Logistics, Local Delivery and Freight Brokerage

Wholesalers have discovered the importance of filling a transportation and logistics role. “Logistics is a huge part of cost-of-goods, and efficiency and expedience are paramount,” says Four Season’s Steffy. “Between the national driver shortage and freight costs at an all-time high, smart and capable logistics options for perishable products are as important as ever. Offering freight brokerage, crossdock services, 3PL, managed freight, and network solutions can really help retailers in their supply chains. Our sister company, Sunrise Logistics, offers these services to both retailers and grower shippers.”

D’Arrigo New York works with some shippers or customers to piggyback a load. “This helps us facilitate cost and logistics with customers,” says D’Arrigo. “We’re overlooking differences and working together, especially as logistics and transportation get more complex. This has been going on for a while, but has really become a focus lately.”

If we have learned anything in the last 18 months, advises JVI’s Dan Vena, it’s that every buyer, whether B2C or B2B, is weighing methods for acquiring the things they need for themselves or their businesses. “Everyone is looking for ways to do more with less,” he says. “It is imperative to build our delivery resources. More customers want it, many insist on it.”

Full-service wholesale distributors can solve a lot of final mile challenges with delivery, emphasizes Steffy, adding Four Seasons owns a fleet of vehicles that specialize in a variety of store door delivery formats.

Procacci has been delivering locally since its inception, but now relies predominantly on outside operators for delivery service. “We have long-term, strategic relationships who partner with us for our delivery,” says Binck. “These operators are like part of the family.”

Other wholesalers own their own fleets. Nickey Gregory’s Andrew Scott says its logistics team, Gregory Family Express, manages an asset base of trucks as well as inbound and outbound orders. “Controlling this piece leads to better cost efficiencies and accurate delivery times while keeping the cold chain intact.”

9. Become Hybrid In Location

As wholesalers expand in services, they expand in space as well. Many traditional on-market wholesalers have moved to operate both on- and off-market facilities. Procacci has four units on the Philadelphia wholesale market and multiple off-market facilities. “Our off-market facilities encompass around 700,000 square feet total and we’re in the process of still expanding,” says Feighery.

Feighery explains the advent of this hybrid model revolves around catering to specific business needs. “We don’t want to deviate from the strict buying and selling of the terminal market,” he says. “But for repacking, reconditioning and other services, we need space off the market. The focus of what we do off-market is different from what we do on the market. The dynamic of the two business environments is different.”

D’Arrigo New York maintains its Hunts Point location, but also has two off-market facilities of about 40,000 and 20,000 square feet. “We love the action of the market for buying and selling,” says D’Arrigo. “Our off-market locations give us more space for pre-staging retail deliveries. We can also separate our organics easier. And, down the road, one could end up being a forward distribution center. These other facilities give us the flexibility and space we don’t have with only an on-market location.”

In addition to expansion on the Philly market, Ryeco has invested in an off-market 30,000 square foot facility for storage and re-packing, says Colace.

10. Serve As A Hub For Local

The wholesale model presents an efficient distribution system for local product. “A lot of local growers run smaller operations and getting deliveries into foodservice and retail distribution centers can be difficult for them,” says D’Arrigo. “We provide an efficient outlet for growers and buyers for local product. Local can get to market more quickly and cost effectively via wholesale.”

Wholesalers are valuable for local growers, agrees Riggio. “Most of the time, local growers are not 12-month producers and do not have the resources in sales, marketing and distribution to reach all the potential customers in and outside the local market,” he says. “Terminal wholesalers are a perfect fit for these growers to grow their business and distribution network.”

S. Katzman Produce serves as a marketing agent for its local growers. “It’s our job as the wholesaler to promote and sell our growers’ products,” Katzman says. “This partnership becomes even more important when the growing operation does not have their own big sales force or access to a marketing department. Our local growers lean on us and our position in the market to be able to find the right customers for their produce.”

At the end of the day, says Rubin Bros.’ Rubin, nine out of 10 times the local grower needs other avenues to sell product than just direct to a store. “When local growers need a place to put product, we’re always here with open arms,” he says. “And when the markets are short, sometimes it’s best to put the product here as well because we pay more for it.”