Officials predict more consolidation

Dan Wheat/Capital Press An orchard stands in front of a part of the main apple packing plant of Stemilt Growers Inc. in Olds Station just north of Wenatchee, Wash., on March 16. Stemilt acquired Dovex Fruit Co., also based in Wenatchee, on March 4, making it the largest non-citrus tree fruit company in the nation.

Large retailers want to do business with fewer, more capable suppliers

By DAN WHEAT

Capital Press

When Stemilt Growers Inc. announced its acquisition of Dovex Fruit Co. on March 4, it was another example of what fruit and produce people say is a continuing consolidation of their industries in the West and nationwide.

As major retailers like Wal-Mart, Kroger and Costco have consolidated and increased in size, they have pressured suppliers to do the same. A Safeway or a SuperValue wants the convenience and surety of going to one or two companies and having all their fruit or produce needs met year-round.

They are willing to pay more for that assurance and that's good for growers, said Mike Nicholson, domestic sales manager of Chelan Fresh Marketing, one of the four largest tree fruit marketers in Washington.

"Say retailer A has 5,000 stores and gets three-fourths of its product from four to five shippers. There's not a lot of range in price from what I and Rainier or Stemilt might quote," Nicholson said.

"So nowadays the emphasis isn't so much price, but consistency of service and supply. They want good quality and consistent supply," he said.

Prices are not negotiated load by load but in larger segments, and a typical load has six to eight varieties of apples at two or three sizes, Nicholson said. He noted it takes a large shipper to provide such variety.

Nicholson said he expects even more consolidation of Yakima and Wenatchee tree fruit shippers in the next year or two. "The retail market will require it," he said.

Kirk Mayer, manager of Washington Growers Clearing House Association in Wenatchee, said consolidation continues because of consolidation at the retail level and rising business costs. But, he said, small and mid-size marketers can be more flexible than larger marketers, fill niches and even sell to some large retailers.

He said marketing consolidation gives the industry more clout in negotiating prices with large retailers.

"It's about having fewer sales desks chasing retailers, more than fewer owners," said Jon DeVaney, executive director of the Yakima Valley Growers Shippers Association.

Ray Gilmer, vice president of communications at United Fresh Produce Association in Washington, D.C., said a critical mass is necessary to meet big retailers' needs and reach the economies of scale that are competitive in price. That caused the consolidation of produce packers, including tomatoes and lettuce, several years ago. Retailers even want suppliers to manage categories for them, and small shippers can't do that.

Some packers have folded because of the recession, Gilmer said, but he added he doesn't know if the consolidation trend is continuing.

Barry Bedwell, president of the California Grape and Tree Fruit League in Fresno, said consolidation will continue but at a slower pace. He said eight medium to large shippers in California went out of business in 2009 because of the recession and low prices. He said nuts are already dominated by just a few companies.

Washington state tree fruit licenses

Marketers

1999 32

2009 26

Packers

1999 151

2009 130

Source: Washington State Department of Agriculture

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