New Jersey Ag News
Speaker assesses wholesale markets for attendees
By DOROTHY NOBLE
STATE COLLEGE, Pa. (May 15, 2016) — Thirty-year veteran of wholesale marketing Rob Amsterdam presented key points in assessing whether growers should enter a wholesale market at the Pennsylvania Association of Sustainable Agriculture’s Farming for the Future Conference.
Amsterdam, who operates Amsterdam Produce Enterprises, Inc., highlighted information regarding industry standards, trends, requirements, pricing and transportation of the wholesale industry.
The wholesale market does not sell directly to the consumer, but rather to entities which do sell directly such as supermarkets, restaurants and other food service outlets, and to other growers for their markets.
Wholesale products are sold in non-consumer sized lots, such as standard box, pallet, truckload, etc.
The wholesale industry also covers other businesses that move products along the supply chain.
In the food distribution system, wholesale markets consist of receivers, distributors, food service distributors, commission agents and terminal markets.
Amsterdam advised the potential wholesale growers to consider the type of markets they wish to target.
These could be direct store delivery to independents, individual stores of chains, farm stands and on-farm markets, or to chain store warehouses. Food service markets could include restaurants, caterers and institutions.
Also, other distributors and wholesale markets, and/or agents/brokers can be targeted.
Amsterdam urged learning the terminology used in the wholesale markets and how the different market types operate.
Also, a prospective wholesaler should have knowledge of common cartons, packaging and pack sizes, and USDA grade standards. Amsterdam noted that chains often desire to exceed USDA grade standards.
He suggested, “Give them what they want; pack and deliver too.”
Terms and their accepted definitions should be mastered for effective management.
Terms such as acceptance, condition defect, effective rejection, no grade contract, suitable shipping condition, wrongful rejection and more impact business profit, legal standing and overall success.
Growers should assess their capacity or access to adequate capacity.
Production potential; available labor for the field and packing work plus the administrative management, and sales force; packing lines, coolers, loading and staging and trucking infrastructure; and available capital all must be evaluated.
Proper storage and handling are vital for produce. Operators must know the requirements.
Different commodities demand specific humidity and temperature to preserve quality.
The mechanics of transactions, Amsterdam noted, should be studied to ensure smooth operations.
The type of communications, whether by telephone or email, their frequency and the time of day can influence work flow.
Pricing and payment terms must be worked out in advance. In addition, the paperwork of a wholesale business includes sales confirmation, plus the transaction mechanics of passing, the bills of lading, invoicing and PACA statements.
An aspiring wholesaler must be aware of regulations, including PACA. Amsterdam shared a PACA terms invoice statement.
It says, “The perishable agricultural commodities listed on this invoice are sold subject to the statutory trust authorized by section 5(c) of the Perishable Agricultural Commodities Act, 1930 (7 U.S.C. 499e(c)),
The seller of these commodities retains a trust claim over these commodities, all inventories of food or other products derived from these commodities, and any receivables or proceeds from the sale of these commodities until full payment is received.”
Amsterdam explained that PACA licensees may preserve their trust rights by giving notice to the debtor on the invoice.
A licensee using that method must have the exact wording on the face of the invoice.
Traceability will soon be mandatory, Amsterdam stressed. In case of a recall, identification must be on the pallet.
Bar codes, PLU stickers, pallet labels, lot and date codes all are essential, and vital to traceability as well as standard business practice.
Wholesaling also demands knowledge of compliance and regulatory factors.
Good agriculture practices, FDA’s food safety rules including the produce safety rule and the sanitary transportation rule are now essential for a wholesale operation.
Liability insurance is vital as well. Amsterdam suggested $1 to 5 million, depending on the business.
Currently, people want local produce and smaller growers to produce it.
He urged attending produce shows, which are many, plus keeping abreast of association events. “Every customer is important,” he emphasized.
Amsterdam finalized by saying, “Opportunity is often a distraction in a sexy dress.”
He continued by advising newcomers to “Optimize rather than maximize, balance subjective with objective (be careful of emotional desires), what may appear to be logical may not make practical sense, understand your most precious resource is your time.”