While North America’s east, west, and southern coasts are defined by diversity and emerging ethnic populations, it’s easy to forget that the Midwest was once the American melting pot with Europeans settling in what was, in the early 1800s, the Western frontier.
Many of the farms and businesses still in operation today were established by families from mainly Germany, Poland, Italy, the Netherlands, Scandinavia, Ireland, and Scotland. Sam Maglio Jr. of Maglio & Company in Milwaukee, WI says, “The Midwest is rich in the heritage of family farms established in the 1800s. There’s a resurgence of second and third generation growers following in their ancestors’ footsteps, but using modern farming techniques and expanded food safety practices.”
Greg Corsaro, president of Indianapolis Fruit Company, headquartered in Indianapolis, IN, says he enjoys doing business in the Midwest. “Midwestern people are genuine and real. There is much diversity in the demographics and ethnicity of the area, and an abundance of different products grown.”
The states of Indiana, Iowa, Missouri, Ohio, and Wisconsin are home to slightly over 33 million inhabitants—10 percent of the U.S. population (see chart for current population and other facts). This region of the Midwest is on a path of slow but steady growth with many companies expanding their distribution area to the Northeast, the Chicago and Detroit metro areas, and south to Atlanta.
Central Advantage Top Crops
During the late May through late October growing season, the Midwest is the source of many of the region’s highest volume fruits and vegetables. Key fruits include apples, peaches, berries, and melons. For vegetables, potatoes are a mainstay for several states, and the region is an important producer of tomatoes, cabbage, romaine, onions, and sweet corn. In addition, Wisconsin is the top producer of snap beans in the country.
Both Indiana and Ohio grow a substantial supply of tomatoes, with the Hoosier state also bringing in watermelon, blue-berries, and cucumbers. Ohio cropland is ideal for the aforementioned tomatoes and sweet corn, as well as green peppers, cucumbers, and squash. Although Wiscon-sin is known for its hardy vegetables, it is a powerhouse producer for cranberries, bringing in nearly 60 percent of the entire U.S. cranberry crop for 2012, valued at more than $230 million.
Missouri’s contributions include potatoes, watermelon, apples, peaches, grapes, and pecans, while Iowa, known for its bumper crops of feed corn and soybeans, produces a variety of apples, most of which is sold and consumed within the state, according to the Iowa Department of Agriculture and Land Stewardship.
While North America’s east, west, and southern coasts are defined by diversity and emerging ethnic populations, it’s easy to forget that the Midwest was once the American melting pot with Europeans settling in what was, in the early 1800s, the Western frontier.
Many of the farms and businesses still in operation today were established by families from mainly Germany, Poland, Italy, the Netherlands, Scandinavia, Ireland, and Scotland. Sam Maglio Jr. of Maglio & Company in Milwaukee, WI says, “The Midwest is rich in the heritage of family farms established in the 1800s. There’s a resurgence of second and third generation growers following in their ancestors’ footsteps, but using modern farming techniques and expanded food safety practices.”
Greg Corsaro, president of Indianapolis Fruit Company, headquartered in Indianapolis, IN, says he enjoys doing business in the Midwest. “Midwestern people are genuine and real. There is much diversity in the demographics and ethnicity of the area, and an abundance of different products grown.”
The states of Indiana, Iowa, Missouri, Ohio, and Wisconsin are home to slightly over 33 million inhabitants—10 percent of the U.S. population (see chart for current population and other facts). This region of the Midwest is on a path of slow but steady growth with many companies expanding their distribution area to the Northeast, the Chicago and Detroit metro areas, and south to Atlanta.
Central Advantage Top Crops
During the late May through late October growing season, the Midwest is the source of many of the region’s highest volume fruits and vegetables. Key fruits include apples, peaches, berries, and melons. For vegetables, potatoes are a mainstay for several states, and the region is an important producer of tomatoes, cabbage, romaine, onions, and sweet corn. In addition, Wisconsin is the top producer of snap beans in the country.
Both Indiana and Ohio grow a substantial supply of tomatoes, with the Hoosier state also bringing in watermelon, blue-berries, and cucumbers. Ohio cropland is ideal for the aforementioned tomatoes and sweet corn, as well as green peppers, cucumbers, and squash. Although Wiscon-sin is known for its hardy vegetables, it is a powerhouse producer for cranberries, bringing in nearly 60 percent of the entire U.S. cranberry crop for 2012, valued at more than $230 million.
Missouri’s contributions include potatoes, watermelon, apples, peaches, grapes, and pecans, while Iowa, known for its bumper crops of feed corn and soybeans, produces a variety of apples, most of which is sold and consumed within the state, according to the Iowa Department of Agriculture and Land Stewardship.
RETAIL LANDSCAPE
Consolidation continues to be a theme in the Midwest, with the growth of Walmart and Target supercenters accelerating the trend in the retail food industry. With superstores focusing on overall store sales and using fresh produce and other grocery items to build traffic, the chains are willing to accept slimmer margins on these items. Smaller chains and independents do not have this luxury, and consequently, many were forced to leave the business or be taken over by others.
Even venerable supermarket chains like Kroger and Safeway have felt the intensity of the competition. Robert Kirch, president and CEO of Caito Foods Service, Inc., says, “We’ve seen Kroger, Aldi, and others change their go-to-market strategy by aggressively advertising and merchandising fresh organic and conventional produce.
“They’ve lowered gross margin expectations to focus on selling units and driving gross dollars,” Kirch continues. “We’ve also seen alternative formats like Trader Joe’s, Whole Foods, The Fresh Market, Lucky’s Markets, Earth Fare, and Fresh Thyme Farmers Market emerge, focusing on local and organic fresh produce. The battleground has put tremendous pressure on costs and margins up and down the supply chain.”
The reshuffling of wholesalers and retailers, however, has paved the way for some surprising under-the-radar regional players. Buddy Pupillo of Independent Fruit & Produce Company in St. Louis, MO observes, “Today there are fewer wholesalers, and smaller farmers are going directly to receivers. There are a lot of Amish growers who sell direct. At auction, their produce goes cheaply because they don’t have coolers for storage.”
Despite the challenges of consolidation, some companies are well-positioned for growth. Justin Howell, general manager of Front Row Produce, LLC in Overland, MO says, “The supply chain continues to get shorter, so it’s important that we continue to add value.” Further, he notes, “We still see a lot of opportunity around us. We relocated to a new facility earlier this year which doubled our size and put us in good position for future growth.”
Location, Location, Location Being located in the center of the United States, and North America as a whole, is a clear advantage. Peter Piazza, president of Piazza Produce Inc. says his customers certainly enjoy selling ‘local’ product, and he is able to save costs on freight.
Corsaro adds, “Being located in the ‘Crossroads of America’ provides definite logistical advantages. Besides what is grown here in the region, about 35 percent of the produce we handle is imported from places such as Mexico, Canada, South America, Israel, and Morocco. Our central location means a large variety of fresh fruits and vegetables is readily available to our customers all year round.”
Jimmy DeMatteis, president of Des Moines Truck Brokers Inc. in Iowa speaks to the challenges of operating in the Midwest. “We enjoy or at least endure four seasons here in the Midwest, which means extreme weather conditions can affect deliveries. There is frequent congestion on Interstates 80 and 70 east of Kansas City and Omaha, even under the best of circumstances. But for the most part, we like being located here in the Heartland. Iowa is an agricultural leader and our carrier partners are the best in the business.”
Like Piazza, Robert Kirch, president and CEO of Indianapolis-based Caito Foods Service Inc. enjoys the company’s central location and reach not only for reduced freight costs, but for environmental costs as well. “The biggest benefit of sourcing regionally,” he notes, “is the ability to reduce our carbon footprint. It also has a financial impact since we can backhaul most of the product we source from the Midwest.”
Kerry Byrne, executive vice president of Total Quality Logistics, a non-asset based freight brokerage headquartered in Cincinnati, puts it this way: “We’re a day’s drive from more than half of the U.S. population. Thousands of customers and carriers with whom we do business are also located in the Midwest.” Even with terminal markets in St. Louis, Columbus, and Cleveland, companies can go to Chicago and Detroit in just a few hours as needed, or even south.
Western Missouri Fruit Sales, located in Waverley, MO, sends a substantial amount of fruit down south, still within easy reach of the company. “We specialize in apples and pears,” says Matt Blomberg in sales, “a lot of our product is shipped to Texas and Louisiana.”
Trends Spur Regional Growth
While most Midwest states have experienced modest population growth since 2010, the economy is affected by the expanding gas and oil industry in nearby North and South Dakota. Maglio says, “Much of the ‘Rust Belt’ has been stagnant in terms of population growth. However, the petroleum boom in the North Dakota area has brought many new inhabitants looking for jobs.”
Jobseekers mean more food buyers, including fruits and vegetables, though at varying levels according to Maglio, who believes many older workers, Baby Boomers, have more “basic tastes—meat and potatoes” while the younger generations, Generation X and millennials, are “heading towards a fresher food path.”
Further, Maglio explains, “The variety of fresh herbs and unusual flavors are driving the cooking boom.” One such example is lemons: “Meyer lemons are now common in most produce departments,’ he says, “they were virtually unheard of five years ago. And ginger has jumped out of the background as an ingredient for juicing operators.”
Loco for Locally Grown
The interest in sourcing local produce remains a growth factor in the Midwest. According to a Wisconsin Public Radio story, in rural Vernon County, WI, farmers sold almost $2.7 million worth of products directly to consumers—nearly twice as much as in 2007.
And while shoppers flock to you-pick operations and roadside stands, retailers carry much more local produce than in years past. Caito Foods Service’s Kirch says, “The Midwest is a great region to source organic and conventional fruits and vegetables from late May to early November.”
And with state branding programs leading the way, suppliers are finding a satisfying jump in interest and sales—a win-win for everyone involved, as local product costs less to ship and supports local farmers.
Several Midwestern states are gaining attention through some sort of sponsored branding program, such as the Buckeye State’s program, “Ohio Proud,” the Hoosier state’s “Indiana Grown,” and the Badger State’s “Buy Local, Buy Wisconsin.”
Greenhouse-grown produce is also expected to rise in the region, as it provides the consistency, availability, and quality that buyers demand. This aligns with further investment in sustainable measures as well as technology to meet regulations and the need for environmental awareness.
Increasing Organics While the number of growers selling directly to consumers has actually decreased by about 6 percent in the last seven years, the dollar value has risen sharply, mostly attributed to a higher concentration of organic farms in the Midwestern region.
“We find sales of organics lagging behind the coasts,” comments Maglio. “With the trend towards local, root vegetables have seen a resurgence since winters here in the Midwest are long and cold. The summer crops like squash and tomatoes are all around in season, with unique varieties being touted as ‘just like grandma had.’ We’re expanding the lineup as the demand grows ever so slowly. We’ve been certified as an organic handler and are moving a fair amount of product.”
Piazza acknowledges the slow but steady growth in organics. “We pull from our sister company, Indianapolis Fruit,” he notes, but adds, “demand for organics is primarily in retail.”
On the retail end, Kirch says, “Organics have increased significantly over the last decade. We went from handling 20 SKUs in organics to 500 SKUs.”
Higher pricing than conventional produce, however, remains a deterrent for both grocers and consumers. Rick Fryman, chief operating officer of T C Marketing, explains the company’s cautious approach to carrying organic produce: “The big chains like Kroger and Meijer may have an organic section, but the mom-and-pop stores just aren’t going to carry organics. It’s a matter of price.”
Salvatore Zingale, president of The Sanson Company in Cleveland, OH says, “We’re a full line distributor and are certified to handle all organics. While organics are high maintenance and you have to buy correctly to manage inventory, it’s an important product line for Sanson and our customers.”
Western Missouri Fruit’s Blomberg also echoes reservations when it comes to handling organic produce. “Organics are not a big factor for us. People want to see how the apples and pears look and they’re very sensitive about price. Very few buyers call us about organics—it’s not a huge trend for us.”
Pupillo, at Independent Fruit & Produce, relates, “We’re finding that organics are just starting to move after the recent poor economy shrunk demand for them. Trader Joe’s and Whole Foods do a big business in organic produce, but the higher prices put organics out of reach for most people. In certain high-end areas there is more demand, but in general, organics are staying steady.”
Justin Howell adds, “We don’t handle many organic items at this time, but we do plan to increase the volume as demand for them in our area increases.”
Kirch puts it this way: “We don’t have a crystal ball, but I think we’ll see more organic and local products grown in the Midwest.”
All Hail Kale
Beside the steady demand for locally grown, Walker has seen more interest in both fresh-cut products and leafy greens. “Kale has been big in the last couple of years—anytime a university study or celebrity mentions the health properties of an item, it becomes a trend.”
Although several Midwestern states grow kale and other greens, as well as increasing amounts of herbs, demand continues to outstrip availability. Fortunately, the nation’s top grower of kale, California, is just a day or two away.
California kale production has continued to climb, from under 1,500 acres in 1995 to nearly 3,250 acres in 2012. The value of kale—as more consumers discovers its healthful properties and restaurants add the leafy green vegetable to their menus—has risen even more, from $11.6 million in 1995 to $50.3 million in 2012 according to the U.S. Department of Agriculture (USDA) Economic Research Service.
Specialty & Ethnic Commodities
Kirch has also seen a number of specialty produce items from outside the Midwest growing in popularity.
“Over the last decade, the Midwest consumer/customer has become more educated about nutrition, flavor profiles, and taste, etc. Consumers are craving high flavor, wholesome items. Avocado growth has exploded. We manage over 18 different SKUs and have seen double-digit growth over the last five years,” he says.
Among the other top trending items are specialty melons like “Sugar Kiss, Honey Kiss, and Golden Kiss,” Kirch says, that people are beginning to request by name each season. In addition, he finds many of the new more unusually-flavored grape varieties such as Cotton Candy, Celebration, and Witch Fingers, are also gaining favor with consumers, especially kids. He also notes demand for an old stalwart, the tomato, is still hot for heirlooms, grape tomatoes, and Campari varieties.
Tropical fruits, such as mangos, especially “golden Ataulfo mangos from Mexico,” Kirch says, are experiencing high demand.
Indianapolis Fruit’s Corsaro concurs, seeing growth opportunities for a number of specialty and ethnic produce items. “The Asian category items like bok choy, Napa and Chinese cabbages, baby vegetables and fruits such as Asian pears and dragon fruit are no longer strangers here in the Midwest.
“In the Hispanic pepper category,” Corsaro continues, “we’re seeing more demand for jalapeño, Serrano, poblano and Hatch chiles. There are new varieties of apples like the Diva, Emergo, Kanzi, and Kiku in addition to the Honeycrisp, which continues to grow in popularity each year.”
Maglio too has seen added interest in specialty items, like jicama, along with an old-fashioned vegetable, rutabagas. “Root vegetables like rutabagas and jicama are also trending into mainstream uses.” (For more information on dragon fruit, jicama, and other specialty fruits and vegetables, see “Mainstream Appeal,” an article in No Boundaries: The Hispanic Market’s Unprecedented Growth, one of this edition’s supplements.)
FRESH FORUM Do you source greenhouse-grown product?
Robert Kirch, Caito Foods Service Inc.
We see regional greenhouses emerging as a viable option for supply. We source greenhouse product out of Canada, Mexico, and domestically. The demand has increased significantly over the past ten years and will continue as these growers develop varieties with different flavor profiles.
Justin Howell, Front Row Produce, LLC
We source our tomatoes, peppers, and cucumbers from greenhouse farms in Mexico and Canada. Our customers demand these products and we typically see better quality.
Buddy Pupillo, Independent Fruit & Produce Company
We deal in mostly conventional tomatoes, not too much with heirlooms. Demand has grown because more buyers want consistent product. Also, because the environment is controlled, rain doesn’t wipe out the crop so we don’t get swings in availability.
Greg Corsaro, Indianapolis Fruit Company
Yes; demand for greenhouse-grown items continues to increase.
Sam Maglio Jr., Maglio & Company The demand for greenhouse products is increasing. We currently see a strong supply of Canadian greenhouse products coming into the Midwest as well as Mexican protected agriculture products.
We’re working in conjunction with Growing Power, an urban farming organization, to put greenhouses on our distribution facility land. Local retailers and foodservice entities have committed to buy the crops out of these structures.
Peter Piazza,
Piazza Produce, Inc.
We handle hothouse red peppers, tomatoes, and cucumbers. In the last five years these items have really gained momentum.
The Challenges Labor, government regulations, and weather are universal concerns in the Midwest and pretty much anywhere agriculture is a major industry. “One of the biggest concerns is available workers to harvest labor-intensive crops like apples,” Maglio says. “Immigration still perplexes legislators, and the effect is uncertainty within the growing community. A former tomato grower in Ohio has not planted in two years due to labor shortages.”
A Missouri shipper reported that in the case of some apple growers he deals with, conditions can be perfect for the crop, but if they can’t get enough people to harvest, they can’t pick and “have nothing.”
Even in California and Washington, which can offer workers longer harvesting seasons, it can be tough to have enough workers. For Midwestern growers, it is even more difficult to find seasonal workers who move from state to state.
While growers are fighting for labor, suppliers can be waging battles of their own. Sanson Company’s Zingale observes that the ‘sphere of competition’ is widening for the region’s receivers. “We’re competing with out-of-state distribution centers.”
Shipping Woes
A labor shortage of a different type affects shipping and logistics, where the lack of qualified drivers continues to affect rates. Total Quality Logistics’ Byrne says driver shortages are certainly a challenge for his business: “The shortage is real and impacts the entire industry. That, along with other government regulations, has certainly impacted capacity and rates.”
Another impact on shipping costs is driving age. “Raising the age of (truck) drivers to 21 has drastically reduced the pool of your drivers,” DeMatteis explains, adding, “Many potential drivers in the 18 to 21 age range opt for other careers instead.”
Clancy Sullivan, president of PAT Brokerage Company, Inc. in Des Moines, IA laments many of the changes and tighter restrictions ushered in by the Federal Motor Carrier Safety Administra-tion’s CSA (Compliance, Safety, Account-ability) program, rolling out over the last several years.
This includes the controversial hours of service rule change that went into effect in July 2013. “New trucking regulations,” says Sullivan, “cut into truckers’ productivity. It’s harder to get loads to their destinations in a timely manner.”
Whims of Mother Nature
Unpredictable weather also created both short- and long-term repercussions. The late freeze in Missouri destroyed 20 percent of the state’s peach crop, just as Ohio’s planting this year was pushed back by late cold and snow past mid-April.
Luckily, the delay had little impact on vegetables. It was quite a different story for some in the fruit trade, however, as wine grape growers suffered major losses due to a warm up in December followed by sharply freezing temperatures. Some growers lost more than 90 percent of their least-hardy grape varieties, with an Ohio State University viticulturist calling it “the worst grape damage on record in Ohio.”
Some growers are trying to outsmart Mother Nature through the Central Wisconsin Windshed Partnership (CWWP), a cooperative of farmers, state agencies, and university personnel from the University of Wisconsin. Like its name suggests, the organization’s services revolve around wind control and mitigating its sometimes harsh effects on land and crops.
The CWWP’s primary defense is planting tree ‘windbreaks,’ which act as natural barriers to protect crops and prevent erosion from soil and dust in the summer and fall, and blowing snow in the winter and early spring. A number of Wisconsin vegetable growers have joined the group to protect their fresh market and processing crops.
Sustainability & Food Safety
While there is increased demand for sustainability, such measures involve added expenses that can’t necessarily be passed along to the consumer in the short-term. Because commodity prices tend to fluctuate, upcharging the immediate cost of sustainability is not always practical. And though beneficial to the public, food safety initiatives continue to add pressure to growers, shippers, and suppliers due to the costs associated with compliance.
From farms to retailers, businesses have to observe expanding regulations for worker safety, pesticide spray programs, cleanliness, and tracking systems. Customers are not always aware of the extra costs growers are absorbing due to food safety and traceability, which includes additional staff, equipment, and software. Blomberg says, “The bottom line is that most of these expenses trickle down to the grower and can’t be passed along.”
Adding to the challenges of growing fruits and vegetables in the Midwest is that U.S. farm expenditures continue to rise nationwide, with a 2 percent increase overall for 2013 over 2012 according to the USDA National Statistics Service (NASS). Unfortunately for the Midwest, which already accounts for the nation’s highest proportion of production costs, the region also saw the sharpest climb in annual production expenses, up $3.7 billion from 2012.
For 2013, total farm expenditures for the Midwest were $118.5 billion, putting added pressure on growers and the rest of the fresh produce supply chain. Luckily, there is a sliver of silver lining as farm land values also increased over the last few years, with NASS reporting an 8.1 percent rise in real estate values in 2013 over 2012, with a national average of $2,950 per acre.
Preview of the Future
As grower-shippers and suppliers grapple with perennial challenges, many are changing the way they do business—taking advantage of new technologies that enhance production and food safety, cut costs and increase profits, and help the planet with less environmental impact.
Among these measures and initiatives are packing shed improvements to maintain temperatures and the cool chain, new scanning and sorting machinery to speed up the sizing and packing process, and redesigned packaging that better protect fruit and vegetables and extend shelf life.
Looking to the way produce will be transported in the future, DeMatteis believes intermodal use will continue to climb. “We’ve been shipping intermodal since 1993 and though it’s not a big part of our business right now, it’s a growing segment of the transportation business.” Further, he thinks “those who invest in infrastructure will be rewarded.”
After the struggles of both Cleveland and Northeast Ohio during the recession, Zingale sees a bright future for the Cleveland metropolitan area and its fruit and vegetable suppliers tied to several sports-related acquisitions. “A resurgence is underway for our city. Lebron James’ return to the Cleveland Cavaliers and the Browns’ signing of Heisman trophy winner Johnny Manziel will certainly fuel economic growth for the region. We will also be hosting the Republican National Convention in 2016—yet another economic boost for Cleveland.”
With the economy seemingly in recovery, suppliers throughout the Midwest are preparing for a better future as demand for fresh produce—especially locally grown, organic, greenhouse, and specialty items—continues to climb. Though the growers, receivers, and retailers of Indiana, Iowa, Missouri, Ohio, and Wisconsin continue to deal with the requisite struggles of shipping and selling, most are confident the pros will continue to outweigh the cons in the heartland’s perishables business.
