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Hustle and Bustle in the Bronx

The Hunts Point Terminal Market and Beyond
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For a $25 fee, certified growers have access to the program, and the state is able to track and distribute information about their product availability, specific commodities, pricing, UPC codes, delivery and distribution options, and ability to take New York State vouchers. This information is then made available to participants in the program via the database.

“The Pride of New York program has been heavily advertised, and it’s definitely caught on,” confirms Pelosi, but for him, there are also enormous practical benefits to buying local. “As part of the program, we’ve been buying more from producers in upstate New York. But our reach has also spread to Connecticut, New Jersey, Ohio, and Canada, particularly Quebec.

“It’s much more attractive to have that option in a year when prices have been flat; it doesn’t make sense to truck goods from California when we can expend far fewer carbon miles to bring the same produce in from much closer,” Pelosi adds. “And we can’t forget that when sourcing goods from Canada, the exchange rate is much more favorable. As long as the cycle of good weather continues to hold for our suppliers in New York, it’s a promise that we’ll keep bringing their goods to the market; it’s good for the state and it makes good business sense as well.”

“The move towards sourcing more locally grown produce is definitely the other major trend we’re seeing, especially this summer,” comments Target Interstate’s Kazan, pointing out the buy-local programs like ‘Pride of New York’ and the tendency of trendy New York eateries to tout locally sourced produce and highlight New York-bred meats.

Local availability, “as well as a move to source more produce from Canada, means quality is good and keeps getting better. The freight savings is significant, and the turnaround times allow us to buy on shorter timetables, since deliveries can be made in a day. The growth of farmers’ markets also play right into this ‘buy local’ mindset.”

Giving Back to the Community
In addition to promoting the Pride of New York program, Hunts Point continues to do its part to address the evolving food wastage issue. Just before close each day, merchants donate fading fruit and vegetables—still in an edible state—to a number of community organizations serving the economically disadvantaged, including the Food Bank of New York and City Harvest.

The Food Bank maintains a 90,000-square-foot refrigerator/freezer facility on the Hunts Point premises, and uses these donations to serve 1.5 million people over 18 million pounds of produce a year.

Drawbacks & Hindrances
Challenges continue to abound at one of America’s oldest and most important produce markets. Storage space is at a premium, with fresh fruits and vegetables often kept on trailers to avoid overcrowding. Fuel and labor costs are even more of an issue here than they are elsewhere thanks to a strong union, complex regulations, and the terminal’s multiple transportation throughways.

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Bringing a world of produce to North America via its longstanding Bronx location, the Hunts Point produce market tries to keep the service and traditions of the past while moving its infrastructure towards the future.

Hunts Point & Other Markets
Wholesale and Retail Shifts
Despite its venerable history, extensive service area, and loyal customer base, the Hunts Point Terminal Market (Hunts Point) isn’t the only game in town.

In the New York City area alone, it shares space with the Brooklyn Terminal Market, and throughout the state there’s also the Capital District Regional Market in Menands outside of Albany, the Niagara Frontier Food Terminal in Buffalo, the Central New York Regional Market in Syracuse, and two facilities in Rochester.

On the retail end, there’s been a great deal of diversification as well, both within New York City and surrounding the terminal market, as well as across the country. Competition continues to climb with national grocery chains and independent locals, disruptors and deep discounters, the rise of more farmers’ markets, the perseverance of neighborhood bodegas and boutique stores, and the sudden proliferation of organic and natural foods specialists, like Whole Foods’ groundbreaking new facility in Gowanus.

This is good news for some, like Peter Pelosi, a buyer and transportation manager for A&J Produce Corp. “I hope Whole Foods is able to make a bigger push into the New York market,” he observes. “They buy a lot of product, and we’ve seen a large impact, albeit indirectly, from them moving into the area.”

Not only does Whole Foods considerably up the volume for fresh produce, but Pelosi says, “it’s a good place to test out new package items like pluots, peaches, and nectarines. The biggest factor for the consumer is still price, and if the price is marketable and attractive, they’ll buy it.”

In addition to Whole Foods, there are over 5,000 grocery establishments in New York—an increase of 5 percent since 2000 (which may not sound significant but is) and over 8 percent in the Hunts Point home borough of the Bronx, where the C-Town Supermarkets and Krasdale Foods, Inc. chains are headquartered. These grocers employ nearly 47,000 workers, an increase of 11 percent, and mergers and acquisitions have risen substantially in the last decade (for more information on M&A in the retail sector, see the front feature article in this edition of Blueprints).

Reduced Space and A Tighter Customer Base
One of the critical issues in retail—known only too well by merchants at Hunts Point—is the lack of space. In New York proper this problem has been exacerbated by a number of older retailers closing locations that are set to become apartments as the Big Apple faces a housing crunch.

Less space for more money is good for the traditional New York bodega, but it hurts standard retailers; Fairway has recently closed and A&P declared bankruptcy, while established presences like Key, Pathmark, and Associated are losing ground to premium grocers like Whole Foods and Trader Joe’s, who are trying their luck in a market traditionally dominated by the corner store.

Steve Koster, sales manager at E. Armata Inc.—one of over 150 sellers on the Hunts Point market—doesn’t see these shifts as a threat. “E. Armata is a fourth-generation family business that has always looked to the future,” he observes. “We’re constantly changing and adapting to market shifts while maintaining old world, traditional family values and long-term relationships.”

Another important trend, borne partially of the increased purchasing power that has come with grocery consolidation, is a decrease in the number of retailers who are willing to use a third-party distributor.

A Profile in Produce: The Hunts Point Produce Terminal Market
Location:
The Bronx, just north of the Fulton Street Fish Market

Toll Plaza Entrance: 772 Edgewater Road; Bronx, NY 10474

Physical Address: 355 Food Center Drive; Bronx, NY 10474

Mailing Address: 101 Food Center Drive, Room #2A; Bronx, NY 10474

Telephone: (718) 589-4095

Email & Website: info@huntspointproducemkt.com
http://www.huntspointproducemkt.com

Hours:
10:00 pm to 3:00 pm, Monday through Friday
9:00 am to 3:00 pm Sunday
Closed Saturdays

Area: 113 acres total 60 acres of refrigerated space

Executive Director: Myra Gordon

“When we first came on the market, it was the norm for everyone to go through a distributor,” explains Charlie DiMaggio, a managing member of Fres Co LLC, “Now, fewer and fewer people are willing to do this.” But DiMaggio takes it in stride as another in a long line of business hurdles. “It’s just a simple function of the economy, with less money to go around generally,” though he does acknowledge the market’s contraction over the last several years. “It’s a whole new world for both retailers and suppliers to deal with, because there’s just not enough for everyone to get a slice of the pie.”

Paul Kazan, president and chief executive officer of Target Interstate Systems, Inc., agrees when asked about consolidation, and expects it to continue into the coming years. He believes there will be no end to the gradual absorption of merchants into fewer and fewer firms.

Changing demographics are also a factor, according to Koster: “Millennials are a dynamic force behind the current healthier eating trend, which is driving a desire for more healthful options at every level of retail,” he says. “This coincides closely with our philosophy of the importance of food safety through unbroken cold chain compliance and quick turnaround, with minimal handling of fresh produce.”

Farmers’ Markets and Small Vendors Competition
Farmers’ markets have also ballooned throughout the Empire State, which has the second-most in the nation, behind only California. In the last 15 years, the number has grown from 235 to over 700, many of which are located in the New York metropolitan area.

Many of those doing business at Hunts Point have an interesting view of their rivals. “We don’t see local farmers’ markets as our competition,” comments Koster, “and using our past as a guide, we deal with ongoing shifts in business like this as they occur. We serve mom-and-pop stores, large retail chains, and restaurants alike. Specialty value-added foodservice is increasing in the New York metro area, and our specialties and staples coexist due to the different ethnicities and social backgrounds in the region.”

DiMaggio feels the same: “We don’t consider the farmers’ markets to be a threat,” he says, echoing a common view that economies of scale that make it a whole different ball game for wholesalers. Since Hunts Point is governed under the aegis of the Port Authority of New York and New Jersey, the largest port on the East Coast, this gives the market and its players a substantial advantage over all possible rivals.

Access, Promotion and Reach
Some companies, such as A&J Produce, even think of terminal markets as pioneers, helping build awareness and consumption of lesser known commodities that eventually break into the mainstream.

While the majority of A&J Produce’s melon business has come from old stalwarts such as cantaloupe, watermelon, and honeydew, the wholesaler has seen rising sales for the ‘hami’ melon, or snow melon, which Pelosi attributes to habits developed at farmers’ markets and small Asian groceries. “It’s been a success for us,” he shares. “It doesn’t outsell our standard commodities, but it’s been a nice complement to our business because of the growing demand for Asian produce.”

Hunts Point also has decades of built-in infrastructure to benefit its members, such as giving them multiple options for shipping and receiving fresh fruits and vegetables from both local and international suppliers, via many different methods of transportation.

To Koster, this means merchants at Hunts Point can offer far more than small vendors at farmers’ market scattered through the boroughs and state. “The market allows us to better serve our customers, growers, and shippers with a full line of produce,” he says. “This coincides with our philosophy of the importance of food safety, unbroken cold chain compliance, and quick turnaround with minimal handling of fresh produce.”

Local Pride
The Hunts Point market has also been a key member of the “Pride of New York” program since its inception by the state’s department of agriculture. Initiated to encourage consumers and retailers to take advantage of locally-grown fruits and vegetables and other foods and drinks native to New York state, the program’s stated goal is to increase the use of local products by a total of 10 percent.

To reach this goal, the program offers marketing and branding assistance, plentiful information, and the use of a database of over 3,000 businesses that handle GAP-certified produce. It also provides local growers and producers with an opportunity to show off their wares at international trade shows held in the city, and works with local retailers and other markets to display special logos indicating locally grown produce.

For a $25 fee, certified growers have access to the program, and the state is able to track and distribute information about their product availability, specific commodities, pricing, UPC codes, delivery and distribution options, and ability to take New York State vouchers. This information is then made available to participants in the program via the database.

“The Pride of New York program has been heavily advertised, and it’s definitely caught on,” confirms Pelosi, but for him, there are also enormous practical benefits to buying local. “As part of the program, we’ve been buying more from producers in upstate New York. But our reach has also spread to Connecticut, New Jersey, Ohio, and Canada, particularly Quebec.

“It’s much more attractive to have that option in a year when prices have been flat; it doesn’t make sense to truck goods from California when we can expend far fewer carbon miles to bring the same produce in from much closer,” Pelosi adds. “And we can’t forget that when sourcing goods from Canada, the exchange rate is much more favorable. As long as the cycle of good weather continues to hold for our suppliers in New York, it’s a promise that we’ll keep bringing their goods to the market; it’s good for the state and it makes good business sense as well.”

“The move towards sourcing more locally grown produce is definitely the other major trend we’re seeing, especially this summer,” comments Target Interstate’s Kazan, pointing out the buy-local programs like ‘Pride of New York’ and the tendency of trendy New York eateries to tout locally sourced produce and highlight New York-bred meats.

Local availability, “as well as a move to source more produce from Canada, means quality is good and keeps getting better. The freight savings is significant, and the turnaround times allow us to buy on shorter timetables, since deliveries can be made in a day. The growth of farmers’ markets also play right into this ‘buy local’ mindset.”

Giving Back to the Community
In addition to promoting the Pride of New York program, Hunts Point continues to do its part to address the evolving food wastage issue. Just before close each day, merchants donate fading fruit and vegetables—still in an edible state—to a number of community organizations serving the economically disadvantaged, including the Food Bank of New York and City Harvest.

The Food Bank maintains a 90,000-square-foot refrigerator/freezer facility on the Hunts Point premises, and uses these donations to serve 1.5 million people over 18 million pounds of produce a year.

Drawbacks & Hindrances
Challenges continue to abound at one of America’s oldest and most important produce markets. Storage space is at a premium, with fresh fruits and vegetables often kept on trailers to avoid overcrowding. Fuel and labor costs are even more of an issue here than they are elsewhere thanks to a strong union, complex regulations, and the terminal’s multiple transportation throughways.

Then there are all the changes in technology and the infrastructure needs that have had an impact on the overall efficiency of the market. But executive administrative director Myra Gordon has been relentless in pursuing alternatives and options, securing a $22 million grant to upgrade the terminal’s rail tracks and trying to find ways to maximize usable space to avoid a move south to New Jersey.

Kazan has been on the market for four decades, and has a few thoughts on the recent changes and needs of Hunts Point’s merchants. He notes that the acquisition of the Morris Okun units by S. Katzman Produce—a large and significant acquisition that continued a trend towards consolidation at the market into a handful of large firms—was the most meaningful development of the year.

FRESH FORUM
We asked a few Hunts Point Produce Terminal Market merchants if 2016 has lived up to their expectations.

Peter Pelosi
A&J Produce
Business has been a bit flat for us this year, but we’re hopeful. All the standard indicators have been level, and we hope that if next year continues to have good weather and stable fuel prices—and the election is settled, whoever wins—that business will come back and we’ll be in good shape.

Steve Koster
E. Armata, Inc.
We continue to have a strong market-based business and are developing our distribution and sales to serve customers inside and outside of the Hunts Point market. We have developed a full line of items to appeal to all of our customers.

Charlie DiMaggio
Fres Co LLC
This year has been another good year for us: we expanded our business beyond our expected 25 percent rate, and for a company that’s relatively new to the market, we consider that a success. We’re hoping to match it next year and focus on expanding our trucking business.

Stefanie Katzman
S. Katzman Produce, Inc.
Between years of experience and teamwork, we managed to get the job done! The Hunts Point market feeds millions every day; we had our trials and tribulations in 2016 just like anyone else, but the amount of fruit and produce that goes through here feeds America, and it’s like no other market in the world.

Paul Kazan
Target Interstate Systems Inc.
This year has posed challenges for growth due primarily to weather, fuel prices, and the economy. El Niño had a real impact; with volume and rates down, our top and bottom lines did not meet our projections.

Thanks to growth in our offices and personnel, we were able to mitigate these effects, but what should have been a great year is turning out to be only marginally higher than 2015. The bright side to the business is that we had a banner year in our general freight business, which we expect to pick up even more.

A Lack of Maneuverability
To put things in perspective, Kazan explains that in 1967 when Hunts Point opened at its current location, there were over 100 merchants doing business on the market; by 2015, it was down nearly 60 percent with only 10 firms doing the majority of the business. “The challenges the market faces are not new,” he asserts, “just operating inside this space is a challenge for the merchants and truckers alike.”

He also laments the lack of space for trucks: “The market was designed back in the mid-1960s when the largest trailers where 40 feet long. We now predominantly deal with 53-footers, so maneuvering the trucks around is sometimes problematic. There really isn’t adequate space for the trucks to be staged waiting to get unloaded, and the services available to the truckers inside are negligible.”

Kazan doesn’t blame the management of the market, however, saying the team does a commendable job under the circumstances with a limited ability to improve on these issues, given Hunts Point’s current footprint. Vendors and management alike were hoping for action from city officials sooner rather than later, but delays have meant improvements in rail beds and siding are all that have come to pass in the last year.

Physical Ailings
If there is a common factor facing everyone at Hunts Point, it is the trial of doing business in a facility whose usage numbers have exploded while its physical stature and infrastructure haven’t kept up.

Many members have scrambled to keep pace; E. Armata acquired and completely renovated a new space for its potato and onion departments last year, and this year acquired a second unit to house its growing Eastern vegetable department.

Stefanie Katzman, marketing director for S. Katzman Produce, Inc., points to the company’s purchase of the Morris Okun units as one of its major moves: “We’ve expanded our business and needed more space, so we bought other units on the market.”

Katzman concedes Hunts Point “is on the older side, and a little outdated” but found a way around these obstacles. “We have gutted and redone our warehouses to better handle product and better service our customers,” she says.

The unspoken threat—or opportunity, depending on who you ask—is the often discussed possibility of moving to New Jersey, which would offer major expansion in terms of physical space while still keeping the terminal market under the watch of the Port Authority.

The move would, of course, present major logistical headaches and moving expenses for every vendor—and the possible loss of customers. To forestall this scenario, the terminal’s Cooperative Association announced a feasibility study to look at the costs, procedures, and requirements for an upgrade to the existing facilities in the Bronx. The issue and future of the Hunts Point market, as reported here for several years, is far from settled.

Waiting For Inevitable Change
In addition to the move or upgrade saga, for A&J Produce’s Pelosi, it’s something else altogether. He echoes another familiar, timely theme when talking to vendors on the market: a sense of neither setbacks nor advances, but of treading water and waiting for the next big decision to be made.

Facing a slow year for growth and the possibility of a major reassessment of Hunts Point based on which way the political winds are blowing, he says, echoes the uncertainty that has permeated most aspects of doing business in 2016.

“The overall state of the economy is not as strong as it’s perceived by many. It’s a buyer’s market, with no real inflation to account for an increase in prices over the previous year, and other factors such as no increase in real wages and flat demand in product from consumers—much of this has to do with the fact that it’s an election year,” Pelosi remarks.

“It’s almost always the case during a presidential election that the economy slows down,” Pelosi continues. “Investing slows up as everyone’s waiting to see the results of the election, and which way things turn as a consequence.”

Business costs have been relatively stable. “Fuel costs are under control, labor has been a consistent cost as our workers are all under a contract that won’t expire for a few years, and the weather has mostly cooperated this whole year,” Pelosi says. But, “there’s a sense that everything has slowed down—we’re waiting to see what will happen.”

Choices & Challenges
Keeping Perishables Moving
A potential move and the presidential election aren’t the only significant challenges facing Hunts Point and its merchants.

The terminal market has myriad issues to address, many of which are familiar to people in the produce industry all over America, and some unique to the New York area.

“Food safety is a critical issue, and is of increasing importance to us,” says Fres Co’s DiMaggio. This, of course, makes the lack of physical space in the facility of even greater prominence, as the tight berths bite into critical turnaround time and increase the risk of spoilage.

Katzman likewise cites logistics and the associated issues of spoilage and food safety, which she says is the company’s biggest trial other than the region’s sometimes wild weather. “Getting the product where it needs to be, when it needs to be there, is a challenge on both inbound and outbound deliveries,” she explains. “It’s not a crazy concept, but the execution can be difficult. And weather controls the supply; this business is a perfect example for page one in an economics textbook: we are the true definition of the supply and demand model.”

Yes, weather does indeed play a role, both within New York state and all along the Eastern Seaboard. Kazan refers to the impact of El Niño on California, Mexico, Texas, and Florida as a major challenge and drag on business growth early in the year. Weather patterns negatively impacted both the availability and quality of commodities, and imposed lower volume and rates for carriers. “The only silver lining has been the lower cost of fuel,” he says, “which has been passed down to our customers as historically low prices.”

Pricing, however, has not been equal across the board. “Fuel costs have dropped, but we haven’t seen an accompanying drop in our overall transportation costs,” points out DiMaggio.

Labor and Shipping
Both labor and transportation problems, endemic to the produce industry, are often particularly acute in New York due to the huge population, the need to deliver to an expansive geographical area, and numerous regulations and union rules.

“The labor shortage in the trucking industry has been a challenge for some time now,” comments Kazan, adding that electronic log book requirements and hours-of-service regulation exacerbate the issue. “You virtually need one-and-a-half more drivers to accomplish what one driver had been able to do.”

Katzman agrees. “With all the new regulations in place, some of the smaller truck companies have closed down, so the supply of trucks has tightened up,” she says. “Although fuel prices have come down, normal maintenance on trucks that drive nonstop across the country is expensive. Weather and traffic also slow down transportation, and that can also result in oversupply later on if everything catches up and comes in at once.”

A walk-off by longshoremen early this year also caused a massive disruption, closing off all truck deliveries to Port Authority properties. Although the situation was resolved quickly, it caused plenty of pain for businesses across New York and New Jersey, particularly those dealing with highly perishable fruits and vegetables, where every second counts.

Trucks and Emissions
New York’s traffic problems, always bad, have gotten worse as the population increases but the city’s roadways fail to keep pace. A reinvestment in trucking access is commonly cited by on-market vendors as a current priority.

A related, looming factor is environmental quality. New York faced its hottest summer on record last year, and suffered through plenty of high temps in 2016. Increased environmental quality standards in a city that would be devastated by some of the predicted effects of global warming has led to a push by many legislators for ever-tighter emissions standards and other issues relating to sustainability.

S. Katzman is one of the companies attempting to get ahead of that legislation, taking steps to make voluntary changes before it becomes a matter of local or even federal law. “We are participating in a zero-garbage challenge to continue to cut down on our company’s carbon footprint,” confirms Katzman, “and we have converted almost half our van storage fleet to electric to cut down on emissions.”

Pointing Towards the Future
The years ahead will be critical for the Hunts Point Terminal Market, and most companies are in somewhat of a holding pattern, trying to maximize the utility of their on-market spaces in anticipation of the results of the Cooperative Association’s quarter-million-dollar feasibility study.

It’s expected to be completed by year’s end, and whether it results in major upgrades to the Bronx facility or a move to New Jersey, the market will find a way to survive and thrive. For many, especially older companies that have been watching the facility burst at the seams over 40 years of expansion, it’s a waiting game to see what’s next. But as long as the biggest problem is pushing the capacity of the market because volume and sales continue to climb, it’s a problem they’re willing to face.

Kazan’s thoughts on Hunts Point are wrapped up with a curious blend of hard-nosed realism and constant optimism: “Doing business here is tough, but I’m hard pressed to explain why,” he says. “It’s just the nature of the market, its competition, and its people—this city is unlike anyplace in the world, period. It’s not for the weak or faint-hearted. Since we’ve been on the market for 35 years, we’ve learned to serve a rightfully demanding and unique clientele.”

Images: Nick Nick & Stuart Monk/Shutterstock.com.

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