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Fertile Fields & City Commerce

Midwest receivers talk perishables from Cleveland, Cincinnati, Des Moines, Indianapolis, Milwaukee, and St. Louis
Midwest Spotlight_MS

BrightFarms, which targets major metropolitan areas, has greenhouses near New York City, Chicago, and Washington, DC, catering to restaurants and retailers. It also has a greenhouse in Ohio, with a 172,000-square-foot structure in Wilmington, northeast of Cincinnati.

Iowa, too, is jumping on the protected agriculture bandwagon. “One of the most recent, big changes I see in produce is receivers here developing a solid homegrown program,” comments DeMatteis. “Even here in Iowa, we see more growers with greenhouses. Consumers want more of that perceived homegrown taste.”

R is for Retail
Food retail competition continues to be cutthroat in the Corn Belt’s major cities, as additional stores pop up and new chains invade the area. “Brick-and-mortar retail seems to be overbuilt already,” observes Maglio in Milwaukee, “with many more locations on the drawing board.” Despite the seeming saturation, there is differentiation as many of the new retail locations are smaller-footprint stores in redeveloped downtowns. Ongoing development has attracted the highly coveted millennial shopper, especially in Cleveland, Indianapolis, and Milwaukee.

“Downtown Indianapolis is just booming,” enthuses Rocky Ray, partner at Ray & Mascari, Inc. in Indy. “Whether it be empty nesters, Baby Boomers, or millennials, we’re just seeing lots of people moving into downtown.”

Cincinnati continues growing into the northern region of Kentucky, and the area has seen both foodservice and fresh-cut business growth. Des Moines keeps blooming as well, into nearby suburbs.

St. Louis, it seems, may be the only city of the six experiencing lukewarm growth; but a huge redevelopment project is progressing in its north, anchored by a new national agency.

And with new housing or retail developments come supermarkets catering to every income level. Discounters—like Aldi, Save-a-Lot, and Kroger’s Ruler banner—have gained market share in the Midwest, challenging Walmart, other chains, and independents. Smaller specialty formats, like Colorado-based Lucky’s, have moved in too.

Supercenters may be slimming down somewhat, but are still opening. Meijer, based in Grand Rapids, MI, continues its expansion, with seven new supercenters in 2017 including two in Indianapolis and three in Wisconsin.

Smaller chains and independents also remain active, with some expanding like Sendik’s in Milwaukee. “Costco now has a presence, Fresh Thyme has recently arrived, Walmart continues to thrive and Sendik’s keeps expanding,” observes Maglio. “All good for the consumer, but potentially too much dilution of dollar-per-square-foot revenue generation for vendors,” he says.

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As consumers continue to demand more fresh produce beyond traditional local seasons, Midwest growers, receivers, and retailers are ready and willing to tackle the challenge. Of course, only part of the Midwest’s fresh produce comes from outside the area, reaching markets in the six cities profiled here (Cincinnati, Cleveland, Des Moines, Indianapolis, Milwaukee, and St. Louis)—as there is plenty of seasonal volume from local growers, especially in Ohio and Michigan.

“As technology has improved, more farmers in this area have been able to invest in tools that allow for prolonged growing seasons,” explains Daniel Corsaro, executive vice president of sales and marketing for Indianapolis Fruit, Inc., in its namesake city.

Not only are growers able to lengthen the season, but they’re winning a few battles against the effects of adverse weather too, with newer varieties and protective measures in the field. One such measure is the use of hoop houses to shield crops from wind, rain, or hail damage.

Sam Maglio, Jr., president of Maglio & Company in Milwaukee, sources from urban farming operations that produce with the wholesaler in mind, rather than selling at farmers’ markets or through community supported agriculture (CSA) subscription programs. “We can get organic basil from a warehouse-based tilapia farm and microgreens from Growing Power’s local hoop houses,” Maglio says.

To learn more about top crops, terminal markets, and the many advantages of buying and selling fresh fruits and vegetables in the Heartland of the United States—read on.

A is for Advantages
Receiving and distributing produce from the Midwest is all about location. The same roads and railways that take the region’s massive corn and soybean crops across the nation can move perishables with ease, especially from Texas and the Southeast.

With good reason Indiana’s state motto is “The Crossroads of America,” and all six markets enjoy easy access in the Midwest with major highways from east to west. “We are centrally located and at the crossroads of Interstates 35 and 80, which gives us a logistical advantage,” points out Brendan Comito, COO of Capital City Fruit Company, Inc. in Des Moines.

Being located in the center of the country also helps increase the supply of imports, especially those trucked in from the East Coast and Mexico via Texas. Wholesalers balance rising shipments from importers with domestic supply to benefit Midwest retailers, foodservice operators, and ultimately consumers—all seeking more year-round produce. In some cases, Midwest receivers are extending their reach and establishing their own facilities at ports of entry. One is Maglio & Company, which opened an office in Texas. “We’ve seen a spike in our imports from Mexico since we established our presence in McAllen,” confirms Maglio.

M is for Markets
The region’s wholesale markets are key to meeting demand, especially the larger terminals in Chicago and Detroit. “We provide coast-to-coast service, and we find our trucks going more into the New York and Chicago terminals than the other Midwest terminals,” says Jimmy DeMatteis, president of DMTB in Des Moines.

That doesn’t mean smaller terminals, like in St. Louis and Cleveland, are hurting for customers or supply. “We have trucks in or near every local terminal market,” observes Maglio. “We’re able to source as needed from these locations to fulfill customer requests in a different region. If romaine lettuce is in high demand in Minneapolis, we can buy from St. Louis and deliver the next day. It’s a service we offer to our client base.”

The St. Louis terminal includes more than 20 tenants, though some merchants have moved off the market into the suburbs to accommodate growth or capitalize on less expensive rates. Front Row Produce, a repacker supplying foodservice and retailers including Aldi, moved in 2014 to Over-land, a northwest suburb near the airport, off interstates 70 and 270. Last year, longtime St. Louis terminal tenant Old Tyme Produce moved to St. Charles, MO, the fast-growing suburb just across the Missouri River from St. Louis.

But don’t judge the region’s market based on the number of tenants at the terminal. “I think the whole St. Louis produce deal is in pretty darn good shape,” observes John Parr, managing member at Fresh Start Marketing, LLC, a St. Louis broker.

“St. Louis has a more diverse population than it used to, and younger people seem more in tune with fresh produce—and that all helps.” Growth in ethnic populations is pushing demand as well, according to Parr and other market observers. St. Louis is home to a large Bosnian population and, like other Midwest cities, has growing Latino and Asian populations too.

Most Midwest markets have seen tenants come and go or gained new owners, but remain reliable, busy hubs for area restaurants, retailers, and foodservice operators. The Northern Ohio Food Terminal at Woodland and Orange in Cleveland maintains a steady flow of trucks and shipments, while the Columbus terminal was purchased by Sanfillipo Produce Company, Inc. back in 2013.

C is for Crops
The Midwest is famous for “corn and beans”—field corn and soybeans, shipped out globally via a sophisticated transportation system. But the same roads (and some rails) also transport fresh produce to augment the region’s ever increasing demand for seasonal fruits and vegetables.

Among the top crops harvested from midwestern fields are sweet corn, watermelon, potatoes, onions, pumpkins, apples, and more. Sweet corn is available and sourced locally in all six of the metro areas. Melons from Indiana and Missouri are regional mainstays; so are Wisconsin potatoes and cabbage, and onions from Iowa and Minnesota.

Receivers also report small, but significant, apple volumes from Iowa and Missouri, though nearby Michigan is king in the region. Then there are pumpkins—the Midwest leads production in pumpkins, and there are also several varieties of squash.

Much of what’s in the fields corresponds to demand and price. “Growers here, like everywhere else, respond to price. So it’s pretty much a guarantee if prices are up for a crop one year, they’ll plant more acres of that crop the next,” confirms Don Goetz, president of Fries Brothers, Inc., in Cincinnati.

L is for ‘Local’
Similar to most other regions of the country, the local craze is still going strong with many Midwest growers stepping up to meet demand. Consumers in Ohio, Indiana, and northern Kentucky are very interested in buying local produce, according to Goetz. The same desire to source locally persists in foodservice as well. “It seems like every chef still wants something that’s been grown in their backyard,” he notes.

But while the trend toward local continues, food safety certifications are heating up, crimping smaller growers who are unable or unwilling to meet retailer or foodservice sourcing criteria. Like other receivers in the region, Goetz sees longer-term sourcing trends favoring the region’s larger grower-shippers and others meeting food safety requirements for wholesale.

“The challenge is two-fold with local sourcing,” summarizes Maglio. “First, we have to meet the consumers ‘definition’ of local: how many miles, counties, or states are within that area? Second, do the growers meet the criteria for food safety and risk management? Finding the exact combination that works is a time consuming, case-by-case operation.”

There are also two other challenges inherent to sourcing from the region: an agricultural infrastructure that has yet to fully support the trend, as some areas lack the necessary packing and storing facilities to keep up with volume, and the Midwest’s famously variable weather. “Weather is always a challenge at the shipping end for sourcing in the Midwest,” confirms Parr.

G is for Greenhouses
One way to increase volume and skirt the Midwest’s unpredictable weather, as well as crop pest and disease pressure, is a physical, protective barrier. Regional vegetable growers continue to invest in greenhouses to protect crops and assure quality. Greenhouse operators, large and small, are expanding and selling to wholesalers, retailers, restaurants, farmers’ markets, and CSAs.

Ohio, for one, has seen major growth in greenhouses, which is a boon for wholesalers and retailers there and in neighboring states. The steady supply creates potential opportunities and closer sourcing for receivers, and allows supermarkets to feature more local produce, free from the Midwest’s notorious temperature and precipitation swings.

“The greenhouse trend has stuck and seems like it’s continuing to gain traction,” comments Dominic Russo of Rocky Produce in Detroit, MI, which is close to both Ohio’s greenhouses and those of Leamington, Ontario. “We bring in many more greenhouse vegetables, as well as pre-packaged items.”

FRESH FORUM
Which has had the most impact on your business in the past year: food safety (prepping for FSMA), weather, the labor shortage, or something else?

Brendan Comito, Capital City Produce, Des Moines
The Greater Des Moines area has an unemployment rate below 3 percent, so there is no question our biggest challenge is finding and cultivating talent to meet our growth targets.

Jimmy DeMatteis, DMTB, Des Moines
Our biggest focus was preparing for FSMA and making sure we had our contracts with motor carriers in place.

Don Goetz, Fries Brothers, Inc., Cincinnati
Weather; it’s been good here in Ohio and Kentucky, some plantings were a little late but we caught up. But peaches are a big deal for us, and the freeze in Georgia and South Carolina really hurt peach volumes.

Daniel Corsaro, Indianapolis Fruit
Dynamic consumers have created an ever-changing retail landscape. Managing our customer base and their multiple business models has been the most challenging. In today’s world, each retail experience has to be unique, and our job is to make sure that our customers are able to leverage produce offerings as a competitive advantage.

Sam Maglio, Maglio Produce, Milwaukee
Labor is the key to many business models. Having the skill sets needed, along with passionate, productive people who are engaged and excited about implementation has been a challenge recently. Employers need to realize it isn’t ‘business as usual’ anymore—employees have numerous opportunities and want to be in a place where they feel safe, are respected and appreciated, and can grow both personally and professionally.

Rocky Ray, Ray & Mascari, Inc., Indianapolis
I would say all three; but I think labor has been one of the toughest. We’ve added a new line this year, and I think we’ll continue looking to technology in the future to solve labor challenges.

Greenhouse acreage in Ohio has exploded since 2014, when the U.S. Department of Agriculture (USDA) reported about 20 acres of vegetable production under glass in the Buckeye State. Golden Fresh Farms and Red Sun Farms opened a 20-acre greenhouse north of Dayton with plans for eventual expansion, while Nature Fresh Farms operates 45 acres near Toledo, with more acreage on the way.

BrightFarms, which targets major metropolitan areas, has greenhouses near New York City, Chicago, and Washington, DC, catering to restaurants and retailers. It also has a greenhouse in Ohio, with a 172,000-square-foot structure in Wilmington, northeast of Cincinnati.

Iowa, too, is jumping on the protected agriculture bandwagon. “One of the most recent, big changes I see in produce is receivers here developing a solid homegrown program,” comments DeMatteis. “Even here in Iowa, we see more growers with greenhouses. Consumers want more of that perceived homegrown taste.”

R is for Retail
Food retail competition continues to be cutthroat in the Corn Belt’s major cities, as additional stores pop up and new chains invade the area. “Brick-and-mortar retail seems to be overbuilt already,” observes Maglio in Milwaukee, “with many more locations on the drawing board.” Despite the seeming saturation, there is differentiation as many of the new retail locations are smaller-footprint stores in redeveloped downtowns. Ongoing development has attracted the highly coveted millennial shopper, especially in Cleveland, Indianapolis, and Milwaukee.

“Downtown Indianapolis is just booming,” enthuses Rocky Ray, partner at Ray & Mascari, Inc. in Indy. “Whether it be empty nesters, Baby Boomers, or millennials, we’re just seeing lots of people moving into downtown.”

Cincinnati continues growing into the northern region of Kentucky, and the area has seen both foodservice and fresh-cut business growth. Des Moines keeps blooming as well, into nearby suburbs.

St. Louis, it seems, may be the only city of the six experiencing lukewarm growth; but a huge redevelopment project is progressing in its north, anchored by a new national agency.

And with new housing or retail developments come supermarkets catering to every income level. Discounters—like Aldi, Save-a-Lot, and Kroger’s Ruler banner—have gained market share in the Midwest, challenging Walmart, other chains, and independents. Smaller specialty formats, like Colorado-based Lucky’s, have moved in too.

Supercenters may be slimming down somewhat, but are still opening. Meijer, based in Grand Rapids, MI, continues its expansion, with seven new supercenters in 2017 including two in Indianapolis and three in Wisconsin.

Smaller chains and independents also remain active, with some expanding like Sendik’s in Milwaukee. “Costco now has a presence, Fresh Thyme has recently arrived, Walmart continues to thrive and Sendik’s keeps expanding,” observes Maglio. “All good for the consumer, but potentially too much dilution of dollar-per-square-foot revenue generation for vendors,” he says.

Sendik’s will open its 15th store, a former Sentry’s in Waukesha, later this year and is also expanding its Fresh2GO concept with a store opening in Greendale, WI followed by another in Hales Corners; all stores market Sendik’s Fresh2GO line of foods with gas and convenience offerings.

Receivers expect the trend of smaller store openings to continue. “Recently we’ve seen Midwest retailers beginning to make the move towards stores with a smaller footprint and providing a geographically/demographically focused set of product offerings,” posits Corsaro. “We’ve seen retailers with a longstanding Midwest presence continue to make an investment in this area through new stores and remodels.”

Although there are new retailers entering the marketplace (like German discounter Lidl) and all manner of experimentation with store size and product range, established supermarket chains have also undergone bankruptcies, mergers, and buying sprees, driving consolidation across the country.

Indianapolis-based Marsh Supermarkets entered bankruptcy with Kroger and Findlay, OH-based Fresh Encounter buying multiple locations. Central Grocers, Inc., owner of the Strack & Van Til chain, Ultra, and others, also went bankrupt. Although Jewel-Osco, owned by Albertson’s, bid for 20 Strack & Van Til stores, it was bested by Indiana Grocery Group, led by Strack and Van Til family members to recapture the popular Hoosier grocery chain. In addition, the merger of Associated Wholesale Grocers and Affiliated Foods Midwest Cooperative impacted independents operating in the regions farthest west and north of this area.

At least one new store location was directly tied to the biggest news in U.S. food retailing during the first half of the year: Amazon’s acquisition of Whole Foods Market. A new Whole Foods, in downtown Indianapolis, is set to open in late 2017. Whole Foods operates three locations in St. Louis and the greater Cleveland area, with at least one location in each of the other markets profiled here. At press time, it was still too soon to tell the impact of the much-touted Whole Foods acquisition in the Midwest, or anywhere else.

Despite changes in size and product mix, retail chains are also facing competition from online sales. Most are stepping up convenience and delivery options to stay above the fray. Walmart is offering online ordering and pickup service, and local and national supermarket chains are partnering with Instacart. Niche delivery services are taking note too, like Indianapolis-based Green Bean Delivery, which expanded into the St. Louis market.

I is for Impact
The abundance of options, according to Corsaro, is making wholesalers work a little harder. “Today, there are numerous retail business models each with their own purchasing formula. We have price-conscious retailers, experience-driven retailers, club stores, and online markets—these models have created a diverse retail landscape and forced supply chain participants throughout the world to manage multiple buying personas.”

To Ray & Mascari’s Ray, ease of use and convenience seem to rule the day, to the detriment of wholesalers. “We see cash-and-carry formats continuing to attract restaurant customers because of the perceived freight savings,” he says.

Despite all the hullabaloo, not all chains and independents are particularly challenged or drastically changing their business models in the Midwest. Estab-lished chains like Wisconsin’s Sendik’s, Fareway in Iowa, Schnucks and Dierbergs in St. Louis, and Heinen’s in Cleveland are moving ahead with expansion despite market saturation in some areas.

T is for Trend Tracking
Growth in smaller-footprint stores, focused on a carefully curated product line, indicates Midwestern consumer tastes are moving in the same direction as the rest of the country’s—with a heavy emphasis on seasonal fare, value-added products, and meal kits. The downtown millennial consumer is expressing interest in smaller-footprint stores with broad selections of grab-and-go produce and meal offerings. “The grab-and-go concept seems to be catching on a little more than conventional packs,” says Ray.

Heinen’s, in Cleveland, operates a downtown location targeted at urban residents. Hy-Vee’s Fourth + Vine, in downtown Des Moines, offers a sushi bar and artisanal Italian sodas. And

Des Moines-based Fareway Food Stores also entered the concept store game, with more than 115 stores in the Upper Midwest, mostly in Iowa.

Small footprint stores are not only expanding with concept and “downtown” formats, but taking on the big box stores. Aldi, and Kroger’s Ruler Foods, as well as Save-a-Lot, compete with Walmart in the St. Louis metro area, where in 1988 the very first Walmart Supercenter opened.

Aldi has more than 40 stores in the St. Louis metro area, where Lucky’s and Fresh Thyme have also arrived to challenge the marketplace. Though it has been heralded in the media, the spread of grab-and-go and value-added products in new—and old—retail formats is surprising. “There are several retail segments that are now carrying produce, including convenience stores—and even hardware stores,” observes Capital City Fruit’s Comito.

Organics continue to grow in popularity with Midwestern consumers, says Corsaro, noting that Indianapolis Fruit has been offering organics for more than 15 years. “Organics continue to grow substantially in movement as availability has increased, pricing has leveled out, and consumer demand rises.”

Helping stoke organic demand are both Aldi and Walmart, as each expands organic produce SKUs. Established independents like Heinen’s, Schnucks, and Dierbergs focus on offering an upscale experience with organics and related products. Hy-Vee this year saw a corporate restructuring program that emphasized its HealthMarkets section, featuring organic, gluten-free, natural, and allergy-friendly foods. Hy-Vee HealthMarkets are present in about 75 percent of its 240 stores.

Despite media coverage and plenty of talk about organics, receivers say Mid-west consumers are still sorting out their preferences. “We’ve seen a bigger increase in organic fruit than vegetables,” observes Rocky Produce’s Russo.

F is for the Future
In the Midwest, buyers and sellers throughout the fresh produce supply chain are looking to the future, in myriad ways. Demand for local, as well as fresh-cut and value-added product are likely to rise in all the markets discussed here. Organics, which some growers believe represent the future and answer consumers’ calls for sustainability and accountability, will make incremental gains.

For receivers, it’s the continual dance to shore up existing relationships and seek new trading partners to maintain retail market share. “Retail has always been highly competitive,” comments Comito. “Our goal is to provide value to our customers by helping make their supply chain more efficient.”

So there you have it—efficiency, sustainability, and giving customers what they want will continue to drive the Midwest perishables supply chain forward.

Images: Mark R. Coons, HodagMedia/Shutterstock.com

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