Until fairly recently, the Alamo City was considered a charming if somewhat sleepy city. But this has changed—San Antonio is now the second largest city in Texas, edging out Dallas to come in behind Houston. Better yet, it has become a favored conduit for produce shipments to the Midwest and East Coast.
A Historical Backdrop
San Antonio is home to the legendary San Antonio de Valero Mission, better known as the Alamo, and the 15-mile River Walk along the San Antonio River, one of the city’s biggest attractions, bringing in more than 5 million visitors a year.
San Antonio as a whole has become a major tourist destination, hosting nearly 25 million visitors every year, and the city has become known for its restaurants, inventive chefs, and top-notch cuisine.
Supplying the city’s many restaurants, large and small, are growers throughout the Lone Star State. Many are located far south of the city in the Rio Grande Valley and ship every day to the city’s new wholesale produce market, or direct to eateries and grocery stores. And of course, there are truckload upon truckload of fruit and vegetable imports from Mexico via the Pharr-McAllen region arriving on a daily basis.
The Wholesale Market Scene
San Antonio occupies an ideal position between the Texas-Mexico border for delivery to customers in the Midwest and East Coast. No doubt this was the thinking at Abasto Corporation when it developed a new wholesale produce market on the city’s southeast side.
Situated on an 80-acre tract of prime real estate, the San Antonio Wholesale Produce Market was inaugurated in 2016.
The warehouse park boasts 60 refrigerated warehouses with 3,100 square feet of storage space each; state-of-the-art technology; extra wide, paved streets for easy truck access and maneuverability; and 24-hour security and video surveillance. Among the plans on tap for this year are persuading several larger suppliers that San Antonio is the ideal spot for distributing, processing, and repacking products grown in Mexico, within Texas, or southwestern parts of the United States.
Abasto Corporation is betting big that companies will agree; as part of its ambitious second phase, the developer has already begun preselling lots on the remaining acreage. Of particular note are customers interested in building warehouses of 10,000 square feet or more.
Until fairly recently, the Alamo City was considered a charming if somewhat sleepy city. But this has changed—San Antonio is now the second largest city in Texas, edging out Dallas to come in behind Houston. Better yet, it has become a favored conduit for produce shipments to the Midwest and East Coast.
A Historical Backdrop
San Antonio is home to the legendary San Antonio de Valero Mission, better known as the Alamo, and the 15-mile River Walk along the San Antonio River, one of the city’s biggest attractions, bringing in more than 5 million visitors a year.
San Antonio as a whole has become a major tourist destination, hosting nearly 25 million visitors every year, and the city has become known for its restaurants, inventive chefs, and top-notch cuisine.
Supplying the city’s many restaurants, large and small, are growers throughout the Lone Star State. Many are located far south of the city in the Rio Grande Valley and ship every day to the city’s new wholesale produce market, or direct to eateries and grocery stores. And of course, there are truckload upon truckload of fruit and vegetable imports from Mexico via the Pharr-McAllen region arriving on a daily basis.
The Wholesale Market Scene
San Antonio occupies an ideal position between the Texas-Mexico border for delivery to customers in the Midwest and East Coast. No doubt this was the thinking at Abasto Corporation when it developed a new wholesale produce market on the city’s southeast side.
Situated on an 80-acre tract of prime real estate, the San Antonio Wholesale Produce Market was inaugurated in 2016.
The warehouse park boasts 60 refrigerated warehouses with 3,100 square feet of storage space each; state-of-the-art technology; extra wide, paved streets for easy truck access and maneuverability; and 24-hour security and video surveillance. Among the plans on tap for this year are persuading several larger suppliers that San Antonio is the ideal spot for distributing, processing, and repacking products grown in Mexico, within Texas, or southwestern parts of the United States.
Abasto Corporation is betting big that companies will agree; as part of its ambitious second phase, the developer has already begun preselling lots on the remaining acreage. Of particular note are customers interested in building warehouses of 10,000 square feet or more.
The Original Terminal Market
While all the latest buzz may be about the Alamo City’s new wholesale market, there’s a longstanding terminal market across town. Opened in 1951, the San Antonio Produce Terminal Market continues to be a bustling, busy center for wholesale produce and related businesses.
According to Tom Preston, administrative director, San Antonio’s terminal market encompasses 39 acres and is fully occupied by 20 businesses that receive produce from Mexico, Central and South America, and around the United States for distribution locally and around Texas.
As for the new market in town, Preston isn’t worried. “Demand and business are both growing,” he says. “I think there’s room enough for everybody to do well.”
In addition to the two wholesale markets, San Antonio also boasts the largest Mexican market in the United States. Named El Mercado, it occupies a three-block section of the city in an outdoor plaza, with as many as 100 eateries, shops, craft stalls, and fresh produce stands filling the space.
Retail Competition
Even as the wholesale marketplace is working to reinvent itself, the retail side of the industry has grown at a frantic pace. There are a considerable number of national supermarket chains, homegrown favorites, independents, and grocery-themed invaders from other states and countries. Big box formats are alive and well too, as are hybrid convenience stores adding shelf space for more fresh fruit and vegetables and grab-and-go snacks and meals.
In addition, there are nearly two dozen active farmers’ markets across the metro area, drawing plenty of health-minded San Antonians to their fresh offerings. Among the notable are the uber-trendy Pearl Farmer’s Market at the renovated Pearl Brewery retail complex north of downtown; the Main Plaza Farmers’ Market on the historic eighteenth-century Main Plaza in the city’s center; and any number of certified markets under the auspices of the San Antonio Farmer’s Market Association.
Down-home favorites
Like just about everything else in San Antonio, the supermarket landscape has been expanding to keep up with the population explosion and the resulting increase in demand.
It’s fair to say that H-E-B, the privately held regional chain with more than $23 billion in annual sales, dominates. The 370-store chain, founded in 1905 in Kerrville and now headquartered in San Antonio, is a favorite throughout the state and over in Mexico (the first H-E-B in Mexico opened in Monterrey in 1997). Even so, it can’t afford to slow down. More and more players are entering the market to compete for consumer dollars, taste buds, and shopping loyalties.
Another homegrown favorite—Whole Foods Market, which was founded and is headquartered in Austin—is in transition since its purchase by Amazon last year. Though how much impact the acquisition will have on the state’s stores is still unclear, few would count it out, as there are plenty of loyal Whole Foods shoppers in San Antonio and throughout the state.
International invaders
Among the international chains setting up shop in San Antonio are Lidl and Aldi, the two popular discount German grocery chains. Lidl, which claims that its products are up to 50 percent cheaper than its competitors, opened in the U.S. market last year and currently has 30 locations around the country. Now, it’s sights are set on San Antonio.
Last August, Lidl bought nearly four acres on the city’s east side. A month later, it acquired five acres on the city’s west side and announced it would anchor a plan-ned retail development with a new 30,000-square-foot store. There also happens to be a brand new 93,000-square-foot H-E-B store down the street.
More land, this time nearly six acres in northwest San Antonio, was purchased by Lidl as well. Fellow German grocer Aldi, which competes directly with Lidl, already operates 40 of its celebrated no-frills stores in various locations around Texas, but has not breached San Antonio. It has two locations some distance away, with one north of Austin in Pflugerville and another southeast of San Antonio in Victoria.
Channeling Innovation
While H-E-B has responded to the hot market by offering shoppers a broad range of new conveniences and perks, it isn’t alone. The company recently partnered with Instacart and Shipt to provide delivery services to some of its locations around San Antonio, and Sprouts Farmers Market did the same earlier this year. Customers can shop for groceries online, then, for a fee, one of the services will deliver to their front door.
Whether this proves popular or not is still a question, but if the data is any indication, making the grocery shopping experience more convenient and enjoyable is a growth industry. According to the Food Marketing Institute, 43 percent of millennial consumers shop exclusively online for their groceries, so making it easy is a key driver. To many, it’s the future of grocery shopping and retailing in general—and it’s already here.
Another convenience is Curbside, where H-E-B online shoppers can pick up their purchases at the store at predetermined times. Last year, the company also debuted a drive-through barbecue and breakfast taco concept at a new 118,000-square-foot store on San Antonio’s north side.
Central Market, a gourmet grocery store that also offers cooking classes and catering services, is H-E-B’s answer to Whole Foods. With nine locations around Texas, Central Market isn’t about to topple the Austin-based supermarket chain, but it’s a fierce local competitor for Lone Star hearts and minds. Perhaps this is why there are only two Whole Foods stores in San Antonio. Whether this changes under the new ownership is anyone’s guess.
Nevertheless, there are other natural and organic retailers, including Sprouts Farmers Market and Natural Grocers, who have found their niche and attracted a loyal following. As Lori Castillo, marketing director for NatureSweet Ltd., a San Antonio-based tomato grower-shipper points out, the demand for produce is only increasing.
“Consumer demand for fresh, easy, ready-to-use ingredients continues to be on the rise,” Castillo says. “Small tomato usage also continues to increase as consumers focus more on salads and other healthy, on-the-go products.”
Organics in Decline?
Healthy and fresh may be a priority, but surprisingly, organic doesn’t seem to be in the San Antonio area. According to Sid Williams, owner of Willson Davis Company, a broker-distributor on San Antonio’s wholesale market, the demand for organics is not booming but rather increasing slowly. For him and Willson Davis Company, it’s a question of balancing cost and volume.
“Everybody wants to talk about organic, but nobody wants to do anything about it,” Williams contends. “There’s not a lot of volume, so when you’re dealing in volume like we do, one box of organic lettuce isn’t worth it.”
Phil Huebner, chief operations officer of fresh-cut processor Fresh from Texas, LLC in San Antonio, hasn’t seen an increase, slow or otherwise, in demand for organics. Surprisingly, the company stopped handling organics about a year and a half ago after noticing demand was shrinking.
“For us, the commodity doesn’t have the shelf life, it’s more expensive to buy small quantities more frequently, and demand wasn’t enough to achieve economies of scale,” Huebner explains. “From a business perspective, we felt it wasn’t in our best interest to continue buying organics.”
On the other hand, Marco Hernandez, Midwest sales manager for Del Rey Avocado Company, Inc., which has multiple locations in California as well as branches in San Antonio and Vineland, NJ, says demand for organic avocados is higher now than for conventionally grown. Framed in the context that demand for avocados has been doubling every year for the past few years, this is rather impressive. At the end of last year, Del Rey had already sold 3.5 million boxes.
Challenges Ahead
Due to the soaring growth in San Antonio, there are challenges—old and new—to face. Among them are weather-related shortages of fruits and vegetables from both inside and outside the United States; the opposite of shortages with a glut of some items due to excellent weather conditions; the stiff competition in retail, including higher fees for some suppliers and loss of lucrative contracts for others (mostly smaller, local growers); new food safety regulations; and a tight labor market, especially for the transportation sector.
Some would say it is ironic to bemoan too-perfect weather, but good conditions can lead to overabundance, and several importers were dismayed by excess supply coming out of Mexico at times, driving down prices.
Chris Damon, president of Produce Connection, which has locations in McAllen, Nogales, and Mexico, laments that, yes, too much of a good thing is, well, just that. “There’s way too much production coming out of Mexico year after year,” he contends. “The windows of opportunity are no longer there unless there’s a catastrophe, and even then, it’s short-lived.”
On the other hand, there were pronounced shortages, and when shippers did manage to secure coveted items like avocados, berries, and citrus for foodservice and retail partners, finding drivers and trucks was extremely difficult. Even worse are various holidays, like Valentine’s Day and Mother’s Day, when demand skyrockets and produce shippers must compete with floral.
Implementation of electronic logging devices is exacerbating the situation. Though federal and state authorities offered a grace period until April 1 for compliance, citations can still be written but drivers will not be put out of service or penalized until after the 90-day period expires.
Despite the mandate’s good intentions, many in the perishables industry are very unhappy about it. Some, like Williams, think it will have both short- and long-term effects on the distribution chain, impacting how suppliers buy produce going forward.
“Trucking companies will want to keep the same schedules, which probably means hiring twice as many drivers as they have now—and customers want the same delivery schedule, so they’re going to pay increased freight costs,” Williams says. “In the end, the consumer is going to pay for it.”
Damon of Produce Connection also thinks the mandate will impact rates. In November and December, prices for some destinations doubled. And while they’ve dropped since then, rates continue to be higher than in previous years. “Besides the impact of higher rates, our biggest challenge is what it takes now to get to the destination,” he says. “The communication between trucks, shippers, and receivers is of great importance.”
Future Thoughts
Although the road has been bumpy for many in the region, the Alamo City’s produce industry is adjusting and moving forward. Indeed, things are looking rosy for both suppliers and consumers, as more companies enter the market.
As Williams of Willson Davis Company puts it, “There’s just a continued and growing demand for every kind of produce.”
