NEWARK, Del. -- The Produce Marketing Association is at a crossroads, and where it heads next will signal where the fresh produce industry is going, too.
The association is in the midst of a heated debate over whether it should merge with the other national trade group, the Alexandria, Va.-based United Fresh Fruit and Vegetable Association. That debate was raised this spring by a merger proposal from United, but also driven by an industry tired of duplication and searching for more effective representation in turbulent times.
As if that were not enough, the organization faces these challenges at the same time it is preparing for the retirement next year of its chief staff executive, President Bob Carey, who has been a major force at PMA since the beginning.
"The Chinese have a saying: 'May you always live in interesting times,' " said Bryan Silbermann,
executive vice president of PMA, musing about the association's current situation during an interview with SN at the trade group's offices here.
The irony of the proverb is that "interesting" doesn't necessarily mean those times will be easy, or good, for either PMA or the industry.
Carey and Silbermann said the industry's push for trade group consolidation raises the specter of weakening PMA's focus as a vertical organization devoted to marketing -- a focus PMA's leadership does not want compromised.
As Carey put it, "The key is, should a vertical association try to represent the entire industry, when you've got the supermarket industry with its representation, the food-service industry with representation nationally, and you don't have a unified fresh produce production voice in Washington? You now have an association that claims that, but some people question whether it is truly representing the entire industry."
PMA's response to the clamor for a merger was a proposal that would fold United into a PMA that would still essentially be intact, right down to its hands-off stance on government lobbying and reluctance to take sides in thorny interindustry disputes.
Some interpret that position as presumptuous, but to PMA's staff and volunteer leadership, it's the best way to move forward and keep what works right with PMA still working.
Although United has rejected the terms of PMA's proposal, the merger drama is still playing out, with further meetings to take place in two weeks at PMA's convention in San Diego. Meanwhile, big issues loom large, such as what the future holds for produce in a grocery business in the throes of adapting to new technology. What follow are highlights from the interview with Carey and Silbermann on these topics and more.
SN: How fast might things happen with regard to the idea of a merger of PMA and United?
CAREY: Things will happen pretty fast.
SN: How did this latest brush with merger/consolidation really come up?
CAREY: It came up because our chairman received a letter from United proposing a single new national trade association. That was something that had not been discussed previously. The first time it was discussed by PMA's leaders was Aug. 18, at the executive committee meeting in Santa Barbara, Calif.
There has been a lot of talk of eliminating duplication, and we've worked together on a lot of such issues for the last couple of years.
SILBERMANN: There is no question that over the last two years the relationship between the two associations has become closer, in terms of staff working with one another, than it ever had been before.
CAREY: Probably that's got to be attributed to [United President] Tom Stenzel, an excellent communicator. It has been an entirely different relationship for the last two years than it had been for the seven or eight before that.
SN: Did the letter, then, come as a surprise?
CAREY: Yes, it was a surprise, because as late as two years earlier, the leadership of United had indicated that there was no interest in a merger. Upon reflection, maybe, part of it is that it is not a full merger United's leadership is after. This business of a single new national association is a vision that some of them had but that we haven't shared because we feel we have been doing a fair job of serving the industry's interests except in the area of government relations, where we were deferring to them.
We don't believe that a vertically integrated association can truly represent this industry. [Controversy over reform of] the Perishable Agricultural Commodities Act proved that. Production interests had one point of view, buyer interests had another, and how could any vertically integrated organization really take a position? The positions taken in that case were primarily for production agriculture, not for the total industry.
I think our position came as close as any to representing the entire industry, which was that we wanted to retain the PACA. But we certainly did not get into the nitty gritty; when it came down to the difficult task of actually negotiating, no. The supermarket industry had its point of view, and the production industry its point of view.
SILBERMANN: I would add to that one point. In all this discussion you have to really define what you mean by representing the produce industry and who it is that you are going to represent. PMA's executive committee and full board has made it very clear in past years that they believe there needs to be strong representation of produce in Washington. Nobody is disputing that.
Just as the Food Marketing Institute and the National Grocers Association represent the retailers' position, and the National-American Wholesale Grocers' Association represents the wholesalers and the Grocery Manufacturers of America represents the grocery manufacturers, there needs to be a strong, cohesive, well-funded organization in Washington that represents fresh produce production interests.
That could be United or it could be something new, if United wants to combine with PMA along the guidelines put forth by our leadership.
SN: What does PMA get out of a full merger, beyond a possible dilution of its focus in serving the industry in specific ways?
CAREY: The executive committee at our recent meeting asked the same question. Ultimately, I suppose, it is the factor that there is quite a bit of interest in the industry in seeing duplication eliminated, and there has been financial pressure on companies that support both associations.
Their thought was that maybe there is a way, particularly since there seemed to be this new interest from United. But the executive committee also thought there are certain fundamentals that have contributed to PMA's success over the years that had to be incorporated into any new organization.
Those fundamentals formed the proposal we brought to United. They involved the fact that PMA was not to be put on the scrap heap, in favor of something that is still on the drawing board. The committee did decide, first, that one national organization would be beneficial to the industry. And second, if that happens, well, what is best for the industry is not to create another United. It was felt that since PMA is a more substantial organization, apparently better managed, certainly financially, than the other organization, that PMA should be the surviving organization.
It does not mean that there is not a lot of thought given to the history of United and delicate emotionalism on the part of United members. But it did not make sense to dismantle an organization or a staff that is as successful as PMA. Another non-negotiable, which I think has been misunderstood, was the proposed composition of the governing body.
PMA has a policy that 60% of our board must represent buying interests. That is a rough guideline, not literal; literally there is a good number of directors that are both buyers and sellers, such as wholesalers and brokers.
We needed to have a board that has marketing as a focus, and that is one of the reasons for PMA's success. That means you don't have a board that has one horizontal segment of the industry outvoting the other segment. The other thing is, PMA has operated on a consensus basis. The directors are geared to reaching consensus on issues, as opposed to other organizations that take votes and use opposing forces to reach conclusions.
There was an issue raised that the chief staff executive of PMA would remain as chief staff exec of whatever new organization emerged. If you have one association that is stronger, you don't pick the chief executive from the weaker organization.
And the PMA executive committee said it would be selecting the next staff exec of PMA, and not a joint committee from both organizations.
It has been suggested that the timing of this might have resulted from the fact that I am going to retire next year, but we have a succession policy that was approved a year ago. That process is working its way through the calendar, and will continue.
SN: If we end up with one organization called PMA, why keep PMA where it is now, and what new presence would there then be in Washington?
CAREY: There would have to be a Washington presence. The question is, what is the government relations role? Is it for production interests primarily? The key is, should a vertical association try to represent the entire industry, when you've got the supermarket industry with its representation, the food-service industry with representation nationally, and you don't have a unified fresh produce production voice in Washington? You now have an association that claims that, but some people question whether it is truly representing the entire industry.
Obviously, when you have buyer members who feel one way and production another, how can you say you represent the entire industry?
SILBERMANN: I think it is crucial to distinguish what you mean by representing. By representing, we mean lobbying on behalf of. PMA does a heck of lot of government-related work that most trade associations regard as representation in Washington.
[At this point, Silbermann produced a diagram to show how PMA's proposal for Washington representation would work.] Here is PMA in Newark, Del., and let's face it, the most important asset an association has is its staff, and here is where they are. In addition, we have an infrastructure here that could not be replicated in Washington for anything near what it costs us to operate here.
In the proposal, you'd have some kind of national production presence in D.C. that is not controlled by PMA, that is a separate organization entirely. PMA would certainly fund it substantially, and any other organization that wanted to be involved, including regional groups and branded companies, can have their own influence and their own lobbyists and PR presence, in committees and subgroups of this national coalition, which could be called United, by the way.
And we would add that this kind of representation would have more funding than government relations currently has through the other organization. The success of PMA is its focus. If you want to have a more substantial government relations lobbying effort in Washington for the produce industry on the production side, you need to focus. If you focus, you will get the money.
CAREY: But it is very difficult to fund programs that assume positions that might be contrary to a large and influential segment of your membership.
SILBERMANN: Especially when you say that one of the three key components of your existence is networking and getting buyers and sellers together.
SN: Where does PMA stand with the succession process, and are there any indications of where a new president should take PMA in the future?
CAREY: We are right on schedule. The step taken at this past executive committee meeting was to look at what the needs of the industry are for the next five years, and then what attributes would be needed by a president to lead the association.
That was done and will be shared with the full board at the convention. In the meantime, the exec committee will select a search organization just prior to the convention. They will meet with that search organization in February in New Orleans at the United convention. The search will start probably by the first of March, and the search committee will have recommendations for the board by sometime in the summer. By August, when the executive committee meets, the plan is for a successor to be named.
SN: Are there any unusual criteria for skill, ability and so on already apparent?
CAREY: I don't think there will be surprises. I would prefer not to discuss it now, before the board gets [the criteria]. I will tell you produce industry experience was a desirable, not an essential, trait.
SN: Is it too early to say in broad strokes what direction PMA's leadership will want a new chief executive to head toward?
SILBERMANN: Following the plan.
CAREY: The strategic plan, which is updated each year, is the guide. Most people don't understand the culture at PMA. Some associations have a very strong chief staff executive, and sometimes that staff and that chief exec go over the line, in terms of pushing the agenda of the association. At PMA a real partnership type of arrangement has developed.
The volunteers and staff function like a team to determine where the association should go. It is not so much a question of where the association is going; PMA is already focused on the direction and just needs somebody to look out for the potholes out there.
SN: What are some of the potholes that the new chief executive should watch for?
CAREY: Some of the issues and movements that have started already and will have greater impact, like category management and Efficient Consumer Response. The issues of price look-up codes and Universal Product Codes will continue to change and grow.
SILBERMANN: We have an agreement with the Uniform Code Council to develop an educational program on the use of codes all the way from the farm gate to the retail operator. It is taking bits of what has already been done, such as standard UPCs and PLUs for consumer packs, back through case coding, pallet coding and the UCC/EAN 128 codes -- all the things that have been bubbling around for some time and are starting to impact the grocery industry.
The UCC came to us with a proposal of a coordinated approach for getting the produce sector of the food industry using the codes and technology available, so we can move ahead on electronic data interchange and category management more effectively than the produce sector does now.
PMA leaders will be talking about that before our convention, and we will lay out some of that in a workshop. The education program itself will involve workshops at the conferences and conventions we have in the course of the year, as well as a publication that will spell it all out in graphic form.
Generally, technology is a huge challenge for the industry. We are planning our first ever technology conference for next year. We are aggressively pushing in this direction. If you look at the convention program in San Diego, you'll see a number of those issues addressed in the workshops. Our leadership is pushing us on it, on the application and management of technology used to help improve communications in the distribution process.
SN: What are the strong points and weak points for the produce industry in the information age?
SILBERMANN: It is almost a reflection of what is behind ECR. The mass marketers have very sophisticated systems; they are pushing them at the forefront, dragging the rest of the industry with them by saying this is what we need to function effectively.
Then some of the larger sophisticated retail chains, as well as food-service distributors, are also making very strong demands on the production side.
This is happening in food service, more so than retail. It is being driven from the retail side, although there are many retailers that are not up to speed. A lot of people are grappling with how EDI, in its grocery format, works with produce. With EDI in grocery, you tend to have something of a revolving door. The data goes through gateways; it is not real-time delivery of information. And produce people say, "If I am sending something to the buyer, he needs to have that in real time." Those are the kinds of issues for produce.
Packaged salads have injected sophistication on the production side of the industry. Now you suddenly have a category that is rapidly growing, that is very information-driven, and that information is being collected and dispersed by third parties.
Information Resources Inc., for example, will be unveiling at our convention its plans for compilation of data on bulk product based on standard PLUs. This is the next generation of utility for PLUs. The packaged salads are showing that there is a better mouse trap out there.
Other areas of technology that are not information-based include refrigeration, a crucial one. It is interesting to see how that is becoming a real partnership between the processors and retailers. The processors keep saying you've got to keep it cold, and the more innovative retailers have got to that point, but there are many others who still need to get to that point.
CAREY: Remember, we are also talking about people, about training, rather than just equipment. That is why we put together a training video on precut last year.
The training issue is one that has been neglected a bit lately. Everyone is focusing on efficiencies to drive costs out, but the truth of the matter is that we have not yet been able to design a produce department that does not require a certain amount of man-hours, and so display techniques, rotation and so on are still important. We have not yet even come up with a checkout system that is foolproof. There is still tremendous shrink and losses that could be eliminated by better training.
SILBERMANN: You will likely see more use of Internet-based communications, though it is a little early to tell how that will be used. We are looking at using a PMA home page early next year.
I am fascinated by real-time satellite delivery systems; some people have talked about two-way video, eventually, so that a buyer could see the product he is being asked to purchase. That's got tremendous applications down the road.
There is a lot of talk about mass marketers and how they have the furthest distance to go in the way they merchandise perishables. If I were a conventional supermarket operator, I know that I would sit up and take notice about the amount of resources that those mass marketers devote to training. They may be low-cost operators, but they make sure their people are very well trained.
Some of the mass marketers are the most frequent users of PMA training programs, and are integrating those programs into their own CD-ROM-based interactive programs and using them across the company.
CAREY: At the same time that we have seen a decline in the use of training programs by the traditional supermarket industry, we are seeing mass marketers ratchet up their use of produce training programs.
SN: Besides technology, what are some product trends that will be important in the near future?
SILBERMANN: We've been saying for a year now that cut fruit will be the next big wave. The industry is looking at the labor involved [in] preparing those items, and category management analysis would help to figure out what makes more sense.
And we are still seeing new varieties coming in for bulk product.
CAREY: Keep an eye on suppliers who will market their produce as products rather than commodities. I don't know if it would be branding so much as product differentiation, new segments within a commodity, different sizes, tree ripe, place of origin, etc.
