A PMA/UNITED MERGER IS UNDER DISCUSSION AGAIN
Would It Make Government Relations More Effective?
Will PMA’s Rebranding Be An Obstacle?
Jim Prevor’s Perishable Pundit, October 27, 2011
There is always a lot of hub-bub when word leaks out that PMA and United are discussing merger. These discussions have been on again and off again for a long time. The current discussions are a continuation of the effort we discussed here.
There is much industry support for a merger this time around. The discussions have been set up with professional moderation so there is a much higher likelihood of success as “partisan” and staff concerns are less likely to interfere with the process. Our general sense is that the grower-shipper community, which pays the bills, is fighting hard this time to achieve economies. The retailer/foodservice operators are less sold. But even they have been encouraging the process.
There are many pros and cons to a merger proposal, but to anyone paying attention, it has been clear for some time that PMA executives have decided that whatever the future may bring, PMA will not feel constrained in its activities by any need to provide room in the marketplace for United.
We saw that very clearly at the recent PMA convention in Atlanta where much attention was paid to the new PMA FIT Emerging Leaders Program, which is positioned similarly to United’s longstanding Produce Industry Leadership Program, and in its fixed time frame and university affiliation, in this case with Thunderbird, is suggestive of United’s longtime Executive Development Program done in conjunction with Cornell. There are, of course, many differences in the programs but there is little question that if there was only one association, there may have been improvements to one program or another but there wouldn’t have been a whole additional program.
This has actually been going on for a long time. Following the Spinach Crisis, when PMA’s ability to be fully relevant was limited because United employed both David Gombas and Jim Gorny, both PhDs with relevant experience in food safety and PMA did not employ anyone with those credentials, PMA decided that it also needed a PhD. And so PMA decided to hire Bob Whitaker. Bob is a great guy and highly competent, but his hiring was also PMA saying that it recognized no boundaries in which it was obligated to allow United space to be preeminent.
This is not surprising as all these organizations are membership organizations, and not all PMA members belong to United. So PMA has a conflict between serving its members and identifying itself as part of a larger group of produce associations.
The thing to understand about these actions is not that they are bad — maybe the industry can use another leadership program or needs another food safety person — but that the motivation is really part of a brand-building effort by PMA. An effort that long precedes the new logo and look unveiled in Atlanta.
PMA did not hire a food safety expert because it was dissatisfied with the work done by David Gombas and Jim Gorny during the spinach crisis. It hired one because PMA executives felt a need to make sure the association was more relevant and engaged during such a crisis and that PMA should be able to advise and assist its own members on such issues. Of course, intentional or not, the effect of this course is to make membership in another association less important. If PMA can meet all its members’ needs, then other associations will probably suffer.
During the course of many years of discussion over the possibility of a PMA/United merger, perhaps the most vexing issue has always been the question of representation in Washington, DC.
PMA’s strength has always been its affiliation with the buyers, and the core question has always been whether it is possible to develop a structure that maintains this affiliation — and the large sums of money that thus flow to PMA through its trade show and similar programs — while simultaneously advocating for production agriculture in the corridors of the Capitol.
Many producers look back at the single greatest incidence of produce industry advocacy, the establishment of the PACA Trust provisions which give produce sellers preferential claims over other creditors, and wonder, quite reasonably, if an organization dominated by retail influencers would have ever been able to make such a thing happen. Indeed some wonder if such an organization would have even allowed such a law to pass.
This is why so many producers reached out to us with deep concern when PMA recently trumpeted that it had held a big meeting with important mucky-mucks in Washington, DC.
The whole exercise was explained as an exercise in “brand building.” But the brand being built seems to have been the PMA Brand — not a more general produce industry brand. After all, PMA could have invited representatives from United, WGA, FFVA, TPA, Northwest Horticultural Council etc., to attend the same meeting. That it did not sends a strong message that PMA is focused on its institutional priorities, not viewing itself as part of a larger produce ecosystem in which an organization such as United must have a place.
Government relations in the produce trade is a tricky wicket. One industry leader, who is opposed to a merger, thinks that hope of a merger making for more effective DC representation is mostly wishful thinking. As he explained:
There are, of course, different levels of effectiveness. We have no doubt that United and many other industry groups have been effective at changing legislation and regulations in a way more beneficial to the industry.
However, it is true that the diverse nature of the industry means that nobody has the money to really play effectively in the electoral cycle. For example, the top public policy issue for the trade in this election cycle was clearly the battle the industry fought to keep food safety regulation on a level playing field. The trade lost that battle. In the end, the exemption known as the Tester Amendment — after Senator Jon Tester, Democrat of Montana – allowed certain small farmers an exemption from food safety rules.
PMA and United both opposed the final bill with the Tester Amendment. FMI and NRA supported it — they cared more about being seen as pro food safety than supporting production agriculture — and it ultimately became law.
It was all a convoluted last minute push in the lame duck session. If there had been more time, there actually is some question as to whether PMA could have taken that position. After all, how many supermarket CEOs — aligned with FMI’s position — would have to demand that their Produce VPs resign from the PMA board before the association would adopt a neutral position?
Of course, proclamations are nice but the aftermath of the whole battle shows that the produce trade just isn’t really structured to pay the ante necessary to compete effectively in Washington. Senator Tester made himself Enemy #1 with his amendment and effective advocacy for it. What is the produce industry doing to persuade other senators that they should never put themselves in the position of opposing the produce industry? The answer: almost nothing.
In this situation, a strong advocacy group would have drafted a credible primary opponent and funded him to the gills. It would have been running negative advertising against the senator for months now. Should Senator Tester politically survive a primary battle, a credible political effort would switch to generously funding his GOP opponent and making independent expenditures to weaken Senator Tester politically.
Although it would be nice if such an industry effort defeated Senator Tester — in the primary or the general election — that is not necessary.
In today’s special-interest-driven politics, high-powered, well-financed interest groups want to send a message to the other senators and representatives that they should go oppose some other interest group. They want to establish a “rep” — that if you mess with us, you will be opposed, you will have to spend your life raising money, fighting allegations, etc. You will face well-financed primary and general election opponents, there will be bountiful independent expenditures made against you, on and on.
This is not pretty and not the elevated politics we would hope for our country, but it is the reality in American politics today.
Whether a merger actually occurs may well be related to a key issue for all trade associations in a globalized world. PMA has long had an effort to globalize. Is true globalization compatible with representing the industry before the US Congress?