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Pundit’s Mailbag — Power Lies In The Pocket Book

Jim Prevor’s Perishable Pundit, July 21, 2012

Eric Schwartz is a frequent Pundit contributor and has shared many letters and done many interviews over the years. You can see some of the issues on which he has spoken out right here:

Pundit’s Pulse Of The Industry: Dole Vegetables’ Eric Schwartz

Pundit’s Mailbag — How About Subsidy Money For GTIN Conversion?

Pundit’s Mailbag — Dole’s Schwartz Comments On Silent Buyers

Pundit’s Mailbag — More Questions About Leafy Greens Board

Pundit’s Mailbag — The Deadline Approaches

Pundit’s Mailbag — Organic Industry’s ‘Situational’ Standard

Single Step Award Winner — Eric Schwartz Of Dole Vegetables

Our piece, The United/PMA Fiasco: THE SPIN IS JUST HALF THE STORY — Lessons Learned: Open Up To Industry Input And Focus On Big Things First, led him to make a point:

You hit the nail on the head. The power to change lies within the “pocket books” of the membership more so than the boards. As long as companies financially support two organizations, there will always be two. The day they decide with their wallets for one over the other, it will be so.

Both are great associations, but no matter which organization comes out on top, the expertise of the surviving board in either case will find a way to fill the void that the former association left behind. This shouldn’t be about winners and losers, but what offers the best value proposition in a struggling economy.

—Eric Schwartz
President and Chief Executive Officer

Patterson Vegetable Company  
Patterson, California

Without a doubt, there is a kind of oddity in the whole discussion over a PMA/United merger. One large company representative was pointing out to us the other day that he exhibits at the two national trade shows and that he finds one “worthless.” He spends several hundred thousand dollars at each show.

He points out what a waste this is, as much of the money doesn’t even go to the associations but goes to airlines, limo services, fancy restaurants, etc.

He used this expenditure to argue for a merger.

We, of course, asked him why he didn’t stop exhibiting if that was unprofitable for his company? After all, even if he wanted to support the associations, he could probably give a donation of 10% of what he is spending and the associations would come out ahead.

There were lots of specifics: his company probably wouldn’t allow him to just make such donations; he was allowed to spend money on marketing, not donations. Exhibiting was important to certain customers who were involved with the associations, and they didn’t want to offend them. Also his presence attracted other exhibitors to the convention, so the loss to the association was more than just the financial contribution. Likewise, his competitors were still exhibiting and he didn’t want to be conspicuous by his absence.

Of course, we pointed out that these “reasons” for not wanting to exhibit were actually explanations of why exhibiting was profitable – by exhibiting he secured the loyalty and support of key customers and prevented competitors from securing a competitive edge. Exhibiting was not, in fact, “worthless” but, instead, sufficiently profitable to induce him to do it.

Of course, if he could somehow get a law passed banning a second national show, then he would not have to worry bout alienating customers or being conspicuous by his absence.

There is a large flavor of that in all this discussion over merger -- a notion that what some of the big boys want is not so much to see the industry gain great synergy by having only one national trade association as to be saved the pain of having to make difficult decisions on their own

We experienced all this 27 years ago when we were launching Pundit sister publication PRODUCE BUSINESS. The small and medium size companies were quick to support us. The largest companies were cordial but delayed decision. At the time we thought it bureaucracy, but over the years we’ve come to see it was strategy. These large companies have large market positions, so a lot of their marketing is defensive – designed to maintain that market position. Smaller and medium size companies tend to market aggressively to increase market penetration.

What this means is that the larger players might be content with a world where all marketing was banned – as this would save them money while also making it almost impossible for new companies to build market position and thus threaten the incumbent’s market share.

So, although theoretically the proper response to not getting value from a trade show is to simply stop exhibiting, if that show is substantial and credible, big companies find the need to defend their turf by being there. But they don’t see any real upside to exhibiting; it is all defense, so they would just as well have the event not exist.

So the long and short is that these companies are attempting through the merger process to achieve a market situation that would be more optimal for them.

It is not clear, however, that this is even possible.

As we mentioned in our piece analyzing the breakdown in the merger talks, the final plan called for maintaining two shows for at least four years! Whether this would continue is unclear, but four years is a long time and, anyway, it seems unlikely that the combined association would abandon a profitable second event.

Beyond that, if there is a profitable event to be run, one suspects that someone else – a regional association or a private company, would go ahead and fill the market gap.

Indeed, one wonders if the one-association situation being so magnificently negotiated is sustainable at all. One thing we are clearly learning from this experience is that a lot of people don’t prefer one or another of the CEOs of the associations. This isn’t, of course, because of their particular attributes; it is because they are human beings and will get along well with some and not well with others.

The implication of this reality is that when people don’t get along or are unhappy with one association – for policy or personal reasons – they may decide to devote their energy and intellect to something other than the industry – which is a loss for us all – or they may decide to set up a new association.

We saw this happen for policy reasons with both the National Association of Perishable Agricultural Receivers and the International Fresh Cut Produce Association.

In our piece analyzing the pros and cons of a merger, PMA And United: To Merge Or Not To Merge? That Is The Question,we mentioned the case of Karen Caplan, Vice President/Secretary at Frieda’s, Inc. We pointed out that she had been on the PMA board, had hoped to rise through the ranks to become chairman and was thwarted. As a result, she took her formidable personality and skill set and walked over to United where she ultimately became the first female chairman of either of the big two national associations -- Lorri Koster, co-chairperson at Mann Packing, was the first female chairman of a national produce trade association when she chaired IFPA.

If there hadn’t been United… if there was no pressure valve to let people who weren’t favored at PMA – for policy or personal reasons – to still go and contribute to the industry, what would Karen Caplan have done?

Maybe she would have poured her energy into non-produce ventures – a loss for the trade or, maybe, just maybe, she would have worked to form a new trade association.

This seems like an awful lot of work to achieve a status – one national trade association – that may very well not last very long.

Many thanks to Eric Schwartz of Patterson Vegetable Company for sharing his insight with the industry

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