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How Much Duplication Is There?

Jim Prevor’s Perishable Pundit, July 30, 2012

Another thoughtful letter on the PMA/United imbroglio came our way:

I disagree with those who claim we have two national organizations duplicating efforts. The PMA is a large national organization that serves as a window through which everyday more foreign companies access the US produce scene. 

For most of the trade, mention ”the PMA” and they think Fresh Summit.   United Fresh is the shared Washington, DC office of the regional grower groups like the California Grape and Tree Fruit League.  The staffs feel totally different. United Fresh feels like a legislative office, and PMA feels like an embassy in a friendly country.  The missions are different so the staffs have evolved differently.

The Florida tomato industry is preparing for a trade war with the Sinaloa growers.  Could Bryan Silbermann summon Jorge Ibarra and Reggie Brown to a Camp David-like retreat on the Delaware seashore and broker a peace deal?  If the FMI and NGA aggressively united to eliminate Country of Origin Labeling, what would PMA do?  

A word about the two conventions: it astounds me how many view the primary benefit of a merger being the elimination of redundant conventions.  It shows the shallow level of engagement of our industry to think the most important thing these organizations do is host their respective trade shows.

With regards to the business model, PMA’s Fresh Summit has been successful based on large sponsorships and a trade show with every year more tangential attendees.  The trend for trade show attendance overall is down. Lots of buyers and sellers is what is promoted at Fresh Summit.  But buyers and sellers of what?

I used to be an exhibitor under the mistaken idea I was a seller.  I was paying to be a captive buyer.  If the large grower-shipper organizations with the big booths, dozens of attendees and the high level sponsorships pull out the way the large beer and soft drink companies pulled out of the FMI show, what happens?     

What happens in a world where the Fresh Summit doesn’t generate the huge surpluses?

— John Pandol
Director of Special Projects
Pandol Bros.
Delano, California

We appreciate this letter that deals with four important issues in the debate over the future of United/PMA:

1)  How much duplication is there?

This is a key question, and the answer is not clear. Some programs may do similar things — say United’s program with Cornell and PMA’s newer program with Thunderbird — but these are relatively small programs. The Cornell program tops out at 40 registrants. It is a big industry and the industry can fill many programs, each different in various ways. Even duplicative programs done at different times and in different geographies can appeal to different audiences. So there doesn’t seem to be any industry outcry to eliminate these types of programs.

Even government relations is questionable. Sometimes two slightly different associations can each have better success at attracting different allies. Maybe PMA can attract FMI and NRA to ally on some issues where United might have better success with various non-produce growing farming associations fighting for issues such as immigration reform.

We can say this: When the two associations just went through a whole process that included creating a pro forma budget, they found almost nothing that was so obviously duplicative that it had to be obviously zeroed out.

2)  How to handle issues where buyers disagree with sellers or different growing regions or commodity groups disagree with each other.

As John points out, the idea of unity is all fine — right up to the point where there is something to disagree about. If the retailers hate the PACA Trust and grower-shippers love it, then a single association would either alienate a portion of its membership or punt and not take a position at all. The question here is whether it really makes sense for a vertical association to have advocacy as a key component.

Of course, even an all grower association confronts these issues. When NAFTA was hot, the interests of Washington apple growers — looking for markets to sell to — and Florida tomato shippers — looking to block entry of winter tomatoes — conflicted. The reality is that the produce industry is composed of crops and regions with many disparate interests, so making government relations the kingpin of any association in this industry requires great skill to effectuate.

3)  Are two conventions too many?

There is little question that lots of people see the primary benefit of a merger of the two trade association as getting rid of one convention — though the merger plan doesn’t contemplate doing so for at least four years.

The real question is why is this even an issue? If businesspeople don’t find value in a convention, you would think they would stop exhibiting or attending.

As we detailed in our piece, Three Possible Reasons For The Collapse Of The United/PMA Merger Talks, the problem is more complicated:

The issue our letter-writer alludes to is that big companies spend a lot of money with the associations that they would rather not spend. They spin this as supporting the associations and, doubtless, sometimes, that is true. For the most part, though, it is marketing by another name. So if a big buyer asks for a sponsorship, the vendor feels it is in its interest to say yes. Or the vendor doesn’t want bad publicity, say trade press reports that the failure of Company X to renew its booth has led to a collapse of exhibitor numbers at one show and threatens its viability.

There is a lot of evidence that the large well established tobacco companies became more profitable when cigarette advertising was banned. They saved on the expenditure, and new entrants couldn’t easily challenge their dominant market share. Equally, if a law was passed against trade shows or publications, these giants might be more profitable. In other words, if trade shows were banned in the produce industry, it might well help the profitability of major players as it would reduce their marketing costs while preventing smaller players from building market share — but that doesn’t mean the overall industry would be larger or more prosperous.

So many large companies do not want to drop out of the second show; they want to negotiate it into non-existence.

4)  Future of trade shows/sustainable business model.

When we wrote our piece, PMA And United: To Merge Or Not To Merge? That Is The Question, prior to the talks collapsing, we detailed the various issues surrounding a merger. One part we neglected to write about was the danger of projecting the present state of things into the future.

All businesses have lifecycles, and nobody can be 100% certain of the future for any business. Certainly consolidation has put pressure on trade show attendance — it has also increased the value of each buyer attending. PMA’s move into the global marketplace provides buyers of value to many fruit shippers, but makes large portions of the attendee base irrelevant to many vegetable producers.

PMA’s success is intricately tied up with the trade show. One reason PMA’s membership numbers are so high, with so many members who do not belong to United, is that these companies get discounts on participating in Fresh Summit by being a member. One wonders how many would bother joining if the price of exhibiting or attending was the same whether one were a member or not?

There has been notable consolidation by some of the big Salinas-based shippers at the trade shows, which has been more than compensated for by expanding international participation. But this could all collapse. The foreign participation in trade shows is often government subsidized and such budgets are under strain. There is now a plethora of regional alternatives for marketers and attendees. Video conferencing also has been advancing enormously.

For better or worse, the industry has been able to have its cake and eat it too. It could attend and exhibit at a trade show that was presumably profitable for all concerned — and then generate such a surplus that it could fund all kinds of projects, from the Produce for Better Health Foundation to the Center for Produce Safety. One wonders if individual companies actually had to write checks for these purposes, how much of all this would the industry desire to explicitly pay for?

Many thanks to John Pandol for helping us think through such an important issue.

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