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Produce Business

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American Food & Ag Exporter

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Pundit’s Mailbag — The Ethics Of Abandoning Short Term Profit For Long Term Gain

Jim Prevor’s Perishable Pundit, May 25, 2010

Our piece, “You’ve Restored Our Faith In Humanity” Award, followed by our Pundit’s Mailbag — Moral Character Carries The Industry In Hard Economic Times, brought this missive:

It is always great to hear of folks with upstanding moral character in this industry, especially in light of the recent Salyer and now, apparently, the HerbThyme situation… It begged us to share what happened this past season in what is known as the “scrappy” world of winter imports where survival of the fittest is the battle cry.

As you know, this past winter Florida had a freeze, which meant that those involved in imports from Mexico stood to make a killing on the deal. Many did. Yet what separated the “boys from the men” here were that some of the importers/distributors and growers who, even though they had a right to charge what they could… to short when they could get away with it… in short, to take full advantage of the situation with impunity… decided not to do so.

In our contacts with retail buyers, we heard of such companies: few but notable. We heard of folks who decided they would remain steady with their customers and continue to offer the same pricing and delivery they had always provided. In short, they declined to take full advantage of a situation where no one would have blamed them should they have done so. To us, that spells integrity.

We need more of these stories…

— Veronica Kraushaar
President
VIVA Global Marketing, LLC
Nogales, Arizona

Sorry, Veronica, but we see no ethical dilemma in maximizing profits. In fact, we think when hurricanes and other natural disasters hit and people attack some for “profiteering” because they sell items at high prices — they are actually increasing human suffering. It is, in fact, those high prices that motivate others to find ways to overcome the logistical difficulties and get product to those who need it.

Does that mean we would always try to charge what the market will bear? That depends on the nature of our relationships with buyers. If we were selling our product at auction, we would happily take what we could get — certain that if things were in oversupply, our customers would pay as little as they could.

If we were dealing with a chain on a regular basis, usually the relationship modifies the market a bit — neither rising as fast nor dropping as fast as the commodity price. Very possibly, to help our customer and to avoid being seen as mercenary, we would sell for less than we could get elsewhere.

It is important to note, though, that we would be doing this to sustain and strengthen our relationship with the customer — in other words, we would be doing this in the hope of making more money in the long run than we could hope to make by maximizing our short term profit.

One key ethical issue involves honoring contracts and agreements — yet even this is a complex area. If a contract contains a force majeure clause, or if a statute calls for such a clause and a contract doesn’t specifically disavow it, then the contract itself covers circumstances under which it won’t be honored.

The Poppa Pundit taught us that one should use a market, not abuse a market. We took that as a teaching that if you want to be in business a long time, you have to not just think about today, but also about tomorrow, and bankrupting your customers isn’t a useful way to build a business.

The reason for exercising pricing moderation is that one is teaching one’s customers that working with you is valuable because, among other things, you will take care of them when supplies are tight.

Yet ethics is never so simple and moderating the pricing may sound like a nice thing to do — but often, in produce, the marketer doesn’t fully own the produce. If the marketer is representing a grower, but not getting all he could in order to build customer relations, maybe he is cheating the grower who, after all, may use a different marketing agent next season.

Many thanks to Veronica Kraushaar and VIVA Global Marketing for helping us think through this important subject.

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