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Pundit’s Mailbag — PMA And United Need To Remain Separate

Jim Prevor’s Perishable Pundit, July 25, 2007

Our many discussions on the subject of the desirability and practicality of a merger between PMA and United came back into prominence lately when the associations confirmed that actual talks were going on to explore merger, cooperation or other forms of co-existence. As a service to the trade we ran a piece entitled An Industry Discussion: Pros And Cons Of A PMA/United Merger which attempted to lay out the basics of the industry discussion on the subject.

  

This piece brought many letters and we dealt with two of those letters in Pundit’s Mailbag — Finding The Right Answers For Possible PMA And United Merger and, today, we want deal with other aspects of this issue by looking at another letter we have received on this subject:

“Partnerships” aside, the economic and political interests of the growers, shippers and distributors are fundamentally opposed to those of the retailers and food service operators. United, FFVA and WGA saved PACA not so very long ago when PMA sat on its hands.

There are any number of issues where PMA and United must disagree. They have different franchises. We need them both. The issue is how to fund United. Income from produce growing, shipping and distributing is notoriously unreliable, and when those involved have a bad year, there is no choice but to hock the jet, fire all non-family staff, cut the advertising and skip United.

I wish there was a simple solution to this problem, but hopefully those more creative than I can come up with one.

— Frank McCarthy
Vice President of Marketing
Albert’s Organics/United Natural Foods
Dayville, CT

Frank has both the benefit of experience in many different aspects of business and an incisive mind, so he quickly cuts to the chase. Most assuredly, different industry segments have different interests.

This being acknowledged, it still leaves three points open for discussion:

  1. Although we are not certain that PMA would agree with our esteemed correspondent’s characterization of its activity on PACA, even if we accepted that PMA may have “sat on its hands” during the PACA situation, that doesn’t tell us how a new consolidated PMA might react in the future if it did merge with United. After all, one reason the grower/shippers didn’t push PMA to go to the mat on this issue is that they could work through United as well as regional groups. If there was only one national association, perhaps the outcome would be different.

    Still, Frank makes an important point because it might not be different in a good way. If, for example, the grower/shipper community did push the one national produce association to take an aggressive stance on such an issue, the most likely outcome is… someone might form a second association.
    If the grower/shippers won the battle, the retailers and foodservice operators — and certainly their non-produce bosses — would object. So they might start a new association to be very similar to the “old” pre-merger PMA.

    If the grower/shipper segment pushed for this position and lost… well the grower/shippers might feel a need to start a new association similar to the ‘old” United.

    It strikes us as very important that the trade not do something out of idealism and a sort of starry-eyed wish to speak with one voice. The difference of interests that Frank speaks of must be accommodated in any new association structure.

    In our “industry discussion” piece, we raised the possibility that the new WGA Washington office could be the nucleus for a group to represent growers or grower/shippers. One of letter-writers yesterday raised the idea of not having a permanent staffed effort but, instead, raising money on an ad hoc basis as issues of concern arise. In other words, the new national produce association wouldn’t lobby at all, and if anyone wanted to lobby, say on issue such as PACA, it would be expected that ad hoc groups would be set up and funded.

    There are pros and cons to all this: Will WGA be too dominant in some council of regional growers groups? Could an ad hoc approach be effective? The point is that no successful solution can be found that doesn’t recognize the different interests in the industry.
  2. Whether “we need them both” is sort of the key question, and the answer probably depends on how we define “we.” Many large western operations seem to have doubts. Even before WGA opened a physical office in D.C., WGA had long ago hired law firms and lobbyists and flew in staff and members to lobby.

    Many western growers consider WGA to be “their” association. They buy their insurance through them and feel perfectly aligned with them. They feel they need to be members of PMA for marketing purposes and support WGA for government relations, but are not certain they need United.

    Now, and this may be the key that decides it all: We understand from several WGA board members that they have been specifically told by Tom Nassif, President of Western Growers Association that United cannot be relied on to represent the interests of western growers. The opening of a D.C. office, which we chronicled here and here, was an obvious manifestation of that opinion.

    Now the question may be, is it useful to WGA to keep United as a lobbying organization? We would think absolutely.

    There is nothing more valuable in lobbying Congress than an aggrieved constituent. WGA makes a mint on its insurance business and may be able to afford big name lawyers, connected lobbyists and an office filled with the finest Gucci footwear. But all that takes a lobbying effort only so far. On any issue of national importance, what WGA desperately needs is a multitude of farmers in other states with which to make common cause. WGA only has members in California and Arizona.

    In other words, viewed in this sense United is not a competitor to WGA as much as a tool for WGA to use. Let United dial its rolodex and find some member in Maine when the visit is to Senator Olympia Snow; let United find a fourth generation Ohio grower to visit a Congressman there.

    One could make an argument that it would behoove WGA to urge all its members to join United so that United would be strong, and when an issue such as immigration comes up, United would be ready, willing and able to have a contingent from every state prepared to descend on D.C. — something WGA could never do.

    Rationally, the argument would probably win that WGA’s interests are served by a stronger United. Yet the spinach crisis did leave confused the issue of a spokesperson for the grower/shipper segment of the trade.

    Some animosity and jealousy may have entered into the mix during the spinach crisis as the two associations, United and WGA, jostled for position as spokesperson for the trade.

    And substantive policy differences have arisen with WGA looking to USDA as the future regulatory partner of the produce trade while United has seen FDA as the way to go.

    Most associations, like businesses, live because 20% of their members or customers provide 80% of the revenue. If WGA comes to decide United is useful and urges the support of United, United will probably have the resources needed to be effective long term.

    But if WGA tells its members that “we” do not need United, “we” need to put more money into WGA’s D.C. office, United will have a tough roe to hoe.
  3. To go back to Bruce Peterson’s ever-present question on associations — if this organization didn’t exist, would we create it now? — we need to make sure that we don’t look at the situation with blinders on. There may be other options than simply saying United and PMA should exist separately or they should merge.

    For example, even if to lobby government we need an association for the production side of the business, should that association also run joint tradeshows with FMI? Should it run leadership programs? Executive development programs? Fresh-cut events in Europe?

    For that matter if we need a supply-chain marketing organization like PMA, does it need a vice president of government relations? Does it need a PhD to deal with food safety issues?

    Traditionally PMA monitored industry issues for the benefits of its members and it assisted regulators with industry information. Its integrated membership gave it the option to be influential in quiet ways — a vice president of produce at a supermarket can speak to his boss to try to sway him; a foodservice operator can speak to NRA and try to move that association in a specific direction.

    Yet one senses pressure on PMA to do things we are not sure anyone at PMA really wants to do — what is the upside for PMA of taking on expensive lobbying tasks that can only be divisive? But as PMA’s membership becomes distinct from United’s, it no longer matters what United is doing.

    United, with its heart and soul in government relations, feels compelled to develop other programs both to, hopefully, make some money for the association and to maintain thicker links with its members. It leaders are not really convinced that if United didn’t do a trade show and didn’t have many other things to connect with its members that members would just send in checks for government relations.

    Plus, United is not just grower/shippers. Yes, that is the identity it has taken on in terms of lobbying in D.C., but some of the oldest members at United are wholesalers, and the association just merged and brought in a group of fresh-cut processors. Surely these wholesalers, brokers and processors are not going to support an association whose only function is to do government relations for produce growers and shippers.

When the International Fresh-Cut Produce Association had talks with PMA before it merged with United, PMA not only didn’t leap to do the merger, it studied the situation and recommended that IFPA had a pretty good gig going and should keep it up.

One wonders if the logic of Frank’s letter combined with the insight in Bruce Peterson’s search for functionality doesn’t lead to this conclusion: That the industry may benefit from a supply chain marketing association that is vertically integrated such as PMA, but that government relations and lobbying should really be the premise of more focused and specialized associations. A fruit and vegetable grower association, a produce shipper association, a wholesaler and distributor association, a processor association, perhaps all functioning under a “United” umbrella for the occasional “joint statement,” perhaps even all working out of a building owned by some kind of industry trust.

In this way, we would all work together on supply chain and marketing issues through PMA yet would also have our own segmented associations to advocate each sector’s interests while maintaining a mechanism for joint action.

Of course, this sounds intriguing but raises the question of who is going to pay for it all, and do any of these sectors actually think they have sufficient interests in DC to justify a permanent presence?

Perhaps they do and will fund it. But if they don’t, well, doesn’t that tell us something about what the industry actually wants and needs?

Many thanks to Frank for such a thought-provoking letter.

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