Page 31 - December2018
P. 31

stock, passing it through to smaller distribu- tion centers that act as  ow-through hubs.
On Aug. 14, the retail giant opened a $135 million DC in Irvington, AL, spanning 2.5 million square feet, about a 15-minute drive for trucks coming in with imported goods from the Port of Mobile.
To improve its sourcing of domesti- cally grown food, on Oct. 18, the retailer announced it would be building a high- tech distribution center for fresh and frozen groceries in Shafter, CA, which is set to open in the fall of 2020.
Michael Castagnetto, director of global sourcing at Robinson Fresh in Eden Prairie, MN, says the drive from some retailers to source directly comes from a desire to control the supply chain and get better purchase prices.
“But the truth is in today’s information world, the markets are what the markets are, and the ability to make a signi cant change in the purchase price by buying direct from the grower is minimal,” he says.“We’re starting to see people recognize the full value of the trans- action from purchase to consumer, and that is shaping buying decisions in categories, certainly the volatile categories that we operate in.”
Castagnetto’s colleague, Gary York, the company’s vice president of sales marketing, sees the direct buying conversation as a euphemism for  nding what’s best in the supply chain.
“Ultimately when you dig in deeper, what all parties want is for each of the parties within the supply chain to bring value,” he says. “In today’s world, you’re going to have to have contingency plans — you’re going to have outlets for the rest of that crop that is different from their retail specs that they can’t take from the grower.”
A second plan is needed in the event of geopolitical disruption, while York also points to the value that brands with strong consumer recognition can bring to retailers. In Robinson Fresh’s case, this includes Green Giant Fresh, Tropicana and Welch’s Grapes.
Castagnetto says direct sourcing is dif cult for crops that are “nomadic” by nature.
“A buyer at a retail level would be forced to manage grower relationships across six, seven or eight growing regions, which means the retailer’s vendor base is changing multiple times,” says Castagnetto. “On a global scale, that could be a product like mangos that we manage in Brazil, Ecuador, Peru, Costa Rica and eight different growing regions in Mexico.
“When you think about how a buyer would manage that direct relationship with growers across  ve or six countries and 14-16 growing regions, that’s a pretty tall tale, especially when some of those seasons may only last four to six weeks.”
According to the National Mango Board (NMB), per capita mango consumption in the U.S. increased 82 percent from 2005 to 2017. Would this growth have been possible without an organization such as the NMB, and would boards such as this exist in a world of retail- er-led direct sourcing programs from farms?
“Each commodity is different,” responds Manuel Michel, executive director at the NMB in Orlando, FL. “When you have commod- ities and there are only a few large players — there are a few that come to mind like pineapples and bananas — that whole scenario is very different to when you have an industry that’s very fragmented.”
“It bene ts everybody to work together to do the promotions and increase demand all together. That’s one of the reasons why you see commodity boards with some commodi- ties and not with others.”
Michel claims the increasing trend of direct mango sales to supermarkets has been more grower-led than retailer-led.
“In the past  ve years, we’re seeing them becoming more vertically integrated, so there are some growers who reach all the way to importers now,” he says.
“Some of the original ones were Coast Tropical [McAllen, TX], Diazteca [Rio Rico, AZ], Ciruli Brothers [Rio Rico, AZ] — they’re involved from the production side all the way to the export-import side. Out of San Fran- cisco, there’s also Splendid by Porvenir of the Arcos family.”
As a leading global supplier with a high percentage of the product it supplies grown on its own farms, buying from Del Monte Fresh Produce is effectively direct-sourcing.
This is the view of Del Monte’s vice presi- dent of marketing, Dionysios Christou, whose company is based in Coral Gables, FL.
“An increase in direct sourcing is an opportunity for Del Monte as it enables us to remind retailers, foodservice and the conve- nience sectors that, while we are one of the largest importers of fresh produce, we are also one of the largest producers of the prod- ucts we offer,” he says.
But in terms of the pure model where of ces are opened overseas, Christou says
retailers’ exploration of direct sourcing has “levelled off” over the past few years.
“Investing in the resources required to implement a successful direct sourcing program can be a signi cant risk for retailers, as this is not their primary business,” he says. “Retailers opting to source directly lose some of their  exibility, which may mean they cannot secure the most advantageous conditions.
“There is also the risk of retailers being forced to become suppliers themselves if market conditions change and they need to  nd a solution for excess product, which is an added risk to their business.”
He recommends retailers carefully consider the risks and their available resources before taking on a direct sourcing program.
“Suppliers are taking on the burden of logistics, availability and demand,” says Christou. “A good supplier will work to  nd retailers the product they need even when supply is limited, for example early or late in the season or as a result of the impact of pests or natural disasters. If the retailers are sourcing directly, they may not have the resources or relationship needed to be able to source and deliver quality fruit and vegetables to consumers during these times.
“If retailers want to try direct sourcing, I would recommend that they start with a small volume of products, so they can under- stand what is involved and assess the bene ts and risks in a controlled way.”
Markus Fellmann, regional head of Perish- ables Americas for logistics company Panal- pina of Basel, Switzerland, says direct global sourcing is a “very relevant” trend that the company sees continuing to develop.
“The evolution of this trend is accelerating faster in the Western world and modern retail, which includes the U.S., driven largely by regional and global supermarket and retail chains,” says Fellmann, who is based in Panalpina’s of ce in Miami.
“The direct sourcing model has been the preferred sourcing model for dry cargo for eternity. It is now making its way into the perishables, and for sure, is there to stay and to grow in the future. The decision-making, space and rate negotiation is shifting to destination.”
However, Fellmann clari es importers will continue to have an important role, even though for some, their roles may change, such as extending into areas such as qual- ity-check, re-packing, invoice checking and payment functions.
“The grower continues to concentrate on producing the best possible quality product with longest possible shelf life,” he says. pb

   29   30   31   32   33