Taste Of Chicago

It may not be a landmark tourists can flock to like the Museum of Science and Industry or the Shedd Aquarium, but the Windy City’s wholesale terminal—the Chicago International Produce Market (CIPM)—is an institution in the Midwestern produce industry.

The CIPM contributes to a booming food industry with more than 7,300 restaurants and nearly 300 grocery stores so visitors and residents alike can taste Chi-Town’s famous foods, from the Chicago Hot Dog (chocked full of fresh vegetables) to deep-dish pizza (smothered with chunky tomato sauce and a variety of toppings).

At the heart of the Windy City’s food business are the CIPM’s merchants, many of whom have been with the market for decades and are third- and fourth-generation family businesses. There is also a fair number of wholesalers based off the market, preferring to conduct business out of nearby facilities where there’s more space, less congestion, and supposedly, less competition.

An example is Blue Island Produce, Inc., an importer specializing in avocados, located across the street from the CIPM. “With the market right across the street, our location is an advantage,” comments Alicia Suarez, the company’s office manager, who believes less congestion can mean better customer service.

Broad Shoulders & Big Benefits
Chicago, known as the “City of the Broad Shoulders,” offers some awesome advantages to produce businesses. First and foremost is the city’s ideal location: it is nestled on the southwestern shores of Lake Michigan near the nexus of six interstates, exceedingly helpful for domestic and international trade.

“Chicago is one of the most im-portant markets in our global shipping network, thanks to its connectivity to Class I rail, ocean shipping, truck transportation, and one of the world’s leading airports,” explains Ryan Sugrue, general manager of sourcing in Chicago for Robinson Fresh. “This location enables our customers to have better access to these transportation options, and positions our company to build on our decades of rapid expansion in Chicago,” he adds.

Scott Weber, vice president of Ruby Robinson Company, a distributor located outside of metro Chicago in Buffalo Grove, says the Windy City offers endless sales opportunities for produce professionals. “As a grower/ shipper/distributor, one of the advantages of doing business in Chicago is we have the entire spectrum of businesses to sell to,” he points out. “We sell to wholesalers and terminal market accounts, foodservice companies that are publicly traded or privately owned, and super-markets, which are publicly traded and privately owned.”

Weber cites the number of inde-pendents in the Chicagoland area as the “bread and butter” of the CIPM. “The independently-owned grocers feature fresh produce every day, 365 days a year,” he adds. Sugrue relishes the assortment of retailers in Chicago. “Beyond the well-known major retailers, there’s a healthy amount of independent retailers, and emerging retail stores for customers to choose from.”

Thanks to Chicago’s extended service area—which encompasses not only its sprawling suburbs but portions of Indiana, Michigan, and Wisconsin as well—Sugrue says there seems to be enough business to go around. “Chicago is one of the largest terminal produce markets in the United States,” he explains, “making it a key location for continued growth.”

Adolfo Vega, Jr., produce manager for La Hacienda Brands, Inc., a distributor located just outside of the terminal market, reflects the same sentiment. “There’s a lot of diversity in Chicago and a lot of different [retail] markets,” he comments. “I think it’s one of the biggest places to do produce business in the entire United States.”

Windy City Trends
In breezy Chicago, it seems the winds of change are constantly bringing in new trends. The past year or so suppliers have noticed several product developments as well as some shifts in demand.

Delivering More Options
In Chicago and across the Midwest, it seems prepared meals with fresh pro-duce are on the rise. “Home delivery services such as Blue Apron, Home Chef, Hello Fresh, and Plated seem to be growing and gaining popularity,” observes Weber. “It’s another market for the grower-shippers, and apparently, [consumers] are willing to pay for the very best quality.”

When these delivery services run short on product, Weber says they look to local terminals and foodservice com-panies to supply fresh product on a just-in-time basis. “It’s another op-portunity for the wholesalers and foodservice companies to move product and develop more business.”

In addition to home delivered meals, Weber has also noticed a surge of hot bars, salad bars, juice bars, and taquerias in many area supermarkets. “Naturally, these bars all use fresh produce,” he adds. “They’re often the best restaurants in the neighborhood!”

Along these same lines, Sugrue has noticed an increase in pre-cut and ready-to-cook produce. “Convenience is king,” he declares. “The on-the-go consumer has realized the benefit of having already cut or easily consumable produce such as pre-cut vegetable packages or bananas that require no utensils. Ready-to-cook produce has become more popular, but may not last as long on the shelves.”

Organics on the Rise?
Reflecting a nationwide trend, Chicago produce businesses continue to see climbing demand for organic fruits and vegetables. “We’ve seen an increase in organics across the country, and Chicago is no different,” Sugrue points out.

Demand has grown so quickly, Sugrue says, the industry has not been able to keep pace with supply. “This is the industry’s largest annual dollar gain, with nearly 5 percent of all the food sold in the United States today being organic—despite the continued struggle to meet consumer demand.”

Chicago International Produce Market

Where: 2404 S. Wolcott Avenue, Chicago, IL 60608
Contact: 847 585-0701 / www.chicagoproducemarket.com / info@cipm.org
Hours: Monday to Friday 8:00 am to 12:00 pm; closed Sundays, New Year’s Day, Memorial Day, Fourth of July, Labor Day, Thanksgiving, and Christmas Day.
(although these are the officially listed market hours, most merchants open their doors as early as 3:30 am and offer reduced hours on Saturdays to workers).

Stats & Snippets:
• 22 independent produce merchants on the premises
• Facility sits on 33 acres in Chicago’s lower west side, near interstate 55 (also known as the Stevenson Expressway) and Midway Airport
• 450,000 square-foot warehouse facility
• Largest terminal market in the Midwest
• Though the current location is relatively new, the CIPM has been in operation for more than 100 years
• On-site value-added services (including ripening rooms, custom packing or repacking, and private label programs)
• On-site transportation services (including load consolidation and cross-docking)

Nearly 13 percent of all produce sold in the United States is now organic, according to the Organic Trade Assoc-iation. “Produce has always been and continues to be a gateway to organic,” explains Sugrue. “More than half of all U.S. households are now purchasing organic produce.” In response, Robinson Fresh is paying attention. “We’re proactively tracking trends through investments in an organics-focused category team and account managers,” he adds.

Some produce professionals refuse to buy into the organic hype. “The whole organic thing—I just don’t go for it,” quips Vince Gregosanc, Jr., in buying for Battaglia Distributing Company, Inc., which does not handle organics. “I’ve seen an increase in demand for organics, but it’s not huge,” he contends. Further, he believes there is even something of a backlash against organics in some consumer segments.

Hispanic Produce Boom
Seeing as Illinois is home to one of the largest Latino populations in the nation, it’s no surprise Chicago distributors and retailers move a great deal of Hispanic produce. The state’s Latino population ranked fifth in the nation (after New York, Florida, Texas, and California), with more than 2 million people, and 95 percent live within Chicago and its surrounding suburbs according to a Pew Research study

Vega of La Hacienda Brands, which specializes in all types of Mexican fruit and vegetables, says he continues to see climbing demand for cilantro, jalapeños, Roma tomatoes, and white onions. When it comes to truly ethnic produce, however, there’s one clear frontrunner in Chicago-land for the distributor: “My biggest specialty is papaya,” he asserts, and yes, demand has been climbing the last few years.

RETAIL SNAPSHOT

The majority of produce pro-fessionals use two simple words to describe the current retail scene in Chicago: highly competitive. And although Dominick’s departed the market several years ago, there are still plenty of viable players remaining in the Chicagoland retail game.

These contenders run the gamut from big box stores and specialty chains to deep discounters and niche ethnic markets. “Chicago is such a diverse retail scene with more chains and produce commodities to offer consumers,” remarks Mark Pappas, president of Coosemans Chicago, Inc.

Ryan Sugrue, general manager of sourcing in Chicago for Robinson Fresh, says large retailers like Aldi, Walmart, Target, Jewel, Costco, Sam’s Club, and Meijer maintain a significant presence in Chicago.

“Even with these giants,” Sugrue observes, “there are a ton of local independently-owned stores, which makes for a really healthy marketplace.” There is, however, one nontraditional retail chain that has also made its presence quite known this year: Amazon. In October 2016, the online retail titan expanded its AmazonFresh grocery delivery service to Chicago, and continues to build distribution and fulfillment centers in the region. At last count, six facilities were either already built or planned, with the megaretailer bringing more than 7,000 jobs to Illinois.

Sugrue says Kroger is also a major player. “Kroger has also grown its footprint in the area through acquisitions of other retailers,” he explains, adding that he’s also seen emerging retailers like Fresh Thyme popping up in Chicago and the surrounding suburbs.

Pappas says there are also some mom-and-pop stores. About 10 years ago, he says, these neighborhood stores were the norm, but now the pendulum seems to be swinging the other way. “We’re seeing a slight push in the other direction, especially now that we have Mariano’s [part of Roundy’s, which was acquired by Kroger Company at the end of 2015] in Chicago,” Pappas says. “Some of the smaller chains have also done very well, like Pete’s Fresh Market and Garden Fresh Market, but the bigger stores like Mariano’s are having a major impact.”

“Honestly, I see an oversaturation of supermarkets in Chicago,” comments Adolfo Vega, Jr., produce manager for La Hacienda Brands, Inc. “There aren’t many spots where you find just one supermarket nowadays. Each town has at least three, four, or five different retailers, so there’s a lot of competition. I don’t want to wish bad luck on anyone, but I could see some going out of business.”

Scott Weber, vice president of Ruby Robinson Company, Inc., agrees, predicting there will likely be a “thinning of the herd situation” in the near future. “There are only so many produce dollars to go around, and the stores that try to be everything to all people are in for a sobering reality,” he asserts. In such a cutthroat environment, Weber emphasizes that specialization, to a neighborhood and its community, can be key to a market’s survival.

Kale Craze Continues
Along with the rest of the country, the Midwest continues to see high demand for kale. “We’re seeing a huge increase,” confirms Branden Wandersee, head of operations and purchasing for V. Marchese, Inc., a foodservice distributor based in Milwaukee, WI, which is 92 miles straight north from Chicago, along the Lake Michigan shoreline.

Over the past three years, U.S. kale sales have jumped by more than 30 percent annually, with an overall price increase of around 80 percent—partially due to demand outpacing supply.

“Kale is probably the biggest mover for us right now,” shares Wandersee. “It’s one of those power greens, like spinach.” He says Marchese is working with a fresh-cut facility to create salad blends featuring kale and other popular vegetables. “We have what we call the ‘power blend,’ which includes broccoli, Brussels sprouts, kale, and carrots.”

Homegrown Produce
Locally grown fruits and vegetables remain popular in Chicago and beyond. “During the summer, we’re seeing a huge increase in customers looking for local product,” Wandersee says.

Sugrue of Robinson Fresh agrees, and notes, “More people are growing produce in a three-state radius than ever before.”

Unfortunately, thanks to the region’s brutal and often extended winters, most Midwest-grown produce has a short window of supply. The good news is the appearance of local green-houses to help fill in the gap. “We deal with some smaller greenhouses here in Milwaukee and Canada that offer [product] year-round, like micro-greens and some spring mixes and salads,” notes Wandersee.

Sugrue is a fan of artisan, small batch products, which he says are rising in popularity. Though they keep consumers coming back for more, it’s often difficult to keep up with demand. “From the business side of things, this is the trickiest trend,” he admits.

“Small batch products mean having a deep understanding of grower avail-ability and consumer demand,” Sugrue continues. “It also means we need to put products on a truck that will fill less than truckload, but still maintain the proper temperature to keep the food as fresh as possible. It’s an area of the business that needs to be carefully monitored and nurtured.”

Chi-Town Challenges
The rough patches encountered by Chicago suppliers are not much different from those faced by other U.S. produce businesses. “Our challenges are the same every year,” Weber states, rattling off the usual suspects: competition, weather, transportation, availability, collections, sales, food safety, personnel changes, and policy changes, to name a few.

“As always, we adapt,” Weber adds. “We work and figure out whatever needs to be done.”

He also says they’ve learned to foresee and react quickly to potential issues, particularly when it comes to pricing, quality, and availability.

“For example, if we anticipate a shor-tage of product, we’ll alert our accounts and have them order early,” Weber explains. “In the Chicago office, we have three managers with over 35 years of produce experience. I’m pretty sure we’ve experienced just about every produce-related challenge. This experience helps with the prediction process.”

Wandersee of Marchese says one of the toughest challenges of 2016 was a lack of demand for some items. “There was more product than demand, so things have been very, very cheap, and margins have been minimal.”

Election Jitters
Despite an often sluggish economy in 2016, most say business is already bouncing back. “Last year was a little slow, and think a lot of it had to do with the election,” Wandersee reflects, and he certainly isn’t alone in this belief.

Businesses across every industry blamed the economic slowdown on consumer anxiety surrounding the results of last year’s presidential election. In a survey released in June 2016, 60 percent of business economists said uncertainty about the November vote was damaging prospects for growth last year.

“It was certainly a polarizing election, no matter which side of the fence you were on,” comments Mark Pappas, president of Coosemans Chicago, Inc., part of the Coosemans Worldwide family of companies. “I don’t know if it was the political climate, but consistency was a challenge in the past year,” he admits, adding that he and his colleagues were always able to predict busy times in the past—but last year was different and perplexing.

“For example, the day after Thanksgiving, there’s a big push for Christmas for all the corporate parties. But a lot of that never materialized last year,” he shares. While the distributor was still able to meet its sales numbers, Pappas says the sales came from different areas in 2016.

“We knew the sales were out there, but we had to figure out how to get them,” he explains. “This past year, if you went on autopilot, the plane was going to come crashing down—and I think some of it had to do with the election.”

Fortunately, most businesses have seen a steady uptick in sales since the election. Marchese’s Wandersee is plenty optimistic about the rest of the year. “We’re looking forward to a good year in 2017.”

FRESH FORUM
Do you think the Trump presidency will affect your business or the industry as a whole?

Jim Lemke – President, Robinson Fresh
We remain optimistic of the pro-business and agriculture stance presented in Trump’s campaign. That said, there are three actions we monitored before the election and continue to monitor that have the opportunity to significantly impact our business: corporate tax rate cuts, trade reform, and immigration reform. Corporate tax rate cuts will have a positive effect on our (and all) business, allowing us to invest more capital back into growing our company. Investing more capital means hiring more people, purchasing more services—all things that help grow the economy. However, [President Trump] has also commented on proposed immigration reform—depending on his final proposal, many of our growers within the United States may feel an impact on their workforce.

Mark Pappas – President, Coosemans Chicago, Inc.
It’s still too early to tell, but Trump seems to be more business-friendly with less regulations, which I think could potentially help us. I know it’s harder to bring in product like tomatoes right now, but I’m optimistic. I hope he makes things more conducive to doing business, and I think the whole political climate will eventually calm down. I will say the influx in the stock market is a good sign. Traditionally, when the stock market is doing well, consumers spend more money in stores and restaurants. So, I hope it will be a positive impact.

Daniel Suarez – President, Blue Island Wholesale Produce, Inc.
I think it will affect us because most of our customers are Mexican, and [many will be] going back to Mexico. So, there will be less business here—Mexican customers are our bread and butter.

Adolfo Vega, Jr. – Produce Manager, La Hacienda Brands, Inc.
I certainly hope not. It’s still fairly early in his presidency, so we’ll see. As far as the taxes he wants to put on Mexican imports, there hasn’t been anything shown of it yet. So, until something actually happens, it’s hard to predict how it will impact us.

Branden Wandersee – Head of Operations & Purchasing, V. Marchese, Inc.
All I can tell you is that before the election, it was very slow for us and a lot of area restaurants, too. But after the election, we’ve seen a steady increase in sales. So, I think it’s looking positive.

Scott Weber – Vice President, Ruby Robinson Company, Inc.
Regarding the Trump presidency, I’m taking a wait-and-see attitude. I’m not worried in the least that it will negatively affect our business at Ruby. We adapt to changes quickly. It’s possible Trump’s policies will affect the labor pool at the grower level, which may make it more difficult for growers to maintain and develop business. Of course, I’m referring to immigration.

It will be interesting to see if his policies change, improve, or relax the food safety regulations we all are dealing with at this time. Food safety has become very complicated and extremely expensive. It’s good for consumers and a challenge for the produce industry.

Vince Gregosanc, Jr. – Buyer, Battaglia Distributing Company, Inc.
President Trump won’t be able to touch NAFTA—he’s too much of a business man (and a darn good one if you ask me). When you get into the fiscals and financials of it, I don’t see it hurting us. There are going to be a lot of revisions, no matter who is president: the industry changes, times change, markets change, the dollar’s value changes. So it doesn’t matter whether we have a Republican or Democratic president—NAFTA was born on the premise that no matter what, it’s going to need to be amended.

Now if [President Trump] tries to power-amend the thing to really crack down on the borders, that’s the only thing I see really hurting us in any shape or form. But I really think he’s going to have his hands full with everything else going on in the world. The only thing I see getting tougher is getting trucks across the southern border.

Weather Ups and Downs
Weather, not surprisingly, is an on-going headache. “Mother Nature is our biggest challenge,” asserts Gregosanc. “It’s tough,” he adds, but knows it is out of his control. During the harshest Midwestern winters, not only does produce supply plummet, causing prices to rise, but snowstorms and sub-zero temperatures cause many consumers to skip or limit grocery visits. This, in turn, can lead to a dramatic drop in sales.

“Two years ago, El Niño was harsh on produce,” says Sugrue. “Produce was harder to source and consumers didn’t want to go outside and shop in the cold.” However, he says, this is simply the nature of the produce business.

“When you’re talking about the heart of our business—produce supply—it’s important to remember that agriculture is cyclical in nature,” Sugrue points out. “There are down years, and there are up years. In the down growing years, we involve our geographically diverse network of producers to help fill any gaps in our local or committed supply.”

And as online grocery fulfillment programs gain traction, Sugrue says this could help boost produce sales during even the most brutal winter storms—since they allow consumers to shop for produce and other grocery items from the warmth and comfort of their own home.

Of course delivery could be affected by inclement weather, but it’s still a viable option more consumers are embracing.

Neither was much of problem this year, though, as Chicago had a record-breaking mild winter with little snow or ice, and few days with frigid temperatures—a signature of the Windy City—which were far below the average.

Transportation Struggles
For many Chicagoland distributors, transportation is by far the greatest challenge. As business costs rise and new regulations take effect, some drivers, independent owner-operators, and brokers are throwing in the towel.

Gregosanc says there are a number of “independents saying they can’t do this anymore. The insurance, the fuel, the hours of service, it’s tough. These third and fourth generation truck drivers just cannot afford to stay in business.”

In the second quarter of 2016, 120 U.S. trucking companies with an average fleet size of 17 tractor-trailers closed up shop, according to an analysis by re-searcher Avondale Partners LLC. That’s an additional 70 firms more than the same quarter in 2015.

To make matters worse, diesel prices continued to climb through the end of last year. The average price of on-highway diesel fuel jumped by 4.6 cents during the last week of 2016, reaching nearly $2.59 per gallon at the pump. That’s 37.5 cents more expensive than the same week of 2015. Though this doesn’t compare to the shockingly high prices of a few years ago, it still affects any trucking outfit’s bottom line.

“It’s horrible, and I think this is an area Mr. Trump needs to focus on,” Gregosanc stresses. “It’s the biggest issue right now. Trucks are tough.”

On The Horizon
Despite the obstacles, struggles, and headaches, Chicago produce is still alive and kicking, and most industry pro-fessionals believe little will changein the coming year. After all, the Windy City is an extremely popular destination for travelers from across the country and even the world—and this trend is unlikely to change in the foreseeable future.

“Issues aside, we’re still going to be a big tourist attraction,” comments Gregosanc. “There will always be a need for the cornucopia of vendors here, and there are always going to be niche markets, because it’s Chicago. It’s a melting pot of people, personalities, incomes, socioeconomic structures, and tastes.”

“I think 2017 will be very big with more trends coming around,” shares Wandersee. “I guess we’ll see as the year goes on.”

Sugrue believes Chicago will also see more emerging retail stores, whether it’s large format, small format, club stores, or home delivery options. “With 9 million-plus people in the Chicago metro area,” he adds, “there is opportunity for everyone.”

Images: Kryvenok Anastasiia & Chicago International Produce Market/Shutterstock.com