I was fortunate to go to Chile in early 1991.

Growers think retailers make all the money
Armand Lobato
The Produce Aisle

Our small group visited beautiful orchards, vineyards and immaculate packing sheds. The trip even included a trip to the port of Valparaiso. There we saw a huge ocean vessel being loaded for the two-week voyage to Philadelphia.

Most valuable to me was the opportunity to talk to growers. It never ceases to amaze me how passionate they are and knowledgeable about sugar-and-acid ratios or in explaining how fruit on one hill matures faster than the on another and why.

All went well until the last day. One buyer from California was getting the brunt of the questions from the growers, as I was just the lowly retail merchandiser. My position was not someone the growers were especially interested in, except one.

“You’re the retail guy?” He thundered (in excellent English). “I want to talk to you.”

I thought I was in real trouble.

“I know what our grapes sell for f.o.b.,” he said. “Yet when I visit stores in the United States, I see how expensive they are. Tell me why retailers make all the money in this business.”

I was in trouble after all. What does a guy say to that? Retailers make ALL the money?

Being the good foreign ambassador that I am, I gave it my best shot:

I explained that when a retailer receives a carton of grapes, we don’t sell the whole case. Customers leave behind a lot of “shatter” — you know, the loose grapes nobody buys. And further, I said, “Overall shrink is around 10%. And that’s if a retailer is careful.”

After that, overhead is deducted from sales. Lots of it. People like to shop in big, clean well-run stores.

“Besides the cost of goods (and freight), we pay for rent, lights, cleaning the store, buying equipment, utilities, labor — the list goes on, everything from the shopping carts to the plastic bags those grapes end up in at the checkout stand.” I offered, “If retailing is such a piece of cake, more people would be getting in on the action. And believe me, plenty fail.”

On average I explained, a retailer is lucky to keep (after interest, taxes and depreciation) 1-3 cents for every sales dollar. They have to sell en-gross (volume) to make it — thus the term “groc-ers.” The grower seemed satisfied with my attempt to say that things are tough for everyone, and we all have a share of risk. We parted friends, an international trade crisis avoided.

Armand Lobato works for the Idaho Potato Commission. His 30 years of experience in the produce business span a range of foodservice and retail positions. E-mail armandlobato@comcast.net.

Have some insight on the relationship between growers and retailers? Leave a comment with your take.