Auctions suit market gardeners

Press, 23 September 1983, Page 21

Auctions suit market gardeners

DAVID LUCAS

Most Christchurch market gardeners appear to be content to sell their produce through the central marketing system (or auction) rather than sell direct to retail outlets.

Selling by auction has been the main way of marketing vegetables in New Zealand for many years, but in Auckland the traditional vegetable industry is faced with tremendous pressure from big retail outlets wanting to buy direct from growers.

One major chain, Foodtown Supermarkets, Ltd, has established a comprehensive network to buy produce from growers and distribute it to its supermarkets, bypassing the auction system. Except for a small quantity of vegetables, this type of direct deal between grower and retailer is not common in Christchurch. The bulk of Canterbury grown produce is sold through the two Christchurch merchants, although some is sold at roadside stalls.

Canterbury market gardeners operate on a much smaller scale than their Auckland counterparts who tend to specialise in certain crops and grow larger quantities, which suits direct dealing. The increasing amount of direct dealing has given rise to strong emotions, particularly in the Auckland area. Direct selling is now well established in Auckland and some growers and buyers predict that direct deals will eventually catch on in other parts of the country.

However, some growers and opponents of direct dealing have a lingering fear of what would happen if they became dependent on supermarkets for the sale of their produce. In the United Kingdom it is reported that a big supermarket chain which has treated growers favourably in direct deals, later became ruthless.

The national organisation for growers — the New Zealand Vegetable and Produce Growers’ Federation — favours the auction system, but this method of selling goods recently came under fire from Mr Mike Mellon, a visiting lecturer at Canterbury University who specialises in the marketing of agricultural products. Mr Mellon told the federation’s annual conference that growers should sell their goods through supermarkets rather than specialist vegetable shops to gain a greater proportionate share of the householder’s food dollar.

Supermarkets should be used as the shop window for the fresh vegetable business, said Mr Mellon. In recent years the public had become more discerning with vegetables and the demand for fresh vegetables was expected to continue to increase at the expense of frozen and preserved produce.

Mr Mellon cast doubts on the ability of the present central marketing system to give the grower a fair return and suggested that growers did not get value for money out of present commission levels.

He does not agree with the auction system being used to determine prices of produce, but would support

an intermediary such as the existing merchants arranging more deals with growers, because growers did not make the best marketers.

The rise in direct dealing in Auckland has corresponded with supermarkets placing more emphasis on selling fruit and vegetables.

Grocery retailing has become cut throat between some of the big chains, but by purchasing fruit and vegetables at favourable prices (during periods of over supply prices are sometimes below the Cost of production) supermarkets can often subsidise their grocery specials. Buying fruit and vegetables at supermarkets also enables consumers to do all their shopping under one roof and offer supermarkets the possibility of a bigger profit margin compared with grocery lines. Foodtown had decided to buy produce direct from growers to reduce problems caused by irregular Supplies at variable prices at auction, explained Mr G. Kelly, the company’s joint managing director (operations). Auctions were unreliable and the sale of produce direct to the public from growers’ roadside stalls and through “cut your own” vegetables was increasing, said Mr Kelly. This had left retailers in an awkward position so Foodtown had taken steps to protect its retail trade in produce. The company had established its own centralised controlled - distribution system from which it could supply produce to its shops. The company’s distribution complex is located in South Auckland where bulk lines of produce from growers arrive in the afternoon and evening. The produce is processed and packaged during the night and transported to the company’s 23 supermarkets early the next morning. Supplies from growers are received daily. The company and grower “settle” on a range of prices for produce purchased directly from the growers, but Mr Kelly would not discuss these arrangements in detail.

Foodtown still buys produce through the central marketing system in Auckland, but Mr Kelly also declined to disclose what percentage of Foodtown’s produce was obtained from the markets compared with direct deals with growers.

Tn Christchurch the two merchants auction perishable goods such as lettuces, cabbages, carrots, cauliflowers, mushrooms and tomatoes on a daily basis, with the auction floor being cleared each day ready for the next day’s supply. Prices for items such as potatoes, onions and pumpkins are set by the merchants according to the supply and demand. Most oranges, bananas and apples are sold at controlled prices. Occasionally the merchants arrange bulk sales to retailers at prices in line

with those received at auction. This allows a grower to dispose of a large quantity of produce quickly thereby reducing a period of over-supply and enables the retailer to embark on an intensive advertising programme in advance.

The chief executive officer for the New Zealand Vegetable and Produce Growers’ Federation, Mr R. H. F. Nicholson, of Wellington, said auctions provided the only practical method of disposing of produce and setting a fair price. On an auction floor, prices reflected the supply and demand situation.

The respective managers of the two Christchurch markets, Mr A. Cahill, of Macfarlane and Growers, and Mr Lyndsay Smith, of Market Gardeners, recently defended the central marketing system for fruit and vegetables.

Under the auction system there was a continual striving for better prices for growers which was in the interests of everyone including retailers and consumers, said Mr Cahill. Unless the grower was encouraged in his efforts and was able to make a reasonable living he would stop producing.

Auctions were the fastest way to sell and enabled highly perishable fruit and vegetables to be sold with a minimum of delay and to reach the consumer in a fresh condition, he said.

Growers were encouraged to aim for high standards of quality and presentation because these attributes were rewarded through the auction system. The best quality and best presented items . usually realised the best prices.

Auction prices reflected the true value of each pro-

duct on a daily basis and were used by direct sellers to set their prices.

Mr Cahill said the auction floor provided a common meeting place where the consignments of all available growers could be examined and compared by all available buyers. Each grower was able to see how the quality and presentation of his produce compared with that of other growers.

The auction system automatically regulated supplies according to demand. As prices rose supplies from a wider area would be attracted to the market and when the prices fell supplies were naturally discouraged from growers. All growers and buyers regardless of size had equal opportunities under the auction system, he said. By selling through merchants growers were as-

sured of being paid at fortnightly intervals, or earlier if desired, said Mr Cahill.

The president of the Canterbury Growers’ Society, Mr Brian Gargiulo, said auctions enabled goods to be sold at their true value on a daily basis. “How else can you find out what the product is worth?” asked Mr Gargiulo. In Europe there was a phenomenal amount of produce dumped because it could not be sold during an over-supply situation, but in New Zealand the auction system enabled gluts of perishable produce to be cleared quickly. There are about 600 market gardeners between the Conway and Rakaia rivers and including the West Coast. Mr Gargiulo believes that many growers have a tremendous gambling instinct, suited to the auction system.