Fruit and Vegetables

Nelson Evening Mail, Volume LXXI, 29 April 1937, Page 10

Fruit and Vegetables

REPORT OF COMMITTEE OF INQUIRY STATE CONTROL RECOMMENDED INDUSTRY IN "CHAOTIC CONDITION” “SUSPICION AND DISTRUST” Far-reaching recommendations for the organisation of the horticultural industries are made by the committee set up by the Minister of Industries and Commerce (the Hon. D. G. Sullivan) to investigate the marketing of fruit and vegetables in New Zealand, exclusive of sales for export. The committee, which comprised Messrs A. Coleman (chairman), J. A. Campbell, and J. E. Thomas, has presented a report of 21 1 typewritten foolscap pages, and has dealt exhaustively with the production and wholesale and retail distribution of both home-grown and imported fruit and vegetables. The evidence covered 2825 pages. A summary of the findings was published in yesterday’s issue of “The Mail.”

The chief recommendations of the committee are as follows: —

1. The formal assumption of control of the marketing: of all our horticultural commodities by the Primary Products Marketing- Department and the extension or amplification of tho Primary Products Marketing legislation where necessary to effect this end. 2. The appointment by the Primary Products Marketing Department of an officer to be designated the “Director of Fruit Marketing.” 3. The setting up of a consultative committee comprising representatives of the New Zealand Fruitgrowers’ Federation, the New Zealand Fruit Export Control Board, the New Zealand Fruit and Produce Brokers’ Federation, and the Wellington Fruit and Vegetable Retailers’ Association. I

4. The establishment of district marketing authorities to direct and control the marketing of any particular commodity where and when and to the extent deemed desirable by the Marketing Department.

The committee finds that the horticultural industries as a whole are in a chaotic state, and although, in the main, good to high quality material is being produced, material that is essential to the health of the community, producers generally by reason of the disorganised condition of affairs are finding it increasingly difficult to carry on In consequence of the low net returns ruling.^ The chaotic conditions not only apply to grading, packing, and the general manner in which the produce is presented to the market, but also to every other phase or department of the industry. Plantings are unregulated and unsystematic, the methods of sale and distribution are obsolete and uneconomic, there is a complete lack of any intelligence system of orderly marketing, the growers have been unable to organise themselves so as to conduct their activities to their own best advantage, and, generally speaking, there appears to be no coherent and rational scheme in existence in connection with any of the various aspects of this many-sided industry.

It might fairly be said that the impression gathered after a complete survey of the whole position by the committee is that the complete lack of sensible organisation has resulted In what almost amounts to positive disorganisation. One regrettable result is that the feeling between many of those in the industry who necessarily have to do business together—growers, processors, wholesalers, and retailers—instead of being cordial and harmonious, is one of suspicion and distrust.

“With the exception of the assembling, grading, and preparation of fruit for export, a phase of the fruit industry which is carried out very efficiently, there is scarcely any organisation at all in our horticultural industries. This is intended as a statement of fact rather than a criticism of those engaged in thise industries, as it is realised, having regard to the number, varied outlook, and irreconcilable differences of opinion of those concerned,, that organisation on a voluntary basis would be virtually impossible for them satisfactorily to accomplish. “DRASTIC REFORMS” The need of organisation, particularly in respect to marketing, and the desire for it, together with other advantages that would be possible through means of combined bargaining, was expressed in one form or another by practically every producer who came before the committee. Growers realise that under the present unregulated and uncontrolled marketing conditions they are liable unknowingly to ruin the market for one another, and also that they are frequently used by interested parties against each other. The question is, How can the shortcomings of the existing state of affairs be readily overcome? The reply to this is that owing to the large number of small producers involved they can be overcome only by the introduction of fairly drastic reforms which must include organisation, regulation, and registration or licensing. Any organisation attempted must include the elements of compulsory control to be enforced when and where necessary. “Regulation” has to do with the regulation o| suppliers in the case of, or to prevent, over-production, and the elimination of low-grade material from the market. “Registration” or “Licensing” have to do with the control of retail fruiterers and fruit hawkers. Commencing with the producer, the first essential is to ensure that he packs and offers for sale only a standardised, or a sound and honestly-packed, article, for if the commodity offered for sale is not of good quality, or is not correctly described and honestly packed, it would be difficult to assess the shortcomings of the other links in the marketing chain. That these other links are not, at the present time, above criticism is evidenced by the fact that, while the net returns to the producer are scarcely sufficient to retain him in the business of producing, the retail price to the consumers of our fruit and other horticultural products is in most instances far too high. AN EXTRAORDINARY POSITION The latter contention—or rather the fact, as it is no doubt a fact —brings to light an extraordinary position in the retail fruit trade as compared with most other industries. Here is the point: in an ordinary business the normal result of greater competition is a lowering of the retail price of the goods sold.

In the retail fruit business the greater the competition, the higher are the retail prices of fruit and vegetables. This position, objectionable as it may be from the consumer’s point of view, would have something in its favour if it ensured to the producci a reasonable wholesale price for his produce, but evidence suggests that the tendency is in the reverse direction.

FORM OF CONTROL

One salient feature of the fruit marketing industry in New Zealand obtruded itself repeatedly upon the Committee from whatever branch that was, for the time being, the subject of examination. It constituted, apart from the matter of effecting actual improvements in the quality of the fruit, the outstanding problem to be solved by the Committee. The facts constituting the problem referred to are these, viz.:

The growers are receiving too low prices for their produce and are finding it increasingly difficult to carry on. The balance-sheets of the wholesale and retail distributors do not suggest that excessive profits are being made by these individuals. The public are paying too high a

price for the fruit they consume. In the solution of the problem constituted by these three facts naturally lies the explanation of the paradox they create, and in such solution will also be found the guiding principles that must be adopted in order to remedy the hardships that both producer and consumer suffer. ,

In making recommendations calculated to improve the' position of our horticultural industries the Committee has given first consideration to the welfare and interests of the producer and consumer looking upon everything which comes between these two, such as transportation and wholesale and retail distribution and sale, as machinery adjuncts that, important as they may be, cannot be allowed to dominate the main issue.

NEED FOR ELASTICITY In attempting to improve the producers’ position, the Committee is of the opinion that the first consideration must be given to the questions of sound and honest grading and packing of the goods intended for sale and orderly and regulated marketing as far as the latter is.found to be practicable in dealing with a large number of small or comparatively small producers and having regard to the diversity of their activities. The process of improvement must of necess:ty be more or less gradual and must follow the education of the producers concenied and have their general cooperation. In the meantime, the aim o. the Committee is to suggest machinery for improved packing and marketing sufficiently specific and complete to be applied when considered desirable to any group of producers or to any particular commodity and, at the same time, sufficiently wide to cover the whole of our fruit and vegetable products when that course becomes necessary.

Any organisation, firm, or individual becoming responsible for the orderly marketing of a primary commodity must have control of that commodity or, what is practically the same thing, authority to direct the producer or producers in respect of the preparation aiK. marketing of that commodity. If this is admitted, and in justice to any marketing authority it cannot well be otherwise, control over the marketing of all horticultural commodities must be established. ELASTIC SYSTEM DESIRED I 1 is felt that elasticity of a control system that can be withheld, or applied wholly, or to any lesser degree desired, and made applicable generally or to any district, or to any group of producers, or to any commodity, as circumstances dictate, and be varied to suit the peculiarities of the district, or producer concerned, would be preferable to a universal system applying equally to all producers of a particular commodity without variation to meet the different conditions obtaining. The Committee is of opinion that such a control system could be devised by the whole of our horticultural industries being brought formally under the control of the Primary Products Marketing Department and it recommends to the Government that such action be taken and that amendments, where necessary, of the Primary Products Marketing Act be made to give effect to this recommendation. The Committee further recommends the appointment by that Department of an officer with the designation of the Director of Fruit Marketing.* The duties of that officer should be, inter alia, that of adviser to the Primary Products Marketing Department on all problems relative to the marketing of all horticultural produce, including the desirability of the Department assuming in due coui-se something more than the formal control of the marketing of any particular commodity and the extent to which such control, partial or general, should be exercised. This officer also should advise concerning the establishment of district or local marketing authorities and generally regarding assistance to producers in connection with their marketing problems.

A CONSULTATIVE COMMITTEE The Committee recommends that a consultative committee be established at Wellington, comprising one representative each of the New Zealand Fruit Growers’ Federation, the New Zealand Fruit Export Control Board, the New Zealand Fruit Brokers’ Federation, and the Wellington Fruit and Vegetable Retailers’ Association, the functions of the Committee to dc advisory to the Director of Fruit Marketing and to the Marketing Department through that officer. It is further recommended that local or district marketing authorities be set up in connection with any particular commodity in any particular district deemed desirable by the Director of Fruit Marketing and approved of by the Marketing Department. The district or local marketing authorities referred to would be equivalent to the Local Control Board provided for under the Fruit Control Act, 1924, but with the following essential differences:—

RETAIL TRADE

TOO MANY VENDORS LICENSING PROPOSED The outstanding problems to be solved by the committee were:— 1. The growers are receiving too low prices for their produce and are finding it increasingly difficult to carry on. 2. The wholesale and retail distributors are not individually making excessive profits. 3. The public 'is paying too high a price for the fruit it consuhies. The solution, if there be one, must therefore lie in an examination of the position of the middleman, both wholesalers and retailers. Any solution, to be satisfactory, must achieve two apparently opposed results; it must increase the price paid to the grower and simultaneously reduce the price paid by the consumer. In the large cities at least there are far too many wholesalers and a reduction in numbers and the establishment of up-to-date municipal central fruit markets, equipped with modern appliances, should enable wholesalers to operate on a lower selling commission. As matters stand, however, the committee does not think that any reduction in their charges, except the abolition of the receiving and delivery charge, is possible. As regards the retailers, their rate of profit on the bulk of the New Zea-land-grown fruit is excessive, but nevertheless, as individuals, the majority cannot be said to be making large net profits and a considerable number can barely make ends meet. There are 119 retail fruit shops in Dunedin and suburbs, 300 in Christchurch, 350 in Wellington, and 306 in Auckland, a total of 1075 in the four principal cities and their suburbs alone. Many of these shops occupy sites in the highest rental areas. BIG SAVING The committee was forced to the conclusion that the explanation of the

Fruit under the Fruit Control Act is limited to apples and pears whereas the marketing authorities now proposed could be made to cover any horticultural product. In addition, the Fruit Control Act does not provide for local control boards to apply to districts within a province but only to whole provinces and also provides for such boards to be established by a favourable vote on the part of the producers concerned within the respective provinces, whereas the marketing authorities proposed by the committee could bet set up in any province or any district within a province in circumstances where any group of growers or the Marketing Department should consider such action to be advantageous to the producers concerned. “GOOD WILL AND SUPPORT” While it is hoped that the good will and support of producers would largely govern the establishment of any marketing authority the committee is of the opinion that, should the lack of unanimity among any set of producers lead to delay in the setting up of such an authority, summary powers to establish such an organisation should be given to the Marketing Department.

Such local marketing authorities should be free, subject to the wishes and approval of the Marketing Department, to determine the extent tfi which they assume control of the marketing of the commodity with which they are concerned, and the conditions under which such marketing shall be conducted, such as standardisation, where such has not been made necessary by law, and pooling according to variety and grade, etc. In addition to the advantages that would arise from regulated marketing under the proposed authorities there are many other advantages to be gained from a close organisation of producers such as these marketing authorities would represent. The producers would be able to speak with one voice on such matters as transportation facilities and improvements, cool-storage requirements, commission charges, charging for containers, etc., etc., when such questions arise, and, conversely, would represent a stable organisation upon which transport authorities and other commercial interests could rely in connection with any undertakings mutually agreed to, a matter that is not practicable while producers are in an unorganised state and can only represent their views and requirements individually.

While the committee is not recommending the immediate establishment of marketing authorities in connection; with the whole of " our horticultural’ activities, excepting in a few instances which are referred to later, the machinery will exist whereby such authorities can be established at any time the producers concerned, or the Marketing Department, feel that their interests will be best served by so doing.

4. That the proceeds of licensing fees in respect of the retail sale of fruit and vegetables be applied towards defraying the cost of fruit and fruit shop inspection.

riddle largely lay in the fact that there was too much subdivision of the retail trade and that individual turnovers were too small to allow fruit to be retailed at a reasonably low margin of profit to the retailer in view of the nign rents and the wages and other charges payable in respect of each shop. If it were possible to reduce the number of retailers by, say, twentyfive per cent., and, assuming that me average weekly outgoings for rent, wages, light, etc., was £8 per week, there would be, on that account alone, a saving of over £IOO,OOO per annum in overhead as regards the four centres. Further, the added trade would enable the remaining 75 per cent, to sell at lower rates of profit without injury to themselves.

The Committee is of the opinion that all retail fruiterers should be licensed annually and that such licences should be both personal and in respect to definite business premises. This would enable the licensing authority, should a licence lapse, or be cancelled for any reason,, to decide, after an examination of ail relevant facts, whether a new licence should be issued in its place or not.

The Committee further considers that a maximum percentage of profit on wholesale cost should be fixed in respect of fruit retailed to' the public upon the lines above-mentioned and that it be made an offence, punishable, inter alia, by cancellation of licence to sell at prices in excess of the prescribed rates. It further suggests tjiat, in the meantime, a strictly-limited number of street barrows or stalls be licensed for the sale of fruit in the four principal cities in order to operate as a check against any tendency on the part of retailers to pay unduly high prices for their requirements.

RECOMMENDATIONS SUMMARISED The recommendations on the retail trade are summarised as follows: — 1. That the maximum retail profit on the wholesale price of all New Zealand-grown apples, pears, and citrus fruits be limited to 33 1-3 per cent., and that the rate of retail profits on the wholesale price on imported bananas and other citrus fruits be limited to the same percentage except in the case of the Cook Islands oranges in respect of which the retail profit be limited to, 40 per cent. ‘ '

2. That a limited number of retail fruit barrows and street retail fruit stalls be permitted to operate in the cities of Auckland, Wellington, Christchurch, and Dunedin, and that such system of fruit and vegetable distribution be extended from time to time if and when considered desirable by the Primary Products Marketing Department. 3. That all retailers of fruit and vegetables including those operating shops, barrows, stalls, and hawkers, together with the premises or vehicles used by them, be licensed and that the Primary Products Marketing Department be established by legislation as the licensing authority. The matter of experience in the business, or a knowledge of fruit and its uses and seasons, should be taken into account in connection with the issue of fruit retailers’ licences to applicants not already established in the business.