Tariffs are dominating conversations across the fresh produce industry right now, and in the last few months a slew of updates have been published that make it hard to understand what will happen next, or when.
"What we do know is that the U.S. imports a lot of fresh produce, and large quantities from Mexico and Canada specifically," says Bill Loupée, Chief Operating Officer, Ben B. Schwartz & Sons. In 2023, Mexico and Canada provided 51 percent and 2 percent of fresh fruits and 69 percent and 20 percent of fresh vegetables, respectively, to the U.S. Fresh produce is largely protected under the US-Mexico-Canada trade agreement, but many people are still waiting to see if new changes will take effect, and how tariffs in other countries will impact their bottom lines.
Loupée believes wholesale distributors play a critical role in the fresh produce supply chain, and can operate as an extension of their customers to support them if and when tariff increases take hold. Here are five ways they can step in as a valued partner:
Open communication
It sounds simple enough, but maintaining ongoing and transparent dialogue with customers is the first critical step in mitigating pain points that could arise down the road. By continually re-assessing market conditions, distributors can have proactive, frank conversations with customers to understand their needs and concerns, and plan ahead before it's too late.
Broaden sourcing
If it's difficult to get product from original sources, working with a distributor who has a broad and flexible grower pool can make it easier for suppliers to get what they need without paying extra. Distributors can pivot to sourcing from local growers or new vendors from other countries that don't have high tariff implications. If it is possible to find local and regional options for certain commodities, distributors can then eliminate tariff costs for those specific transactions, offsetting additional spend they may have to absorb elsewhere.
Smart ordering & inventory management
Before tariffs go into effect, distributors can use sales history and forecasting data to analyze their customers' orders and proactively stock up on commodities prior to price increases. By looking at these insights, they can estimate how demand will shift for certain items and adjust ordering as needed. Distributors can also work directly with their suppliers to lock in pre-orders or setup contract pricing to mitigate any hiccups with inventory, so that their customers don't absorb unexpected, downstream costs.
Pricing flexibility
If prices go up, distributors can introduce contract adjustments to lessen the impact. One option is for distributors to create tiered pricing options that could offer premium products from countries with lower tariffs, and more affordable products from higher-tariffed countries. In addition, distributors can explore long-term and flexible contracts, such as fixed or capped prices for certain time periods to make purchases manageable.
Invest in resources
Aside from finding ways to adjust inventory and pricing, distributors can support customers in other ways by putting effort into industry resources. This could mean greater knowledge sharing, networking events and educational opportunities for industry professionals. By contributing to the industry at-large, distributors can strengthen relationships and provide additional value.
"It's difficult to know what will happen, but the best way we can future-proof our businesses and relationships is to be mindful of changes as they happen, maintain our commitment to high-quality service for our customers, embrace flexibility and have options at-the-ready," Loupée concluded.
For more information:
Bill Loupée
Ben B. Schwartz & Sons
[email protected]
www.benbdetroit.com