Hawkins, Wayne

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Research Papers in Economics

Strategic Marketing Strategies for Florida Tomatoes
Wayne Hawkins
Florida has  three  separate  tomato  organiza-  but we are fortunate  that about 90  percent of the
tions  that work  together  closely  to  form  a  well-  tomato  industry  in central  and  south  Florida  be-
organized  marketing  strategy  to  sell  tomatoes  longs to these two exchanges.
grown  in central  and  south Florida.  All three  or-  I  have  been  involved  in  the  so-called  Flor-
ganizations  are  managed  by the  same  staff even  ida/Mexico  Tomato  War  for  about  30  years.  I
though they all have separate financial  structures.  have watched  numerous  laws passed  by the  U.S.
The  Florida Tomato  Committee  is  a federal  Government that regulated  Florida Tomato  grow-
marketing order formed under the authority of the  ers,  but exempted  Mexican  imports.  Even  worse
Agricultural  Marketing  Agreement  Act  of 1937.  are the laws  on the books designed to regulate the
The committee  enforces quality and packing  stan-  product of both countries but Mexican imports are
dards on Florida fresh market tomatoes shipped in  exempted at the whims of bureaucrats who totally
interstate  commerce.  It also supports  research ac-  ignore the intent of the law.
tivities  and  conducts  a  well-rounded  education  The last  straw and the  one that  really broke
and promotion  plan  designed to increase  per cap-  the back of the  Florida Tomato  Industry was  the
ita  consumption  of fresh  tomatoes.  The  twelve  passage  of NAFTA.  I  testified  before  numerous
members  and  twelve  alternates  are  all  tomato  committees  in  Washington,  D.C.,  and  told  them
growers  in central  and  south  Florida and are  ap-  what  would happen  to  Florida's  perishable  agri-
pointed  each year  by the U.S.  Secretary  of Agri-  cultural  industry  if this  legislation  passed.  I  was
culture.  wrong! It's ten times  worse than I predicted  and
The  Florida  Tomato  Exchange,  formed  in  happened  much  faster  than  I  anticipated.  The
1974  under the provisions of Chapter 619, Florida  Florida  Tomato  Industry  was  promised  by  the
Statutes,  has  first  handlers  of tomato  in  central  President of the United  States that they would be
and south Florida as members.  The main activities  protected,  but  unfortunately  the  promises  made
deal with  lobbying,  hiring  legal  counsel  on mat-  were not  kept and the industry has suffered  hun-
ters affecting the Florida Tomato Industry, public  dreds  of millions of dollars  of losses  as a result.
relations  and dealing  in other areas not permitted  Thousands of workers have been displaced.
under the marketing order.  In  tomatoes  alone,  Florida  production  has
The third organization  is  the Florida Tomato  decreased  more  than  37  percent,  while  imports
Growers Exchange formed  in  1989  under Chapter  have  increased 275 percent  in the first three years
618, Florida Statues, which provides the members  of NAFTA,  according  to  the  latest  figures  pro-
with  the  Capper-Volstead  Exemption  which  ex-  duced  by  the  U.S.  International  Trade  Commis-
empts them  from  the  anti-trust  laws  and  allows  sion. This resulted in a decrease in farm income of
them  (the  growers)  to  create  a monopoly  to  sell  more  than  $750  million.  Many  of the  Mexican
their  produce.  They  can legally  have meetings to  imports  were  sold  all  over  the  United  States  at
openly discuss marketing  problems without being  prices  that did not  return  their  own  costs  of pro-
in violation of the anti-trust laws and can even set  duction.
the prices that tomatoes can be sold  for, if it is the  Prior  to  any  negotiations  on  NAFTA,  the
desire of the members to do so.  U.S. International  Trade Commission (ITC)  found
I  am  manager  of the Florida  Tomato  Com-  that the  winter  vegetable  industry  was  in  direct
mittee whose regulations are mandatory and apply  competition  with  Mexico  and  that  it  would  be
to all  tomato  growers  and  handlers  in  the area.  I  negatively  impacted  should NAFTA  be  adopted.
am executive Vice President of the two exchanges  In response,  our trade negotiators adopted  several
which  are  both voluntary  cooperative agricultural  safeguard  provisions  to  assist our industry.  They
organizations.  The rules  apply  only  to  members,  failed miserably.
Efforts to  obtain relief from  unfair  Mexican
Wayne  Hawkins  is Executive  Vice  President  of the  Florida  competition were filed with the ITC by the Florida
Tomato  Exchange,  P.O.  Box  140635,  4401  East  Colonial  Tomato  Industry  under  sections  201  and  202  of
Drive, Orlando, FL 32814-0635.34  February  1998  Journal  of  Food Distribution  Research
the Trade  Laws  of 1974  and with  the commerce  According  to Department of Commerce  fig-
department  under provisions  of the Anti-dumping  ures,  the U.S.  trade deficit  has  worsened  in  each
Laws of the U.S.  year of NAFTA. The trade deficit has gone from a
Evidence presented to the ITC in the section  deficit of 84.5  billion dollars  in  1992 to  166  bil-
201  and 202 cases  in  1995  and  1996 documented  lion dollars in  1996.
24  packinghouses  and  more  than  100  tomato  Exports  to  Mexico  from  the  United  States
growers  that had  gone  out  of business.  The ITC  have  risen  from  41  billion  dollars  in  1993  to  56
accepted  these  facts,  but  four of the  five  voting  billion  in  1996;  however,  imports  from  Mexico
commissioners  still  voted  that  the  evidence  did  have  risen  from  40 billion  dollars  in  1994  to  72
not  support  the  premise  that  Mexican  imports  billion dollars in  1996.
were a substantial cause of serious injury or threat  This  has  created  an  enormous  trade  deficit
thereof to the  domestic  industries  producing  to-  with  Mexico  that  was  not  present  prior  to
matoes  in the United States.  I would like to know  NAFTA. For the three years before the agreement
what  the  terms  "substantial  cause"  and  "threat  went  into  effect,  the  U.S.  trade  balance  with
thereof" mean.  I  requested  a definition  from  the  Mexico  was  a  surplus  of between  one  and  five
ITC, but never received a response.  billion dollars each year.  Since NAFTA has been
The  one  commissioner,  Lynn  Bragg,  who  in effect, the balance  has degraded from a surplus
voted  in Florida's  favor  stated,  "In  my view,  by  of 1.3  billion dollars  in  1994  to  deficits  in  1995
making a negative determination  in  these investi-  and 1996 of 15.3 and  16.2  billion dollars,  respec-
gations  the  commission  majority  has  set a  stan-  tively. The U.S. trade deficit with Canada in 1996
dard for obtaining relief under section 201 that is  was 22.8 billion dollars.
virtually impossible to satisfy."  An  important  lesson  can  be  learned  from
The  U.S.  Commerce  Department  issued  a  studying  the  results  of  only  three  years  of
preliminary  finding  under the  anti-dumping  case  NAFTA.  It  may  work  for  some  industries,  but
that indicated  Mexico  had dumped tomatoes  into  overall  it  has  been  a disaster  for  U.S.  trade.  If
the United  States at less than fair value. Dumping  continued and expanded as is presently planned,  it
margins  ranged from 4.1 percent to  188.5  percent  could be the start of hard times  for many  United
with an average  of about 20 percent. Following a  States citizens. Good paying jobs will be replaced
recommendation  by  the  commerce  department,  by minimum  wage jobs and the standard of living
the Florida  Tomato Industry  agreed to accept the  in the good old U.S.A. will be lowered.
terms  established  under  a  suspension  agreement  Before  considering  fast  track  approval  of
between  Mexican tomato  growers  and the Com-  more NAFTA trade  agreements,  let's  fix the  one
merce Department that established a floor price on  we now have or get rid of it. Why legislate the end
imports of Mexican tomatoes. This appeared to be  of  important  industries  like  the  Florida  tomato
a solution to the problem and worked quite well in  industry  and  displace  thousands  of  workers?
the  beginning.  Changes  in the  terms  of enforce-  Maybe  if more  legislators  had  to  meet  payrolls
ment  of the  suspension  agreement  by  the  cor-  each week,  it would place a different perspective
merce  department  months  after  it  was  approved  on the situation.
have and will undoubtedly continue to weaken the  This leads  us to the topic of this meeting to-
final  results.  This  again  points  out that the  safe-  day. What is the Florida tomato industry doing to
guard  provisions  under  NAFTA  and  our  other  try  and  cope  with  Mexican  competition?  I  men-
trade laws do not work for perishable  agricultural  tioned earlier that the Commerce Department  and
commodities.  Mexican  growers  entered  into  a  suspension
In  1974,  when  I  became  manager  of the  agreement that took effect  on November  1, 1996.
Florida  Tomato  Committee,  there  were  475  to-  A reference price of 20.68 cents per pound ($5.17
mato growers on the mailing list. In  1990-91 there  on a 25-lb. equivalent) was established  on all im-
were 230  and today there are less than 75.  Drops  ported  tomatoes  from  Mexico.  Although  several
in  numbers  of producers  for  each  of the  other  adjustment  procedures  were  added  after  the
winter vegetables  are  similar.  This  clearly shows  agreement was signed,  it worked pretty well.
what NAFTA  has  done for Florida agriculture.  It  Following  the  signing  of  the  suspension
looks  like  it will  be the kiss  of death  for Florida  agreement, the Florida Tomato Growers Exchange
vegetable production.  amended  their  operating  policies  to  provide  forHawkins, Wayne  Strategic Marketing  Strategies  for Florida  Tomatoes  35
the establishment of a floor price of $5.35 per 25-  better meet competition  from Mexican  place-
lb.  equivalent.  Provisions  were  also  adopted  to  packed vine-ripes.
stop packing  U.S.  no.  2 and U.S.  no. 3 tomatoes  (5)  The  consumer  today  asks  for  a  "vine-ripe"
on declining markets.  tomato. She really wants  a "red-ripe"  tomato
These  provisions were very  beneficial to  the  like  she picks in her own  garden or picked  at
Florida  tomato  industry  in  the  fall  of  1996  and  some  time  in her  life  in  someone  else's gar-
generated a lot of interest in other tomato growing  den.  She  doesn't  know  a  vine-ripe  is  not  a
areas  of the  U.S.  During  the  spring  of  1997,  I  red-ripe. It is picked from the gush showing a
traveled  to  California,  South  Carolina,  North  slight tinge of color on the blossom end.
Florida  and several  other  areas to  explain how  a  Numerous  taste  tests  have  shown  that
grower marketing exchange  could help them mar-  tasters  picked  the  mature  green  tomato  that
ket  their  products  for  more  money.  Exchanges  was properly ripened over the vine-ripe  prop-
were  formed  in  California,  South  Carolina,  erly  ripened  three  out  of  four  times.  The
Quincy  and the Eastern  Shore  of Virginia  to  set  comments  were  better  taste,  better  texture,
floor  prices  on  fresh  market  tomatoes.  They  all  better color  and  more  like  one  grown  in the
worked. Even  though the floor prices  were set  at  backyard.  We  have  a  good  product  but  we
ranges that did not guarantee  the grower a profit,  need  to  properly  market  it.  We  need  to  sell
they did prevent devastatingly  low prices.  farm  ripe,  Florida ripe  or  some  kind  of ripe
Other areas  to  improve  marketing  practices  tomato instead of calling them  mature  green.
are  now  being  studied  by  the  Florida  Tomato  This  places  a  stigma  on  the  Florida tomato,
Growers  Exchange.  Rebilling,  back  billing  and  and one that we can live without.
price  protection  are  a  few  areas  under  investiga-  Technically, any tomato showing color at
tion. Slow pay is another area under investigation  point  of  shipment  can  be  called  vine-ripe;
and finding ways to encourage the Perishable Ag-  therefore,  gassed  green  tomatoes  could  be
ricultural  Commodities  Act  to operate  according  sold  as  vine-ripes  after  they  start  turning
to law is a priority project.  color.  Morally,  this  would  be  wrong,  but we
The  Florida  Tomato  Committee  is  working  could sure sell them  as  something  other than
on other improvements of more orderly marketing  "mature  green."  Why not  "farm  ripe,"  "Flor-
of the crop. A few of the areas  being investigated  ida ripe,"  etc.?
are:  (6)  Finding ways  to ship  a more  mature  product
(1)  Changing  the  minimum  and  maximum  size  to  the  consumer  is  a  necessity.  A  tomato
designations  in each of the  size categories  to  picked  at the  mature  green  stage  will  ripen
provide a more  uniform pack  of tomatoes  in  properly and be  satisfactory to the consumer.
all three sizes.  An immature tomato may turn red, but it will
(2)  Eliminating  U.S. no. 3 grade  tomatoes.  They  never  be  a  good  product.  More  emphasis
are  a  dog  on the  market  and  rarely  return  a  should be placed  on proper  determination  of
profitable price.  Since  too many tomatoes,  at  the maturity of the product.
given  times,  is  the  most  devastating  occur-  The Florida  Tomato Committee  also  funds  a
rence,  why not eliminate  your least  desirable  lot of research with IFAS. In the past this research
product?  has  been  directed at the most pressing  problems,
(3)  Requiring  all  tomatoes  picked  at  the  mature  but now we are spending more money on breeding
green  stage to  be de-greened  for a  minimum  programs to develop a tomato with more desirable
time of say two to three days before they are  characteristics.  Not just  color,  aroma,  taste,  etc.,
shipped to market. We make a mistake by let-  but one with  resistance  to  pests  and  disease  and
ting the wholesalers  control  our  post-harvest  one with longer shelf life.
handling practices.  The key to a  good Florida  The  committee  also  has  a  full-time  director
tomato  is  proper  ripening  at  the  right  tem-  of education  and  promotion who  spends most  of
perature.  her time educating wholesalers,  retailers  and con-
(4)  Relaxing  packing  regulations  to  allow  for  sumers  on  how  to  properly  handle  and  prepare
more specialty-paced tomatoes.  Place-packing  tomatoes.  She has just completed  production of a
tomatoes  to prevent  bruising  in transit  is be-  video for wholesalers  and retailers on proper han-
coming  more  popular  and  will  allow  us  to  dling  and storage  of fresh  Florida  tomatoes.  One36  February 1998  Journal  of  Food  Distribution  Research
is  also  planned  for  the  food  service  industry.  If the  goal  of the  administration  is  to  have
These  two  tapes  will  be  distributed  widely  one big happy market for all products produced in
throughout the marketing area. She also devotes a  the  Americas  - fine!  But,  let's  have  one  set  of
lot of time to recipe development and distribution  rules to follow to produce and sell products in this
and to  helping  develop  export  markets  like  Can-  one big market.
ada and more recently, Japan.  The Florida tomato industry can compete with
The  final  tomato  organization,  the  Florida  anyone - on  a  level  playing field.  But, don't  tie
Tomato  Exchange,  will  continue  their  all-out ef-  both arms  behind our back  and break  one leg and
forts to  try and get the USDA  and other  govern-  head  us uphill. That's  been the scenario for  more
mental  agencies to enforce  the laws  the way they  than  25  years.  I'd  sure  like  to  try  it  on  level
were intended to be enforced. Too many times the  ground or  going  downhill  with  all  legs  and arms
administrative  rules  designed  by the  bureaucrats  working at once - before I retire.
to  enforce  the  laws  have  no  resemblance  to  the
original intent of the law.

STRATEGIC MARKETING STRATEGIES FOR FLORIDA TOMATOES

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Research Papers in Economics