The Midwest: The Center of Everything

Supply Chains and Distribution Channels
Receivers in the region have seen a shift in both the retail and wholesale sides of the business. Big box stores are maintaining their own distribution centers, many strategically located in the Midwest. These ‘food hubs’ are supplied by a combination of wholesalers and local growers, Kirch says.

“Target and Walmart have their own supply chains, so wholesalers are trying to find ways to fit in, whether it’s with a value-added item or some other unique product,” he says.

Despite this move away from wholesalers with direct grower-to-retailer sales and distribution centers, Maglio believes terminal markets still remain relevant and necessary. “The food hub concept is gaining popularity,” he notes, but even though “large retailers have an intrinsic drive to buy directly from the growers, the growers need a place to consolidate and precondition product. So while the mega-retailers seem to avoid wholesalers in an effort to minimize another layer of costs, those wholesalers do indeed offer a service from existing brick-and-mortar locations,” he explains.

With competition heavy and complex, the independent retailers have their work cut out for them. Corsaro says it’s a mixed bag. “In some areas, they’re doing very well. In other areas, it’s not so good.” He observes that demographics play a pivotal role. For example, in higher income areas the independents tend to do better if they focus on and advertise the shopping experience with special services and perks.

Conversely, in lower income areas, customers are drawn to big box stores that promote a low price and deemphasize the experience. Overall, Corsaro is a bit cautious. “We are optimistic, but there may be some more consolidation.” Ten years ago, he recalls, the industry didn’t think independent retailers would survive. Today, this viewpoint has been disproven. “The ones who do a good job at promoting the experience over the commodity,” he stresses, “will stay in business.”

Demographic Influences
In addition to the shopping experience, demographics also drive the product mix. Maglio traces the industry’s evolution throughout the last two centuries. “From a rich heritage of Western European immigrants who settled in the Midwest in the late 1800s through the mid-1900s, we were a very stable ‘meat and potatoes’ demographic,” he says.

“The seeds of change started blowing in towards the end of the century with waves of Latino immigrants from Mexico and Central America. They were followed by Asian immigrants from China and Vietnam as the twenty-first century arrived. Most recently, we have seen African (mostly Nigerian) immigrants arriving. All of these groups bring their varied backgrounds and wants for traditional foods. This is a great boon to produce merchants, as members of these nations typically consume a larger percentage of fresh fruits and vegetables in their diets.”