Lettuce Growers See Red : They Say Greedy Grocers Are Hogging Profits, Hurting Sales

For nearly a decade, grocers have known that when the price of iceberg lettuce nears $1 a head, consumers start balking. But this past winter, when lettuce prices soared past the $1 mark in many parts of the country, it was the farmers who got mad. And many of them still are.

Most California produce growers and packers say they have been losing money on lettuce like crazy in the past several months, even as retail prices remain fairly high.

And many of those growers say they are not getting their fair share of the high produce prices. They blame grocery stores for hogging profits and capitalizing on fears that the whitefly infestation would cause severe shortages. The high retail prices are depressing sales and causing an apparent oversupply, they contend.

But other growers say there is too much production, and the resulting stiff competition--including from imports from Latin America--keeps their prices low.

“It’s a true free market,” said F. Robert Nunes, who with his brother runs the Nunes Co., a Salinas, Calif.-based produce grower and packer. But even Nunes is at a loss to explain why consumers haven’t been getting more of a break on lettuce.

While growers are concerned about their own financial condition, they say they are more interested in bringing down retail prices--and thus spurring sales--than in making large profits on produce. Retailers contend that the high prices are needed to cover their overhead and shipping costs.

After a sweet potato whitefly infestation ravaged the winter melon crop in the Imperial Valley late last fall, many in the agriculture industry feared that the pest would lay waste to fields of other winter vegetables. Those fears proved unfounded when cooler weather chilled the whitefly into dormancy. But in the meantime, a seasonal lag between the end of the harvest in one area and the beginning of the harvest in another did make for some temporary shortages, and prices of many winter vegetables--especially lettuce, broccoli and cauliflower--went sky high.

Iceberg, or head lettuce, is considered a produce staple, and consumers generally will tolerate higher prices for it than for other, less popular varieties.

In some parts of the country last winter, lettuce was selling for nearly $2 a head. Growers say they were getting rock-bottom prices of 12.5 cents a head, well below their break-even figure.

Some growers in the Imperial Valley, the nation’s most significant growing area for winter vegetables, say they now are nearly bankrupt. Others say they may not plant a lettuce crop for harvest next winter.

Since the beginning of the year, retail produce prices have been gradually dropping. In the past couple of weeks, iceberg lettuce has been selling for 69 to 89 cents a head, and growers and packers say they have been getting from 15 to 20 cents a head. Major packers say they are still losing money at those prices.

Some growers are beginning to sell produce to wholesale grocery chains or membership clubs and have even talked about pooling finances to buy an interest in a large grocery chain.

Lawrence Cox, of the Lawrence Cox Ranch in Brawley, said he gets the same price from wholesalers as from retail grocers. But the wholesalers take only a 15% markup on the produce, Cox said, whereas the retail markup on lettuce this past winter averaged 300%.

Cox said he hopes that consumer pressure will drive down retail prices and increase sales. He and other growers say that higher sales could alleviate the seeming oversupply problems.

“If the customer can buy asparagus at (a wholesale chain) for $1.30 a pound and a (major retailer) is selling it for $3 a pound, that customer is going to ask the supermarket why they are charging so much,” Cox said.

And while growers acknowledge that they have no control over what supermarkets charge, their discontent over lettuce prices spilled out this past month in the one forum where their voice is heard: the California Iceberg Lettuce Commission.

In voting that continued throughout March, iceberg growers and handlers voted to disband the commission, a quasi-governmental agency funded through mandatory payments by all iceberg lettuce handlers. For every 24-head box of lettuce sold, growers or shippers paid 2.5 cents to the commission. The commission’s task was to promote iceberg lettuce, with the goal being greater sales and better business for growers and shippers.

Commission members said nagging unease with the agency’s efforts ballooned this past winter as growers became increasingly angry about the price gap. But Nunes, whose family-run business sells about 7 million cartons of lettuce annually, said the price differential wasn’t an issue. His company voted to disband the commission because “we weren’t getting our money’s worth.”

Some growers and packers worry that without the commission, the small- and medium-size growers will suffer. Among them is Floyd Griffin of Mission Packing Co., another Salinas-based grower and packer.

“We’ve lost the entity that promoted lettuce generically--without regard to the size of the grower,” Griffin said.

Looking for More Green

Before the Iceberg Lettuce Commission was formed in 1978, growers received about 30% of the retail price for lettuce. In the years since, the growers’ share has dropped to closer to 20% despite the rising retail price of lettuce.

Sources: Agriculture Department, Labor Department and The Packer, an industry newsletter