I conclude my three-part series on the history how supermarkets get the food they sell. This post bridges the gap between the farmer and the supermarket. It is the supply chain that gets the food to the supermarket. Lurking in the supply chain are one or more middlemen. The common concept is that each middleman grabs a piece of the action with a cumulative effect of higher prices for the consumer. Helen Tangires suggests in her book Moveable Markets: Food Wholesaling in the 20^th-Century City that the role of the middleman is not as we have been led to believe. The setting of this story moves from Chicago to Baltimore as we learn about wholesale markets.

This post is a combination of what I learned while studying the supply chain of fresh produce during my research career at the University of Georgia and by reading Moveable Markets. My research in this area spanned the last two decades of the 20^th Century. The thoughts and ideas presented by me and the book are thus dated, but many of the trends are still applicable.

SHAZZAM!! You and I develop a partnership to grow and sell fresh fruits and vegetables as well as prepared homemade salsas. We could start out by gathering up enough items to sell at a local farmers market. We would need to be able to afford the tent, furniture, and vendor fee to break even. Or we could ask a friend who already has a stall at the nearest farmers market if they would add our items to their collection of goods to sell. We would need to be able to meet all the requirements of the local food inspector as well as any applicable county, state, and federal regulations. For example, that salsa may need to be produced in a home kitchen to comply with state regulations.

Chances are that we might need some help from a company that deals with governmental agencies or we could track down all the requirements ourselves. If we are really successful, we might want to produce our goods for sales outside our city or county. We might want to trademark our idea which would require interaction with the US Department of Commerce. It’s clear where this is going. Anything we do as the producer of the items or by our paid employees counts as direct selling. Any other company or contractor that performs a function for us for a fee or cut of our sales is in effect a middleman including sellers who display our goods for sale.

If we get very successful, we could buy more land, grow more crops, ship our goods across the county, across the state, and even out of state. We would need to navigate the handling system to find shippers and buyers. The more complex our distribution becomes, the more help we would need. We might want to buy a company or two to perform some of these functions or we might want to join ready-made supply chains to get our food to market. The bigger we get, the more complicated our transactions get. How much do we want to do it all ourselves, and how involved do we want to work with other businesses? Welcome to the wonderful world of wholesale distribution and that dreaded middleman!  

The Middleman is hated by many and appreciated by few. The primary reason producers we would get entangled sell to middlemen is that a we lack “the time, inclination, and money to market” or handle our products. Two visions of the middlemen emerge

1. whole foods travel from the farmer to the point of sale, passing them from one organization to another, charging for minimal services, and leading to an increased price consumers need to pay, or
2. as foods pass through the supply chain, middlemen provide specialized services that make the chain more efficient while lowering prices for the ultimate consumer.

More below on which of these visions is closer to reality.

Wholesalers are the dealers who receive foods close to where they will be sold whether across the county or across the country from the farm where it was produced. Wholesalers are the ultimate middlemen. Wholesale markets can sell fresh foods directly to walk-up customers or to the restaurants and grocery stores in the area. They may advertise themselves as farmers markets or include areas dedicated to direct sales. Wholesalers are key links in any supply chain that perform functions to get goods from producer to the consumer. When operating efficiently they move goods rapidly to awaiting consumers. When not operating efficiently middlemen in supply chains result in delayed shipments, shortages, and empty shelves.  

Farmers markets are open-air venues that sell fresh foods and other items to customers. They may be small operations that feature farmers and other entrepreneurs selling their wares. Vendors can display a wide variety of fresh foods, cooked dishes, and non-food items such as herbs, potions, or books. They usually are limited to one or more select time periods each week, particularly in the Spring, Summer, or Fall. These operations feature separate stalls to sell fresh items or packaged products. Buyer beware as the seller may or may not be a farmer or producer or even assoicated with the farmer of the items offered for sale. At state farmers markets associated with terminal markets, ‘fresh’ produce for sale may be rejected items by wholesalers from a terminal market. Also note that foods for sale at roadside stands may also be rejects from various wholesale markets.   

Terminal markets deal only with other establishments and not directly with consumers. They usually are funded by state and federal funds and may be associated with state farmers markets.

A brief history of wholesaling can be broken down into 3 eras:

• Open Entry—1850-1900 where wholesalers became the main link between the farmer and the ultimate consumer. Railroads provided the main link between the farmer and the wholesaler. Grain and meat led the way followed by fresh produce and then other crops produced on the farm.
• Consolidation—1900-1930 when the limitations of rail transport became apparent including an aging infrastructure, handling-system inefficiencies, and poor sanitation. Instead of improving efficiency, middlemen made things worse in many cases. The birth of the Agricultural Economics discipline at Colleges of Agriculture across the nation focused attention on efficient distribution of farm goods.  
• New Frontiers—1930-present continued scholarly attention on wholesale markets and introduced state and federal attention and funding of fresh food distribution. Wholesale markets located in the city center started moving outside the city while trucking became the primary mode of transport for food distribution.

Long and short supply chains are inhabited by middlemen. Technically all companies between the farmer and the ultimate consumer are middlemen (or middlewomen). As the produce moves forward from one company to the next, money flows back to the previous member in the chain. Remember, the reason fresh produce requires middlemen is that companies in the chain lack the lack “the time, inclination, and money to market” their products. Each member of the supply chain performs a specific function that is necessary to get the food to market. Along the way any member of the chain that contracts out labor, transport, or marketing efforts is bringing in another middleman.   

SHAZZAM!! Back to our growing fresh produce business. It is now becoming apparent that, as we become bigger and are making more money, we need to decide how much we want to do things ourselves and how much we are willing to rely on middlemen. We might even get a food processing facility to manufacture our line of salsas! Everything we or our paid employees do between us and the ultimate consumer is direct marketing. Any contractor that we hire to perform one of those functions or a link in a supply chain we don’t own or manage is a middleman.  

Middlemen take care of all of the nitty-gritty details we have neither time, patience, nor expertise to deal with. Those middlemen ease our burden while contractors perform the management function we would need to provide. Remember that anyone not in our employ who sells our items directly from farmers markets to supermarkets is also a middleman. Tangires suggests that the many middlemen prior to the 1930s deserved their reputation as leeches on the system adding to the price of the final product with little or no added value. She indicates now that they actually speed up distribution and provide better service at a lower ultimate cost.

Take-home lessons. We live in an angry society. Too many of us get too mad at life when things don’t go our way. We look for scapegoats. The middleman is a convenient foil to blame all our concerns with the food we buy. Sometimes it is deserved. Other times it is not. Can we blame all businesses who don’t sell direct? Would we deal with middlemen if we had a business of our own? Why are we so angry? Is it that as consumers we expect everything to be available at any time we want it? Or have we always been an angry society? Before we condemn the middleman, let’s try to understand his or her functions and enjoy the bounty we have wherever we purchase our food.

Coming soon: The aftermath of Hurricane Ian two years later