Refining the art of wholesaling

Remaining on-trend as well as fit-for-purpose are key goals for London’s £1.6 billion wholesale market sector as it evolves to meet future challenges

London’s wholesale scene remains a vibrant and prosperous arena; having adapted successfully to major structural changes in the capital over the last couple of decades.

Across three sites at New Covent Garden, New Spitalfields and Western International, the UK’s capital accounts for over one-third of the £4 billion plus in turnover garnered by the nation’s wholesale markets as a combined force.  

A small rebound in fortunes for the independent retail sector has helped, but the real boon for the markets has been the exponential growth of London’s restaurant and foodservice scene. The sector has benefited, but recognises the need to continue evolving to remain a relevant choice for both customers and tenants.

New Spitalfields moved to its current site nearly 25 years ago, Western International was successfully rebuilt six years ago and, after 40 years at its current location in Nine Elms, Vauxhall, New Covent Garden Market (NCGM) is on the verge of a significant redevelopment.

Having visited Philadelphia’s state-of-the-art wholesale market during December’s New York Produce Show & Conference, Gary Marshall, chairman of Covent Garden Tenants Association (CGTA), believes there are important lessons that his market can take on board as it aims to build a new wholesale market fit for the 21st century.

“There is a tremendous amount that we can learn from the building of the market [in Philadelphia],” states Marshall, who also travelled to the older Hunts Point Produce Market in New York. “I was very impressed and I’ve asked the Covent Garden Market Authority (CGMA) to speak with those who built Philly to get some tips.”

In particular, Marshall describes as “excellent” the market-first temperature control used at the Philadelphia Wholesale Produce Market (PWPM) – a feature he would love to see implemented at NCGM. “It’s an enclosed, fully temperature-controlled building. I’ve already told the CGMA that it’s something we should do with the rebuild of NCGM. If we have temperature-controlled warehouses, then the buyers’ walk should be too as it keeps produce chilled for longer.”

Other inspiring features included PWPM’s chilling system and its energy supply. “Rather than individual chiller units in Philly they have a blower that can be set at five different temperatures and serve into three different areas of the warehouse – that’s a brilliant system,” notes Marshall.

“To legislate against breakdown there are two electricity suppliers which share the power supply although both are capable of supplying all of the power to the facility. There are also three main generators supplying the market that split the workload, but any one can serve the whole market.”

Overall, Marshall liked the well-lit facility, its strict health and safety standards, the broad range of produce on offer and the brilliant display along the buyers’ walk. “There was a really nice display in the buyers’ walk,” he explains. “It felt like a Whole Foods Market store.”

Also impressed by the PWPM was Chris Hutchinson, chairman of the Spitalfields Market Tenants Association (SMTA), who, with Marshall, visited the market as part of the industry tours organised for the New York Produce Show & Conference in December.

“It’s quite amazing,” he says. “It’s been built and designed beautifully and it operates very well. “The roadway was pristine and looks lovely but if there’s any moisture you can’t walk or drive on it, so the logistics can be a problem in that respect.”

In common with tenants in Pennsylvania, Marshall agrees the occasionally slippery buyers’ walk is a fundamental flaw of the market design, and believes customers could have been better split from machinery too. Another downside is an unsustainable roof, which will have to be replaced.

“The roof should’ve had solar panels too, to supply the market’s electricity but there was a budget and the traders would’ve needed to pay for any extras,” he says. “In hindsight, however, they wish they’d done it.”

Hutchinson adds: “The roof will need replacing in 25 years’ time and no one is looking forward,” he explains. “A landlord doesn’t manage the market, so the communication between tenants and developers isn’t what it could be.”

With the CGMA stating in both the national and trade press that it will ‘build a market for the 21st century’, Marshall claims it’s vital the organisation implements all of the modern features he saw in Philadelphia, especially the temperature control, in order to deliver on that promise.

“If NCGM wants to supply a major catering company or hotel, we have to have a fully chilled supply chain,” he points out. “If the market is not in the same capacity you’re failing in your duty.”

Although it may cost more, he believes it will be worthwhile in the long run. “It will increase product shelf-life, plus the temperature will be balanced so you can wear the same work clothing for 12 months of the year,” he notes.

In stark comparison, with New Spitalfields having relocated in the early 1990s, Hutchinson says there was little to pick up from PWPM in terms of ideas or features that could be implemented at the Leyton site in east London.

“The people involved in our relocation from the developers to the private consortium did a first-class job,” Hutchinson points out. “In Philly they haven’t done anything better and I think Spitalfields is better off in some respects. The quality of our building is newer and at the end of each day’s trading the building is still in the same condition as when it was built.”

Furthermore, Hutchinson says PWPM uses an “impressive” computer system but no more advanced than the one used at Spitalfields, while Philly’s general equipment was not generally as modern, he said.

The challenges ahead

In the meantime, NCGM remains “in dispute” with the CGMA over its reconstruction, according to Marshall. The crux of the problem is the complex ‘decant’ process proposed by CGMA which entails knocking down the market and rebuilding on the same site over a seven-year period.

“It won’t work,” states Marshall. “CGMA is trying to tell us what facilities we will have but we want to know exactly what it will look like. That is crucial to the future of NCGM.

Marshall says the traders also need proof that the decant will not disrupt their business. He explains: “If a customer drives in and has to park up to find his supplier he’ll go to another wholesale market. We’re creatures of habit, so once you change you won’t change back.”

Already several companies have already decided not to extend their lease and leave NCGM, leading to a loss of over 150 jobs at the market, according to Marshall. So, with the decant proving crucial to the redevelopment, he admits the traders are feeling extremely nervous.

“Our 40-year history has proven that you cannot split up traders – you need one trading block. We’ve told CGMA that they must not split us up. They say they’ll do it for a year but that’s an unnecessary risk. We’ve come up with an alternative plan that’s far better for the community, the market and its people. But the government says it doesn’t need it,” he says.

Despite the difficulties, the traders remain committed to focusing their energy on making the decant work. “NCGM is our home and we don’t want to look at a site elsewhere,” Marshall points out. “All of us spent tens of thousands on making our business work here. We have to look at the options of the decant because there isn’t anywhere else that we can do it.”

At New Spitalfields, meanwhile, the main challenge ahead lies with renegotiating its lease with the Corporation of London, which owns the land on which the market is situated and has already proposed doubling in rent charges.

“We’re confident we can negotiate a better deal,” explains Jan Hutchinson, SMTA’s chief executive. “We were located in a cheaper area of London but since the Olympics the government is looking to regenerate more of east London. The rent is there to be negotiated.”

Regardless of the challenges, the population of London is continuing to expand at a pace, presenting ongoing opportunities for the city’s wholesale markets to supply greater volumes of fresh fruits and vegetables.

Philadelphia wholesaler John Vena offers advice to UK executives looking to improve their wholesale facilities

Produce Business UK reporter Mira Slott asked John Vena of Vena Produce to share his wisdom on the most important drivers, challenges and solutions he faced in bringing the groundbreaking Philadelphia Wholesale Produce Market (PWPM) to life.

PWPM was a vision 10 years in the making. Tell us how it came to fruition.

John Vena: There were several key steps involved in moving along the timeframe from concept to reality:

• In the late 1990s many of our merchants began to realise that our aging facility was hampering our ability to grow our businesses.

• In 2000, we formed a sub-committee to study the problems associated with renovating or building a new facility.

• Because our Merchant’s Association did not own the facility we had to approach local government for guidance and help.

• We began discussions with our Pennsylvania State legislators, the City of Philadelphia was in no position to help us.

• This process led us to three different proposed sites that proved very costly to properly research, all of which proved unusable.

• The current site became available by chance and even though it was considered too small, the project moved forward and construction began late in 2008.

• We opened in June of 2011, six months later than planned.

Why did Philadelphia need to build a new market?

JV: The facility we inhabited could not sustain growth and would slowly strangle the viability of a “terminal market” for various reasons:

• Repair and maintenance costs were rising dramatically.

• We had no room for modernisation or expansion.

• No “re-modelling” was going to bring our facility up to the standards the industry would demand in the next century.

• Our direct and indirect competition were slowly modernising their facilities and we felt it imperative to keep up with them.

• A shrinking market would lose employers and employees.

• A viable “terminal market” is an asset to a major city.

What were the risks and benefits?

JV: For us, it really wasn’t a choice to go forward or not. A new facility was the key to our future, once we had everyone in the market on board, we never looked back. The risk would have been to stay where we were.

In what ways is PWPM groundbreaking?

JV: There are key innovations and major changes in comparison to our old market, as well as other market developments in the US. The most challenging and valuable feature of our facility is its basic design. We asked:

• How could we build a live, compelling “marketplace”, not a produce distribution centre?

• How could we maintain the cold chain in a bustling facility?

• How could we design enough dock doors?

These were solved by utilising a powerful central refrigeration system designing a long “shopping concourse” [buyers walk] lit by natural light carefully studying our customers’ needs and buying patterns.

Who were the players (industry/government) that needed to get on board and what partnerships were formed?

JV: Our facility is a public-private partnership that really works, but it was a difficult partnership to create. Early on, we found an advocate in our local State Senator, Vincent Fumo, within whose district we were located. Sen. Fumo found support in our state capital among other legislators and also in the then governor’s office (former Governor Edward Rendell). The project was turned over to our current landlord The Philadelphia Regional Port Authority, which is an agency of the State. Years of meetings finally produced our facility.

What kinds of resistance did you come up against, and how did you overcome that?

JV: Initially, resistance came from every quarter. The project was very difficult to explain to many people. Politically, it was a tough sell due to the narrow focus of the facility. There were questions about what to do with the old facility, which is still vacant today.

Our team, led by Caesar “Sonny” DiCrecchio (the PWPM’s CEO) made many trips to Harrisburg to meet with everyone from the Governor to the Budget Director to individual State Legislators. DiCrecchio’s relentless work is what kept this project alive.

Financially, our biggest challenge came in September of 2008. The financing on our project closed just days ahead of the banking debacle that threw our major lender (AIG) into government control.

What were the costs and the initial investment? How long is the return on investment?

JV: Our budget was US$216 million (£143m). Our commitment is a 40-year lease, at the conclusion of which our association will own the facility.

What advice do you have for anyone in the UK looking to build a new market?

JV: I’d say the following:

• Control the design.

• Create low maintenance structures.

• Make it easy to clean.

• Be generous with floor drains.

• Don’t let the “engineers” tell you how the building will be used.

• Make sure they don’t cut back on “protective” structures: bollards, etc.

• Test every electronic item before they select vendors, especially door and dock mechanisms.

• Make sure the budget covers everything you need.

• Consider the design of IT and telephone facilities in the original plans.

• Be sure every one of your members is strong enough and willing to take on the commitment.