THE DISTRIBUTION AND SALES OF SHELLED PECANS 1959

THE DISTRIBUTION AND SALES OF SHELLED PECANS 1959

Pecan Research

George C. Witte, Jr.

Manager, Leonard Nut Co.

Being growers, you know a great deal about a Sheller’s procurement problems, and having seen a shelling plant you know more of our production problems (I use the word "problem" jokingly, because of course, we have no problems). Therefore I would like to take as the subject of my talk the third and last main phase of a Sheller’s operation, which is the sale and distribution of the shelled pecans. In any discussion on sales the first consideration should be an emphasis on the importance of proper grading and sizing; an importance easily understandable when you realize that we, as a typical large Sheller, have approximately thirty different bulk packs not including additional packs that we might have because of the difference between the various papershell varieties that we shell in a year. When you consider that some of the biggest customers will use a half million pounds or more in a year, you can realize that their buyers fully understand grading and sizing and expect and demand only the best. In attempting to produce the best, we rely almost completely on the standards set forth in the pamphlet, "Standards for Shelled Pecans," published by the U. S. Department of Agriculture. This pamphlet describes two quality grades the top one being U. S. No. 1. Our equivalent of this grade is our Fancy Grade, which makes up from 85 to 95 per cent of our total production depending naturally, upon the quality of the shelling stock. Other names for this grade are Select, Selected, and Quality, depending on the preference of the individual Sheller. The other grade described in U. S. Commercial and most Sheller is including ourselves; call this simply the Amber Grade. Some of you might be familiar with the very appropriate name "Brown Sweets" which is used by some Sheller’s for their U. S. Commercial Grade. This grade is distinguished primarily by its color, which is, as you know, an amber or red. In addition, some Sheller’s, of which we are one, have another quality grade called Standard that is between the Fancy and the Amber Grades. A typical Standard is lighter in color than an amber but probably is lighter in weight than a Fancy and many times is appreciably shriveled. Names used by Sheller’s for this grade are Special, Bright Amber, and Light Amber. The USDA pamphlet also describes rigorous size specifications for six sizes of halves and five sizes of pieces. 'The size description of a half is determined by the number of halves that will weigh one pound; for example, a Topper, which is one of the most popular sizes of halves this year, will amount to between 650 and 750 per pound, while a Mammoth Half, which is the largest described, will amount to PROCEEDINGS TEXAS PECAN GROWERS ASSOCIATION 77 between 200 and 250 per pound. It is obvious that heavy, well-filled halves of a certain size will have a smaller number per pound than light weight hollow halves of the same size. This, incidentally, is a general problem faced by a Sheller of southwester papershells when selling in competition with a Sheller of southeastern papershells, since the larger halves are wanted primarily for decorative or display purposes. While sizing of halves could be considered a problem in weighing, sizing of pieces is almost completely a problem of actual physical sizing; if a piece will fall through the holes in a certain size screen but ride over or fail to pass through the smaller holes in a second screen, it is determined to be a certain size. Some Sheller’s sell most of their production in cellophane bags to grocery and chain stores while other Sheller’s sell primarily in bulk to industrial users. The Leonard Nut Company is presently in the latter category. I will give a brief description of our existing broker organization but care should be taken to note that it would be slightly different if our sales were mostly in cellophane. A large Sheller needs at least some broker representation to handle his sales mainly because it would be financially impractical to hire the number of direct salesmen that would be necessary to effectively cover the country. This point is emphasized when it is understood that most of the contracting and a large percentage of the spot sales are made between the time the first of the new crop is processed and Christmas. During this short period a Sheller would really need a salesman in each of the cities in which he was trying to sell. We like for our brokers, of which we presently have twenty-five, to be handling so called bulk food items and to be calling regularly on most of the major users of pecans. In a large city, it is practically impossible to find a broker organization that will be calling on all the major pecan users. Brokers may have as few as seven and as many as twenty other accounts, some of which may be other nuts such as walnuts and almonds. In fact, we encourage the handling of other nuts but not other pecans. The Sheller awards exclusive representation to a broker who in turn agrees to handle no other lines of pecans. On bulk sales, the brokerage commission is usually two percent on the gross amount but there are some Sheller’s that are paying three percent. After the sale is made it is the Sheller’s' responsibility to do the shipping, on which the freight is usually prepaid, the billing; and the • collecting. The broker has a further responsibility of assisting on any complaints and of helping in collections if it should become necessary. Earlier I mentioned that we had twenty-five brokers, but this figure will eventually have to be increased to fifty or sixty to provide the necessary national coverage. To be more competitive in a particular market and when a broker can justify it by his sales, we maintain smaller or spot stocks in selected warehouses throughout the country, in addition to the large stocks here in Fort Worth PROCEEDINGS TEXAS PECAN GROWERS ASSOCIATION 78 that you saw yesterday. The number of such spot stocks varies but as an idea, we now have stocks in Los Angeles, Baltimore, and Boston. There are five principal types of consumers of shelled pecans. First and largest is the baking industry which accounts for 49 percent of the shelled pecans consumed, followed by the candy manufacturers with 20 percent, the ice cream manufacturers and retail stores with 12 percent each, and the nut salters and rebaggers with a total of 7 percent. These figures are from a 1952 government publication and should be reasonably accurate today. My last subject is that of pecan contracts, an item rather near and dear to the Sheller’s heart, but in a painful way. Most of the larger customers like to contract in November, December, or January for their estimated year's requirements, and since most of them are willing to pay the customary carrying charges of one half cent per pound per month after March 1st, you might at first glance think this to be a satisfactory arrangement. But unfortunately these customers expect and demand a guarantee against price decline clauses in their contracts. For example, if the general market price (if there really is such a thing) declines, the Sheller is expected to lower his price on the unshipped balance of the contract, but if the market happens to go up, the price remains the same as was written. A guarantee against decline clauses is fairly common in certain other commodity contracts, but to our knowledge they are not usually applicable for six to seven months as they are in pecan -contracts. In other words, it’s the old game of heads I lose, tails you win. Not being one to finish on such a pessimistic note, we would like to thank you for coming to Fort Worth, for taking the time to tour our plant, and lastly for the time you have given me this morning to complete the story of a pecan journey from your groves to the consumer.