By Cristina Adams

The growing allure of Dallas for the industry

Bright Lightsand

Big Business

ome call it“The Big D,”while high-tech typesrefer to it asthe “SiliconPrairie.” Andfans of the

wildly popular 1980s and recentlyresurrected television series,Dallas—made famous by big hatsand big hair—often assume thatcowboys still outnumber bankers.

Yet the jewel of northeast Texas ishome to many Fortune 500 companiesand serves as a national hub for a numberof industries including financial services,information technology, telecommunica-tions, manufacturing, and defense.

Today’s Big D boasts just as manybriefcases and tablets as cowboy hats andboots.

BURGEONINGGROWTH

Like other major urban centers acrossthe Lone Star State, Dallas is a boom-town. It is the country’s ninth-largestcity and home to 1.2 million people, 25.4

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more

percent of whom are foreign-born. It occu-pies a strategic position—just northeast ofcenter—in a massive state, and boasts asprawling international aviation megaplexthat ranks among the busiest airports forpassenger traffic in the world.

Over the past several years, Dallas hasseen its economic fortunes rise steadily, ifnot meteorically, even as the rest of thecountry shook off the last vestiges of therecession. Not only are there plenty ofavailable jobs but, according to theBureau of Economic Analysis at the U.S.Department of Commerce, job growth is

projected to continue trending upward atan annual rate of 2.8 percent through2019.

All this good news has had peopleflocking to Texas: according to the U.S.Census Bureau, from August 2011 to July2012 more than 427,000 people moved tocities in the Lone Star State.

Texas has four of the fastest-growingcounties and the two fastest-growing met-ropolitan statistical areas in the country.Among them was the Dallas-Fort Worthmetroplex, which has a population of 6.5million spread over 9,286 square miles.

Boom times in the metroplex are in fullswing and predicted to continue, althoughat a somewhat slower pace, according to areport by the U.S. Conference of Mayors.

In 2013, the Dallas-Fort Worth economy grew by 3.4 percent; this year, that number is expected to dropslightly to 3.3 percent. Much of thisrobust growth has been fueled by the area’s diverse business landscape, especially the quickly evolving IT andtelecommunications industries.

WHEN COTTONWAS KING

Dallas wasn’t always a hotbed of high-tech. Once upon a time, the city—andneighboring towns—relied on agricultureto fuel the economy. Founded in 1841,Dallas wasn’t more than a spot on theshifting map of Texas until 1873, whenmultiple rail lines came to town.

Transportation opened the city up toimmense growth. At the turn of the century, cotton was king, and Dallas wasone of the biggest inland cotton marketsin the world. By 1925, Texas was responsi-ble for supplying more than one-third of the entire country’s cotton, 30 percentof which was produced within 100 milesof Dallas.

Since then, other industries have cometo town, but according to the TexasDepartment of Agriculture, the state stillranks as the number-one producer of cot-ton in the United States.

It also remains a heavily agriculturalstate, accounting for about 6 percent oftotal U.S. agricultural income. In 2012,Texas ranked third nationally—to thetune of $6 bi l l ion—in agriculturalexports. It also consistently makes the top

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Local investors have purchased the market and plan to turn it into a destination for foodies and families.

ten list for some fresh fruit and vegetablesincluding corn, sweet potatoes, water-melon, citrus, onions, and more.

Not surprisingly, given both its longgrowing season and proximity to Mexico,the state is a powerhouse of the produceindustry. In 2012, it ranked 15th in theUnited States in terms of fresh vegetableexports, generating $38.9 million, upfrom $35.9 million in 2011. Among U.S.fruit exporting states, Texas was ranked11th in 2012. Fruit exports outpaced veg-etables, totaling $53.5 million versus$46.1 million the year before.

A CHANGINGPRODUCE LANDSCAPE

Dallas, while strategically important interms of its location between the East andWest Coasts, doesn’t actually have a ter-minal market.

According to Steve Ford, owner of pro-duce broker Dallas Direct DistributingLLC, most Dallas produce businesses—from distr ibutors and brokers toexporters, repackers, and receivers—aresituated outside the city, where there iseasy access to highways, abundant space,and affordable property. His own com-pany is headquartered 25 miles southeastof downtown where warehouses are plen-tiful and can be customized with state-of-the-art cooling systems and loadingdocks.

Operating in downtown Dallas since1941, the Dallas Farmer’s Market offersboth wholesale and retail shoppers arange of local and regional produce, nurs-ery items, prepared foods, and bulk items.

Formerly owned by the city, the mar-ket has been in sore need of renovation. Yet according to Dallas-based marketingconsultant Dedie Leahy, a group of local investors has purchased the marketand plan to turn it into a destination forfoodies and families.

The $64-million renovation is slatedto wrap up this fall, and will feature anew infrastructure for the first shed withexpanded space for farmers and vendors.The second building will house artisanalproducers and the market’s food court.

The few growers still operating at themarket have been moved to another spaceduring the rebuilding process. “The newowners are very passionate about the

Market,” Leahy says. “They’re going toturn it into an attraction for shoppers.”

RETAILROUNDUP

While the Farmer’s Market gets amakeover, the retail grocery presence in theDallas-Ft. Worth area has been growing byleaps and bounds.

Kroger, the world’s fifth largest groceryretailer, renovated and expanded severallocations around the metroplex andplanned five new Marketplace stores for

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“If you look at powerhouseregional and national

chains, Dallas is probablyone of the top markets for

retail exposure in the United States.”

2013 and 2014. The company’s ‘growthinitiative’ was slated to bring as many as1,700 new jobs to the region.

Austin-based Whole Foods Marketannounced plans to increase its NorthTexas presence to 12 stores over the nextyear or so, while Albertsons, Inc., freefrom former parent company SupervaluInc.’s centralized empire, may be betterpositioned to take advantage of the Dallasarea’s surging growth.

Albertson’s recently purchased 98-year-old retailer The United Family (formerlyknown as United Supermarkets, Inc.),acquiring 57 Texas stores operating underthe United Supermarket, Market Street,Amigos, and United Express banners.Albertson’s was reportedly looking to growthe more sophisticated, pricey Market Freshbrand in the Dallas area, though a mergerwith Safeway could curtail such plans.

Longtime Texas chain H-E-B (H.E. ButtGrocery Company), dubbed “the SmartestSupermarket You Never Heard of ” byForbes magazine, has only a few stores inDallas, but denied rumors of a swift expan-sion in the region. Company officials of the109-year-old grocer did confirm they had

been purchasing land in North Texas andwere looking to open new stores in thefuture, including the popular CentralMarket concept, but would not deliver anynumbers or a timetable.

“If you look at powerhouse regional andnational chains, Dallas is probably one ofthe top markets for retail exposure in theUnited States,” says Dan’l Mackey Almy,president and CEO of DMA Solutions,Inc., an Irving, TX-based marketing andadvertising agency specializing in the freshproduce industry.

“If you look at where we are, how we’vedone economically, and at our demograph-ics,” Mackey Almy explains, “that all playsinto why Dallas is a thriving food market.It’s also indicative of the retail bannersalready in this marketplace and of thosewho want to get in.”

Another unique aspect of the Dallasmarket is its Hispanic retail presence.National and regional chains like FiestaMart, Supermercado El Rancho, Terry’s ElMariachi Supermarkets, Amigos, and LaMichoacana—the latter is the largest inde-pendent U.S. Hispanic grocery storechain—all have locations in the Dallas-FortWorth area and provide a wide range ofspecialty products, including fruits and veg-etables, to shoppers.

A New Kid on the BlockThe region has also been invaded by

Barrington, IL-based Aldi (short for‘Albrecht Discount,’ a name established byits German corporate parent, Aldi Süd),which has significantly increased its freshproduce items, reportedly offering morethan 70 varieties of conventional andorganic fruit and vegetables.

In December 2013 Aldi announced anaggressive expansion program to open asmany as 650 new stores nationwide overthe next five years, adding to the nearlythree dozen in the Dallas-Ft. Worth area.

The less-is-more approach of Aldi is inrather stark contrast from the hip, artsy atti-tude of its step-sibling, Trader Joe’s, Inc.(owned by Aldi Nord), which only hasthree stores in Dallas.

Despite the plethora of stores, JuanManuel Ibarra, CEO of Marengo FoodsCompany, LLC, a grower and supplierspecializing in greenhouse vegetables,doesn’t believe the retail market is overlycompetitive. “From what I can tell, there

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is stronger competition between the largertraditional retailers, expansion by Kroger,and a consolidation (or buyout) in the caseof Albertsons and/or Tom Thumb.”

As a newcomer, however, Aldi may proveto be the exception. Overall pricing, Ibarraexplains, hasn’t been too aggressive withmost grocery chains, though Aldi is chang-ing the game. “They operate at such a lowcost they’re able to gain market share due tothe prices they can offer.”

The good news for Dallas consumers,and shoppers across the state, Ibarra notes,is quality: “the quality is very good in gen-eral, being so close to the shipping points inMcAllen and only two days away fromNogales in Arizona.” On this point, hebelieves Aldi falls short, “as far as freshnessand assortment of products.”

UPS ANDDOWNS

A new Dallas Farmer’s Market andplenty of new retailers aren’t the only devel-opments on the metroplex’s horizon.According to Ford, one of the biggestchanges he’s noticed in the Dallas produceindustry is the competition.

These days, he’s not just competing forbusiness with other brokers, he’s up againstanyone who can make a phone call.“Growers, small brokerage companies,shippers—everybody tries to sell directnow,” he says. “That makes our job moredifficult.”

Ibarra finds transportation can some-times be an uphill battle: “The biggestchallenge we have right now is the avail-ability of transportation out of southernTexas due to increased costs,” he explains,adding, “there seems to be a shortage ofdrivers and trucks, especially with theopening of the port of McAllen receiving alarger portion of winter shipments comingout of northwestern Mexico-that tradition-ally would have been exported throughArizona.”

Sheena Fan, produce buyer for PacificPlus International, Inc., says more grow-ers are also approaching buyers directly.While this might squeeze some middle-men out of the equation, it can also meanmore savings for both the grower and thebuyer. “I buy snow peas from Guatemalaand Peru, for example, and one growercontacted me about selling product,” she

says. “That grower turned out to havebetter quality control, a fresher product,and a lower price than the grower we hadbeen working with.”

Food safety and traceability are alsoamong the hot button issues. Area ven-dors, brokers, and distributors say morecustomers are demanding Primus- orGAP-certified product.

Ford confirms most of his customersrequire some kind of certification to con-duct business. “My end users want it[and] my customers need it,” Ford says. “Ihave to do it, too. I don’t deal with anyonewho isn’t certified.”

LOOKINGAHEAD

Perhaps the most critical issue affectingthe produce industry in Dallas, indeedacross the entire state, is water—or thelack of it.

For the past three years, Texas has expe-rienced drought conditions not seen sincethe 1950s. In July of 2013, three-quartersof the state was in severe or extremedrought; by November, thanks to the most

above-normal rainfall since 2010, only 25percent of the state was still in extremedrought.

Unfortunately, the drought conditionsaren’t expected to end anytime soon. In theshort term, that means potentially leantimes and high costs for Texas growers.

Many growers in the Rio Grande Valley,which accounts for much of the state’s pro-duce, are struggling to keep acreagewatered. According to Ford, who buys,among other things, cabbages and onionsfrom the Valley, some growers have com-plained about their wells going dry. And afew decent thunderstorms will not beenough to make up for three-plus years of drought.

“It’s going to take a lot of rain for thingsto improve and for growers to recoup theground they’ve lost,” Ford says. “This is a seri-ous issue, and if the rain doesn’t come, there’sgoing to be a real fight for survival.”

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Cristina Adams is a writer and editor withmore than twenty years of experience. Shewrites for a number of business publicationsand websites.

Image: Thinkstock.