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Italian grower reduces capacity to stay profitable

"Our production costs have skyrocketed, yet produce prices have stayed the same"

One can list hundreds of challenges growers find themselves dealing with regularly. Yet, there is one in particular that has stayed quite unmoved over time: getting paid as they deserve. This is something that Angelo Mencarini from Societa’ Agricola San Paolo Mencarini has had to deal with, quite unsurprisingly, since the company’s inception.

“My brother started this business on a small scale, initially,” he explains. “He used to sell at farmer’s markets. Ten years ago, we could get into the big distribution, which was more profitable with regards to both the labor that went into the cultivation and the quality of the products.”

The company is located in the Lazio region, central Italy, in an area not that far from Rome. They grow tomatoes in greenhouses, and other crops in the open field, such as melons. “We were very careful in selecting this location for the quality of the soil, which truly boosts the organoleptic characteristics of our produce,” he says. “I bought the greenhouses in 2018, and I’m constantly looking to improve the cultivation processes in there.”

Higher costs
Although things have been going well for the company for many years, energy prices, labor crises and so on, posed real challenges to every grower in the world, and Angelo was no exception. As demand started going down because retail prices kept going up, the price rates for growers stayed the same. This can be quite a challenge for growers to deal with, as the production costs haven’t shown any sign of going down.

“Our production costs have skyrocketed,” he points out. “Yet, produce prices have stayed the same, or they were even lower than usual. The big distribution has adapted to the higher retail prices, but it didn’t do a similar thing for us growers. When your operation is set up to supply the big distribution, you can’t change your distribution network within a reasonable time. This has been used as leverage against growers. We have to plan our cultivation 6-8 months ahead, and you do everything to satisfy the big distribution. Yet, even though the listing price of a tomato is, for instance, 1.30 euros, they would give you 1.10 euros. This is simply not sustainable.”

Reducing capacity to increase prices 
To find a solution for that, Angelo did something that may sound counterintuitive but paid off big time. “I scaled down cultivation by 50% and diversified my crops further,” he explains. “Since I have less product, I can decide whom to give it to. I can do this because, next to the big distribution, I also have a relationship with some retail chains. But that aside, this method allows me to have leverage when dealing with distributors.” Angelo can afford to do that because he says that the quality of his products speaks for itself. “I have leverage with some retail chains because they value quality. For instance, I’m the only one in the area supplying zucchini with an open flower. More on that, customers demand my melon because it’s just of a better quality.”

This solution is not bringing big money to Angelo as of now, but at least it allows him to keep operating, unlike many other greenhouse growers. “I’ll keep production at 50% capacity because it’s easier to manage as of now. I have less waste, and I can better control everything that is going on both in the field and in the greenhouses.”

Currently, increasing capacity even by 10% would throw a wrench in the works for Angelo. “If I scaled up again, I’d have a surplus production that would entirely meet the demand of the distribution. That’s something I don’t want. As long as I stay below the actual demand, I can get a better price that would allow me to sustain the company and my family.”

For more information:
Azienda Agricola San Paolo Mencarini
Angelo Mencarini
+39 328 456 9541