Tech startup poses threat to Oakland’s century-old Produce Market

Between 2 a.m. and 8 a.m., a swarm of clerks, bosses, and jobbers crowd the intersection of Third and Franklin streets in Oakland. They stack boxes of food for pickup — ginger from China and lettuce from Texas. From the dim light emerge chefs and grocers who greet the sellers, squeeze a few avocados, and load their trucks. 

This ritual has occurred at the Oakland Produce Market six days a week for a hundred years. It is a spot of authenticity in the changing city, and its future is fragile.

Condominiums now loom over the path where trains once delivered bananas from Panama. Some new residents have complained about the predawn commotion. Rising property taxes are being passed down from landlords to vendors. And recently, a digital warehouse company bought one of the merchants and tried to buy about four others, potentially taking their operations online. But the market place has the benefit of premium values that might save it — long-term customer relationships, quality products and the status of being a piece of living history.

The market’s presence helps to support three on-site restaurants, as well. The Oakland Grill opens for breakfast at 8 a.m; Ben’s Chinese opens at 7 a.m.; and the Merchant’s Saloon (est. 1916) is open most days from 7 a.m. until 2 a.m.

“There used to be a train that came right there,” said Joel Hernandez, pointing down Third Street, where a freight train delivered goods and blocked traffic until 1997.  “People would throw goods in between the cars.” 

Hernandez works for Bay Area wholesaler Shasta Produce, and has been at the Oakland Produce Market since 2003.He said that after one of the new condominiums opened, some of the residents complained about the noise. “I don’t know why they didn’t think about that before moving in. There were some reports made, but I think they gave up,” he said.

Hernandez sells nothing but bananas to customers and other wholesalers. “All these markets buy my bananas,” he said. “They know I’m the banana guy.” 

The Oakland Produce Market is on the city’s Local Register of Historic Places and is eligible for the National Register. It is a neat grid of early 20^th century utilitarian buildings, with sidewalk canopies and metal screened fronts. 

Over the years, the face of the market has changed with the faces of Oakland. “The whole market used to be owned and run by Italian merchants,” said Van Lam, 58, who has worked at the market for 30 years in a building that has been owned by the same family since 1970. “Now it is all Asian and Hispanic.” 

Mexican cactus, Middle Eastern spices and leafy greens from the valley are trucked in daily from growers and West Coast ports. The market’s proximity to Interstate 880 and the Bay Bridge make it easily accessible. It’s a vital node on a supply line for small businesses and corner stores from Chinatown to San Jose. It’s also a supplier for larger stores like Berkeley Bowl and Monterey Market, but anyone can shop there. You don’t have to be a retailer to buy a crate of oranges or a big box or romaine.

Hubert Kha has owned Ocean Produce for 20 years.  Most of his clients are restaurants, so his profits dropped during the pandemic, and he had to move to a smaller stall. He is concerned about rising property taxes, “especially right here, it’s so much money.” Kha said his tax bill last year was $5,000, adding, “If later, they build a stadium here, we will have to close down and move.”

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Before the pandemic, growers were committed to a single supply line. Farmers that sold to grocery stores had shortages. Those tied to restaurants had excess. The pandemic-related supply chain problems were like a tailwind for e-commerce distribution startups, and one has made a presence at the Oakland market.

In July 2020, San Francisco-based e-commerce company GrubMarket announced the acquisition of Cali Fresh Produce Inc. and made proposals to three other merchants at the Market. 

GrubMarket is an online middleman. It distributes food between growers and retailers through an ordering and delivery service, a web-based counterpoint to the in-person Oakland market. It is not yet known how this might affect the Oakland market in the long run, but it has vendors at the market talking about what the venture capital-funded startup’s endgame might be.

Financial analyst Jack Finnegan suspects the purchase was an acqui-hire, “a business acquisition with the intention to hire the employees along with the company.” Walt Duflock, vice president of innovation at the Western Growers Association, agrees. His organization represents produce farmers across several western states. He grew up on a family farm and now writes about agricultural technology. He said that several of GrubMarket’s recent buys “do appear to be acqui-hires, and they [GrubMarket] are definitely gluing pieces together very quickly.”

In the past three years, GrubMarket has acquired over 40 wholesalers, brokers, and farms across North America. In a 2021 interview with Bluebook Services, GrubMarket CEO Mike Xu said, “Our angle is to bring software and ecommerce technology to digitally transform the industry, the entire supply chain, from first mile to last mile.”  Xu also told TechCrunch that the company’s long-term plans include the integration of robotics for picking and moving items in digital warehouses. Despite repeated efforts to contact GrubMarket, the company has not responded to requests for comment.

“To vertically integrate,” Duflock said, “you would obviously go to all of the folks up and down the supply chain and make a buy-versus-build decision.” About the GrubMarket acquisition of Cali Fresh, he said, “buying it probably made more sense than building it. At least for the first one, right?”

Cali Fresh Produce CEO Sadiq Awnallah said that day-to-day operations haven’t changed much since GrubMarket bought the business. “We have not yet switched over to the new software system, but there are new people here that are in training,” he said.  Awnallah was hired to manage the Oakland site just before the sale, and said he has no idea what GrubMarket plans in the future.

Sadiq’s uncle Abdul Awnallah also works in the Market, as the CEO of Golden State Fresh Produce. GrubMarket representatives made a purchase pitch to him too, but he said he was not interested. “No hard numbers were discussed,” he said.

The overall idea of GrubMarket made Abdul Awnallah uncomfortable, especially given the company’s stated ambitions. “It’s going to be mostly a monopoly because somebody drives the whole thing,” he said, “because they would have the whole food supply chain in their control.”  

“They are trying to do it like Amazon,” said Ronald Napolis, manager of Fujii Melons, which has operated from the Oakland Market since 1985. “They have houses in all three markets: farms, produce companies and brokerage.” 

Napolis worries that GrubMarket might have an impact on labor the way Amazon did. “At first they don’t change,” he said, “then they start changing your insurance, they start changing your salary, your hours.” 

As for the potential impact of e-commerce on places like the Oakland Produce Market, Duflock said, “The dirty truth is, if you’re just a nameless, faceless, transaction facilitator, it’s easy to get driven out.” 

For comparison, he looked at the problems faced by print media. ”The advertising is going to dry up. The circulation is going down. The flywheel of death begins and you’re in a world of hurt.” 

Duflock said that if  small markets focus on premium values, such as the quality of service, the experience of the exchange and the loyalty of its customers, they might be able to fare better than newspapers have. 

“For these little distribution hubs,” Duflock said, “if they can continue to add value, add either a service level or a value proposition level that somebody can’t come online and commoditize, they’re going to be OK, at least for a while.”

The Oakland market does have loyal customers, and it may benefit from the fact that people like to buy food in person.  

Juan Guitierrez, owner of Dan’s Farmers Market in Alameda, uses the Oakland Produce Market to stock his business every day. “Our business is a physical thing. You have to see it,” he said. “Would you buy strawberries online? I don’t think so.” 

Guitierrez said he can’t afford the gas, tolls, or time to drive to San Francisco’s produce market. “We’d be screwed without this place.”

The story was published in collaboration with The Oaklandside.