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Perishable

Can the South Water Market survive where it is? Can it be moved without spoiling?

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Bob Strube never had to agonize over what his life's work would be. "It was 1932 and I was 12 years old. If I didn't work for my father, he would go bankrupt. He needed slave labor, and I was his slave."

Strube's father, who'd started the business in 1913, bought celery from farmers, mostly around Kalamazoo, washed the dirt off--"in those days they didn't ship it washed"--and sold it to stores, restaurants, and anyone else who would buy in bulk. "He believed that to stay in business you had to provide a product and a service. The product was celery, and the service was washing it." Young Bob took over the laundry job. "We still have that old washing machine here in the basement someplace.

"Celery was all we talked about at night at the dinner table. When the family got bigger we started washing beets, carrots, parsnips, and turnips. We took the dirt off and sold them washed. Now we had four more things to talk about." Over the years there always seemed to be more vegetables to sell and more services to provide. In the early 1950s Strube's son got his start, hauling chives from the growers at Irving Park and Harlem down to the market, three blocks south of Roosevelt Road.

Today the Strube Celery and Vegetable Company sells everything from artichokes to zucchini and is the largest of some 60 wholesalers at the South Water Market, owning 17 of the market's 143 three-story storefronts. The only thing they still have to wash is horseradish from southwestern Illinois. But the paterfamilias remembers 1932 well enough: "If we lose money three months in a row, I have 15 Strubes who go off the payroll until we're making money again."

"It's genetic," jokes Dean Bastounes, who took over Capitol Produce from his father. Capitol owns two storefronts at the market. "Nobody grows up wanting to be a vegetable man. Nobody grows up wanting to get up at three in the morning."

Think of South Water Market as a wholesale produce mall--except that the shops at South Water are both more competitive and more interdependent than those at Water Tower Place. They divide up by size and specialty. "We are a car-lot jobber," says Strube. "We buy 1,000 bags of carrots [from the grower] and sell them to people by the 100s or the 50s. If the customers for hundreds have got enough, we might sell to those who buy 25 bags, or even 1. It's easier to sell by the 100s, but if I get in a bind I've got to sell those carrots."

Among their customers are the "doghouses"--a traditional term--such as Capitol Produce, which buy and sell in smaller amounts. Every day Dean Bastounes walks the market's four blocks--up and down South Water Market Street between Racine and Morgan. "I stop by each different company and see what they've got. I'm a steady customer to all of them, some more than others, depending on personal relationships. The salesmen will get to know me and give me a call, tell me they've got the kind of peppers I want." But it's important to circulate through the market. "These are perishable items. Some day your normal pepper guy might not have any, so you go to someone else. But if they've never seen you before . . .

"My customers"--restaurants, hotels, schools--"don't come down here. They call me. I'm the produce guy. I do the shopping, make the selection, get the best price, deliver for them. I will break a case if that's what they need." A car-lot jobber like Strube can't afford to break cases.

Obviously Bastounes is better off being able to stroll through the market than if he had to drive across town from one jobber to another. The competing jobbers are better off too, because together they draw a crowd. To be elsewhere would be disastrous, says Rosemary Auster of Auster Company, a competitor of Strube's. "It would be ridiculous to have a produce store miles away from anywhere, when a few miles away is a shopping center with everything."

"It's a little like Maxwell Street," says Strube, referring to South Water's better-known and more raffish neighbor. "Have you ever heard of a garage sale that would draw 20,000 people? That's why nobody wants to sell out of the back of their truck someplace else."

Back when most produce arrived in Chicago by train, South Water Market was almost the only way fresh fruits and vegetables came into town. Now, with trucks still in the ascendancy, it's merely one important way. (The market's smaller, more specialized counterparts on Randolph and Fulton streets have also lost ground.) Total sales of produce are growing, but South Water's share of them is not. That's partly because early on a Friday morning the place looks like a garage sale gone mad.

Trucks of all sizes fill the 90-foot-wide street. A few daring vans and station wagons squeeze in. Semis are lined up for two blocks north, next to the town houses on Morgan. The winners in this slow race eventually succeed in backing up to the storefronts, next to a high sidewalk that doubles as a loading dock. And eventually they succeed in leaving. A loaded maroon van, with duct tape covering its right rear window and a Mexican flag on the aerial, edges out of the pack in triumph.

The canopied docks are wide, but like the street, not wide enough. Men thread their way from one shop to the next, dodging moving pallets stacked head high with cases of lettuce, oranges, bananas, tamarinds, juice drinks. Painted rectangular signs hang in front of most storefronts--"Chicago Melon," "Anthony Marano," "Cee Bee Cartage," "Mushroom Growers Assn."

If you imagine away the exhaust fumes and the forklifts, the place surely works much as it did a hundred years ago. South Water is one of those hidden engines that makes the city go--like the water-filtration plants, the power lines, and the umbrella vendors who miraculously appear when it rains--pumping out deals and sweat so that weight-watching Loop workers can order salad for lunch.

But this engine is laboring. "People are refusing to send food to Chicago," says deputy city commissioner of planning and development Charles Thurow, in part because of South Water Market's perpetual traffic jam. He says it's gotten so bad that local restaurants have bought in New York to avoid South Water. "All produce is, in terms of cost, is labor. If it takes all day instead of one hour to get into the facility, you're paying a big premium to send produce here."

Since 1989 the city has wanted to move the market to more accessible and modern quarters--a feat attempted often and accomplished only once in the market's long history. "The produce industry is probably one of the last open markets," says Auster, who's in her second year as president of the Market Service Association. "There are no boardrooms where they decide potato prices." And there's no boardroom that can issue an order to move. It's not that simple.

Nothing about the market is that simple. South Water Market is no longer on South Water Street. In the trade it's known as a terminal market, as in railroad terminal, but it's never been located anywhere near one. And it depends on the willingness of fierce competitors to trade side by side. Any change of location threatens that delicate balance. (Ronnie Solomon of Irv Solomon & Son: "Us guys with one and two [storefronts] can't afford to move. The big guys will swallow us up.") Yet not moving threatens the market itself.

In old-time Chicago, South Water Street ran east and west along the south bank of the Chicago River. There was no West Wacker Drive: the buildings on the north side of South Water had back-door docks on the river. After the Civil War, as downtown banks and businesses moved south, away from the river, produce dealers took over the buildings along South Water from State Street west.

The growing city needed wholesalers and jobbers to move food efficiently from farms to the multitude of retail peddlers, grocers, and fruit and vegetable shops throughout the city. Having one central market for this purpose worked well for everyone. Sellers could confidently haul their goods there, buyers could comparison-shop without trekking all over town, the buying public could trust competition to keep prices down, and the South Water middlemen could always count on a crowd. By World War I they were doing business at the rate of about $300 million a year.

Some called South Water the busiest street in the world, but University of Chicago economist Edwin G. Nourse pointed out at the time that a lot of the busyness was wasted effort: "The extraordinary mass of vehicles which choke this thoroughfare, the endless piles of crates and sacks and barrels which obstruct its sidewalks, the seething crowd which fills every inter-space until it impedes its own progress, give evidence . . . of the lack of up-to-date equipment."

In theory the market would have been better off somewhere else. Except for produce shipped across Lake Michigan, the riverside location was inconvenient for receiving. Most goods came by rail, and no railroad ran to South Water. "All products are carted to it under costly and wasteful conditions," complained the Chicago Plan Commission (which had an ulterior motive) in 1917. "Food is frost-bitten in winter, wilted in summer, and started toward decay by being hauled over rough streets. . . . It would be difficult to select a more disadvantageous location for a fruit market." And, of course, the crowds spilled over into the nearly gridlocked downtown streets.

But once the merchants had settled in one place they constituted a seemingly immovable object. Even the 1871 Chicago Fire had not displaced them. An attempt to move the market to Jackson and Wells failed within six months. The city built a "market house" at 92nd and Harbor that languished. Proposed moves in 1904, 1914, 1915, and 1916 all failed. Nourse--in a book largely devoted to defending the market against populist "antimiddleman" agitation--acknowledged that it was "quite useless to talk to the dealers in terms of 'moving South Water Street.' No dream of increased efficiency seems strong enough to make them resolve upon breaking home ties and emigrating to a new location. . . . Their factional differences and shortness of vision caused them to lose quite an exceptional opportunity."

Only bulldozer-style urban renewal succeeded in getting the produce market out of the Loop. In 1917 the Chicago Plan Commission undertook a campaign to replace South Water Street with a double-decker "modern, high-class business thoroughfare," later named after CPC chairman Charles Wacker.

In its quest to turn grubby Chicago into Daniel Burnham's White City, Wacker's group did not hide its contempt for the colorful, chaotic, and definitely lower-class produce market. It was "an economic waste; insanitary; a burdensome charge on all the people; a drawback to Chicago's progress; obstructive to its prosperity; and a conflagration danger to the whole Loop district. It cannot longer remain as it is; dwarfed, a physical misfit, destroying its own value and usefulness, damaging the entire city, congesting the streets, and seriously hampering the movement of traffic on all north-and-south streets entering the downtown district."

The commission's agitation caused more economic ripples then than it might today, because the Chicago Mercantile Exchange (formerly the Butter and Egg Board) was still firmly rooted in actual foodstuffs. In January 1920 executive secretary Edward S. Davis wrote that the CME's new ten-story headquarters--then "practically an accomplished fact"--was being put on hold until South Water Market's future was cleared up.

The City Council finally condemned the market properties in the summer of 1922. Three years later, on August 31, 1925--one year after the council's original deadline--the market opened at the near-south-side location where it remains today. The new three-story row houses, clad in white terra-cotta, were bedecked with flags and flowers. "The South Water Market is the greatest market of its kind in the world," South Water Market Trust finance chairman H.E. Nellis told Straus Investors Magazine. "And it will not move again."

The bankers and stockbrokers and planners had gotten the market out from underfoot and thought no more about it. The produce merchants, however, were soon able to find fault with their "White City." Astonishingly, it still had no railroad connection. Its 90-foot-wide street, state-of-the-art for horse-drawn wagons and primitive trucks, was regularly being blockaded by the bigger trucks of the 1930s. The three-story buildings made a handsome front, but it soon became obvious that having to haul produce up and down elevators wasted time. A 20-story auxiliary building for banks, brokers, and club rooms--enthusiastically predicted by the American Fruit Growers Magazine in 1925--was never built.

But the inertia that kept the market on South Water Street has kept it on the near south side even longer (the current market buildings are now older than most of the South Water Street ones were when they were condemned in 1922). But the inertia is understandable: For any move to work, the new location must be both central and affordable. Pretty much everyone has to agree to move into it, and everyone has to be confident that no one will somehow sneak a competitive edge out of the change. Those are hard conditions to meet; at least traffic jams and aging facilities are known evils. Old Mr. Nellis began to look more and more like a prophet.

In the 1960s Mayor Richard J. Daley and the U.S. Department of Agriculture pushed a grandiose scheme to consolidate the city's food-related businesses near Lake Calumet. The plan's two lasting results were the Heritage Pullman Bank building and a mysterious and apparently indestructible sign among the landfills at 111th and the Calumet Expressway: "THE WORLD'S LARGEST FOOD CENTER, METROPOLITAN CHICAGO FOOD CENTER." Since then people have suggested, with varying degrees of seriousness, that the market move to West Randolph, Ashland and I-55, Chicago and Pulaski, 45th and Racine, Goose Island, Midway Airport, the Union Stock Yards, suburban Lemont, or Fort Sheridan. In 1980 39 merchants anted up a total of $346,000 for a proposed site at 31st and California. The money had to be returned.

While the market spun its wheels, the world of food distribution changed. In 1939 less than 20 percent of Chicago's produce arrived by truck; today more than 75 percent does. "By truck we can get third-morning delivery out of California," Auster explains. "By rail it's cheaper, but it takes five days." Trucks also give sellers, buyers, shippers, and wholesalers more choices. South Water merchants no longer dominate the wholesale produce market. They're competing against smaller but newer regional markets in Cleveland, Saint Louis, Indianapolis, and Minneapolis--and against direct shipments. According to Bob Strube, out-of-town wholesalers without Chicago labor costs and overhead are increasing their sales in the city.

Moreover, large chain stores--Jewel, Dominick's--that didn't exist in 1925 can bypass South Water altogether and buy their produce direct from the grower. Smaller buyers large enough to take at least one pallet at a time can arrange to have produce "drop-shipped" by truck to their place of business. When the city planning department surveyed 16 area businesses ("produce receivers" of various kinds) in 1989, 11 said they had either sharply reduced their buying from South Water Market or cut it out entirely. Some wholesalers have moved out of the market "because of the gridlock and because they needed to expand," says Auster. And most ominously, one shipper told the city that "when he contacts a truck broker to arrange a shipment to South Water Market, the broker laughs and hangs up unless there is a surplus of trucks at the time."

So it's not surprising that USDA sources estimate that South Water Market's share of Chicago produce shipments has dropped from 60 percent in 1983 to 45 percent today. The business-to-business Yellow Pages lists more fruit and vegetable wholesalers outside of South Water Market than in it.

If the market is in decline, should the city let it die a natural death? Has the semitrailer made South Water Market obsolete?

Probably not. South Water Market still brings buyers and sellers together competitively. Its merchants provide some 1,200 well-paid low-skilled jobs in the heart of the city. It's still essential for specialty and ethnic produce--anything sold in small enough quantities to make direct shipment impractical.

The market also serves as a kind of shock absorber for growers with excess produce--someone there will buy it at some price. "When something has to be harvested and shipped, we can take it," says Auster. "A guy in a single installation would have to call up all his customers." Dean Bastounes: "You can get green beans in Chicago in January because someone will buy them if they're shipped in here." The market is also a shock absorber for stores that run short of an item--someone at South Water will have it for sale.

"The market is an advantage, not a necessity," says Bastounes. "I buy off the market and direct. I sell to restaurants and hotels. My business would be better off in a new market, if it's affordable. But if it dies, everyone will find a way to survive."

But one person's convenience is another's livelihood. "We have little fruit stands all over the city because of South Water Market," says Todd Pappas of Panama Banana. "If they couldn't come down here and buy something and make 60 percent on it, they'd be out of business. You'd have more Jewels and Dominicks, and fewer of them."

Still, now that it's possible to imagine feeding the city without it, South Water's amazing immobility may have become a fatal flaw instead of an annoyance. "If we're going to save the wholesale food market," Bob Strube told the Sun-Times in 1989, "we're going to have to move within ten years."

Involved again for the first time since the 1960s, City Hall is trying to beat that deadline. "There is no way these 62 competing businesses can structure themselves to do this," says deputy commissioner of planning and development Charles Thurow. "The city has to be the glue." In 1989 his department issued a 64-page report on Chicago's wholesale food distribution markets.

Ideally the city would like to do more than just replace the market with a modern facility. Thurow's ultimate dream is of "a state-of-the-art industrial park for food distribution and processing" that might make Chicago once again the produce-distribution hub for the 25 million people who live within 500 miles. Big shipments would come in by train and then go out to regional centers by truck. Such an arrangement, Thurow believes, "would keep food costs low even if gas taxes go up."

In line with Mayor Daley's usual inclinations and in hopes of avoiding yet another fiasco, the department decided to privatize the whole moving process. Instead of first acquiring the land and then entertaining competitive bids to build a new market, the city took a step back and last summer issued a "request for qualifications." Thurow: "Basically, we said, we have this project to do, and we don't know how. Put together a development team." City officials evaluated eight teams' proposals on the basis of experience, personnel, and work plan, says Thurow, and chose the team headed by local developer and property manager Stein & Company.

Working together, Stein & Company and the Department of Planning and Development have determined an overall price tag, $100 million, and a site--a 62-acre tract with railroad connections off Ashland between the South Branch of the Chicago River and the Stevenson Expressway (1600 west, 2800 south), which contains a closed Sears distribution center. "It's the biggest tract we could find in the city," explains Thurow, "and it's in an ideal location for trucks coming in from California on I-80." (By a hopefully harmless coincidence, the warehouse is also built on "one of the oldest industrial sites in the city," a site that used to be part of the 1848 Illinois & Michigan Canal.

The city has committed general-obligation bonds to get the project started. It would like help from Sears, the federal government (which paid for one-third of Los Angeles's new $60-million produce market in 1986), and the state (through retraining funds). But what it needs more than anything else is what Stein & Company is supposed to come up with by year's end: a redevelopment plan that South Water merchants, the city, and the banks will all sign on to.

Financing the move is especially tricky, says Thurow. "These are small businesses with no inventory the bank can take as collateral. I've seen newcomers come in, buy a strong business, and go under in a year"--hardly a prospect to warm a loan officer's heart. Making the move even trickier is South Water's unique ownership system. Rather than lease from a central market authority, as vendors in a shopping mall do, each South Water merchant owns his or her own 25-by-80-foot storefront (or storefronts). Depending on whom you ask, each unit may be worth as little as $250,000 or as much as $500,000. But its value, like that of a seat on the Board of Trade, is entirely dependent on its being part of the market. For this reason banks are unlikely to loan money without some stronger central market management than now exists.

Still, to hear Stein & Company project manager Doug Berlin tell it, the financial risk is not great. "All wholesale produce markets in this country are 100 percent occupied," he says. "Los Angeles just built a new market in 1986, and they're looking to increase their acreage."

Under the deal now proposed, each merchant would trade his or her current storefront for an equivalent space in the new market. But in most cases the equivalent space would cost more--so even a business that had paid off its mortgage at the present site might well have additional payments in the new one. Every merchant's situation is different, but Dean Bastounes thinks this could cost an average $7,000 to $10,000 more a year. "People down here work 12 or 14 hours a day. If you're fortunate enough to make that kind of money, you don't want to give it away. We make maybe one or two or three dollars a package. This isn't cars, where you make a thousand a pop."

Ronnie Solomon, the third generation of his family in the business, resigned from the Market Association board over the issue. "We can't afford it. The new place will be more expensive and we'll have to charge more. I've had 50 customers tell me, 'Ronnie, if you move to a new market, you're going to lose us.' The only way they're going to get me out of here is feet first."

The deal would also reorganize the market as a cooperative, with Stein & Company as manager. "Why the bureaucracy?" asks Bastounes rhetorically. He smells pinstripe patronage. "Get some engineers, build a new market. There's never been a management committee running South Water Market in 65 years."

Yet the benefit of moving would be the chance to do more business--maybe twice as much as today's $800 million a year--and to do it more efficiently. "We've been doing time-and-motion studies in the market," says Thurow. "We should be able to increase productivity 30 to 40 percent." Strube envisions cross-dock loading, with over-the-road trailers on one side of a wide dock and city trucks on the other. Supposedly this efficiency would cost no jobs, because buyers and sellers who've drifted away from the market would come back. Says Berlin, "Both Dominick's and Jewel have said they would buy differently and use South Water Market more if it were modernized." But the produce business is nothing if not competitive, and no one is offering any guarantees.

Thurow hopes to start demolishing the Sears warehouse this fall and have the new market open in 1995. If the market fails to move, or fails to thrive in the new location, it wouldn't put any wholesalers out of business right away, or drive grapes up to $2 a pound. But it will guarantee more direct shipments of produce, a continuing trickle of merchants out to the suburbs, and the slow dissolution of another Chicago institution.

Art accompanying story in printed newspaper (not available in this archive): photos/Marc PoKempner.

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