PORTLAND, Ore. — Suddenly, railroads again are viable competitors in the perishables business, the Portland Business Tribune reported.
It wasn’t very long ago that Bud-Rich Potato Inc. of Hermiston shipped its fresh potatoes by rail “only if there was no other choice,” said salesman Troy Betz.
Access to the Union Pacific Railroad Co.’s main line wasn’t a problem — Bud-Rich has a rail siding next to its warehouse. But during the last decade, Betz said, it seemed as if the railroad lost all interest in shipping perishable commodities.
“They couldn’t guarantee any arrival time,” he said. “They used to have an area representative, and they did away with that — you had to call Omaha if you had any customer service needs.”
Fresh potatoes must be refrigerated during shipping and need to reach the East Coast within a week to 10 days. There were times, however, when it took 25, even 40 days.
But now both Union Pacific and the Burlington Northern Santa Fe Railway, the two giant Class 1 railroads that have main lines to Portland, have reconnected with perishable transport, a service sector they had virtually abandoned.
“Service is suddenly back. The loadings have gone way up,” said Stephen Anderson of the Washington Department of Transportation. Last year, he said, the number of refrigerated cars out of Washington totaled 200. Already this year, the count has leaped to 520.
When Richard Davidson, Union Pacific’s chairman and chief executive officer, recently reported improved earnings for the third quarter, he said the railroad was pulling some market share back from trucks — particularly in shipping vegetables and fruits from the West to eastern markets.
It’s about time, said Claudia Howells, manager of the Oregon Department of Transportation’s rail division.
“If they’re going to grow their share of the market, they’re going to have to change the way they do business, which means take commodities that are time-sensitive and handle them appropriately,” Howells said.
Howells said she has heard complaints for years about the main line railroads’ mishandling of perishable goods. “You can only wring so much revenue out of the stuff that’s easy to handle, then you’ve got to begin competing in a market that takes a little more effort,” she said.
Cold cash
Both railroads are spending serious money on the new service. Union Pacific, which owns more than 5,000 refrigerated boxcars, has spent $44 million to upgrade 660 refrigerated cars with new technology. Burlington Northern announced in 2000 that it planned to acquire 700 high-tech refrigerated cars, each equipped with a global positioning system plus a satellite communications link to control car temperatures.
Bud-Rich, which ships about 60,000 tons of Oregon potatoes a year, now is sending about 10 percent of its product — “graded, sorted, packed, ready for market” — by Union Pacific’s Express Lane service.
That doesn’t sound like much, “unless you consider that two years ago, it was down to just about nothing,” Betz said.
“Over the last year, it seems like they’ve done a 180 and they’re paying more attention to the produce industry,” he said. “I’m not sure what brought that about. But they’ve got competitive rates, they’ve got good transit times and they’re a lot friendlier to deal with. Even though they don’t have a representative in the area, they are doing service calls.”
Spuds away Fred Zerza, a spokesman for J.R. Simplot Co., said Union Pacific’s improved service, along with a shift in distribution strategy, has led the frozen-potato giant to increase rail shipments of frozen processed potatoes by 35 percent to 40 percent during the past few years. The move translates into thousands of rail-car loads a year from Boise-based Simplot, which has seven potato processing plants in Oregon, Idaho and Washington.
Zerza said his company’s transportation department reports that the Express Lane service cut up to four days off delivery time to East Coast distribution centers.
“It’s proved to be extremely reliable as well,” he said. “They said you can virtually set your clock by the time the car is spotted.”
Union Pacific spokesman John Bromley said the Express Lane service, which started in 2000, has been expanding steadily, with a 10 percent growth in volume last year. Union Pacific formed a partnership with another railroad, CSX Corp., which moves shipments on from Chicago to cities in the East and South.
“We’ve put together a service that’s very consistent,” Bromley said. “It isn’t high-speed, but it’s consistent. That’s kind of a magic formula.”
In addition, he said, “We’ve been experiencing an on-time rate of over 90 percent. That’s what’s really making this thing fly.”
Besides apples, pears, carrots, onions and potatoes from Oregon, Washington and Idaho, Union Pacific also is picking up shipments from California that range from wine to honeydew melons, Bromley said.
The scenic route It may take even more effort for Union Pacific to regain a large share of business from some shippers, including Hood River-based Diamond Fruit Growers Inc., which until the 1960s sent all of its pears and apples to market by rail.
But retail and wholesale produce buyers have different delivery demands these days. And Diamond, the Northwest’s largest shipper of fresh pears, has moved its main facility to Odell, a community in the Hood River Valley that is a few miles south of Hood River and Union Pacific’s main line.
The new location apparently plays havoc with the railroad’s delivery time guarantee.
“Oh, my gosh, it’s so slow,” said Gerry Jessup, Diamond’s vice president of marketing.
Union Pacific Express Lane guarantees delivery in Chicago the sixth morning out of its big rail yard at Hinkle, near Hermiston, with delivery in New York on the eighth morning, and in Boston, Philadelphia and Atlanta on the ninth morning.
But Jessup said Diamond has to add four days to those numbers because that’s how long it typically takes to get a refrigerated carload of pears from Odell to Hinkle.
“We’re seven miles up the trail (from Hood River),” Jessup said. “They’ll bring a car here to our facility at Odell, they’ll load that rascal, take it down to make the connection to (Hinkle), and that’s where we lose it.”
Retailers, he said, “are on a very, very tight schedule; they order a truck out of here — they want it there in four days. They don’t want it early, they don’t want it late. A rail car could take 10, 13, 14 days — they’re not interested.”
Also, he said, fresh pears from Hood River often make up a partial load on a truck that then will go on to Yakima to pick up a shipment of apples.
“That has nothing to do with rail, it has to do with the way customers are buying now,” he said.
Diamond ships 2.5 million boxes of fresh fruit each year — enough to fill about 2,500 truckloads or about 1,200 rail cars. This year, the firm probably will ship 15 rail cars, at the most, Jessup predicted.
“I don’t mean to throw rocks at the railroad by any means,” he said. “They’re always trying.”
But he couldn’t help recalling the time it took a rail car loaded with pears 21 days to get from Odell to New York — along a route that included two side trips into Canada.