With Wal-Mart’s PTI Mandate And 100% Guarantee On Produce, One Wonders If Local Is Included Or Is There More Fluff Than Real Stuff; Unions Will Be Watching Carefully
Jim Prevor’s Perishable Pundit, June 6, 2013
We have written a great deal about Wal-Mart. Now, like a one-two punch, Wal-Mart has roiled the produce industry with two separate announcements. It declared that it would begin to enforce the requirements of the Produce Traceability Initiative (PTI) on vendors and that it would “recommit” to providing consumers with the freshest fruits and vegetables by rolling out a “100 percent money-back guarantee” for consumers. Significant organizational change would also be executed in order to accomplish this goal.
Wal-Mart’s PTI announcement falls into the category of “interesting, if true.” The letter to suppliers is robust:
Date: May 29, 2013
To: Wal-Mart and Sam’s Club Produce Suppliers
Re: Case Labeling Standard
Greetings supplier partners.
As you know, both Wal-Mart and Sam’s Club are longtime supporters of the Produce Traceability Initiative, its milestones and standards. Along with that, we are corporately placing a heightened focus on freshness, quality and satisfaction of the produce we sell to our customers. In the past months, we’ve invested significant resources to improve our freshness, flow, and store-level execution. To ensure customer confidence in produce industry-wide, food safety and traceability continue to be one of the most important focus areas.
To that end, we’re ready to take the next big leap towards standardized case labeling and product track and trace. We recognize and commend those of you that are already there. We appreciate your trailblazing efforts. The fundamental pieces are in place, and are being demonstrated on a commercial level by many small, medium, and large suppliers. It is now the time for us to move it to the norm;
• Effective November 1, 2013, all fresh commodity produce delivered to a Wal-Mart Distribution Center will be required to have standardized case labels, consistent with the PTI standards. Wal-Mart and Sam’s Club receiving specifications will be updated with a requirement for standard case label including GTIN, Lot/Batch#, Voice Pick code and Pack or Sell-By Date.
• We will work with suppliers who are making a good faith effort towards standard case labels by using the spec exception process. Through buyer discretion, additional time may be allotted to those who are working hard at achievement, but still need a little more time.
• Initially, product that is not label compliant will be received as A- out of spec unless an active exception has been issued by the buyer prior to delivery.
• On January 1, 2014, product out of compliance will be rejected as out of spec unless an active exception has been issued by the buyer prior to delivery.
Additional information on the timeline and label standard is attached. Please work with your Wal-Mart or Sam’s Club buyer/sourcer for additional detail, or with any questions you have.
These efforts are designed to create transparency in the supply chain so our customers can be confident in the freshness of the produce they are bringing home to their families. Let’s work together to close this out and achieve comprehensive produce supply chain visibility. Our produce businesses have strong momentum, and we look forward to taking another step towards improving the produce experience for our customers.
Vice President – Produce / Floral
Wal-Mart Stores, Inc.
U.S. Produce Division
702 Southwest 8th Street
Bentonville, AR 72716
Senior Director – Produce / Floral
Sam’s Club, Inc.
2101 SE Simple Savings Drive
Bentonville, AR 72712
If one studies this letter carefully, it is filled with loopholes:
1) It covers “fresh commodity produce,” which could be interpreted to exempt branded or private label product.
2) It allows for “buyer discretion” to allow “a good faith effort” exemption. No limit to this exemption is set.
3) It specifically says that product will not be rejected if an “active exemption” has been granted.
Perhaps just as important is what is not said in the letter. Wal-Mart has strong initiatives for produce, from “Heritage Agriculture” to buying “local,” and there is nothing in this announcement to indicate that Wal-Mart will insist that such vendors also conform to the standard. Since this is obviously an issue of great concern, both to the supplier community and those concerned with public policy, Wal-Mart’s silence on this matter is deafening.
In addition, no mention is made of fill-ins and similar efforts by distributors and wholesalers, none of which are able to conform to this standard right now.
Wal-Mart and other large retailers promised to do this a half-decade ago, so it is nice to see some action being taken. Such an announcement can only help to build consumer and regulatory confidence in the produce supply chain. Yet, we have doubts the announcement means very much at all. Recently, the Produce Traceability Initiative's Leadership Council reported that 22 to 50 percent of produce cases at buyers' distribution centers now have PTI labels. Wal-Mart deals with the largest vendors, so it is probably at the top end of that range. It is not clear how rapidly that number will increase due to this initiative.
If Wal-Mart and other large buyers are really serious about PTI, here is what the announcement has to say:
Effective X Date, we will reject any produce that is not compliant with PTI labeling rules.
1) We will not provide any extensions or exemptions.
2) If product is not available that meets these requirements, we will do without the product.
3) If compliantly labeled product is more expensive than non-compliant alternatives, we will pay the higher price rather than change our standards.
4) We will hold all producers -- local, regional, national or international -- to the same standards. There will be no exemptions or postponements for local product or any other class of producer.
5) We will enforce the same standards on our own private label product, product owned by our global sourcing operation, etc., as we do on products of other producers.
Lo and behold, if any retailer does this — it constrains its supply chain and thus provides an opportunity for producers to profit from investing in PTI -- shock of all shocks, conformity with the standard will come very quickly. Until the buyers do this, progress will be achingly slow.
Perhaps retailers pondering Wal-Mart’s move will think of General William Tecumseh Sherman when making a decision about PTI. Sherman really did not want the Republican presidential nomination in 1884. He expressed this in a way everyone could understand: "I will not accept if nominated and will not serve if elected."
To jump-start PTI, we need some Shermanesque retailers to say: “We will not buy non-PTI compliant produce and if it is delivered, we will reject it.”
The “Fresh Produce Guarantee” announcement could be more far reaching:
Walmart Launches Fresh Produce Guarantee in U.S. Stores
Grocer recommits to guaranteeing customers the freshest fruits and vegetables, announces changes across sourcing, training and operations
BENTONVILLE, Ark., June 3, 2013– Walmart, the nation's largest grocer and seller of produce, announced today new efforts that will ensure the quality and freshness of the fruits and vegetables that it offers customers. The retailer is standing behind this promise by rolling out a 100 percent money-back guarantee* and making changes across produce sourcing, training and operations.
"We're listening to our customers and delivering on our promise to offer great produce at the most affordable price," said Jack Sinclair, executive vice president of the food business for Walmart U.S. "We are so sure our customers will be pleased with the fruits and vegetables they buy in our stores, they can receive a full refund if they aren't completely happy."
The retailer's initiative includes:
· Delivering produce from farms to store shelves faster by purchasing fruits and vegetables directly from growers and leveraging Walmart's produce experts, distribution centers and trucking systems;
· Executing independent weekly checks in its more than 3,400 Supercenters, Neighborhood Markets and Express Stores that sell produce; and,
· Launching Fresh Produce Schools and other expanded training programs to 70,000 associates.
"Walmart has always been focused on providing its customers with top-quality fruits and vegetables, including our Cuties brand," said Berne H. Evans III, chairman of Sun Pacific, a Walmart produce supplier. "As a direct result of how Walmart has stored and handled our product, both Cuties and our Ripe and Easy Kiwis have been tremendous sales success stories at Walmart."
Leveraging Produce Experts and Delivering Fruits and Vegetables to Customers Faster
To improve quality and freshness, Walmart has hired produce experts to work directly with farmers in the key growing regions where the company has produce-buying offices. Building long-term partnerships with farmers while having Walmart associates in the regions – and in the fields everyday — where produce is grown has made it possible for Walmart to select farmers who grow the best fruits and vegetables. As part of this program, Walmart works closely with local growers in the U.S. to fulfill its commitment to double the company's sales of locally grown produce by December 2015.
Walmart's produce offices, combined with Walmart's advanced supply chain and efficient trucking network, have enabled the retailer to decrease the days needed to get produce from growers to individual stores. Reducing the number of days produce is in transit has made it possible for Walmart to deliver a fresher product to customers so it lasts longer at home.
Weekly Produce Checks
Independent teams responsible for checking Walmart produce departments are going into stores each week to ensure only the freshest fruits and vegetables are on Walmart store shelves. Results are reported to every level of store management. Through this program, Walmart is benchmarking itself and its competitors week over week.
"Empowering our associates with the tools to guarantee our produce quality is a critical component to our 100 percent money-back guarantee," said Sinclair. "These efforts, combined with the weekly produce checks and operational changes, will ensure our customers bring home the freshest fruits and vegetables."
Today's announcement follows a number of recent commitments by Walmart to make food healthier and healthier food more affordable. As part of its healthier foods commitment, Walmart has saved customers more than $2.3 billion over the last two years on fresh fruits and vegetables in produce sections across the country.
*If customers are not completely satisfied with Walmart's produce, they can bring back their receipt for a full refund. No questions asked and no need to bring back the produce.
Wal-Mart sells more produce than anyone on the planet, so the more its marketing efforts talk about how fresh their produce is, the better for the supply chain and the general image of the industry. We doubt Wal-Mart’s own image will change all that much. Although this announcement focused all on quality, the link it points to is still promoting “Produce Costs Less at Walmart.” There is a disjunction in its messaging that Wal-Mart can’t seem to get past.
There is a bit of a flavor of “weren’t you already doing this” to the announcement. It is hard to believe that Wal-Mart never had people checking the produce departments before and comparing them to competitive departments. Didn’t Wal-Mart executives always try to leverage Wal-Mart’s logistics abilities? Didn’t the company always provide necessary training to their associates?
The announcements are sufficiently vague to sound like PR fluff. To the extent they are specific, they raise as many questions as answers.
1) Buying the best fruits and vegetables
The release claims that hiring people in the field has enabled Wal-Mart to identify and buy from the people who grow the best fruits and vegetables. This doesn’t really make any sense. Very small retailers can have people walk a terminal market and select not just a Washington Extra Fancy apple, but the particular lot that is extraordinary. But Wal-Mart’s volume needs preclude this.
2) Fresher produce with better shelf life
There is a claim being made that somehow Wal-Mart’s buying office, logistics and trucking enables Wal-Mart to get produce to stores faster, resulting in fresher product with consumers getting longer shelf life at home.
It is not clear what this meant or if it is true. In most cases, the product goes direct from a packinghouse in, say, Yakima, to a DC and then to the store — which is what happens at Kroger, Safeway or, for that matter, a terminal market. So how, or if, this is faster is unclear. Sure there are cross-docking efforts and Direct-Store-Delivery (DSD) initiatives, but doing these things for Wal-Mart is not really any different than doing them for Costco. So it is not clear that this is a Wal-Mart edge.
If Wal-Mart produce actually had better at-home shelf life, that would be a pretty easy thing to prove and it would be a valuable thing to promote. That no such study is being proffered makes us think this whole line is just PR.
Back in the Bruce Peterson days, he had begun an initiative to deliver produce seven days a week to every store regardless of size. This basically would have eliminated the need for stores to hold any significant produce inventory and thus keep produce in optimal storage and so provide consumers with maximum shelf-life. But that project was killed when Bruce left the company.
3) Independent weekly produce checks
This is a great idea, though it is not clear what it means by the term “independent.“ Store level execution has been Wal-Mart’s problem since the birth of the supercenter, so constant evaluation and benchmarking against competitors can be a very useful tool. Of course, what management does with this data is the $64,000 question.
4) Training and Operations
The one big potential “game-changer” in this announcement is the plan to provide produce training for 70,000 associates. Traditionally Wal-Mart associates are generalists, not specialists, and merchandising efforts had to be “dumbed down” to allow these efforts to be executed by staff that is not expert in produce.
Wal-Mart does not have produce department managers or produce merchandisers. As such, the same person who is putting out the underwear today may be putting out the lettuce tomorrow.
Now we don’t know who, precisely, will get this training. Is it store managers, assistant managers or employees who work in produce? We also don’t know precisely what the training will teach or what authority the employees will have to execute.
Still and all, extensive produce training has to be a good thing for the consumer and thus for the produce industry.
Whether it is a good thing for Wal-Mart may hinge on an issue not discussed in the press release. Many years ago, when the unions were trying to organize Wal-Mart’s meat operations, Bruce Peterson was able to stand before the National Labor Relations Board, raise his right hand and solemnly swear that in a case-ready meat operation, no special or specific training was required. This is a crucial issue in determining whether something is a separate “business unit” and thus subject to being unionized independently of the larger store.
Now, Wal-Mart just gave the unions a Valentine’s Card, publicly declaring it needs to provide specialized produce training. We don’t know enough yet about what the training is or who is being trained to assess all these implications. But, quite possibly, the positive PR this press release has generated may be long forgotten when the unions are using it as “Exhibit A.”