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September 25, 2006 –
Perishable Pundit Overview:
Though Not ‘All-Clear’, Consumers
Can Eat Spinach Again
Another Oddity In Spinach Crisis
The Role Of Retailers And The Future Of Food
Safety
Reassuring
Consumers
Pundit’s Pulse Of The Industry
•
Robert DiPiazza and Jerry Hull, Sam’s
Club
• Bob Harding, Westborn
Markets
• Don Harris, Wild Oats
• Jeff Lyons, Costco
•
Mike O’Brien,
Schnuck Markets
Pundit Rewind
Pundit’s Mailbag
Though Not ‘All-Clear’, Consumers
Can Eat Spinach Again
Things are still moving fast and furious in the
spinach/E. coli crisis, although there is now some light at the end of
the tunnel. Here is the Pundit’s fourth 10-point analysis of the
constantly changing situation. You can read the three previous 10-point
reviews
here,
here and
here.
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Change in FDA advisory means the industry
can sell spinach again. Late in the evening on Thursday,
September 20, 2006, the FDA quietly and subtly changed its advice to
consumers. On Thursday during the day, the advice read as follows:
FDA advises consumers to not eat fresh spinach or products that
contain fresh spinach until further notice. Fresh spinach includes
bagged spinach, spinach in a clamshell, and loose spinach purchased
from retail establishments such as supermarkets, restaurants and
farmers' markets.
At this time, FDA has no evidence that frozen spinach, canned
spinach and spinach included in pre-made meals manufactured by food
companies are affected. These products are safe to eat.
If individuals believe they may have experienced symptoms of illness
after consuming fresh spinach or fresh spinach-containing products,
FDA recommends that they seek medical advice.
But consumers who check the FDA web site awoke on Friday to find
it reading as follows:
The FDA, in working closely with the CDC and the State of
California, has determined that the spinach implicated in the
outbreak was grown in the following California counties: Monterey,
San Benito, and Santa Clara.
Other produce grown in these counties is not implicated in this
outbreak. Processed spinach (e.g., frozen and canned spinach) is
also not implicated in this outbreak.
Effectively this ended FDA’s recommendation to not consume
spinach, though it wasn’t until a 6:30 PM press conference on Friday
evening that the FDA verbalized the switch.
There is no specific mechanism to assure consumers that the spinach
available is from non-implicated areas other than labeling signage
and in-store efforts. Much will depend on retail efforts. If
retailers do a good job with reassuring customers, the product will
sell. In fact, though consumers will be cautious, supply will be
severely decreased because the three counties implicated are big
producers. At this time of year, California produces about 75% of
the spinach sold in the US, and these counties account for the bulk
of that production.
If we don’t get the other three counties back on line soon, even
modest customer acceptance and retail promotion of spinach will lead
to shortages and high prices.
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Kudos to the association community. On
Friday, September 22, 2006, the Produce Marketing Association,
United Fresh Produce Association, Western Growers Association and
the Alliance for Food and Farm held a conference call for the
industry, which followed an earlier one held the previous Friday.
It was good to see the association community working together to
solve such a serious industry problem.
It is tempting in a situation such as this for one association to
try to steal the limelight from the others so as to convince
industry members of its importance. There was precious little of
that this time around.
There were plenty of differences behind the scenes, but the industry
presented a unified front and used all its resources to deal with
the issue at hand. A very strong performance.
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PMA consumer research. Bryan Silbermann,
president of the Produce Marketing Association, gave a sneak preview
of some quick consumer research sponsored by the association. When
asked where consumers got information from regarding food safety,
the most frequent response was personal experience, the
second-most-frequent response was the FDA and government agencies,
and the third-most-frequent response was the media.
He also reported that almost 70% of consumers thought the produce
industry was doing an excellent or good job in dealing with the
current spinach/E. coli crisis.
These are preliminary findings and more research is being done. I
find the 70% number highly encouraging as consumer sentiment that
the produce industry was cooperative and looking to do the right
thing will be crucial in rebuilding consumer confidence and getting
sales moving again.
The notion that people get their information from the FDA and
government is problematic. Obviously, only a tiny portion of the
population calls up the FDA and talks to them or even reads the FDA
and CDC web sites. So people rarely get unadulterated advice from
the government. What they get is governmental advice as filtered
through the news media. This means a two-prong industry outreach
program is required, both to shape governmental recommendations and
to shape the way consumer media present these recommendations.
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Organic vs. conventional and fresh-cut vs.
bulk. Two arenas of industry competition, long festering, have
risen anew with the spinach/E. coli situation. One is a competition
between organic and conventionally grown product; the other is a
battle between fresh-cut and bulk product. The Pundit has been
actively involved with these debates addressing what the spinach/E.
coli controversy implies for fresh-cuts
here and how the issue impacts organics
here.
Whenever one raises differences, it can be controversial.
Association leaders, almost as an occupational requirement, prefer
harmony among their members. And, presented unfairly, arguments such
as these could reduce consumer confidence in all produce.
But safety in food, as in other products, is rarely an
all-or-nothing thing, and many corporations have used safety as a
point of differentiation without bringing ruin on their industry.
Volvo has for decades promoted the safety of its vehicles and its
emphasis on engineering safety into each car. When Pan Am flew, it
did so under the slogan “The World’s Most Experienced Airline” –
which is a subtle way of saying “we are the safer choice.”
The reason some find this type of promotion unacceptable is because
it implies that some produce is less safe than others. One of the
reasons the industry is in this fix is we have sometimes wanted to
present all produce as “perfectly safe”. This is understandable, but
problematic, because it isn’t true. Just as it isn’t true in
airlines and isn’t true in cars.
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State government promotion of Salinas
Valley. The body blow that has been dealt in this current crisis
is really to the Salinas Valley. The spinach crisis, the constant
reminders in the media of past problems with lettuce and the
publicity over the FDA letter to lettuce farmers are a flame set in
the kindling of a pre-existing environment in which large-scale
agribusiness was already the subject of attack.
It is all very unfair. The truth is that the Salinas Valley feeds
countless millions with fresh product every day. When they have a
problem such as this, it is going to be big, really big, because
they distribute to every corner of the country and around the globe.
So it is very good news that the government of California,
recognizing the stake California has in burnishing the image of the
“Salad Bowl of the World”, is looking at running some kind of
promotional campaign to promote the valley, the farmers who work it
and the high quality produce it produces. Of course, this won’t
happen until everyone is shipping again.
There is no place quite like Salinas in the whole world. It is a
resource California would be wise to invest in.
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Getting Salinas back in production.
With the FDA’s decision to lift the blanket recommendation not to
eat spinach, the market can start up again. But until product is
flowing from the three counties still under investigation in this
crisis, the crisis is not truly resolved.
Now the problem is that the FDA is in a difficult spot. Everyone
knows the odds are that whatever caused this outbreak is long since
gone. But the FDA has to somehow announce that it has “done
something” to insure food safety. So working with the industry, the
tentative plan is to announce some kind of “Fresh-Start” program on
a short-term basis to get the industry going again.
The proposal, not yet approved, is for a five-part program:
• An
“industry restart cleaning”, in which all facilities are
sanitized.
• A pre-harvest audit to make sure good agricultural practices
are being followed.
• Monitoring of irrigation facilities and procedures.
• A review of all
soil amendments
• And, if all this can’t be done or done satisfactorily, pre-harvest
spinach testing.
How all this can be verified is still an open question, but there is
a possibility that the California Dept. of Food and Agriculture
might be willing to take on the task.
How quickly such a system can be up and running is unclear, but it
doesn’t seem easy to do. Several weeks seems pretty optimistic.
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Temporary or permanent? Just spinach, or
lettuce too? Industry is pushing hard that these requirements be
temporary as part of a “Fresh-Start” program. But rent control in
New York City was a temporary measure imposed during World War II
and is still going strong. When I look at that list, I don’t see a
thing on it that those who are concerned about food safety won’t
want to make permanent.
I also don’t see anything on the list they won’t want to apply to
lettuce as well as spinach.
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FDA teams in Salinas. The FDA currently
has 20 investigators in the field functioning in multidisciplinary
teams of four. By the end of the day Friday, they visited six
growers and 10 fields. The impression they give is that the FDA is
throwing all it’s got at this problem, which means the FDA is
woefully unprepared for a serious act of terrorism. What if this
were a case where thousands of people were dying? The FDA needs the
capability to field hundreds of teams on a few hours’ notice.
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Was the recommendation to stop eating
spinach too broad? One of the most hotly contested issues that
will be debated forever is whether the FDA recommendation to stop
eating all spinach was too broad. Tom Stenzel, President/CEO of the
United Fresh Produce Association, tried to explain the FDA’s
thinking by comparing it to 9/11 when, uncertain of the source or
extent of danger, the government grounded all airlines.
I think this has always been the FDA’s position, but in this case,
the danger was always known much more exactly. In the first case,
the majority of illnesses came from people who bought bagged
spinach. Because this product is, well, in a bag, we have a brand so
it is a relatively easy thing to suggest a voluntary recall on those
brands. It might be one brand, it might be 100 brands – but never on
bagged product would there be a need to withdraw brands that were
never implicated in the illnesses.
There were some reports that people purchased bulk spinach and
others that they fell sick as a result of eating something at a
restaurant or at a salad bar.
Once again, the industry has trace-back mechanisms. If you go to a
retailer, you should be able to find out who they bought loose
spinach from or who they bought foodservice-sized bags from. Once
again, recalls could be done with those specific brands and
suppliers.
What is the point of these expensive trace-back systems if the FDA
isn’t going to use them to limit the extent of these recalls?
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Message. The problem with releasing
some spinach and not other spinach is that it gives a mixed message
to consumers regarding the safety of spinach and adds to the
complexity of developing a consumer-based spinach message.
What should the industry message be? The temptation is to try to
reassure consumers that they can eat with confidence. But you can’t
overdo this because we can’t guarantee that this will be the last
food safety outbreak we will ever have.
You can show care and concern; you can emphasize that farmers eat
this product as well; you can show lots of women and children on the
farm. But it is a bad idea to guarantee what can’t be guaranteed.
Another Oddity In Spinach
Crisis
Though they have not published the information,
FDA officials have been privately telling industry leaders they have
determined that both organic and conventional product are implicated in
the E. coli spinach situation.
If this information is true, then this already odd food safety crisis
gets odder still. Organic and conventional product would be grown in
separate fields and processed on separate machines in different parts of
the plant. For the E. coli to be on both at the same time, there would
have to be a coincidence of mind-boggling proportions.
Unless… what if all the product is actually organic? Sometimes
organically grown product is sold as conventional because that was where
the demand was that week, or perhaps because the product yields well
when grown organically.
In any case, when the FDA says that product is conventionally grown,
they probably mean that it was marketed as conventionally grown, not
that they tested it for synthetic chemicals. What else could explain
this oddity?
The Role
Of Retailers
And The
Future Of Food Safety
Retailers are absolutely key to both the
short-term and long-term ability of the industry to recover from the
spinach/E. coli crisis.
In the short term, the question is to what degree retailers will feel
comfortable stocking and displaying spinach? Extensive studies after the
Alar event of 1989 showed that a large portion of the sales decline for
apples occurred not simply because retailers refused to buy the apples
but because retailers elected not to promote apples.
This is a cautionary note to trade leaders. You need buy-in by key
retailers or all the messaging and promotion to consumers will have a
tough row to hoe.
Of course, it is a bit of a chicken-and-the-egg situation. Retailers
will feel more comfortable promoting spinach to the extent they feel
that their customers are comfortable with spinach.
So we, as an industry, have a two-way task ahead: raise consumer comfort
levels with spinach so that retailers feel comfortable promoting and
displaying, while simultaneously getting retailers to display and
promote so consumers will become acclimated to the idea that retailers
they trust, trust spinach to be safe.
Long-term, it is a responsibility that produce retailers would prefer to
pass on to the FDA, but in the end the strength of our food safety
systems is at least as dependent on what retailers demand as they are on
what the government does for the simple reason that what retailers pay
for is what they are going to get.
The other day in a piece we wrote
here, I urged PMA to bring in David Theno, Ph.D, to speak at its
convention. David is the Sr. Vice President, Quality and Logistics at
Jack in the Box. He is conveniently local in Southern California
and considered a rock star in the Quality Assurance world, credited with
saving Jack in the Box from near certain bankruptcy. Though I linked to
it the other day, what he has to say is so relevant, I’ll display his
complete article right here:
Industry Must Raise the Bar
to Ensure Safer Burgers
Recipe for Safe Meat: Stricter Microbial Standards, Vigilance, Quality
Control
by David Theno, Ph.D.
August 1997 — The grill
and frying pan were never intended to be worn as protective armor. Yet
Americans are being warned that these standard household items are their
best, most reliable defenses against the dangerous bacteria that
prompted the largest meat recall in U.S. history — E. coli 0157:H7.
Certainly, cooking is one of the final checkpoints on the road to food
safety and wholesomeness. But the fact is, much more can be done at the
meat procurement and processing stages to ensure the finished hamburger
patties we buy are safer when they arrive on the retail market.
Companies that sell meat products — including restaurants, grocery
stores and other vendors — have a key role to play in this regard.
That's because these retail outlets have the ability to put pressure on
the companies that slaughter and process meat products. And as the
places where 70 percent of all hamburgers consumed in the United States
each year are sold, quick-service restaurant chains — so-called "fast
food" outlets — are in a particularly unique position to use their
purchasing power to compel meat suppliers to adhere to more stringent
microbiological specifications.
Simply put, if buyers only accept products that meet the highest
standards, then only the best meat will get to the consumer. The
companies that don't measure up won't stay in business. But before the
retail food industries can form a united front to help realize our
collective goal of a better quality national meat supply, they must
confront a few basic misconceptions:
Myth #1: Meat
quality doesn't vary appreciably from one supplier to the next.
The simple fact is, all meat suppliers are not created equal. As is the
case in nearly every industry, some manufacturers produce a better
quality product than others. Some slaughterhouses have superior systems
in place to ensure that animal hides and digestive tracts, where most
contamination lurks, are carefully removed so as to avoid all contact
with the cuts of meat that will ultimately end up on a consumer's plate.
And some processors test for E. coli 0157:H7 much more frequently than
others.
In my position as vice president of quality assurance and product safety
for Jack in the Box restaurants, my chief responsibilities include
establishing the product specifications our suppliers must meet and
jointly monitoring their performance. It's not enough to take a
supplier's word that his products are in compliance with your standards;
you have to do your own product testing as well. This is the only way to
develop, as we have, a supplier base that is doing everything
technically possible to control bacterial contamination.
Myth #2:
Testing for E. coli 0157:H7 is ineffective.
The argument goes something like this: since you can't test every ounce
of product for E. coli, there's no point in testing at all. This is
nonsense. While taking one sample per 100,000 pounds of product does not
sufficiently reduce the consumer's risk of getting a contaminated
hamburger patty, serial sampling, which involves taking a sample of
hamburger every 15 minutes, enables you to know the microbial status of
your meat supply all through the production day. That practice has
enabled us to reduce microbial levels 100-fold. Our suppliers are
required to conduct a sample on the order of every 2,000-3,000 pounds,
which some companies would deem excessive. But once again, companies
should want the security and confidence that comes with knowing they are
going the extra mile for their customers.
Myth #3:
Testing for E. coli 0157:H7 is expensive.
In fact, it costs less than a penny per pound of hamburger for Jack in
the Box to maintain its system of testing for E. coli. Even when you
sell 65 million pounds of hamburger per year, as we do, the cost is
still quite reasonable for such an effective insurance policy,
particularly when compared with the devastating human and economic costs
of an outbreak of foodborne illness. Working with our suppliers, it took
less than one month to set up the programs.
Myth #4:
Government will take care of the food-supply problem.
The legislative and regulatory processes, by their very nature, require
extensive consultation and research. Comprehensive public policy doesn't
take shape overnight. But outbreaks of foodborne illness do. We in the
food-service and retail food industries have an opportunity and an
obligation to be the gatekeepers who filter inferior meat products out
of the American marketplace. By rising to this challenge, we will
ultimately provide Americans with the key ingredients they need to enjoy
their beloved hamburgers once again: confidence and peace of mind.
Just change the word hamburger to fruits
and vegetables and change the word meat to produce and you see the
challenge ahead.
Much of our food safety system is built on “reps and warranties” —
promises made by shippers to retailers, by packers to shippers, by
growers to packers.
At each stage, the question is: Are we sincerely interested in these
representations because we want the safest food supply possible, or are
we interested in these reps and warranties as a liability-shifting
mechanism so if there is a crisis we can deflect blame and lawsuits to
someone else?
What Dr. Theno is telling us is that, as a big buyer, Jack in the Box
took the bull by the horns and both made its product safer and rebuilt
consumer confidence.
If this crisis had been on Wal-Mart brand spinach, Wal-Mart would be
doing exactly what Dr. Theno urges with meat, on spinach. It would be
there demanding E. coli checks on every 5,000th bag, either sending its
own staff out in the field or demanding third-party audits on food
safety protocols. In other words, Wal-Mart would be doing what is
necessary to both have safe product and rebuild consumer confidence.
It would be a terrible mistake to wait for political consensus to
achieve the same level of food safety and the same consumer comfort
level.
Reassuring Consumers
Regardless of what the FDA does, there cannot be a
successful outcome to this disaster if consumers don’t feel reassured as
to the safety of spinach and all produce products.
Certainly if Good Agricultural Practices need to be revised, they should
be revised. But that is very subtle and not likely to move consumer
perceptions.
There are two things that can and should be done:
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Manure, composted or not, should be banned in
commercial agriculture. It is not necessary and is barbaric. Every
consumer is repulsed by the idea that their fruits and vegetables
could be raised in soil laced with manure. And they don’t feel
better because you tell them it is heated up for five days.
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Every
processing plant should do “nth” bag inspections for E. coli on all
lettuce and spinach products. Even if it is every 10,000th bag, the
very concept of continuous testing will be enormously reassuring to
consumers.
These are real changes to the system which would,
without a doubt, reassure consumers and might even make outbreaks less
likely.
Pundit’s Pulse Of The Industry
What has it been like on the front lines during
this spinach/E. coli crisis? The Pundit asked Mira Slott, ace special
projects editor at the Pundit to reach out and capture the pulse of the
industry at retail. We thus present the first in a new series in which
we collect opinions and insights from different industry sectors on
different subjects.
A special thanks to our Pundit Panel of the day:
·
Robert DiPiazza, Senior Vice President and General
Merchandising Manager for Fresh, and Jerry Hull, Senior Produce Buyer,
Sam’s Club, Bentonville, Arkansas
·
Bob Harding, Produce Buyer, Westborn Markets, Berkley,
Michigan
·
Don Harris, Vice President Produce/Floral, Wild Oats,
Boulder, Colorado
·
Jeff Lyons, Senior Vice President of Fresh Foods, Costco,
Issaquah, Washington
·
Mike O’Brien, Vice President of Produce, Schnuck Markets,
St. Louis, Missouri
The Pundit Panel has
generously been willing to share their time and expertise to help the
whole industry understand the way this has played out at retail: We are
proud to present today’s panel of Retail Pundits:
Robert
DiPiazza, Senior Vice President and General Merchandising Manager
for Fresh, and Jerry Hull, Senior Produce Buyer, Sam’s Club,
Bentonville, Arkansas
Q: Could you
describe the dynamic on the retail floor?
DiPiazza: We’re patiently… or I should say… un-patiently waiting
for the FDA to bring this investigation to a close. Sam’s Club has two
items affected, bagged baby leaf spinach, and typically our spring mix
has spinach as part of the mix.
Hull: We pulled all spring mix and baby leaf spinach off the
shelves — all the spinach we carry — so we’ve lost those sales and have
only gotten modest sales back in other SKU’s, not close to what we would
have experienced with the spinach products. We picked up a few sales on
romaine hearts, but have seen no noticeable decline or increase in
tossed salads. Chopped romaine has picked up, so we’ve had two items
increase. Everything else is not impacted at present time.
DiPiazza: I don’t think in instances like this that those sales
shift over to other products. We are anxious to get back to normal and
get spinach back on the shelf. We understand this ban has been
devastating to the industry and that we need to make corrections and
move forward.
Q: Are you making product adjustments for your customers?
DiPiazza: We’ve re-formulated our spring mix, taking spinach out
and are in the process of getting it in all our clubs. It’s back in some
clubs right now. We made sure to take spinach off the ingredient label
on the package.
Hull: We started reformulating the products without the spinach
the second day of the news event. The new spring mix was ready to go out
in clubs earlier, but we were just waiting for clearance to be sure
everything had been done properly to insure public safety.
Q: What feedback have you received from your customers?
Hull: We’ve had probably the normal consumer questions and calls,
but very consistent reaction in line with an incident like this. We
haven’t put signs up, but we make clear to the public on the product
packaging there is no spinach in it. I hope this whole thing blows over
soon, but the way things have been unfolding, it’s hard to know if that
will be the case.
DiPiazza: When a food safety concern like this is so broadly
covered in the media, retailers get a lot of calls. We field consumer
questions like any other issue, in this case telling consumers they
should return any fresh spinach they’ve purchased. Do I think this
outbreak will have long term affects? Unfortunately, we’ve had food
safety outbreaks before in meat and other products. If you look at
history, long-term the product will rebound. I expect we’ll have spinach
sales back in some time. It’s just difficult to forecast when that will
be.
Q: What can be done to jumpstart the recovery process?
DiPiazza: Once the investigation is complete and the market is
ready, we’re going to try and work with our grower partners, who have
been significantly impacted to reenergize sales of spinach and try to
help them revitalize their businesses.
Bob Harding,
Produce Buyer, Westborn Markets, Berkley, Michigan
Q: In many ways,
produce is at the core of your identity, so as a relatively smaller
chain, how does a food safety incident such as this affect your
operations?
A: Essentially what we did when we first found out, we went through
every product and brand with fresh spinach in it, both conventional and
organic, including cooking spinach, and pulled it all. We kept counts
and gave product back to the suppliers, and they gave us 100 percent
credit. Earthbound went to supplying us herb salad and spring mix
without baby spinach and printing no spinach on the label. We do have
signs on our counters letting consumers know our spring mix does not
contain spinach. Our salad bar spinach was immediately pulled as well.
Q: How did your customers take to the news?
A: Surprisingly, we didn’t hear any concerns from consumers. The funny
thing about this is that we just had consumers ask, “When will we get
spinach again?” It’s ironic when every time you turn on the news or pick
up a newspaper, there are reports of the outbreak giving details of what
happens when the E. coli spreads. I really received no negative
feedback. A few people brought back their uneaten baby spinach bags, but
there was never an overwhelming reaction of people pounding at our door.
Since we removed the spinach, we’ve received a small spike in green
leaf, romaine, romaine hearts, and head lettuce, but no significantly
meaningful numbers.
Q: It sounds like your customers have a serious liking for spinach.
Had the category been increasing in sales prior to the outbreak?
A: This incident really hurts a category that has been growing in
interest. The category of baby spinach over the past few years has
skyrocketed, and sales of spinach have been a huge deal for us. Of
course, this will affect spinach sales dramatically. A lot of time local
media sensationalizes things and scares the consumer before they have
the facts and figures. I think there will be a cooling-off period and
people will forget about this incident, but it will be a gradual process
and probably a long time before that happens.
Don Harris, Vice
President Produce/Floral, Wild Oats, Boulder, Colorado
Q: What are the key
strategies you engineered when you learned of the fresh spinach e-coli
outbreak?
A: We pulled everything with fresh spinach from the shelves and our
produce managers, who are always very involved with our customers,
encouraged them to make transitions to other bulk greens and organic
salads. Even with Earthbound Farms labels, items like organic leaf
lettuces and romaine mixes have done well filling in the holes, despite
the fact the company name has been so prominently linked in the media to
the spinach E. coli outbreak. We did the same with Fresh Express, and
other organic leaf lettuce brands. Bulk leaf lettuces probably doubled
in volumes and salads tripled. I had expected an overall sales drop with
the spinach ban and all the press, but overall sales were actually up
last weekend on salads.
Q: Why?
A: Our customers in general are flexible. If they can’t get spinach,
they have arugula or bulk greens; it’s organic, it just won’t be
spinach. They talked with managers and associates on the floor to learn
about other choices. In some cases, it encouraged consumers to try new
items.
Q: With the ordering adjustments to fill displays, have you
encountered any problems?
A: We’ve had a hard time keeping shelves filled with the alternative
products because in some cases we’ve had a tripling in demand. We always
have big displays. Keeping some products in stock has been challenging.
We’ve had trouble filling kale orders, some other mustard greens, even
dandelion greens, bulk greens as a replacement for baby spinach and the
bulk spring mixes.
Q: Has there been any confusion with reformulated spring mixes?
A: I had great grief over last weekend because of an ad that was running
on spring mix. We couldn’t take the ad out because it was too late. We
had pulled spring mix because it could have had spinach in it.
Earthbound reformulated the spring mix for us. It would have been hard
to explain that ad after the initial outbreak if those bags included
spinach, but we will have spring mix in stores without spinach. All
people in the stores are a little paranoid. We did get consumers
calling, examining the bags with a fine-tooth comb, calling us, asking,
“Is this spinach?” for some of the greens that look similar. Young
chard, for example, is often mistaken for spinach.
Q: With your many years in the industry, how does this recall compare
to others?
A: I’ve dealt with a lot of recalls over the years. My history has
been with conventional, but I’ve found there’s a general consensus of
consumers thanking us for taking the product in question off the shelf.
They believe we wouldn’t sell them something that wasn’t safe for them
to eat. At this stage, organic hasn’t been implicated. On that Saturday
when Natural Selection was implicated, this indicated it was a
California outbreak. Normally the recall would be confined to California
growing areas. So, I initially told the stores to play up local spinach;
we bring in spinach from Long Island, for example. But then the FDA
banned all spinach, so we pulled it all. We’ve been pushing local
spinach, and those guys really get clipped. If you are a medium or small
grower, this ban can be tragic. All the different labels created
complexity. But it is very unusual to ban all spinach across the board
because, normally, there’s a measured run for your orders.
Q: Your experience on the retail floor in terms of sales sounds more
encouraging than at other chains I’ve spoken to. Why is that?
A: We’ve been very fortunate. My stores made this thing work by not
only getting all spinach products off the shelves, but putting signs up
without panic, beautiful displays with additional greens, and moving
quickly to execute strategies. Having well-trained, knowledgeable
managers and employees made it work. They were calling us asking what
they should be doing, and coming up with their own ideas. In my former
life, I was dealing with 1,700 stores. Here at Wild Oats, we could
follow up with phone calls and by noon double check progress.
Merchandisers in each area were calling on product substitution strategy
because they didn’t want to see holes in the department.
Q: What additional steps can you and the industry as a whole take
moving forward?
A: Our number one priority is to look out for the consumer. I’m on
the board of PMA, and we, as an industry, should use them to try and get
the FDA to start moving on lifting the ban. When the whole industry is
affected, forces everyone to get involved and think about how to make
changes.
We’re going to have to spend money to get the word out to consumers that
spinach is safe. When FDA comes out saying fresh spinach is safe, the
news won’t get front page.
In the organic industry, which is only one or two percent of the
industry, while in produce closer to 5 percent, we need to ask
ourselves, can we do something better?
Jeff Lyons,
Senior Vice President of Fresh Foods, Costco, Issaquah, Washington
Q: What’s your take
on the FDA’s handling of the situation?
A: It’s a pretty tough deal when the FDA comes out with a blanket
statement, “Don’t eat spinach”. It’s the first time in my experience FDA
enacted such a broad rule; it didn’t matter the vendor or where it came
from. I’m used to dealing with food safety issues, whether bean sprouts
or meat, focused on this plant or that label.
Q: How did you respond to FDA’s broad ruling?
A: We were able to get all spinach off the floor immediately,
broadcast the message to all buildings, and track sales to see there was
no product on the floor or mishaps with customers purchasing a bag. If
that occurred, we have the capability to call directly to the warehouse,
and since we operate through membership cards, to contact the customers
directly and inform them to please dispose of the product. We’ve done
this in the past on recalls. We know who has purchased the product. This
is confidential information, but in this instance of safety we are able
to alert the customers to please return the item, and let them know
there’s been a recall. It gives us confidence that we have this
mechanism in place, even though it didn’t happen in this case.
Q: Could you describe interaction with suppliers on product
solutions?
A: This is a devastating thing for them. Our original spring mix had
some spinach in it, and the vendors asked us if they could reformulate
it and get it back on our shelves. We said sure, and we put a label on
the front of the bag letting consumers know it contains no spinach. The
vendors didn’t have time to change their label yet, so we contacted our
attorney, and our food safety person contacted the FDA to be sure. They
said it was fine to go ahead with our own labeling in the interim. On
the back of our spring mix package, it says it may contain spinach or
product ingredients may vary. Costco uses up to 17 lettuce varieties to
give us flexibility in offering consumers the highest quality offering.
When something starts to break down, we don’t want it in the mix. Our
membership is our primary concern; at the same time we want to work with
vendors. Otherwise these other crops would be thrown away. If you’re a
spinach farmer and it’s your whole crop, and you choose to plow it
under, you’re finished.
Q: How have customers reacted with the media blitz?
A: We had some concern with some members after a TV news company in
Los Angeles falsely accused Costco of carrying spring mix with
spinach and saying this is bad and they have it on the floor. It wasn’t
spinach, it was arugula or another rounded shaped leaf variety that is
less familiar. The TV company did three retractions over the next day,
but the damage had been done. We had members worried, and people on the
floor trying to explain. That was the biggest hiccup in the whole thing
because there are a lot of leafy varieties out there. By next week,
package labels will all be changed around the country, which should
eliminate any further confusion. Hopefully customers are trusting of
their club store or supermarket.
Q: So, where does that leave Costco in relation to getting back into
the spinach market?
A: If the FDA investigation proves water contamination that could lead to a lot of
concern, that’s tough. At this point we won’t carry spinach and won’t
carry it for some time, even if FDA says New Jersey crop or spinach from
other states is OK. We will wait awhile to get back into the category
because consumers will still be concerned. We’ll take a cautious
approach. Once there are enough reports and media coverage that
consumers feel comfortable about eating spinach again, we’ll bring it
back.
Q: Costco generates huge dollar volumes from limited product SKUs, so
how will this affect the category?
A: At Costco we’re an item business, so that was a tough one to lose.
Spinach is a very good item for us, within the top five items in our
salad area and big dollars. Spinach has really been growing at
double-digit pace for us. We have mixed greens that don’t have spinach,
and mixed greens still are our number one selling item in the category.
We saw a pick up in alternative items, but not as much as we saw in
loss. I think the scare had an impact on consumers thinking of just
avoiding lettuce and other leafy greens in general. We saw a little
switching over to romaine hearts but not a major difference in buying
patterns.
Q: Where do you go from here?
A: We realize that consumers are wary. We have to manage those
inventories, and we think sales of spinach will come back gradually.
When you look at the myriads of produce eaten in this country, you can’t
say the E. coli outbreak is a pervasive problem, rather isolated
instances, but this is a signal to the industry to make improvements in
food safety. Ever since the Jack In The Box incident, the meat industry
has made improvement after improvement, and our meat supply is safer.
The industry needs to work on intervention strategies; we need to get
proactive in this business so consumers feel confident. We can’t sell
double messages — saying that organic is better will confuse consumers.
Mike O’Brien,
Vice President of Produce, Schnuck Markets, St. Louis, Missouri
Q: Since the outbreak, how have your actions
affected your customers?
A: We voluntarily pulled all spinach, including bulk when FDA extended
the recommendations, even though our bulk product is grown in Colorado,
which is not even under investigation. FDA said to pull it, so we did.
Feedback from consumers is they’re happy we voluntarily pulled the
spinach. I don’t think they’ve lost confidence in eating spinach, at
least the customers we’ve talked to. The news hasn’t had a major impact
on department sales. We’ve seen a little bit of substitution and
consumers are buying more bulk. Our supplier, Fresh Express, pulled its
spinach bags and spring mix that had spinach and reformulated product
without the spinach. Fresh Express is not associated with Natural
Selection, but everyone’s guilty until proven innocence. The industry is
working on trying to get the ban lifted in those areas not affected.
Q: What is your assessment of the long-term effect?
A: It’s hard to say the impact until I’m able to analyze sales data over
time. It has kind of calmed down at retail. The customer only knows that
if they are looking to buy fresh spinach, they have to wait and they
seem OK with that.
Pundit Rewind
The Pundit originally
ran this piece on September 21, 2006, but in order to keep everyone
organized with respect to reference material on this subject, we have
updated it with new items and run it again today.
Spinach Crisis Summary
With so much having been written in so short a
time, thought it would be helpful to publish a sort of round-up of
available material to help people understand the whole situation
regarding spinach and this E. coli breakout:
The Perishable Pundit itself has dealt extensively with the subject in
several major pieces. On September 15, 2006, we published Spinach
Recall Reveals Serious Industry Problems, which addressed the
implications of this crisis for the fresh-cut industry. You can read the
piece
here.
On September 18, 2006, we published Organic Dodges a Bullet,
which deals with the implications of the outbreak for the future of
organic farming. You can find this piece
here. Also on September 18, 2006,
we ran a piece called Ramifications and Reflections on the Spinach
Recall, which provided our first 10-point analysis of the situation.
You can read it
here.
September 19, 2006, we asked Is FDA’s Concern Now an Obsession? –
a piece in which we assessed whether a national recommendation to not
eat spinach made any sense. You can review this
here.
On September 20, 2006, we noted 10 Peculiarities about the E. coli
Outbreak and reviewed why certain aspects of the situation are
unlike past food-safety challenges and other unanswered questions
regarding the outbreak. Read this one right
here. Also on September 20, 2006,
we did our third 10-point list, calling this one “Spinach Recall Begs
for Solutions”, where we reviewed how the trade can deal with this
issue for the future, including looking at the meat industry, the
prospect of universal testing and the use of
RFID and
GTIN. You can read all this
here.
On September 21, 2006, we asked Is FDA Causing Long-term Damage?
Here we posed the question of whether punishing the innocent and the
guilty alike doesn’t reduce incentives to invest in food safety. You can
read this piece right
here.
In addition, the Pundit did several smaller pieces
that touched on various aspects of this crisis. On September 18, 2006,
we raised the issue of whether food safety outbreaks such as this raise
long-term issues about the viability of cartoon character tie-ins in
Who Has Marketing Fortitude? You can read about it
here. Also on September 18, 2006,
we dealt with the way some companies have little sense of decency when
it comes to marketing their products in the midst of a crisis. You can
read this one right
here.
Additionally on September 18, 2006, our Pundit’s Mailbag focused
on letters received by United President/CEO Tom Stenzel and incoming
Chairman Emanuel Lazopoulos of Del Monte Fresh, which dealt with the
confluence of United’s Board Meeting and the spinach crisis as well as
issues of industry leadership. You can find this one
here.
On September 19, 2006, we noted that there might be a Greenhouse
Opportunity in all this. Read this
here. Also on September 19, 2006,
we noted that, though fruits and vegetables are healthy, fresh produce
is not necessarily the best choice for those with a compromised immune
system. The piece is called Marketing Nightmare and you can find
it right
here.
On September 21, 2006, we did a piece called Wal-Mart Deli/Bakery Has
Crisis Of Its Own that draws a link between the difficulty of
preventing a Salmonella outbreak at one store with the difficulty of
preventing an E. coli outbreak on an industry-wide basis. You can read
this piece
here.
Several additional pieces appear in the September 25, 2006, Pundit and
they will be incorporated into future iterations of this Spinach
Crisis Summary.
In addition to our own work, there are many excellent sources of
information out there that do not require payment, membership or
registration. Three of the Pundit’s favorites:
The U.S. Food and Drug Administration has offered daily information on
the crisis right
here.
The Centers for Disease Control and Prevention deal with the outbreak
here.
The Produce Marketing Association has maintained an excellent industry
resource on the subject right
here.
Please feel free to write or call if you are looking for specific
information not included here. Note that many of the articles and
websites have links to other resources.
Pundit’s Mailbag
The Pundit would like to thank the many industry
members who've called or written over the past week. Most have given
information in confidence, and regular readers of the Pundit have been
enjoying the benefit of this input since the crisis broke. But wanted to
deal here with two specific letters:
John Pandol, a partner at Pandol Bros. in Delano, California, asks an
interesting question:
Did any of these people use supermarket loyalty cards and, if so, was
any of that info used to verify the purchase of the affected
individuals?
With so many loyalty card programs out there, we should be able to
get good data for a lot of people who have already thrown out their
spinach bags.
Jeff Lyons, Senior Vice President of Fresh Foods, Costco, Issaquah, WA,
touches on this issue in today's Retail Pulse series as he mentions that
Costco uses membership club data to let people know about recalls when
health or safety are involved.
Why hasn't the FDA mentioned accessing this data?
And Tom Marrolli, Outside Sales Executive/Mid-Atlantic at State Garden
in Boston, Massachusetts, answers the Pundit when I asked:
How is it possible for so many brands to be implicated? Even if they
come from the same packing plant, it doesn’t make sense. These items are
batch processed. If Natural Selection Foods is packing for Dole, it
packs for Dole for many hours. It doesn’t pack in bits and pieces for
each brand.
Since so many brands are implicated, it would have had to have been
packed over many different packing days. But an E. coli problem is
typically in a small batch. It doesn’t make sense.
You can read the whole article
here.
But as Tom explains:
It’s not only possible, it’s probable. There is not just one
packaging machine in a major processors operation. Each machine may be
loaded with a different film. The machines can work simultaneously off
the same load. In other words, one line may be packing one brand; the
line next to it may be packing another. Same spinach, different brands.
And he is, of course, correct. Although there aren't enough lines
for all these labels to run at once, industry sources tell me that some
of these labels would have been packed on different days. Of course, the
FDA has never issued a list of implicated labels, so it is possible that
Natural Selection Foods was being conservative and recalled all its
labels packed in that plant just to be safe.
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