The Disruption Of Established Markets:
How Four Strategies Can Help Transcend Today’s Dilemmas
Can Retailers Show A Little Love For Produce Marketing?
Dutch Marketer Nic Jooste Will Share His Thoughts On Swimming Upstream At The Global Trade Symposium
Jim Prevor’s Perishable Pundit, November 16, 2015
A few months ago over at Pundit sister publication ProduceBusinessUK.com, Kathy Hammond wrote a piece that was published with the title, Treating CSR as a collective asset can lead to tangible gains. The article detailed how the integration of a Corporate Social Responsibility initiative into the very DNA of a company can create a valuable asset that will attract employees and customers alike.
It was natural to see if we could get the article’s chief CSR protagonist, Nic Jooste of Cool Fresh International, to come to New York for our Global Trade Symposium and expand beyond CSR into the broader question of how the overall produce business is changing and how firms can capitalize on that change.
We asked ProduceBusinessUK.com Contributing Editor Tony Leighton to find out more:
Cool Fresh International
Ridderkerk, The Netherlands
Nic Jooste is marketing director of Cool Fresh International, a Dutch group with clients spread across 54 countries. The company imports fruit through the port of Rotterdam — the company’s base — from all of the world’s main fresh produce nations.
Q: At the New York Produce Show and Conference, you will be giving a European take on the theme ‘Fresh Produce Import & Export: The Disruption of Established Markets.’ What will be your starting point?
A: Market disruption has been defined by Bryan Silbermann, president of the Produce Marketing Association, as “situations causing markets to cease functioning in their traditional manner.” He identified issues such as price, a slowing global economy, sustainability challenges, food safety complications and global politics as the ‘baddies’ and added, “to survive means finding opportunity amid challenges.”
I believe that this is at the heart of being able to effectively handle disruptions, and in our company we fully embrace this approach.
Q: What personal experiences do you have of market disruption?
A: Well, I am an offspring of South Africa, one of the world’s fresh produce stalwarts, yet a country which is disturbed in its own right as a result of poverty, politics and social inequalities.
I have travelled extensively in the line of duty and have seen many disruptions from close by — El Nino in Peru, uprisings in Egypt, volcanic eruptions in Iceland. I am involved in a European fresh produce company, which is situated in one of the world’s most important fresh produce hubs and operates in a great number of countries, and which feels every disruption, whether it is economic or political.
Q: What kinds of disruption, and ways in which to overcome them and prosper, will you be discussing at the New York Show?
A: I’ll highlight four issues that are crucial in combating current disruptions in the fresh produce industry. Firstly, the flexibility and determination to do things differently. Secondly, sustainability throughout the supply chain. Thirdly, niche marketing to gain market share and fourthly, product specialisation to dominate categories.
Q: Can you give us some examples of these issues?
A: Well, around the turn of the century, about 70% of all produce imported into Europe was handled by independent wholesalers on fresh produce markets. Today it is estimated that this percentage has swung around, and retailers now handle 70%. So the number of wholesalers has been annihilated.
In the year 2000 in Holland, no less than 300 importers handled the bulk of all fresh produce imports. Today only 82 remain. The fresh produce specialist has been ousted by the big retailer, and as a result we have lost the passion and product knowledge these individuals brought to the fresh produce industry.
From an economic perspective, we can also safely say that the retailers’ aggressive growth has disrupted the established/traditional wholesale market system in many countries. And consequently, the traditional marketing approaches are also completely outdated.
The European retailers’ dominance in the consumer markets has had another affect on our industry. Previously fresh produce was a source of pride for the people who did the importing and selling. There was a continuous focus on presenting fruit as being ‘top quality’, ‘wholesome’ and ‘healthy’.
Over the past few years, we have seen a drastic decrease in brands which speak to the imagination and which are put on the market by fresh produce specialists who are committed to quality. Simultaneously, there has been a radical increase in the use of generic packaging. This approach is disrupting the fresh produce trade as we know it.
The passion has largely gone out of fresh produce marketing, and consumers are not being engaged sufficiently in the story of fresh produce. We are killing our very own story, which should be all about goodness, flavor and taste, but today is predominantly based on price.
Another aspect that can be connected to market disruptions is politics. In 2014, Russia decided to retaliate against the West by imposing a full embargo on food imports from the EU, the US and some other western countries in response to sanctions over Ukraine. This ban included fruit, vegetables, meat, fish, milk and dairy imports.
In the year preceding the ban, total European farm exports to Russia were worth some €11bn, with 29% of all fresh fruit and vegetables exports from the Union finding their way to the Russian market — then suddenly exports to Russia came to an abrupt halt.
For a couple of weeks, there was chaos all round, and the pessimists predicted large-scale bankruptcies amongst European growers and exporters/traders. Negative affects were certainly experienced in the short term, especially by those companies that had all their eggs in the Russian basket and had to lay off staff and radically decrease their operations.
This disruption had all the potential to create a massive impact on the Dutch fresh produce trade, but with survival at stake the country’s terrier-like trading attitude came into play. Within weeks, we saw entrepreneurs reacting to this disruption, developing solutions to the problem every day.
My final example of a disruption is to my mind the most threatening and frightening of all. This is the disruption which the processed food industry is imposing on ‘real’ fresh produce. With advertising budgets equaling the annual turnover of the average fresh produce company, big food business is effectively misleading the consumer and cannibalising the real fresh produce industry’s market position.
Not so long ago, the only thing that could claim to be a tomato was, in fact, a tomato — round and red, and you could touch it! The same applied to other products in the fresh produce category, but the playing field is no longer level, and the consumer is continuously confronted with slogans such as ‘ketchup containing only fresh tomatoes’.
When you read the small print on this kind of labelling, you will see that if you use commercially prepared ketchup on your food, you might as well be starting an IV of sugar, because that’s primarily what glugs out of the bottle. As another example is a packet of ‘mashed potatoes out of a box.’
I’ve seen claims to contain real potatoes, but the small print actually shows the following list of ingredients: Potato Flakes, Sodium Bisulfite, BHA and Citric Acid, Monoglycerides, Partially Hydrogenated Cottonseed Oil, Sodium Acid Pyrophosphate, Butteroil. Check the label! By abusing the goodness of real fresh produce in the communications and marketing mix, the processed food industry is cannibalising our industry to death.
Q: You have given some bleak-sounding scenarios there, particularly the last one — so how do you feel the European fresh produce industry can successfully meet the challenge?
A: Well, from the Cool Fresh Group’s perspective, the fresh produce industry can still put itself way ahead in the food game. We work with and believe in our product, which can be categorised as ‘pure goodness’.
That being said, just believing in your product is not sufficient to remain ahead of the game. One actually needs to be creative, innovative and daring to stay at the front of the pack. We started with a new approach in 2007, when the Cool Fresh Group decided to invent its own future.
We knew we had a good thing going, but we needed to do more. We created a strategy around two very specific corporate approaches, the first of them based on the famous business consultant Peter Drucker’s suggestion that, “The best way to predict the future is to create it.”
With that in mind, we set about making sure that our company could not only react but also ‘pro-act.’ For instance, when the Russian crisis exploded, we had already been active in the new economies for some time and had therefore pre-empted the challenge.
We understood what we call the ‘grey’ logistics routes, and in a short space of time we developed a solid turnover with clients who appreciated our guts to become involved in the unknown. These clients, in the so-called ‘backwoods’ of Europe, are still with us and we are constantly discovering new frontiers and opportunities.
The second approach was to take on head-first the challenge of difficult markets and difficult-to-liaise-with clients. This approach was based on a simple principle in handling disruptions: the higher the degree of difficulty, the less competition there is, and thus the greater possibility of earning a solid margin based on providing a higher value-added service.
So we say that the further away the destination and the more complicated the logistics routes; the more labelling which is required; the more complicated the documents which need to accompany the order; the greater the variety of products which we have to source and stack on mixed pallets; the more fragile the products, which we need to supply... BRING IT ON!! The lesson here is to be creative, daring, flexible, and eager to explore new frontiers.
Q: Exploring new frontiers is laudably bold, but Drucker also said, “The aim of marketing is to know and understand the customer so well that the product or service fits him and sells itself.” How difficult a task is that, especially in the context of disruptions which may occur at any given time or place?
A: We have travelled extensively to meet with clients and suppliers in order to understand their markets and situations, and to generate mutual trust between ourselves and our clients and suppliers. The close working relationships we have formed make it easier to handle disruptions and to collectively identify and exploit opportunities. This approach has taught us not to fear the unknown, but rather to distrust that which has remained the same for too long.
Q: Along what you have described as Cool Fresh International’s, “journey of knowledge in the market place,” the company took the Corporate Social Responsibility route. Has this had beneficial effects in terms of combating disruption?
A: Initially we saw CSR itself as potentially a major potential disruption. The multi-national retailers were giving out clear signs that CSR was here to stay and that, in order to have a long term relationship with them, suppliers needed to be CSR-certified.
We had to get our act together in this regard and to do something before something was done to us. So we embarked on a process of transparency, good citizenship and a clean bill of health in terms of corporate integrity, and we became the first fresh produce company in Europe with a high level CSR certification.
With a strategy based on keeping things simple, we targeted issues that we could influence directly, both within our company and in passionate and high integrity social and educational projects we created in countries from where we source our fruit. We ended up still moving big volumes, but with a different approach that took our corporate profile to a whole new level.
Nic’s bio explains that “Nic believes in swimming upstream. If everybody else is doing it one way, he believes that there is a good chance a company will find its niche by going in exactly the opposite direction.” This philosophy plays out in his expression of willingness to take on difficult challenges as the road to profitability.
It reminds us of a great uncle we had in the produce business. Although the family business is well known with Pundit Great-grandfather Jacob opening in the US in the old Wallabout Produce Market in Brooklyn; Pundit Grandpa Harry Prevor moving the business to the old Washington Street Market in Manhattan and Pundit Poppa, Mike Prevor, moving the business to the Hunts Point market, we also had a more distant relative in the produce business who made a good living in an unconventional way.
The merchants of the market published a unified credit report that indicated who owed a lot, who wasn’t paying, etc. Most of the houses on the market used it as a kind of “stop list,” refusing to extend credit to buyers that were behind terms.
But this relative ONLY sold people who were listed as bad credit. Why? Since selling to these buyers was risky, few would do it. So these companies had little choice but to willingly allow a vendor a high profit margin. They paid very high prices. Of course, managing this was very difficult and many went broke and never paid, but if they were charged triple normal prices, even if two thirds never paid, he cleaned up.
Back in the mainstream business, we found the same to be true. Sure we could sell full trailers, sometimes boatloads to large markets in Europe or Asia, but these buyers knew every price and practically told us what we would be allowed to earn. When we sold mixed trailers to the Caribbean, it was the service that was valued, and it was a difficult business for others to access, so we could make larger profits.
We think Nic is quite astute in pointing out the problems that growth in private label is causing the industry. It is very difficult to encourage investment in product development if the producer won’t be able to realize a return on this investment, and it is difficult to realize a return on this investment if everything is presented to the consumer as identical.
In many cases, the move into private label is specifically designed to allow the retailer and/or the consumer to capture margin that used to go into R&D and marketing — but if that margin is not there anymore, who is going to build demand and develop products for the future?
One thing we will wait for the presentation to buy into is the whole idea that processed foods that use produce as ingredients — ketchup, boxed mashed potatoes etc. — are actually reducing fresh consumption.
Although it is true that these products have large marketing budgets, we doubt that people require much persuasion nowadays to not try and make their own ketchup for example. And fresh has its own problems — notably very inconsistent taste.
We wrote about it years go when Jr Pundit Primo, aka William, was only 18 months old in a piece titled, Little Taste Bud. But, to be honest, we had breakfast at a small diner this morning, and the cantaloupe and honeydew served was almost inedible. The more marketing dollars put behind inconsistent product, the faster consumers will learn not to buy it.
In any case, this is sure to be an intriguing presentation and a spirited discussion, so come join us at the Global Trade Symposium on Tuesday, December 1st, and stay for the whole New York Produce Show and Conference.
You can register for the Global Trade Symposium and the New York Produce Show and Conference right here.
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