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Perishable Pundit
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Produce Business

Deli Business

American Food & Ag Exporter

Cheese Connoisseur



Wal-Mart Produce Procurement
‘Set Up For Devastating End’

We have written a great deal about Wal-Mart. Recently our focus has been on the effectiveness — or lack thereof — of a procurement model Wal-Mart has been testing in Washington State on apples. We’ve written three pieces on this subject:

SPECIAL EDITION: Wal-Mart’s Global Food Sourcing Initiative Closes The Peterson Era And Threatens Sustainability Of Agricultural Base

Flaws In Wal-Mart’s Produce-Procurement Thinking

Wal-Mart’s Blind And Costly Focus On FOBs

Now we received this letter from a knowledgeable observer:

I have to commend you. These articles have been on point from start to finish.

I first would like to point out that the Wal-Mart executives, by turning their backs on the many suppliers that have supplied them with their required 32% — 35% maintained margins, have effectively set Wal-Mart up for a devastating end in regards to the apple commodity.

You caught the indirect effect of a change in procurement systems in your most recent piece when you wrote the following:

When Wal-Mart was under contract, its vendors had an obligation to meet volume requirements week in and week out at the agreed price. Sometimes, although the contract may have been based on a particular grade, say US Extra Fancy, the shippers wound up delivering better grades, say Washington Extra Fancy, to meet their obligations.

Now the shippers can pick and choose when to bid for the Wal-Mart business; that won’t happen very much.

So the consequence of Wal-Mart’s switch is that its shoppers will have lower quality produce than they did before. What is the long-term cost to Wal-Mart of handling a lower quality package — even if it meets minimum Wal-Mart specs.

As you pointed out where suppliers were formally contractually obligated to insure they met volume requirements set forth at the agreed-upon price, they are now free to pick and choose when they are willing to “bid” for Wal-Mart business.

Often times the contract pricing was for a particular grade, but due to contract volumes, suppliers had no choice but to provide higher grades to Wal-Mart at the agreed-upon price. Wal-Mart will be hard pressed to get the same quality of produce that they have been gifted in the past. I have to believe the consumer will notice.

Second, the 10% figure that Wal-Mart boasts is at the very least an exaggeration. The letter from Dan Sutton in the most recent article detailed a few of the issues.

Third, the key point, however, as I’m sure you, as well as all your business savvy readers, are aware, is that statistics are only representative of the data that is analyzed. Anyone competent at working with the numbers can make GM look like a profitable company if they are aware of which data to analysis.

Ask any of the men or women who have worked as a business analyst on the Wal-Mart account for one of Wal-Mart’s suppliers, and virtually all of them, if familiar with the situation, will say with total conviction that Wal-Mart is losing far more money than Wal-Mart executives are willing to look at. Wal-Mart, as well as all other retailers, lose money at the POS level every time that the shelves aren’t supplied for the end consumer to make a purchase.

By dedicating just a small handful of people to replenish product for multiple distribution centers and relying on an automated replenishment system that is at the mercy of the produce manager who likely was over stocked for one week and has now over-rode the system and shut off orders, Wal-Mart is taking outs on a regular basis.

They have, in effect, simply deemed that the business analyst is an un-needed position, which results in there not being anyone held accountable to look at the outs. You said it point-blank:

…Wal-Mart didn’t just buy apples and transport… it bought a range of services that fall under a category of business analysis. Just a tiny shift here can result in thousands of incidents of being out of stock. Under the old system, if Wal-Mart was out of stock, that counted against the vendor and would affect its being awarded future business.

Who does it count against now? Nobody. Which means out-of-stocks will zoom. This means that even if they are successful in reducing procurement costs — the whole procedure will still cost Wal-Mart a fortune.

In the past, these are things that strategic suppliers were scored against and had a direct correlation to the amount of business they were awarded. Now nobody gets paid to keep these things in line.

It may not show up in a two week snapshot or by analyzing the maintained margins, but it is simply guaranteed that quarterly sales will suffer dramatically.

Considering that Wal-Mart stood to make a conservative $.08 per apple (average over all varieties), take into account that they are likely taking thousands of outs per day per Distribution Center and it is quickly obvious that there is a lot of money being left on the table. Now, Wal-Mart didn’t cut any in-house staff to my knowledge (they have actually gained bodies with the replenishment staff) and it doesn’t take a genius to see that equals a loss.

One last point I’d like to make is how all of this impacts on food safety to the consumer. I am very vocal about pointing out that the likelihood of someone getting sick due to an outbreak caused from eating apples is far less likely then you or I winning the lotto tomorrow, and based on the fact that I don’t buy lotto tickets, I have to say that it seems like a long shot at best.

BUT, consider the devastating effects of Wal-Mart pushing this model into more vulnerable produce commodities — leafy greens, melons, berries, herbs, tomatoes, etc.

Apple warehouses each fork out hundreds of thousands of dollars each year on a product that was unlikely to ever pose a risk. This has (and will continue to be) a cost of doing business in the modern world we live in.

But Wal-Mart, even when in good times with its suppliers, had no qualms about “buying local” from some guy with five acres in Minnesota that was willing to field pack it into a tote bin and drop it off at the local DC.

If they ever do realize the losses Wal-Mart is incurring due to empty shelf space, are we suppose to believe for a second that they wouldn’t heighten their efforts to source product from anyone willing to cut them the deal of the day? And just as these local guys have received a free “food safety pass”, the same will go to the vendor that has never had the big boys breathing down his throat to be in compliance but has a bargain price.

I am not opposed to local growers benefiting from big business, but without a strategic supplier who’s held accountable for insuring that a legitimate food safety program is in place, this has “worst case scenario” written all over it.

I would like to thank you for allowing me to get on my soap box and for serving the industry with your coverage and analysis of this issue. Keep up the good work.

We appreciate the letter. What is unfortunate is that there is this juggernaut at Wal-Mart, and they are going to do this no matter the consequences. Some vendors hold out hope that as the losses become obvious, Wal-Mart may make a U-turn and reexamine a once very profitable system.

Alas, we suspect that Wal-Mart is more likely to do a Margaret Thatcher: “the Lady’s not for turning”:

As much as this is a story about apples and about issues surrounding procurement and about Wal-Mart, it is also a story of big business and human motivations.

There will probably never be a day in which it becomes obvious to executives at Wal-Mart that the procurement system is a mistake. With different people working on procurement, merchandising, marketing, etc., and no controlled test having been done, it will be easy enough to see what someone wants to see and to blame someone who one wants to blame.

Besides there is too much at stake. Too many people who hope to climb the ladder of success are vested in this program. For them it is personally better to simply declare victory and get a promotion than to do what will maximize wealth for their shareholders.




Tesco’s Fresh & Easy Is No More Popular In Real Estate Than In Produce

We have written extensively about Tesco and, specifically, its effort to establish a foothold in America under the name Fresh & Easy. You can review this extensive coverage here.

One of the themes that came out is that in all the perishable areas and especially in produce, Tesco entered the market with an attitude that was widely perceived as arrogant. Professionals who had worked their whole lives in the business were being given “orders” that really made no sense.

Now comes word that the real estate industry also suffers from the same kind of treatment. A fellow named Chris Rodriguez is a well known real estate professional and had an e-mail exchange with Tom Scorer, the British transplant who does real estate for Fresh & Easy. He decided to post it on his blog, Retail Chart Commercial Real Estate Blog:

Fresh & Easy Real Estate Director Making Empty Threats

Posted on January 19, 2010, 5:18 pm, by Chris Rodriguez, under Brokerage, Legal, Retail, Tenants, Thoughts.

I just had to post this. I just closed a Fresh & Easy ground lease that was purchased by Fresh & Easy on 12/31/09. Earlier today, we sent out an email blast announcing the sale of the property. I received the following email (with his attorney cc’d as well) from UK transplant Tom Scorer, Real Estate Director for Fresh & Easy at 3:25 PM this afternoon:

Chris,

I have received your email blast directly and from many other sources.

The executed PSA contains a confidentiality clause, which clearly prohibits the publication of any details of the deal without our express permission, which was not sought and is not given. See below the relevant extract from the agreement:

16.8 Confidentiality. All information, studies and reports relating to the property obtained by Buyer, either by the observations and examinations of its agents and representatives or as disclosed to it by Seller, shall remain confidential and if the transaction contemplated herein fails to close for any reason, Buyer shall deliver to Seller, at no cost to Seller, all such information, reports and studies, and Buyer shall make no further distributions or disclosures of any such information, reports and studies. Buyer and Seller agree that, to the extent reasonably practical they shall keep the contents of this Agreement confidential and that no publicity or press release shall be made regarding this transaction without prior written consent of the other party.

Please be advised that your publication breaches the recorded agreement. We are considering the action we will take.

Kind regards

Tom
Tom Scorer
Fresh & Easy Neighborhood Market Inc.
Real Estate Director
310-867-0418

— — — — Disclaimer — — — — –
This is a confidential email.
Fresh and Easy may monitor and record all emails. The views expressed in this email are those of the sender and not Fresh & Easy. Fresh & Easy Neighborhood Market, Inc.
2120 Park Place, El Segundo, CA 90245

Naturally, I could not resist responding to such foolishness. Here is the email I sent back to the bloke:

Tom,

This is one of the most ridiculous emails I have received in my career. Your claim is a joke and without merit. I don’t really think I need to explain why but I will do so anyway.

You (on behalf of Fresh & Easy) went out of your way to circumvent my involvement in this transaction, specifically refusing to include language in the purchase and sale agreement protecting my position and specifically refusing to have brokerage representation in the purchase. As a result of your efforts, I am not a party to your purchase and sale agreement and am therefore not bound by its terms.

The property was marketed for sale for well over 1 year prior to your purchase. The terms of your lease agreement are widely known. The date, purchase price and identity of the purchaser are public knowledge. If you take a moment to read the language of your PSA that you so kindly provided to me, you may notice that particular phrase stating “to the extent reasonably practical.” I would think that information that resides in the public domain would fall outside of this clause, don’t you?

Lastly, I would think that any claim you may attempt to make would need to be based upon actual damages. Do you have actual damages? You may want to brush up on your US law. Your attorney is a very good one. You should consult him before sending out emails like this again in the future.

At this point it seems like you may just be wasting your company’s cash on unnecessary legal fees. Maybe I should copy your superiors in the UK. I’m sure they would love to hear how you are spending your time these days.

Thanks for the new blog content. I haven’t written a post in quite some time. This one should be up shortly.

Cheerio!

— Chris

P.S. — As a point of clarification, I did not consult any person or entity which was directly involved in this transaction in preparing my email. I did not, nor am I required to, seek approval from anyone prior to sending the announcement.

Tom, instead of threatening brokers with lawsuits, why don’t you focus your attention on opening stores that actually attract customers? Don’t you think that might be more productive and beneficial to the bottom line? Just a thought.

For the record, the property was a ground lease. The leased fee interest (land) was purchased by Fresh & Easy on 12/31/09 for $2,650,000 which was equivalent to an 8.49% CAP rate on the in-place ground rent of $225,000/year NNN. If you are a seller negotiating with Fresh & Easy to sell them your property, I would think this would be a pretty good comp for you to reference when they submit their 9.50% CAP offers.

I love citizen journalism.

********

As we mentioned here, Tesco is now looking to purchase properties in the US. The company may, in fact, ultimately make money on the real estate but this e-mail had a couple zingers: “You may want to brush up on your US law.” — and — “Tom, instead of threatening brokers with lawsuits, why don’t you focus your attention on opening stores that actually attract customers? Don’t you think that might be more productive and beneficial to the bottom line? Just a thought.”

Ouch!!




Supreme Court Ruling May Push Political Donations Toward Trade Associations

If you value freedom of speech, you have to be pleased that the Supreme Court, by a 5-4 vote, decided Citizens United v. Federal Election Committee in a way that overturned restrictions on a corporation to engage in political speech.

The specifics of the case were that an organization produced a movie attacking Hillary Clinton, and the Federal Election Commission blocked it from being shown as a pay-per-view movie on cable, claiming that corporations were forbidden to engage in that kind of advocacy.

If you want to understand what was at stake, take a look at this video produced by the Cato Institute, a libertarian-leaning think tank in Washington, DC:

The Supreme Court had already ruled that individuals could not be blocked from directly spending money in advocating their political views. This new decision held that organizations, such as corporations and unions, could also not be blocked. Note that this does not affect limits on donations to campaigns — it simply allows people to speak independently about topics or candidates they are passionate about.

Some have argued that because corporations are artificial persons created by law, they had no first amendment rights and so could be regulated at will. Others held that corporations grew out of citizen’s rights to peacefully assemble and to collaborate and that just because citizens are doing something jointly — as through a corporation — they don’t lose their first amendment rights.

More generally, in a society such as ours, in which almost everything is done through various corporate entities, a judgment that the government can restrict the speech of these entities severely constrains political discourse — and thus strikes at the heart of the first amendment.

The justices upheld, however, disclosure requirements — with only Justice Clarence Thomas calling for the elimination of these as, inherently, an obstacle to the freedom of political speech. This will have significant consequences for precisely how corporations will choose to contribute and may lead to a dramatic influx of money into trade associations.

Ben Ginsberg, who was national counsel for both of the Bush-Cheney campaigns, and several colleagues at Patton Boggs wrote a memo that political columnist Ben Smith got hold of and published. The memo analyzed the possible consequences of the court decision, and included this comment (note that trade associations are typically organized under 501c6 of the tax code):

501c4s and 501c6s: Likely to emerge as the biggest players in the 2010 and 2012 elections, ideological groups and trade associations also have been granted the ability to engage much more robustly in the political process. Meager disclosure requirements of their donors will make them a favorite repository of funds for independent expenditures.

In other words, corporations desiring to engage in political speech will often elect to do so through a trade association, because trade associations would not have to disclose precisely who is paying for the advocacy.

Some of the regional grower groups have endorsed candidates, but they are much more homogeneous than the national associations. United Fresh has had a political action committee but it is small, and most of the funding has been raised independently thus avoiding conflict among the members.

One trusts our associations are even now preparing policies on how they will deal with efforts to use them as political conduits.




PR In The Produce Industry

It is frustrating to work in public relations as PR Professionals often do their best work under the radar. It might be the story that wasn’t published because of their deft hand or it could be that they put their client front-and-center and kept themselves out of the story.

We know that when the industry was wrestling with issues related to food safety and labor crises, such as the Samonella Saintpaul problem, or matters related to labor issues, such as the “penny-a-pound” controversy — which we dealt with here and here — Gary Caloroso was one of the quiet giants working tirelessly behind the scenes to help present the industry in the best possible light.

So when we received word that Gary was getting a promotion, we thought it merited attention:

Food-Focused Public Relations And
Marketing Firm Announces Leadership Changes

The Sahlman Williams executive team includes(Left to right): Gary Caloroso, president, Cheryl Miller, chief financial officer, and John Williams, chairman. (Ann Sahlman, Sahlman Williams partner, not pictured)

TAMPA, Fla. — Sahlman Williams Public Relations and Marketing announces today that Gary Caloroso, a food marketing industry leader who directed the company’s West Coast expansion, is the company’s new president. Assuring management continuity, John Williams, the company’s visionary leader who created the food practice, becomes the firm’s chairman while Sahlman Williams’ long-time administrative leader, Cheryl Miller, becomes chief financial officer.

As the company continues to expand its national and international client base, the leadership changes reflect the company’s initiatives to offer an even wider range of services so its clients benefit from opportunities in social media, crisis communications, multi-ethnic marketing and retail promotions.

“Our mission to maintain excellence by exceeding client expectations will not change,” Caloroso said. “We do, however, know that our clients have many new ways to communicate and we intend to be a leader in assuring our clients benefit from every opportunity especially in this very tough business environment.”

In his new role as president, Caloroso will continue to maintain client relationships with a strong business-centric approach while leading the company’s dedicated team of professionals. Caloroso joins Williams, Miller and founder Ann Sahlman as partners of the firm.

Caloroso received the coveted “40 Under Forty” award by Produce Business magazine. The publication recognizes top industry leaders, under the age of 40, whose qualifications include outstanding community involvement and are considered young leaders in the produce industry.

Founded in 1983 by Ann Sahlman, the company hired Miller in 1987, building its reputation for excellent client service in corporate public relations. In 1997, Williams became president and a partner with Sahlman and Miller, establishing the food marketing practice with clients the firm still retains. In 2006, Caloroso left Porter Novelli in Los Angeles to join Sahlman Williams and led the company’s West Coast expansion to serve its growing list of national clients from its office in Westlake Village, Calif.

“We have built excellent relationships with our clients and within the food industry for more than 25 years,” says chairman, John Williams. “Relationships will always be a priority for us. I look forward to the next 25.”

In fact, we thought it was high time to pull Gary from the shadows and ask him to speak out on the intersection of food marketing, technology, food safety and the future. We asked Pundit Investigator and Special Projects Editor Mira Slott to chat with Gary:

Gary Caloroso
Partner/President
Sahlman-Williams

 

Q: How would you describe Sahlman-Williams?

A: We are a food-focused public relations firm; we love and are very passionate about food and beverages. We are story tellers and our job is to help clients communicate messages and provide the best platform to do so.

Q: How does your experience help you in your new role as president?

A: I’ve worked for more than 14 years in public relations and marketing for companies including the Dolphin Group, Porter Novelli, and Sahlman-Williams. I’ve counseled trade organizations such as the California Strawberry Commission and the California Table Grape Commission, and worked on issues from labor and food safety, to promotional/marketing activities. I helped Eurofresh Farms when they first started.

I was recruited to go to Porter Novelli Global, where I was a supervisor to McDonald’s Operators Association of Southern California. McDonald’s has a cooperative of franchises and corporate stores, with more than 600 McDonald’s restaurants in Southern California. At Porter Novelli, they found out about my produce experience and agriculture experience and that traveled through the network, so then I worked on Duda Farm Fresh Foods, Fresh Produce Association of the Americas, and The Almond Board of California. I had non-food clients as well, like Cirque du Soleil, and the Muppets.

I worked on a lot of different brands for a lot of different companies and it was a tremendous experience. I was at Porter Novelli for six years, and it was wonderful. And I still have a great relationship with the Dolphin Group. Both experiences were fantastic.

Q: While your background is certainly diverse, do you have a proclivity for the produce industry?

A: What I found was that the more I worked on some of the produce accounts at Porter Novelli, I started to feel like… wouldn’t it be wonderful to work at a food-focused PR firm that just specialized on the produce industry? That would be my dream job! And I found that at Sahlman-Williams. So I moved from Southern California to Tampa, Florida, in 2006 to join Sahlman-Williams. They were looking for somebody, and it was a perfect opportunity for me.

It’s really amazing in life when you’re really passionate about something how success can come rather quickly, and that’s what happened with Sahlman-Williams. To me, it’s such an honor to work with John Williams, Ann Sahlman and Cheryl Miller, the three partners when coming in; all three of them would have such great strengths to work with them, learn from them, to help take their company to the next level, which I believe we have done. We have such a terrific staff, really talented people, who also share in that passion of food and particularly produce.

Sahlman-Williams has been around more than 25 years; Ann Sahlman founded the firm, Cheryl Miller, now the chief financial offer, has been with the firm more than 22 years. When John Williams joined to work with Ann, he’s the one that took it in that food direction. John worked at Ketchum, so we both came from similar big agency backgrounds. What’s wonderful is to go in with that experience and council produce industry clients on their opportunities and how they should be positioned.

Q: Who are some of your key clients?

A: We represent the Georgia Pecan Commission, The Georgia Peach Commission, the Vidalia Onion Committee, and Chilean Avocado Importers Association, Bolthouse Farms, the Sweetbay Supermarket chain — we do all of the public relations and charity work for Sweet Bay — and the Napa Valley Vintners Association. We have some other clients that are new, Peak Fresh USA, and Agromin.

We share both clients with Westlake Marketing Works, which does a lot of green marketing. Agromin sells premium soil to farmers, and also commercial, consumer organic gardening kits; they’re a terrific company… what a story they have to tell. Peak Fresh sells consumer bags, and commercial bags in terms of wrapping pallets and strawberries, for example. Both these companies have a very strong social responsibility/sustainability message. That’s another whole area for us too.

Q: To that point, sustainability mandates are creating new challenges for produce companies, both operationally and in public relations messaging. How are strategies evolving here?

A: We believe that farmers are the true environmentalists, the stewards of the land. It’s so great that farmers continue to progress and innovate their ways of providing product to consumers. I think at times agriculture is unfairly characterized as living in the past, but that’s not what I see. I see a lot of farmers looking to the future and trying to be more efficient and trying to be more responsible.

Q: We’ve highlighted Gills Onion’s resourceful efforts in the Perishable Pundit, and featured Publix Supermarkets’ broad sustainability strategies in PRODUCE BUSINESS…

A: If you look at Gills Onions, while it is not a client of ours, Westlake Marketing Works helped them. You can see what a fantastic job that Gills Onions has done in making sustainability a sound business decision. That’s just one example, but lots of companies throughout the supply chain are moving in that direction.

Q: From your vantage point, what are the biggest challenges and problems facing produce companies today you’ve looked to tackle?

A: One key area for the produce industry is trying to figure out how much you target the consumer versus the retailer. That’s always the question for produce companies and commodity boards. How much marketing should we be doing directly to the consumer or should we just put that money into supporting retail-type programs? At the end of day, the consumer and the retailer are aligned. The retailer is making merchandising decisions based on what their customers prefer and what their customers are telling them.

So if produce companies and commodity boards approach this from the perspective, “how are we going to solve consumer problems,” that’s where the sweet spot is. I’ve found, and our company has found, that if we come up with a program that’s a win/win for the consumer and the retailer, then they will be successful.

If you look at the Chilean Avocado Importers Association, we’ve had great success with that account in terms of coming up with consumer-centric programs that retailers are excited about. That’s a good example of creating the right balance of consumer activities merchandised back to the retailer, working in conjunction with the retailer to integrate your message in a way that works with the consumer. There’s quite a bit of work done between produce companies directly with retailers, but the critical question at the end of the day is, are we providing a consumer solution?

Q: With limited funds to go around in a commodity-based business, there’s this overriding concept that if you don’t get your product on the retail shelf, it doesn’t matter what you promote to the consumer because they’ll never have the opportunity to buy it…

A: I think it’s important to show a retailer you are committed to supporting that retailer in consumer solutions and innovative programs to increase consumption. Once the product is there on my shelf, what are you doing to encourage my customer to walk in the door and buy it? I know marketing funds are not as prevalent in the produce industry. But there are ways to be efficient with those resources.

Q: Could you provide examples of strategies to utilize funds productively and get the best bang for the buck in such a competitive, fast-paced environment?

A: Sure. I think we have a great opportunity right now in the whole digital, Internet, social networking arena. As time evolves, consumers utilize different communication signals. Less people are reading the newspaper, while more people are accessing the Internet, using their iPhones or Blackberries. And they’re joining Facebook and communicating with their friends that way. They’re receiving their information in a variety of ways. So, the key thing for us is to just continue to help clients communicate their messages, no matter which channel they choose.

Q: How can companies capitalize on these technological advances, without watering down their messages, or turning off consumers, already trying to digest an influx of information from a myriad of sources?

A: In the case of Chilean avocados, we’ve had a tremendous response to our Chilean Avocado Lovers Club, which we ask people to join on the Chilean Avocado website and also on Facebook, and it’s amazing the response. We’ve received more than 10,000 entrees to a random drawing. And that’s terrific, and it’s been integrated in store and a number of retailers actually promote the contest in stores as well. From our company standpoint, this is an entire area we are continuing to council clients on, and we think we have cutting edge approaches to both digital, social networking space.

The other area of focus for us as a company is to continue to provide crisis counseling, particularly relating to food safety and labor; also creating customized retail programs for produce companies and commodity boards. We have a lot of strong supermarket retail relationships after all of our years in the business.

Q: How do you utilize these established retail and networking circles in developing strategic plans, facilitating and implementing tactics? How important is it to create and nurture relationships in this industry? I would imagine a company would have a significant advantage in getting a retail program approved with inside connections or understanding political nuances. And in a time of crisis, such as a food recall, well-formed contacts in the media and government to tamp down concern and get a fair shake?

A: In terms of developing detailed, customized retail programs, you’ll have folks that say, OK Sahlman-Williams, we want to target this region or this part of the country, whether Midwest, Southeast, Northeast or West… how do we move the meter with supermarket chains there, or with consumers there? Based on the commodity or company, we’ll come up with nuanced programs that will work.

We have strong relationships with not just the retail produce executives, but also the consumer affairs advisors, registered dietitians and other folks as well. We have a lot of different entry points at the various chains. And plus, which is sort of an advantage; we represent a retail chain, so we know how a retailer thinks. We live and breathe the retail environment every day.

Q: You mention various contacts in the retail structure, but isn’t there a bottom line, on who actually has the influence and ultimate power to make the decision on these programs?

A: You have chains that have various priorities. A lot of times you have a chain with a strong consumer affairs advisor, or director, particularly in the Midwest and the Northeast, they have quite a few of them. That’s usually a great place for a produce company or commodity board to start. They’re interested in health, and the great health message with fruits and vegetables.

Retailers want to promote that message through their newsletters, their websites, their in-store events and food demonstrations, etc. They’re always looking for support. So, if you have a retailer you want to target, that’s a great way to go about it. In terms of messaging, we’re both on the same side, and it’s an area where the retailer wants to do more because consumers are interested in health today more than they’ve ever been.

Q: Do you find politics involved with the different departments, or is there a way to bring everyone together?

A: What usually happens in those situations is they’ll go to the top, they’ll go to the director of produce for the entire chain, and speak one-on-one with the director of consumer affairs, they all talk to each other, they’re all friends, and they’ll say, can we do something with this one company or commodity board and they’ll work it out. It ends up being a win/win. We’ve found the produce executives love it because it’s additional support and promotion for their department.

Q: Let’s revisit technology as a messaging tool, and how you’re working with an expanded national and international client base to capitalize on it…

A: In terms of technology, we’ve evolved to websites. Companies said, oh my God, we have to have a website, and now that’s par for the course. Then you want to drive traffic to your website, and now what’s happening is there’s a way to deliver core messages technologically directly to the consumer. In other words, you don’t have to ask the consumer to come to you, you can actually go to them, not just through the Blackberry or iPhone, but also through widgets, that you could actually have your information delivered to consumers’ desktops, so they open up their computer in the morning and click on your branded icon; they get their Facebook, Twitter and everything else and they can get your messages. So you’re going directly to the consumer that way. The other part to that is you have to make sure you’re respectful on the Internet.

Q: I was just about to ask, couldn’t you irritate your potential customer by sending information they didn’t ask for, especially in this age of information overload?

A: Yes. Just like traditional marketing, you really need to make sure you’re providing a solution or else they’re not going to participate. If you’re supplying some value, some solution to them, then they’ll stay engaged. So that’s really important, continuing to offer something they want, and that has to do with listening to the consumer, really understanding what they are looking for and what they want.

There’s the digital and social networking part of this, crisis management, retail, and we talked about social responsibility and sustainability, and then there’s the multi-ethnic side, which I want to be sure to discuss.

Q: I’d also like to delve more into crisis management with you, so let’s be sure to go back to that as well. How do the different technologies for communicating tie into demographic and psychographic messaging strategies? For example, by targeting Facebook users, would you be aiming at a younger shopper? Not everyone is going to gravitate to Twitter, or even know how to access it, although that might change in no time, and who knows what’s next…RFID-controlled messaging, etc.

A: You’re absolutely right… which technology you use to communicate your message must correlate with the customers you’re trying to reach. Facebook does skew older now. Folks are signing up on Facebook, who usually don’t, and not for anything on the Internet, but so they can stay in touch with their families. You want to be very careful you don’t violate any privacy or step over the line in anyway. It’s a great tool that hopefully folks will respect. Some tools get mismanaged and abused and then disappear. My Space, for example, is more on the ropes then anything. What’s going to happen with Twitter?

Twitter seems to be a tool that is good for certain situations; if you were a celebrity, for example, and you wanted to get a statement out about something, Twitter is an easy way to do it, because a lot of media and fans are following you. I guess that’s an efficient way to get your message out.

The other trend we’re seeing with Twitter… there’s a number of mobile restaurants now, caterers and mobile food trucks, using technology as a means to alert customers of their locations — today were going to be at the corner of Main Street and 10th, and everyone shows up there to eat lunch. They’re promoting that on Twitter and Facebook. So you see this culinary trend now, with some gourmet, upscale food establishments.

Q: Sounds like this concept has potential in the produce industry…people talk about bringing mobile fresh produce stores into under-developed neighborhoods lacking fully-stocked supermarkets, or healthy fruit and vegetable trucks trying the same venue as ice cream trucks…

A: Right. You could use social networking through technology to promote those types of initiatives as well. If people are interested in health, or a new study or survey that has come out, we work with a registered dietitian, who is great at this, where she’ll find a study and tweet about it, and have a link there so you could see an article about what she’s just found.

Q: And then you’d connect a company’s brand or product with that?

A: You could. Again, if it’s not overly commercial you’re OK. It has to be a value or solution. Typically there are public relations firms in food areas that will focus on the culinary and health aspects; we are very strong in those areas and we do that very well. But these other areas where we have specific expertise and experience make us a little different, and where we think our clients are really benefiting.

Q: So let’s hone in on the issue of dealing with produce outbreaks and other crises. What are some of the pitfalls you’ve witnessed in the industry and strategies to overcome them?

A: I think the first step for companies and associations is to really have a crisis management plan in place. They need to ask a third party like us or another company with the needed expertise to come in and audit their operations, and find out where the weaknesses and vulnerabilities are, so they know these are the potential problems that could arise. How would you react if that were to ever happen? You go through simulation and training and come up with tools to prepare yourself and the operation in the event something happens.

So, there’s an operations side to analyze, but you also look at the communications. Who would speak on behalf of the company or association, what sort of protocols, and have all that prepared and ready to go if something were to happen. What’s important too, after you have a crisis management plan in place… you need a team of people that meet periodically to assess potential risks, so you’re constantly updating your situation. That’s really a good way to start.

Q: Should it be the CEO or president of the company that speaks, or a food safety expert, or a worker that could project sympathy? What do you recommend?

A: It depends on the situation and crisis. It all depends on the circumstances. As an example, there’s probably some issue that is unexpected at a restaurant chain every day or every week. It would be a bit strange if the CEO spoke every day. Believe me; I’ve been involved in a lot of different things, where you never would have imagined what happened, happened. You’ve seen cases where a person commits a crime and goes to a popular restaurant chain to surrender for fear of retribution.

Years ago, in the Rodney King days, you had a real issue between the Los Angeles police department and the community. Now that’s been fixed for the most part, but back in those days, you had a lot of cases where someone robbed a bank and they just want sanctuary so they won’t get beaten up and die. They’ll go to a restaurant or supermarket chain and say please, please will you protect me? I want to surrender to police. Well, what does that have to do with that supermarket or that brand; it was just a choice someone made that day. But you get the phone calls, and you have to respond on what your position is, and in those cases you have to find the right person to communicate the company’s message on that. So you run into strange situation. The key is that you can always prepare for what you think could be the worse things that could happen in your business. You have a plan and then you try to stick to it.

If it’s a serious issue, where you’re talking about food safety, where people are getting sick, you definitely want the CEO’s and the higher ranking level executives to get involved, to really handle what’s going on.

Q: Could you provide some direction on what the CEO actually says? Is it advisable to provide complete transparency, which might require a complex explanation, for example, or keep it clear-cut and brief?

A: In terms of how you communicate during a crisis, there are key provisional tenants to the whole approach. A lot of people talk about the four “R”s; this is if you actually did something wrong. In the produce industry, as you know, there are a lot of cases, where we end up suffering for something we didn’t do. But we have made mistakes in the produce industry as well. If your company or an association did something wrong, then you look at the four “R”s: Taking Responsibility, offering Restitution, expressing Regret, and committing to Reform.

We’re really sorry that this happened, we take full responsibility, we have helped the people we hurt and we promise we will never do it again. So, that’s the basic, traditional statement during a crisis. And if you do those things, much of the time, you’ve answered a lot of the media’s questions. When folks start rejecting that approach, it opens up a can of worms and the story becomes out of control. Look at Tiger Woods as an example. We’re big proponents of communicating with the media.

Q: The produce industry hasn’t always been fairly depicted in the media, creating a sense of skepticism and futility by many. For example, there might be a concerted effort to get a T.V. crew out in the fields to provide a more comprehensive picture of the challenges growers face, and the whole segment will be edited down to unrepresentative sound bites… or juxtaposed with a disturbing visual image of a contaminated piece of produce, for example, or in another instance, an image of a worker being mistreated.

A: I think a lot of folks in the produce industry are hesitant to trust the media; I’m talking more of the consumer mainstream media, because they feel the stories have not been fair to them in the past. And that’s a very legitimate concern.

But at the same time, if you don’t communicate your story, so the media can write or broadcast the news, someone else will fill that void, and your story will then have less accuracy in it. We’re strong supporters of being forthright, honest, providing the facts, and answering all the questions. We’re proud of the industry and believe the industry has a great story to tell.

Q: Companies face a dilemma because in not speaking up, it could appear you’re hiding something, and then people question your honesty regardless of your integrity or the reality. In other words, not being forthright could create a backlash, or actually exacerbate a problem.

A: Exactly. With the advent of technology you need to be transparent. Reporters have a lot more tools than they did before. They’re going to find out more about you, so it’s just best to be upfront and honest from the beginning. At the same time, it’s important to talk about the positive story, to help put the issue in context and position the company and industry in a constructive, beneficial way.

During crises we’ve created websites and videos for various clients. We’ve tried to focus on the positive, to tell the story of farmers and farming, and talk about the relationship between the farmer and the farm worker, interview farm workers, and have those in videos and sound bites to get their stories across. There are great stories of farm workers becoming farmers themselves. And that’s all over our industry.

Q: Do you have any ideas or advice on ways the industry can further position itself to better handle crisis communication moving forward?

A: You have an industry coalition with PMA, United, Western Growers, various regional councils, and each of those commodity groups. Obviously, we have the Produce for Better Health Foundation to help us on the health issue. But I don’t think we do enough proactively on the food safety side. We have a group like Fight Bac, a partnership for food safety education. I believe the industry should be more supportive of them. We need to be more proactive on our communication as it relates to food safety and what the facts are. It’s frustrating when we end up in these food outbreak situations, and allowing it to run away from us, like it did with the Salmonella Saintpaul Outbreak.

The key is to have a positive relationship with the FDA, the CDC, and the health department. I know that outbreaks really hurt those guys, and they have really worked hard on improving their own communication procedures. The key thing there is to keep that dialogue going, and figure out ways, outside of outbreaks, to proactively reassure consumers of the safety of fruits and vegetables, and to talk about what they can do in their homes. I think the Fight Bac message and partnership for food safety education is a great way to do that.

I also think that when outbreaks occur, it’s important for us to have a nice updated produce industry website everyone can go to get their information. This could be part of the coalition that already exists behind the scenes already. But I think that the website needs to be known by everybody in the industry and everybody in the media.

Q: This sounds like a new idea to have one produce industry communication site, a cohesive voice to provide comprehensive, accurate food safety and outbreak/recall information to non-industry members…

A: Obviously there are various associations, PMA, United, etc., but it would be nice to have one very vibrant updated site so that when an outbreak actually occurs, people can go to it to get accurate information.

Q: There really isn’t anything like that right now…

A: No there isn’t. In fact, a lot of people go to the Perishable Pundit to find out the real story.

Q: But the Perishable Pundit still isn’t directed toward consumers… Of course there are government sites, FDA and CDC alerts, but the information is not always in context, comprehensive or correct. The produce industry doesn’t have the opportunity to tell the whole story. This could be a way for the industry to have a voice.

A: Produce organizations could come together and we all decide there’s going to be one spot for the media and consumers to come for any outbreak, so they get the messages right away. So whatever commodity boards, or commodities fit, those groups need to be prepared, so the information is right there. This is where you can use social networking and technology. Each of the groups can put it on their Facebook pages; they can put it out on Twitter, what ever channels they’re involved in they can push the information out, and it becomes a very good way to communicate.

Q: And also it’s a consistent message. Sometimes during a crisis, you get conflicting messages.

A: That’s exactly right. And you work with FDA and CDC and say look, guys, we’re going to have this site up to help this issue, and we’re going to have links to your information as well.

Q: Now, there was one more area that you wanted to be sure we covered — multi-ethnic communication?

A: I speak Spanish fluently; my mother came over from Columbia to America. I’m more your acculturated Latino. What that means is I grew up speaking in English and speaking in Spanish, getting my information in both, able to immerse myself heavily in the Spanish language, situations, and culture, and also receiving my information from mainstream media. If you look at the Latino community, there are three different groups — there is the acculturated like myself, there is the new immigrant that comes to the United States receiving all their information in their native language — you could call them isolated — and the other one is assimilated. Those are folks that are Latino but don’t speak Spanish. It’s very difficult to tell them from the rest of the regular, mainstream market.

You basically have those three groups, and like the Latino community you have a lot of nuances as it relates to the American community. You have the geography, you also have the Asian Pacific community, whether it’s Chinese, Korean, Japanese, Vietnamese, you can go on and on. Take Southern California, where I grew up… you have a central melting pot with such diversity, there are all these nuances.

We did a lot of this work at Porter Novelli, and they still do with McDonald’s, and I’ve been immersed in that whole situation and how to market and how to communicate with various ethnic audiences. That’s important for us in produce, particularly as we see an increase in those populations. Particularly, obviously the Latino community in Southern California has exploded.

You need to be sensitive in how you’re communicating with these various audiences. In produce for the most part we’ve looked at the general market consumer, certain age range, certain psychographic breakdown, but I think it’s important to customize our message. If you want to sell more fruits and vegetables in particular parts of the country where you find higher diversity levels, you really have to customize your message a bit.

Q: How does this impact produce departments?

A: It definitely affects the retailers. Having less packaging and more bulk produce and displays, for example, because the Latino consumer wants to touch and feel the produce as opposed to opening a clamshell. You have different preferences there too. And some of the supermarkets are laid out differently as well, whether Asian markets, Latino markets or African American heavy markets. So you want to be sensitive to that. We’ve created and executed a lot of different programs targeting Latino consumers. The Chilean Avocado program has a lot of that too.

Q: In what ways?

A: We’ve partnered with Chivas USA, they’re with major league soccer. How do we target Latinos living in Southern California? That’s such a big market for avocados. How do we affectively market to that community? One way is through Chivas, which is like the New York Yankees of soccer in Mexico. It’s the most popular soccer team in Mexico.

They entered our league in the U.S. with an American version, and that’s the team that plays in Los Angeles; they share the stadium with the LA Galaxy, rivals. That partnership has been tremendous for us. It draws on the isolated immigrant Latino and also the acculturated Latino. So soccer has been a great one for us in that regard. And then we’ve set up retail promotions and partnerships with Chivas, so players go to stores and sign autographs in supermarkets in LA. We’ve reached millions of people in stadiums at home games, and we’ve done community events, huge soccer clinics with Chivas. We set up demos for consumers to sample Chilean Hass Avocados.

Q: The program is quite multifaceted in scope; you’ve taken it from all different angles.

A: We went to the different touch points with consumers; community events, retail stores, and stadium. On the flip side, we also work with the American Youth Soccer Organization, which targets the general market; 600,000 kids in the AYSO, half girls, half boys, it’s the largest soccer sports organization in the country. That’s a great partnership for us as well. Their motto is everyone plays, it doesn’t matter how good you are. It’s a great story, and a great group for us to partner with, you talk about soccer moms…

Q: Do you capitalize on the link between health issues and eating fresh fruits and vegetables?

A: Yes we do. Outreaching to their members and volunteers is a great way for us to promote our health and culinary messages, whether it’s good snack ideas while out on the soccer field, or providing recipes that are nutritious. Using avocado on a sandwich is a better alternative than sour cream, and that is part of our messaging.

Q: And the other is branding?

A: For us it’s about promoting Chilean Hass Avocados with those audiences. We want them to understand that Chile complements California because a lot of folks are very supportive and protective of California avocados. It’s a big brand that has been beautifully developed by the California Avocado Commission. It’s really been sensational. We want to make sure that they understand that Chile has different seasons.

In the United States, Chilean avocados are available in the fall and winter, and Californian avocados are available in the spring and summer. That’s part of our messaging as well.

Q: As you pursue new ideas and strategies to build your company’s client base, you also provide a broader service to the industry as whole. Thank you for sharing your insights on ways to drive produce consumption, minimize problems during crises, and better utilize social media to portray the industry in a positive light.

A: Resources for marketing in the produce industry are quite precious. What it comes down to is priorities. What do you absolutely need to do? We have a business-centric approach, which might sound a little different coming from a public relations firm, but at the end of the day, we’re really trying to help companies in the produce industry by using our specialized experience and relationships to move the needle forward.

We appreciate the time Gary devoted to sharing his ideas with the industry. He has always been generous in his time and energy to improving industry communications; in fact he shared some of his earlier experiences in a December 2008 article titled, “Courting Consumer-Affairs Advisors,” in Pundit sister publication, PRODUCE BUSINESS.

There is simply no question that new technology, such as social media, create new opportunities and the question is how the industry will capitalize on these opportunities. Produce is, in general, an under-marketed industry, but the solution, as was discussed during the extensive debate over an industry generic promotion program, is problematic.

For individual companies, outreach to consumers is fine and, indeed, the demand for authenticity means it is a virtual necessity to offer a narrative to those consumers interested in learning it. The fundamental limitations of fresh produce however — that only a small percentage of retailers carry even the biggest brands of most items — means that significant expenditures are inefficient because consumers simply can’t buy the product.

One area where we might debate Gary is on the desirability of aggregating things. Although the idea of a unified web presence sounds great, we suspect the industry might be better off to keep things discrete. So if there is a food safety problem with one commodity, we might want to have people looking to that commodity rather than tying it in with the whole department.

Besides, official sites and organizations suffer from an inherent flaw… they are not really 100% trusted by the media and consumers.




New York Metro’s Economy Is 12th Largest In The World

When we made an announcement about a new industry event in a piece we titled, New Event Planned for 2010: Eastern Produce Council and PRODUCE BUSINESS Announce The New York Produce Show And Conference, we were not prepared for the avalanche of support. In the month since the announcement, despite Christmas and New Year’s Day intervening, we quickly sold over half the exhibit floor, more than 120 companies.

Although, of course, much of this support for the show came from industry members looking to support the members and staff of the Eastern Produce Council and the team that puts out PRODUCE BUSINESS, PerishableNews.com and, of course, the “Pundit” — the business case for the show is overwhelming.

In fact a new report from The United States Conference of Mayors makes the case pretty dramatically.

The report includes a chart that is titled, “If U.S. Metro Economies Were Nations.” We’ve excerpted the top 15 listings in the chart you see aside this article and it shows that only the New York metro area would rank as one of the top 15 economies in the world if metro areas were counted like countries. That means New York Metro has a bigger economy than, say, India, Mexico, Saudi Arabia, Australia, South Africa. In fact, if it were a country, New York Metro would have the 12th largest economy in the world.

And, of course, The New York Produce Show and Conference draws on a larger area than this official definition of a metro area. For example, we are sending a bus down for an exclusive tour of the brand new Philadelphia market and a lot of folks from Philadelphia are coming on up for the show. Philadelphia Metro itself ranks 37th on this list with an economy larger than Ireland, Thailand, Finland, etc.

We can’t help but be excited about the opportunity… when Pundit Great-Grandpa Jacob Prevor landed in New York and set up his produce business at the old Wallabout Market in Brooklyn, he must have been astonished at the gap between what he knew back in Russia and what he saw in America.

The hopes and dreams immigrants carried as they passed The Statue of Liberty and prepared to land in New York were wonderfully captured in the animated “An American Tail” produced by Steven Spielberg’s Amblin entertainment. The movie has mice play the role of European Immigrants and the featured song includes the line “There are no cats in America and the streets are paved with cheese.” Watch it here:

The streets of Manhattan may not literally be paved with gold, but there is no larger or denser buying audience in the country.

If you are interested in exhibiting or sponsoring at The New York Produce Show and Conference, click here.

If you are interested in attending The New York Produce Show and Conference, click here.

If you would like to see where your metro area or country fits in on the rank of national economies, click here.




Pundit’s Mailbag — Help Haiti
By Purchasing Haitian Mangos

Thanks for running the piece Haiti Earthquake Relief Underway But Much More Needed.

I did not know about the Prevor family history tied into the Haitian mango industry. It is quite astounding that you manage to have such deep connections with so many topics of importance to our industry.

Who knew you knew all about Haitian mangos — especially the best variety: Francine!

Colleague and former client, Haitian-owned Blue Ocean Harvest, located right near Pundit headquarters in Plantation, Florida, is launching a large effort to help, sending aid via the Dominican Republic. We also blogged twice about this last few days with a post entitled Turning Haiti into Love and Humanism, Hierarchy…and Haiti.

Commerce is one way to help these folks… We need to let the industry know: BUY THOSE MANGOS: THEY ARE HEAVENLY!

Veronica Kraushaar
President
VIVA Global Marketing, LLC
Nogales, Arizona

Many will debate the tastiness of various mango varieties and origins, but we certainly can agree with the importance of commerce. Immediate aid may be necessary to save lives and avoid disease. Long term, though, commerce is a more sustainable path to development than any form of charity.

In fact, among the most misguided commentators on the Haiti earthquake and its aftermath have been those attacking cruise ship operators for continuing to serve unaffected parts of Haiti with cruise ships.

Some individuals may choose not to go to Haiti on a cruise due to the earthquake, which is a triumph of sentiment over rationality. The people in Haiti need money in the short term and a way to make a living in the long term. A person who elects not to go on a cruise that stops in Haiti and, instead, goes on one that stops at St. Martaan does nothing to help Haiti. He actually hurts Haiti and Haitians.

Many thanks to Veronica Kraushaar for reminding us that the power of the purse is a powerful way to help those working hard to earn a living.




Pundit’s Mailbag — Produce Industry Not Immune To Credit Card Fraud

We have received this note regarding our piece, Cash Or Credit? Which Is More Expensive?:

Your position that the poor should join the modern financial world might be workable down the road but for now the system takes extra fees out of merchants for corporate cards etc., so the people with the largest budgets are costing the merchants the most.

You didn’t mention the latest cost being passed on to the merchant, which is third-party deductions hidden in merchant settlement statement.

Twice this year Discover has allowed third parties to make deductions from my merchant account. I only found the deduction when the third party used my bank routing numbers to make a direct deduction. The third party claims that an employee authorized the deduction, but the third party does not provide any product or literature or any other way for the merchant to know that he is being billed.

I don’t expect that we can get away from credit card transactions but I do hope for legislation allowing merchants to subscribe to a minimum fee, no perks, system that allows the merchant to have a single non-variable rate.

— John F. King
King Orchards
Central Lake, Michigan

We’ve had the pleasure of speaking before the members of the Michigan Apple Committee, and John runs a pretty nifty operation:

We are a first generation family farm. John and Betsy along with Jim and Rose King and the children make up the family. Our fruit stands and orchards are located at US-31 and Creswell Road in Kewadin (12 miles north of Elk Rapids) and 3 miles east of US-31 on M-88 (near the town of Central Lake, Michigan). We love the farming life and work hard to grow quality fruit. In addition to 130 acres of tart pie cherries, we grow 10 acres of Balaton cherries (a new tart cherry variety from Hungary), 32 acres of sweet black cherries; 95 acres of apples, including 20 acres of staked high-density plantings; 10 acres of peaches; 3 acres of pears; 2 acres of apricots; 12 acres of sweet corn; and 2 acres of garden vegetables (if we can keep Rose reigned in).

The orchard is situated on the highest ground in Antrim County. Looking west we can see Torch Lake, about 3 miles away, and Grand Traverse Bay and the Leelanau peninsula beyond that. The rolling hills and ridges here were formed by the glaciers and are called drumlins. They help to allow good cold air drainage, which is important to prevent frost damage. Our proximity to Lake Michigan’s Grand Traverse Bay keeps the temperatures moderated in the spring and fall. Many people feel that the best fruit in the world is grown here in northwestern Michigan.

We will stay out of the debate on where the “best fruit in the world” grows, but we do find the King family (the Michigan fruit growers, not the singers) an asset to the produce industry. Not originally in the business, they had the guts to buy a farm, improve it with high density planting and make a living with a fruit stand, U-pick operation and a mail order program.

Although small farmers may sell in commercial quantities, the more of their product they can sell direct to consumers, the higher their profits.

Of course, a lot of these direct-to-consumer sales are done with credit cards; thus John’s particular focus on this matter.

The variable rates on credit cards — merchants typically pay a higher percentage for cards that are reward cards or other special types — is frustrating for merchants because it is difficult to plan pricing when one doesn’t know what one’s costs will be.

Still, it is not too difficult a problem. If one can, one simply assumes the highest costs and prices on that assumption — if someone uses a card that costs the merchant less, you make a tad more profit. Alternatively one can use the average cost paid for credit card fees over the course of the year — some sales are more profitable and some less, but they all average out.

We understand the inclination to have the government straighten it out, but there is little reason to believe that a flat rate, mandated by the government, would be lower than the average rate merchants pay now.

As far as the issue of third parties making deductions from a merchant account, there is something odd here. We read John’s own blog where he mentioned this problem in detail:

Yesterday I was balancing the checkbook against the bank statement. I found a withdrawal that I didn’t recognize for $49.95. It is a monthly charge put in place for a service from a telemarketer. They tricked whoever answered the phone into agreeing to something. (I know that no one here knowingly agreed to this). Here is the scary part. This company is working through the Discover Network Merchant Services company so that they made a direct withdrawal from my bank account. The withdrawal says “CHNICAL UMG*MRECHANT TE.” There is no phone number or any other way of knowing who accessed the farm’s bank account.

This had happened once before with Discover last month too. That time I saw a direct deduction from my bank account for $39.95, but there was a phone number with it and I complained and had the charge reversed. It turns out that that time a similar fraudulent deduction was hidden in my Discover Merchant Services monthly statement and I would never have found it except that the third time they were stealing the $39.95 they didn’t do it on my Discover statement but instead went direct to my bank account.

So when Patty came in, she put on her CSI hat and began investigating. Discover Network Merchant Services is allowing these companies to use their processing department to steal from us. These companies did not ever provide us with anything that I saw or know about. They only quietly deducted money monthly. Discover Network Merchant Services made my bank account and routing number available to third-party thieves. It is just lucky for us that they didn’t clean out my account. (Apparently they fly under the radar).

When I called Discover Network Merchant Services to complain, they said that it was in my merchant agreement that they could share my information with third parties. We do quite a bit of business with Discover Network Merchant Services, so I am loath to quit taking Discover card for payments, but I am really mad about this. I encourage anyone who takes Discover Card to examine their statements from Discover Network Merchant Services to see if they are paying for scams.

The two companies that I ran into were called Merchant Discount Health Plan, and Merchant Technical Solutions. Merchant Technical Solutions is apparently “sold” by UMG (United Marketing Group) out of Schaumberg, Illinois. I did not receive any benefit or information from either one of these companies. Now I am spending Saturday blogging and writing the Better Business Bureau and Chambers of Commerce to spread the word. It is a shame that we can’t interest the government in preventing these fraudulent ripoffs.

This seems to be a real problem. The best information on scams like this is typically available at RipoffReport.com. Here a person who claims to be a telemarketer selling UMG products tells how it works.

Here the editor of Ripoff Report gives suggestions on how to get the money back. Mostly demand assistance from your bank in accordance with Federal Regulation E.

Certainly, in this age of electronic banking, careful attention is due to closely reviewing statements. Every withdrawal must be verified each time one receives a statement, with the same procedure a company would have to issue a check.

We don’t think we would call this a cost of accepting credit cards; the Internet is filled with complaints by companies that got charged on their credit card merchant accounts, but also on their telephone bills and via direct withdrawal from bank accounts. So this is a scam, and vigilance is required on all accounts.

You may want to forward this to your Comptroller and ask if your organization is monitoring every phone bill, credit card merchant account and bank account to protect against these unauthorized charges. Many thanks to John F. King and King Orchards for bringing this matter to the attention of the industry.

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