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Is Produce Traceability Initiative
Worth The Investment?

Jim Prevor’s Perishable Pundit, January 29, 2009

We’ve written a great deal about traceability and, most recently, we were sent a copy of a letter that a Midwestern firm sent to David Gombas, Senior Vice President of Food Safety and Technology, United Fresh Produce Association, critiquing the Produce Traceability Initiative:

27 January 2009

Dr. David Gombas
United Fresh Produce Assn.
1901 Pennsylvania Ave. NW, Suite 1100
Washington, DC 20006

Dear David:

I’m a fourth generation produce guy who operates a company called Produce Packaging, Inc. in Cleveland, Ohio. We’re a wholesaler, repacker, and fresh-cut processor. I’m not usually outspoken about produce industry issues, but I recently found one that I just have to address.

Last week I attended the United Fresh winter board meetings in La Paloma. I’m a member of the new Wholesaler-Distributor Market Segment Board. During one segment of the meeting, Amy Philpott gave us a summary of the Produce Traceability Initiative (PTI) Action Plan, and we were told that you were heading up the PTI for United Fresh. Others on the board who were familiar with the plan helped clarify certain issues for the rest of the group. One raised the alarm about potential costs, so I decided to look into the PTI further, mostly because I don’t want to be “behind the curve.”

Now I’m scared! This morning, I went through the process of applying for a GS1 Company prefix. Based on my company’s sales and the number of items that I would need a code for (approx. 300), “BarCodes and eCom” wants $8830 for initial membership and $500/yr. annual renewal fee. For a company with margins as low as mine, this is an onerous amount, and this doesn’t even include costs to upgrade computers and associated hardware (such as scanners) required, software, and labor to company with this system. This could run into the many thousands of dollars for initial purchase and set-up, then many thousands in extra labor every year for record-keeping and maintenance.

Being a fresh-cut processor that sells to major retail accounts, we have to maintain a very high standard of food safety. We have a full time QA Coordinator, Angie Surtani, who has degrees in food science and nutrition, who keeps us in compliance with government and our customers’ requirements. We’ve received an AIB/Primus “Superior” warehouse rating for the last 5 years in a row, and last year for the first time we received our HACCP accreditation, also from AIB. We’re also a Kosher (Star K) and organic certified (QAI) packer/processor.

We have developed our own traceback system that is very simple and highly effective. It’s an 8-digit code consisting of the Julian date and the product’s incoming lot number. Every case that leaves our facility carries a traceback code.

Since we’re a tomato repacker, our system got a major test this past summer during the Salmonella debacle. We were able to provide a major customer who requested traceback information on all lots received during the whole month of May and first week of June (about 5-6 weeks) with the information in about 2 hours. I am very confident in the effectiveness of our system — our ability to comply with the Bioterrorism Act of 2002 requiring traceback of “one up, one back.” The traceback system that we have in place now at Produce Packaging is simple, cost-effective, and compliant with the law. Granted, the law could change, but I can’t see it being more onerous than PTI.

You state in your article in the January 2009 issue of Fresh Cut, “Currently, traceability requires step-by-step — or sequential — traceability from the point of purchase back to the producer, which is time consuming and prone to error. The goal of PTI is to overcome that weakness with a common language and common case-labeling standards. If a GTIN and lot number is identified at the point of purchase, everyone in the supply chain knows immediately and simultaneously if and when they handled a case from that lot.”

“Time consuming” I’ll agree with, depending on the scope of the shipments involved. “Prone to error” I can’t agree with, if you have an effective system in place, which many of us in the industry already do.

Can the cost of “reinventing the wheel” (which is what PTI essentially does for produce companies that can already comply with current law) be justified? You admit, “the full economic impact of the steering committee’s recommendations is not yet known….”

I’m here to tell you that this PTI is bad news for repackers, processors, and the consumer. The costs involved will have to be passed on to my customers, who will have to pass them along to the end user (or go broke). Does the end user want to pay for universal traceability when what we have already in place works fine? No. Should they? No.

The implementation of the new COOL regulations last summer is, in effect, a new tax on produce. I’m sure, thanks to much industry input, the damage from government intervention was minimized, but the effects in increased cost to the industry are staggering. The PTI is another “voluntary tax” that we want to impose on ourselves before the government supposedly imposes a larger one. It’s like we’re saying, “Let me hurt myself and show you I’m hurt so you won’t hurt me so bad when you come after me.”

Why do we go in for this self-mutilation? Why don’t we just stand up for what we believe in? These tough economic times can make any business struggle just to stay afloat. My customers are demanding pricing less than I gave them last year! How can I afford COOL, and now PTI, and stay in business?

On a related note, I’m sure you know well about the growing “buy local” trend in produce purchasing the last couple of years. We’ve noted both retail and foodservice food safety requirements that, by God, better be in place 10 months out of the year, seem to hypocritically get “thrown out the window” in the summertime up here in the Great Lakes area, indeed nationwide.

In other words, “local” trumps food safety. How will these small, local farmers comply with PTI if they don’t need a HACCP plan? What do they care for PTI if they’re growing tomatoes next to a cow pasture? How is it that food safety is not relevant to consumers in the summertime when local farms are selling produce out of baskets and roadside stands? The answer is obvious — it is as important as ever, but the fact that they want to buy local proves that they don’t want to pay any more for food safety. They just want safe food. It’s the classic, “I want to have my cake and eat it too” scenario. I’d bet the same is true for traceability.

Why don’t we, as an industry, instead of pushing for a universal traceback system, concentrate our efforts to push for all produce companies, regardless of size, to at least pass a minimum set of food safety standards? One of those requirements should be conducting a mock recall and scoring a certain percentage of effectiveness. This would help insure that they can effectively trace their product “one up and one back.” Those that can’t pass should be given a 30-day warning to get into compliance or they will not be allowed to operate in the produce industry until they can comply with the standard. Those that do pass should be allowed to operate using the systems they have developed to allow themselves to operate profitably.

You’ve probably figured out that I’m against PTI, and I urge you to consider the opinions of other United members who may be opposed to this initiative. Let’s let this dog lie.

You’re probably a very busy man with a lot of projects on the table, and I appreciate your listening to my concerns. Please feel free to contact us for any other information regarding our food safety plan. Also, I welcome you to visit our plant to see for yourself how our system works and gauge whether we need PTI.

— Gregory J. Fritz
President
Produce Packaging, Inc.
Cleveland, Ohio

We found this letter most intriguing. Not because it complains about the cost of implementing the Produce Traceability Initiative, nor because it claims current systems are sufficient. Both these objections have been frequently raised.

We find this letter interesting because it raises three often overlooked points:

First, it focuses on the consumer. It asks the classic question that producers always have to ask about any expenditures. Would consumers actually like to pay for this?

Second, Mr. Fritz questions the sincerity of this effort, pointing out that despite the trade’s supposed commitment to food safety standards, these standards are regularly waived for local growers. Surely many will never enforce these traceability standards and will simply buy from the cheapest guy, and what is United — or its association partners in this venture, PMA and CPMA — going to do about that?

Third, as any businessman should, he asks what evidence there is that investment in this traceability initiative is the best use of scarce resources. Perhaps, as he argues, the same money and attention paid to holding mock recalls would result in more practical improvements in traceability as it would catch those not even meeting the current legal standard as opposed to burdening those who already meet standards with tougher standards.

We empathize greatly with Mr. Fritz. We do not think he is the problem. Here is a letter we ran in a piece entitled, Though Traceability Initiative Is a Big Win, Weak Links Still Exist:

Putting in a system to trace product gets more difficult the further down we go in the distribution chain. Stand on the floor on a busy Terminal Market and try and imagine where the product goes after it is sold by the Wholesaler. A customer known as “Ken, the guy with Red truck,” pays cash for a pallet of tomatoes. He takes the tomatoes to his garage where the boxes sit on the floor next to cleaning supplies, motor oil, and who know what else.

He and his kids (2 of whom just used the toilet without washing their hands) dump the tomatoes on a dirty tarp to sort them for color. The green ones sit in the garage for a few days to color up during which time one or two rodents snack on tomatoes. When they finally ripen, Ken delivers the tomatoes to some of the finest restaurants in town for all of us to enjoy.

Somehow I don’t think that Ken or even a legitimate small wholesaler or purveyor is interested in investing in a traceability system. They will have to be dragged kicking and screaming to the table. The problem is that the system is only as good as its weakest link, and unless Ken is a part of the system it doesn’t work.

Since “Ken” is not going to be part of the system, the system will not work. So why not abandon this effort as Mr. Fritz suggests. There are really three reasons:

First, whatever improvement we can get in traceability is useful. Although Produce Packaging, Inc. may be scrupulous about maintaining its one-up-and-one-back traceability requirement, doubtless some of its customers are not. If Mr. Fritz sells something to a Cleveland wholesaler, who sells it to a Chicago wholesaler, who sells it to a purveyor, this new system, though not perfect, at least holds out the possibility of improved traceability. That is a plus.

Second, it is an example for the industry. There is, of course, no law that requires Produce Packaging, Inc. to do this. If the company proceeds, it will either be because its customers demand it or because Mr. Fritz wants his company to be perceived as top of the line. One thought is that it matters what we get the best people in the business to do because this sets up a standard that organizations aspiring to leadership will seek to maintain.

Third, most of all, though, this is a case where you come to realize that the dynamic that moves a private company is different than what motivates a trade association. United, PMA and CPMA have pushed this because they hope to see substantive improvement in traceability and, perhaps more important, because they want to safeguard the image of the produce industry before the media, legislators and regulatory officials.

Although it was in many ways unfair, the trade’s traceability capabilities were disparaged during this past summer’s Salmonella Saintpaul outbreak. Folks like Caroline Smith Dewall, Director of Food Safety for the Center for Science in the Public Interest, were holding press conferences at the National Press Club in Washington, DC, demanding tougher traceability laws. This is not trivial. She is a sharp attorney, articulate, well-respected and, in fact, the favored candidate to be President Obama’s choice to be the new head of the USDA’s Food Safety Inspection Service!

If all the industry did was act defensive during the Salmonella Saintpaul crisis, indeed we would have probably wound up with tough new legislation. Certainly we would have no goodwill to tap into when we needed help with other matters. Now we have a bit of a goodwill bank account to draw on because the industry made this effort and, bottom line, in DC the only alternative to mandatory government regulation is self-regulation. So the trade associations pursued this matter for lots of reasons other than because they thought it would result in perfect traceability.

One question Mr. Fritz did not ask but that is completely legitimate is this: Is the goal of avoiding mandatory regulation one that should be pursued in this case? After all, if the problem is our “Ken, the guy in the red truck,” and he is not a member of any association and cannot be brought into a voluntary system, aren’t we going to make all the top performers vulnerable to a food safety problem caused by “Ken” Maybe the industry is better served with a mandatory regulatory structure that, at least theoretically, applies to Ken as well?

As for Mr. Fritz and whether he should make this investment, we cannot be doctrinaire. Industry self-regulation is not a suicide pact, and if Mr. Fritz believes his customers will so little value this that by Mr. Fritz fattening his expense structure, he will not be able to compete and will have to close — well, we would advise him not to do it. Although we will say that there is a branding value to a company in always being associated with best-of-class initiatives, so we would urge Mr. Fritz to think carefully.

Long term there is a challenge for the associations to require more than nice words from buyers. Just the other day, we ran a truly scandalous piece, titled, Is Tesco Defrauding Consumers? Promising Only Nature’s Choice Certified Product But Delivering Cheaper Alternatives? From a trade perspective, it was the story of a retailer enticing vendors to spend money to improve supply-chain standards and then disregarding those investments to buy what was cheapest.

The bottom line is that there is nothing to stop big buyers from doing the same thing on traceability.

Some trade associations have codes of ethics and similar standards that require members to sign a paper promising to obey the code as a condition of membership. We thought about suggesting it but, honestly, we suspect the retailers would quit before they would sign it.

The Pundit Poppa used to say that there is nothing harder than to make an honest living. He may well have been right, and so we share with Mr. Fritz the frustrations of dealing with such rules and regulations. We know that United Fresh will be more than respectful in its response, and we think Mr. Fritz did the industry a service by speaking honestly and with integrity on this matter.

Our problem is not with those who forthrightly disagree; it is with those who never had any intention of executing on the plan, but sign pledges left and right because it is expedient.

If Mr. Fritz does decide to bite the bullet and execute the program, as we suspect will happen, we hope he’ll invite us for the first run; it would be an honor to see it working.

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