Just the other day, we issued our Tesco Intelligence Report: Slow Start and pointed out that Tesco’s Fresh & Easy concept is not succeeding with consumers:
Here at the Pundit, though, we have our own unique intelligence network, and what happens is that virtually every day we receive calls and e-mails from around the industry on topics of current concern. Tesco being of great industry concern, we receive a lot of messages regarding Tesco. In fact, we are well in excess of 200 comments, most saying nothing more than that a given industry member — a wholesaler, a grower-shipper, a broker, a consultant, another retailer — was just in a Fresh & Easy and was reporting his or her perceptions.
The vast majority of these comments contain a line similar to this: “It may just be the time of day or day of the week or perhaps just this particular store — but, there were practically no customers in the store.”
One comment, two comments, ten comments — and it could be the time of the day, the day of the week or the particular store. But so many reports, from many stores on every day of the week and from a diverse mix of times of day, seem likely to indicate that sales are not strong.
Several suppliers have also told us that orders are well below their expectations and at least some primary suppliers have thought the business not worth the trouble and stepped back into secondary supplier roles.
Although Fresh & Easy has signed on to open stores in San Francisco and Oakland, and plans are proceeding to open a Northern California distribution center in Stockton — all evidence that Tesco is dead serious that this is “…a launch and not a trial…” — it also speaks to the fact that Tesco has yet to prove the viability of the Fresh & Easy concept.
We would expect some major revamps to the concept in the months ahead. The commitment has been substantial, so Tesco will go to great extremes to juggle the variables and get the offer right. But there is no assurance that this size footprint is viable.
Our report came as no surprise to Pundit readers who have followed our extensive reports on Tesco’s efforts to establish a retail operation in the United States.
We have pointed out several times that Tesco, in electing to open an entire chain without test marketing the concept, is following a ”brilliant or bankrupt” strategy — and it is now clear that something dramatic is going to have to happen to save this operation.
Now, Willard Bishop Consulting has come out with an analysis that further buttresses our case. The report is entitled Phoenix: The New Battleground for Express Format Food Stores, authored by Willard Bishop’s Jim Hertel. The title of the report is something of a misnomer since Wal-Mart’s new concept — which we dealt with here — isn’t open yet and thus can’t really be evaluated.
The money quote:
Current performance doesn’t appear to meet initial sales projections of $200,000/store/week. Our very rough estimate is that a typical store is achieving about $50,000/week, or only 25% of initial projections.
This is a catastrophe for Tesco.
The report goes on to explain all this in the context of issues we’ve mentioned before:
- Light consumer traffic
- Enormous out of stocks — at least 20% of fresh items completely sold out.
- Issues with prepared foods
Willard Bishop does say that they have heard some positive feedback on the plastic wrapped produce, which, as we pointed out, can be seen as “cleaner” than bulk.
The report also cautions against assuming failure. It notes that Wal-Mart, which has experience competing against Tesco in the U.K., is showing that it is taking Tesco’s efforts very seriously by its opening of an Express store of its own.
This all being said, Tesco expected sales of $200,000 per Fresh & Easy store. This was about twice the sales per square foot that American supermarkets average. If they are, as Willard Bishop estimates, realizing $50,000 per store, they are averaging not double but, instead, about half the sales per square foot that US supermarkets average.
To add to that, Willard Bishop doesn’t think Tesco has the ability to easily change the operation:
“… ( Tesco/Fresh & Easy) developed a very aggressive expansion plan and as a result must help shoppers appreciate their stores because they don’t have the time or flexibility to modify operations and retain efficiency.”
That is quite a turn of phrase: “…must help shoppers appreciate their stores…” They must, unless they can’t, in which case Tesco may wind up where it started, out of the US market and in the company of Sainsbury’s and Marks & Spencer — all three having failed to crack the US market.
You can read the whole Willard Bishop report here.
When we returned from our trip to South Africa, we wrote a column for Pundit sister publication, PRODUCE BUSINESS, that, among other things, advised the following:
What is really needed is for some corporate giant, a Wal-Mart, a Costco, a Kroger, a Supervalu, etc., to step up to the plate and locate a global procurement office in South Africa.
Let them procure fruits and vegetables, but also wine, seafood, canned goods, juices and many more things. I think the company that does this can make a buck. But, beyond that, the company would be serving both American interests and the hope for future world peace.
And by the way, I have just the guy for the job. A gentleman named Danie Kieviet showed me around South Africa. He is a member of the board of directors of PMA. He also is the founder of the modern South African retail produce industry, as he built from scratch the procurement arm for Africa’s largest supermarket chain, the Shoprite/Checkers group. He pioneered direct procurement for retailers and built up supply chains where there were none.
Now, he has built an organization, known as Freshworld, involving his two eldest sons, that champions the interests of the Sunkist brand, and he has built a substantial counter-seasonal market share in Asia. He is knowledgeable and modern, up on RFID, category management and all the latest technologies, but he is also old school. Like a great African bull elephant, he cannot be stopped.
Danie travels across the country and around the world to create opportunities in South Africa. If some giant organization, with stores that could sell product, gave him a shot, he would not only make them plenty of money but also open up opportunities for producers all across South Africa and into the recesses of the continent.
He could identify not only traditional exporters but also new farmers being assisted by empowerment programs. To give him a shot would be a contribution to peace and prosperity for a continent with precious little of either. Who will step up to the plate?
As we said at the time, great minds think alike because soon after that post, we were able to ran another piece entitled, Wal-Mart Picks Right Man In South Africa that made the following announcement:
The Pundit has always thought well of Wayne McKnight, Wal-Mart’s Vice President of Global Procurement. His announcement that Danie Kievet will join Wal-Mart, heading up its South African Procurement Operations, is a coup for Wal-Mart, the realization of a life-long dream for Danie and proof that great minds think alike….
Since that column was written, Danie’s term on the PMA board has ended, but he was appointed as Chairman of PMA’s International Council.
Wal-Mart has done a good thing. For itself, it has secured the single top man in the South African deal. For the world, it has done something special by putting such an effective executive in such a crucial position. You can be sure that exports from Africa will receive a boost. To help such a country as South Africa and a continent such as Africa is a very good thing indeed…
Although initially the South African product is likely to go to traditional South African markets, such as Wal-Mart’s ASDA subsidiary, Danie is not the type of guy who accepts convention as a limitation. He will find wine and seafood, produce and ethnic products, and he will in his own persuasive manner have Wal-Mart buyers from China to Mexico convinced they must have South African product…
The right man, the right moment and the right opportunity have certainly met. The Pundit congratulates all concerned.
Well the moment came and went. The right man, the best man in South Africa to represent Wal-Mart’s interests, has resigned. He will be leaving Wal-Mart’s Global Procurement team effective February 29, 2008.
There are always specific circumstances. Danie is fortunate in that his family business, Freshworld, is growing rapidly and he has plenty of opportunities. So he has a place to go.
Sources in the United Kingdom also point out that the key to the South African business for Wal-Mart’s global procurement efforts was to procure the volumes purchased by ASDA, Wal-Mart’s UK subsidiary.
The UK is the traditional market for South African fruit exports. Yet ASDA’s supply is done through International Produce and executives there preferred to make their own deals, thus frustrating Wal-Mart’s corporate goal of establishing a strong South African procurement office. In fact Wal-Mart Global Procurement executives around the world report frustration with an inability to actually get Wal-Mart’s massive volumes substantially committed to procuring through this system.
In effect, the procurement executives have to become salespeople, selling Wal-Mart’s far-flung executives on buying through Global Procurement. But if the offices have to become selling offices, they lose the cost advantage over any traditional exporter.
Danie did a great job for Wal-Mart, securing for it the ability to export and import in its own name — a big advantage in the South African business. Yet the combination of other opportunities calling, with the unwillingness of Wal-Mart corporate to compel those with conflicting interests to follow the corporate imperative to enhance global procurement, led Danie to leave.
This is no small loss for Wal-Mart. And following the loss off Bob DiPiazza, Bruce Peterson, Danie’s boss at Global Procurement, Wayne McKnight, and the cultural shift at Wal-Mart we discussed in conjunction with John Menzer’s departure, Danie Kievet’s departure is very bad news for Wal-Mart.
We can see in Bruce Peterson’s departure a conscious effort to get out of the way executives who were steeped in Sam Walton’s culture and were thus obstacles to a new way of thinking. Whether this was a good or a bad idea will depend on the success or failure of the new culture that Eduardo Castro-Wright and Lee Scott are attempting to create.
Thus in some ways the loss of Wayne McKnight and Danie Kievet are more dangerous for Wal-Mart. These guys are superstars. It is not as if Wal-Mart will hire more knowledge, smarter people to fill these positions; they will hire people less knowledgeable, less insightful.
When a company can’t hold onto executives like this, it indicates either a dysfunction at a very high level or a dramatic shift in priorities.
Most likely it means that the organization is shifting to value a different kind of expertise — so Wayne McKnight will not really be replaced at all. His department will wind up being supervised by an executive in China who knows nothing at all about produce and knows a lot about spreadsheets.
That is quite a dramatic shift in an organization; it takes an enormous amount of confidence on the part of Wal-Mart executives to believe it is likely to be a success.
When our copy of The Wall Street Journal arrived with a prominent headline on the front page of the “Weekend Journal” section entitled The 247-lb.Vegan* and illustrated by a handsome photo of Kansas City Chiefs tight end Tony Gonzalez, we thought we had found a story that would surely be an enthusiastic endorsement of the fresh produce industry. With its sub-head saying, “NFL star Tony Gonzalez is out to answer a question: Can a football player live mainly on plants?” we thought we’d see great examples of his fresh produce diet. Even the little asterisk at the end of the headline, pointing to a tiny caveat that Gonzales eats a little bit of salmon, didn’t lessen our enthusiasm.
Yet reading the whole story, and especially watching the accompanying video, made us think the story was rife with lessons for the fresh produce trade.
First of all, the headline was a little deceptive:
Mr. Gonzalez joined a handful of elite athletes who have put the vegan diet to the test, either for their health or because they oppose using animals as food. But he was the first pro-football superstar to try. And the first to fail.
Mr. Gonzalez had never heard of the vegan diet when he boarded a flight from New York to Los Angeles last spring, about a month before preseason training. His seatmate turned down most of the food offered in first class, and Mr. Gonzalez finally asked why. The man told Mr. Gonzalez about “The China Study,” a 2006 book by Cornell professor and nutrition researcher T. Colin Campbell that claims people who eat mostly plants have fewer deadly diseases than those who eat mostly animals. The evidence was drawn from diet surveys and blood samples of 6,500 men and women from across China.
Mr. Gonzalez was intrigued. Earlier in the year, a bout with Bell’s Palsy, a temporary facial paralysis, had focused his attention on health. He bought the book, and after reading the first 40 pages, he says he was convinced animal foods led to chronic illness. He was an unlikely convert. Mr. Gonzalez, who grew up in Southern California, says cheeseburgers were his favorite food. But he quit them, substituting fruits, nuts and vegetables. At restaurants, he ordered pasta with tomato sauce.
Three weeks later, he walked into the weight room at the Chiefs’ training facility and got a shock. The 100-pound dumbbells he used to easily throw around felt like lead weights. “I was scared out of my mind,” he says. Standing on the scale, he learned he’d lost 10 pounds.
Mr. Gonzalez considered scrapping the diet altogether and returning to the Chiefs’ standard gut-busting menu. First, though, he called Mr. Campbell, who put him in touch with Jon Hinds, himself a vegan and the former strength coach for the Los Angeles Clippers basketball team. Mr. Hinds suggested plant foods with more protein.
The Chiefs’ team nutritionist, Mitzi Dulan, a former vegetarian athlete, did not believe that was enough. With the team’s prospects and Mr. Gonzalez’s legacy at stake, she persuaded the tight end to incorporate small amounts of meat into his plant diet. Just no beef, pork or shellfish, he said; only a few servings of fish and chicken a week.
The article doesn’t actually give enough information about the exact diet Tony Gonzalez is consuming to know how close he is to a vegan diet, but if he is consuming chicken and fish, he is not even vegetarian much less vegan — so why an editor at The Wall Street Journal selected that headline can only be guessed at. Basically, while a true vegetarian doesn’t eat any animal, a true vegan not only doesn’t eat animal but also doesn’t eat any animal byproduct such as eggs or dairy products.
The Wall Street Journal online offered a nice sidebar on training tips if one is going to follow a vegan diet — the comeuppance being that one can get adequate calories, adequate B vitamins, adequate iron and adequate electrolytes on a vegan diet — but it probably won’t happen automatically. One has to really consult with a nutritionist and plan meals to make it work.
There is also an illustration called “Dueling Menus”, which is supposed to contrast Tony Gonzalez’s typical menu with a typical “training table” menu. But without actually tracking what people eat and how much of it they eat, one has to take these types of comparisons with a grain of salt.
Regardless of the details, though, we still thought the piece would constitute a big win for the fresh produce industry. After all, this is a professional football player reducing meat consumption and upping produce and grains. Then we watched the video The Wall Street Journal produced of Tony Gonzalez making his high protein vegan shake. Take a look at the video below:
It is annoying that the moderator calls Tony Gonzalez a vegan, which as we noted above, he is not and, in fact, without looking at the protein powder he uses we can’t even be certain that this drink is vegan, as many protein powders are derived from egg whites, a high quality protein that is not permissible on a vegan diet.
Yet we found the video intriguing on three counts:
First, the casualness with which “pop-science” gets thrown around even by someone like Tony Gonzalez, who has apparently tried to study the subject, knew he was going to be quoted on the subject and, certainly, could get information from the NFL which has every interest in seeing its players eat well, is simply shocking.
For example, any benefits in health and longevity that may come from increasing one’s antioxidant intake is quite uncertain. Oxidation is a natural process, and one eats antioxidants as a natural part of a diet diverse in foods. That special efforts to eat anti-oxidant rich foods will help people in some way is, at best, a theory.
As the International Food Information council puts it:
Although recent research has attempted to establish a causal link between indicators of oxidative stress and chronic disease, none has yet been validated.
Whatever the benefits of antioxidants in general, the evidence that eating acai berry from Brazil is especially useful in promoting human health and longevity is so slight that believing it is better described as superstition than nutrition science. Actually what it really amounts to is being a sucker for people wanting to sell stuff. Google the word acai and you get thousands of websites that want you to buy acai in various forms.
Even when the nutrition information Tony Gonzalez gives is accurate, it is not clear the meaning or importance of the fact. For example, yes, strawberries ounce for ounce have more vitamin C than oranges. We keep that intriguing fact at hand in case we should ever play Jeopardy. But it has no impact on diet for most people. People need vitamin C; if you don’t get enough of it you might get scurvy. Once a person has adequate vitamin C, though, there is no known advantage to having more.
Second, the shake he was preparing is rich in calories. Although he points out that he didn’t add any sweetener and that everything is “natural from fruit,” it is not really clear that that is a distinction that makes any difference. A calorie is a calorie, and that drink he is preparing is pretty calorie-intense. He is in the NFL and needs the calories — not many people do.
Third, the video points out the big problem that the fresh produce industry is going to have. Here is a guy really working to increase his produce consumption; he has no practical limits on expense, yet aside from one leftover banana and some baby carrots — every produce item in the drink is frozen: Spinach, blueberries, cherries, strawberries, raspberries, boysenberries, assorted tropical fruits, including pineapples and mango — are all frozen. The produce department item that will get a boost from this video: The Sambazon juice.
We have written here and here about the challenge the produce industry is facing from frozen and canned product.
The industry has hung its entire marketing hat on the nutritional message, but the instrument of the trade’s effort is the Produce for Better Health Foundation, which promotes frozen, canned and juice — along with fresh.
The fresh industry needs a marketing tool that is dedicated to promoting fresh. What are we going to say to Tony Gonzalez to explain why his produce-rich shake should be made with fresh ingredients? And what organization, precisely, will say it for us?
Being that the Nobel Prize is awarded by the Nobel Foundation in Sweden each year, it seems somehow fitting that our piece, Decline Of Nobel Culture: From Theodore Roosevelt To Al Gore..To Tesco & Non-existent Drowning Polar Bears, should draw objection from a Pundit reader in Stockholm:
I have just been through part of your ‘climate story’ and have read your sarcasms about the decline of the Nobel Peace Prize and feel that on this subject there is a vast difference between the common views on this matter of people living in the US and we Europeans.
A few weeks ago, I had the privilege of attending a seminar where one of the Intergovernmental Panel On Climate Change (IPCC) members — Professor Erland Källén, Dynamic Meteorology — gave a PowerPoint presentation with only scientific/statistical data and forecasts. It showed basically the same picture as An Inconvenient Truth but without the dramatic effects of the movie, which are probably a must in order to break through the permanent media noise. (Propagandist) Those effects were probably necessary in order to reach a broader audience and get the impact which, I’m convinced, is scientifically motivated and politically necessary, particularly in the USA.
One of these days, the eco-thinking will spread outside of California and when it’s embraced by politicians, the world will quickly change just like in the case of cigarette smoking where the US proved to be more radical than others.
Group Networking Manager
LCL World Wide Group
We deeply appreciate Ake taking the time to write and we also find it interesting to review cross-cultural differences. In fact, our interest is so great in the subject that, thanks to a generous grant from Stemilt Growers, we’ve been able to begin a study comparing and contrasting consumer attitudes on sustainability and corporate social responsibility in the United Kingdom and the United States — we gave a presentation providing some initial results at the PMA convention this past fall in Houston.
And, of course, our sense of the importance of this issue is such that we are now in the planning stages for the industry’s first conference on Sustainability and Social Responsibility. This project was triggered when Tim York of Markon (and also Chairman of the Board of the Center for Produce Safety) issued his call for an industry initiative on sustainability. In fact, we have received over 100 indications of interest and we still welcome any Pundit readers interested in getting involved to contact us here.
We certainly didn’t intend to make light of the climate-change issue, and if we came across that way in Stockholm, we apologize to our Swedish readers.
Yet the piece was pointing out two important points:
The first had to do with the Nobel Prize — especially the Peace prize — which has become so politicized as to be completely lacking in credibility. In fairness, this trend didn’t start with Al Gore. One just has to look at the awarding of the Nobel Peace prize 15 years ago to an outright liar like Rigoberta Menchu, a Guatemalan political activist who did little more than write a book in which she fabricated and distorted matters big and small to correspond with a particular political predisposition.
We contrasted Al Gore with Theodore Roosevelt both because they were, coincidentally, both former Vice Presidents when they won their prize but also because the difference in what they did to merit the prize so perfectly contrasted: Al Gore was a promoter and a propagandist; Theodore Roosevelt got two parties at war to stop shooting.
You can believe every word Al Gore has said about global warming and still scratch one’s head wondering what in the world that has to do with the Nobel Peace Prize.
Second, we wanted to point out the difficulty of knowing the impact of these very complicated issues. One can accept global warming as a fact and still be uncertain of its impact. Just the other day, there was a new study out, which the Associated Press entitled in its report on the study: Warming May Reduce Hurricane Landfalls, Study Says. This, of course, is directly opposite to what has been repeated a thousand times about global warming. Now we do not know who is correct in this assessment, but we found the quote we gave from another member of the IPCC panel to be revealing:
As John Christy wrote some time ago, to interpret weather changes in our own lifetimes this way is bizarre:
Mother Nature simply operates at a level of complexity that is, at this point, beyond the mastery of mere mortals (such as scientists) and the tools available to us. As my high-school physics teacher admonished us in those we-shall-conquer-the-world-with-a-slide-rule days, “Begin all of your scientific pronouncements with ‘At our present level of ignorance, we think we know…’”
I haven’t seen that type of climate humility lately. Rather I see jump-to-conclusions advocates and, unfortunately, some scientists who see in every weather anomaly the specter of a global-warming apocalypse. Explaining each successive phenomenon as a result of human action gives them comfort and an easy answer.
Others of us scratch our heads and try to understand the real causes behind what we see. We discount the possibility that everything is caused by human actions, because everything we’ve seen the climate do has happened before. Sea levels rise and fall continually. The Arctic ice cap has shrunk before. One millennium there are hippos swimming in the Thames, and a geological blink later there is an ice bridge linking Asia and North America…..
More broadly, we are interested in the work of Bjørn Lomborg, who we wrote about in a piece entitled, Reducing Carbon vs. Increasing Wealth. His work is intriguing because he gets us past a dispute about global warming or even a dispute over the cause of global warming — he accepts global warming but then looks at policy from the standpoint of achieving desired goals.
It is indeed possible, even likely, that eco-thinking will, as Ake wrote “spread out of California.” In fact, we find most growers very interested in sustainability issues and think many Americans care deeply about the environment and sustainability — but caring doesn’t substitute for the critical thinking necessary to solve the problem.
We can all care immensely and that still doesn’t tell us what to do — especially because we all work with limited resources and if we are spending money building CO2 scrubbers to reduce carbon emissions, we can’t spend that money curing malaria in Africa.
We do confess that we are not prepared to let Al Gore off as easy as Ake when it comes to “dramatic effects.” We love high-tech special effects as much as anyone, but in doing a documentary, one’s first responsibility is to accuracy.
If the truth is too ambivalent to interest people, that is just a sign that there are limits to the horrors we know are about to befall us — not permission to exaggerate in order to drive policy in one’s preferred direction.
We hope that people in Europe, North America and around the world will insist that their governments make policy after carefully studying the impact of various policy choices and not make policy so we can all “feel good” about what we are doing to reduce global warming.
We all know we can use sustainability and social responsibility as a marketing tool — the question is how to really do some good for the world.
We appreciate that Ake Lewander sent us this letter and thank him for helping us wrestle with this important issue.