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American Food & Ag Exporter

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Pundit’s Mailbag —
Gatekeepers And Risk Aversion

Jim Prevor’s Perishable Pundit, February 8, 2007

Our piece Consumer Studies On Spinach Reviewed … And Costco’s Proactive Approach brought a quick response from an important industry leader:

The distribution issue is right on target. It is the 500 gatekeepers managing brand reputation and liability risk making the decision for consumers. Consumers are not nearly as risk averse as the gatekeepers. This returns the discussion to what is reasonable risk, as you addressed in prior Pundits, and reasonable means of risk management. Does testing assure no risk? No.

As a United board member, I supported United’s call for federal mandatory oversight of produce safety. The regulatory sector must have confidence in the industry’s protocols and it seems the effective method is inviting them to the party. The call for federal mandatory oversight will engage the industry in the regulation development and aligns the government as the industry’s partner. This partnership will result in a significantly different dynamic when an event occurs than recently experienced. Is this not the model of the meat and seafood industry? Further, in these industries the market preparation processes provide more food safety checkpoints and kill points than are typically in produce preparation. This seems to add weight to the argument for mandatory federal standards for the produce industry.

Such oversight will provide confidence to the gatekeepers mitigating the spinach distribution adverse actions.

— John Shelford
President
NATURIPE FARMS LLC
Naples, Florida

John is referring to two things. First in the article, after noting that the Perishables Group did a study that found spinach sales were still depressed, we discussed how the common perception that this is due to consumer concerns about spinach was probably wrong:

It is easy to decide that this is due to a decline in consumer confidence. Perhaps. Yet produce is very sensitive to availability, placement and promotion.

Following the Alar debacle in which a 60 Minutes program led to a massive decline in apple sales, people leapt to the conclusion that consumer confidence in apples had declined, and that led to the sales catastrophe.

But when all the data were in, it turned out that virtually the entire sales decline could be accounted for by retail factors: Were apples available? Were all varieties and packs available as they were before the crisis? Were they positioned the same way in the traffic pattern? Were they promoted in store and on ad as they were before the crisis?

The Pundit bets that when all the data are in, we will find out that the sales decline is tied principally to a reduction in retail placement and promotion.

So as John points out, the question is: What does the buying community decide is excessive risk? John is absolutely correct that testing doesn’t assure safety. Deming’s work implied the opposite, that a “quality control” step at the end might lead everyone further down the line to be too lax.

Still, testing does have two virtues: First, it lets the processor know the product will be tested with 100 percent certainty. This likely motivates a lot of other food safety decisions. Second, it is a simple step that can easily be explained to regulators and consumers, thus demonstrating that efforts are being made in a tangible way to increase product safety.

John then segues into the fact that United Fresh has endorsed mandatory government regulation, a point we covered in our piece United Calls For Mandatory, Federal, Uniform Food Safety Standards.

The Pundit endorsed the concept for the same reason John gives: It seems the only way to really align the regulatory apparatus and the produce industry and thus build regulatory confidence.

But the devil is in the details. On the one hand, we have had problems with spinach and leafy greens, tomatoes, scallions, melons, berries, sprouts and almonds. It is a big leap from seven product categories to hundreds of produce items. It may be overreaching.

On the other hand, regulatory confidence can be rebuilt only if we stop the outbreaks. This means that who enforces the standards — the government, the buyers or some third party — is probably not as important as what the standards are.

At some point, the United board will be asked to sign off on the Good Agricultural Practices document for spinach, lettuce and other leafy greens. The board should then insist that the standards for ready-to-eat product be at least as rigorous as those followed by Fresh Express, the industry’s largest producer. We’ve reviewed those standards several times, including here, and this issue will really tell the tale.

Because Natural Selection Foods and Ready Pac, the two companies implicated in outbreaks last year, were already well-regarded, reputable operators with significant food safety awareness, the goal has to be to raise the standards not of the bottom 50 percent of the industry, but of the bottom 99 percent of the industry.

So the focus on form — a marketing agreement, a marketing order, federal regulation, etc. — should not be allowed to distract from the substantive need for standards that will be world-class.

This is what will avoid outbreaks, and avoiding outbreaks is what will build and maintain regulatory and consumer confidence.

Our piece Consumer Studies On Spinach Reviewed … And Costco’s Proactive Approach brought a quick response from an important industry leader:

The distribution issue is right on target. It is the 500 gatekeepers managing brand reputation and liability risk making the decision for consumers. Consumers are not nearly as risk averse as the gatekeepers. This returns the discussion to what is reasonable risk, as you addressed in prior Pundits, and reasonable means of risk management. Does testing assure no risk? No.

As a United board member, I supported United’s call for federal mandatory oversight of produce safety. The regulatory sector must have confidence in the industry’s protocols and it seems the effective method is inviting them to the party. The call for federal mandatory oversight will engage the industry in the regulation development and aligns the government as the industry’s partner. This partnership will result in a significantly different dynamic when an event occurs than recently experienced. Is this not the model of the meat and seafood industry? Further, in these industries the market preparation processes provide more food safety checkpoints and kill points than are typically in produce preparation. This seems to add weight to the argument for mandatory federal standards for the produce industry.

Such oversight will provide confidence to the gatekeepers mitigating the spinach distribution adverse actions.

— John Shelford
President
NATURIPE FARMS LLC
Naples, Florida

John is referring to two things. First in the article, after noting that the Perishables Group did a study that found spinach sales were still depressed, we discussed how the common perception that this is due to consumer concerns about spinach was probably wrong:

It is easy to decide that this is due to a decline in consumer confidence. Perhaps. Yet produce is very sensitive to availability, placement and promotion.

Following the Alar debacle in which a 60 Minutes program led to a massive decline in apple sales, people leapt to the conclusion that consumer confidence in apples had declined, and that led to the sales catastrophe.

But when all the data were in, it turned out that virtually the entire sales decline could be accounted for by retail factors: Were apples available? Were all varieties and packs available as they were before the crisis? Were they positioned the same way in the traffic pattern? Were they promoted in store and on ad as they were before the crisis?

The Pundit bets that when all the data are in, we will find out that the sales decline is tied principally to a reduction in retail placement and promotion.

So as John points out, the question is: What does the buying community decide is excessive risk? John is absolutely correct that testing doesn’t assure safety. Deming’s work implied the opposite, that a “quality control” step at the end might lead everyone further down the line to be too lax.

Still, testing does have two virtues: First, it lets the processor know the product will be tested with 100 percent certainty. This likely motivates a lot of other food safety decisions. Second, it is a simple step that can easily be explained to regulators and consumers, thus demonstrating that efforts are being made in a tangible way to increase product safety.

John then segues into the fact that United Fresh has endorsed mandatory government regulation, a point we covered in our piece United Calls For Mandatory, Federal, Uniform Food Safety Standards.

The Pundit endorsed the concept for the same reason John gives: It seems the only way to really align the regulatory apparatus and the produce industry and thus build regulatory confidence.

But the devil is in the details. On the one hand, we have had problems with spinach and leafy greens, tomatoes, scallions, melons, berries, sprouts and almonds. It is a big leap from seven product categories to hundreds of produce items. It may be overreaching.

On the other hand, regulatory confidence can be rebuilt only if we stop the outbreaks. This means that who enforces the standards — the government, the buyers or some third party — is probably not as important as what the standards are.

At some point, the United board will be asked to sign off on the Good Agricultural Practices document for spinach, lettuce and other leafy greens. The board should then insist that the standards for ready-to-eat product be at least as rigorous as those followed by Fresh Express, the industry’s largest producer. We’ve reviewed those standards several times, including here, and this issue will really tell the tale.

Because Natural Selection Foods and Ready Pac, the two companies implicated in outbreaks last year, were already well-regarded, reputable operators with significant food safety awareness, the goal has to be to raise the standards not of the bottom 50 percent of the industry, but of the bottom 99 percent of the industry.

So the focus on form — a marketing agreement, a marketing order, federal regulation, etc. — should not be allowed to distract from the substantive need for standards that will be world-class.

This is what will avoid outbreaks, and avoiding outbreaks is what will build and maintain regulatory and consumer confidence.

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