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Fresh Express Declines To Sign
California Marketing Agreement

Jim Prevor’s Perishable Pundit, February 14, 2007

The big question regarding the California Marketing Agreement for spinach, lettuce and leafy greens has been whether Fresh Express would elect to sign the agreement. As the biggest player in the field and the one with the best reputation for its food safety program, its signature to the agreement would certainly have helped solve a public relations problem for the industry.

From a business standpoint, though, its decision is completely understandable. For months now the Pundit has campaigned for the industry to adopt the Fresh Express food safety program as its baseline Good Agricultural Practices document. One of the reasons is because it has been obvious for months that Fresh Express would resist associating itself with a food safety program less strenuous than the one it has in place. As its letter, several copies of which we received from industry friends, explains:

Fresh Express growing and processing facilities rigorously follow, and in many instances, exceed the proposed GAP metrics. In fact, Fresh Express standards and commitment to food safety are already the most complete and comprehensive in the industry. At considerable expense, we have our own field staff confirming that the standards are being met every day. Of equal importance, our food safety program is built around prevention, and our preventative measures are reviewed and improved continuously throughout the entire supply chain. Food safety at Fresh Express is fully integrated into every aspect of our business, every single day.

The letter, written over the signature of Tanios E. Viviani, President of Fresh Express, attempts to walk a political tightrope. It is clear Fresh Express wants to be seen as supportive of industry aspirations on food safety, but also that it believes it has a stronger program already in place:

To be clear, Fresh Express is in full support of tightening food safety standards, and we urge all handlers whose standards do not currently meet the improved GAP metrics defined within the California Marketing Agreement to adopt them promptly. We also believe the GAP metrics called for in the agreement will only be as good as the prevention system each handler has adopted for its own organization.

Fresh Express stands by its already comprehensive and fully integrated food safety program. We are ready to put our full support behind industry efforts to raise the food safety standards, because consumers are entitled to industry-wide protections.

Here at the Pundit, we have been deeply concerned that the consumer marketing aspect of the California Marketing agreement, namely a seal on packaging, will be deeply confusing to consumers. We’ve argued that for a national and international industry to have a seal for small range of products — only when produced by companies licensed to do business in one state and only available for a portion of the year — is more likely to confuse consumers than restore consumer confidence.

Fresh Express seems to share these concerns:

The Marketing agreement is an important first step, but the solution for food safety must be global. The fresh produce industry is not confined to California; it’s largely national, and most handlers grow or process in several other regions of the country. We’re even seeing an increase in international production, which the California Marketing Agreement does not address. Fresh Express itself produces raw product only seven months of the year in California and processes less than one-third of its product line from California sources. Today’s consumers demand a 12-month supply of high quality, food-safe, fresh produce that requires production and growing across national and international locations. Fresh Express already applies the same high-quality standards throughout the global supply chain as we do nationally, and we believe any food safety initiative should do the same.

The letter goes on to subtly imply a fear that consumer confusion on these matters might lead this very limited program — not addressing non-California product — to give consumers a false sense of security and that both the press and consumers could misinterpret what the seal stands for:

Although the California Marketing Agreement has a limited reach, it may very well create consumer expectations that are too high to meet. That’s why, as an industry, we must find ways to earn consumer trust and not jeopardize it with limited safeguards.

Put another way, the program is too limited both in substance and geography to assure safe product, yet it will be promoted as doing just that.

The letter must have been a difficult one to write, and it is possible that the $2 million donation Fresh Express made to further research on E. coli 0157:H7 was part of a trade relations strategy to soften the blow of its rejection of this agreement. A way of saying to the industry we can’t associate ourselves with this plan but we want to help the industry. The letter explains:

We continue to make significant investments in food safety. Last May, well before the fresh spinach outbreak, we formed a blue ribbon scientific advisory panel headed by Dr. Michael Osterholm, PhD, MPH, to further explore how food safety practices might be enhanced through a better scientific understanding of the pathogens common to fresh produce, especially E. coli O157:H7. Last month, we committed $2 million dollars to fund the research priorities recommended by the panel and announced that we will share the findings with the entire industry. This past December, we established an endowment at UC Davis to support graduate students researching food science. All findings from Fresh Express-funded research will be made public.

Our sense is that Fresh Express is sincere in its critique of the California Marketing Agreement. If the industry had been willing to adopt the Fresh Express standards as the GAP metrics, it would have been harder for Fresh Express to decline to sign, even though it would still have been a regional agreement.

Yet we are also reminded of John Maynard Keynes — a man so influential that an entire school of contemporary thought, Keynsian economics, bears his name — warned us that “Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist.”

The decision that Fresh Express has articulated in its letter is to some extent dictated by the economics of the situation. Competitors who are signing the agreement are urging retailers to require that all suppliers be signatories to the California Marketing Agreement. Implicit in this call is a notion that adhering to the food safety standards in that agreement is sufficient, otherwise the call would be for retailers to demand that their suppliers meet some specific, more strenuous standard that is required for food safety.

The whole reason the industry has resisted adopting the Fresh Express standards in the first place is that they cost money. To say you won’t buy product within a mile of a composting operation or five years after land is flooded restricts the supply chain and raises prices. Fresh Express needs to legitimately recover these costs which it believes are necessary and desirable to incur on behalf of safer food.

Most retail buyers, much less consumers, are not food safety experts; they are bound to assume that the standards agreed to by the industry and assented to by government are sufficient. That is why they bought spinach under the old standards.

Fresh Express is saying that it supports the California Marketing Agreement, by which it means that it thinks it is a great idea for companies that do not meet the draft GAP standards to immediately sign up and raise their standards. That is why Fresh Express did not speak out in opposition to the agreement. Yet, Fresh Express is also saying that it supports the industry plenty with its research grant and its willingness to share results with the whole industry. It wants to keep clear in the minds of its trade customers that it is operating to its own, higher standard and that, in its judgment, it does things in food safety worth paying for.

What is going on beneath the surface is a classic situation in the field of “Information Economics,” in which an early adopter of food safety systems is being challenged by an industry that would like to use industry standards to head off the early adopters’ competitive edge.

We dealt with the subject in the Pundit’s sister publication, PRODUCE BUSINESS in a piece entitled The Economics of Mandatory Regulation which you can read here.

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