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Perishable Pundit
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Produce Business

Deli Business

American Food & Ag Exporter

Cheese Connoisseur



Lessons From The Peanut Salmonella Outbreak: Audit System Broken

Of all the millions of words that have been written and broadcast regarding the Peanut Corporation of America and the salmonella outbreak with which it is associated, the most utterly astounding were spoken by James Munyon, President of AIB International, and recorded for posterity in a news story written by Andrew Martin and published in The New York Times titled Peanut Plant Says Audits Declared It in Top Shape.

The piece included this utterly revealing bit of investigative reporting:

Kellogg, one of the companies that recalled peanut products, received reports of third-party independent audits of Peanut Corporation of America in 2007 and 2008. The audits, paid for by the peanut company to meet food manufacturers’ requirements, were intended to assess its compliance with federally mandated manufacturing practices, including the condition of the plant and equipment and cleanliness, said Kris Charles, a spokeswoman for Kellogg.

Audits are also supposed to review the supplier’s food safety program, microbial test results and internal audit results.

Each audit, conducted by AIB International, gave the Blakely plant a “superior” rating. “We are looking into whether the third-party auditor reviewed state inspection reports or the plant’s test results,” Ms. Charles said by e-mail. “It is certainly something we would have expected them to do because it is an audit requirement.” Kellogg also received written test results from Peanut Corporation of America that the peanut paste it had supplied Kellogg showed no positive salmonella results, she said.

Had Kellogg known of the problems at the plant that theFood and Drug Administration detailed recently, “we would have discontinued the relationship with P.C.A. immediately and would not have accepted any ingredients from them,” she said.

Jim Munyon, president of AIB International, based in Manhattan, Kansas, said he could not release details of the peanut company’s audit because of confidentiality agreements. He said the company would not have received a superior rating if his auditors had seen the filth the federal government described.

“It would mean that we didn’t see it on the day we were there,” he said of the rating. “What goes on the rest of the time, we don’t know.”

He said his company relies on his customers to provide details of internal microbial tests. Had the peanut company divulged the presence of salmonella, he said, “We would have had a discussion about those failures.”

AIB International is the lineal descendent of the old American Institute of Baking. Although the organization is not the most used third-party auditing firm in the produce field, it does have programs for agricultural crops, fresh produce packinghouses, fresh -cut processing, and it is one of the largest and most respected auditing organizations and also offers a Gold Standard Certification Program.

So it is not inconsequential when the CEO of such a prestigious and respected auditing firm says these words:

“Jim Munyon, president of AIB International, based in Manhattan, Kansas, said …the company would not have received a superior rating if his auditors had seen the filth the federal government described.

“It would mean that we didn’t see it on the day we were there,” he said of the rating. “What goes on the rest of the time, we don’t know.”

He said his company relies on his customers to provide details of internal microbial tests. Had the peanut company divulged the presence of salmonella, he said, “We would have had a discussion about those failures.”

We’ve read the line 50 times and the words still ring in our ears: “It would mean that we didn’t see it on the day we were there,” he said of the rating. “What goes on the rest of the time, we don’t know.”

It is a shocking admission because, of course, the logical question is to ask is, “If this is true, what is the point of third party audits?”

We all know that as a matter of fact no audit can provide perfect assurance of food safety. Even if perfectly accurate and comprehensive in scope, there is always the possibility of a dramatic change the day after the audit is conducted.

This is true of all sorts of certifications and is a risk. But such sudden declines are rare and none is alleged in this situation. It is also true that AIB — and other such organizations — hardly represent their work in this way. In its web page on its Good Manufacturing Practices (GMP) audits, AIB explains itself this way:

Some companies require that all of their suppliers, whether they make hamburger buns or napkins, be audited by AIB. Scoring high on an AIB audit shows that a supplier complies with food safety regulations and is committed to providing safe, high quality food products to consumers.

Other companies, such as packaging suppliers, become AIB audit customers because they are committed to doing all they can to provide clean, safe products. For them, scoring well on an AIB audit is something that warrants a press release and often provides them with a competitive advantage. Sharing their AIB audit results with a potential customer demonstrates their dedication to providing safe, superior products.

Of course, there is nothing here about AIB not knowing what goes on except on the day they happen to be inspecting. In fact Mr. Munyon’s comments clearly indicate he himself is confused as to the difference, by AIB’s own definitions, between an audit and an inspection:

At AIB, we define an Audit as:

• A systematic evaluation to determine if programs and related activities achieve planned expectations

• The review or challenging of written programs; documentation of activities; corrective actions; trends

• An aid to determining the correlations between documented procedures and activities and actual execution

• A potential assistance in identifying root cause, which can lead to long term corrective action

In contrast, at AIB we define an Inspection as follows:

• An assessment at a “moment in time” which identifies positive and negative conditions

• An extensive physical examination of a facility and its equipment and observation of practices in order to collect information to determine compliance with plant programs

• Structured to initiate immediate corrective action, when it is required

• Structured to often lead to an evaluation of programs and systems

So, yes, if you want to get just a physical inspection, that is just a ”moment in time” and the facility could well be gussied up for that inspection.

An audit, however, is not just an inspection. It is an evaluation that procedures are established and being followed that “achieve planned expectations.”

Beyond what AIB claims itself, the simple logic of the role of third-party auditors in the food industry indicates that what Mr. Munyon said simply cannot be the basis for the existence of third-party auditors.

The logic behind these organizations is really quite simple: In some cases because they do not have the expertise, in other cases because they don’t have the scale, companies turn to third-party auditors to get the kinds of assurances they are incapable of producing for themselves.

Since nobody cares solely about the “day we were there,” an audit must represent something more comprehensive, at very least, a judgment that the procedures of this company mean it is likely to meet food safety expectations.

Now, of course, auditing organizations can certainly be defrauded. Yet Mr. Munyon’s statement seemed carefully worded not to allege such a thing:

He said his company relies on his customers to provide details of internal microbial tests. Had the peanut company divulged the presence of salmonella, he said, “We would have had a discussion about those failures.”

This raises two questions. First, did the audit standard require microbial testing? The Kellogg representative seems to imply it did. Yet we don’t know what information was, in fact, provided to AIB. Second, did AIB ask if microbial testing was done and if there were any positives?

These questions are crucial because if AIB were actively defrauded, that speaks to a different vulnerability of the food safety system than if AIB just didn’t ask the right questions or enforce the rules on its books.

There is a lot of information still to be learned, but we know enough to identify a few clear lessons from this situation that should be adopted as a matter of public policy and by all third-party auditors.

1) Public Records for Promoters

In The New York Times article, Mr. Munyon indicated that because audits are confidential he couldn’t speak to details of the Peanut Corporation of America audit. This is absurd. Yes, we believe it important that audit information be kept confidential. This ability of a company to call in an auditor and not wash its dirty linen in public is important to get companies to improve their food-safety practices and begin a journey of continuous improvement. A simplistic demand that everything be public will lead companies to avoid auditing. This would hurt food-safety efforts in the country and around the world.

The exception, though, is if a company publicizes its audit status. The minute a company starts telling buyers, “You can buy from us with confidence because we are AIB-certified,” that is the moment that all audit reports should become public records, posted on the Internet for all to see.

2) Simplify and Clarify

One of the problems with AIB and many auditors is that commonly used phrases such as “AIB-certified” actually have no specific meaning. These organizations offer hundreds of different programs. One could say one’s organization is AIB-audited and be speaking the truth, but it may be an Allergen Audit or an Occupational Safety Audit or many other types of audits, assessments and inspections.

This is too confusing, and if you read AIB’s own literature you see that there is significant market confusion with many FAQs on its website asking about an “AIB certification” that doesn’t actually exist.

Although all these different programs doubtless were developed to meet market demand, we should not allow auditing organizations to enable such market confusion. If you Google “AIB Certified” you get about 2,950 references. Although some have nothing to do with the organization we are discussing, you get vendors from Soy Beginnings to Kenny’s Candy Company and on to packaging and pest control companies all declaring they have a “certification” that AIB claims doesn’t exist. Yet AIB doesn’t seem to be issuing cease-and-desist letters to all these organizations to preserve the integrity of the AIB brand.

Interestingly enough, the two most rigorous programs, the Bakers Quality Seal and Gold Standard Program, have very few companies participating.

It looks like McCain Foods and Amcor PET Packaging around the world, Charcuterie La Tour Eiffel, Fres-Co System, Safries down in Australia and East Bait in Chicago and Denver are the only ones that submit to the rigor of this program.

One of the dirty little secrets of the industry is that many big buyers don’t want to pay for the gold standard. Why didn’t Kelloggs, for example, insist that its suppliers be Gold Standard members?

There is nothing wrong with AIB offering training programs and specialized inspection services. We think it is terrific that AIB offers a correspondence course for pest control contractors. But there should be a specific name and logo reserved for a comprehensive, gold standard audit. Everything else can be building blocks to the audit or something completely separate, but the branding is now designed to create confusion.

3) Clarification of Purpose

Audits are not designed to solely be a picture in time. Audits are designed to provide reassurance that the food the consumer is about to eat has, with a high degree of likelihood, been produced according to the expected standards.

What follows from this are all kinds of implications. For example, every employee should have a toll-free number and an e-mail address and website in which he can report anonymously any deviation from audit standards.

Although it is fine to do practice audits as planned events, actual audit visits should always be unannounced. The point is to determine if procedures have been properly established and are regularly being followed — not if they can polish up the brass for a big visit.

4) Fraud

It may be that auditors — be they financial or food safety — will never catch all cases of intentional fraud. That is, however, a far cry from saying, as Mr. Munyon did, that they are dependent on the company to provide details such as on internal microbial tests.

The audit can require the tests, it can dictate what is an acceptable lab to do the test, financial records can be audited to see what and who paid for tests, and employees can sign sworn affidavits as to test results. Many things can be done that will significantly reduce the likelihood of such fraud.

5) Switch the Payee

In fact, companies should not pay for their own audits. Let an industry organization on the buy-side, say the Grocery Manufacturers of America, put together a pool organization, define an acceptable standard and pay for an acceptable audit.

There is always an implied threat when an auditor comes in that the company will switch and decide not to be IAB audited but, instead to be BRC or SQF or something else. This causes auditors to be too concerned with the feelings and thoughts of the manufacturer.

6) Watch the Individual

AIB has its own list of full time auditors. What it doesn’t clarify is how they are assigned. At our bank, we can never tell you who the branch manager or commercial loan officer is, because they change them constantly. The last thing the bank wants is these folks giving out loans because they are chummy with someone.

Some auditing organizations use sub-contractors and some divide the work regionally. It is important that the opportunities be minimized for collusion. Generally auditors should never have client contact alone and there should often be new blood rotating in.

**********

We are sure there are more points to be drawn from this, yet these six strike us as a very good start.

The third-party audit system is the lynchpin of our food safety system. Thanks to an aggressive reporter we now know that the system is really broken and must be fixed right away.




‘Professor’ Bruce Knobeloch
Is Bullish On Industry Opportunities

This year’s United Fresh/Cornell University Produce Executive Development Program is coming up in March and there is a new element to the program. Since its founding, the program has provided an unusual combination of a sort of compressed MBA curriculum, taught within a prism of the realities of the fresh produce industry. The Pundit was a founding member of the faculty and will be back teaching this year working with luminaries such Ed McLaughlin, who we wrote about here, and a roster of outstanding Cornell faculty members to bring a unique educational experience to the industry.

Held Far Above Cayuga’s Waters on the beautiful Cornell University campus, the program provides a unique networking experience and unusual opportunity for reflection and strategic thinking about business … and about life. If you haven’t signed up for the program yet or would like to send someone from your organization, it is not too late. You can still register right here. We strongly encourage you do so.

The new element this year was the decision to incorporate a presentation from Bruce Peterson and Bruce Knobeloch. Because both of these gentlemen have worked on both the buy and sell sides of the industry, we can count on an unusual perspective on how decisions get made in the produce trade.

To give us all a kind of “head’s up” as to what these gentlemen are thinking, we asked Pundit Investigator and Special Projects Editor Mira Slott to speak with both of the Bruces. We ran her first discussion under the title, ‘Professor’ Bruce Peterson Talks About Traceability, Immigration, Transportation and Water Utilization. Today Mira speaks with Bruce Knobeloch.

Bruce Knobeloch
Former Vice President of Marketing
for River Ranch Fresh Foods,
and Director of Produce at
Schnuck Markets, Inc.

Q: What inspired you to get involved in the United Fresh/Cornell University Produce Executive Development Program?

A: There are several reasons why I was attracted to the opportunity to participate in the program. When Ed McLaughlin called me, his perspective was to instill something fresh into the program. I was very lucky to be a part of the program in the first year, and really excited to come back. I was pleased to learn I’d be participating with Bruce Peterson, who I’ve known for a long time and consider a friend. And also to work alongside Ed, who I’ve known since my Schnuck days. I have tremendous respect for him and the impact he’s had on the industry.

Q: What insight could you invoke at the conference that might stir up dynamic conversation?

A: Bruce Peterson and I will be able to provide unique perspective to participants, since we each have navigated the business as both a retailer and a supplier. I’ve been lucky to see the good, the bad and the ugly from both sides of the fence, as director of produce at Schnuck’s, and in the experiences I’ve gone through the last 10 years in California. The value is really in being able to dissect that a little bit with a small dedicated group in an intense educational setting. And in looking at the business, I hope to get the perspective of attendees on how they view things as well.

Q: You also can impart your perspective as an attendee yourself during the launch of the program…

A: I vividly recall from the class two years ago the great interaction and networking that happened from start to finish of that week. A number of people I met for the first time at that conference, I regularly communicate with now. This was one of the best programs I’ve ever attended.

Q: That’s quite a glowing recommendation. Could you provide more specifics on why the program was so important to you? Is it most helpful from an educational and business-improvement standpoint, or is the benefit more intangible, based on the close-knit dynamic?

A: People really want to go. I’m not trying to offend anyone, but to participate in a week-long class takes a major commitment of personal and professional time, so to go, you have to be devoted to getting a lot out of it. Like other leadership programs, you have to make a conscious decision to immerse yourself in it. You get out what you put in.

I’m really interested in exchanging ideas on ways to maximize opportunities in our industry.

Q: What are some of those opportunities as the industry confronts this global economic crisis?

A: You can’t talk about any industry now without talking about the economic environment we’re in. It’s the 800-pound guerilla in the room. Brilliant economists don’t have the answers on how to fix the crisis we’re in, or its impact on the future. Give us five minutes at the conference, Bruce and I will figure it out!

Seriously, it hasn’t been a rosy economic picture for the industry for a number of years, whether you’re growing spinach in Salinas, tomatoes in the East, or sweet corn in the Midwest. It’s been tough, with technology investments, the increased input costs, the demands on margins, etc.

Q: Hasn’t the produce industry always faced tough margins, a competitive environment and economic challenges?

A: Yes, all this is proper and correct, but the expectations of buyers today are higher, and the disciplines are much different. Take just one component, of food safety — as a grower, shipper, or processor, the effort just in documentation and audits is 10-fold what it was 10 years ago. Take that thread and start pulling it. What that means in overall costs, in terms of investing in more complex food safety measures, additional manpower, internal and external communication measures, and that’s just one component of their economic reality.

Q: In economic downturns, isn’t the produce industry in some ways insulated since food is a basic need, whereas consumers will hold off on more luxury, discretionary purchases and big ticket items like cars?

A: To a degree, economics is a drain on the industry. Unemployment in the country has hit a level we haven’t seen for 16 years. 0verall, people face cost-of-living increases while the average wage is flat or slightly declined. At the same time, the health industry is focused on everyone eating fruits and vegetables, yet overall consumption hasn’t been growing significantly in the last decade.

Q: Why is that? With the obesity epidemic and childhood health and nutrition issues top of mind, you’d think the produce industry could generate a boost in sales. As Vice President of Marketing for River Ranch Fresh Foods, you were involved first hand in clever promotional efforts. Why is it so challenging to increase produce consumption?

A: Some of the best efforts whether mine or others in marketing face obstacles. I can speak to the programs that are most successful, which involve working with the buyer/seller in a coordinated effort. The concept may or may not have been driven by the seller, but both parties bought into it because of the soundness of the idea. It’s tough to accomplish this because on both sides, everyone is time-constrained, and economically constrained.

It’s difficult to get the dollars in budgets to drive some of these programs. Whether it’s a one-on-one promotion, direct mail, out of a customer club card, a new product introduction utilizing demos, or whatever it may be, dollars are more difficult to obtain. Margins the last few years have been compressed. I can’t imagine any part of the industry that hasn’t experienced margin compression and cost increases.

Q: What is your view of the Fruits & Veggies More Matters campaign in promoting a consumption lift?

A: From a global perspective, More Matters is a phenomenal education and outreach tool. Combined with what’s been happening in schools with the fresh fruit and vegetable program, we all hope this will drive consumption and nutritional awareness in the long term. The industry has done an outstanding job of pushing the government for more funding.

Q: Everything’s relative though. It seems the produce industry is forever the underdog in battling the big food corporations flush with mega advertising budgets to inundate the airwaves. What’s the solution?

A: I don’t mean to make this simplistic, but it’s all about dollars. Look at other industries that have driven consumption… dairy and meat are prime examples of multi-million dollar marketing campaigns. Even with issues some have faced in food safety, they still have been able to drive consumption.

The produce industry has a hard time supporting promotional programs. This really is a dollar-and-cents issue. Consumption is driven by awareness, and communication costs a lot of money. With that said, what the industry has done on a shoestring has been phenomenal. To a great extent, the money going into school lunch programs today comes from our industry just being bull dogs and going after the money. Even so, if you look at the school lunch program, I would bet the money spent on fruits and vegetables is but a miniscule fraction of what is spent on other meal components. I truly do applaud a large number of people in our industry for what they have accomplished with such limited resources. It makes you ponder what we could do with more resources.

Whether it’s food safety, input costs, labor, workman’s comp or water shortages, we are all facing these problems as an industry. Demand for water in urban areas is a mounting problem. In California we have one of the biggest needs and one of biggest budget shortfalls of any state in the union. But this is not just a California problem; it’s a global one. All Bruce Peterson’s comments in your Pundit interview are dead on.

Q: Bruce Peterson pulls no punches in blasting a powerful wakeup call to the industry to drive forward on key issues that could impact our livelihood. You paint a grim picture of economic hardships the industry must overcome. How can companies turn these challenges into opportunities?

A: Our industry always faces challenges; growing food is not an easy thing to do. Mother Nature gives us the good, the bad and in-between, and because of that, there is always opportunity as well as risk.

What I think is most intriguing is good companies can become great companies. The one thing I valued most at the Produce Executive Development Program was the ability to think strategically; not necessarily about my business but more strategically about the industry. Attendees can walk away from this week at Cornell with optimism. People need food, a place to live, certain basic human needs, and we fill one of the most necessary. I can work in this industry with my head held high, providing families with healthy, nutritious food.

We’re a collection of industries within an all-encompassing industry. I don’t have a tremendous amount of experience growing, processing, and shipping some things, but what I do know well is closely related to other segments of our industry. The growth opportunities are out there because of the entrepreneurial spirit of our industry.

Just because of the nature of the beast, our industry is still very much a regional, passion-filled business. It kills me when I read or see doomsday scenarios about big business agriculture, and it’s the end of the family farm. My comment to that: I would welcome anyone to come spend a day with me and I’ll introduce you to the evolution of the family farm. One hundred years ago, all they could farm was a small amount of acreage. Technology in many forms such as improved water delivery systems enabled good, conscientious growers the luxury of expanding their base of operations.

Just because the family is farming on 5,000 acres, doesn’t mean it’s still not a family business. This is lost by the media. Just because a produce company has a professional farming business, it’s not like growing wheat in the Midwest within the agribusiness umbrella. It’s still a matter of a family getting together and making plans for next season or the next planting cycle.

Bruce Peterson and I hold this industry in very high esteem. This industry has provided a lot of blessings to both him and me, although it sounds like we worry about our industry’s future, we’re energized about the opportunities ahead.

Q: Have you given thought to what you will do next in your own career, following your successful tenure at River Ranch?

A: I’ve been fortunate that my career path has enabled me to work on both retail and supply sides. In whatever I’m focused on over time, the experience has helped me to make good decisions. River Ranch has been restructuring to solidify the company’s position. I have nothing but great comments for the team at River Ranch and wish them the best. I’ve been looking at a number of paths. I’ve been one of luckiest guys in produce, met an unbelievable group of people with great minds and even greater hearts. I’m truly excited about the future. And I can’t wait until the middle of March when I head to Cornell!

We’ve written more than a little bit about the financial crisis and will speak more about it while lecturing at Cornell. Yet we would see two things as especially relevant to a course such as this that is focused on strategic thinking:

First, preparing for fluctuations in the economy is part and parcel of long-term planning. Statistics are a challenging issue because people have to wrap their arms around this insight: Just because something is a once-every-hundred-years event doesn’t mean it won’t happen twice this week.

Many of the companies that have failed or been bailed out were consciously managed in the hope to increase returns by increasing risk. Even a mighty company such as General Electric was managed to be at risk to a freeze-up in the commercial paper market for no better reason than to improve profitability.

Second, despair is an unusually useless emotion and mostly blinds one to opportunities. We can’t say we know when the recession shall end and, indeed, we fear that bad policy first by the Bush administration and now being continued during the Obama administration will extend the recession. Yet we are confident that none of these policies — good, bad or indifferent — are enough to either save or destroy America. So we are reminded of a piece we wrote in Pundit sister publication PRODUCE BUSINESS titled Despair Overstated? — the piece recounted a story told by J.P. Morgan, most famous banker in the world:

“My father told me,” Mr. Morgan was quoted as saying, “to follow my own bent in business, but whatever that business, to work hard. One thing he said I shall always remember. . . not to discount the future of America. ‘Remember, my son,’ he said, ‘that any man who is a bear on the future of this country will go broke. There may be times when things are dark and cloudy in America, when uncertainty will cause some to distrust and others to think there is too much production, too much building of railroads, and too much development in other enterprises. In such times, and at all times, remember that the great growth of that vast country will take care of all.”

In our article, we applied the thought to the United States today:

Housing prices may fall as we have a surplus right now, and that may bring down banks and Wall Street institutions. Yet long term, this country will fill with people who yearn to breathe the freedom of America and we will need more houses built yet. In moments when many counsel despair, this is a bet as certain as any the world has to offer.

So as we contemplate heading off to the Ivy League we ought not focus on the momentary disruptions, we ought to focus on building businesses strong enough to withstand the vicissitudes of life because surviving is a necessary condition for achieving success.

Yet it is not a sufficient condition. We stand along with J.P.Morgan’s father in believing that, in this country, long-term success shall belong to the optimists.

We hope you are optimistic enough to invest in yourself and your company by joining us at the United Fresh/Cornell University Produce Executive Development Program. You can register right here.




Pundit’s Mailbag — How About Subsidy Money For GTIN Conversion?

We have run many pieces on traceability and most recently ran two articles based on a letter that Greg Fritz, President of Cleveland, Ohio-based Produce Packaging, Inc. sent to United Fresh Produce Association regarding the Produce Traceability Initiative and the response from United, PMA and CPMA to that letter.

The two pieces — the first titled Is Produce Traceability Initiative Worth the Investment? and the next run under the title Pundit’s Mailbag — Joint Response To Produce Traceability Cost Concerns — dealt specifically with the cost concerns for many companies of adopting the PTI.

Now we have a letter from a frequent Pundit contributor suggesting an alternative:

Here is a thought. Why not have the federal government (USDA) subsidize the conversion to GTIN as the global traceability standard?

If the USDA can subsidize crop farming, surely they can subsidize traceability?

If the federal government can find funds to switch television to digital, they can find the funds to implement a traceability standard.

My point being is that we need a standard, and GTIN is an already universally understood and accepted method. However, the cost of conversion is substantial, and for many small shippers, it will not be feasible.

I suspect many shippers don’t have any idea what a common standard would mean from a financial or a skill set implementation standpoint. Knowing how archaic a lot of computer systems are in this industry, the cost of conversion will not only surprise many, but simply be out of reach financially.

Is a common standard the right thing to do? Most definitely. However, it’s easy to be idealistic when you can afford it or don’t have to pay for it.

— Eric Schwartz
President
Salyer American Fresh Foods
Monterey, California

Eric has been an outspoken leader on many issues important to the industry. Here at the Pundit, we’ve spoken with him or he sent a note to us many times, including these examples:

Pundit’s Pulse Of The Industry: Dole Vegetables’ Eric Schwartz

Single Step Award Winner — Eric Schwartz Of Dole Vegetables

Pundit’s Mailbag — Dole’s Schwartz Comments On Silent Buyers

Pundit’s Mailbag — More Questions About Leafy Greens Board

Pundit’s Mailbag — The Deadline Approaches

Dole Hit With Another Recall

Dole’s Schwartz Sheds More Light On Recent Recall

Pundit’s Mailbag — Lesson From Avocadogate: You Get What You Tolerate

Pundit’s Mailbag — Organic Industry’s ‘Situational’ Standard

Why The Secrecy On Inspection Agency Lab Results?

Inspection Agencies Could Assist In Traceability

Ocean Mist’s Joe Pezzini Honored

Now his point today gives us a chuckle simply because in light of all the bailouts and the stimulus package, we’ve reached the point where one feels slightly ridiculous in arguing against the government paying for anything. So, sure, if in Stimulus Bill II someone can slip in a little technology money for the produce industry well, why should the produce industry be left out?

We would, however, say two things:

First, we have to be careful about struggling to preserve a produce industry from days gone by. Food safety, traceability, sustainability… all these, plus customer needs such as vendor-managed replenishment, create the need for different competencies, a different scale of operation and different levels of managerial depth. It is not surprising that businesses that grew up in a time with different demands should sometimes be ill-suited to the new environment. Some of them won’t make it and, although we may lament that, it is actually not clear we can or should do anything to prevent this transformation.

Second, although Federal money would certainly make things easier, it shouldn’t be necessary. Although Greg Fritz pointed out the investment required, his real concern was that the investment would not be required of everyone:

…I would wholeheartedly support the PTI effort, given the assumption of a level playing field. If, as in your example, “Ken” has to pay for the fees, systems, and record-keeping that Produce Packaging will have to pay for, then that’s fair, and good for the industry. However, if the small, “local,” or “seasonal” boys get a pass (or an “exemption” from the government), then it’s no longer fair, and not a significant benefit to the public.

If buyers actually constrain their supply chains to only purchase from vendors compliant with the PTI, in all likelihood they will have to pay higher prices as that will exclude the more informal sector of the industry. These higher prices will probably justify the investment required to be PTI-complaint. The big risk is that buyers will be unwilling to constrain their supply chains and will just buy from the cheapest vendor.

If vendors preach high standards but purchase based on price, those vendors who take supply-chain responsibilities — such as traceability — seriously and invest to fulfill these responsibilities will lose money or earn inadequate returns. That can only go on for so long.

Many thanks to Eric Schwartz and Salyer American Fresh Foods for helping us think through such an important issue.




Pundit’s Mailbag — As ‘Spiked’ Organic Fertilizer Investigation Widens, Potential Grows For Weaker Consumer Confidence In All Fresh Produce

Thanks for your insightful articles, including ‘ Spiked’ Organic Fertilizer Raises Consumer Doubts About Organic Definition and Pundit’s Mailbag — Organic Industry’s ‘Situational’ Standard.

This is more than just a quirky organic produce issue. While it remains a tiny percentage of overall production and sales, organic produce gets top billing with the media these days.

Consumer trust in any kind of fresh produce concerns all of us, and when the organic leadership and organic certifiers are not willing to do the right thing, it hurts everyone in the produce business as we continue to face major challenges in maintaining consumer confidence in the integrity and safety of fresh produce.

The investigation widens and now involves another fertilizer producer.

— David Sasuga
Founder
Fresh Origins
San Marcos, California

Yes, the investigation is widening. Jim Downing over at the Sacramento Bee continues his series with a piece titled, Federal Raid Heightens Concerns about Fake Organic Fertilizer:

Federal agents… searched a major producer of fertilizer for California’s organic farmers, widening concern about the use of synthetic chemicals in the industry.

The raid… targeted Port Organic Products Ltd. of Bakersfield. Industry sources estimate the company produced up to half of the liquid fertilizer used on the state’s organic farms in recent years.

The Bee reported in December on a state investigation that caught another large organic fertilizer maker spiking its product with synthetic nitrogen, which is cheap, difficult to detect — and banned from organic farms.

Since then, the organic industry and state officials have taken several steps to catch violators in California, which produces nearly 60 percent of the U.S. harvest of organic fruits, nuts and vegetables.

California Certified Organic Farmers, the state’s top organic certifier, last week mandated inspections of fertilizer makers that sell to its clients. Meanwhile, Earthbound Farm, the nation’s largest producer of organic greens, is stepping up a new testing program for the chemicals its farmers use. In addition, state fertilizer inspectors may get additional auditing powers …

… work remains to improve a patchwork regulatory system that presumes manufacturers tell the truth about their products…

“Trust is fine until there’s money on the table,” said Dennis Macura, who runs the Morgan Hill-based fertilizer company AgroThrive.

No charges have been filed in the most recent case, but Kern County records dating back to 2005 show Port Organic has stocked thousands of gallons of aqua ammonia, a common source of synthetic nitrogen.

The company’s fertilizers were ostensibly made from ground-up fish carcasses. But documents obtained by The Bee show that California Department of Food and Agriculture officials suspected the company of using synthetic nitrogen back in October 2007.

Port Organic’s president, Ken Nelson, did not return calls from The Bee. On Friday, California Certified Organic Farmers ordered its clients to stop using Port Organic’s products.

“We are shocked at the lack of integrity of this manufacturer … and we are doing our best to restore trust in the organic system,” said Claudia Reid, the group’s policy director. …

The incentive to make a fake organic fertilizer is clear, since synthetic nitrogen is as much as 20 times cheaper than approved nutrient sources such as ground-up fish and chicken feathers. Synthetic nitrogen often works better than organic products and it also is difficult to detect using standard laboratory analyses.

Port Organic is the latest in a series of fertilizer makers to be accused of passing off chemical fertilizers as organic.

California Liquid Fertilizer held as much as a third of the state market in 2006 before state regulators quietly pulled the Salinas-area company’s leading product, which had been used by Earthbound Farm and other industry leaders. Another company pulled its fertilizer from the organic market in November 2007 amid a state investigation.

As part of efforts to crack down on unscrupulous fertilizer makers, Earthbound Farm and others are experimenting with more-sophisticated analyses that help reveal whether nitrogen in a fertilizer came from a natural source. …

It is hard to know what to make of all this. Is it really possible that executives at California Certified Organic Farmers are “shocked” that a vendor would attempt to enhance his profits by misrepresenting his product?

If so, then there must be many more examples among various organic inputs. As Ronald Reagan said: “Trust, but verify.” CCOF needs to have an audit procedure for all organic inputs.

Of course, one other question is why we would think this is solely a California problem. Perhaps as part of its activities the USDA needs to insist that all inputs not only be organic but be certified to be organic.

It is good to see that Earthbound Farms is stepping up testing and experimenting with new techniques to identify non-organic fertilizers. However one suspects that smaller organic producers would have a lot of trouble with this regimen; they need a certification that they can rely on, not a procedure they can do themselves.

David’s letter is raising another, broader, point. We already discussed that CCOF perceives itself not as a consumer protection group but rather as an advocate for organic farming. So it has avoided recalls and reclassifying land as transitional rather than organic because causing losses, even though the action was inadvertent, would raise the risk of investing in organic agriculture.

On the other hand, we raised the possibility that a failure to enforce standards would diminish the credibility of organic certification, a concern Claudia Reid, group policy director for CCOF, echoes when she says in the article above that “…we are doing our best to restore trust in the organic system,”

David Sasuga raises the ante still further. He argues that a lack of credibility for organic certification will reflect in less consumer confidence in all fresh produce. In other words, if the perception is that the industry fools around with standards and enforcement to enhance its profitability on organic matters, perhaps the industry would do the same for sustainability or food safety.

It is a fair assessment, even if unproven. It is hard to imagine that falling short on consumer expectations of any sort is going to help organics or the broader produce industry.

Many thanks to David Sasuga and Fresh Origins for helping to keep this issue top-of-mind.




Perishable Thoughts — The Secret To Success

Business is tough for many… indeed many individuals have it tough right now. There is a tendency to think that what one needs is a brilliant idea to burst through the malaise and come out a winner on the other end. Then one thinks about Thomas Edison and his famous quote regarding the nature of genius:

“Genius is one percent inspiration ninety-nine percent perspiration.”

— By Thomas A. Edison
First alluded to in “Ladies Home Journal” 1898
First published in “Idaho Daily Statesman” 1901

We asked Pundit aide-de-camp James Elmer to investigate the derivation of this thought:

In the January-June 1898 “American Monthly Review of Reviews” magazine, they cite the April 1898 issue of “Ladies Home Journal” in which they published an article titled: “The Anecdotal Side of Edison,” a group of short stories and photographs of Edison and his family:

“Once, when asked to give his definition of genius, Mr. Edison replied: ‘Two per cent is genius and 98 per cent is hard work.’ At another time, when the argument that genius was inspiration was brought before him he said: ‘Bah! Genius is not inspired. Inspiration is perspiration.’”

On May 5th, 1898 the “North Adams Transcript”published this quote: (PDF Attached)

“When approached on the subject of genius being inspiration, he answered: “’Bah! Inspiration is perspiration.’”

The Delphos (Ohio) Daily Herald, May 18th, 1898, quotes Edison as earlier saying:

“Ninety eight per cent of genius is hard work. As for genius being inspired, inspiration is in most cases another word for perspiration.”

In the “Idaho Daily Statesman,” on May 6, 1901, they published an article on genius, not dealing particularly with Edison, but still attributing to him this quote:(PDF Attached)

“Genius,” says Edison “is 1 per cent inspiration and 99 per cent perspiration.”

In 1908, Francis Arthur Jones published his biography of Edison: “Thomas Alva Edison: Sixty Years of an Inventor’s Life,” in which Edison is quoted as saying:

“Genius is two per cent inspiration and ninety-eight per cent perspiration.”

The Washington Post published on, May 10, 1915, an article titled “Genius And Work.”(PDF Attached)

On May 5th, 1898 the “North Adams Transcript”published this quote: (PDF Attached)

“When approached on the subject of genius being inspiration, he answered: “’Bah! Inspiration is perspiration.’”

The Delphos (Ohio) Daily Herald, May 18th, 1898, quotes Edison as earlier saying:

“Ninety eight per cent of genius is hard work. As for genius being inspired, inspiration is in most cases another word for perspiration.”

In the “Idaho Daily Statesman,” on May 6, 1901, they published an article on genius, not dealing particularly with Edison, but still attributing to him this quote:(PDF Attached)

“Genius,” says Edison “is 1 per cent inspiration and 99 per cent perspiration.”

In 1908, Francis Arthur Jones published his biography of Edison: “Thomas Alva Edison: Sixty Years of an Inventor’s Life,” in which Edison is quoted as saying:

“Genius is two per cent inspiration and ninety-eight per cent perspiration.”

The Washington Post published on, May 10, 1915, an article titled “Genius And Work.”(PDF Attached)

“A recent meeting to do honor to Thomas A. Edison has recalled an observation attributed to him that ‘genius is 1 per cent inspiration and 99 per cent perspiration.”

Statement during a press conference in 1929, as quoted in “Uncommon Friends: Life with Thomas Edison, Henry Ford, Harvey Firestone, Alexis Carrel & Charles Lindbergh” (1987) by James D. Newton, Pg. 24:

“None of my inventions came by accident. I see a worthwhile need to be met and I make trial after trial until it comes. What it boils down to is one per cent inspiration and ninety-nine per cent perspiration.”

While the percentages changed slightly over the course of its early history, this quote is a Thomas Alva Edison original, through and through. It represented a core principle that Edison believed which was that success was the product of hard work, and not innate genius. It could certainly be argued that Edison did actually possess an intelligence greater than that of a common man, and it was probably this intelligence, coupled with his tenacious work ethic, that resulted in his magnificent inventions.

It was a quote that took some time to mature into a palatable witticism, but it was mainly in circulation only about 3 years. He also never shied away from using many versions of this quotation over a period of almost 40 years.

I am a bit surprised at the information I was able to find that refutes and calls into question several of the common sources given as the genesis of this quotation. Several respected quote anthologies cite these following sources as its origination point, but several more scholars, including myself, have uncovered the older published references that you’ve seen above. (I discovered 1901’s “Idaho Daily Statesman” instance)

Bartlett’s has the quote attributed to “Life” [1932] chapter 24. The book was originally published under the title: “Thomas Alva Edison: Sixty Years of an Inventor’s Life”, in 1907-8. In 1931, not 1932, the book was published in a revised edition titled: “The Life Story of Thomas Alva Edison” see here and here. This, I believe, is where Bartlett’s has attributed the source of this quote.

“The Life Story of Thomas Alva Edison”
By Francis Arthur Jones
Grosset & Dunlap (Incorrect as 1932, actually 1931)

Harper’s Magazine (Google Books snippet)
Remark to author M.A. Rosanoff, “Edison in his Laboratory”
Sept. 1932
Pg. 40

The quote can be viewed here:

Thomas Alva Edison: Sixty Years of an Inventor’s Life
(Google Books, download the entire volume here)
By Francis Arthur Jones
Published by T. Y. Crowell & co., 1908
362 pages, Pg. 347

Uncommon Friends: Life with Thomas Edison, Henry Ford, Harvey Firestone, Alexis Carrel & Charles Lindbergh (Google Books)
by James D. Newton
Houghton Mifflin Harcourt, 1987
Pg. 24

Brewer’s Famous Quotations: 5000 Quotations and the Stories Behind Them
(Google Books)
By Nigel Rees
Sterling Publishing Company, Inc., 2006
568 pages

The quote can be purchased here:


By Francis Arthur Jones
Kessinger Publishing LLC, 2003
432 pages, Pg. 347

Uncommon Friends: Life with Thomas Edison, Henry Ford, Harvey Firestone, Alexis Carrel & Charles Lindbergh
by James D. Newton
Houghton Mifflin Harcourt, 1989
Pg. 24

We agree with James that the most interesting part of the quote is not that Edison was spouting some kind of false modesty; it was that he, in fact, was not an accidental genius and he shared that with the world.

We can leave the argument about genius to, well, geniuses, but certainly in the industry, success comes much more frequently from hard work than from brilliance.

When we were exporters, we had a relationship with a broker who bought millions of cases of a particular commodity for our family business. He had had the business for decades and did a very good job… most of the time. But most of the business was, as these things go, relatively easy, straight trailers of common varieties and sizes.

When we had something difficult — say a less common variety, a hard-to-get size or grade, a need for a special pack or a complicated and difficult delivery schedule — our supplier had become a little complacent. He was doing so much business with us he didn’t need to call around all day to find 20 cases of some hard-to-find item. It was easier to tell us it was unavailable.

But another, younger, hungrier, more aggressive broker had been soliciting our business, so we started giving him these “unavailable” items and, through a lot of hard work, he found them. It was a lot of work for very little money for some time but by doing the job for us he started to switch our loyalties and we started throwing him a few straight trailers. In time he had most of the business.

In our experience in the industry, that is the route most likely to success. Work really hard, be willing to do the jobs others don’t fancy and, in the end, you wind up getting the big volume business as well as the hard stuff.

There is a little inspiration there in the willingness to see beyond the moment. But, for the most part, it is a lot of perspiration. But it is the route to success and when you achieve it, here is a funny thing: People will never remember how long and hard you worked; they’ll just call you a genius.

****

Perishable Thoughts is a regular section of the Perishable Pundit. If you have a favorite quote that you would like to share with the industry, please send it on. You can do so right here.

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