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Perishable Pundit
P.O. Box 810425
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Fax: 561-994-1610


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a

Produce Business

Deli Business

American Food & Ag Exporter

Cheese Connoisseur



Tesco Comes Clean: “Less Loyalty
In American Market”

We really should give out a lot of hat tips because Pundit readers from around the world — from top London investment bankers to California farmers to industry members on vacation in Anguilla and at work in their wholesale and retail operations, plus industry friends in South Africa and Australia — sent us copies of this article, simultaneously stunning and predictable, from The Sunday Times of London.

These readers knew, of course, that we have been the leaders in bluntly assessing the efforts of Tesco to open its Fresh & Easy division in the US. A body of thought and critical assessment that now exceeds one hundred articles, plus presentation on the BBC in London, conference calls with investor groups and a presentation at the Citicorp Annual Retail Conference in London, as well as commentary presented in dozens of newspapers and magazines from Los Angeles to London.

Now, after two-and-a-half years, in which Tesco tried to dismiss our critique, the admission finally comes:

TESCO ADMITS: WE GOT IT WRONG IN US

By William Kay, Los Angeles

THE head of Tesco’s US operation, Fresh & Easy, has said its early market research was mistaken and it may make big changes to the stores.

“We may have assumed that certain elements of the Fresh & Easy brand would do the work for us and we would not have to go down and dirty on price. That may have been a mistake,” said Tim Mason, head of Tesco’s US business.

Ahead of Fresh & Easy’s launch in November 2007, Mason trumpeted the in-depth research that was done to identify a gap in the West Coast grocery market.

Marketing director Simon Uwins said: “We went into people’s houses, talked to them about food and food shopping. We went into their kitchens and poked around pantries.”

Unfortunately, Mason now admits, they did not poke around their garages, where they would have found huge freezer chests bulging with stockpiled meat bought on special offer.

“There’s less loyalty in the American market,” said Mason. “A Brit has to hear it a few times before you accept that people make up their minds where to go each week when they check out the special offers around the kitchen table.

“In a key moment at a focus group, one man told them that he had stopped shopping at Fresh & Easy because they no longer sent him a flier promoting the latest special offers.

“We came out of that meeting and said we had better make sure we hit everyone in the area with fliers.”

Recession has slowed expansion. There are 113 Fresh & Easy outlets, and plans to have 200 branches have been put back at least six months.

Acknowledging a problem is often the first step in solving it, so we commend Tim Mason and Tesco for coming clean. As we have since the beginning, we wish them well. The supply sector could use a vibrant and growing customer.

Unfortunately, the article gives every indication that Tesco is misdiagnosing the problem.

After initially thinking that Americans would be wowed by elements of the Fresh & Easy brand, Tesco executives now think that only getting “down and dirty on price” matters. In truth, the problem is this search by Tesco executives for the “one thing” that American consumers want.

We once wrote a piece in which we explained that Tesco’s biggest challenge was that we speak English in America. As a result, the same executives, who realize they must understand foreign cultures by deferring to their colleagues in other countries that do not speak English, think they personally know what to do and how to do it in America only because we speak the same language.

We’ll do some translation for them and save them a lot of research money by letting them in on the great secret to American retailing: It’s a big country! There is no “one thing” that Americans want.

The presentation of a uniform product assortment and merchandising offering before consumers diverse in income, ethnicity, age and other demographics is going to be a failure.

There are three known ways of dealing with this:

1. Micromarketing

This is the Wal-Mart “store of the community” concept. Same store, same brand, but customize the assortment and marketing based on the locality.

2. Multiple Banners

This is Aldi and Trader Joe’s model… it also is the model of Publix, Publix Greenwise and Publix Sabor. It is HEB and HEB Central Market. The concept or banner itself differentiates and is only built in appropriate locales for the demographic and psychographic mix the retailer is looking to attract.

3. Specialization

Whole Foods specializes in certain types of shoppers and certain types of neighborhoods. Even a Safeway Lifestyle store needs a certain type of neighborhood to make it work.

Right now, Fresh & Easy is dead in the water if it doesn’t make some drastic changes. It cannot ever be a profitable chain with its small-store count and low volume. It simply cannot defray the large costs associated with the large distribution center, the dedicated British transplant suppliers and the expensive British executive team.

So how does Fresh & Easy start to grow again? Well, we have suggested many times that Tesco should consider splitting the chain into a Trader Joe’s clone and an Aldi clone. These are the two most successful small formats in America and would both help Tesco focus its offering and provide two platforms for national expansion.

Presumably it could also intensively micro-market or shutter many stores and, in so doing, define Fresh & Easy as a more specialized concept serving certain types of consumers.

Tesco’s US consumer research shows a focus on price, partly because of the current economic environment but also because Tesco has been using coupons as its big draw. People who use coupons are a particularly price-focused group of shoppers. So its own marketing methods have made the Fresh & Easy consumer base more price-sensitive and promotion-driven than the average US consumer.

But the US is so big that any retailer who worries about the average shopper will soon have no shoppers.

The key is a specialized offering for each type of consumer.

In light of the difficulty of appealing to the diversity of American consumers, the question is: Does Tesco even want to try or will it just give up?




Produce Takes Greater Role
In Sustainability Standards

Our extensive work in sustainability included a series of pointed critiques of initial efforts to establish an ANSI standard for the industry. These critiques include pieces such as these:

Sustainability Standard Being Steamrolled — Does A Sustainable Vision Encompass Only Organics?

The Imperative For Action (Part 1)

No Standardization Without Representation (Part 2)

The Produce Industry Strikes Back (Part 3)

Pundit’s Mailbag — Organic Icon DiMatteo Weighs In On Sustainability Standard

Pundit’s Mailbag — SCS Takes Exception To Analysis of Sustainability Standard

One of the important criticisms we made of the initial attempt was that a draft standard had been submitted and changes were going to require advocacy. In effect, instead of starting from a blank sheet of paper, a rebuttable presumption had been established. This was profoundly unfair.

Much work, by many people for many months, has finally led to the rejection of that draft standard and thus given the industry an opportunity to rethink the whole process.

Although it still leaves many unacceptable conditions, this change is important. The industry was still hoodwinked into being forced to use the Leonardo Academy as a facilitator, and Leonardo still has arbitrary and subjective rules such as a requirement that 25% of the seats on the board be reserved for environmentalists, a requirement with no grounding in anything other than personal preference.

Still and all, progress has been made and the possibility of a more inclusive kind of sustainability has been created by the separate if parallel formation of a group developing methods of measurement for the produce trade similar in some respects to what we reported Keystone is doing for other parts of agriculture in our piece here.

Wanting to get an update on both sustainability tracks, we asked Pundit Investigator and Special Projects Editor Mira Slott to speak with a man whose activities intersect both projects:

Tim York
President
Markon Group
Salinas, California

Q: You’ve been recognized for your progressive role in building coalitions to drive food safety reform. How are you capitalizing on this work to help the industry confront and implement sustainability strategies?

A: Buyers are moving on sustainability practices. I’m applying my efforts in food safety to the sustainability front so we don’t make the same mistakes. I’ve learned from my food safety efforts what worked and what didn’t. My mantra around food safety has always been that practices must be specific, measurable and verifiable, and sustainability needs to take the same approach through metrics-driven guidelines.

In addition, the proliferation of [different] buyer standards is a mistake. Multiplicity adds costs back into the system and arguably doesn’t improve food safety. Growers complain buyers burden them with numerous overlapping audits — Markon included.

Q: Is your goal to create sustainability metrics in pursuit of developing a set of national standards? Do you envision replicating, at least in concept, what was done with the California Leafy Greens Metrics Standards in response to the spinach E. coli outbreak?

A: It’s important to first define the difference between metrics and standards. We’ve viewed standards as essentially required practices or performance scores… saying the grower must use drip irrigation, or pesticides at or below a certain level, for example.

Metrics is how we would measure performance without imposing a score or practice. Measuring x number of cubic feet of water per crop, or use of water with the goal of reducing water usage and benchmarking it against others’ practices. If you’re irrigating, compare irrigation techniques, or if you’re doing drip irrigation, look to others also doing drip irrigation as an opportunity to benchmark; figuring out what works and applying the same principles.

We believe measuring metrics is more helpful and instructive for the grower rather than imposing standards, rather than saying this is what you must do. Most of us don’t have expertise to say how much pesticide application is acceptable.

Q: How would a metrics system for self-improvement that is void of standards eliminate this issue of multiple-buyer standards? The leafy greens metrics were adopted by most supermarket chains in part so that suppliers would not have to get separate audits. People have agreed to accept this standard, while before everyone had their own. Some in the industry believe that instituting the California Leafy Greens Agreement preempted the possibility those standards could have become more oppressive.

A: Avoiding multiple standards means getting engaged with buyers on the front end. The California Leafy Greens Agreement, about a 60-page document, says here is how we should measure water quality, here’s how often and here’s the process to verify, i.e., with inspectors. It’s very specific, measurable and verifiable, applying a standard this way and this often to be in compliance. I don’t necessarily see this as a good comparison to what we’re trying to accomplish with sustainability.

With metrics, you certainly could have buyers like Markon say we only want lettuce if you use this number of pounds of potash on a crop. Certainly, this doesn’t preclude buyers from setting different standards. The metrics will enable all growers to measure performance in the same way. So I don’t say measure field use this way, and someone else says measure field use another way. An analogy would be miles per gallon in automobiles; some say 35 miles per gallon are sufficient, others say 20. We’re not saying you must drive a Prius or hybrid; if you can get the same mileage in a Toyota Camry or SUV, that’s fine. You figure out as the grower the best way to design and innovative.

Q: You have become involved in two initiatives: The Stewardship Index for Specialty Crops, which is not standards-driven, and the ANSI/Leonardo Academy National Sustainable Agriculture Standard Process. Are these parallel, overlapping or conflicting? Certainly within the produce industry, Leonardo Academy’s role in an ANSI sustainability standard has been steeped in controversy. In addition, the wide-ranging inclusion of diverse industries outside of produce has also raised eyebrows.

A: Sustainability is a journey. Those involved in the ANSI process are on this journey. The Leonardo Academy-run project had been crosswise with USDA, weighted toward organic through a draft-standard development by a third-party auditor, and wide in scope. There was general agreement to throw out the draft standard. It wasn’t an open enough process.

The ANSI/Leonardo initiative is still sorting out a path forward; is it going to be metrics or standards, taking a methodical approach across many industries, forestry, bio fuels, and commodity and specialty crops? Then there’s an argument about including livestock. It’s a broad agriculture program versus the targeted Stewardship Index for Specialty Crops.

Those who signed up to be involved in the specialty crops project all did so because they believe in the metrics-driven approach, and want to agree on how they are measuring performance and what methods they can institute to become more sustainable. The metrics is not standards-driven, but rather prescriptive.

Take an environmental problem. If a company is trying to reduce runoff, it must start by defining how it is measuring inputs and outputs. We want to develop a metrics specific to specialty crops in a transparent process with involvement of major trade organizations, suppliers and buyers. Costs with third-party audits are not sustainable.

Q: What is your function in the ANSI initiative?

A: I’m one of the committee members. There are multiple task forces examining the standards mission based on a set of principles. There was industry concern about the way Leonardo Academy undertook this process and whether it met ANSI standards. For example, some disputed the efficacy of Leonardo mandating that 25 percent of the board be environmentalists.

USDA weighed in, submitting an appeal questioning the validity of Leonardo’s management and status. ANSI ruled in Leonardo Academy’s favor, citing that it has followed ANSI-accredited procedures in its administration of the process to develop a national standard for sustainable agriculture.

Q: This ruling is essentially related to procedure, not content. With controversy brewing over the fairness and potential bias, why did you choose to take part in the project?

A: We got involved in the ANSI process because we had concerns and felt it was better to participate in order to have an impact on the outcome. The appointed board is larger than it was initially, and Leonardo Academy reacted to the industry’s objections, alleviating many of the initial concerns. The ANSI/Leonardo project is still taking a methodical approach to figure out what direction it will take, whereas we have a very clear path on where we’re going.

Q: Could the Specialty Crops Metrics be integrated into an eventual ANSI sustainability standard?

A: If the ANSI/Leonardo project has a metric for specialty crops, we could inform their work. We’re no more interested in multiple standards than multiple metrics.

Q: How do you resolve conflicts with potentially opposing interests? Food safety requirements, for example, could infringe on environmental concerns. Hypothetically, the Department of Agriculture could say maintain 100 foot buffer zones, and clear out brush for rats, and then Environmental Services shows up and says your actions are destroying wildlife. This could create a convoluted dilemma for farmers.

A: You’ve heard of the law of unintended consequences. Food safety is a component of sustainability. The industry has to recognize that steps to address food safety may harm the environment. Organizations including the National Wildlife Foundation, Environmental Defense Fund, the Sierra Club, and Defenders of Wildlife have argued the need to examine food safety measures in the context of environmental consequences, rather than setting food safety requirements in isolation of holistic approaches. They warn that the industry could unnecessarily overstep in food safety at the expense of the environment.

A couple of organizations have expressed their unease about the environmental impact of food safety to the leafy greens folks and other grower groups, and that will be sorted out. Our approach two years ago with leafy greens in the aftermath of the spinach crisis was, let’s do anything we can to prevent a reoccurrence, and we made great ground in that area. Now we must be sure what we are doing is both food-safety smart and environmentally sound.

Q: And how are you going about doing that?

A: At the Center for Produce Safety (CPS), we realized we didn’t have environmental people on board when looking at research priorities. Now Eric Holst of the Environmental Defense Fund is on the CPS’s board of advisors. He was quick to point out these are complex issues that can make one’s head spin with no easy solutions. Christina Fischer of the Nature Conservancy is also participating on the board of advisors to help shed light on the issues. We are trying to open lines of communication with folks driving food safety and those protecting environmental interests. Sustainability is a vehicle that will help do it.

That’s why we were very deliberate early in this sustainability process. One lesson of food safety was to get all the stakeholders, or as many you can identify early on, to make an effort with environmental and public interests groups, technical experts, trade associations and buyers. We have big buyers, from Sysco to Wal-Mart to Markon to Bon Appetite, involved in the Stewardship Index for Specialty Crops. [Editors note: See complete list of current participants here]. We’re certainly making progress toward a broad coalition.

Q: Do you anticipate these specialty crop metrics will be targeted primarily for growers and others on the supply side?

A: The specialty crop sustainability effort tends to cover the entire supply chain, not just the grower and farm processor, but transportation providers, distributors, retailers and foodservice operators. If we’re going to ask for metrics at the farm level, retailers recognize questions are going to be raised. What is the retailer doing?

Q: Hasn’t this been a prominent question in the food safety realm, where growers have often felt they’ve taken the brunt of the responsibility for food safety reforms?

A: This is a good parallel. If the grower does everything right and the product is mishandled in processing, transportation, on the retail shelf or consumer’s kitchen, you potentially have a food safety issue. If you impose performance measurementson growers and are not doing that for yourself, it’s somewhat hypocritical, but also not getting you toward your ultimate goal of becoming more sustainable.

What do we expect of our suppliers and what is our performance measure, and do we have different measures for our own operations? And how do we evolve to meet new technologies and changing market variables? For example, right now there are no expectations on gas emissions for transportation, but maybe those are developed over time. How data gets used in the marketplace remains to be seen, and also in regulation at the state or federal level for greenhouse gases. The goal now is to demonstrate progress.

Q: Do you think sustainability is a marketing issue? Promoting the safety of your food compared to another company’s program is risky at the very least because there is no guarantee you won’t have food safety problems. Retailers on the other hand seem to have gained favor with customers by highlighting sustainability measures. Still, do most consumers even have a clear understanding of sustainability?

A: Consumers have said they expect companies to be responsible not only around workers but around the environment. Like food safety, it’s an expectation that we need to be prepared for. As a sidebar, I spoke to my son’s high school group recently and asked, what is organic? The students floundered around; one said it means there are no pesticides, another said the grower can’t use cow manure, but they couldn’t define it. My understanding is the general consumer wants you to be sustainable but doesn’t know exactly what it is.

Q: Is it even possible to get a uniform agreement on sustainability? Food safety seems more objective, less ambiguous than sustainability goals. Take the SAFE standards for Florida tomato growers. Consensus was reached in the grower community. However, the standards didn’t satisfy the Immokolee advocacy group fighting for the extra Penny a Pound for migrant workers. Can the industry come up with a sustainability standard that everyone in the supply chain agrees on as reasonable? Potentially, retailers and foodservice buyers would like a sustainability agreement too.

A: Hartman Group studies show consumers are not defining sustainability in a rigorous way. A grand goal for the Stewardship Index is to help define sustainability. Right now there is no consumer message in our strategy. It’s focused on measurable metrics for the industry. Tropicana is measuring the carbon footprint for oranges. This is a consumer approach. Pepsico is saying it is measuring carbon footprints to understand the impact on its operations. Companies have received potshots for consumer-focused sustainability campaigns that are not based on science.

Q: Aren’t there multiple aspects to a sustainable business? I understand how a retailer could look at uniform specialty crops metrics and develop standards from that data; say Whole Foods determines it will only purchase from suppliers getting a score of 800 or higher on water usage. Couldn’t there be a problem however in isolating issues in the system one criteria at a time? For instance, some crops may be harder to produce, upping the water score, yet those same crops imported from a Third World country are produced with poorer water supplies. Maybe the standard helps the environment but produces fewer yields and is less profitable, diminishing availability of food to the malnourished, or forcing the company to lay off workers and cut healthcare benefits. Isn’t environmentalism controversial?

A: This just underscores the complexities in defining sustainability and the need to develop metrics and start measuring. By accumulating years of data, we can start to define sustainable best practices. Let’s set aside defining specific levels of sustainability which are acceptable. There may be cases in the spectrum that don’t look good. Sustainability is a three-legged stool: business, environment, and people. These don’t need to be mutually exclusive. Growers are under huge cost pressure, and so are retailers and foodservice operators.

It’s good business to reduce agricultural impacts on the environment. This is not at odds with food safety. There needs to be an industrywide effort toward sustainability metrics; like what was done with the Sustainable Wine Growers Alliance [read more in the Pundit here]. This was a defensive move from the wine industry under pressure to address issues with air quality, pesticides and water use. We better start to measure, benchmark and document. This is a very good model for the produce industry to follow.

Q: What can you tell readers who want to become more proactive in insuring the produce industry comes out on top in its sustainability efforts?

A: We are learning from our mistakes in food safety with the Center for Produce Safety. That’s moving forward with $1 million in research grants. We have two years under our belt with the leafy greens issue. We’re putting environmental people on the Center for Produce Safety board, hearing the voices of these people and not just approaching food safety from the grower perspective.

Real work on sustainability is already underway, and people who want to participate can join a metrics review committee, or provide your expert knowledge in water use or pesticides. Your voice can be heard in what we measure and how we measure. The time is now, whether you’re critical or supportive. We’re still open, and invite people to participate.

We’ve been working on a metrics-driven pilot program two years now. Last year, Joe Pezzini of Ocean Mist and Steve Griffin of Misionero Vegetables began testing sustainability metrics. You can’t manage what you don’t measure. Steve Griffin invested $1 million in a pesticide residue lab, deciding to let science run this process. The company learned about efficiency and shelf life of applications. By beginning to measure in an effort to reduce pesticides, the company saved money. Gills Onions has turned waste into methane gas.

There are defensive and offensive moves. Water shortages are a huge issue. This is a big deal in California because of drought. Agriculture uses 85 percent of the water in the State. Water utilization is also an issue in Europe and in other parts of the world. The industry has to be proactive or it will get caught flat-footed.

In implementing sustainability solutions, we need to make sure we’re insulating the industry from fallout from a business standpoint. We need to stay ahead of this trend because sustainability is here to stay. If we don’t act now, we’re headed for a train wreck.

To gain additional perspective on the ANSI project, Mira touched base with Leonardo Academy to get an update…

Amanda Raster
Sustainability Standards Development Manager
Leonardo Academy

Q: Leonardo Academy has faced much upheaval since it began the ANSI sustainability standards process. Why? And what is the current status of the project?

A: The process was started by Scientific Certification Systems (SCS). They had written the draft standard and published it for comment through ANSI. We wanted the effort to go through ANSI because it is very well established for voluntary standards. No organization can own them and they are available for the public to use. We didn’t want a standard that had any ownership.

There were two options for developing standards. When we started the project in 2007, one choice was to fill out a form indicating a project was going into the Public Information Notices (PINS) form; basically announcing this project is gong to start from general principles, using no documents as a starting point, bringing stakeholders together to work from scratch.

The other option was a Draft Standard for Trial Use (DSTU); that’s how SCS chose to start this process. It is published as a DSTU. The document has an expiration of three years. In that time, people can use it and test it, they can’t certify to it but they can test it.

In the meantime, the committee formed to develop the standard is tearing it apart, refining it, determining what really needs to be in it and what doesn’t. As the standard was written, it included only certain vegetable and fiber crops and anything grown for fuel, and didn’t include dairy or livestock or aquaculture. There was a lot of controversy around the way it was formed. Both organic and conventional producers alike had issues with the draft. We were fortunate enough to form a committee, and at the first meeting agreed to set aside the SCS standard as the starting reference point, and begin from scratch.

Q: So, where does the project stand? Is the DSTU concept tossed out as well, or could that be reinstituted down the line?

A: Since then, in October, ANSI decided to eliminate the DSTU option. That means any DSTU existing out there had no standing with ANSI. All projects filed under that had to be re-filed under PINS, and from this point forward no project can be announced first as a draft standard.

The DSTU standard was not used very often. It worked out well for our committee. Now the committee has broken off into six different task forces. Tim York is on the committee; the task forces are made up of committee members and anyone else who wants to get engaged in the process.

Q: Are the committee and separate task forces operating with the goal of developing national standards?

A: We are not at the point of looking at content, but are concentrating on structural issues. Do we need a standard, what is the potential value, is there a market value for the standard, what are the sustainability principles we want to adhere to, etc. They are questioning whether performance should be standard-based or continuous improvement-based.

The latter would establish a base line of what sustainability is and setting incremental levels of achievement, increasing sustainability with each level. This strategy gives producers the choice of where they want to go. What are the rewards? Looking at feasibility and economics, will producers will be able to recoup costs?

Q: Executives in the produce industry expressed concern that the number and range of industries included was too broad. Is the focus being reevaluated?

A: The committee is also looking at the scope of the standard, and determining if it will include livestock at all. And they are going to be discussing, not in the task forces but probably in subcommittee, the role of biotechnology like GMO’s, which is a huge issue. One side is arguing that to be completely sustainable, GMO’s must be banned. The other side is saying there is no research to support negative ramifications.

The committee is also looking at different metrics, gathering tremendous data and analyzing a variety of sustainability standards. The committee has come to the conclusion that so much work has already been done in this area, but it is not cohesive.

Q: By cohesive, are you referring to the problem of multiple standards in the marketplace?

A: Now you have certain retailers creating their own standards and asking suppliers to adhere to them, so the suppliers have four different standards they have to comply to. The committee is talking about the best way to take what’s been done, assess where the gaps are and create all encompassing standards that apply to all, utilizing metrics already existing.

It would make sense that fresh produce would have different standards than cotton. Another initial concern of the draft standard was that it seemed like one-size-fits-all frameworks. Now the committee is exploring what a standard could look like, and it is completely up to the industries to customize it to fit their needs. This involves much more cooperation and engagement.

Q: It sounds like there are many issues to resolve before this could become a reality…

A: Biotechnology is one issue I eluded to, but it just hasn’t come up yet because the timing hasn’t been appropriate. At this juncture, we are looking at what we can all agree on before we move forward. The process has changed dramatically since the first meeting and creation of these task forces, which serve as places to give input and air out concerns. The dialogue is interesting to watch; e-mails are sent back and forth everyday with a spectrum of opinions, all trying to find the best solutions.

Q: Are you still requiring a certain percentage of environmentalists on the board? This was a bone of contention that the board would be set up with these arbitrary requirements swaying the balance of power.

A: Leonardo Academy’s requirement that 25 percent of the board be environmentalists has come up in appeals. But at this point at least it’s a non-issue because every environmentalist on the committee has experience in agriculture. They are not just coming in and saying save the trees; a lot of the environmental representatives are very science-oriented. The issue may very well come up again in the future but for the most part people understand the breakdown.

Q: What is the reason behind that percentage requirement?

A: Leonardo Academy works on sustainability issues by pushing environmental change through the marketplace. It’s important to recognize we are not responsible for any of the content; we just provide process support making sure procedures are followed.

Even if we have opinions, we cannot weigh in, we remain completely neutral. Our job is to assure balance and that people have the resources they need to do the work. At the same time we do develop sustainability standards. We have this environmentalist category to bring in people who can speak to sustainability issues. In our experience in developing standards, the people with the research and science are the environmentalists. The producers can discuss what works and doesn’t for their industry. The perspective is becoming more and more desired.

Q: If this is the case, why was the DSTU such a contentious document?

A: When the DSTU was accepted, it was a launch pad for industry to look at but didn’t mean that the same document was going to be issued as a national standard. The committee could tear it apart, rip it up and start over. The DSTU is just something people can look at in its written form to comment on.

DSTU does go through a process based on feedback and input, but doesn’t mean any of the content is necessarily going to be the final document. This is just a starting point of very rough draft through the vetting process. What ends up being submitted for a national standard could be completely different. And with PINS, we are starting from scratch with the goal of developing an American National Standard (ANS).

Q: Are there any important dates coming up that could influence the outcome of this project?

A: Task forces are fully functioning right now. They are all given a specific mission to get work done, and all will be meeting again in May to put forth recommendations; and then a vote on the recommendations and decisions made on how to move forward.

Q: Can interested produce industry executives still influence the direction?

A: Right now there’s an outreach task force identifying different sectors involved in the process, looking at what sectors are missing, and who else should be engaged to provide feedback and input at any point in the process. This is ongoing. Anytime in the process peoples’ feedback is wanted. Once the task force work is completed, probably in May, they’ll form subcommittees to look at actual content broken up to different categories: water conservation, irrigation, soil fertility, ecosystem management, product, packaging, farm efficiency… things like that that will have some bearing on what the final product will look like. The standards committee will ultimately be deciding, but there is the opportunity for unlimited participation. People can bring issues and concerns and any constructive knowledge to the process.

Q: What is Leonardo’s vision of what will ultimately materialize from this process in the end?

A: SCS does a lot of work in agriculture production and food safety. It had many growers come to them complaining about a proliferation of standards we have to conform to and multiple audits at unbearable cost. The idea could be an umbrella standard. Within that, there could be a separate metric for a given sector. It would be used to indicate sustainability on the farm. We haven’t decided whether it could be used to certify or not. The idea is to simplify things already out there, take the best out there and identify it.

Q: Tim York is a primary participant in the Stewardship Index for Specialty Crops and also a member on your committee. Are these two projects compatible?

A: Those involved in the formation of specialty crop metrics have told us they hope the ANSI project will be able to incorporate the specialty crop index. This is a possibility as the committee moves forward in sustainable agricultural practices and standards development.

The irony of all this is that the industry is finally gaining a little traction on this issue just in time to have many lose interest. In a time of recession, survival seems more important than sustainability. With fuel prices in a free fall, the opportunities for financial savings due to reduction in input costs have narrowed substantially.

And none of these efforts really are prepared to wrestle fully with the more controversial social aspects of sustainability.

That Tim’s heart is in the right place is certain, though we do wonder if any effort can prevent sustainability from being used as a marketing tool when the economy rebounds. If it is a marketing tool, then each retailer will have a substantial incentive to demand higher and more proprietary standards to differentiate itself.

In a sense, this is the problem with trying to create an ANSI standard on sustainability. There really is no consensus on how to value different aspects. So if one company is highly productive and so produces more food to feed the world but uses more chemicals and another company uses no chemicals but is far less productive — which is more sustainable? If one company maintains large riparian areas and leaves much land as a nature preserve, it may be environmentally friendly, but if the cost of that effort is that its profits are pressed and it cuts salaries 10% while another company tills more of its land and is more profitable and gives its employees a 5% raise — which is more sustainable?

ANSI may do a good job at getting people to agree to a common standard in engineering applications in which having a standard is more important than selecting the optimal standard. So plugs will fit in the wall or telephones from different companies can still communicate, but it is hard to see our industry coming to consensus on the kinds of questions we just listed.

It is, of course, good that efforts are being made, and we commend those involved in these efforts. We thank both Tim York of Markon and Amanda Raster of the Leonardo Academy for helping the industry to think through such an important matter.




Pundit’s Mailbag — CCOF Speaks Out
On ‘Spiked’ Organic Fertilizer

Our pieces, ‘ Spiked’ Organic Fertilizer Raises Consumer Doubts About Organic Definition, Pundit’s Mailbag — Organic Industry’s ‘Situational’ Standard and Pundit’s Mailbag — As ‘Spiked’ Organic Fertilizer Investigation Widens, Potential Grows For Weaker Consumer Confidence In All Fresh Produce, brought this response from California Certified Organic Farmers (CCOF):

Thank you for your recent coverage of the spiked organic fertilizer issue in California. Discussion is always healthy and helps keep the public fully informed. With this in mind, CCOF would like to comment on a number of the questions you ask and points you raise.

Firstly, with regard to CCOF you question:

“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?”

The answer is a simple ‘yes’. Despite recent growth, the organic sector remains a tight-knit community with the shared core belief in the benefits of organic farming and food in terms of sustainability, environmental impact and a healthy diet. When a member of this community betrays the trust of the rest of the community, we are “shocked”. It’s not the organic way. One might assume that, in any industry, bad players can be expected to enter the market when growth and profit opportunities present themselves, but this does not diminish the shock and dismay felt when it happens.

Secondly, we would like to refute the assertion that CCOF is not a consumer group. CCOF does not perceive itself as a producer group, advocating only for the organic farmer. CCOF’s mission is to certify, educate, advocate and promote organic both for the producer and consumer. We interpret this mission broadly. Our advocacy efforts are based on protecting the integrity of organic for both producers and consumers alike. Similarly, our outreach activities are as much about consumer education as they are about educating producers.

While we certify over 2,000 organic operations, we also have over 350 supporting members who include students, individuals and families who have joined CCOF in support of our mission and who believe in the important work we do to protect the integrity of organic and educate consumers on the benefits of eating organic. An overview of our current activities on the liquid fertilizer issue can be viewed at www.ccof.org/atwork.php

Thirdly, we would like to clarify why CCOF took the decision to avoid recalls and the reclassification of land as transitional. CCOF is accredited by the USDA to certify organic, and ultimately report to the USDA. To suggest we made the decision based on fear of raising the risk of investing in organic agriculture shows a lack of understanding of organic farming practices. Organic agriculture is readily accepted as being a riskier business due to the very fact that organic producers work with nature and find ways to let nature to do its job more of the time rather than using the methods of conventional farming.

CCOF made a balanced decision based, firstly, on not penalizing the initial victim, in this case, the farmers who inadvertently used the fertilizers in question, and secondly, on not punishing the consumer. Organic farmers are the victims of the recent suspected fraudulent activities of two organic liquid fertilizer companies. CCOF did not believe it was in the interest of either the farmers and producers or the consumer to penalize the victim. Returning land to a transitional status would have resulted in the consumer becoming the victim too. You correctly state:

“…consumers want to eat not just organic today but that they want to see the range and availability of organics increase.” (Pundit Mailbag, February 6)

A reduction in the land in organic production would have led to a decreased supply and increased prices, neither of which is in the consumer interest. We believe that if you ask the organic consumer if they would want organic farmers, who had been the victims of fraud, to be put out of business, many would answer no. As you correctly surmise, “consumers would rather cut producers some slack under difficult situations”. (Pundit Mailbag, February 6)

We would also like to question your view of the organic consumer and the assumptions you make. You state:

“Our take is that when organic was a small community, it was reasonable to think that consumers deeply committed to organic would have thought it important to encourage the growth of the organic industry. Today, however, the typical organic consumer is some mom at Wal-Mart buying organic baby food or milk, and the mom has no connection to the “organic community.” (Pundit Mailbag, February 6)

The above reflects an elitist standpoint. Since when should eating organic only be the preserve of the few who can afford to pay higher prices? Why should the benefits of eating a healthier organic diet not be available to the mass market? Also, it is wrong to assume consumers are not well informed or connected to the organic community. Numerous magazine articles on the benefits of eating organic have resulted in an informed, well-educated organic consumer, including those who shop in supermarkets.

We would also like to counter your statement “….people are just being tricked because organic standards are too situational.” (Pundit Mailbag, February 6)

There has been no attempt to trick the consumer. Quite the opposite, the excellent work done by the media and journalists like yourself has meant that the consumer has been kept informed of what is happening and able to make their choices accordingly.

And last, but by no means least, we would also like to address the statement made by David Sasuga in his letter to the Pundit’s Mailbag:

“…the organic leadership and organic certifiers are not willing to do the right thing…” (Pundit Mailbag, February 19)

And to pick-up on your statement:

“CCOF needs to have an audit procedure for all organic inputs”

Over the past month, CCOF has implemented a number of steps to introduce increased regulation and oversight of the organic liquid fertilizer input industry. CCOF recently introduced a new organic liquid fertilizer policy,
(http://www.ccof.org/
Certification_Updates_Resources.php#liquidfert
), mandating inspection of fertilizer makers that sell to our organic producers.

You correctly comment:

“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 they can rely on, not a procedure they can do themselves.”

This is why CCOF also launched a fertilizer sampling initiative, (http://www.ccof.org/
Certification_Updates_Resources.php#fertsampling
), the results of which will be made available to all our growers large and small.

Similarly you say, “Perhaps the USDA needs to insist that all inputs not only be organic but be certified to be organic.” CCOF supports increased regulation of the organic input industry by the USDA and here in California by the California Department of Agriculture (CDFA). CCOF applauds the new notice from the National Organic Program (NOP), (http://www.ccof.org/pdf/Cert_News_Resources/
NOP_LiquidFertPolicy_2.20.2009.pdf
), which reflects the policy recently implemented by CCOF.

In conclusion, CCOF and others in the organic sector are fully aware that we depend on consumer confidence in organic and consumer trust in the USDA organic seal. In light of recent events, the organic sector has taken swift and decisive action to improve and enhance regulation of the organic liquid fertilizer industry to ensure that organic standards are not compromised in the future. We have taken immediate action to reassure consumers that they can continue to rely on organic certification, accredited certification agencies such as CCOF and can trust the USDA organic seal.

— Jane Baker
Director of Sales and Marketing
CCOF
Santa Cruz, California

We certainly thank Ms. Baker and California Certified Organic Farmers for reading and for taking the time to keep the industry informed. Ms. Baker raises several key points:

1) We accept at face value the assertion that executives at CCOF were shocked at the notion that a vendor would cheat to enhance its profits. What can we say, except for the future we are reminded of the old adage: “Fool me once shame on you, fool me twice shame on me.”

Whatever expectations are in one’s heart, clearly the policy that should be followed should not rely on blind trust. Hopefully Ms. Baker and her fellow executives at CCOF will develop systems that presume there are bad apples in every bushel.

We suspect this has always been a problem but, clearly, as organic grows, it is safe to assume that many growers, retailers and vendors will get involved in organic not for love, but for money.

2) It is always interesting to see how people perceive themselves, but despite Ms. Baker’s fervent desire to “refute the… assertion that CCOF is not a consumer group,” clearly CCOF is not a consumer group. The Chairman of the Board works for Earthbound Farms, the Vice Chair works for Bolthouse, the board Secretary works for Alexandre Ecodairy Farms; there are five other directors on the board right now and all of them work for organic producers.

So the board is 100% made up of producers. That means it is a trade association.

Now this does not mean that the board members of CCOF don’t care about consumers; we assume they do. But the decisions are made by the trade and, inevitably, in the interests of the trade. To claim otherwise is disingenuous.

3) Sometimes the explanation of an act turns into a de facto confession. We have not the slightest doubt that CCOF made, as Ms. Baker points out, a “balanced decision” in deciding not to demand recalls and not to decertify land after the non-organic fertilizer was added to the land.

The question… the essence of the dispute… is whether a “balanced decision” should, in fact, be made at all, or if this is a case that requires an absolute decision.

We go back to the original analogy we made, which looked at how a kosher-certifying authority would view such a matter:

The other issue raised by this piece is the question of whether organic certification is not too protective of the industry and too dismissive of consumers.

We can agree with not “penalizing” growers who didn’t know they were being sold a synthetic chemical. In other words, they shouldn’t be fined or go to jail. On the other hand, if organic is to have meaning, consumers have to be able to rely on the certification to consistently mean something.

It is not really a question of evil intent or not; it is a question of consumer protection. If a kosher hot dog manufacturer in good faith orders kosher beef but a vendor delivers pork and it is put into hot dogs and shipped, that hot dog manufacturer has to recall the hot dogs as they are falsely labeled and then the entire plant has to be made kosher again through a process involving both cleaning and rabbinic authorization.

This is not to punish the hot dog manufacturer but to protect consumers who wish to pay for kosher food.

Why would organic consumers merit any lesser protection?

Put another way, a kosher-certifying authority is not permitted to make a “balanced decision.” It is not permitted to consider the long term interests of consumers in cheaper kosher food or more available kosher food.

Its purpose is to certify if the food in question is kosher or not.

CCOF seems to be arguing that when consumers see the USDA Certified Organic logo, they are looking to support organic agriculture — as opposed to gaining an assurance that they are consuming organic food. We think this is an argument that is very hard to sustain.

4) An “elitist standpoint” — us? — sacre bleu! Actually we in no way said or implied that eating organic should be the preserve of any demographic group. Nor did we “assume” anything about consumers and their knowledge of things organic. What we did say, and stand by, is that the organic consumer is changing. When people used to go out of their way to a special store to buy organic, you got a much more committed consumer. Perhaps in those days it was logical to assume that these consumers felt a special desire to help build the organic movement. Today, a mother who confronts two brands of baby food in a store and elects the organic baby food is willing to pay a premium to get her baby organic food. She may or may not want to support organic agriculture, but she definitely wants organic baby food.

If as an industry we knowingly allow her to buy baby food that does not meet organic criteria, aren’t we defrauding her?

5) We are pleased that CCOF is taking steps to improve oversight of the organic liquid fertilizer industry. We think, in general, that all inputs need to be third-party verified as to their suitability for use in organic production. We doubt that the liquid-fertilizer producers are uniquely malicious, so we suspect there are many other input problems all across the country.

**

We suspect that as the organic industry grows, there will be a separation between those who promote organic agriculture and those who certify product as organic. There is a conflict of interest between these two functions. Interestingly enough, this is why food safety advocates do not approve of the USDA being responsible for food safety in any sector. They feel this regulatory role conflicts with USDA’s role as a promoter of American agriculture.

We thank Jane Baker and the CCOF for sharing their views. Only through such dialog can the industry grow and prosper.




Perishable Thoughts — Tesco’s Missed Mark: American Consumer Complexity

As we reflected on Tesco’s recent admission that it had profoundly misunderstood the American consumer, we thought about the difficulty that a foreigner has in doing business in another country.

Though the difficulty is multiplied if the challenge is working with consumers, that is not the only challenge. For example, we ran a piece pointing out that Tesco had elected to alienate many suppliers when it broke the produce trade’s cultural pattern by refusing to join trade associations, such as the Fresh Produce & Floral Council in California or PMA and United Fresh nationally.

What is interesting about this type of decision is that, doubtless, if Tesco is opening a store in China and is advised that it must practice Feng Shui in the location of its windows and doors, it would instantly indulge local practice. If in Thailand it was told it must have a Buddhist Monk give a blessing over a store before it opens, the Monks would be brought in. The British, confronted by cultures so alien as to be virtually beyond understanding, would rush to accommodate.

In America, a land with filial ties to the mother country expressed in our shared language, the British think they understand. That is what we were talking about when we said that the biggest problem Tesco executives were having in America was the fact that both nations speak English.

In the case of Tesco, this natural and problematic tendency to think that people who share the same language are really just like ourselves was compounded by an even worse problem — an unparalleled track record of success both in the UK and overseas. So Tesco went under the premise that if Americans don’t eat ready meals or watercress salad, it must be because nobody sells any good ones.

Until very recently, we found in our dealings in the UK that most in the industry — even people who hoped Tesco would fail — found it impossible to believe they would not succeed. All through the process, as we wrote article after article, we were warned by British suppliers and competitors that Tesco would succeed brilliantly… that even if it looked bad, Tesco would turn around one day and would stand triumphant.

The Tesco team had internalized this sense of infallibility and it showed. A very top executive at a very large vendor sent us this note when some had challenged us about the degree of attention we were paying to Tesco:

I think one reason everyone is so interested in Tesco’s adventures is because of the way they treated the potential US suppliers and the market place.

When suppliers were interviewed, there was a level of arrogance and bullying that most of us hadn’t seen since we were on the playground in grammar school.

Most people don’t want to see that type of treatment rewarded with success.

Tesco is going to spend a lot of money to find out the fresh industry may not be the most sophisticated bunch, but we do know a little bit about how our industry works.

Perhaps this alienation from the trade would have been worth it if it was necessary to create a new paradigm of service to American consumers.

Yet the Fresh & Easy concept has not been embraced by consumers, and the new strategy — “down & dirty on price” — hardly requires any innovations in retailing.

The truth is there is something a little comical about this image of British executives poking around people’s refrigerators trying to “study Americans” much like Jane Goodall studying apes in Africa. Now they acknowledge missing storage freezers in basements and garages, but the truth is that they have missed so much more.

This is why people hire locals, because you can’t internalize a culture in a month or two of observation.

It was this thought that brought us to today’s Perishable Thought, a brief snipet from a much longer work.

See, the real problem is not that the Tesco executives were incomplete in their research. It is that the research should start the day one is born. In that sense, the problem is that the British schoolchildren don’t read much Walt Whitman, known as America’s “poet of democracy” for his ability to write in a manner reflective of the country.

If Tesco had hired Americans to head up the US division, even Americans who have never read a word of Whitman would have been so conditioned by Whitman’s influence on the culture as to realize instinctively that Tesco’s search to define what American’s want is bound to be in vain. For they would hear deep in their subconscious Whitman’s famous lines in Song of Myself:

Do I contradict myself?
Very well then I contradict myself,
(I am large, I contain multitudes.)

Excerpted from Song of Myself, which was originally published as part of the larger Leaves of Grass

Purchase an edition here.

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It is not solely that America is large, nor that it is diverse, though it is both. To a degree not fully appreciated in Britain, America is a Schumpterian society — abubble with creative destruction. Indeed it is wise to see the current financial crisis as a test not of our Democrat or Republican inclinations but, rather, as a test of whether Americans will still accept the pain of creative destruction.

As long as we do, the Tesco executives peering through the pantry were seeking Americans who will never exist. The moment a fix is put upon an American, that model is — poof — into dust and a new American is created.

One of the few constants is that nobody will feel an obligation to apologize to our British visitors for failing to stay still long enough to give them a fix on the market.

****

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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