Our long-running coverage of Tesco’s journey to America has attracted much controversy, particularly, our estimate that sales levels for the Fresh & Easy stores, after their grand opening period, are running at roughly $50,000 a week — although we did expect that they will rise from that level.
This week in London, an analyst with Piper Jaffray came out with a report that grabbed much attention:
Tesco US foray is struggling, claims broker
TESCO’s plans to make it big in America were called into doubt today when a major US stockbroking house claimed the Fresh & Easy stores are struggling.
In the first in-depth research into Tesco’s assault on the US market, Piper Jaffray said sales are far short of target and the stores need an urgent overhaul. Tesco opened Fresh & Easy in a blaze of publicity in November, after years of research.
But Piper’s Mike Dennis warned: ‘The Fresh & Easy concept is not right and they need to quickly find out what the issues are and reset the concept.’
Dennis said it could cost Tesco £400 million to exit the US — a dramatic move the supermarket insists it is not contemplating. Dennis claims the 50 Fresh & Easy stores opened so far are averaging sales of only $170,000 (£86,500) a week. He thinks Tesco was aiming for closer to $200,000 initially, rising to $270,000 later.
‘The overall indication seems to be negative,’ he said. ‘This begs the questions of how bad it could be for Tesco’s Fresh & Easy stores across California, Arizona, Nevada and what it would mean to Tesco’s long-term growth rates and international strategy in the US.’
City analysts seem aware Tesco may be having teething problems. One said he had already begun referring to Fresh & Easy as ‘Ambient and Quite Difficult’. Tim Mason, who moved to the US with his family to run Fresh & Easy, recently sold £1.3 million of Tesco shares.
Said Dennis: ‘Maybe he knows what the impact of a poor US sales performance could do to Tesco’s shares in 2008, but any official explanation is probably not going to give clarity.’
A Tesco spokesman said of the Piper Jaffray note: ‘This appears to be a bit of scaremongering particularly as Mike Dennis hasn’t even spoken to us about Fresh & Easy’s performance.
‘It is ridiculous to make judgments just four months after the first store opened. I don’t know when Mike last visited California but the up-to-date picture is one of growing sales, increasing customer numbers and more repeat visits.’ London-based Dennis is in fact in America at the moment. Marks & Spencer, Dixons, Next and Sainsbury’s have all seen attempts to grow business in the US collapse in recent years.
The report by Piper’s Mike Dennis is quite intriguing, but not for reasons the press highlighted. The $170,000 per week sales number is not an actual estimate by Piper Jaffray. It is better described as an assumption used to run through Piper’s analytic models and estimate the impact on the profitability of the Fresh & Easy format.
The report is ambiguous on the point. Although in its Key Points Summary, the report does say, “We believe the 50 stores opened to-date could be averaging sales of $170k per week,” the word “could” is unclear. If you go to the text of the report, it says things such as “…if the overall sales run-rate per week is closer to $170k…” At no point in the report do you see a line saying Piper Jaffray or Mike Dennis estimate Fresh & Easy sales at $170,000 per week per store.
We think Tesco executives would be doing a jig on the rooftop (would that hurt the solar voltaic cells?) of the California distribution center if they were doing $170,000 a week per store. Since that number is so dramatically different from what we have estimated as well as what independent analysts have found as we discussed in Pundit Analysis Buttressed: Tesco’s Fresh & Easy Sales Only 25% Of Plan, Says Willard Bishop Report, we wanted to find out more. So we sent Pundit Investigator and Special Projects Editor Mira Slott to try to explain the discrepancy.
Mike Dennis was quite graceful and shared his methodology:
“We based our $170k sales on the fact that Tesco aimed for $200k and only anticipated a variance of +10 to -10, so we used -15 to see how that impacted margins and returns.”
In other words, being that the feedback is now pretty substantial that Fresh & Easy is underperforming expectations, and being that Tesco expected first-year sales of $200,000 per week, per store, what Mike actually did was say that since Tesco, in its planning, figured on a 10% variation either up or down, Mike looked at what the numbers would be like if Fresh & Easy underperforms by, say, 15% — which would be outside of Tesco’s expectations. Here is how Mike Dennis explains his intent:
Now we want to discuss what a 15% drop in average weekly store sales from $200k to $170k means in terms of store operational performance, flexing costs and ultimately CROI.
One reason the report is so intriguing is that it shows that even a relatively small deviation from plan can have devastating financial consequences. This 15% underperformance on sales translates into a dramatic change. Piper estimates that with an initial sales base of $200,000 per store per week, in Year 5 of the project EBIT margins — Earnings Before Interest and Taxes — will be 6.5%.
Yet a drop in first-year volume by 15% cascades into future years, reducing Year 5 EBIT margins to only 3.7%.
And CROI — Cash Return On Investment (earnings before interest, tax, depreciation and amortization, expressed as a percentage of net invested capital) — would collapse. At an initial $200,000 per week, per store, Piper sees a CROI in Year 4 of about 15%, but adjust the initial years sales level to $170,000 a week per store and Year 4 CROI drops to about 10.5%.
It is a fascinating report, not because it contains any real estimates of how Fresh & Easy is doing, but because it provides a model to assess the implication of that performance on Fresh & Easy and, ultimately, the Tesco share price.
Piper didn’t run its model with sales estimates at around $50,000 a week, per store, but it is fair to say that the analysis would show red ink as far as the eye can see.
Tesco keeps insisting its expansion is on track. Yet Tesco could put the whole controversy to rest in two minutes by revealing sales numbers, as Tesco did for its UK stores in the UK, but Tesco refuses to do so.
Tesco’s Fresh & Easy has been expanding rapidly in Southern California, Nevada and Arizona. Now comes official confirmation of what everybody has known: That Tesco is moving into Sacramento:
FRESH & EASY ANNOUNCES
19 SITES IN SACRAMENTO REGION
Capital City Stores Will Begin Opening in 2009
Fresh & Easy Neighborhood Market CEO Tim Mason was joined today by Sacramento Mayor Heather Fargo and Councilmember Ray Tretheway in announcing plans to bring fresh, wholesome food at affordable prices to the Sacramento region.
Nineteen store locations were announced outside a future Fresh & Easy Neighborhood Market at Northgate Blvd and San Juan Blvd in Sacramento. Other locations revealed during today’s announcement include sites in south Sacramento, Oak Park, Citrus Heights, Elk Grove, Folsom, Rancho Cordova, Rocklin and Vacaville.
“The Sacramento region is a great fit for us — it is vibrant, fast-growing and widely known as having one of the most diverse populations in the U.S.,” said Mason. “We’re looking forward to bringing fresh, wholesome food at affordable prices to all types of neighborhoods throughout the Sacramento area.”
Mason also commented on the company’s entry into the Western U.S., “We have been very encouraged by the response to our stores thus far. Every single week brings more good news as sales, customer numbers and repeat visits are all growing.”
Fresh & Easy currently has 55 grocery markets open throughout Southern California and in Nevada and Arizona. The company is a subsidiary of U.K.-based Tesco, one of the world’s largest international retailers, which has invested $2 billion over five years in Fresh & Easy.
The Sacramento locations are as follows:
Fresh & Easy Neighborhood Market
Sacramento Area Locations*
- Auburn & Coachman — Citrus Heights
- lkhorn & Andrea — Citrus Heights
- Bruceville & Elk Grove — Elk Grove
- Elk Grove Florin & Calvine — Elk Grove
- Kenneth & Madison — Fair Oaks
- Greenback & Madison — Folsom
- Twin Cities & Carillon — Galt
- Lincoln & Sterling — Lincoln
- Sunrise & Coloma — Rancho Cordova
- Stanford Ranch & Sunset — Rocklin
- Bradshaw & Old Placerville — Sacramento
- Broadway & 34th — Sacramento
- Del Paso & Commerce — Sacramento
- Franklin & Mack — Sacramento
- Meadowview & Freeport — Sacramento
- Northgate & San Juan — SacramentoWatt & El Camino — Sacramento
- Alamo & Marshall — Vacaville
- Elmira & Nut Tree — Vacaville
- Pending Final Negotiations
You can see a map of the locations here.
The key missing ingredient is the disposition of the much discussed distribution center in Stockton. Since our estimate is that volume in the existing stores has been so much under estimate, there is plenty of spare capacity and perhaps Tesco is not rushing to expend that capital.
But then again, it might.
One of the more interesting facets of watching the Fresh & Easy rollout is considering how compensation agreements can affect behavior. There have been plenty of stories with headlines such as Tesco brass in windfall if venture a success.
And, in fact, it appears as if the CEO of Tesco, Sir Terry Leahy, could receive about $22 million in stock and the CEO of Fresh & Easy, Tim Mason, could receive about $18 million in stock if the Fresh & Easy venture is a success.
Now we begrudge these gentlemen nothing and, in fact, a vibrant, growing and profitable Fresh & Easy division would be transformational for Tesco. It could easily be worth that price and more. Just the diversification of revenue and profit for Tesco into North America would probably increase its multiple on the stock market — resulting in billions in value.
Yet, it is also possible that the compensation agreements could distort people’s perceptions and lead to unwise decisions.
We’ve reported pretty extensively that we believe Fresh & Easy is having some real problems.
That doesn’t mean it is a lost cause. But it might mean that it would be wise to stop expanding and focus on getting the concept right or changing the concept.
It is difficult to know precisely what is required by the compensation agreements through the public filings, but it seems to require earning a minimum return on the total investment. But what if, right now, Tim Mason already knows that the money Tesco has invested is all lost but $50 million dollars worth of liquidation value, but freezing the expansion will enable him to make the chain marginally profitable and that he could eke out a very satisfactory return on that $50 million.
A prudent businessperson would have to assess that strategy against continuing to invest billions in an expansion in America.
Yet, the financial incentive that has been structured for both Tim Mason and Sir Terry Leahy seems not to be flexible enough to allow for this type of decision-making.
In fact the incentive is all the opposite: swing for the fences, blow a couple of billion and hope to hit it big.
It is tempting to offer a big incentive in business to achieve what you want to achieve — in this case a large and successful US business. It is dangerous, though, if things are not going well.
Tesco may want to reassess whether its incentive program doesn’t need to be adjusted in light of the present circumstances, and all of us need to keep in mind the hazards of putting people in a position where their interests may no longer align with the shareholders.
It seems like just yesterday we were writing the news but, come March 1, 2008, it will be one year since Bruce Peterson left Wal-Mart. We’ve kept the industry up to date on Bruce’s activities with many articles, including these:
Wal-Mart’s Bruce Peterson Resigns
Bruce Peterson Focus On Traceability
Bruce Peterson Lands At Naturipe As Its New President/CEO
Naturipe’s Peterson Builds All Star Management Team
We’ve also kept the industry up to date on changes at Wal-Mart since Bruce left, running many pieces including these:
Wal-Mart Continues To Change Its Buying Practices described how Wal-Mart executives have to think long and hard about how Opportunity Buys, Global Procurement and business assignment can be done so as to avoid creating inefficiencies. 3/1/2007
Ron McCormick Of Wal-Mart Elaborates On Its Procurement Reorganization summarized a conversation with Ron McCormick, vice president of produce for Wal-Mart, on its buying structure and the reorganization of procurement. 3/2/2007
Pundit’s Mailbag — Wal-Mart’s Market Managers provided comments from Keith Anderson of Management Ventures, Inc., on Wal-Mart’s new “Market Grocery Managers”, who are limited in the contribution they can make, and this fragmentation of authority has caused there to be less uniformity in execution. 3/9/2007
Organics One Year Later — Wal-Mart, Whole Foods & Wild Oats shared reactions from the Reuters Food Summit and a news report explaining that organic versions of products are experiencing modest sales, and food industry executives are increasingly sensing that growth may come with a different focus such as natural or local. 3/14/2007
What Is Wal-Mart’s Role In The New NRA Food Safety Standards? warned the Foodservice Leadership Council has been drafting new food safety requirements for fresh produce, which could blow up in everyone’s face. Wal-Mart doesn’t believe private groups should set standards, even though they helped to initiate them. 3/15/2007
Wal-Mart: The Name On The Door Is the Same; The Thoughts Inside Are Very Different pointed out that no one with any historical connection to Wal-Mart’s heritage exists in any major responsible position, with a quick comparison and contrast of historical core values against the new regime. 4/10/2007
Good News For Wal-Mart reported that TNS figures show that ASDA is Britain’s fastest-growing retailer and is outperforming the rest of the retail sector for the first time in three years. 4/17/2007
Tesco’s US/Japan Small-Store Strategy Contrasts With Wal-Mart’s Big-Store Plan shows similarity in the competition between the Airbus A380 and the Boeing Dreamliner as compared to Wal-Mart’s lack of urgency in responding to the Tesco invasion in the Southwest, both examples, at their core, concern differing visions of the future. 4/24/2007
Tesco’s Small Store Format Not Unnoticed At Wal-Mart asked why Wal-Mart would consider small store formats when Supercenters are still viable, plus, Wal-Mart will need thousands to make an impact. Still, the company gave a new executive the task of developing it, a former Tesco chief executive. 5/2/2007
Activists Target Wal-Mart In Mexico While Company Accommodates Local Culture scoffed at activists who enjoy the panoply of retailers and restaurants in San Francisco but seem to want to deny people in developing countries the right to make these decisions for themselves and their families. 5/9/2007
Wal-Mart’s Latest ‘Green’ Move Gives Pause To Explore Sustainability Rationale specified three categories for achieving sustainability initiatives: Those that produce positive ROI, those that produce a “reputational dividend, and those that lose money for a company’s shareholders. But really, what is all the fuss about? 5/10/2007
Tesco, Whole Foods And Wal-Mart Concepts Tested On Both Sides Of The Pond looked broadly at the ideas these retailers are exporting, and how they will play out in their new surroundings; in the end, success or failure may come down to the details. 5/15/2007
Ben Stein On Wal-Mart offers commentary on the opening of a Wal-Mart in Manhattan from actor and columnist Ben Stein. 5/16/2007
Wal-Mart’s Changing Treatment Of Suppliers explains how Wal-Mart needs its produce suppliers more than they need Wal-Mart, and unhappiness in the supply community over perceived mistreatment is fueling interest in the unproven concept that Tesco is bringing to America. 5/17/2007
Calls On Wal-Mart Point To More Vendor Negativity continued to show that Wal-Mart is losing priceless equity with the vending community and their former good name is being allowed to waste away. 5/18/2007
Clash Of Corporate Cultures Seen In Contrast Between Wal-Mart/ASDA Essentials And Tesco/Fresh & Easy examined problems with the Wal-Mart/ASDA Essentials small store concept including pricing, merchandising and store branding. 5/29/2007
‘Anyone But Wal-Mart’ expanded on our earlier pieces concerning vendor dissatisfaction with Wal-Mart. Vendors have seen the writing on the wall and are working feverishly to diversify their business away from Wal-Mart. 5/30/2007
Has Wal-Mart’s Desire To Buy Cheaper Changed Its Values? continued coverage of the procurement transformation at Wal-Mart, with detail on the slew of issues surrounding it and growing vendor dissent with the mega retailer. 6/1/2007
Wal-Mart’s ‘Opportunity Buy’ Policy Reveals Much About The Company recapped our series on procurement reorganization and vendor discontent. Points out that Wal-Mart is moving away from the integrated supply chain in favor of traditional produce industry transactional deals, which has implications for the entire trade. 6/5/2007
From The Frying Pan Into The Fire — Wal-Mart Finds Another Way To Alienate Suppliers disclosed reports from Ace PACA lawyer Larry Meuers that an outside firm has begun auditing transactions between Wal-Mart and its suppliers, with discrepancies being demanded repaid. So much for the “partnership” relationship with Wal-Mart. 6/7/2007
Pundit’s Mailbag — In Defense Of Wal-Mart excerpts a letter from Ken Kodish, AYCO FARMS, who suggests that unscrupulous vendors who gorged themselves at the expense of Wal-Mart prompted recent changes to the procurement system and audits of supplier transactions, It seems more plausible that the combined efforts of everyone to serve the consumer has allowed for the creation of so much wealth. 6/8/2007
Pundit’s Mailbag — Are Supermarket Chains Catching Up to Wal-Mart? revealed an immensely important point from Keith Anderson, MVI (Management Ventures, Inc.) that Wal-Mart, it is projected, will for the first time since supercenters started rolling across America, grow more slowly than the average U.S. retail chain. 6/13/2007
A Solution For Wal-Mart’s Organic Woes dealt with the impossibility for Wal-Mart to procure enough organic fresh produce to fulfill the hype. However, Wal-Mart could take the lead in selling organics while positioning itself as both a friend of the farmer and one really helping to move society on environmental issues. 6/14/2007
Working With Wal-Mart May Not Be As Bad As You Think — Tesco Could Be Tougher! examined how U.S. vendors may be excited about Tesco’s arrival in America, enabling them to diversify their business away from Wal-Mart, but the grass may not be greener once a Tescopoly takes hold. 6/15/2007
Wal-Mart In India Faces Tremendous Obstacles extolled that involvement in a market the size of India’s is almost irresistible, but protesters, political activists, trade federations and merchants are binding together to fight new competitors. 6/19/2007
How Wal-Mart Lost A Customer related an anecdote from an unsatisfied Wal-Mart customer who lost a day of work, his keys and his patience with the mega retailer. 6/19/2007
Loblaw’s Holds Off Wal-Mart With A Fresh Foods Strategy pointed out that Loblaw is the great colossus of the north. Back in 2004, the speculation was that the goal was to keep Wal-Mart from opening supercenters in Canada. It didn’t work, but it is in a better position to fight Wal-Mart than most American chains. 6/20/2007
ASDA/Wal-Mart And Tesco Price Wars Portend Future Of Having To Take Sides foretells of trouble ahead for U.S. suppliers after an ultimatum from ASDA’s business unit director: “We will only back those who back us.” 7/24/2007
Wal-Mart Eyes India For Future Growth announced Wal-Mart’s partner in India has set the opening of its first store for mid-2008, with 200 stores by 2015 and expected annual sales in 2015 of $5 billion. Challenges include irregular infrastructure, real estate, and the hope that India will relax its laws and allow Wal-Mart to buy the stores. 7/25/2007
Carrefour Judgment In India May Be A Good Sign For Wal-Mart reported news that indicates India is really changing and Wal-Mart may be correct in its judgment about the direction of Indian society. 7/26/2007
Wal-Mart’s ‘Save Money — Live Better’ Slogan Is Step In Right Direction announced Wal-Mart’s new slogan. The new one is unquestionably better; it is based on an important reality that Wal-Mart needs to emphasize that its low prices translate into better lives for tens of millions of families. 9/14/2007
Wegmans, Wal-Mart And Media Bias questioned glowing media reports on the opening of a new Wegmans in Pennsylvania, which tell us less about the quality of Wegmans than about the cultural predisposition of the media. 9/18/2007
Wal-Mart Looks To Keep Deep Discounters At Bay reminded that although taking the margin hit is perceived as a high risk strategy, it could also be a big winner. 9/20/2007
Wal-Mart Joins Fray In Carbon Profiling revealed Tesco in the UK was already asking U.S. exporters to do it; now Wal-Mart is asking suppliers of select items to ascertain the amount of energy they use and their total carbon footprint, which used properly, could be helpful, but there are dangers. 9/25/2007
Wall Street Over-Analyzes Wal-Mart Woes excerpts an article from the Wall Street Journal, which states the Wal-Mart era is drawing to a close, with critique of its analysis from the Pundit and our own three primary causes for the problems at Wal-Mart. 10/4/2007
Wal-Mart’s ASDA Serious About Sustainability repeated that Wal-Mart is pretty hot on sustainability initiatives, but its UK subsidiary, ASDA, is really focused. We believe consumers are skeptical that all this stuff isn’t just another way to increase profits. 10/5/2007
High Lettuce Prices Strain Supplier Relations With Wal-Mart discussed that though things have been quiet at Wal-Mart, with many vendors reporting a sincere effort by the company to amicably resolve disputes, the inherent tension between the desire to contract and the desire to take advantage of market dips remains unresolved. 10/19/2007
Wal-Mart Tightens Quality Specs explained that Wal-Mart has quality issues but the quality issues have to do with inconsistent store level execution, not with the quality being purchased. 10/24/2007
Pundit’s Mailbag — Wal-Mart’s Path Of Decreased Store-Level Execution shared industry comments that all seem to agree on our main point: That Wal-Mart’s quality problems have nothing to do with procurement and everything to do with store level execution. 10/25/2007
Wal-Mart’s Global Procurement Division Gets Special Pass On Quality reported many Wal-Mart vendors have no problem with higher quality specs; in fact, the best vendors tend to see them as a competitive advantage. What is more of a concern is uneven application of the standards, especially as it relates to global procurement. 10/26/2007
Is Wal-Mart Foolish For Focusing On Small Savings? indicated very often the thirst to eliminate a “middleman” and the supposed “excess cost” he represents stumbles over a surprise — the value that intermediaries can often provide. The real question is, ‘Are there any savings by importing independently of that system?’ 10/30/2007
Pundit’s Mailbag — Wal-Mart Lacks Store Level Produce TLC followed up on our series on Wal-Mart and quality with a letter from Helene Dembroski of Dembroski Orchards Inc. who agrees that when we find poor quality produce being presented to consumers, it is usually due to poor store level execution. 11/2/2007
Pundit’s Mailbag — Wal-Mart’s Short Term Mentality Hurts Produce recognized that top executives outside of produce are trying to save money via procurement instead of through enhanced marketing efforts or improved customer service. Its actions in produce can be seen as an outgrowth of overall short-term thinking. 11/9/2007
Is Wal-Mart’s ‘Heritage Agriculture’ An Initiative Driven By The Consumer Or By the CEO? The “Heritage Agriculture” initiative sounds great, as introduced by Ron McCormick, VP of Produce at Wal-Mart, to the Fresh Produce Association of the Americas. Perhaps most interesting is that there was not one mention of consumer demand for these initiatives, and it probably won’t take costs out of the system. 11/30/2007
Wayne McKnight To Leave Wal-Mart reported that the brain drain of industry luminaries exiting Wal-Mart continues. We do know that this is a big loss for Wal-Mart in one of its most important initiatives, and his availability will be a big gain for some lucky food company. 12/20/2007
India’s Farmers And Traders Counter Wal-Mart By Competing continued our coverage of Wal-Mart’s expansion into India. Now comes word that farmers and traders are now going into business to block Wal-Mart — and getting public subsidies to do so. 1/11/2008
Wal-Mart Takes On Tesco With 20,000-Square-Foot Stores announced Wal-Mart will open four small-format grocery stores in Arizona this year under the trade name, “Marketside”, directly combating Tesco’s new Fresh & Easy Markets. However… you need a lot of little stores to equal one Supercenter. 1/15/2008
Wal-Mart Takes On Tesco With 20,000-Square-Foot Stores announced Wal-Mart will open four small-format grocery stores in Arizona this year under the trade name, “Marketside”, directly combating Tesco’s new Fresh & Easy Markets. However… you need a lot of little stores to equal one Supercenter. 1/15/2008
Wal-Mart Loses Another Star: South Africa’s Danie Kieviet To Leave followed the loss of Bob DiPiazza, Bruce Peterson, Wayne McKnight and the cultural shift at Wal-Mart we discussed in conjunction with John Menzer’s departure. Danie Kievet’s departure is very bad news for Wal-Mart. 1/29/2008
Pundit’s Mailbag — Rough Ride For Wal-Mart/ASDA: Kievet Could Have Been A Big Asset shared a letter from Stoney Steenkamp of Fruits Unlimited in response to our piece on Danie Kievet’s departure from Wal-Mart. The problem for large companies is that leveraging that size is very difficult, and that they aren’t good at dealing with the likes of Danie, who is an entrepreneur at heart. 2/1/2008
Wal-Mart Revamps Procurement System explained that on the face of it, the reorganization of Wal-Mart’s procurement system is not necessarily good or bad for the vendor community. The $64,000 question is how will these four areas interact? 2/5/2008
Wal-Mart Uses New Food Safety Initiative As A Marketing Tool assessed a statement Wal-Mart recently issued requiring all perishables suppliers to be certified by Global Food Safety Initiative (GFSI) standards, includes an explanation in our interview with Catherine Francois, Senior Manager of Food Safety at CIES-The Food Business Forum and analysis from the Pundit. 2/8/2008
Just Say No: The New Dynamic Of Producer/Buyer Relations examined how buyers, beyond big retailers, have so pressed their advantage that producers, beyond the banana giants, are increasingly just saying “What is the point?” The uncertainty of future options with Wal-Mart, for example, is one reason why Tesco’s Journey to America was so welcomed by America’s suppliers when it was first announced. Yet Tesco may well disappoint U.S. producers. 2/22/2008
So in the last year, we wrote four articles about changes in Bruce’s life and 53 articles about changes at Wal-Mart. From this we deduce that Wal-Mart has changed more without Bruce than Bruce has changed without Wal-Mart.
We all know that sweet potatoes are trendy right now. Their nutrient value, eye appeal and taste appeal have allowed them to substitute for many traditional items. But maybe we didn’t realize how hot this item can be and how many traditional items sweet potatoes can substitute for:
One of the biggest legal cases in America involves Richard “Dickie” Scruggs:
Mississippi multimillionaire lawyer Dickie Scruggs has been indicted on charges of conspiring to bribe a judge handling the case involving $26.5 million in attorney fees related to Katrina claims.
Scruggs — the brother-in-law of U.S. Sen. Trent Lott — is best known for his handling of mass litigation on behalf of the state of Mississippi, first involving asbestos and the second involving tobacco.
According to the indictment, Lafayette County Circuit Judge Henry Lackey cooperated with the FBI in the investigation after reporting a bribery overture to authorities.
According to the indictment, Scruggs and others tried to influence Lackey by giving him $40,000 in cash to resolve the attorney fees’ dispute in favor of Scruggs’ law firm.
Now the court has released transcripts of wiretapped phone calls related to the case. Turns out there is no mention of cash; only “sweet potatoes” are the subject of discussion:
Henry Lackey: Hello?
Tim Balducci: Uh, Hey Judge, It’s Tim.
Henry Lackey: Hey, Hee. . Hee . . He . .
Tim Balducci: How ya doing buddy?
Henry Lackey: Doing good . . .
Tim Balducci: Good . . . good . . . You got just a second?
Henry Lackey: Have plenty of time.
Tim Balducci: Good . . . um. . . Listen, I was just calling to uh . . . ask you you know uh . . . I was gonna get those sweet potatoes delivered to my friend down there . .
Henry Lackey: Oh . . yeah!
Tim Balducci: And I was just wondering do you have any idea when you might get those that that bushels of sweet potatoes . . uh . . down there . . . uh where I can get em . . . uh . . . over to him?
Henry Lackey: Okay? Uh . . Ah .. ., Let me . . . uh . . ., I will, . . . uh, Yeah, Yeah. . . should be . . . uh. . . should be tomorrow or the next day, if that’s okay?
Tim Balducci: Naw, that’s fine. He was just asking me uh, uh, about it you know it . . .
Hope they didn’t eat the evidence! This case could be fried… or mashed… or boiled.
You can read the transcripts here. The produce section starts on page 40.
While we are on the subject of potatoes, Mrs. Pundit advises that this is floating around the Internet:
The Potato Story
You know that all potatoes have eyes. Well, Mr. and Mrs. Potato had eyes for each other, and finally they got married, and had a little sweet potato, whom they called ‘Yam.’
Of course, they wanted the best for Yam. When it was time, they told her about the facts of life. They warned her about going out and getting half-baked, so she wouldn’t get accidentally mashed and get a bad name for herself like ‘Hot Potato,’ and end up with a bunch of Tater Tots.
Yam said not to worry, no Spud would get her into the sack and make a rotten potato out of her! But on the other hand, she wouldn’t stay home and become a Couch Potato, either. She would get plenty of exercise so as not to be skinny like her Shoestring cousins.
When she went off to Europe, Mr. and Mrs. Potato told Yam to watch out for the Hard Boiled guys from Ireland, and the greasy guys from France called the French Fries. And when she went out west, to watch out for the Indians so she wouldn’t get scalloped. Yam said she would stay on the straight and narrow and wouldn’t associate with those high class Yukon Golds, or the ones from the other side of the tracks who advertise their trade on all the trucks that say, ‘Frito Lay.’
Mr. and Mrs. Potato sent Yam to Idaho P.U. (that’s Potato University) so that when she graduated she’d really be in the Chips. But in spite of all they did for her, one day Yam came home and announced she was going to marry Tom Brokaw. Tom Brokaw!? Yam’s parent’s exclaimed! Oh my, Mr. and Mrs. Potato were very upset at this announcement. They told Yam she couldn’t possibly marry Tom Brokaw because he’s just …
Are you ready for this?
… a Common Tator.
Our piece, Traceability Committee Cuts To The Chase For Workable Standards, brought this letter requesting some clarification:
I was hoping you could help in providing clarification for a point in the article published about traceability for produce companies. I currently work for a manufacturing company that develops VA-type products. The question I have is in the level of traceability that is going to be required for a case. In reading the GS1 traceability documentation, there are three levels of precision, which include GTIN, GTIN+LOT and GTIN+SGTIN.
I am trying to get clarification on what precision standard would be used for case identification.
— Dennis Flynn
We thank Dennis for the letter. The Produce Traceability Initiative has just come off its second meeting, held February 22 in Atlanta. It looks like the initiative is working, as it seems close to developing some specifics on exactly what will be required by the industry and when it will be required — all in the cause of full traceability.
Especially crucial is that the buying end of the community seems poised to buy into the program — and that is really crucial if we are to motivate the entire supply base to move to these standards.
We’ve promoted the importance of traceability for some time:
- We started out by asking Gary Fleming, Vice President of Industry Technology and Standards of the Produce Marketing Association, for his insight into this crucial area. First, in Guest Pundit — Traceability And the Need For A Common Language, Gary explained the vital role that data standards play in any industry-wide effort to begin a trace-back and trace-forward capability.
- Then, in Guest Pundit — Pairing The Global Language With Technology, Gary explained how we could actually implement such a vital strategy. Following this, we produced an article entitled, Guest Pundit: Traceability — A Forgotten Piece of Food Safety, in which Gary, who had gone to Argentina in search of an effective traceability solution, explained what he found.
- Bruce Peterson resigned from Wal-Mart and people wondered what his next step would be. Then a press release was issued, pointing out that he had entered into a “partnership” with Michael McCartney, Principal of QLM Consulting, to promote a traceability initiative for the fresh produce trade. We spoke to Bruce to see what his plans were. That piece, Bruce Peterson Focuses On Traceability, explained Bruce’s main point that the produce industry is more likely to reduce the negative impact of food safety outbreaks by enhancing traceability than through any other measure.
- We also reached out to Michael McCartney, and he explained his role in the Peterson/McCartney Initiative; we published that piece under the title, Getting A Better Grasp On Traceability.
- Jane Proctor, Director of Industry Technology and Standardization for the Canadian Produce Marketing Association, then sent a note which we included in a piece entitled, Pundit’s Mailbag — CPMA & PMA To Lead Industry Closer To Global Traceability. This piece featured new data from a study on traceability.
- Traceability Falls Short at Distributor Level was written in response to the high cost of recalls, as it became clear that small amounts of doubtful products were requiring distributors to conduct large recalls. We also ran Pundit’s Mailbag — When It Comes To Traceability, We Have The Technology, which included key letters from both Alan Siger of Consumers Produce Co., Inc. of Pittsburgh and Scott Danner of Liberty Fruit Co., Inc. pointing out that technology and business systems already exist to have strong traceability at the distributor level.
- PMA, CPMA And United Form Traceability Initiative focused on a rare joint announcement by the North American trade associations to jointly conduct a traceability initiative. We then published Traceability Initiative Lacks Full Industry Representationn, urging that the makeup of the steering committee be expanded to include wholesale/distributor companies.
- Traceability Group Meets Tuesday celebrated the upcoming initial meeting of the Produce Traceability Initiative in Atlanta. We then published, Traceability Committee Cuts To The chase For Workable Standardsds, which reported on the results of the first Produce Traceability Initiative meeting, including settling on the GS1 standard, the importance of a timeline, the commitment required and the decision to focus on a case level initiative.
Our early pieces on traceability were all written by Gary Fleming, Vice President, Industry Technology & Standards at the Produce Marketing Association and an industry expert on traceability.
We asked Gary for help clarifying Dennis Flynn’s question: What level of precision is likely to be required for a case of produce? Gary was kind enough to give a succinct answer:
Regarding the “level of precision” needed for traceability on produce cases, there are three things that will be required on the case:
2. Lot #
3. Pack/Harvest Date (*if not already embedded as part of the Lot #).
Well, there you have it. Three things on every case. Let’s make it happen.
Many thank to Dennis for posing the question and to Gary for helping us answer it. Traceability is an area where the industry, after many years of struggle, is finally poised to move ahead. Everyone pulling along is helping their own organization, while also helping the trade as a whole.
The article we ran, entitled Pilot Project On Vending-Machine Produce Shows Promise In New Channel Of Sales, was a follow-up on one entitled, Dole Introduces Unique Vending Machine Concept, and our coverage of this area prompted this nice letter:
As a state Fruit & Vegetable Nutrition Coordinator, I was pleased to see the great article you sent out yesterday.
As a public health professional whose role is to create environmental changes that make it easier to access and enjoy fruits and vegetables, seeing this produce and vending article gave me great hope about what the produce industry can achieve that will also have a great public health impact.
I enjoy getting your newsletter.
— Diane R. Beth, MS, RD, LDN
Nutrition Manager/NC Fruit & Vegetable Nutrition Coordinator Physical Activity & Nutrition Branch NCDHHS/Division of Public Health
Raleigh, North Carolina
We appreciate Diane Beth’s kind words and those of the many readers we often hear from in the public health community.
A while back, we ran a piece entitled, Pundit’s Pulse Of The Industry: California Department of Public Health’s Sue Foerster, that was fascinating in its portrait of the changing priorities of public health authorities. Sue had been one of the founders of the 5-a-Day program back in California and, although she remained supportive as it transitioned to the Fruits & Veggies — More Matters program, it also was clear that the old system in which each state had a 5-a-Day coordinator was giving way to a new system in which Fruits & Veggies — More Matters would be one of several initiatives that would be promoted on the state level.
Still, we like Diane Beth’s self-description: “As a public health professional whose role is to create environmental changes that make it easier to access and enjoy fruits and vegetables…”
What a great description. What a great job.
Many thanks to Diane Beth for her letter.