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Produce Business

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American Food & Ag Exporter

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Pundit’s Pulse Of The Industry — Perfection Fresh’s Michael Simonetta

Jim Prevor’s Perishable Pundit, March 14, 2008

The relationship between the produce industry in Australia and New Zealand and that of the United States is most intriguing. There is some trade… the Pundit remembers, in his youth, buying apples from the late, great Harry Chilton of Tasmania. We ran a piece, ‘Great Mates’: USA Pears And New Zealand, about USA pear exports to New Zealand and, of course, there is a navel orange export deal from Australia to North America. There’s also some trade in apples, pears, kiwis, some small volumes of other items depending on crop conditions and price.

Yet even if trade is slight, that doesn’t stop the industry from sharing ideas and experience across the Pacific and from the northern to the southern hemisphere and back. Typically the largest single contingent at PMA from outside North America comes from Australia — a wildly disproportionate showing based on trade and on population.

We have discussed some of this industry interchange with pieces, such as Is It Possible To Have A PMA Chairman From Outside The US? and Pundit’s Mailbag — In Support Of Rob Robson.

We wrote a profile of a Canadian who is working in New Zealand in Pundit’s Pulse Of The Industry: Enza’s Dawn Gray. We also highlighted food safety efforts in Australia in our piece, Pundit’s Pulse Of The Industry — OneHarvest’s Rob Robson And His Food Safety Team, which we followed with Pundit’s Mailbag — More Insights On OneHarvest’s Leaders.

We also highlighted the efforts of Australia’s largest supermarket chain to increase consumption and health among children with our piece, Woolworths Supermarkets In Australia Promotes Kids’ Produce Consumption.

When we ran our piece, PMA Convenes First Country Council, we pointed out that Michael Simonetta of Perfection Fresh in Australia had been named Chairman of the PMA Australia-New Zealand Country Council. The piece brought us this note:

I have followed with interest your coverage of PMA’s new Australia-New Zealand Country Council.

In addition to providing an obvious produce industry networking umbrella, this new council can also provide a local platform for PMA programs and services that often go un-noticed overseas.

Having served for several years on PMA’s Board of Directors and later on its International Advisory Council, I am intrigued by this new PMA effort to establish a regional presence overseas and believe the “council” format has great promise in other countries as well — particularly if PMA can cultivate the interest and involvement of key supplier-retailer leaders elsewhere as it has in Australia and New Zealand.

This initial line-up is impressive and will do much to ensure that the council remains relevant and successful. PMA is particularly fortunate to have Michael Simonetta’s influence and leadership on this new effort. He and his Australia-New Zealand colleagues are industry stand-outs; PMA would do well to identify similar produce industry leaders in Europe, Chile, South Africa and Asia and to introduce country councils there as well.

— David Marguleas
Sun World
Senior Vice President, Licensing and Business Development
Coachella, California

Indeed PMA has gone in the direction David suggests, having launched a Country Council in Mexico — as we discussed in PMA Mexico Country Council Meets — and, without doubt, if local industry leaders support the effort, we would expect to see more such efforts.

As David alludes in his note, these efforts depend a little on PMA and the support it provides but they depend a great deal on motivated local leaders who believe in the industry, believe in a tie with North America and believe in a tie with PMA.

What kind of leaders are these? What makes them tick? What motivates them in their local industry and what do they relish about the tie with PMA? We asked Pundit Investigator and Special Projects Editor Mira Slott to speak with Michael and find out:

Michael Simonetta Michael Simonetta
Chief Executive Officer
Perfection Fresh
Sydney, Australia
Chairman, PMA Australia-New Zealand
Country Council

Q: What inspired you to take on the chairmanship of the newly-formed PMA Australia-New Zealand County Council?

A: I’ve been involved with various boards and councils with PMA for a number of years now, since the late 90s when I first joined the international council; I think that was in 1999. At the expiration of my three-year term, they asked me to join the food service board for another three years, providing a whole new perspective. Then I was asked to come back to the international council for two years as chairman, a great honor to lead world leaders.

The executives and board decided to enhance member value across the world, that we pioneer the country council concept. Australia-New Zealand would be first, followed by Mexico, now up and running. They asked me to be chairman, of course another great honor. And now we are coming into our second year.

My drive for wanting to be continually involved here is twofold; to give back to the industry we all love so much and to do it through PMA is a great opportunity. Besides this, here in Australia, industry is probably more fragmented than in the U.S. We don’t have a strong industry body that represents all aspects of the supply chain. Through this country council, we can get closer to having a strong industry body, forging a strong relationship with Horticulture Australia that shares a vision with PMA of where we want produce to go in Australia. Horticulture Australia is a body that’s been set up for a number of years. Its main role is to manage statutory levies, and through various committees representing products that have levies, oversee research, product development and marketing.

Q: What is your vision of where you want produce to go in Australia?

A: The key things for us, first and foremost, is to increase consumption. That is a continuing challenge. Produce is one of those food groups that is very much high profile when it comes to a health perspective and we have to capitalize on that. The average consumer is more aware of personal health, especially with baby boomers becoming more considered with what we put in our mouths.

Q: America has been contending with an obesity epidemic and serious health issues related to diet for quite some time now, but it seems the problems have proliferated, taking on an international sense of urgency. What is your perspective as an Australian?

A: I don’t think we’re too far behind. Those issues are just as prevalent in Australia.

Another area we find personally challenging is the area of recruitment and people. We have a bit of a talent shortage in Australia and around the world, and PMA has attacked this problem through the Education Foundation and the Pack Family/PMA Career Pathways Fund program.

It is difficult in Australia to get young people to join the produce industry. Unfortunately it’s very true. In Australia, the thing we have to compete with is a bit of a talent war with the mining and resource boom going on here in case you haven’t read about it, taking up our workforce and leaving a shortage. Salaries and incentives to go to the mines make it hard not just for the produce industry but for a lot of industries to compete with.

The next big challenge is the whole issue of going green and the environmental issues, social and environmental accountability we read about a hell of a lot. It’s not going away, consumers are aware, and as good corporate citizens we need to play our part in reducing carbon footprints. As suppliers to those supermarkets making a stand in this area, we have to set targets and meet them.

Q: Are retailers in Australia paralleling the actions of retailers like Wal-Mart and Safeway in the U.S., and Tesco and Marks & Spencer in the U.K?

A: Yes. Woolworths’ CEO Michael Luscombe only a matter of weeks ago made a commitment that by 2015 the company will reduce carbon output by 40 percent, leading the way on that issue when it comes to the supermarkets in Australia. Even some of the independent green grocers are talking about sustainability. Even in its most basic form, having recyclable packaging, where until recently independent retailers could care less about recycling. Sustainability is top-of-mind for the most progressive retailers. Some are not making a commitment, but the more proactive ones are.

Q: The issue of food miles has become quite controversial. I interviewed Kenyan High Commission officials who say U.K. retailers are unfair in labeling imported produce packages with airplane stickers to signify the product generates more carbon. They say this misrepresents the facts while disenfranchising developing country farm workers.

A: I read the study done by the flower industry that did calculations to show you reduce more carbon by growing in Kenya than producing in greenhouses where heating costs are astronomical. These are important points that need to be analyzed and addressed.

At the same time, suppliers are working closely with retailers driving sustainability initiatives; in our case with Woolworths, which is an important part of our business. Obviously, beyond ethical precedent, we’d be really silly to not to do our share.

Q: In discussing key issues and challenges, you haven’t mentioned food safety yet.

A: Our company was a pioneer in introducing food safety plans here in 1990 to 1991 when McDonald’s first introduced HACCP programs a little before the retailers here started talking about it. I will never forget a two-day McDonald’s HACCP workshop I attended. It was the only migraine headache I had in my life! It seemed so daunting at the time. Like anything else, when a major customer asks you to embrace and maintain something, you do. Food safety is a moving target.

We made the decision at least seven or eight years ago, we wouldn’t deal with any supplier that isn’t independently accredited with a HACCP program. There are a multitude of different programs; one developed for produce producers here is Fresh Care.

Q: Wouldn’t Woolworths demand that kind of food safety requirement from its suppliers anyway?

A: Wooolworths drove food safety in retail without a doubt, now the food safety plan is known as WQA [Woolworths Quality Assurance]; I’m not sure what version we’re up to, version 11 or 12 by now. Woolies certainly led the way, Coles got more serious about it in the last few years. I won’t say they weren’t before, they have their own food safety requirements, and the food service segment is very serious.

Q: Are all retailers following suit?

A: One area where we’re not seeing enforcement of food safety is in the independent retail arena, which surprises me. Unlike the U.S., a good percentage of business in Australia is taken up by independent stores, two types; green grocers with one, two or three stores, and then independent supermarkets trading under brands Food Works and IGA. Their updates to food safety and enforcement have definitely been slower than what I’d expect.

Q: Why is that? How is that tolerated?

A: I don’t know the answers exactly. They haven’t had food safety issues and haven’t felt the need to enforce standards. The more proactive ones are starting to enforce. Let’s hope.

Q: It’s notable that without stringent food safety requirements, they’ve escaped food safety incidents, at least those large enough to create a need to act.

A: Those people are dealing with people like us that are accredited. They haven’t said they will only deal with those that have implemented a food safety accreditation program, but 90 percent or more of their purchases end up coming from accredited suppliers. These independent retailers are not being like Woolworths and Coles and pushing a strict food safety code.

Q: Are consumers aware of this distinction?

A: Consumers expect when they walk into a retail outlet, that people running it have kicked out the problems and food they are buying is safe. .

Q: What was your reaction when the spinach outbreak hit the U.S. produce industry?

A: I was surprised certainly; shocked that something like this spinach crisis could happen in the U.S. I thought the U.S. was really leading the industry in this area. I was stunned to see how long it took to trace product back. That was the biggest shock of all. It was certainly a wake-up call for us and every player in the produce industry to never ever be complacent when it comes to food safety. As good as the system is and may be, it can always be better.

We’re not a big company by any means, in terms of international standards, but we have five full-time quality assurance people here; that’s the commitment we make to food safety and quality.

Q: Can you speak to product testing? Since the spinach E. coli crisis, U.S. produce companies have grappled with strategies to optimize its value.

A: Product testing has been happening in Australia for quite some time with Woolworths leading the way. It’s an assurance that food safety protocols are working. We do hundreds and hundreds of tests of both raw and finished product.

Q: Tell us more about the evolution of your company and your family history.

Simonetta Family

The Simonetta Family: Michael, CEO;
Tony, Founder/Director; Vince, Director of Sales;
and John, COO.

A: We were born into fruit. My father emigrated from Italy with my grandfather and started an independent fruit and vegetable shop in western Sydney, in a suburb called Moorebank, in 1955, and continued to run that business for many years. In 1978, Dad decided working seven days a week in a retail store was wearing and he had enough. In 23 years he never had a day off. He decided to buy a wholesale business with his cousin in Sydney’s Flemington Market, what you would call a terminal market — I hate that term, I prefer produce market.

Dad never wanted us to work in fruit and vegetables. He thought the hours were too long, and encouraged us to go to university, get a degree and enter other professions. To that end, I got an accounting degree and did six years in accountancy. In 1994 my brother got a law degree and worked in a law office. My middle brother straight after school went into the family produce business. Produce was in our blood and eventually my younger brother and I joined him. Now the three of us are running the business, each in different roles; I’m the CEO, my middle brother is in sales and the other in operations.

We’re a national company now, trading in four Australian market regions with distribution centers and packing facilities covering those areas. We employ 140 people full time, then a lot of part time people depending on the time of year.

Q: What products do you specialize in and where do you see the most growth potential?

BroccoliniA: Our specialties in commodity areas are lettuce, cauliflower, broccoli, celery and tomatoes, if you want to count that as a vegetable. In fruit, our two biggest items are mangos and table grapes. And the third area of business, started back in 1999, is our proprietary product program. We have exclusivity in broccolini rights to Australia and New Zealand. We were the first to introduce grape tomatoes to Australia. We still license the Grape Tomatoesbreeding rights in Holland, which we think is the best program. We have a whole staple of products we categorize in the proprietary area. One of the trends that is world-renown that we can’t ignore is fresh-cut produce. And we got more involved in the processing side of the business.

We’re not doing any processing of lettuce products. But we’re doing hard vegetable areas — broccoli, carrots, that kind of thing. We’re just in the final stages of rolling out our fresh-cut fruit offer, using new technology we’ve licensed from researchers based in New Zealand. We believe it is cutting edge in terms of any fresh-cut fruit product based on the processing and packaging techniques.

Q: Do consumer trends parallel those in the U.S.?

A: One thing we’re very proud of on our website is our electronic newsletter that goes out mostly to consumers, and keeps growing in interest. We run a lot of promotions, we encourage people to write back and enter competitions, and while 1,300 registered users isn’t a big number, we get a lot of requests and feedback.

Q: So you can utilize your newsletter to get a pulse on the market and shopper trends?

A: About 12 to 18 months ago, we were contemplating releasing some new products and initiatives into the marketplace and wanted to do consumer research. We used our electronic newsletter to ask for participants interested in joining a focus group, and we were bombarded with hundreds of volunteers.

Q: What are some of the most valuable consumer comments?

A: Originally, back in 1999, 2000, and 2001, we received a lot of inquiries when we started launching proprietary products. The main question: Are they genetically modified? (None of our products are). We don’t get that question much any more. Now we get a lot of packaging questions focused on the whole sustainability issue and consumers wanting to know what we’re doing about it. That’s a main area of consumer concern now. The other one now is that consumers are hungry for information on usage and what to do with products. We get requests for healthy recipes and new forms for using products. It’s a given that food safety is an issue, but we don’t hear from consumers about this. They expect the food to be safe.

Q: You’ve covered several critical issues the industry faces moving forward. Is there any other key challenge you’d like to highlight before we close our interview?

A: These issues we’ve discussed; health and obesity, talent and recruitment, regulatory requirements with food safety, environment and sustainability are only going to become more important. One last thing I’d like to mention is cost control and margin management, Australia is a very high labor cost market and coupling that with energy costs, it puts a lot of pressure on margins, and managing business on margins will be a challenge. We face tough economic times ahead here and in the U.S. The smartest and most efficient will prosper.

Q: Additional food safety costs place additional burdens on companies as well.

A: Yes, that’s true, but here in Australia, as an industry we’ve been ahead of that game with food safety, we’ve known about the costs and have already incorporated them into our planning.

Q: Your father tried to dissuade you from working in the produce trade, understanding the hard work and challenges you would face. After getting your accounting degree and working in a different world, what drew you back in?

A: We all grew up in a fruit shop. My younger brother is only 35, my other brother is 41, and I’m 47. My younger brother was more fortunate to be able to play football (soccer) while we worked in the shop on weekends. The produce industry is infectious and in our blood. If you don’t have the passion, you don’t belong in this industry. It’s too consuming, and unless you’re passionate you won’t survive.

Q: This takes us full circle to your mandate of drawing more talent into the industry. What is the best way to do this?

A: It’s about promoting ourselves as an industry of choice, if I may borrow that phrase from the PMA Education Foundation. This enters discussions in all areas of my involvement at PMA. It’s a matter of promoting the industry as better. It’s not looked upon as an option when students are sitting with a career advisor. I can almost guarantee a student in their last year of high school wouldn’t have produce on the list of industries recommended. The student may not know what he or she wants to do next year.

We have to get out there in those areas, promoting ourselves at university levels and continue the work through PMA and the Education Foundation, bringing those kids to PMA. Through the Pack Family program, I was a mentor for one of those kids from a university in Pennsylvania, it was a great experience, I so enjoyed it. This young, dynamic individual came with me to meetings and stayed with me the whole time at PMA. Last year for the first time, we had two university students from Australia. Recruiting is one area we don’t do enough of ourselves here, and we are determined to do more and more.

**

We suppose you could say that a paucity of trade makes it easier to share information and technology. Perhaps the position of Australia so far from the wellspring of Western Civilization has pre-disposed its population to hopping on airplanes and going long distances to learn and share information. We could even surmise that the small population has created weaker local institutions on an industry basis and that has led to more involvement with organizations from outside the country.

Yet, you listen to Michael tell the story of his father and grandfather emigrating from Italy, opening a little produce shop and dreaming of a better life for their children and you realize instantly why friendship comes so easily between the people of our countries — our stories are so similar.

Vast and empty continents on opposite ends of the world were filled with teeming multitudes of immigrants, all shaped under concepts of law and liberty that the English bequeathed to the world.

Every nation has its own history, every people their own past, yet there is some comfort to be drawn — in a world not always hospitable to our concept of liberty — that on the other side of the world we find not only trade partners and strategic allies but actual friends.

Many thanks to Michael for sharing his story with the industry.

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