Pundit Interviews

Pundit Letters





Perishable Pundit
P.O. Box 810425
Boca Raton FL 33481

Ph: 561-994-1118
Fax: 561-994-1610


email:
info@PerishablePundit.com

a

Produce Business

Deli Business

American Food & Ag Exporter

Cheese Connoisseur



Tesco ‘Pauses’ With
Fresh & Easy Expansion Plans

Fresh & Easy announced that it would be “pausing for breath” and it would stop store openings, other than a couple in Phoenix, for the next three months.

This is surely a wise decision. As we have extensively reported, the more stores Tesco opens, the more money the company loses. Fresh & Easy tried to gild the lily by claiming this had always been planned:

“…after opening our first 50, we planned to have a 3-month break from openings…”

Precisely how this break had been “planned” or who planned it is not clear. We can only say that we have spoken to a broad array of vendors, all of whom assure us that at no point in time was ever a mention of such a “pause” communicated to them until last week.

In fact, if our estimates are anywhere near correct, Fresh & Easy is hemorrhaging money and the “pause” is an effort to stop the bleeding and reassess.

Although we’ve been accused of being critical of Fresh & Easy, analytical would be a better term. We wish Tesco nothing but success. It would be great for the industry to have another big, well-capitalized, fast growing buyer.

However, when the Emperor has no clothes, it is our job to say it. And no matter how big and praised Tesco may be, this concept hasn’t been working. The concept has been failing, and both Tesco and its vendors will be better off if that is recognized and soon. So we take the idea of a “pause” as a good one.

In theory, lots of smart people can now address their attention to fixing what is broken or reimagining the concept. They will also have 90 days more to judge consumer reaction. That is all for the good.

But the status quo is not really acceptable for very long.

The first problem is that Tesco adopted what we have called a “brilliant or bankrupt” strategy and built this enormous distribution center. As long as Fresh & Easy has only 60 stores, it is impossible to be profitable — the overhead is simply too great. So standing still for very long is not an option.

The second problem is that a 60-store chain sitting in the midst of a competitive retail environment creates what, in the vernacular, would be called a “sitting duck”. One can only assume that other retailers will redouble their efforts to make life difficult for Fresh & Easy. They will put specials in stores near those Fresh & Easy locations, do more advertising, use loyalty card data to target Fresh & Easy shoppers, renovate nearby stores, build new stores and more. If Fresh & Easy is rolling out, it is a moving target. If it stands still, it is just a target.

So what can Fresh & Easy do to turn things around?

Things range from small, easy-to-implement things, to substantial changes. Here are a few ideas:

  1. Stop running the chain as if it has 6,000 stores doing tremendous volumes. Many of the innovations are designed for a business Tesco doesn’t yet have. We hear so much about the vaunted “ordering system,” but so far it seems to deliver a lot of out-of-stocks — why not give each store manager a blackberry and have the staff walk around e-mailing what they are out of each day? Then Tesco could send that stuff the next day. If you want to get really down and dirty, how about calling in the order? With 60 stores it is not a big deal.
  2. Reduce private label to a bare minimum. Fresh & Easy is an unknown store. That itself makes trial difficult to obtain. To ask consumers who are visiting the stores for the first time to also try product under an unknown label is too much, too fast. Sell the best brands of groceries and perishables and, gradually, increase private label as consumers grow more comfortable with the store — it might take 20 years to get to an almost fully private label store.
  3. Get rid of the packaging middleman in produce. It won’t be possible to compete price-wise if Fresh & Easy adds this intermediate step of putting everything in trays, bags and clamshells. Do as much bulk as possible.
  4. Introduce a frequent-shopper program so Fresh & Easy can have access to consumer data and can do target marketing.
  5. Do a micromarketing assortment for each store. Right now, the offer is all wrong — one size does not fit all.
  6. Stop doing markdowns on expiring food; they cheapen your store. Get rid of sell-by dates where quality or food safety doesn’t require them. They confuse consumers.
  7. Reduce the British staff, keeping only a financial guy to watch the money. Americans are different than Brits and the stores will be more successful if Americans make the decisions. And the team that failed is too emotionally invested in its decisions to properly critique them. Besides, Tesco could use the British team back in the UK. As part of this “Americanization” program, drop resistance to American cultural norms in business — for example, immediately join the Produce Marketing Association, United Fresh Produce Association and Fresh Produce and Floral Council just as domestic retailers such as Safeway and Kroger do.

All these are good ideas. Our sense, however, is that there is a bigger problem. Many of the stores are ill-sited — they lack a sense of place — and it is unclear as to the kind of customer the stores are built for.

The single best answer for Fresh & Easy would be to close the stores and reopen them as two separate chains. One would be modeled after Aldi; the other after Trader Joe’s. Demographics would dictate which store gets bannered in which way.

These two successful concepts would work in the Fresh & Easy footprint, both scream out with a sense of place and with a target customer. Why recreate the wheel? Don’t the British like the opportunity to beat the Germans at their own game?

If Tesco doesn’t do something big, it may not succeed. But it still has a chance to do something great. We wish them every good fortune during this reassessment.




Memo to Sir Terry Leahy:
King George III Lost the War;
America Is Independent Now

If you want to know why Tesco chose this moment to announce a “pause” in the roll-out of its Fresh & Easy operation, you can credit an exceptionally sharp British analyst on the European food retail team at Citi in London. His name is James Anstead.

As if our substantial reporting on Tesco’s launch of its Fresh & Easy concept was not sufficient evidence that things were not all coming up roses, prior to Tesco’s announcement of a "pause" we received word from London that Tesco is likely to attempt to hide the results of its new US venture within the results of its massive UK retail operation. In fact, Tesco has already done so surreptitiously in previous reports.

James receives the credit for catching this subterfuge, which shows he is both smart and minding his knitting.

He is also rather brave.

We learned this when he arranged for the Pundit to present a conference call about Fresh & Easy to investors looking to the Citi team to inform their investment decisions.

Many analysts tremor at letting a negative word pass their lips — because they fear losing access to important companies. Although he acted as Tesco’s advocate in our conference call — and a fierce and effective one at that — James still felt it important to allow Citi’s investors to hear other perspectives.

Now James Anstead has authored a report that made several salient observations:

  1. The expectation has been that Tesco would report separate numbers for its USA business:

    Until recently, we were under the impression that Tesco would create a fourth ‘reporting segment’ (in addition to UK, Europe and Asia) as soon as the first Fresh & Easy store opened. There were two reasons for us holding this belief:
    • We remember Tesco telling us this — and the fact that other parties also remember being told this suggests that our memories are not faulty.
    • The consensus sheet that Tesco regularly circulates presents the US as a fourth segment.
  2. But now Tesco is hemming and hawing on this point:

    It was therefore something of a surprise when, in our conversations with the company, Tesco would not confirm that it would separately report the US business as of 2H07/08. The company was non-committal about how it will report the results of the US business on 15 April, when it is due to release its FY07/08 results. However, we took the fact that Tesco would not confirm its intentions — in an area we had understood to be very clear — as a sign that the results of the US business will not be separately identifiable on 15 April.
  3. In fact, Tesco has — without bringing this to anyone’s attention — been hiding Fresh & Easy results in its massive United Kingdom business:

    If the US is not reported separately, then the obvious place would be within the UK. (Incidentally this is not unprecedented — Tesco’s one French store is disclosed within the UK, but that is one store in Calais catering to ‘boozecruisers’, not a potentially large part of the group!) We decided to double-check where the US was reported over Christmas and were surprised to hear that F&E’s sales were effectively disclosed within the UK over the six weeks of Christmas trading, within the contribution from net new stores. (It was also disclosed this way in 3Q apparently, although there were hardly any F&E stores open in that period.)
  4. Size of business would not justify this plan:

    The fact that F&E was disclosed within the UK over the Christmas period strongly suggests that this will be the case for the FY results also. Normally Tesco provides sales details for every country at the 1H and FY stage in its ‘broker pack’. Not only would we expect the US business to remain within the UK on the face of the P&L on 15 April, but we would not be surprised to see it absent from the ‘broker pack’ analysis. This cannot be justified on grounds of size, considering even small countries in the past have at least had their sales featured in the broker pack — eg £4m of sales in Malaysia in 1H02/03.
  5. Neither would commercial confidentiality:

    Given that this is a 180-degree turn from what Tesco had previously suggested, it would not be surprising for the cynics to use this as evidence that management is disappointed by the early results. Commercial confidentiality does not work as a justification because this consideration would have been obvious to management when they gave the original guidance.
  6. Conveniently, including Fresh & Easy numbers, even though small, in the UK numbers would have provided Tesco’s numbers a boost:

    The inclusion of F&E within the UK figures must have — very slightly — inflated the contribution from net new space; we tentatively estimate by 5-10bps. Although this is clearly not a huge number by any means, it would have boosted a line that had been showing slight signs of weakness earlier in the financial year.
  7. The market may react to a lack of candor on Tesco’s part:

    We would argue that the decision to account for the US within the UK over the Christmas period was somewhat disingenuous. We would have expected the company to be quite candid on this topic given its treatment was not what most people would have expected. Indeed, looking back at the trading statement, the company’s comments about the US were made within the international section, not the UK.

And the money quote:

…if Tesco does indeed delay breaking out the US business, it will intensify the perception that F&E has not had an especially auspicious beginning. It will also do nothing for Tesco’s reputation for openness, which is unfortunate. No doubt Tesco will be able to point to other companies that have ‘hidden’ start-up businesses for some time, but the point is that their position seems to have changed since this time last year and the only explanation in our minds is that Tesco is disappointed with the sales figures achieved so far.

Now the report goes on to emphasize that where things are reported has no effect on the actual performance of the business and that, long term, if the business is a success, nobody will remember this issue in five years’ time.

The report also emphasizes that it is not attempting to speculate on the actual operating performance of Fresh & Easy but only on how such performance as might occur will be reported.

Still the report does provide a quick summary of current thinking on Fresh & Easy:

…it would be remiss of us not to at least summarise our current thoughts. From our discussions with industry contacts — including, but not limited to, Jim Prevor (the ‘Perishable Pundit’) — we suspect that sales densities are so far in the range of US$5-10 per sq ft per week. We frequently read suggestions that Tesco was ‘expecting’ sales densities of US$20 per sq ft per week — against which US$5-10 would clearly look very disappointing.

However, the facts are that on the November investor trip, Tesco’s presentation indicated an expectation of sales densities of US$14-21 per sq ft per week and one would presume this was what they expected to achieve ultimately rather than immediately. While some commentators have suggested that F&E may be generating densities of US$5 per sq ft per week and that this is just 25% of what they ‘needed’, we would argue that while densities may be below where management had hoped they would to be, the gap is not quite so dramatic versus where they were expected to be at this stage. We need to remember that this is a radically new format that will take time to gain traction with consumers.

The good news is that Tesco is learning by its mistakes; for example, it has recently decided to start accepting American Express cards. And there will doubtless be plenty more changes going forwards, such as more store-specific ranging, a more flexible approach on self-scanning and more focus on the rather dull dry grocery and health & beauty sections within the stores.

We remain cautiously optimistic on the long-term future for Fresh & Easy, but it is a dramatically new format that may take time to build loyalty. Although we are disappointed by the likely lack of transparency on 15 April, at the end of the day this will not change the ultimate outcome one iota. However, management should be prepared for some criticism on this score.

We suppose the criticism might as well start here. To point out the obvious: The purpose for which public companies disclose financial information is to allow shareholders — the owners of the company — to evaluate how the company is doing and how effective the management team — paid for by the shareholders — actually is.

The decision to spend billions of dollars to open a division in the largest market in the world is precisely the type of decision that shareholders will want to use to evaluate both the prospects for the company and the wisdom and effectiveness of the management team.

Lumping together Fresh & Easy results with those of Tesco in the United Kingdom has the effect of both preventing shareholders from evaluating how wisely their money is being spent in the United States and of making less accurate any evaluation of how the core business they own in the UK is faring.

We hope that The City — London’s version of Wall Street — puts great pressure on Tesco to provide the kind of transparency shareholders have a right to expect and investment bankers in The City were promised.

Beyond future reports, though, the way Tesco has acted in the past — releasing Christmas numbers without telling anyone it had decided to include sales from America in a reporting segment clearly labeled UK and in a document in which discussion of USA operations was placed in the international section, not the UK section — was clearly misleading.

We don’t know British securities law well enough to say it is a violation, but it is not something we would want to have to defend before the SEC.

As far as Citi’s comments on current performance, our understanding is that Tesco expected sales of $200,000 per week, per store, although it had budget numbers that indicated it could eek out a living at $150,000 per week, per store. We also understood that to really perform well, Tesco needed each store to sell $250,000 per week, per store. Other analysts have said that Tesco budgeted for $200,000 per week per store but was prepared to operate profitably with a 10% shortfall.

Part of the problem is with the word “ultimately” in the Citi report. If, like Trader Joe’s, Tesco had opened one store and gradually built up a reputation and gradually built more stores over a period of decades, ultimately, the stores might do anything.

We are mindful, though, of the admonition expressed in the Willard Bishop report:

…(Tesco/Fresh & Easy) developed a very aggressive expansion plan and as a result must help shoppers appreciate their stores because they don’t have the time or flexibility to modify operations and retain efficiency.

In other words we are not certain Tesco has the operational flexibility in its Fresh & Easy division to make the kind of changes that are needed without suffering large losses. The current "pause" may well be an attempt to evaluate if such a revamp is feasible. In other words we are not certain Tesco has the operational flexibility in its Fresh & Easy division to make the kind of changes that are needed without suffering large losses. The current "pause" may well be an attempt to evaluate if such a revamp is feasible. It certainly is an attempt to show action on the Fresh & Easy front, before the April 15th reporting deadline and all the questions that will be asked.

James Anstead and Citi’s team of European food retail analysts certainly deserve a hat tip for pointing out this change of heart on Tesco’s part.

To us the whole issue — and particularly not telling anyone back when it released Christmas sales — speaks to an excessive desire to “manage” the release of the Fresh & Easy results. We hope Tesco’s investors will demand better treatment.

Of course, those investors may be less concerned with whether Fresh & Easy sales are classified in the UK or USA; they probably are hoping Fresh & Easy won’t have to be classified under the category reserved for “discontinued operations.”




Positive Test On Cantaloupes
Causes More Confusion

The FDA tells us that it has a positive test result for salmonella on some cantaloupes produced by Agropecuaria Montelibano. The results are from samples the FDA had taken for testing at a border crossing on March 12, 2008.

We’ve been covering this issue extensively both here and here.

Information is scarce, and it is hard to know what to make of this. The finding of salmonella is interesting because the serotype found was Salmonella Freetown, which is different from the Salmonella Litchfield strain that supposedly sickened 50 people.

We have to be careful. Cross-contamination in labs is common. It seems that the famed Chilean grapes, if they had cyanide, got it while in FDA custody, as we mentioned here. We also dealt with a food safety “outbreak” at Church Brothers/True Leaf Farms that was also prompted by lab error.

Until FDA releases the full test file and it can be examined by outsiders, we won’t know very much.

This test was done because the FDA ramped up testing before it had identified a company as responsible for the illnesses. Now the FDA views any salmonella as an adulterant. But we suspect that if we tested every cantaloupe in the country, a certain percentage would have some salmonella. The more we test, the more we find.

The more reasonable question is to ascertain if there is a reason to think that this firm’s cantaloupes have a higher incidence of salmonella than is generally to be found on the commodity.

We asked Pundit Investigator and Special Projects Editor Mira Slott to find out more:

Sebastian Cianci
FDA spokesperson

Q: I understand FDA has obtained a positive salmonella test from a cantaloupe sample originating from Agropecuaria Montelibano. Where and when was this sample taken?

A: We do have a positive test. At the beginning of March, we had begun sampling cantaloupe imports. Based on the epidemiological analysis, we had narrowed the problem to melons but weren’t sure where the problem originated, which company was involved, so we increased the sampling to find the source. This was prior to the FDA import alert going out.

We pulled samples originating from the grower at the point of entry on March 12 that came up positive for Salmonella.

Q: Was it the same strain that was connected to the outbreak?

A: No. It was a different serotype than the one that has been making people sick. There are lots of different serotypes of Salmonella; there could be 250 variants. This one is called Salmonella Freetown. This positive test shows that cantaloupe that entered as recently as March 12 from this grower could be contaminated.

Q: Just to clarify, the positive test only relates to the Freetown strain? There have been no positive tests linked to the grower for the Litchfield strain that was related to the outbreak?

A: We haven’t found a positive sample for the Litchfield strain yet. But the epidemiological analysis and trace back analysis are implicating this firm.

Q: Who did the testing, FDA or an independent lab?

A: FDA did the testing; this was an assignment for FDA in the field, and the samples were gathered as part of that.

Q: Will FDA provide the results of the tests? Are you releasing tests so the shipper can monitor and evaluate them?

A: We are sharing the test results with the company. We follow a scientific method and we share that method and the results. We stand by our tests.

Q: Does FDA have a regular program to do sampling on a random basis to establish a baseline for comparison?

A: I don’t know what the base line is for this particular commodity. We try to sample all commodities at some rate, and it varies from commodity to commodity. In general, we try to increase samples where we think there is a greater risk. If a particular product is processed and there’s a kill step and the chance of contamination is unlikely, we may do less sampling.

We try to weight our testing so there is increased attention toward areas where we think there is potential public health concern. One type of food is more likely to support pathogen growth than another. Some pathogens will get you sick; some will kill you. If there’s a history of problems in a category, or a firm has a history of problems, we’ll focus more on that.

Suppose an average base line is every 18 months, but there’s a firm we’ve had sporadic trouble with, maybe we look at that firm every 12 months. Another firm has no problems, maybe for them 24 months. Everyone has a finite amount of resources; we’re trying to put resources where we’ll get the largest payoff. The goal is to protect people.

The goal is to have no positive result, but as a practical matter, you can’t expect that; is it 1 in every 10,000 or is it 1 in every 20,000?

Q: If every cantaloupe imported or grown in the U.S. were tested, a certain percentage would show up positive for salmonella. Therefore, increased testing would increase the likelihood to produce some positive samples (i.e., was it just terribly bad luck on the part of this grower?). Therefore, it seems important to find out the baseline.

A: I wouldn’t approach the issue from a baseline standpoint. I don’t know the baseline, but FDA’s position is presence of any salmonella renders the food to be adulterated. Clearly the better your testing capability, the more likely you are to find something. The more you sample, the more likely you’ll be to find something. Without the positive test result we had still implicated the company for the Litchfield.

Q: Do you know the concentration of salmonella discovered in the positive Freetown sample?

A: As far as concentration, I don’t know. We know as of March 12, product came in from that grower that could have been potentially contaminated. Unless it was just these samples that we grabbed, we would expect more problems. We’ve implicated their product through sampling and also through epidemiological and trace back methods.

While we were looking for one type of contamination we found another. By following GAP, you can minimize the likelihood for Salmonella contamination to happen and companies do have some ability to influence this. The 50 people that got sick don’t care about a baseline in testing. Every year, we find a few cases and we need to pursue them.

Q: Agropecuaria Montelibano goes well beyond minimum GAP standards, putting itself through rigorous third-party auditing and testing. Its food safety practices and integrity are in good standing throughout the industry. Is there no threshold that would influence FDA’s actions?

A: This positive test for a different serotype just surfaced. Yet before this, FDA’s investigation was targeted on the Litchfield serotype outbreak.

Q: From what you said in our earlier interview, the outbreak followed a bell curve shaped pattern, starting at the beginning of January and trailing off in March with the last case March 5. If the incubation period is a few days, why would it have made sense to continue widespread recalls of product believed to be connected to this serotype outbreak more than three weeks later?

A: This Litchfield outbreak is actually bimodal, with more than one peak, but trailing off in March. What if more problems exist? Basically FDA looked at the data, and we were not convinced this was over. Now with this positive test for another strain; clearly there’s something else going on, and how widespread is what we’re trying to find out. It doesn’t mean this company didn’t have a good track record.

Now FDA and CDC have a team down there investigating. I’m sure there is frustration. We need to find out why this contamination is happening. If we can help the grower determine the cause, then they can use that information to implement measures to improve pathogen control and insure product they ship to the U.S. meets U.S. safety standards. We’re down there trying to trouble shoot what went wrong. It’s often difficult to find the smoking gun because fields have been harvested. But we try and narrow it best we can.

Quite often in trace back you can’t find that smoking gun. That’s not to say there isn’t value in doing the investigation. Maybe the grower will find room for improvement in irrigation techniques, for example; whether that was the exact cause, we may never know.

Q: That being the case, how does the FDA determine when the import ban will be lifted? Is it discretionary judgment by the head of FDA? Is it based on a certain number of trailer loads testing negative? What are the criteria? Are there rules?

A: Criteria for getting an import alert lifted are in the guidance section of the alert. http://www.fda.gov/ora/fiars/ora_import_ia2202.html

Q: Imports are regulated in this way, but is there any comparable program for U.S. shipments. Do you do random sampling of domestic cantaloupes? If a problem happened with a shipper in Arizona, could FDA block him from shipping? And what would a domestic shipper do to earn his way back into the market?

A: We do domestic random testing, and if we did find a positive sample, we could block the shipper from shipping interstate commerce.

Generally speaking, once a problem is identified, a firm needs to show they’ve taken corrective actions to remedy this problem and then show so many clean shipments.

If an outbreak involves illnesses, there’s a rule of thumb… we’re probably going to have to visit the farm to be sure that the manufacturer’s processes and procedures are being properly controlled and followed. We’d like to see a plan and test results.

When the ban is lifted depends on the severity of the problem. We will be seeking some sort of assurance the problem has been corrected.

Q: How can a company give you assurance the problem has been corrected in cases where you can’t determine the source of the problem?

A: We investigate the heck out of the company and can’t find anything, then what? I’m not sure what happens in that scenario. Maybe the company is doing everything right and they have a sick worker. Maybe there is a problem with one piece of equipment that contaminates product coming from five fields. It may turn out the problem only impacts a certain percentage of their product. Discovering the source can be complicated.

Q: Is the FDA equipped with enough staff, money and resources to conduct thorough investigations on site when these problems arise? And what authority does FDA actually have to conduct investigations of these companies, especially in countries like China?

A: It’s very tough to put together investigations. We do look at all these things… irrigation, fields, processing plants. We regularly do these trace backs. If we have outbreaks with tomatoes in this country, we would investigate all those areas. We went to Guatemala during the raspberry outbreak. We’ve been to China when unapproved drugs were discovered in seafood.

But I can’t say a blanket statement that every time there’s a problem we’ll visit fields. At the same time, we can’t just show up. In the U.S. we have a little bit more leverage. For this Honduras firm, we have an import alert for this product. We have to coordinate a visit with them or suggest or be invited to come down.

All we know is that something has changed at this Honduran grower that has created a food safety problem, and now we want to figure out what it is. It doesn’t mean they weren’t trying to take preventive measures. Was there something they were missing, a control they overlooked? Something seems to have gone awry, and we’re working with the government and the company to find out the problem. This positive sample for a new serotype adds another wrinkle. It’s not uncommon when contamination takes place to find more than one type of salmonella involved.

Testing is one part of an effective food safety program. But it’s not a reliable protective measure by itself. The best we can do is try to ascertain the cause as fast as possible.

The key points are: 1. On Friday March 21, we completed testing of the grower’s product that had entered the U.S. before the import alert was put into place and that testing has now come up positive for Salmonella Freetown, another strain unrelated to the Litchfield outbreak. 2. We have a team on the ground in Honduras now investigating the cause of the problem.

There are two issues here: 1) Does the FDA reveal enough information for its tests to have credibility. Banks always have two witnesses to deposits being opened from night depositories. 2) Does a zero-tolerance policy make sense for a field grown crop such as cantaloupe?

There are real risks to this issue. Who will invest millions in farms and packing houses if you can have all the certifications, all the credibility and, even if your product has no more salmonella than the industry average, you can still be thrown into bankruptcy.

We need to really think through what we hope to accomplish with our food safety laws.




Produce Food Safety
Discussion Set For April 4

Fortunately PMA was sharp enough to add a special food safety seminar to its agenda for its upcoming conference:

PRODUCE FOOD SAFETY LEADERS
FERNANDEZ, WHITAKER AND HORSFALL
TO SPEAK APRIL 4 AT
PMA’S CONSUMER TRENDS ’08

For the first time since they assumed their respective positions, three of the produce industry’s food safety leaders will take the stage together next month before a national industry audience to discuss food safety. Bonnie Fernandez, the new executive director of the Center for Produce Safety (CPS) at the University of California at Davis, and Dr. Robert Whitaker, Produce Marketing Association’s (PMA) new chief scientific officer, will speak April 4 to attendees of PMA’s “Consumer Trends ’08: A Produce Solutions Conference.” They will be joined on a panel presentation by Scott Horsfall, who became chief executive officer (CEO) of the Leafy Green Products Handler Marketing Agreement (LGMA) in May 2007.

The conference will be held April 3-5 in Newport Beach, California.

Tim York“Food safety is featured so prominently on consumer trends because it is top of mind these days with buyers, customers — and our state and federal regulators,” said Markon Cooperative, Inc. President Tim York, who will moderate the conference’s food safety panel. “I encourage every industry member who wants to know what’s going on to attend this session.”

The session will explore the latest information on food safety including the challenges facing the industry today and the status of regulatory and legislative developments. Fernandez, Horsfall and Whitaker will also report on produce safety priorities and efforts underway within their respective organizations.

Bonnie FernandezFernandez became the first director of the new CPS on March 1. She brings to the position a wealth of knowledge and practical experience in agriculture, most recently serving as executive director of the California Wheat Commission. She will guide the center’s efforts to develop workable, science-based solutions to safeguard the nation’s produce supply and strengthen the produce industry. She holds a master’s degree in business administration from California State University, Sacramento, and a bachelor’s degree in agricultural business management from California Polytechnic State University, San Luis Obispo.

CPS was founded in April 2007 at UC Davis’ Western Institute for Food Safety and Security. PMA contributed $2 million to establish the center; Salinas, California-based Taylor Farms contributed an additional $2 million in funds and also pledged $1 million in research already planned by the company. The state of California contributed $500,000.

Bob WhitakerWhitaker will assume his new position with PMA on April 1. He will direct the creation of PMA’s new science-based programs and services at a time when food safety, traceability, sustainability and other science-based issues are taking immediacy in the produce industry. Whitaker has worked in the produce and agricultural industries since1982. His background includes food safety, security and quality, new product development, product and process innovation, production, operations, research ranging from consumer testing to plant breeding, grower and industry outreach, and planning and training. Whitaker comes to PMA from NewStar Fresh Foods LLC of Salinas, where he served as vice president of the company’s product development and innovation program. He holds Ph.D. and bachelor of science degrees in biology from State University of New York, Binghamton.

Scott HorsfallLGMA was founded in 2007; Horsfall took over as CEO in May of that year. Prior to joining the agreement, he headed the state’s California Grown program. He previously served as president of the California Kiwifruit Commission, and as vice president of international marketing for the California Table Grape Commission. The marketing agreement represents 120 handlers to date who produce approximately 99 percent of the leafy greens from California; signatories are required to implement and maintain the highest standards of safety in growing and handling spinach, lettuce and other leafy greens. Horsfall holds a master’s degree in international relations from Fresno State University, and a bachelor’s degree in communications from Brigham Young University.

With frequent Pundit contributor Tim York moderating and Bonnie Fernandez and Bob Whitaker making their debuts wearing new hats for the industry, plus Scott Horsfall, who has been at a key place in industry food safety efforts, presenting the LGMA platform, the workshop will be intriguing.

The salmonella/cantaloupe situation has just added a new spin and new urgency. The conference is coming up fast. You can learn more right here.




Pundit’s Mailbag —
More On Lousy Fruit:
Where’s The Management?

Our piece, Lousy Fruit Undermines Consumption, brought along this letter, evidence that the problem we identified is an international problem:

The world is changing! We used to have a group of experts spread across the land who tasted the product if they knew there was opportunity or risk to build or lose sales on it.

With structural change in the industry and the retail sector, economies of scale mean individual stores may lose the battle to survive even if they have a passionate and skilled Greengrocer. Remember them?

There is a massive opportunity to build sales, generating new business rather than chasing a declining market on a downward price spiral. But our ability to take advantage of this opportunity must be built on skilled staff and good management.

Of course we need to incorporate all the new technologies, respect the environmental health and safety issues and address all these issues and more in regard to due diligence.

But above all we need to instill in the retail sales staff passion and enthusiasm for the product and pass that on to the consumer.

Most products such as chocolate have a hefty marketing budget. For fresh produce this money may be better spent on training and education — both of the retailer and the consumer.

Blood sweat and tears go into getting the product to market, and often it now becomes just another product competing for space with the crisps and booze.

The proposition is simple, managing it is not, or we would all be doing it making good profits and improving the health of the population.

A few simple rules drive the category:

  1. If you wouldn’t buy it yourself it should not be on the fixture.
  2. The product must be of good quality.
  3. The product must be priced fairly.

The rest is flim flam and excuses for which the retail sector is to blame.

Anyone in the industry would probably pick oranges and peaches as taste opportunities to build sales.

The problem is that short term profit on an item such as peaches means that retailers both buy and display peaches underipe at the start of the season. Consumers pay a premium to get this early fruit and are disappointed when they don’t ripen properly.

Consumers then informally boycott the fruit, come back to the item halfway through the season and enjoy them. Then 2 weeks after they should have been taken off sale at the end of the season, consumers end up with a mouth full of cotton wool. This results in year-on-year sales declines rather than sales growth.

Oranges can be sensational but consumer expectations built on experience are often very low, which does nothing for the industry and its potential.

There are lots of clever people driving the industry now so why do we struggle with “simple” products like Fruit & Veg?

— Jim Cooper
Founder and Lead Consultant
Fresh Solutions
Staffordshire, United Kingdom

We very much appreciate this thoughtful letter. Jim’s bio gives his background this way:

Fresh Solutions founder and lead consultant Jim Cooper has more than 25 years experience of fresh produce growing and retailing in the UK and in France. After college, he joined his family greengrocery business, taking time out to work with farmers in Brittany and start his own market garden.

Over the years, he has extended and transformed the family business into a thriving neighbourhood store, majoring on fruit, vegetables, salads, herbs and packaged groceries, but also selling freshly baked bread, wine, cooked meats, cheeses and other fine foods. In 1995, he won the Midlands region award for Building a Better Business in Retail.

At the same time, he has expanded his career away from the store. For several years was National President of Field Fresh; a group of some 200 retailers. He is founder-director of Fresh Produce For All, a social enterprise whose mission is to re-introduce fresh produce into communities that have forgotten what it is like to have good quality, affordable fresh fruit and vegetables available on their doorstep.

Particularly intriguing is that Jim has been involved with a program called “Shopwell”, which is part of a larger “Eatwell in Sandwell” program — the concept for Shopwelll goes like this:

Some 50 retailers in Sandwell are being recruited to the Shopwell scheme, so there should be a shop near you selling top quality fruit and vegetables at affordable prices.

We’re helping shopkeepers display their fresh produce attractively and we’re training their staff so they can help you make the right choices.

Certainly an interesting idea; the listed shops don’t include any of the large multiples we are familiar with in the states but seem instead to be a way of helping independents and getting produce a more prominent spot in some non-traditional venues.

Increasing the availability of produce is one almost certain way to boost consumption.

And we do think Jim’s assessment — that a lack of passionate produce managers is a real problem — has much merit. In fact Jim’s notion that despite efforts in growing and packing, fresh produce “…often now becomes just another product competing for space with the crisps and booze” reminded us of nothing so much as Tesco’s Fresh & Easy subsidiary.

We wrote a piece in Pundit sister publication, PRODUCE BUSINESS, entitled Merchandising Disconnect, in which we wrote: “Fresh & Easy forecloses the possibility of great merchandising by transforming produce into another packaged good.”

Wal-Mart, which as we’ve discussed periodically rejuggles its procurement efforts to enhance produce quality, is typically missing the point. Its retail execution is what trips up this behemoth.

Yet our shopping trip pointed to other obstacles as well. On the merchandising side, stores need to honestly discuss certain things with consumers and they seem unwilling to do so. Our complaint wasn’t so much that the imported peaches were inedible — we assume they will ripen if treated properly — it was that the merchandising display didn’t make that point.

We also can’t help but feel that the produce manager with the clementines was more concerned with his weekly shrink numbers and gross margin numbers than with long term effects on consumption. For that, by the way, we do not blame the manager. He is responding to precisely what he will be evaluated on.

If he pulled those clementines and dumped them, he might well be asked why shrink was high or gross margin or gross profits low this week. If he pulls them and five years from now his consumers are eating 5% more produce every day because of him, nobody will ever know.

That is a significant problem.

Many thanks for this input from across the Pond.

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