Q: I understand the cantaloupe import alert has made its way to the island of Guam, and that you have been handling the situation. What’s happening?
A: I’m in charge of the Division of Environmental Health, which manages food safety problems of this nature. We have a food, drug and cosmetic program, similar to our federal counterparts, responsible for regulating the importation, distribution and sale of consumer commodities such as food on the island. Our law somewhat mirrors federal law to insure that no misbranded or adulterated food products are imported.
Our political situation is that we are part of U.S. territory and all federal mandates apply to Guam. We also have local statutes governing island activities such as food.
Our federal counterparts are in constant communication with us and we are notified of recalled items that are overseen by FDA, whether by fax or e-mail. Just like everyone else, we were notified of the voluntary recall of Honduran cantaloupes.
We’re given notice from the FDA, or it could be USDA, as to the reason for the recall and the product in question, whether the problem is with canned goods, agricultural products, or anything else.
Q: Did Guam import product from this Honduran grower? If so, have you tracked it all down?
A: We have accounted for all cantaloupes imported to Guam from Honduras; three vendors on the island imported a total of 425 cases of the implicated cantaloupes. Each case weighs 35 to 40 pounds with 8 to 9 cantaloupes in each case, so we’re talking approximately 3,400 cantaloupes from this grower that were imported to Guam.
Q: Did the cantaloupes make there way to the market and to consumers? I haven’t seen any reports of illness coming from Guam.
A: Our understanding is that those distributed to hotels or restaurants may have been sliced and served to their customers. And some were directly sold to retailers whole. I believe some of those melons were converted to fresh-cut product in store. Every single case has been accounted for now. Either the product was quickly taken off the shelf for destruction, or we learned it was purchased or consumed by consumers.
We’re happy to say there have been no reported cases of salmonella infection in Guam. Of course, the bad news is that some of the contaminated product came into Guam. But it shows you the globalization of food commodities; whether on an island in the Western Pacific or in a large city in the U.S., food gets around.
Q: Could you provide more detail on the tracking and withdrawal of product from the market? How do you know all products in question are accounted for? It seems every day another company somewhere in the U.S. is putting out a voluntary recall notice related to this problem.
A: We work pretty closely with our local vendors and they were very responsive and had no hesitation in taking the guidance of the Guam Department of Health and the FDA.
We immediately contacted major importers and distributors on the island. We made phone calls, and sent companies the FDA information by fax or e-mail, if they have such form of communication available to them. Then we did follow-up visits. We’re much smaller, so on-site visits are easier for us. That helps because vendors can be better informed. They appreciate the personal communication and are much more responsive when we are able to be there in person.
Q: How did you alert the public? Did the government issue its own release? Did Guam importers put out their own recall notices?
A: Upon learning that Guam did receive implicated melons, we did a press release and local media covered the news. You’ll note that the number of cases originally reported in the release is less than the final tally of 425 cases. I don’t believe the importers sent out any recall notices of any kind to the public.
Q: Was there ever any question in conducting a recall?
A: We seek and obtain a lot of guidance and information from FDA in making our decisions. We were told this is a voluntary recall. We passed this information to local importers and distributors. Obviously they had the option to refuse, but as I mentioned we have close contact, and the companies chose to take the side of precaution.
Q: Is your island status and relatively small size an advantage in handling recalls and isolating food safety problems?
A: Our relatively small size essentially enabled us to track down all importers to whom the grower sold melons. The three importers knew immediately through their own documentation the melons were from Honduras and quickly isolated the implicated melons. Instead of identifying brand names, it’s easier if a consumer had purchased cantaloupe recently to contact the local retail establishment and find out if the melon was part of the recall. The fact that we didn’t have any salmonella problem on the island lessened the concern. Most of our produce is imported for obvious reasons. We essentially import everything into the island.
The image of Guam is people living in grass huts, but we have a fairly large population, 175,000, like a large U.S. town, and the island is pretty westernized. Our main tourist area is often referred to as a little Waikiki.
Fortunately nobody got sick. If someone had gotten salmonella there is a decent shot it would have ruined someone’s honeymoon, since Guam is a very popular destination for Japanese honeymooners. In all probability, the melons reached Guam as part of mixed load shipments coming out of Los Angeles.
Mr. Nadeua’s comment. “…it shows you the globalization of food commodities; whether on an island in the Western Pacific or in a large city in the U.S., food gets around,” made us curious as to what else we could learn about the industry in Guam.
In order to get close to the consumer, we wanted to speak with a retailer. Pundit Investigator and Special Projects Editor Mira Slott did some digging and found the largest retail chain on Guam::
Q: When we heard the cantaloupe outbreak recalls reached Guam, we thought it would be fascinating to learn more about the island and retail produce operations.
A: MIKE: Pay-Less is a privately owned, 57-year-old company. We’re the largest retail chain on Guam with six stores spread out through the island evenly. They range in size from 30,000 square feet to as small as 10,000 square feet. Probably 70 to 80 percent of our produce selection comes from off-island, and 20 to 30 percent is grown locally.
Guam used to have a pretty good agriculture industry — coffee, tobacco, fruits and vegetables. Obviously it’s difficult to compete on volume, price, and quality of produce U.S. stateside.
Q: How does your procurement system work?
A: MIKE: We bring in the majority of our produce via surface, via ocean. There are only two carriers; Matson and Horizon lines. We do import some produce from Korea, the Philippines and Japan, but a large percentage is from the U.S.
Q: Do you purchase directly from a few large importers?
A: MIKE: Pay-less has a partner in California, Bruno’s Quality Produce. They handle the process, procure what we need, put product in containers and ship it out to us. They’re like a broker but they have a warehouse and do a lot of business in Guam and Micronesia. We’re a part owner of that company. They sell us the lion’s share of our produce offering.
A: TOM: We also buy direct from New Zealand — onions and apples. Kiwis can’t handle the four-week trip; Philippine mangos are an Ataulfo variety originating out of Mexico, some of the sweetest in the world. They have to have a USDA inspector on site for shipping season. There is so much politics for getting products out, it’s a nightmare because of USDA regulations and restrictions. From Korea we import strawberries, sometimes we bring in grapes, and golden Asian pears are huge. From Japan, we bring in apples and pear apples.
Q: What produce is grown on the Island?
A: TOM: Local produce on Guam is huge; we have so many farmers on this island. Guam is situated on a dormant volcano, 36,000 feet above the ocean floor, with 1,500- to 1,600-foot peaks. It’s mountainous and lush, on an ocean surrounded by reefs, creating rich and fertile land for growing fruits and vegetables. I try to buy local when I can, aiming for 25 to 30 percent of all produce I purchase.
Items grown here include Macau bananas, Tara root, cucumbers that look like the straight Japanese variety, coconuts in abundance, different kinds of local yams, and local cherry tomatoes unlike those you find stateside. You can eat this tomato green, it’s so sweet. The eggplant grown in Guam is very popular. It’s comparable to a baby Italian eggplant variety, but more purple/green in coloration.
Q: Do logistical challenges hinder your imported assortment?
A: MIKE: We definitely face obstacles because of our remote island location. Produce comes in only once a week, after losing 13 days of shelf life on the water before arriving at port. Our produce is immediately many days older than product in other U.S. stores.
Our damage is very high with many pull backs. We have to work our product a lot more. It can also dry up, losing water weight in transit. People are critical of produce prices; they don’t understand what it takes to get it on the shelves.
The type of produce we carry is generally pretty standard, very typical of a mainstream supermarket — a whole gamut of fruits and vegetables. We do have trouble with the more perishable products. Being 5,000 miles away does cause problems. We air freight the vulnerable items like strawberries and mushrooms. And we carry a lot of pre-bagged lettuce to meet customer demand.
A: TOM: Logistically it’s challenging. We only get shipments once a week by surface in containers. Technology has come a long way as far as transportation and maintaining the cold chain, but when it comes in, it’s tough to prolong freshness when we’re already behind the eight ball on shelf life. Refrigerated trucks deliver to stores, and we try to uphold the half-hour-out-and-in rule. We do best practices, trimming, misting, crisping, etc. With the lead time before it gets to the broker or distributor, it’s a good 15 days before product arrives and 16 days till it hits stores.
Fortunately we get two air shipments a week for products like cucumbers, bagged salads, baby lettuce, all berries, mushrooms, and herbs. We really have to maximize these shipments because of the rising cost of freight. Now it’s upwards of $2,100 dollars related to rising fuel costs.
Q: What happens when items don’t arrive as expected? Do you have back-up strategies in place?
A: TOM: In the States, if you don’t like the shipment you reject it and get another delivery. We don’t have that luxury. One time on the island, I got a 42,000-pound container, and the refrigeration failed. Nothing I could do but scramble, scavenging from other companies to make do.
On holidays, I bring in four or five containers and hope and pray there won’t be a problem because there’s no fall back. Bruno’s is highly proficient with cold chain packing to the point where the process is very consistent and manageable. Horizon Lines is a great company, monitoring product in transit, misting the produce and insuring it stays at the proper temperature, so some of the produce we get looks like it was just shipped. It is very rare when I receive a container that’s a problem.
A lot of customers are very savvy; they know the logistics issues and are very forgiving. And I have the best produce supervisors, all have been in business a long time. We have employees with the company 20 or 30 years who know how to handle problems.
Q: How was Pay-Less impacted by the cantaloupe outbreak?
A: MIKE: We weren’t carrying any cantaloupe from the Honduran grower. Our system of being advised of any recalls is very good. Obviously with the Internet, we get information very quickly. We made sure we didn’t have any on the shelves and that none was shipped. We let our customers know immediately our cantaloupe was OK and put up signage.
A: TOM: My distributor and I have a strong relationship. Bruno’s always informs me of what’s going on. Fortunately enough, we were one of the only companies that didn’t have any cantaloupes from the Honduran grower. We had Costa Rican cantaloupes from Del Monte. I went on local a.m. radio station and did a nice public announcement alerting consumers that cantaloupes from Pay-Less were fine to eat. Our boxes of cantaloupes showed Del-Monte labeling. The FDA notice was long, so we just put up a sign that said we didn’t carry cantaloupes from that grower.
Q: Did you interact with the government in any way?
A: MIKE: The Guam Department of Public Health is pretty effective in dealing with food safety alerts; they send us a notice when product is recalled, whether beef, seafood, dry grocery, or produce. When the warning comes in, every manager is advised and we’re very aggressive in taking implicated product off the shelves. We’ve been very blessed not to have had any food safety problems at our stores.
That product did come over to Guam from the Honduran grower. Sometimes our distance is one of our greatest problems, but in this case it was one of our biggest benefits. That product was already in the water 13 days. FDA was already having issues with that product when it was in transit. Suppliers were pre-warned and when implicated product came in, it was segregated and destroyed.
Q: Did your customers express concern or stop buying cantaloupes?
A: MIKE: With our customers, some were cautious and didn’t buy cantaloupes even though our product wasn’t part of the recall. But something else occurred. We had cantaloupes, and probably were the only company that had cantaloupes. Our major industry is tourism; we had hotels and restaurants coming to us for cantaloupes, since we were the last man standing.
TOM: The same rush occurred during the spinach crisis. Even after the spinach outbreak, we had a hotel rush for product. Unfortunately wholesalers and other retailers tended to just stop selling all spinach because of how the FDA generalized the warning. Our supplier was Fresh Express and we got notice that their spinach wasn’t involved. We did start selling spinach again.
What the FDA did was wrong. The FDA can’t do general statements across the board destroying whole industries; they have to isolate the problem before scaring consumers unnecessarily.
During the cantaloupe outbreak, we were able to alleviate concern. It was a matter of educating our supervisors. We did a good job of letting our customers know the facts. We were still sampling cantaloupes when news of the outbreak hit the media, to get sales up. When something like this happens and consumers get scared, that commodity can be destroyed.
If retailers have samples of product out, employees should also eat the samples with their customers to reassure them. It’s important to educate customers best you can. Of course, you want to keep customers safe and take all necessary precautions when alerts come out, but it can be just as bad to over-react and create false alarm.
Q: Could you describe your customer base?
A: MIKE: We provide mainly for the local market. Of course, Guam is like Hawaii — a melting pot, a mix of ethnic cultures. There are a lot of Japanese. We get Japanese honeymooners; many marriages take place in Guam. Obviously, there is a pretty big Asian population on Guam and there are some smaller Asian stores that cater to that market. Pay-Less is more mainstream. We also have a large military contingent, and commissaries are pretty big here too. We do get a lot of military personnel and their families shopping at our stores.
A: TOM: Another political story is happening in Guam. The U.S. is redeploying 8,000 marines over to Guam. It’s a huge military buildup that will involve building all the supporting infrastructure. The majority shop in commissaries, but Pay-Less carries an average 300 to 350 SKUs in the produce department, and we continue to expand and add in new SKUs. We’re also neighborhood stores, strategically located.
Q: Tell us more about the retail landscape. I understand the Guam Kmart is the largest Kmart in the world.
TOM: Kmart is more of a Japanese tourist destination. With a 250-square-foot produce area, they don’t really compete in produce, and are more or less focused on general merchandise variety items. At Kmart, you find the top 10 produce items in bulk. They don’t sell small quantities, or variety. They may bring in a case of oranges at a good deal.
In Pay-Less, we just transitioned to five decks and value-added sections. If you walk into a regular mainstream supermarket stateside and compare to it to Pay-Less, we usually have more variety, cleaner stores, better customer service, and are community-oriented.
Cost-U-Less is definitely a Costco-style concept, with two stores. They do have a produce department but are more club-oriented; customers box stuff when they check out, there are no bags.
There are other stores; California Mart, an Asian market oriented toward Korean clientele and some Japanese, and the island is sprinkled with a lot of mom and pop stores.
A: MIKE: We’re really the only mainstream supermarket like what you see stateside. We have a competitor, Alaska Commercial, which is coming to Guam, so that will present new challenges.
A: TOM: Alaska Commercial, a large retailer in the states, with 180 stores or so, has a format that is kind of similar logistically and in square footage. We go through some of the same issues, so they might be suited to be a competitor of ours on Guam.
The island is very unique in its operation. Mike promotes a good point that competition is keeping us honest and on our toes. Competition is good for the company; it makes us all better. We may not necessarily welcome it, but in a sense we do. I think it will just strengthen Pay-Less and benefit our customers.
Q: What attributes will Pay-Less capitalize on to give it an edge?
A: MIKE: Labor issues are difficult and we have been able to maintain a loyal employee base. Many of our employees have been with us a long time. We’re very community-oriented; it’s one of our big pushes. As part of our community service, Pay-Less employees are helping to build a homeless shelter.
TOM: Pay-Less Community Foundation, our non-profit arm, runs a Feed the People project, which Mike spearheaded. Employees donate a certain amount a month out of their pay checks. We just broke ground on the homeless project.
MIKE: We’re building a new fully concrete structure to replace the rundown location. The generosity of our employees and their desire to volunteer is uplifting; even down to cashiers, baggers and drivers, donations range from $2 a pay period to $50 a month. It’s all voluntary. The Foundation has taken a loan out from the Bank of Guam, no collateral involved. We’re using it to construct the building. We’re funding that debt service payment to get the loan from companies in the community and our employees are the biggest contributors. It was a very nice surprise to see the employees come together for such a worthwhile cause.
Q: Do you promote any health/nutrition initiatives, such as the Fruit & Veggies — More Matters campaign?
A: MIKE: We have an annual Five K race, Kick the Fat, which is in its 11th year now. Some 2,400 people showed up for that race, part of our big health fair. Huge tents are out with medical stations set up for sugar and blood pressure testing, chiropractors, yoga lessons, organic and natural foods, and all the money we make we donate to non-profit charities. We give away a lot of produce, apples and bananas. We also do store promotions building up to the event.
Q: Do you integrate the healthy eating/lifestyle theme in other ways throughout the year?
A: MIKE: We run a lot of demos on how to cook vegetables and healthier dishes. We sample produce constantly. This is a regular thing with us, putting out sample trays, and all our supervisors are trained on proper food safety procedures, washing hands and using clean knives to cut up fruit for passersby.
A: TOM: Pay-Less is very health-conscious. In addition to the Five K run, we advertise that consumers should eat 9 servings of fruits and vegetables a day; we put a standards symbol with 9 a day, since some health reports are coming out in that direction. Five is not enough. I’m excited about the produce industry and the direction it’s going. Years ago, the produce department was a contributor but not a focus point.
In our remodels, we moved the produce department to the front of the store, and expanded on dollars we do per square foot, and produce consumption is increasing.
Q: How does the natural/organic food trend play in Guam?
A: MIKE: We rolled out a pretty wide natural and organic section, starting about three years ago. We’re putting more emphasis on that whole category because of rising interest.
A: TOM: Organics is a small trend, but the category is increasing. We’re far off the national average growth percentage-wise, if you look at organic trends in the States. Our organic produce is integrated into the department. We have one store targeted as our destination store, with a large Health Smart department next to the produce department, and in other stores to a lesser extent.
My view is all produce is Health Smart. So many studies show organic is no healthier than conventional produce, and it costs people 22 percent to 25 percent more. Somewhere along the line information about organics has become a fallacy. There may be more chance of getting sick from organic produce than traditional. Think of what growers are not using to kill pests and bacteria.
Q: With food safety concerns reaching a fever pitch in the U.S., more retailers are starting to require stringent standards from their suppliers, including third-party audits. Do you?
A: MIKE: We don’t require third-party audit food safety certifications. We have USDA inspectors and EPA. When produce companies are mass-producing, those certifications are necessary. Suppliers manufacturing and reselling produce require regular inspections from the Department of Public Health, as does Pay-Less. We are regularly inspected by Public Health and rated.
Most produce is relatively safe. With our local produce, a public law recently passed applying to farmers that want to sell to retail establishments. These local growers have to pass a pesticide/fertilizer program and get certified. We’re just beginning to implement the program, but we’re giving these suppliers a little time. Many backyard farmers are not sophisticated like those in the States. By the beginning of next calendar year, we’ll issue a memo. It will inform local farmers that if they don’t pass this class and provide certification, they can’t sell to us.
A: TOM: Guam passed a bill related to pesticide and crop management. The problem is with the EPA here; they’re so shorthanded. The bill has been passed and EPA has given a certain amount of time for growers to get credentials, but the EPA is not able to enforce it now. We’ve been asking the government to do this for a long time. We have a lot of established farmers in Guam, who have been around a long time, and then there are smaller farmers that don’t understand legislation, and some have been caught using pesticides they shouldn’t. The bill requires local growers have to take classes and get certified.
Q: In the mean time, is Pay-Less concerned that all local produce is OK to sell? How do you differentiate?
A: TOM: At Pay-less, we wash all local produce when it comes in. I’m sure there are times when it comes in not being washed, but we strive for it to be thoroughly cleaned.
Anywhere we can, we want to make a difference. This is an added precaution; we have tubs where we soak everything when it comes in. Growers are not doing traditional packing on the island. Every one is going green, using reusable crates. Everything they pick, we transfer from the crates to carts and then we wash the produce.
We have an in-house safety and health guy that goes to the stores and follows all guidelines set by the government organizations. Our supplier Bruno’s buys from larger farms in California. Most of our U.S. imports are from large reputable companies upping their standards.
Q: Supermarkets continue to build on their own private label initiatives. Does Pay-Less have store brand private label products?
A: MIKE: The majority is supplier-branded product. We don’t manufacture anything ourselves. Pay-Less buys from Unified Grocers and we use their private label, which is different from, say, Safeway brand private label. Unified Grocers, based in California, sells to the majority of independents on the West Coast.
Q: How is Pay-Less positioning fresh produce moving forward?
A: MIKE: We’ve done a series of remodels and produce departments are bigger. Every set expanded produce sections because of demand. We are opening up another store around March of next year and produce will play a key role. A couple of stores do prepared foods and one store has a full-blown service deli with two and three course meals. We don’t have salad bars, but carry a variety of grab-and-go items, wrapped sandwiches, sushi sets, and bendo boxes. The convenience-type product segment continues to grow. The company is set up well to adapt to trends.
A: TOM: The Island is a small knit community; everyone knows each other. When customers go into Pay-Less stores, company executives are very accessible, friendly people; they don’t hide in offices, they’re in the stores talking with customers on a first-name basis. This is a very family- and community-oriented company.
Paul Calvo, President/CEO of Pay-Less, owns Calvo Enterprises and Pay-Less is a part of that. Kathy Sgro, his daughter, is Chairwoman and Executive Vice President. Mr. Calvo was the governor of Guam at one time.
A: MIKE: As an aside, Calvo Enterprises is made up of a diverse group of companies. The Market Wholesale and Distributors brings in container bananas green, ripens them here and supplies to different entities on the island. It is a family business. I’m married to Kathy’s sister, Marie, although she doesn’t work at the company.
Q: Did Marie inspire your entrance into the supermarket world?
MIKE: I’ve been in retail a long time, I like to think I’m relatively young, but I’ve worked in the supermarket business since the summer of 8th grade. My family owned one of the biggest supermarkets in Guam before and after World War II. Most of our family members worked there, I started on weekends. Retail is pretty much the only industry I’ve been in, except a stint when I went to school in the States.
When I was a teen in high school, I moved to the States with my family, and stayed for college at San Jose State in California. I headed back to Guam in1989 and started working for Pay-Less, gaining experience at the store level in the meat department and produce department, learning the operations and making my way from assistant manager to where I am now.
Q: And that’s when you fell in love with your wife?
A: MIKE: We were destined to be together even back in junior high and high school. We were dating in 9th grade, and she still likes me!
Q: Tom, how did you find your way to Guam. Sounds like a fantasy to work on a tropical island.
A: TOM: I’m originally from another island — Long Island, New York! Prior to moving to Guam, I worked at HEB for seven years out of Texas. They’re an awesome company. I was cruising the job opportunities on monsterjobs.com out of curiosity one day and saw a retail position for a produce manager in Guam, and couldn’t help but be intrigued.
Pay-Less had great stateside turnout for the position, they narrowed it down to two candidates and flew us out to the island. I took a two-year contract. They were struggling a bit with their produce department and wanted change. I was able to offer my experience, since I had been in the business 25 years. I’m a very hands-on manager but like to give my guys the credit. They are so committed to their jobs and do outstanding work. Mike is such a competent and inspiring general manager and he’s bringing us into the future.
Now I’m at Pay-Less two years and a month, and I’m staying! I’m at a wonderful company on this beautiful island in the middle of the Pacific Ocean. Guam is 36 miles long, and 8 miles wide, with the most diverse population. There is an amazing mix of cultures, Asian, Micronesian, also a prevalent Spanish influence, originating from the explorer Ferdinand Magellan; my wife is Mexican and the cultures are close in many ways. Things are more laid back here, but it’s a good culture shock. Since the moment my wife and I arrived on the Island, people have treated us like family.
Q: As the market evolves, I imagine the company’s well-established family roots and community ties will serve Pay-Less well.
A: TOM and MIKE: We couldn’t agree more.
Well what do you know? The Pundit is also a Long Island boy; who would have guessed we would travel half way around the world and find out we are chatting with a produce category manager from right where we started?
One wonders if HEB is aware it is providing a management training program to help out our countrymen in Guam! In any case, a good cause.
It is interesting that even so far away, the issues are so often the same: locally grown, food safety, private label, health marketing, and even in Guam, maybe especially in Guam, a boy and girl still fall in love and the guy winds up in the family business building it for the next generation. It is a beautiful thing.
Many thanks to Mike and Tom and to Pay-Less Supermarkets for giving the whole industry a little window into life at a supermarket chain in a little patch of paradise.