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Produce Business

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Tesco’s Chief Executive Comments On US Venture

With all the industry getting ready for Tesco to Come to America, it is worth paying attention to what Sir Terry Leahy, Chief Executive for Tesco, has to say.

He did a video commentary after Tesco announced its preliminary results last month. You can watch the video here.

Sir Terry made a few comments specifically about its U.S. venture:

Q. And all this investment in International, that’s going to be dwarfed isn’t it by the investments in the US. Are you confident that this will pay off?

A. I don’t think the US investment will dwarf investment internationally. The majority of our capital investment will continue to go into the countries we’re already in but we’re very excited about our plans for the US and, as I say, we will launch this year, we intend that we’ll grow as rapidly as we can in the US, and, if we’re right and the thing is as successful as we expect it to be, then we have the potential to develop, in Tesco terms, a very substantial business in the United States.

Q. When you say as rapidly as you can, might there be delays in the United States?

A. Well, there are always delays everywhere but the United States ought to be one of the better places for planned growth: planning zoning is relatively open.

That is the big win for Tesco in America — it is a large, modern market in which one can actually get real estate and open stores. In much of the world, this is impossible. You either have to pay off corrupt politicians for zoning cooperation or the rules are strict and you can’t get around them at all. In some countries property is traded back and forth between either a few select families or politically favored groups.

In the U.S., the key is really whether or not you have a business, and Sir Terry alludes to this with the billion-dollar question: “…if we’re right and the thing is as successful as we expect it to be, then we have the potential to develop, in Tesco terms, a very substantial business in the United States.” Which means that the potential is there but they still have to have a concept that works.

You can find a transcript to the video here and a slideshow on Tesco’s preliminary results right here.




Wal-Mart’s Latest ‘Green’ Move Gives Pause To Explore Sustainability Rationale

First Tesco USA announced that it would install the “…largest roof-mounted solar installation in California, and possibly the world” on the roof of its distribution center currently under construction in Riverside, California.

Now, Wal-Mart has announced that it will have installed solar power panels on 22 locations including distribution centers, Wal-Mart stores and Sam’s Club stores in California and Hawaii.

Not only do California and Hawaii both have lots of sunshine, they also offer potentially lucrative tax credits to those who install various renewable energy efforts on their properties.

In addition, if so called “carbon caps” are imposed, solar panels may produce valuable “carbon credits,” which companies can trade or sell.

There is nothing wrong with solar power, but the noise around sustainability is getting so loud it is hard to think clearly.

Most of this is just PR, and every once in a while some little tidbit leaks to prove it. For example, Tesco, a company that every day is busy talking about alternative energy and carbon footprints, was caught sending CDs and DVDs back in forth from the U.K. to Switzerland, burning carbon every mile, to take advantage of some tax loophole.

Clear thinking on sustainability initiatives can be achieved by dividing these initiatives into three categories:

  1. INITIATIVES THAT PRODUCE A POSITIVE ROI. Putting solar panels on the roof can produce profits — sometimes directly, sometimes indirectly, as a result of tax credits. The same applies to utilizing bio-diesel fuel, designing facilities to use passive solar energy — skylights and what not.

    Since things that produce a higher return than one’s cost of capital are profitable, everyone ought to do them — regardless of one’s opinions on global warming, carbon neutrality, etc.

    Companies that promote that they are doing this kind of “green” initiative are just trying to get publicity points for doing what they would do anyway.
  2. INITIATIVES THAT PRODUCE A SUFFICIENT “REPUTATIONAL DIVIDEND” TO BE PROFITABLE. Many things a company does are done not because they produce an immediate obvious ROI but because doing them provides a form of advertising that enhances one’s reputation in a way that encourages any number of good things: It may make customers want to shop with you, employees want to work with you, the town leaders want to cooperate with you, etc.

    An example of this is a substantial local business supporting the town hospital or library or volunteer fire department. Although these expenses may be officially deemed “charitable,” in reality a large local employer who didn’t do these things would get a bad name in the community. People wouldn’t want to work there, theft would rise, consumers would shop elsewhere, etc.

    Equally, environmental initiatives impact the image of a company in the community. The impact may vary with the clientele. Whole Foods would face a consumer boycott of it wasn’t perceived to be doing good things for the environment. Tesco is probably going for the JetBlue effect — trying to find a way to offer a mainstream offer such as Wal-Mart does but with just enough ‘coolness’ so that more upscale earners will feel comfortable shopping.

    In any case, if a company thinks that by engaging in “sustainable’ activities and promoting that fact, it can gain sufficient goodwill that its business will benefit more than the cost of the initiatives, then, of course, the business ought to do it.

    It is important to note, however, that these activities are being undertaken because they increase profits — not decrease them.
  3. INITIATIVES THAT LOSE MONEY FOR A COMPANY’S SHAREHOLDERS. Ninety-nine percent of the sustainability initiatives fall into categories 1 or 2 and thus are entered into in order to increase corporate profits. They should be done irrespective of global warming and other environmental issues.

    The hard issue is whether companies should lose money to enhance the environment. So far, no CEOs have come out and said they are doing this. It is morally problematic, at least in a publicly held company, because it is not the executive’s money to give away. After all, if a corporation has extra money that it can afford to lose, why not pay it out as dividends to shareholders and let them decide if and to what they might like to donate it?

But, of course, if so-called sustainability initiatives are just another way for a company to maximize profits, it is sort of odd that there should be so much fuss around the issue.




A Look At Whole Foods

Whole Foods has made available an interesting presentation from its annual meeting of shareholders. The presentation reviews the core values of the chain and provides some great photos, including the first Whole Foods in Austin, Texas, back in 1980 and the latest iterations of in-store restaurants, fantastic wine displays and customer communication devices.

There also is a portrayal of the new Whole Foods Guarantee, which tries to bring British-style environmental and labor certifications to the U.S. as well as all the financial information and a review of the proposed merger with Wild Oats.

The presentation plucks out the volume of “locally grown” produce Whole Foods sold in 2006 — $163 million. Although no definition is given of what qualifies as local. Still this is an advance move against the “movement” advocates who attack Whole Foods as part of “big organic” looking to work with big vendors.

And there’s a picture of the new London store set to open in June. A test of whether the Whole Foods concept will play outside of North America.

You can see the presentation right here.




Pundit’s Pulse Of The Industry — Dole Food Company’s David Murdock

Dole launched its $54 million East Coast processing and distribution facility in Bessemer City, North Carolina last month. But another major development close by and close to David Murdock’s heart is also underway. It is the Dole Nutrition Institute at the North Carolina Research Campus, a life sciences hub in Kannapolis, North Carolina.

At the salad packaging plant opening, Pundit Investigator and Special Projects Editor Mira Slott had the opportunity to sit down with David Murdock to learn more about his vision for The Dole Nutrition Institute, and especially its associated research laboratory. The project is a public and private collaboration between the Dole Food Company, the University of North Carolina, Duke University and community colleges, initiated and fueled by Mr. Murdock and his passionate interest in nutrition.

It coincides with the state-of-the-art plant start-up, which is equipped with high tech European food safety agitation wash systems and horizontal drying machines designed to accommodate more delicate baby spinach leaves.

Dole is bringing spinach production under its umbrella instead of outsourcing, following the E. coli crisis. Richard Dahl, president of Dole Food Company, said that Dole decided to put another $10 million in equipment to process spinach and other leafy green products. It also is partnering with the North Carolina State University Ag Extension to conduct trials on romaine lettuce and other items, such as cabbage, turnips, mustard greens, sweet potatoes, blueberries and watermelons.

It will take an awful lot of product to fill this plant, which at 285,000 square feet is already set to produce 324,000 bags of fresh-cut salad daily, says Dahl.

Eric Schwartz, president of Dole Fresh Vegetables, says the operation opens the door for Dole to aggressively pursue business in the northeast. [Read his interview in the Pundit here]. The plant also brings financial relief and a sense of hope to a community that witnessed a loss of more than 4,000 textile-related jobs from 2000 to 2005. At the same time, David Murdock’s plans to impact people’s health and well-being are significantly more far-reaching:

David Murdock
Chairman and CEO
Dole Food Company
Westlake Village, CA

Q: Could you share your goals and vision for the Nutrition Institute?

A: The Nutrition Institute is the love of my life. I’ve invested $150 million of my own money into what will become one of the most advanced research and scientific labs of its kind ever conceived.

I wanted a facility totally dedicated to the benefit of improving health, to discovering what we need to know to live longer lives. I figure I’ll be living until I’m 125 years old, on the way to 150. I’d like to stop people from smoking and eating big juicy steaks saturated in fat. It’s hard motivating people to change. Part of the Institute’s function will be to educate people through publications on what to eat and drink and the reasoning behind it, with recipes and incentives.

I’ve devoted a great amount of time to create a huge major park with elegant landscaping and beautifully designed buildings in Regency style, and I’m putting 100 bicycles around the campus in the spirit of health for people to enjoy.

Q: What kind of research will take place at the lab? How will this sophisticated equipment be utilized? Will you be developing new varieties of healthier fruits and vegetables, for example?

A: Since Dole is the largest fresh fruit and vegetable grower in the world, in 94 countries, I felt I was in a position to start doing scientific research on what are super foods, what causes different cancers, heart attacks and other health problems. We know there’s a causal link between saturated fat and many of these diseases, but there is so much we don’t know.

We will be able to study when to take any kind of fruit or vegetable to address specific diseases and health needs. We know you find potassium in potatoes and vitamin C in citrus, but there are a whole string of other ingredients to learn about in testing and to provide information that is not available to the public now. It’s not as much about creating new varieties as about learning what is in the varieties. What makes hair grow, what’s good for the skin, what kinds of produce should one eat to prevent breast cancer or prostate cancer?

Q: Where does your passion for nutrition emanate? Have you always been so disciplined in your eating habits, and in your fervor for getting others to follow suit?

A: I haven’t always been so passionate in this regard. I reached a turning point in my life in 1985 when my wife died of cancer. If I had only known more about the medicinal qualities of fruits and vegetables, the preventive and curing properties of certain foods in fighting different diseases, I could have extended her life for many, many years.

From that moment forward, my commitment to nutrition and health has been steadfast. My wife exercised, but she ate steaks like everyone did in those days. I totally believe that what we put in our bodies is critical to our life expectancy. I always say, don’t eat yourself to death, eat yourself to life.

Q: I understand you practice what you preach. Mike Cavallero [President of North America Tropical Fresh Fruit] told me you’ve banned all creamed soups from the Dole cafeteria, which he describes as the healthiest corporate dining establishment one may ever see.

A: That’s right. Not only don’t we have cream soup, I took butter off the menu, no saturated fats, no cheeses and no steaks, but we have a nice selection of fresh fish to choose from each day. I’m a vegetarian, but I eat fish. I don’t put a drop of cream in my coffee, I use rice milk. And I make an effort to eat the proper amount of nuts and grains.

I have a chef at home to make sure my meals are healthy. I know everyone doesn’t have that luxury, but it’s still possible to learn how to become a vegetarian. People spend more time working on their automobiles than on the product going into their bodies.

I will be personally spending up to $1 billion on that campus to further research on nutrition and how to be healthy. Everyone can extend their life considerably if they eat more fruits and vegetables and be very careful what they eat all day long. People have to stop taking handfuls of pills and imagining that will solve their health problems. Think about your body. It dies or lives by what you put in it. If you have a belly, you have a problem. The more stomach you have the shorter your life.

Q: How does the new processing plant fit into this plan?

A: That’s why I built this plant here. We want to encourage farmers to switch over to farming safe and healthy products. We had a problem with E. coli, and whatever went wrong in the farm, we got blamed for it.

I don’t smoke cigarettes and never did. This state has supplied more nicotine that kills people than any state, and I want to switch that over to fresh fruits and vegetables. We need thousands of farmers. We’re waiting for farmers to make up their minds.

I took a big gamble when I built this plant. So far it’s been pretty slow bringing farmers in. Everyone knows how to grow tobacco, but we have to work on changing mindsets. Right now, all product processed here has to come in from elsewhere. We need more quantity grown here.

I’ve promised to build another plant here, but I’m holding off on the timeline for that. I don’t want two partly empty plants. We grow and ship all kinds of produce around the world. I want farmers to know we will buy virtually all products healthy for the body. There are all kinds of fresh fruits and vegetables that can be grown here. I’m working to help people get healthy.

Q: Is this your first project in North Carolina? What are your previous connections to the state?

A: I built a home 25 years ago in Kannapolis. Most people don’t realize that. I travel a couple hundred thousand miles a year around this great world of ours and I call it the world of Dole! I’m helping to develop a new kind of farming here. For awhile, we’ll be shipping product in from Georgia and California and other places.

I’ve been particularly dedicated to building a plant and nutrition institute in North Carolina. I had a hard time turning down Tennessee because they were practically paying us to go there. My friend Arnold Schwarzenegger was not pleased. He wanted to know why I didn’t build the research institute in California. I not only built a home here, but I built a love for North Carolina.

As Isaiah prophesized that the people “…shall beat their swords into ploughshares, and their spears into pruninghooks…” so David Murdock prophesizes a day when the tobacco farms of North Carolina shall bring forth a bounty of health-enhancing fruits and vegetables.

Although the Dole Nutrition Institute has existed for some time, based at Dole’s California headquarters, it has functioned primarily as a communications vehicle. With this new venture in North Carolina, it moves into the realm of original research, building a core laboratory that will contain, among other elements:

  • A 900 megahertz nuclear magnetic resonance spectrometer to analyze and dissect the sub-molecular components of matter.
  • An 800 MHz NMR spectrometer and a 700 MHz NMR spectrometer for the analysis of specialized molecules.
  • A high-tech genomics facility capable of analyzing the genomes of plants, animals and people.
  • A digital imaging facility that contains things from electron microscopes to computers to produce advanced three-dimensional reconstructions, and
  • A model Good Manufacturing Practice-compliant sterile manufacturing facility that can produce both small molecules and biologics.

The campus model is unique because it combines in an integrated setting research on plants — such as a school of agronomy or an ag research station might conduct — with research on human health.

It also combines produce processing facilities such as the just-opened salad plant with agricultural research to facilitate the production of locally grown crops.

Getting all these components to work together is a substantial challenge, but making it work is also a substantial opportunity.

David Murdock’s passion is also taking the produce industry where it has never gone before in another sense: Mr. Murdock is the first high level, mainstream produce industry executive to publicly preach a form of vegetarianism.

Most produce executives have hesitated to take that step, thinking that it would put produce companies too far out of the mainstream. Yet, Mr. Murdock is, in fact, echoing the direction that most of the scientific research is leaning toward. It is the political pull of other food industry segments that has kept the government from speaking out as frankly as Mr. Murdoch.

Even the Produce for Better Health Foundation tries to be upbeat by urging that More Matters! — when it comes to fruits and vegetables. Although, by implication, the foundation urges less meat and dairy consumption as the idea is that people will eat more servings of fruits & veggies and less of other, less healthful things. It never actually tells people don’t eat something.

It is good to be a billionaire in many ways. One very good thing about it is that you can speak your mind and not worry about what others think. So Mr. Murdock, passionate in his belief in the power of produce, just doesn’t worry if the cattlemen don’t like what he says.

David Murdock with
Pundit Investigator and
Special Projects Editor Mira Slott

 

There is something enormously inspiring about David Murdock. A high school dropout, he saved Dole when it was in financial distress. Now, at over 80, inspired by the love he feels for his lost wife, he tries to save not only the produce industry but the human race by enhancing human health through produce.

It must be frustrating sometimes to work at Dole, to see resources expended on projects with no clear ROI, yet it must be inspiring as well. A business and a boss dedicated to a higher purpose, what an awe inspiring thing to be a part of.

Many thanks to Mr. Murdock for giving us some of his time.

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