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Got Produce?Generic Marketing Program Dialog Begins, But Is It Right To Use PBH Donor Funds To Lobby For A Mandatory Assessment?

Jim Prevor’s Perishable Pundit, May 15, 2009

There is a proposal outstanding to establish a National Fruit and Vegetable Research and Promotion Board, basically a program similar to those in the dairy, beef, pork and other industries.

It is an old idea, one discussed for many decades, and in fact it is not clear who actually supports the idea today. The spark has come from the Produce for Better Health Foundation — yet its board has not endorsed such a plan. There were six people put on a special committee to consider the idea, but the organizations they represent have not issued endorsements.

Paul Klutes, Director of Brand
Sales for C.H. Robinson and
current Chairman of PBH, and Elizabeth Pivonka, President of PBH, speaking at United Fresh

Mark Munger, Vice President of Marketing at Andrew & Williamson Fresh Produce and immediate past chairman of PBH, and Paul Klutes, Director of Brand Sales at C.H. Robinson, who is this year’s chairman of PBH, have been flying around the country with Elizabeth Pivonka, who is the President of PBH, giving presentations promoting the idea. However, neither Andrew & Williamson nor C.H. Robinson have endorsed the plan.

We have kept an open mind on the matter and have been studying the proposal. As is typical in things that depend on USDA data, there are many questions regarding the validity of the numbers being represented. The organizers already had to adjust the grape numbers because it seems like some wine grapes were accidentally included. We’ve been asking questions because the processing numbers look incorrect to us.

As these numbers get clarified, we’ve planned a series of articles, each of which will analyze a question raised by the concept. You can keep an eye out for the “Got Produce? Generic Promotion” logo you see included in this article. We will include it in each piece of this series and on a “hot topics” button on the left hand side of the Pundit.

We come to the issue somewhat wistfully as there is little question that the world would be a better place if diets shifted to a diet composed mostly of plant-based foods, especially fruits and vegetables. So the concept is not merely desirable; it is an important public health and sustainability opportunity.

Yet that doesn’t settle the matter. The way this is being promoted — as a program to increase consumption — there is a contradiction at the heart of the proposal. In this industry of family businesses, there are plenty of farmers who grow a set acreage, say 200 acres of vegetables. These growers will not profit just because consumption increases. They will only profit if prices go up.

Yet to argue that the program, by increasing demand, will cause prices to go up is inimical to the professed goal of increasing consumption.

If prices don’t go up, though, our 200 acre vegetable farmer and others like him will be compelled to pay to fund an activity — increasing consumption — from which they will derive no benefit.

To add insult to injury, the current proposal will result in farmers being charged to support the generic promotion program but will deny them a vote on the matter.

In this industry it is quite common for growers to have their sales handled by an outside entity that would be classified, under this proposal, as a “first handler” — it is the first handler that gets the vote and has to send in the check. Yet, these handlers often sell product under arrangements in which they charge back to the growers all expenses. So they deliver an account sales document that includes USDA inspections, warehouse charges, freight and, yes, the “tax” imposed by the generic promotion board.

So the comeuppance is taxation without representation. Compelling payments under these circumstances is very problematic.

There also is a real issue as to whether this type of program makes sense for produce and might not cause discord in the industry. In dairy or beef, generic industry promotion works because a “cow is a cow” — if the beef board decides to have James Garner grilling steak, the hamburger people don’t get upset because there are no hamburger people. The same cow — which is where the assessment is levied — produces both steak and hamburger.

Produce is not like this. The biggest competitors to produce producers are other producers of competing produce products and, inevitably, one can’t promote just generalities. James Garner had to grill something — a T-Bone, a New York Strip, a hamburger, a hot dog, a sausage — and the beef people may have thought a particular approach wise or not, but they basically would acquiesce to the advertising professionals.

In produce, in the context of a mandatory assessment, it would be a fighting matter if an ad showed grilling portabellas or sweet corn or roasting peppers or grilling pineapples or peaches. In fact, if through effective campaigns the board quintupled pear consumption, isn’t it highly likely that the biggest loser will not be Ring-Dings or Devil Dogs, but apples?

In addition there is a substantial group that could support a generic program but expect a credit for their current efforts. This could be a brand credit going to Sunkist and Dole, Chiquita, Del Monte and anyone who spends money on marketing. Some farmers who are already paying into commodity promotion boards think they should get a credit for those assessments. Otherwise many fear this board will “crowd out” other marketing efforts.

We’ve heard “over my dead body” from some producers over plans to exempt both organics (we would need an Act of Congress to change this) and sales to farmer’s markets from the assessment.

And all this assumes that the program would actually work. Yet there are real questions whether the budget proposed — roughly 10% of what the milk board spends, for example — would actually be sufficient to move the needle on consumption.

These are all serious questions and there are many more. Fortunately, the proposal calls for industry dialog and a decision deferred until October. That means we have some time to think about these problems and see if we can find solutions to these problems.

So the issue for the industry right now is how to conduct this conversation and the way it is being handled is quite problematic.

The involvement of PBH in this matter is in many ways very regrettable. The Produce for Better Health Foundation is a charity — what the IRS calls a 501c 3 organization. One donates voluntarily to PBH because one believes in the cause of enhancing public health through increasing the percentage of the diet that comes from produce.

But favoring this cause in one’s charity has nothing to do with favoring a mandatory assessment. There are many principled people in the industry who have supported the Produce for Better Health Foundation on a voluntary basis but who strongly oppose this mandatory proposal. Some would rather fund their own commodity groups; others want no assessments at all.

We have been receiving word from substantial donors to PBH who are simply aghast that money they donated expecting it to be spent on programs is, instead, being diverted to a lobbying effort for a referendum they oppose. Here is how one PBH donor put it:

Let me get this straight… as a voluntary donor to PBH I am giving them money which, without my permission, they are using to promote an idea I oppose that will compel me to pay money whether I want to or not? Can you imagine I will hesitate to donate to PBH in the future?

I think Tom Stenzel and Bryan Silbermann should give Elizabeth Pivonka a call and gently tell her to pursue other endeavors in the promotion of fruit and vegetable consumption.

At very least they should tell her to stop spending donor’s money on purposes that were never mentioned when those funds were solicited. Webinars are expensive and so are travel and staff time. What did it cost to build the web site? How much have they diverted from donor funds for travel? How much staff time has been diverted to this lobbying effort from doing what we donors intended to pay for?

Once again, it’s THE GROWERS being asked to foot the bill, not large retail chains (hello, Wal-Mart?) who get the healthy margin return from the sell generated by all of this wonderful advertising…

We are prepared to work hard to help analyze the issue and see if there are ways to advance the industry through this proposal. We are also prepared to look at alternatives. For example, maybe the industry should raise five million dollars to fund an effort to persuade the government that changing diet is cheaper than paying for medical care through Medicare, Medicaid, etc.

Yet it will be difficult to discuss this issue appropriately if people think it is being shoved down their throats.

There is nothing in the way the Produce for Better Health Foundation has solicited funds over the years that gave donors the slightest reason to believe it would spend their money on a lobbying campaign. So PBH staff and money should not be used for this effort.

Those who favor this new board should chip in and fund a campaign — including reimbursing PBH for its expenditures. Otherwise, we may get the worst of both worlds. The national board will not go anywhere and people will hesitate to donate to PBH lest their money be spent on causes which they do not support.

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