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



Got Produce? Is $30 Million Sufficient?

Jim Prevor’s Perishable Pundit, May 21, 2009

One might think anyone who opposes the proposal for a national generic promotion campaign is not in favor of the idea. Yet from our conversations we would say that this assessment is not true. Quite a number of people may oppose this particular proposal not because they fear being taxed too much, but because they fear being taxed too little.

Or to put it more precisely, they fear that money will be spent without effect — and that this would be the worst outcome of all.

Let us, for the sake of argument, posit that, in fact, a properly planned generic promotion program can increase demand and consumption. Let us further posit that it can do so at a price point that provides an adequate return on investment for the industry members who would pay the assessment.

Even giving all this to start, we are left with the question of whether this particular proposal, estimated to raise $30 million dollars a year, would be sufficient to do this.

We’ve written so far mostly on the way the project is being presented and questioned if these procedures were going to build confidence enough to see such a program pass:

First, in Got Produce? Generic Marketing Program Dialog Begins, But Is It Right To Use PBH Donor Funds To Lobby For A Mandatory Assessment? we pointed out that people and companies that donated money to the Produce for Better Health Foundation thought they were giving money for programs to increase the public health through encouraging produce consumption. We pointed out that it is just plain wrong to use their donations to fund a lobbying campaign. Just the other day, we ran a piece about a lamb roast being done in California to raise money for cancer. The funds go both to a national association and a local group. Can you imagine the outrage if instead of using the money for treatment, research, patient and family care, they decided to spend the money flying an executive around the country and doing webinars to promote a special mandatory tax on everyone in the country to go for cancer care?

There is right and there is wrong, and those companies or individuals that favor this should fund the advocacy effort. If the advocacy of those who favor the effort is so tepid that they won’t pony up even a little money to run this lobbying campaign, that raises the issue of whether support is actually broad enough to even bother with this industry discussion.

Second, in Got Produce? Both Sides Need To Be Heard, we pointed out that the problematic nature of arranging things so that the industry discussion on the matter is being organized and moderated only by advocates for the idea. The supposed “dialog” consists of official presentations by advocates, with some time for feedback. When, as happened at United, someone respected and important such as Mike Stuart, President of the Florida Fruit and Vegetable Association, raised serious reservations about the program pointing out the difficulty in seeing how it would translate into increased profits for growers in Florida, there was no mechanism to communicate this idea to the industry. Mike was not invited to appear at all future presentations to provide a diversity of views.

We pointed out the obvious. We can’t advance as an industry if the perception is that “the fix is in” — these dialogs have to be genuine and neutral as to the outcome. The organizers of this effort simply can’t have any skin in the game as to whether the industry comes out pro this proposal, anti this proposal or makes a different proposal.

Now, as we move into more substantive areas — in this case whether adequate funding is being provided to accomplish program goals — we find the lack of neutral parties involved in this effort even more troubling as we fear that the budgetary number was chosen, not based on an appropriate analysis of what is necessary to accomplish the goal, but, instead, because the proposal was designed by advocates, who chose the budgetary number because that was the number the advocates felt they could get approved. This way lies ruin… and the waste of industry funds.

We are reminded of the battle 20 years ago over the possibility of establishing a California Orange Commission. That effort ultimately failed, foundering mostly over the issue of a ”brand credit” — meaning primarily that Sunkist growers, since Sunkist was already spending money on promotion, should get a credit against the assessment.

One can be certain that the issue of brand credits and, perhaps even larger, credits for money being spent by state- and commodity-specific promotion groups will come up again, and we will discuss them in a future piece. For now, however, we wish to focus on the issue of sufficiency and in that vein we recall a 20-year-old interview that Pundit sister publication, PRODUCE BUSINESS, did with Ray Cole, who was, at the time Director of Marketing Services for Sunkist and had previously been with Sunkist’s longtime agency, Foote Cone & Belding.

In a fascinating interview he dealt with this issue of sufficiency by comparing launching an underfunded generic promotion program to launching a satellite but with insufficient fuel in the rocket to achieve orbit — a lot of money and effort expended pointlessly. You can read the whole interview here, and we reprint the relevant section below:

PB: How does Ray Cole feel about it?

COLE: I am opposed to the generic program on a totally different basis. I don’t see the industry taxing itself sufficiently to really do an effective job. I’m not even sure that Sunkist is doing the best possible job at the moment, because we’re not spending as much money as I think we should, but that’s a separate issue.

PB: Well, exactly how much money do you think Sunkist or the proposed commission should spend?

COLE: Let’s talk about what it takes to increase the consumption of California oranges, because I’m not sure we can promote navels without Valencias either. We did a lot of work in 1970-72 and repeated it in 1981 to see what the effect of more advertising on the American consumer would do in terms of consumption of California-Arizona oranges, particularly Sunkist oranges. We found a level of advertising that worked. We experimented with higher levels and lower levels and we did a test marketing program.

It was scrutinized beyond belief, because it was highly questionable here at Sunkist. The first effort was done when I was back at the agency, and we were trying to recommend this to Sunkist. I know from that experience that there is a level of advertising that it takes to change consumption habits, and I know that consumption habits, can be plused, at least I think they can. I’ve not yet heard any discussion in this talk of generic advertising that would come close to generating the dollars to spend at the rate necessary to increase consumption.

PB: You’re talking about a very big increase of how much?

COLE: I’m talking about spending probably $20 million a year. If you only spend $10 million and you don’t change per-capital consumption, what do you accomplish? You’ve taken $10 million out of the growers’ pockets for no end result. It’s kind of like trying to put a satellite into orbit and not putting enough fuel in the rocket. You blew a lot of money, for nothing.

PB: Some people would say something is better than nothing, when it comes to promoting citrus or any other commodity.

COLE: I think if you really want to do this you have to do it at a proper level, with a thought-out plan, and a comprehensive recommendation based on the size of the task, not what the grower can afford, necessarily. And let the grower decide if he wants to undertake that task. But don’t just assess him 7-cents or 10-cents a carton because that’s all he can afford. If it doesn’t give you enough money to do the job, don’t do it. That’s where my concern is about the generic program

That $20 million a year figure was based on research done in 1981 — almost 30 years ago. Not only have we had about three decades of inflation, that estimate was also based on a much simpler job, increasing consumption of one commodity. When the goal is increasing consumption of oranges, it doesn’t matter if you get the sales from the most likely place — other snack fruits. So the boost in orange sales probably would come at the expense of apples, grapes, tree fruit, bananas, etc.

Thirty years later, we are talking about a much more difficult task; getting people to consume more produce overall, which means the increase in orange sales can’t come from other snack fruits. It likely means getting people to eat less of totally different categories: meat, dairy, seafood, poultry, bakery, candy, etc. That is a far more difficult and expensive task to undertake than a commodity promotion effort.

So, how do we know that the $30 million budget for this new board will be effective? Well we don’t.

First the proposal is missing what should be a prerequisite: an estimate of sales in the absence of such a board. If we allow this to go through without such estimates, it is a sucker’s game because three or five years after launch, when the program would likely be up for renewal, one of two things will happen: If consumption numbers have risen, the program executives will take credit for that increase — even though it may have happened without the program. If consumption numbers drop, program executives will claim they would have dropped even faster had it not been for the program, and it should be renewed with a bigger budget so that they can get consumption into positive growth.

Without estimates of what consumption would be in the absence of the program, we can’t even begin to look at what kind of benefit this program — if it achieves its goals — will bring to the industry.

How did the advocates settle on this $30-million amount? That is a little difficult to say. The proposal is filled with all kinds of things that are at best, suggestions, not binding restrictions. So the advocacy piece proposes a “social marketing” program — although the board is actually free to run any kind of program it thinks best. They don’t go into great detail but basically this means that, in addition to conventional advertising, they will use PR, the Internet, viral techniques, social sites, such as Facebook and MySpace, partnerships with community groups, schools, etc.

The advocates then identify varying social marketing campaigns that have been, supposedly, effective.

One was a very short program — only six weeks — to get people to switch to skim milk. It seems to hold promise. You can read literature about it here, here and here. But as a six-week-long program, we just don’t think it is relevant to what is being proposed here: A multi-year, indeed supposedly a permanent program.

Three others were also presented:

One focused on increased physical activity in the US and supposedly had a 20% impact. That program cost $60 to $125 million per year, or double to more than quadruple this proposal.

A second was an anti-drug campaign that supposedly had an impact of 23%. It cost $90 to $180 million per year, or three to six times what is being proposed for this program.

The third example given of long-term programs that advocates claim prove the effectiveness of these programs and the budget needed to make them happen is a foreign program, a program designed to increase consumption of fruits and vegetables in Western Australia.

This program was done in an area with a fraction of the population of the United States. They spent $0.56 per adult per year. If we extrapolate this to the population of the United States, the cost would be approximately $135 million per year. Many would argue that in the crowded media markets of the United States where there is so much competition and noise, the cost would be far higher.

Now Elizabeth Pivonka got an estimate from an ad agency that if they adapted the program to only go after the PBH target audience of moms, the campaign could be done for about $52 million a year. Although, of course, the “impact” of the campaign — supposedly 19% over three years — would presumably be affected by no longer exposing the campaign to men, single women and married women without children.

In any case, here we have the three programs that the advocates of this new generic promotion program point to as examples. Presumably these are the best case scenarios. We have costs ranging from $180 million a year to an abridged program aimed only at mothers that costs an estimated $52 million a year. So after carefully reviewing these programs, what budget did the advocates come up with? Inexplicably, $30 million a year.

In our attempts to understand why this number was selected, we have been given two responses. One is that with all the produce industry has going for it, with free publicity and public health authority backing, it can do things cheaper than other industries. This may or may not be true, but since the Western Australia program also was a produce program, and they know all about public health benefits of produce down under, this argument would not apply to the most relevant example.

Second, Paul Klutes of C.H. Robinson and current Chairman of The Produce for Better Health Foundation and one of the three main advocates for this generic promotion proposal, draws on his experience working for Welch’s that many private companies run effective campaigns for less than $30 million. This may be true, but we are not sure it is relevant. When Coca-Cola advertises, it is not really to make people thirsty, it is not even to get people to give up milk or beer… it is mostly to keep people who already drink Coke happy with that decision and, to some extent, to get Pepsi drinkers to switch.

Our purpose in considering industry-wide generic advertising is to change eating habits, which poses very different challenges than most corporate campaigns. When Progresso advertises soup, it doesn’t care if the overall soup category grows. It is content to take a little market share from Campbell’s. Tell Progresso to grow its sales without taking them from any other soup — including frozen soups and just-add-water soups — it would need more money as well.

So we look at the numbers and, as we emphasized earlier, these are the programs that the advocates of the proposal have presented as models, and we can’t see how one gets a $30 million budget.

An extrapolation of the West Australia program at $135 million seems more reasonable. And this is more in line with other US commodity promotion programs. The National Pork Board has a budget of about $60 million a year; Beef is $80 million a year and Dairy about $280 million a year. When you consider the enormous difficulty of promoting produce what with the diversity of produce items, something in that $135 million-a-year range strikes us as realistic — though note this is more than four times the money the proposal calls for!

The real problem, though, is not a difference of opinion between the Pundit and those advocating this program. People of good will can differ. The problem, once again, is that because advocates of the program selected this number, it has no credibility.

This is the type of situation in which credibility is crucial because the industry has to know it is not throwing money away, as Ray Cole suggested could easily happen.

In drawing up a proposal like this, the industry needs to go to a neutral party, say Ed McLaughlin at Cornell University, and ask him to put together a team of top academic experts to A) Make an assessment of what the trends for produce consumption are leading to in the absence of a program, and B) Have his team suggest the bump in consumption attributable to marketing programs at different levels.

In retaining the academics the industry needs to make it 100% clear that we are completely neutral as to the outcome of this study. We don’t care if the promotional cost is cheap or dear, we just want the best estimates that can be developed.

Then we can all sit down and assess whether this makes sense. As Ray Cole said, give the grower the facts and then let the growers decide if this is a project they wish to undertake. Under the current proposal there is this nagging fear that the budget-selection process was influenced by political consideration. That $30 million was chosen not because it is optimal, not even because it is sufficient, but because that is what the advocates thought they could get. And that is not an acceptable way to budget for a media campaign.

There is one other way to approach this. And that is to do a test market. One of the unusual things about this proposal is that it proposes a roll out without a test. Why not do a local version of the proposed national campaign in a few test markets? Then we could actually evaluate its effectiveness before we roll it out nationally.

Actually PBH has applied for a grant to get funding to do such a test. Here is the Grant Abstract:

The Amount/Intensity Of Marketing Required To Increase Fruit & Vegetable Consumption

This Coordinated Agricultural Project (CAP) will test the effect on sales and consumption of fruits and vegetables (F/V) of an intensified social marketing and communications program for the new Fruit & Veggies — More Matters public health initiative at three levels of intensity, targeted to mothers and their families.

This project will expand current marketing efforts for Fruits & Veggies — More Matters in three markets using proven social marketing and health communications models; a fourth market will be followed for comparison. A strategic step-wise process will include formative research, communications planning, and implementation of the intensified campaign. Process and outcome evaluation will be ongoing with final assessment and modeling.

The intensified campaign will include public relations and community outreach activities, advertising, TV programming, social media such as the web, and partnerships with influential groups such as schools, community groups, and extension. Outcome data to determine impact will include F/V sales data, attitudes towards, and self-reported consumption of, F/V. Results will be used to develop a model for implementation in other markets, to project the cost to implement the campaign at a national level, and to inform a proposed new national fruit and vegetable research and promotion board about the amount of funding that is needed to increase F/V consumption.

The primary goal as it relates to the Specialty Crop Industry is to increase short and long term consumer demand for F/V, to improve profitability of the specialty crop producers and the health of consumers through increased consumption of F/V.      

This is a very sensible idea. Perhaps, though, we should wait on making a decision about at what level to fund a national generic program until the results are in?

In fact, if the grant falls through, perhaps our focus should be on funding such a test, rather than leaping to a roll-out?

© 2017 Perishable Pundit | Subscribe | Print | Search | Archives | Feedback | Info | Sponsorship | About Jim | Request Speaking Engagement | Contact Us