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Pundit’s Mailbag — Tesco’s Behavior

Jim Prevor’s Perishable Pundit, June 19, 2007

In response to our overall coverage of Tescos’ Voyage to America and, specifically, to our piece, Working With Wal-Mart May Not Be As Bad As You Think — Tesco Could Be Tougher, we received this thoughtful letter:

I think people are going to find that the grass is not greener on the other side.

I feel people are quick to complain about Wal-Mart because it is the popular thing to do. Many vendors who may seem satisfied use the fact that so many people are harping on Wal-Mart to try and better their situation by jumping on the bandwagon.

If Tesco is able to make a serious presence in the U.S., it will be interesting to see if vendors who end up dealing with both companies have better views of Wal-Mart in the end.

I think in the world of big companies like this, vendors have to deal with the demands or lose the business as plenty of other people are nipping at their heals.

It is surprising to me that Tesco chose Bonipak as a vendor. I wonder myself if this is a situation where Tesco could not find anyone else to take its deal or if the two companies mutually struck up a deal. From my dealings, Bonipak is a great vendor who treats its customers well with high quality product and customer service.

It will be interesting to see how their relationship with Tesco impacts the long term goals of Bonipak.

But give them credit for taking a chance. If Tesco succeeds, it could be huge for growth with Bonipak long term.

— Matt Roy
Produce Director
Lincoln Poultry

For those who don’t know, Lincoln Poultry is one of those companies that has long outgrown its name. Though it started as a poultry and egg distributor, it is now a full line foodservice distributor. We find something appealing in a company that must have been advised by everyone and their brother to change their name, yet sticks steadfastly to its roots.

Matt’s letter brings us to the heart of the dilemma. For all the problems in dealing with big buyers, for big vendors, there is no alternative.

Dealing with Tesco probably is tougher than dealing with Wal-Mart for the simple reason that Tesco operates in an even more consolidated market than the U.S., so if vendors bellyache, so what? Where are they going to go?

Of course, just because one can get away with something, doesn’t mean one should do it. So when we told of perfectly reputable produce vendors being treated rudely, with unreturned phone calls from the U.K. and an unwillingness to disclose the name of produce personnel here in the U.S., we weren’t reporting any crimes — but we were questioning why.

Sure Tesco could take the position that it has its vendors and doesn’t care about anyone else. But what is the upside to that strategy? They save some staffing cost? This is a multi-billion dollar effort to establish a base in North America.

Who knows where the next new idea will come from? One of the guys whose phone call Tesco never returned owns shopping centers on the side — a lot of them. He called about his produce business but, maybe, if they were in communication, he would offer them a good location — or a few of them.

There is no question that other, larger, players were offered the deal that Bonipak has and turned it down. Which just means that it is more of an opportunity for Bonipak. It gives them a chance to be a strategic partner with one of the largest retailers in the world. They are smart people and are hoping to ride on the wings of this expansion. More power to them.

We are sure many of the individuals who work for Tesco both in the U.K. and the U.S. are perfectly good people. But for all the talk of deep research they did on the American consumer, there are behavioral patterns that indicate they did not do comparable research on the trade.

Because they are alienating good people for no reason. That is not nice, and it is not good business.

What should they do? Well, PMA is coming up… why don’t they call PMA, ask to rent some spare rooms in the convention center and explain that they will offer a 5-minute appointment — gratis — to any PMA or United Fresh member who wants to meet with someone from Tesco.

They can bring some people from the U.K. to add staff for the three days of the exhibition. It would make the industry feel better, support the industry trade associations and be good for Tesco to let in some new ideas and meet some new people.

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