Pundit Interviews

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Perishable Pundit
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Produce Business

Deli Business

American Food & Ag Exporter

Cheese Connoisseur



Wal-Mart Prepares Launch
Of Its ‘Marketside’ Concept

Wal-Mart’s new small store concept, which, as we discussed here, supposedly is going to be called Marketside, made the news recently due to some Help Wanted ads the chain was running.

The Financial Times ran a piece entitled, Wal-Mart Sees Marketside as a $10bn Chain that explained:

Wal-Mart’s executives have described the Marketside stores as a pilot project, although it is the first new store format to be launched by the company in a decade. But a job advertisement for the retailer indicates the scale of its ambitions for Marketside, saying the format “is expected to start with 10 stores and evolve to between 1,000-1,500 stores with over $10bn annual sales”.

When Wal-Mart was contacted by the newspaper, it emphasized it was just a pilot project and took the explanatory language off the web site.

So what is it? A pilot project? Or a 1,000-plus store rollout? Is Wal-Mart being coy? Did a lowly ad copywriter reveal a secret truth?

The whole contretemps is kind of ridiculous. Wal-Mart is a giant company; it probably wouldn’t launch any concept unless it could see the potential for a substantial business. On a small footprint store, that means it has to perceive the opportunity for many stores.

That it hopes for the concept to open over a thousand stores and sell $10 billion is not surprising — why else would it bother?

It is just as obvious that no company does more than sketch out how a thousand store rollout might work when it hasn’t opened even a single store.

Wal-Mart hasn’t signed a thousand leases or done any other concrete action to commit to opening a thousand stores. It is more correct to call such an expression a hope than a plan.

What is surely true is that in hiring executives Wal-Mart is looking for people capable of handling a roll-out and so the ad copy is an attempt to attract that kind of person. In much the way that Bruce Peterson didn’t sign up at Wal-Mart to run produce for a seven-store chain, he signed up because Sam Walton told him they would be the biggest grocer in America.

Sam Walton was right. Will current management be as well?

Well the ad itself gives us a clue. One thousand stores generating $10 billion in sales, implies sales of $10 million per store per year. Interestingly this number works out to just about $200,000 per week per store, which is precisely the expectation Tesco had for its new Fresh & Easy stores.

Now Tesco failed dramatically to achieve those numbers. As we chronicled, initial estimates were that sales were running around $50,000 per week per store. Time has led to improvements, but much of this has been driven by heavy use of promotional pricing and couponing, so much of the increase in business has not been profitable business.

Is there reason to think that Wal-Mart will be more successful? Well, the Wal-Mart stores are believed to be at least 50% larger than Fresh & Easy, so that $200,000 per store per week represents an expectation for significantly lower sales per square foot. This should make obtaining that goal more plausible.

It is also expected that as with Safeway’s small store format that we spoke of here and here, Wal-Mart will offer a full range of perishable departments, including a service deli. These departments tend to price higher and thus raise the average ring.

We can also expect Wal-Mart’s venture to focus more heavily on well known brands rather than private label.

All this, combined with Wal-Mart’s knowledge of the US consumer, extensive real estate expertise, distribution and logistics capabilities, and heft with the supplier base, all may make for a potentially more successful concept.

Yet there are also reasons to think the prospects for the division are not that great. A big red flag was recently unfurled when David Wild, who had been spearheading the development of this new concept for Wal-Mart as the Vice President for Business Development suddenly left Wal-Mart in June to accept a position in the UK as CEO of Halfords Group, a British retail group. Wild was previously managing director at Wal-Mart Germany before doing 18 years at Tesco.

It is always difficult to surmise much from personal decisions. Perhaps Mr. Wild or his family didn’t thrive in the US and were looking for a way back home to Britain. Perhaps Mr. Wild really wanted to be a CEO. Maybe Wal-Mart whispered to him that he wouldn’t be put in charge of the roll-out and he should look for other opportunities. Many plausible explanations can be theorized.

Still it raises doubts. Although the conceptual work on the project was pretty much done by the time he left and so his departure will have little direct impact, it raises concerns about Wal-Mart’s commitment to the project.

Although Wal-Mart CEO Lee Scott has said that Tesco stole a march on Wal-Mart’s ASDA Division in the UK when Tesco seized the convenience market with its Tesco Express stores — and presumably he is dead-set against that happening in the US — there are real limits to the price most public companies will pay to achieve these kinds of goals.

In fact, even what one could identify as a great strategic goal for Wal-Mart — keeping Tesco out of North America — has not prompted much action on Wal-Mart’s part. After all, when Tesco announced its venture in the US, had Wal-Mart really wanted to signal an aggressive fight, the place to hit Tesco would be in the UK, where its dominant market share means that any price war would be enormously expensive for Tesco.

An aggressive private company thinking strategically might have chosen to lose a lot of money in the UK as a signal to Tesco: Don’t tread on our turf. It would have worked too. Tesco is also public and the City — London’s version of Wall Street — would probably have objected strenuously to investing billions in America if the UK operation was hemorrhaging money.

Even now, we are often asked if Tesco will withdraw from the United States. The answer depends as much on what is going on at home as with how this little Fresh & Easy division is doing.

Sainsbury’s sold Shaws because of a need to focus on its home turf. Ford just sold its European Auto Group for the same reason. If Wal-Mart is concerned about Tesco in a strategic sense, developing little stores to compete mano-a-mano is a weak response.

By building a giant distribution center, sending a large management team over from the UK and signing many leases, Tesco showed real commitment. The personal prestige of the CEO was committed to the project and the best and brightest of Tesco’s management team was sent over.

It obviously is of strategic importance for Tesco to establish a presence in the largest market in the world and it seems prepared to pay a substantial price to do so.

Wal-Mart does not seem prepared to pay the price necessary to prevent that from happening.

So, on at least some level, David Wild leaving may have signaled that he doubted Wal-Mart’s commitment to the project. Sure Wal-Mart would love to have another successful store concept in America. Much as it would have loved to have its Neighborhood Market concept roll out across the USA.

In the end, though, it didn’t roll out the Neighborhood Market concept because it did not get the return on investment from those stores that it required. It always could make higher returns by devoting its efforts to building more supercenters.

There is zero indication that Wal-Mart will build these small format stores as a strategic initiative to fill the market niche to prevent others from doing so. It is only going to build these stores if it can make a good return on investment.

That may be a decision Wal-Mart regrets when Tesco buys Meijer, as we discussed here, or starts building its own supercenters.

Of course, there is one other option for Wal-Mart. Most chains make their money on a small percentage of high performing stores. If Tesco builds 200 stores initially and Wal-Mart identifies the 20% that probably supply 80% of the profits, and if Wal-Mart opens 40 Marketside stores as close as possible to the 40 top performing Fresh & Easy stores, neither will probably make a profit. That is insignificant to Wal-Mart’s US operation, but devastating to Tesco’s US division.

Yet our sense is that Wal-Mart is not thinking this way. Wal-Mart is simply trying a new concept. It would help Wal-Mart in the many markets in which supercenter size stores are difficult to open. Wal-Mart likes that it can typically open this size store “as of right” without the need for special permitting. And, of course, if Tesco has identified a new niche, Wal-Mart wants its piece.

So far though, Sir Terry Leahy at Tesco is showing a willingness to bleed to establish this beachhead in America and this format. Lee Scott, CEO at Wal-Mart, is showing no such inclination. That may speak to the result of this battle more than the virtues of their respective concepts.




Whole Foods Meat Recall
Leads To Inspection Change
And Lesson For All…
Including the Produce Industry

Talk about an Achilles heel in the food safety system — and not just with meat.

It was big news when Whole Foods had to do a beef recall. The headline on the article in The Washington Post ran was descriptive: Whole Foods Recalls Beef Processed At Plant Long At Odds With USDA. But the newspaper’s blog post, The Checkout, was more blunt: Holy Cow! Whole Foods Linked to E.coli Outbreak.

This type of food safety issue is devastating for Whole Foods. Few of its customers understand the technicalities of natural and organic, but all are partners in an implicit bargain: Whole Foods will charge more but deliver the best.

Without a doubt, “best” includes safest.

Whole Foods grinds its own hamburger meat, but it purchased meat from its longtime supplier, Coleman Natural Foods, which, it seems, may have supplied contaminated meat that had been processed at Nebraska Beef, a company that has had many a food safety battle with the USDA.

Now why would Whole Foods choose to deal with a controversial company such as Nebraska Beef? It didn’t… and in the story of how it happened is a food safety issue as applicable to produce and other perishable items as it is for meat.

In its piece, Grocer Works to Repair Its Image: Whole Foods Tightens Inspection Rules After Beef Recall, the Washington Post indicated that Whole Foods is now changing procedures, including this change:

Whole Foods recalled ground beef on Friday that was sold between June 2 and August 6 after seven people in Massachusetts and two in Pennsylvania who shopped at its stores were infected by E. coli. Wittenberg said employees at distribution centers are now checking labels on all meat shipments to insure that it comes from approved processors.

We haven’t seen the contract between Whole Foods and its vendors, so the contract may have been violated by the vendor shipping product from an unapproved plant.

But Whole Foods wasn’t defrauded. Every box of product included information indicating who the processor was, yet Whole Foods had no system by which that information was checked by receiving to ensure that those processors were approved.

This is a key problem in the food safety system for fresh produce as well. Enormous efforts may go into getting QA approval to sell a chain — but there is little follow-up to make sure that the product being delivered actually comes from the farms, packing sheds and processing plants that have been approved.

This is a food safety loophole big enough to drive a tractor trailer through. Buyers had better get serious and start cross checking the origin of the product that arrives vs. approved sources. Otherwise all the attention to audits, certifications and metrics is of questionable value.




Baja Grower ‘Held Hostage’ ToFDA’s ‘Ban’ On Mexican Peppers

In the course of our extensive coverage of the Salmonella Saintpaul outbreak, we have on several occasions called for the FDA to limit its de facto market blocks to areas actually implicated in a problem. For example, we ran a piece, Free Baja, calling on the FDA to provide access for Baja tomatoes as it had for northern Florida crops. Then we ran a piece entitled, Free Baja Take II, which made the same point about chili pepper production in Baja.

Since the U.S. crop was cleared, the whole issue seems to have been dropped. No more FDA press conferences, no more trade association conference calls, the Pundit was getting calls every day to be on TV — one night CNN’s Lou Dobbs, next night with Fox Business’ Stuart Varney, etc. — now the calls don’t come.

Although Mexican jalapeno and Serrano peppers are still effectively banned from the U.S. market, some might think that the crisis is over.

Of course, the crisis is not over if you happen to be a U.S. grower who has built an operation in Mexico dedicated to supplying fresh chili peppers to the U.S. market. Then it is worse than ever. You find yourself in the midst of the crisis, but, almost surrealistically, you feel as if you are the only one who knows it. Even the Mexican government is absent without leave on the issue, seemingly unwilling to risk a confrontation with the U.S. over this small item.

So how does a grower perceive the world in this scenario? We asked Pundit Investigator and Special Projects Editor Mira Slott to find out:

Doug Hermance Doug Hermance
Owner
Pea King Produce
Santa Maria, California

Q: How have you been holding up since your heart-wrenching letter?

A: I’ve been doing business in Mexico 10 years. My take is personal. After the Perishable Pundit published my story, people have been coming to me saying, ‘this is wrong, this is a travesty.’ Condemning all of Mexico is just not fair.

Q: Have you made any progress in getting your company’s product cleared?

A: I’ve been trying to get more information from people but no one will return my calls or e-mails; I’m really frustrated and don’t have much more time or money to invest as I need to prepare for my upcoming pea programs.

I’ve talked to many people and helped many others, but the only correspondence I receive is when one of them needs more information. I give it to them, and then they say they are working on a solution, and will get back to me; then nothing. I’ve been waiting for 4 weeks now!

In my opinion, the monetary element is going to keep Mexico in this “holding pattern” until there are no other options but to return to Mexico production or go without product; which will happen in November or December. Therefore, I anticipate some type of action in late September or early October; this will give the buyers ample time to “renew” their relationships with the Mexican producers and the U.S. stores time to “reassure” the consumers the product will be clean.

There are many powerful people making money due to this situation, and the chili pepper industry doesn’t have lobbying power and/or money, especially in Mexico. We are “conditioned” to this type of governmental bureaucracy in Mexico. This time it is just coming from a new source, the U.S.

I am now living in Mexico, so this is my first experience with something of this nature, but I now understand what the growers have been telling me all along. “You can’t win without money and connections; and we have neither in this particular instance.” The U.S. companies and growers are satisfied and the Mexican government and growers will just accept the fate and move on.

Left to Right: Artura Silva, a snap pea and green bean grower, Doug Hermance and Elias Berry, a chili pepper grower.

Gaston Sepulveda
Baja Chili Grower

Q: Even though FDA’s investigation and actions are predicated on food safety, are you saying the process and ultimate resolution is more about politics and business advantage? It is one thing to analyze missteps or incompetence in a well-meaning investigation process, but what you describe is quite cynical and disconcerting…

A: At first, when FDA told consumers not to eat any jalapenos regardless of where they were grown, everybody was communicating. Basically the whole industry shut down and there was a sense of urgency to band together. Western Growers Association (WGA), the big produce companies…That Friday July 25, the FDA press release went out declaring all U.S. areas cleared, and all Mexico suspect, and everything changed.

Even though I’m so close to the border, everyone in the U.S. got what they wanted but I was abandoned. All the people barking got their way. The U.S. started doing sales, chain stores and restaurants got product.

Our customers said, ‘We feel bad for you, but when things get clear we’ll take your product again.’ The guys I supply said they had no choice. Initially, U.S. chain stores demanded growers with certification. A lot of jalapeno growers don’t have certification. Now buyers say they’ll make an exception. Now stores are getting a lot of product that isn’t certified. As long as it is U.S.-grown, that’s all they’re asking for because there just isn’t enough supply.

Q: Are these certifications based on third-party audits from companies such as Primus Labs, verifying food safety standards set by U.S. buyers?

A: I grow snow and snap peas for companies such as Fresh Express, Apio, Mann Packing and MCL Fresh that require the highest food safety standards. I know food safety and what standards these companies will accept and deny. For peppers, we’re trying to do the same programs as companies in Salinas because that is what our clients demand.

My main two customers for chilis are Cal Fresco and Melissa’s/World Variety, both located in Los Angeles and both have very solid food safety programs as well. They service some of the very large chain stores throughout the US.

Now FDA says all Mexico is bad; that shuts me down, even though I am a good supplier. Even if my product is allowed to enter the U.S., no one is going to buy it. Consumers are going to listen to CNN; they won’t buy Mexican product no matter what. And stores have liability.

Q: Ironically, FDA’s blanket ban across Mexico could actually result in less safe product being sold to consumers.

A: U.S. companies are happy, retailers are happy because they’re getting product. Now the market is moving. People are making money and not saying anything. The Mexican government is infuriated because no one in the U.S. wants to help any more.

From their perspective, the FDA released all this incriminating information without talking to Mexican authorities. The timing of that release at 6:00 PM Eastern Standard Time allowed no time on a Friday to get a response there until Monday, but by that time the damage was already done. Mexico is saying, first you destroy our country’s tomato industry and now you do the same thing with chilies.

Q: In press briefings, FDA and CDC told reporters the two governments were working harmoniously to get to the source, but this belies what’s happening behind the scenes. Mexican authorities point to major discrepancies in FDA’s findings.

A: In a juvenile kind of way — like two little kids fighting — the Mexican government’s feelings are hurt and they have no confidence in the U.S. government sharing information. Now they go into their shell in an effort to do damage control and limit access, but closing off communication just makes matters worse, further distancing growers, and slowing down the process of resolution.

Like ‘he said, she said,’ FDA announces dramatically for the first time in a congressional hearing the positive sample was from irrigation water; a Mexican official holds a spontaneous press briefing in Mexico City claiming it was from a stagnant tank filled with rainwater that hadn’t been used for irrigation for two or three months. This dialogue should have been done before the information was released.

Q: How does one mend this fractured communication?

A: The reality is that if tomatoes were at issue, there’d be a lobby group down here. With jalapenos, there is no voice. Now there is no advocating force to compel action; people won’t return a call. The Mexican government won’t give any more information — they feel FDA is going to report what they’re going to report. That’s what people I’m talking to lament. There’s a sense of hopelessness.

Q: What steps have you taken to get answers?

A: I contacted FDA with an e-mail, their response — talk to my State Department of Health. That didn’t get me anywhere. WGA told me to talk to Fresh Produce Association of the Americas because I kept asking questions. I contacted FPAA and they told me they don’t represent areas or specific crops.

Their response was they only help members so I would need to join. Obviously, I didn’t agree with their approach. For me that’s another money deal. WGA asked me for more information on chili production and I believe any inquiry is worth a response.

[Editor’s note: According to Allison Moore, Communications Director for the Fresh Produce Association of the Americas, “We have a lot of members that import peppers, and right now we are compiling data from each state to build a case so that FDA can start exempting states and narrow the problem to specific regions, just as we did with tomatoes. In that regard, our work benefits everyone, whether members or not. We also have been working with individual members since the U.S. first started increasing the sampling of chili peppers, like what was done with tomatoes. FDA hadn’t issued the countrywide alert but the requirements changed. If the companies were facing complications in the sampling and lab procedures or in getting test results back, we helped individual companies to navigate the whole process.

“Obviously our resources are going to be focused on the industry as a whole, as well as individual members. I have 120 different bosses because we have 120 members; they’re ultimately paying my salary and I need to focus on helping them — to get the pepper alert as specific as possible and to help individuals any way I can. If there are members paying me to work for them, it would be difficult to divert our limited resources to people not paying into the association. Our members are paying to help everybody; these companies are committed to the industry, the same as members in other trade organizations, which helps everyone whether a member or not.

“FDA wants to be able to release regions and that’s what we’re trying to move toward now, especially as new regions come into production for the fall season. We’re still very much in the middle of what’s happening now, and so is the Texas Produce Association. PMA, United and other industry groups are still really involved but our vantage point is a lot closer. We’re on the ground and on the front lines. I haven’t heard of any major things that are going to happen, but I wait for the next surprise, hopefully it will be a good one.”]

Q: What information did you provide?

A: Chili production schedules:

November — May: Southern Baja (La Paz, Constitcion, Vizcaino) — port of entry through Tijuana/Otay Mesa.

November — May: Middle Mexico — Guanajauto, Vera Cruz are first to start; then the progression works Northward; Sinaloa, Chihauhau, Nuevo Leon, Tamaulipas & Sonora. Port of entry on most of this product is Texas and Nogales.

May and June are transition months. The Mexican States of Chihauhau, Nuevo Leon, Tamaulipas and Sonora have the ability to be producing during this time frame. Southern Baja can also be in production during this time frame. Market and plant quality will dictate if the product will be sold for export markets in the U.S. or sold in the Mexican markets and processors.

June — October: Northern Baja (San Vincent, Santo Tomas, Ojos Negros) — port of entry through Tijuana. California, Georgia, North Carolina, Florida, Michigan all have their programs during this time frame.

I explained to WGA that just as in the U.S., all the growing areas have contacts and the ability to sell and distribute product to all shipping areas during the entire year. There are times when you will see product from middle Mexico in the Tijuana markets, which I’m sure could end up crossing into the U.S. We keep coming back to traceability and accountability!

Q: Would this information facilitate clearing jalapeno growers in Baja and other parts of Mexico?

A: Everyone has been scrambling to find the source and end the problem, and in reality they don’t know what’s going on, but for now everyone in the U.S. is content, stores are getting product, companies are getting their money. Everyone is doing the wrong thing by shutting up and not communicating; it’s the opposite of what should be happening. .

Before, everyone would talk in Mexico; now no one feels comfortable. And no one’s acting aggressively to solve the problem. Eighty percent of chain stores won’t take my product. I can send it over the border, but no one will take it.

Q: Are customers working with you to plan for future shipments in hopes of a resolution down the line?

A: I did receive a call from one of my larger customers, asking if I was going to plant chilis for the winter season in Middle Mexico; the response was absolutely NO! The customer has people working on trying to get Mexico cleared as well, because they need the Mexican suppliers to cover their programs; or they may lose them to other suppliers.

This is why I think there will be a shift in the speed and determination in which Mexican clearance is actually pursued, again, my thinking is late September or early October, so four to six more weeks for things to settle. Still no response from ANY agency, Mexico or U.S., on my questions and concerns.

In November and December, Mexico is the big supplier to peppers in the U.S. The companies in the U.S. are dependent on these growers. If I’m going to have product in the middle of Mexico, how good is that? Better for me that I don’t plant, or I find another country or outlet for my product.

I’m running up against walls. I thought once California was cleared, they’d isolate further and my region would be cleared. It shouldn’t be one bad apple spoils the bunch — find one area, narrow it down but don’t ban an entire country. For people who don’t care now that the problem is being isolated to Mexico, remember that next time it could be another big commodity in question and entire states shut down. Next time it could be your crop and livelihood.

This is going to continue to happen. Mexico needs the U.S. but the U.S. needs Mexico to share growing areas and have product year round; it benefits everyone to share food safety methods. The problem has been isolated to a few hours south of Texas, one ranch with a Serrano pepper and the single jalapeno pepper in Texas from another area in middle Mexico.

Q: How does your business stand at this juncture?

A: I’m at the point now weeks later where I’ve had to start discussing fields, plowing crops under. We don’t have a choice. Unable to sell in the U.S., the cost to pick is more than I can get in national markets. Mexico is full, no one wants this stuff. My plan was to pick the crop and take care of the fields, biding time. Every week I do samples to show I have clean water and safe practices, waiting for the magic release — Baja is cleared.

WGA did their job, they got their members cleared, produce companies in Los Angeles are back in store, but hey, I’m a part of your team; they say we feel for you, it’s a tough break… they don’t get it. Obviously, I’m furious but it’s going to continue to happen to other commodities unless someone gets this changed.

Pea King’s chili pepper field. This photo was taken in June, but the company has since had to abandon much of the field.

Q: Have you contacted Mexican government officials directly?

A: The Mexican equivalent to the FDA is called SENASICA. I met with their Baja North representative/director Roberto Roche Uribe. It was a good meeting. They are a government group with direct communication lines to the FDA; I guess they recognize their organization, practices, etc.

This group works directly with growers in Mexico in the development of food safety programs, tracking of produce shipments, random sampling, very similar to the FDA. When the tomato growers had their problems, SENASICA was the agency who talked to the FDA and received clearance for Baja product. All the growers were already registered with this agency, so the process was fairly easy and fast.

Q: Was Roberto able to help you?

A: Unfortunately, we did our third-party certification with Primus, as requested by our customers; we should have done both in retrospect, as SENASICA will only speak on our behalf, after they do their own studies and audit to determine our product is safe. I fully understand and respect this decision, as I wouldn’t want to depend upon another’s work in this type of situation as well, but the process to get my ranch audited by them will take four to six weeks and it will be too late.

Roberto says he is going to head to Mexicali and speak on our behalf. To his knowledge, we are the only grower speaking out or requesting action, so he is hoping he can use the information we have and the information other agencies have to get our area cleared.

Food safety requirements have to be equal. If stores are demanding food safety, it should be the same food safety standards for everyone. I’m two hours over the border and have the highest certifications and testing, but I can’t sell because of FDA’s actions. If I could only talk to every housewife in the country and have them inquire of their retailer… has this product been tested, has this product been certified to the highest food safety standards?

The markets went from $16 to $24 on jalapenos — people are making money, better for them for things to die down now and not have the competition from Mexico.

Q: If in the U.S. there is little incentive to get Mexican product cleared, the fight has to come from Mexico and produce industry leaders who understand the broader consequences of allowing this kind of practice at FDA to continue…

A: What Mexico should be doing is standing on every box of jalapenos screaming at the top of their lungs that this is unjust and tell FDA why, but they shut doors and haven’t said anything; if they know something about a potential problem they should say something. The U.S. doesn’t have very many choices now. You can hear the frustration in my voice, it’s a vicious cycle.

Q: On one hand, implementing and enforcing uniform food safety practices within and across borders should be a priority. Until then, are you saying it’s important to distinguish and reward companies that have high standards in place?

A: I wish people could understand the process to get our ranches where they are in food safety today; reinventing the wheel with food safety in other countries is a challenge. We have been spending so much time and money on food safety, and people are frustrated with us. Our workers do everything we asked them to do; and in the middle of the season, I have to let them go. There are people who don’t have work, loyal people that stayed with me. I’ve been keeping them on as long as I can. They have no options, but I have to shut down. I can’t afford it any more, I’m losing too much money. If I don’t shut down, I’ll jeopardize my entire company. When bad things happen you have to learn from them, but in this instance, I haven’t learned much; it’s just chaotic, no one is responsible, but at the end of the day the farmer is the one who suffers the most. It’s a tragedy.

At the Perishable Pundit, you’ve been the only one putting out the voice of growers. If you didn’t run my letter, no one would even know of my situation. After it ran people were calling, saying this is wrong. They cleared the entire U.S. Now weeks have gone by and nothing has been done out here to help Mexican growers.

Q: Now that you have a forum to speak to the industry again, what message would you like to leave with our readers?

A: Having operations on the U.S. and Mexican side, I see both perspectives. I pay a lot of rent in California. Food safety differs from country to country, state to state, county to county, grower to grower. Everyone should have the same food safety requirements. Speaking from the U.S. side, I agree with that. If I do have the same criteria in Mexico as in the U.S. and am audited to that effect, I should be able to enter the U.S. Everyone should be looked at as an individual. The group mentality leads to discriminating against everyone in Mexico, or everyone with jalapenos, depending on the FDA’s whims on what they release when.

Obviously product should be labeled with the country of origin, but also certification documentation, and if you’re a chain store gold star supplier it should say that. If I have everything in place, I shouldn’t be penalized for a problem 1,500 miles way. It takes 24 hours in a car to get over there. If you had a tainted head of lettuce grown in southern Texas, would you shut down southern California? That’s the equivalent of what’s happening to me.

There are at least three terrible things that have grown out of the Salmonella Saintpaul outbreak:

The first is the clear politicization of the FDA. Its decisions have consistently been prompted by who screams the loudest. We saw this in the order in which states, countries and localities were added to the “safe” list by FDA. Equally, the northern tomato counties in Florida that were exempted were just a step across the county line from the counties that were — and remain — implicated by the FDA. Looking at this, the slow release of Baja tomatoes — fully 1,500 miles from the area implicated — is best understood by Baja’s lack of representation in the U.S. Congress.

Tomatoes, though, were an important enough industry to get the highest levels of the Mexican government involved in pushing for a solution. We were on the verge of escalating to a Presidential level when the FDA relented — another political decision.

Alas for Doug Hermance, the President of Mexico doesn’t see the need to get involved on such a small item, and Baja doesn’t have effective representation in DC, so the FDA feels no pressure.

Although we decry the politicization of public health, FDA has brought it on itself because of the unreasonableness of its policies. Mexico is a giant country. Saying one knows a pathogen is in Mexico is not much more meaningful than saying it could be anywhere. For the FDA to maintain bans for weeks and months against an entire country on such flimsy evidence as we have indicates a kind of lackadaisical attitude toward their work.

A lot of things can be justified temporarily on the basis of public health. That doesn’t remove the responsibility of the FDA to move expeditiously to identify the exact problem. If the FDA cannot do that, it has no right to hold innocent people perpetually hostage to its limitations.

As it happens in this case, the farms in Baja are, again, 1,500 miles from the places where some Saintpaul Salmonella was supposedly found. Restricting Baja production and bankrupting this American farmer simply serves no public health purpose. Doug sees nefarious profit-motivated sources at work. It is not necessary to do so. It is most likely happening because the Baja growers do not have the power or money to make the Mexican government compel the FDA to pay attention to their plight.

One could say that this just proves the importance of having effective associations and that would be true. But Public Health policies are not supposed to be influenced by one’s wallet or advocate. The irrational restriction against Baja chili pepper stands as a horrible example of a politicized FDA, inconsistently applying policies based on who throws the most weight around. It demeans FDA and the public health authorities in general and should be stopped.

The second terrible thing that arose out of the Salmonella Saintpaul investigation was the treatment of all farms the same — regardless of food safety status. This sends a clear message that investing in food safety is a waste of time and money. It will hinder the advancement of food safety for years to come.

Especially in Mexico, where you have bifurcated food safety system with one set of growers producing mostly for export, operating at a high level, and another set of growers with few standards at all — what an incredibly powerful message would have been sent had FDA allowed shipment of all product produced from audited farms. It would have sent a clear message that food safety is an investment that pays.

Instead it comes out as an expense that should be avoided if possible. What a lost opportunity.

The third terrible thing that came out of the Salmonella Saintpaul outbreak is that FDA approaches each outbreak with such blinders that it only cares about the particular food safety outbreak it is focusing on and thus regularly takes actions that increase, rather than decrease, food safety risks for consumers.

This was the story of our first Free Baja. Big buyers, very conscious on food safety — Darden, Tesco, etc. — select individual producers to work with and they work together, transparently, to improve food safety. On an item on FDA’s high-risk list, a company such as Darden will have someone in the fields every single day

For liability and public relations reasons, these companies cannot go against an FDA recommendation. So when the FDA de facto bans an entire region, what it does is force these food-safety-conscious buyers to move from carefully vetted farms to those they may not know at all. It is hard to imagine this increasing food safety.

In the case of jalapenos and Serrano peppers, Doug Hermance is making a variant on this argument. He is an audited producer of jalapenos and Serrano peppers in Baja. Now American consumers, due to FDA action, don’t have his audited product, so they may wind up, instead,with unaudited product from producers in the U.S. or elsewhere. The CDC says that there are 1.4 million cases of Salmonella in the U.S. each year and 76 million cases of foodborne illness.

Even if in some way this ban reduced the risk of Americans getting sick from this particular outbreak, these actions increase the likelihood of another foodborne illness by removing certified product from the food supply. This is the exact same thing that happened with the Honduran Cantaloupe situation, in which a gold-standard farm was banned and countless unaudited producers allowed to keep shipping.

We defend Public Health but Public Health is supposed to increase the health of the public — these actions damage it.

We thank Doug Hermance for speaking so freely. It is terrible what is happening to him. We ask the FDA to look at the actual consequences of its actions and either articulate a basis by which this farm’s bankruptcy serves the interest of Public Health or free his production by freeing Baja or at least freeing all third-party-audited product in Baja.

We don’t know if they will buy or not buy, but the point is that this Salmonella Saintpaul outbreak is only one facet of food safety, if buyers think that they are better off buying from pre-vetted, audited suppliers in Baja than unaudited suppliers elsewhere, on what basis does FDA claim expertise to say they are wrong??




Award-Winning Articles
Raise Topics To Consider

We just arrived back in Pundit headquarters in Boca Raton, Florida, and were greeted with some nice news. The American Society of Business Publication Editors has awarded the Pundit its Gold Award for the Best Editorial/Editor’s Letter in the United States for his 2007 work in PRODUCE BUSINESS magazine.

We don’t like to crow about awards too much, partly because Momma Pundit taught us it wasn’t polite and mostly because we care more about accolades from people in our industry than editorial experts.

We did, however, think it interesting to note the two columns the editors recognized for excellence are very topical a year later. In February of 2007, we wrote a piece entitled, The Economics of Mandatory Regulation, which analyzed how government regulation can have unintended consequences on food safety. In September 2007, we ran a piece entitled, Wages And Social Responsibility, which assessed industry vulnerability as the social component of sustainability gains traction — while also pointing out that what many claim to be “socially responsible” behavior may actually do much harm.

What unites both of these pieces is the sense that what is obvious is not always correct. This strikes us a worthy point to consider in industry deliberations.




Pundit’s Mailbag — Wegmans Responds
To ‘Double Standard’ Allegation

We’ve written about the issue of food safety and locally grown produce previously with pieces such as Food Safety And Locally Grown and Getting Locally Grown Up To Standard, but our recent piece, New York Times Article Reveals Double Standard On Food Safety, caught the interest of many. Some were large growers applauding attention being paid to this issue. For example we received this missive from a large grower:

Amen, Amen and Amen. Finally the elephant in the room and the crazy aunt in the closet are exposed. A huge DOUBLE STANDARD.

As a producer both on the West Coast and in Mexico, this DOUBLE STANDARD in food safety program criteria and application has me on the edge of bitterness towards an industry I love and have been passionate about for nearly 30 years.

— Steve Scaroni
Veg Packer USA and Veg Packer de Mexico

We also heard from several retailers objecting to the characterization of the situation as a “double standard,” most specifically in the form of this letter from Wegmans:

In the “Perishable Pundit” dated August 7, 2008, you include a piece entitled New York Times Reveals Double Standard On Food Safety. In this piece you review an article from The New York Times on locally grown produce, and take me and Wegmans Food Markets to task for having a double standard on food safety for large and small growers.

I would like to provide an accurate description of my comments because, as you know, a reporter doesn’t always report everything you tell them. I work for a company of high integrity and I wouldn’t work against that value. In fact, I’m very passionate about food safety practices across industry, not excluding small growers. I think minimal food safety standards need to apply across the board. Clean water, controlling manure, and high levels of personal hygiene for people working with food are critical requirements for any farm, regardless of size. And I’ve got to make sure that I’m holding up my end at the retail level.

For The New York Times article, I was asked what’s different today with our local growing initiative versus many years ago (in our case over 20 years of local produce procurement). One of my quotes published was referencing relationships, not standards. In addressing relationships, it would be an oxymoron for this program to be driven centrally when local growers harvest and deliver directly to the stores. Our store managers and team leaders establish these local relationships and that’s a key difference in the success of our local program. I then mentioned about guiding stores, meaning providing guidelines for quality specifications, pricing, etc. A key element today that’s different from 20 years ago is food safety. Our responsibility is to provide guidance, no pun, on food safety.

We’ve worked with Dr. Bob Gravani at Cornell University and sponsored GAPs training for our local growers since 2005. We expanded this to include Dr. Wes Kline at Rutgers and the folks at the USDA GAPs program in 2006 and 2007. We will do more training sessions this year, and are requiring our local suppliers of lettuce and leafy greens, tomatoes, netted melons, green onions and herbs to provide us with a third-party GAPs audit of their operation. Bill Pool, our Manager Food Safety and Regulation for Produce, assists me greatly in this process. Certification of these practices becomes effective this season, and if the grower is not willing or able to do that, our stores won’t be able to buy from them. We require our California leafy greens suppliers to be part of the CLGMA, and our local lettuce suppliers to be GAPs certified.

I don’t think we have a double standard. I informed the reporter about our food safety standards with local growers but those comments didn’t make the article.

I thought it was important to address the issues raised by your comments and to clarify my position on food safety.

— David Corsi
VP Produce and Floral
Wegmans Food Markets

We thank Dave very much for writing. So many in the industry are afraid to speak up, yet if we don’t honestly address our problems the industry can never advance.

And Dave’s letter is actually giving important news. Up to this point in time, Wegmans’ public pronouncements on food safety related to local growers have only included only a ”recommendation” to local growers to get an audit. As recently as July 7, 2008, in a press release Wegmans was unwilling to go beyond saying it was “asking” as opposed to “requiring” local growers to get audited.

This is the first time that an executive who works for Wegmans has actually said that the company is prepared to cut off growers unwilling or unable to get audited.

Now, we found the letter a little unclear so we went back and forth with Dave on e-mails, and Dave was courteous enough to clarify this point. Here is what he explained to us:

“Local growers who provide products of high risk must have GAP’s certification this year. By the ‘09 growing season, we will require the entire local grower community to be GAP-certified.”

We had taken the names of Wegmans’ local suppliers off its website and ran the farms against the admittedly incomplete public databases available from companies such as Primus and SCS of audited farms. We also looked at the USDA program. We found that few of Wegmans’ local suppliers had been audited by any of these third parties.

It turns out that what Dave means is that on the items identified as “high-risk” by the FDA, Wegmans is asking local growers to conduct audits this season — which is just now approaching high season. By their nature, doing the audits this season means the results don’t affect purchasing eligibility on high risk items until next season.

By the same token, the growers of the rest of the items are being asked to conduct audits during the 2009 season. If they fail, they won’t be eligible to sell to Wegmans in 2010.

We have often praised Wegmans for a progressive attitude on food safety, even pointing to its willingness to offer irradiated chop meat in pieces such as this and this. We also have praised Dave Corsi, personally, for leadership on food safety, presenting him with our Single Step Award for his contributions, as a co-founder of the Buyer-led Food Safety Initiative to resolving the Spinach Crisis of 2006.

And in all fairness, we never saw this as an issue particular to Wegmans. The issue of differential treatment of local growers applies to all retailers who run real local programs. That is to say programs that really try to bring into the supply chain small growers who were not selling to big chains previously.

On the substance of it, Dave’s announcement that Wegmans is moving to mandatory GAP audits for food safety purposes on locally grown product is very good news. It sets Wegmans up as a leader, and we hope others will follow this example.

It is certainly not a complete solution. GAP is itself too vague and self-referential, dependent on a farm’s own assessment of its food safety needs. Dave further advised us that Wegmans would be requiring, specifically, “…all local growers to be audited/certified using the National GAP’s Program process starting next year. AMS, who has oversight for this program, also provides oversight for the California Leafy Greens Marketing Agreements in effect in California and Arizona.”

This AMS/USDA program is also too lax. Just as an example, it requires a score of 80 out of 100 to pass. By contrast, no non-conformance is acceptable with the California Leafy Greens Marketing Agreement.

On the other hand, if the issue is progress, just the fact that farms have to develop a food safety plan will encourage focus on the issue, and the prospect of USDA inspectors on the property will focus more attention on the issue. This is all to the good. Dave Corsi, Bill Pool and Wegmans should be praised for this move. Wegmans ownership should be saluted for supporting and encouraging such a move.

Yet all this hardly addresses the issue of a “double-standard” and, on that issue Dave’s letter merely confirms the case.

First, all the things Dave is talking about are things that will happen in the future. As of today, Wegmans is buying unaudited produce from local growers. It won’t do this from national producers right now — so that is a double standard.

Second, as Dave points out, to use leafy greens as an example, on those products Wegmans is requiring California and Arizona producers to meet the metrics of the CLGMA. We doubt these metrics are perfect, but they certainly are different than simply a GAP audit. Now we asked Dave about this and his response was that “the Leafy Greens Marketing Agreement and the associated metrics were developed for a specific commodity in a specific growing area. As other commodity-specific guidance is developed (such as the tomato guidance), we will review and implement as necessary.”

This is a fair enough claim, but doesn’t really hold up when one considers that the CLGMA metrics are applied not just in the Salinas Valley but across the length and breadth of two enormously productive agricultural states. From the deserts of Arizona to the coast of Monterey, from the mountains to the valleys, these metrics apply.

To say that requiring a GAP audit is equivalent to requiring a farmer to follow the CLGMA is not true, so, once again, we have a double standard.

Third, of course, you have the question of what the standards are for all other produce items. Wegmans is in a tough position here. It is not a Wal-Mart size buyer and buys a lot through wholesalers and brokers, which makes it difficult for it to establish proprietary food safety standards. There are other buyers out there — often on foodservice, some retailers — who set up their own proprietary standards sitting down with vendors and demanding to see evidence of water tests on a set schedule, demanding a specific auditor or performing audits themselves, etc. as a prerequisite to being approved as a vendor.

Wegmans doesn’t do this. As Dave explained in a subsequent e-mail, “We are not asking anything beyond the CLGMA requirement and the GAP’s requirements,” — so its national standards are more generic. If Wegmans gets all its local items GAP-audited, it will not be out of line with its requirements for most of its national suppliers and thus, not be a double standard.

Of course, other buyers that do impose special requirements on national shippers are often waiving them on local produce and certainly have a double standard.

None of this should overshadow the fact that Wegmans is trying to move in the right direction. There are plenty of buyers out there who are buying anonymous produce at Amish Auctions, and so the fact that a GAP audit is being required is a big win. The truth is that audits and water testing, etc., are very expensive on small farms, and the tension between uniform national standards and the viability of small farmers will not go away soon.

In fact, if this controversy makes the industry confront the broader issue of how amorphous GAP standards are, it might turn into a really big win for the trade. That, however, is an article for another day.

For now, we wish to thank Dave Corsi and Wegmans for sharing with the industry this important news about the new requirement for its local vendors to get GAP audits and, more broadly, elaborating on Wegmans food safety efforts.




Perishable Thoughts

We decided to take the Jr. Pundits to Williamsburg, in the Great Commonwealth of Virginia, to expose them to the early roots of the American nation. They have a program where the children can be “apprentices” in many of the trades. So they tried being silversmiths, cabinet-makers and, their favorite, brick-makers. Brick making is actually pretty simple — if arduous — work, but the part where they get to take off their shoes and socks and stomp around in the clay makes it a favorite with five- and six-year-old boys.

Thomas Jefferson wrote that three men and a child could, together, produce 2,000 bricks a day, and the demand was brisk for new foundations and chimneys — only the gentry could actually afford brick houses.

The Pundit family is staying at the Williamsburg Inn, which is just outside the historic area but was built as a result of the decision to restore the colonial city. In 1926 the Reverend W.A.R. Goodwin convinced John D. Rockefeller (commonly referred to as Jr. to distinguish him from his father, the founder of Standard Oil) that there was a unique opportunity to buy and restore an entire city. Mr. Rockefeller agreed and the purchase and restoration commenced.

People began to arrive but there were few local accommodations, so Mr. Rockefeller funded the construction of a hotel. Both Mr. Rockefeller and his wife, Abby, were intricately involved in the design, construction and furnishing of the hotel, and it opened to worldwide acclaim on April 3, 1937.

Though not as historic as the buildings nearby, the hotel has created its own history. Queen Elizabeth II stayed here, as did Winston Churchill. It is easy to teach your children history when you can explain that Emperor Hirohito of Japan slept here.

It is a modern hotel, but in its practices the hotel stays true to a time when people thought about things differently. Teaching children about America hundreds of years ago is important, but there is also a value in them learning that rules they have here — men must wear jackets at dinner, you don’t walk through the lobby in bathing suits and flip flops, etc. — harkens back to a not-so-ancient time when one’s personal comfort was not considered the most important thing.

There is a chance to learn something everywhere you go if you are open to such learning. Each night on your pillow, the staff places a little card with a saying from one of the founders, and we always find these missives from long gone men thought-provoking and relevant.

Last night this is what our pillow card said:

“The superiority of chocolate, both for health and nourishment, will soon give it the same preference over tea and coffee in America which it has in Spain.”

Letter to John Adams
Thomas Jefferson
1785
Included in The Adams Jefferson Letters the Complete Correspondence Between Thomas Jefferson and Abigail and John Adams.

We read this and realized that the argument Jefferson is making — which is that superiority in health will drive consumption — is pretty close to the argument for our own Produce for Better Health Foundation and its 5-a-Day and, now, Fruits and Veggies More Matters! branding efforts.

Of course, the disconcerting news is that it is now two hundred plus years later and Thomas Jefferson’s prediction did not prove accurate. Coffee and tea are far more commonly consumed than is chocolate, hot or cold.

It is possible Jefferson got the science wrong, although the current craze for dark chocolate is health-based, so his perceptions on chocolate are pretty current. Chocolate does have calories, of course, and drinking many cups a day could add on the pounds, so perhaps that is what has prevented it from achieving Jefferson’s prediction.

This is just to say that culturally speaking, coffee is consumed not so much for nutrition as a stimulant. The fact that food and drink play many roles in our culture means that any pitch devoted solely to nutrition is going to be incomplete and thus less likely to succeed in changing behavior.

We’ve been spending a lot of industry money every year on PBH — plus the program has received funding from other sources. It is a worthy cause, but are we moving toward achieving our goals?

Our sense is that we need to add a program that promotes fresh produce solely and on grounds of taste, flavor and indulgence. We need to do tie-ins with ice cream and whipped cream on fruit, and butter and cheese on vegetables. Not because health is unimportant — it is crucial. Health is just one facet, though, of the human experience, and you just can’t produce a symphony if you only play one note.

The produce industry efforts to increase consumption go back long before 5-a-Day, so we would hope action can be taken to complete the PBH efforts with other types of promotion. Otherwise, we fear we will be discussing this issue two hundred years from now.

****

Perishable Thoughts is a regular section of the Perishable Pundit. If you have a favorite quote that you would like to share with the industry, please send it on. You can do so right here.

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