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Pundit’s Pulse Of The Industry

Jim Prevor’s Perishable Pundit, October 2, 2006

We previously ran a Pundit’s Retail Pulse in which we featured a guest panel consisting of Robert DiPiazza and Jerry Hull of Sam’s Club, Bob Harding of Westborn Markets, Don Harris of Wild Oats, Jeff Lyons of Costco, and Mike O’Brien of Schnuck Markets, and we explored their reaction at retail to the initial recall.

We’ve now turned to Bob Edgell of Balls Foods and Ron McCormick of Wal-Mart to give us additional feedback on how the initial reintroduction of spinach to the stores is being perceived at retail. These interviews were both conducted before Salinas spinach was allowed back on the market.

The Perishable Pundit expresses appreciation to today’s retail pundits for sharing their insights with the industry.

Bob Edgell, Director of Produce Procurement & Distribution, Balls Food Stores, Kansas City, KS

Q: Where do you stand as far as putting spinach back on the shelves?

A: We’re not selling any spinach, period. We are taking it day by day. We won’t go back to market until the spinach problem is completely resolved, or at least until the FDA has reached a better conclusion. We are probably going to wait for some more evidence that FDA has gotten to the root of the problem. I understand FDA has eliminated possibilities and narrowed it down to four fields. Until we feel comfortable, we don’t want to sell.

Q: What if the FDA never determines the exact cause, which is a distinct possibility?

A: Then it becomes a time healed issue. It may come to that if they don’t figure out the cause, or the answer is not conclusive. It’s the same scenario as if you go to the doctor and you leave not knowing what’s wrong with you. At some point we will begin product integration. We’re thinking anywhere between two to six months down the line, unless FDA pins it down to an exact cause.

Q: What would you say to spinach growers/shippers who are anxious to start selling their product that has been cleared by the FDA as OK for consumers to eat?

A: Suppliers are calling me, wanting to sell spinach, but that’s not the right call to make to me because were not going to buy spinach. We are not convinced areas in other parts of the country are safe. We are really sorry for the growers and shippers of spinach, who have suffered because of this spinach E. coli outbreak, but we must always put the consumer first.

Q: And how are you going about doing that?

A: We immediately stripped spinach completely off the racks, contained it in a separate pallet in a cooler to consolidate it, documenting every SKU and then dumping it. We posted prominent signage at the store and directed consumers right to our web site. We have a zero tolerance policy, and moved quickly to inform store directors and employees. We have been educating employees through meetings and newsletters on how to answer a customer’s question, and where a customer can go to get more information. At the beginning of this outbreak, our team members were receiving more consumer questions, but things have calmed down. Now some consumers are asking when they can get spinach again.

Q: And what do you tell them?

A: We are cautiously selling non-spinach retail items that growers have packed without spinach with signage at store level. Even with the disclaimer of no spinach printed on the packages, we are putting signs up.

Q: What do you write on the signage?

A: Department signs say, “Due to recent outbreaks, we no longer carry spinach until the conflict is resolved.” That way consumers can ask questions to a produce manager or employee once they see a sign. In addition, we connect signs to bagged salads and spring mixes that may have originally included spinach before the outbreak that say, “Items above do not contain spinach and will not contain spinach until the problem is resolved.”

On the packages, there is a small disclaimer: “This contains no spinach.” I know suppliers don’t want to splash it all over the container, but a notice an inch and a half long down by the bar code wasn’t good enough for us. Now, when consumers are pushing their shopping cart, they can see the information without having to search for it.

Q: How are consumers taking to this approach?

A: It’s a double-edge sword. All the signs draw attention to the problem. The whole category group in general suffers, with processed salads taking hits between 8 to 20 percent in sales. We are spreading out alternate product lines, giving consumers other options. Swiss chard, which has a spinach flavor, has picked up a bit. Whole leaf lettuces have experienced a little bit of lift. We are working on building alternative items and trying to better educate consumers on food safety measures they can follow when they leave the store.

Q: For example?

A: We’ve integrated more of the vegetable wash products on the shelves throughout the department, instead of just placing them in one or two places. We want to remind consumers that vegetables need to be washed, and letting them know these practices should be in place when they get home.

Q: Produce washes have always been a bit controversial in the industry, giving consumers the perception that produce is unsafe to eat if washed with regular water? Does that concern you?

A: We are using the washes as a signage. We don’t care if we sell more. We spread it out around the department to remind consumers they should wash their produce. We received a small sales lift from doing that, but that wasn’t our intent. Most people are pretty educated and the majority of vegetable eaters do wash their vegetables first. With all the prepackaged salads out there that are pre-washed, some consumers forget that most produce is not. Fresh-cut is a big category and tough to manage. We are very upset people in the country are ill because of it, and like our customers, we want answers, and we’re going to be pretty stern about getting them before putting spinach back out on the shelves. We must build consumer trust.

Q: How do you go about that?

A: Trust is everything. We do a big Buy Fresh, Buy Local campaign. It highlights produce but goes beyond it for a range of home grown products from honey to cheese to meat to free range chickens, and we have aligned accounts so people grow for us locally.

We do a great job in signage with pictures and we bring farmers in the store. Consumers learn their family stories and what they do to support agriculture. Because of this belief and effort in promoting local agriculture, consumers have very few issues with how we operate and have confidence in our practices. Our homegrown local product for three years in a row has grown 38 percent in sales, and we were named retailer of the year in Kansas City by the state Ag Department.

Q: Could you utilize your successful homegrown campaign as a stepping stone for bringing back spinach?

A: There is a spinach festival here in Shawnee, Kansas. Curly spinach is a local variety, and we do some home grown spinach in the summer months. That will be something we highlight. And we are looking into getting local farmers to extend the season with a second crop. We help local farmers take the risk, work with them on the seeds, pricing return and transportation costs. We will go out of our way to make it happen.

Ron McCormick, Vice President/DMM of Produce and Floral, Wal-Mart

Q: What is Wal-Mart’s strategy now that FDA says it’s safe for consumers to eat fresh spinach not grown in three California counties?

A: All retailers are pretty much in the same boat right now — in wait-and-see mode. People are beginning to feel a little more hopeful that FDA is isolating the problem, and we’re moving closer to the time when retailers feel comfortable putting spinach back on shelves. The challenge as an industry is alleviating consumer fears and changing perceptions. PMA, FMI, and United are working with the FDA and doing a great job flowing information to retailers. These organizations have the understanding that we need to reach a point in time where we put together a collective face to customers on what the problem was. We don’t have the answers yet. We need to wait.

Q: At what point could it be prudent for retailers to start selling fresh spinach cleared by the FDA again?

A: The e-coli outbreak is still hitting the media at too great a level for us to do something without talking to customers about it. We can’t just say, “Here is spinach from approved areas and it is your choice.” The spinach outbreak has brought attention to wider food safety issues, which is impacting consumer buying in a broader context.

Q: Could you provide an example of this phenomenon?

A: I was recently talking to buyers of canned spinach and they say sales are down. Canned spinach never had anything to do with the fresh spinach E. coli problem. This demonstrates the magnitude of consumer confusion and unease. Customers concerned about all the reports are saying, “I don‘t know what is safe to eat. Why take a chance? Maybe I’ll just eat green beans instead.”

Q: Couldn’t retailers like Wal-Mart, which have the size and power to get the word out on the retail floor, put up signs or POS information letting consumers know this spinach is from New Jersey, for instance, and is fine to consume?

A: You bring up an interesting point, and New Jersey is a good example. We will see some retailers doing just that. In some places, signs will tell consumers this spinach is from a particular growing area and is OK to eat. If the chain is based predominantly in that area, and has an intimate relationship with the customer, it could communicate that information well. Retailers could bring in home grown New Jersey product and put the message out successfully, but I think this also could convey the wrong message to consumers. There is danger in making that customer think this is good New Jersey spinach, not bad California spinach. The goal should be to increase consumer confidence in eating spinach and all produce in general; not pit one produce product, manufacturer, or growing region against another, which could have the unintended affect of scaring consumers and decreasing produce consumption.

Q: On the other hand, couldn’t Wal-Mart potentially sell an enormous volume of fresh spinach by taking a less cautious approach and speeding the process of getting it back on the shelves?

A: We need to re-introduce spinach in a way that reassures consumers, and this can’t happen overnight. When all this settles down, I think that the consumer will have the perception that bagged spinach product was the cause of the problem. One thing that will recover soonest will be bulk spinach. (I avoid saying fresh spinach when referring to bulk because it gives the impression that bagged spinach is not fresh).

We’d all love to get the sales back, but we should be concerned with more than handling recovery of sales short-term, and building back consumer confidence in eating spinach and produce in general long-term. We must think in the larger picture. It’s not enough of a strategy to just say it’s safe and get back in the water putting product on the shelf without properly educating and reassuring consumers. I’m proud of the work the industry organizations are doing to achieve this goal.

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