Fresh Express Claims A Food Safety Breakthrough…But Does It Work And Will It Cause Consumer Confusion?
The big news at PMA is that Fresh Express leaked its new food safety innovation to The New York Times and so William Neuman, who writes much of the Times food safety coverage since Andy Martin went onto the bank beat, gave them a big story. The piece is titled Post-Recalls, A New Way to Clean the Greens.
Fresh Express has been aggressive in food safety, and we certainly hope this works and serves to enhance safety. But the way this was done is really problematic and raises at least three categories of concern:
First, there are consumer concerns. The gist of this food safety innovation is that instead of chlorine the company is going to use an acid mixture. Here is how The New York Times describes it:
The company plans to announce on Friday that it is abandoning the standard industry practice of washing leafy greens with chlorine and has begun using the acid mixture, which it claims is many times more effective in killing bacteria. The new wash solution, called FreshRinse, contains organic acids commonly used in the food industry, including lactic acid, a compound found in milk.
Obvious questions in terms of consumer response:
1. Won’t vegans now refuse to eat the product because it contains what appears to be a derivative of milk? And is it smart for the industry to confuse consumers as to whether produce is an animal product?
2. Won’t kosher consumers now reclassify this product as dairy, thus meaning they can’t eat it with meat?
3. What about all those lactose intolerant folks? Won’t they not only not buy this product but might it not raise issues about all produce with these consumers?
The second issue is unveiling something this big, as a top secret project. This means nobody actually knows that the Fresh Express claims are true. These type of claims need to be subjected to third party vetting. This should have been peer reviewed. Independent scientists should be able to duplicate the research results that Fresh Express has achieved.
Right now Fresh Express is asking every supermarket and consumer in America to take at face value that A) This actually advances food safety and B) That it has no negative effect on taste, shelf-life, etc. Nobody knows whether this is true.
There is a real question as to whether Fresh Express is serving anyone’s interests, including its own, by prematurely announcing this and starting to use it, when nobody can vouch for it outside of Fresh Express.
Third, is the general question of the desirability of utilizing food safety for competitive differentiation with consumers. Fresh Express took some heat a few years ago when it arranged for US Today to run a flattering piece on the Fresh Express food safety program just in time for the PMA Convention. The piece violated the 11th commandment of not utilizing food safety as a competitive edge.
This piece brings that to a whole new level. Clearly supermarkets are not going to want consumers confused about whether other companies have safe product or not. They certainly won’t want consumers confused over whether produce is vegan or not, dairy or not, and whether it will impact lactose intolerant consumers.
Maybe all this will be resolved satisfactorily and maybe this is a big advance. The fact that the process is in use, that The New York Times is writing about it and we are still able to ask all these questions, is a clear sign that what should have been introduced via a scientific symposium and peer reviewed journal has been rushed to market. Fresh Express could have proudly introduced a new industry standard for food safety. Instead it comes across as a marketing gimmick.
We would like to celebrate a food safety advance. Yet so much — including the effectiveness of the innovation — is up in the air. We fear the implications for Fresh Express…and the broader industry …are not positive.
Like St. Augustine praying for chastity — but not yet — Tesco has declared that its Fresh and Easy division shall make a profit — just not yet. Tesco management has declared that its US division shall become profitable in fiscal year 2012/2013.
Of course, such predictions are curious as Tesco has never acknowledged any significant flaw in its rollout of Fresh & Easy. Instead it has claimed that the general economy has been the problem. Of course, if the general economy is the problem, precisely how does Tesco know that things will be OK two years from now? Maybe they will be worse!
Tesco believes it will be profitable because stores will mature and thus have higher sales and, by that time, it expects to have about 400 stores — more than twice what it has today. This will max out, it says, its distribution center capacity.
One can take these projections or leave them, as at various times, Tesco projected hundreds of stores to be open by 2009 and 2010 that never materialized. Of course, while Tesco announces plans in the out years to open a store a week or more, it is “mothballing” 13 stores right now. The implication is that Tesco opened stores in outer areas that it had expected to fill up with people, and because of the housing crash, these areas are not filling up. Thus Tesco is closing down these stores until some day in the unknown future when more people might move near the stores.
It is reasonable enough to look to locate stores in areas where the population may grow, so this claim may even be true. The meaning of “mothballing,” though, is suspect — one wonders if it is some scheme to avoid having to write-off the stores. One wonders what British accountants would say? Is the professed intent to reopen a store at some indefinite date in the future sufficient to avoid an immediate write-off?
One suspects there will be big write-offs in the Fresh & Easy future. We already mentioned that Tesco acquired its two British transplants, 2 Sisters Food Group and Wild Rocket Foods, here and here.
We now learn the shockingly high price paid: £52 million, or $82 million, for 2 Sisters and £64 million, or $101 million, for Wild Rocket.
Now Tesco discloses that in addition to asset values that we would consider wildly overvalued, Tesco paid so much that about £82 million, or nearly $130 million, in goodwill arose as a result of the acquisition. Yet these companies that practically only sold to Fresh & Easy have nothing that merits such a goodwill evaluation.
Tesco writes in Note 10:
On 18 June 2010 the Group acquired the trade and certain assets and liabilities of 2 Sisters Food Group, Inc. for consideration of £52m. On 19 July 2010 the Group acquired 100% of the ordinary share capital of Wild Rocket Foods, LLC for consideration of £64m. The table below sets out the provisional analysis of the net assets acquired and the fair value to the Group in respect of these two acquisitions.
Pre-acquisition carrying values
Fair value adjustment
Provisional fair values on acquisition
Net assets acquired
Goodwill arising on acquisition
The goodwill represents the benefit of supply chain efficiencies, production economies, the ability to develop new and innovative products and further third-party revenue potential.
Tesco paid £45 million, or $71 million, in cash plus £71 million, or $112 million, in non-cash consideration for these two companies. Tesco is cryptic about what this enormous non-cash consideration could be. Did the company give Tesco stock? Did Tesco own some percentage of the British sister companies and pay that out? We once noted that Tesco had a lien against Wild Rocket. Could it have had a note, perhaps guaranteed by the owners of Wild Rocket that it threw in, as part of the deal? In fact, could the whole deal have taken place to avoid a write-off of a loan to Wild Rocket or to both of the transplants?
In any case, it is now clear that this was a bailout more than an acquisition. The non-current assets were written down slightly from £45 million, or $71 million, to £41 million, or $65 million, but we would guess that in an actual sale, they would struggle to get a fraction of that for their facilities.
Goodwill in a third-party sale would be almost completely dependent on the terms of the contract with Fresh & Easy. It is like a sales leaseback — the value is entirely based on the terms of the lease. If there was no contract, the very fact that one company accounts for 100% of the business would make it a tough sell.
Our estimate is Tesco paid more than five times what these companies would have gone for to a third-party vendor not protected by a contract with Fresh & Easy.
The high prices paid for these assets still leaves one to wonder if there was not some informal agreement to bail out the ownership of these transplants if things didn’t go well. This is significant because such an agreement, if it existed, would have misrepresented to shareholders the risks the company was taking in America and the losses it was actually experiencing. One wonders if the UK’s Serious Fraud Office will ever take a look at this.
In another part of the report, Tesco claims that its Fresh & Easy “like for like” sales — or as Americans would say, same-store sales — are up 10% and sees this as “good progress,” but it is not. We wrote way back in February 1, 2008, that stores have a natural maturation process, which we detailed like this:
When a new store opens, sales commonly drop, not increase, by 20 or 30% within the first four weeks.
Then, they can start to grow, but rarely by leaps and bounds. If these stores have stabilized at $50,000 a week after being open a month or two, you would expect to see sales at $60,000 a week a year later, $69,000 two years later, $80,000 after three years and, say $90,000 after four years.
Now if the concept really takes off and gains wide acceptance, instead of a gain of 20% and then 15% each year, you could get a gain of, initially, 35% and then 25% after that.
Operating grocery stores is a tough business, but it is not rocket science. The big problem Fresh & Easy has is that the stores do not make money. In fact, losses have increased. Tesco announced that in the first half of its 2010/2011 fiscal year, Fresh & Easy lost £95 million, or $150 million. This is up from a loss of £85 million, or $134 million, in the same period last year. Tesco blames its acquisitions of suppliers and paying rent on stores it has elected not to open for aggravating these losses. Of course, other retailers manage to rent almost only stores they actually open and only do acquisitions if they are accretive to earnings.
We have done much analysis on Fresh & Easy. Now we sense the arrogance of pride that so often comes before a fall. Sure Tesco is a wealthy company, and it can spend money as long as it wants. But we are hearing grumbling from employees at Tesco in the UK and other places that the annual quarter-billion dollar losses are starting to grate on people.
We also think Tesco is wildly optimistic about the success it will have in other regions. Northern California is becoming a highly competitive — and very expensive market — to operate in. Wal-Mart is about to announce a new small-store initiative drawing on its experience in Mexico and modeled after its urban entry agreement in Chicago.
We’ve raised before the possibility of changing concepts to become an Aldi clone or a Trader Joe’s clone; we have also raised the idea of franchising the stores.
Yet the Tesco report seems to envision success as coming through a “steady-as-she goes” philosophy. Yet a stagnant concept gives competitors a chance to practice and discover vulnerabilities. As tough as Fresh & Easy’s entry in Southern California, Phoenix and Las Vegas has been — and it has been tough — going into Northern California will be tougher. Safeway has some pretty sharp people and pretty decent resources and they have been practicing now for three years.
Earlier this summer, we received the official word that Tonya Antle was going to retire from Earthbound Farms. We ran the announcement in Pundit sister publication PerishableNews.com as soon as the press release went out, but we thought we would wait to weigh in until PMA so people would have an opportunity to thank Tonya for a lifetime of exceptional contribution to the trade.
You don’t have to trust the Pundit on this one. Here are just a few of the nice comments sent to us upon the announcement… comments that address both the unique quality of the person and the unique contributions she has made to the trade:
You probably heard the announcement on Tonya Antle’s retirement and I want to give testimony to one of the “shakers and movers” of the organic movement. The organic category may still be in the specialty area of a supermarket if it wasn’t for Tonya.
I can still recall the outstanding Greek girl calling on me to sell me on stocking organic grapes grown by her husband’s family, the Pavich’s. No doubt her looks helped her get the appointment, but it was sheer talent and passion for the product that convinced me to give it a try.
We tried it in our Pavilions division and other high volume/high education areas and it did well. Not only did I give it a try, but in a couple of seasons she convinced me she had enough volume to have me use it as our #1 ad item for the entire chain. She was right and it was a great success in sales, with a ton of letters from our customers telling us it was the best grapes they had purchased at our Von’s stores.
I can’t tell you how many boring organic panels I sat through until it was Tonya’s turn to speak. She put all of her produce savvy and passion into what she was saying. I am not alone on my feelings for what she has done for the organic category as I have heard similar stories from the likes of Ed Odron, Harold Alston, Tony Missai and many others.
— Dick Spezzano
[Former Vice President of Produce for Vons]
Others remember both Tonya’s business savvy and her personal effervescence:
When it comes to reminiscing about Tonya Antle, I do seem to remember a PMA convention evening in New Orleans, and a karaoke performance that had me singing with a group of backup singers and dancers that were affectionately known as my “Doo-Wop” girls, and led on stage by none other than Miss Tonya!
I will have to check with a few of my fellow conventioneers to see if they recollect more of the details. If we check the convention locations, New Orleans should have been around 1990.
On a serious note, I remember Tonya calling on my team at Dominick’s in the late 80’s and early 90’s long before organics had been established….. and so admiring her passion for the product and her enthusiastic presentation. Her passion paid dividends and we sold a great deal of Tonya’s product.
— Bob DiPiazza
DiPiazza Consulting Services, Inc.
[Formerly Senior Vice President and
General Merchandising Manager for Sam’s Club
and formerly Vice President of Produce for Dominick’s]
Others point out Tonya’s role in moving from one leading organic marketer to another:
Tonya was instrumental in establishing organics at Wegmans.
Her persistence with Pavich organics in the early days assisted in placing organic produce on the map for us.
As the leader of Earthbound Farms and through her efforts of educating our team at Wegmans with organics, Tonya launched us into a different stratosphere!
I applaud all that Tonya brought to us over the years to create a true destination for this ever growing segment!
Vice President Produce
Wegmans Food Markets
Rochester, New York
While another retail leader found that Tonya exemplified authenticity before authenticity was cool:
The single word that comes to my mind when I think of Tonya is “genuine”. She is genuinely beautiful, genuinely charming, genuinely funny, genuinely intelligent, and genuinely passionate.
And when you think of all of the “canned’ approaches that so many people in sales display, I always appreciated Tonya’s approach to her profession, and her approach to her friends. And so often they were one in the same.
Anyone who has had the opportunity to interact with Tonya was better off for the experience.
[Formerly Senior Vice President and
General Manager of Perishables for Wal-Mart]
Tonya is now going on to be an adjunct professor in the College of Agriculture, Food and Environmental Sciences at Cal Poly — San Luis Obispo. Whoever gets to be her students will be mighty lucky.
When we think about Tonya, five things come to mind.
Rootedness — Tonya is a Hronis, and she has worked her whole life in the industry she was born in. The whole organic ethos of rootedness and connectedness is intrinsic in her life story.
Exuberance — This PMA convention is the 25th anniversary of Pundit sister publication PRODUCE BUSINESS at the PMA convention in San Francisco. We celebrated the launch on the dance floor with Tonya and for years after Ken Whitacre, with whom this Pundit launched PRODUCE BUSINESS, would cut quite a rug with Tonya. She has always enjoyed what life offered up to be enjoyed. As a result those around her have always been happier for her presence. That is a great gift.
Focus — See her dancing at a party and you would think she was just a party girl — this is a party girl with a business focus like steel. We remember in the early years of the Pack Family/PMA Career Pathways program. Both Tonya and the Pundit were “mentors” for the students and, one day, back in the pre-cell phone age — Tonya didn’t show up. We covered for her and took care of the student then the Pundit went out to find Tonya and make sure she was OK.
We found her selling the buyers for Stop & Shop, and when we asked why she missed the meeting she was already playing a marketing professor. She said, “My first mentoring lesson for my student is ‘go for the order’. When the buyer is ready to order, you help him do so. My student just got the most valuable lesson in marketing I could give.”
We used that with the students that year and she was absolutely right.
Passionate realism — Whatever job she has had, Tonya always believed in her cause. She managed to sell organics without losing site of the reality in which a commercial industry must function and budget-constrained individuals must live. She never became Michael Pollen, but we would say she got more people to eat organic than he did.
Love and Friendship — Tonya danced at the Pundit’s wedding and we have shared happy times. Yet we came to really understand Tonya when, one day, many years ago, we found her hidden away at a trade show, crying. It was a personal matter that had hit her hard. We sat for awhile. Got her a drink and then, like Scarlett in Gone With the Wind declaring she would never be hungry again, Tonya wiped her tears, pulled herself together and declared herself ready to go on.
She did go on both professionally, finding a new home at Earthbound Farms and, personally, marrying Rick Antle. She added a dose of electricity both at work and at home.
We hope she will ask us to guest lecture, less because we need another speaking gig than because every once in awhile we need a dose of Tonya’s electric personality.
We wish Tonya the best in her retirement. She was instrumental in building the organic industry. In the course of doing so, she won the respect, friendship and love of many she came to interact with. We are glad that between CSU, Rick and Tonya’s family we know that retirement, in this case at least, is not the same as saying goodbye.
As we head off to the PMA Convention in Orlando, its proximity to the election gives us cause to explain how valuable attending industry events can be. Of course, we all recognize the value of networking and can see how a trade show with an opportunity to buy and sell can certainly produce value.
Yet, over the years we have found the workshops and programs to produce the most lasting value and often in unpredictable ways.
For example, at the 2009 PMA-FIT Leadership Symposium, back when PRODUCE BUSINESS was a partner along with PMA and Cornell University, there was a speaker who wrote and talked about a 2006 book, titled, The Starfish and the Spider. Rod A. Beckstrom wrote the book with Ori Brafman, but it was Beckstrom alone who gave the talk.
It was a fascinating workshop in which the author detailed his thesis, which was that traditional organizations were structured like spiders with a centralized “head” that could be chopped off. If the head was destroyed, the organization died. Mr. Beckstrom explained that other types of organizations — think of the music-sharing site Napster, or the terrorist group Al Queda, for example — were organized more along the lines of starfish, without centralized authority. Interestingly, if you chop off an “arm” of certain star fish, the starfish will grow a new arm and the arm itself will grow a new starfish. This makes certain types of organizations very difficult to destroy.
The thesis went on to say that though decentralized organizations go down through history, the ubiquity of the Internet has made them more powerful and relevant.
It turns out that this model is the perfect lens from which to view the rise of “The Tea Party” in American politics. Whereas the GOP has a structure, a national director, etc., the Tea Party movement has no president or board of directors. There is no boss or someone who can expel you from the Tea Party.
In other words, it is precisely the kind of movement that Mr. Beckstrom was thinking about.
Basically, the point here is that one of the worst possible things you can do at PMA is decide to only go to things that you know to be relevant. The problem with that approach is that it condemns you to live in a sheltered intellectual world in which you only expose yourself to a narrow band of knowledge.
Nobody sitting in that room at the PMA-Fit Leadership Symposium back in 2009 had the notion that this speaker and this book would help them better understand American politics in 2010. Yet it did.
You should remember the unpredictable utility of knowledge when deciding whether to take advantage of the knowledge available at the world’s most comprehensive produce event — PMA’s Fresh Summit.
Here is a short video in which Jonathan Rauch, who wrote a piece on the subject for National Journal, explains how the “headless” starfish model applies well to the Tea Party Movement and how major political parties are the spider in this story:
With the trade’s newest event, The New York Produce Show and Conference, coming up in November, we’ve written a number of pieces:
New Event Planned For 2010: Eastern Produce Council And PRODUCE BUSINESS Announce The New York Produce Show And Conference
New York Metro’s Economy Is 12th Largest In The World
Retail “Thought Leaders” Panel Announced For The New York Produce Show And Conference
Famed Food Writer Joan Nathan To Speak At New York Produce Show And Conference
A New Hypothesis On Local:
To Boost Sales, Sell It Through Supermarkets… Cornell’s Miguel Gomez Previews His Upcoming Talk At The New York Produce Show And Conference
One of the goals of the event is to uncover the great diversity of work done in the region and about the region. A great part of this work is done at the region’s many fine universities. We already discussed Miguel Gomez and some of the work he is doing at Cornell. We also learned of some intriguing research being done at Rutgers focused on the marketing of Asian and Hispanic produce on the East Coast.
We asked Pundit investigator and special projects editor Mira Slott to find out more:
Q. Could you provide a preview of the research you will be discussing at The New York Produce Show and Conference this November? What insights have you discovered about marketing ethnic produce to consumers on the East Coast?
A: Basically, this is a project funded by USDA, and we are on our third one now. The first one started about seven years back. The focus of that one was demographics and marketing of Asian produce to Asians in the Mid-Atlantic States. The second one broadened to include both Hispanic and Asian produce. The geographic focus was the East Coast and included Washington D.C. and 16 states bordering the East Coast.
That research is what I’m going to speak about at the show. We’ve completed that project, and recently received funding for a third research study focused on leafy greens and herbs for Hispanics and Asians. We had a substantial team of collaborators on the project:
Venkata S. Puduri
James E. Simon
Q: Did you assess all subgroups within the Hispanic and Asian populations or narrow your research to particular segments? I would imagine there could be dramatic differences within each… What were the parameters?
A: The top two subgroups within the Asian and Hispanic populations we chose for the study were Chinese and Asian Indian, and Puerto Rican and Mexican.
Q: What sparked the project?
A: These segments have grown dramatically in the past 20 years and the trend is expected to continue. If you look at Hispanic and Asian populations in the U.S., we’ve seen a 50 percent to 60 percent rise between 1990 and 2000.
Q: And since that time?
A: The most recent figures show 100 percent growth from 2000 to present. It used to be African Americans second to Caucasians in population size, now Hispanics have taken the number two spot.
We wanted to examine how this phenomenon impacted demand for ethnic vegetables and the opportunities to grow these vegetables in the U.S. This is a very niche market for the small farms. These demands are highly regionalized and specialized because of very concentrated local populations, and handled by small and medium-size farms.
Q: With the increase in ethnic populations, is there an opening for larger farms?
A: The big farms are doing high-volume, mainstream and don’t often cater to these specialized pockets because the production demands for these more unique produce items are relatively insignificant.
Q: How are you defining small to medium farms?
A: In the marketplace, there are many definitions. The USDA has a definition based on income, and some assessments are based on size of the farm.
Location is a key for ethnic produce; the way it works is that most farmers do sell direct to consumers depending on the location. If you know Newark or Jersey City, New Jersey, for example, the farmers’ market is a good outlet for small to medium growers.
In the study, we surveyed consumers in 16 states along the East Coast, Maine through Florida, plus Washington D.C. Our focus was Hispanics, specifically Mexicans and Puerto Ricans, and in the Asian population, Chinese and Asian Indians. We looked at buying behaviors of sample populations in those states, product demand issues, traveling and spending habits, whether born in the U.S. or immigrant, etc., compiling a myriad of interesting figures.
Q: Could you highlight some? [Editor’s note: you can read a copy of the full report: Demographics and the Marketing of Asian and Hispanic Produce in the Eastern Coastal U.S.A. here]
A: We looked at how much these different groups were spending on ethnic produce.
Q: How do you define ethnic produce?
A: It’s not simple. Essentially, it’s produce not available in the mainstream market, which is sold in specialty stores or ethnic stores, but you won’t generally find in the mainstream grocery store. Our study found the average Chinese consumer spending $32 per month per person on ethnic produce, versus $27 for Asian Indians; while for Mexicans $22 per person, and for Puerto Ricans, $23 per person.
Based on the populations in those states, and how many buy these ethnic produce items, we extrapolated those numbers to estimate the size of the ethnic produce market.
Giving a range, the Chinese were between $245 million and $295 million, Asian Indians between $190 and $230 million, Mexicans, between $280 and $362 million, and Puerto Ricans between $531 and $655 million.
Q: How did you come up with these numbers?
A: We asked respondents in a survey to fill out how much they spent in the previous year on average per family per household per month, and we divided that by how many in the family for a per person estimate.
In terms of household size, the majority have between two and four family members. Seventy percent of Chinese respondents had two to four members in their households, 65 percent for Asian Indians had between two and four members, 62 percent for Mexicans, and 61 percent for Puerto Ricans
Hispanics in general have a larger household size than Asians. We were surprised Mexicans had such a large household size. To be precise, 30 percent of Mexican households had between 5 and 7 members.
Q: Did you consider how many respondents were born in the U.S., or how long the respondent lived in the U.S., or whether they were a recent immigrant? Wouldn’t that affect the type and amount of ethnic produce they would purchase?
A: Yes, if the U.S. was their country of birth or they lived here longer, they may be used to mainstream. In our study, only 11 percent of the Chinese respondents were born in the U.S. and for Asian Indians, only 10 percent were born in the U.S., versus Mexicans where 55 percent were naturally born U.S. citizens, and Puerto Ricans, 69 percent.
We also categorized respondents by age. Although there is some variation on purchasing based on a respondent’s country of origin, the number of ethnic products consumed is still a huge number, given the size of the population of Mexicans and Puerto Ricans. Growers of ethnic produce could definitely make a difference in filling supply gaps and meeting these increasing demands.
Q: When analyzing potential areas of growth, did you look at particular crops? What crops have growth potential?
A: We started with 50 or 60 crops. We had a big team working on this, narrowing the scope down to 10 to 12 crops on the survey for each ethnicity, then learning how much they buy of those items and in what expenditures. Then we ranked the top five or six.
For the Chinese, the top items were Baby Pak Choy, Oriental Eggplant, Smooth Luffa (a type of gourd), and Napa Cabbage, a very popular vegetable.
Asian Indians preferred Bottle Gourd, eggplant, different types, including Raavayya, Bharta, Ridged Gourd, and Fenugreek Leaves.
Mexican respondents’ top purchases included Chile Jalapenos, Tomatilos, Calabaza Squash, Chile and Poblano.
The leading ethnic produce items for Puerto Ricans were Aji Dulce, Batala, Calabaza, and Cilantro.
These are major items in demand by these ethnic populations.
Q: What other insight did you glean from respondents? Were there any notable surprises?
A: We asked for their opinions in certain areas. For example, the majority of respondents want to buy produce grown on local farms. They also want to buy organically grown, but it’s really hard to find organic ethnic vegetables. We’re not there yet.
The majority said they were less willing to buy GMOs. In the case of genetically modified food, 40 percent of the Chinese are less willing to buy it, versus 62 percent of Puerto Ricans, 56 percent of Mexicans and 47 percent of Asian Indians.
Here is the percentage break down by ethnic group for those more willing to buy local: Chinese 64 percent, Asian Indians 54 percent, Mexicans 79 percent and Puerto Ricans 76 percent. This is good for small and medium-size farms because many go direct to consumers.
Regarding recently introduced or new products, there is a quite a variation on that as well: For Asian Indians, 34 percent are more willing to try a recently introduced product, versus 61 percent of Chinese, 57 percent of Mexicans, and 50 percent of Puerto Ricans.
If you look at the Asian Indian respondents, the majority are immigrants.
Q: How did this study compare to your earlier study. We’re the results markedly different?
A: The outputs were very similar on the two studies, but the first one only focused on Asians and was done on a smaller scale, with fewer states involved. The sample size in the second study is much bigger and more reliable.
The latest study on leafy greens and herbs, for which we received the funding last fall, is well underway. We just finished with the survey, and are meeting to review the results.
Q: Do you ask respondents questions related to food safety?
A: Just on quality, but not on food safety, which would be interesting to include in further studies…
We did ask how often they shop, the average number of trips per month to ethnic markets, and we learned that the frequency for Chinese is 5.8 times, or more than once a week. They go many times but spend less per visit. The average per month is 3.7 times for Asian Indians, 4 times for Mexicans and 3.6 times for Puerto Ricans.
Q: How accessible are these ethnic markets and are there opportunities for retailers looking to break into these niches?
A: In the last 10 years, the ethnic produce markets in the New York and New Jersey areas have multiplied. So, many of these specialty retailers have popped up in the area to meet the growing demands. As of right now, the business is really focused on independent ethnic stores.
Mainstream supermarkets like ShopRite are trying to expand into this area. Consumers are used to buying ethnic produce in ethnic stores. The supply chain is different. Mainstream retailers are not moving the product; it’s sitting on the shelves too long. They may have one or two SKUs, high priced and not turning, so the quality is not good.
The way they source the products is completely different for mainstream and ethnic stores. Even if a large chain is selling ethnic produce, it goes to a main distribution center, versus for an ethnic store, where it’s done by the brokers and goes directly to the store and it’s less expensive.
The mainstream supermarkets have tried, but it takes a while for something to become a mainstream product from an ethnic market, like Cilantro. Many ethnic products are still sold only in the ethnic produce markets.
We had asked about the distance that respondents travel to buy this ethnic produce. The majority traveled 10 to 20 miles to buy. Compared to the mainstream, it is far. They’re lucky to find some of these products and are willing to go further to get what they want.
Is there more availability? Basically it comes down to where ethnic populations are concentrated. I live in South Brunswick, New Jersey, and the Asian Indian population here has grown by leaps and bounds. Now ethnic retail outlets in South Brunswick have popped up in the last two or three years to accommodate demand.
Apna Bazar is popular. It has captured that audience, and weekends are very crowded. I’m sure it is selling a lot of produce and non-produce items as well. As ethnic populations continue to grow, new opportunities for supplying ethnic produce will abound.
This research is really fascinating because it conflates two separate issues — how to market effectively to certain ethnic minorities and how to market effectively certain produce items that have traditionally been associated with certain ethnic minorities.
The goal of the research was really to help producers. A great deal of the work at land grant universities in the eastern US is focused on identifying market opportunities for small and mid-size producers. Typically, California producers have big cost and marketing advantages because of their scale and their ability to produce virtually year-round, but they have heavy freight. The question is: Can the east coast researchers identify market opportunities where eastern growers can make a living because their costs of production and distribution give them a market window when western production and shipping to the East Coast is factored in?
In the East Coast, where you have big concentrations of ethnic groups — New York, for example has over a million people of Puerto Rican descent and almost a half-a-million people of Chinese descent — you have the opportunity for ethnically specific markets to spring up. We discussed this in a piece in Pundit sister publication PRODUCE BUSINESS, titled, Independent’s Carry On The American Dream.
When we convene at The New York Produce Show And Conference and attend this micro-session, we will be interested to hear what quantification Professor Govindasamy can offer regarding the degree to which these products are sold direct to consumer. As we discussed in exchange with one of his collaborators, Richard VanVranken, which you can read here, the overall percentage of produce sold to consumers is quite low. With the many obstacles immigrants face — language, income, etc. — it would be interesting if they find the time to go buy direct.
We are also interested in the notion that, whereas supermarket chains ship through distribution centers, ethnic-specific markets work with brokers and ship direct to store. We are sure that happens, but as someone who imported many a trailer of items such as Calabaza, our experience was it typically went through wholesalers, which we would see as comparable in cost to a distribution center.
We would also like to see generation-by-generation iterations on consumption and venue of purchase. As ethnic populations move onto the second and third generations, they not only acquire a taste for diverse foods and so eat less of their traditional items but, also, these generations tend to move out to the suburbs and, although there may be an occasional trip back to Chinatown and, today, people can order things on the Internet, they tend to buy what is available in their local stores.
Of course, that changes with the population as well. It has been often repeated that salsa now outsells ketchup, and bagels outsell doughnuts. This is because the non-ethnic-specific population gained exposure to these items.
When ShopRite sells an item because it knows it has demand from an ethnic group, it also is displaying it, and thus marketing it, before plenty of Anglos. Already a look at the list of Asian and Hispanic produce featured in this study includes items edging into the mainstream: Items like Bok Choy, Napa and Chili peppers aren’t so unusual.
We suspect there is a seasonal market for locally growing these items and taking advantage of lower freight than shipping from the west coast. We also suspect, since many of these items are delicious, that there is plenty of opportunity for mainstream retailers to take them seriously and merchandise them, market them, promote them to both an ethnic clientele and the mainstream population.
We look forward to learning more at The New York Produce Show And Conference.
You can find the website for the show here.
And you can register right here.
In the school district responsible for the education of Mrs. Pundit, there is attention being paid to the school cafeteria:
The battle on the school lunch front is gaining momentum as unsatisfied parents and administrators band together to get processed foods and unhealthy snacks out of their school lunchrooms for good.
A particularly passionate committee of parents in Sea Cliff, New York on Long Island is fighting to revamp their district’s lunch menu, and they are getting results.
There was always a nutrition committee, but it was weak,” says Rieger. Only one or two parents would come to the monthly meeting and offer up ideas on how to improve the school lunch, but they would be shot down and dismissed as too expensive, says Rieger.
The Sea Cliff Parent Community Association (their name for the PTA) decided to put out a sign-up sheet at “Back to School Night” in Sept. 2009 and got 12 parents to form the Sea Cliff School Nutrition Committee. Rieger was asked to be the chair.
It sounds very exciting. Who could possibly be opposed? Yet very quickly the effort seems to lapse from nutrition to ideology:
A diverse group of parents including a pediatrician, a nutritionist, and a yoga instructor makes up the committee.
We long for a cafeteria which serves simple seasonal food, in an environment that fosters community. We want our children to understand the connection between the foods they eat and the farmers that produce the food,” says Luisa Giugliano, a yoga instructor, parent, and committee member.
The yearning for “simple seasonal food” might be strongly held and the desire to “foster community” may be sincere — but both have to do with a vision of society that has precious little to do with getting sustenance into the students and getting them off to math class. Even the educational purpose of teaching young people about farmers and food production is only marginally related to the food in the cafeteria –after all, a farmer grows grapes, whether they come from New York, California or Chile.
All over the country, efforts such as this are gaining momentum. In many cases they pander to a kind of anti-scientific sentiment and achieve things that are meaningless or even teach the children errantly. It happens so frequently, with so much the same effect, that one is reminded of Marx’s critique of Hegel. Hegel taught that history repeats itself; Marx said Hegel forgot to add the first time as tragedy, the second time as farce. Here is what these efforts seem to come to all too often:
One of the committee’s missions is to involve the children and to teach them about wholesome, nutritious food. They held a healthy bake sale with treats containing no refined sugar and organic ingredients. It sold out. The $140 raised will go towards improving nutrition education in the school.
Of course, the evidence that organic ingredients promote human health is scarce indeed, and the evidence that sweetening one’s cake with honey or agave nectar or other “unrefined” sugars will make people live longer or be healthier is virtually non-existent.
There is a lot to educate about here. Jan DeLyser, Vice President of Marketing at California Avocado Commission, teaches a class in marketing communications at Cal Poly — Pomona, and she invited the Pundit to guest lecture on the topic, “How to Arrive at an Informed Opinion.” The lecture was well-received, and it would be very helpful for children to be taught a mode of thinking so when people start pushing ideologies — “seasonal eating” “non-refined sugars” etc. — the children know how to ask pertinent questions.
That is actually a more important thing for a school to teach than propagandizing children with the currently trendy weltanschauung of the intelligentsia.
As the industry prepares to convene in Orlando for the annual convention and exposition of the Produce Marketing Association, one of the business management questions this brings to mind is precisely how did PMA come to have the largest produce event in the country.
It wasn’t always so. When the Pundit was a boy and the Pundit Poppa and Momma were flying off to the produce convention every year, it was to United they went, not PMA.
Part of the story has been well recounted. PMA made a strategic decision to focus on the buying end of the industry in part with the hope and expectation that the sell-side would follow. It turned out to be a shrewd strategy.
Add in some management miscues at United, a little arrogance that came with being so large and successful — United turned down a plea to absorb an almost-broke PMA in the early years — and the fact that PMA did not do government relations back then and thus avoided expenditures and the in-fighting that comes from taking positions, and the story is pretty clear.
There were, however, other factors that influenced the outcome, not as often recounted in the telling of the tale. One factor was a societal change that impacted where people lived and vacationed, another was a labor force change and still another was the change in the seasonality of the industry.
PMA was generally in October and United was in February. When United set that February date, back in some time immemorial, the produce industry was pretty much dead. The spring planting hadn’t begun; the summer and fall harvests were over. Retail and wholesale offerings shrunk to acknowledge the paucity of crop available. All in all it was a good time to go on vacation. And what better vacation to go on than one you could write off on your taxes. So everyone headed to United, often held in some warm climate — can you say Hawaii! — during that wintry February down time.
Lots of big trends were happening that influenced the outcome. Central air conditioning became commonplace and people began moving to the Sun Belt. This made the appeal of a winter escape less powerful. Women streamed into the work force so they often weren’t free to come to the convention with their husbands. That made it less of a vacation and more of a business function.
The importance of the rise of counter-seasonal produce and, specifically, the Chilean deal comes with news of the death of one of the pioneers in the field, Joe Turino. The Pundit had the privilege of working closely with Joe as we worked together at the Pundit’s family produce business. Another alumni of the family firm, Mike Pfluegar, who was a USDA inspector and then joined Prevor Marketing International, where he worked closely with Joe before forming High Point Marketing of NJ, Paramus, New Jersey, sent along the news:
Joseph Michael Turino
(November 21, 1919 — October 7, 2010)
It is with great sadness that I inform you of Joe Turino’s passing.
As you know we worked together at your Dad’s place in New York and for some years after Prevor sold to Polly Peck. Joe was 90 and his wife Betty passed about two years earlier.
Joe retired from the business officially in about 2003 when he closed the J.M. Turino Company in Waldwick, NJ. He moved to RI where he enjoyed Golf and Boating with his family.
I knew a little about Joe as he would reminisce when the business was slow and he would tell me a little about his past.
He was connected in the business for many years. First working with his father Michael Turino in the old Washington Market on the lower West Side of New York.
Joe went to Colgate in upstate Hamilton, NY. After college he enlisted in the US Navy where he served during World War II as an officer on various ships. The one ship that he served longest was a troop carrier taking the wounded from the Far East Theater (Burma area) over the West Coast of India where the British were in control and to hospital.
When he was discharged from the US Navy in early 1946, he rejoined his father and became a principal in the Wm. Turino Co. and worked there in the Washington Street Market until the Hunts Point Market was built. He along with many others migrated to Hunts Point.
The J.M. Turino Company was located on Row C in the market and in the early 1980s he sold it to the Guardian Group Investment Company.
He joined the Jac Vandenberg Company and later Prevor Marketing International, also headquartered in the market. While at Prevor he was the Import Director in charge of the Import Department importing primarily Chilean Fruit, Greek Figs, Italian Chestnuts and NZ Kiwi.
Joe was one of the pioneers in the early 1970’s in the Chilean fruit importing industry, along with Ed Guzi of Coexport in Chicago, William Kopke Company and the Jac Vandenberg Company, to mention a few.
I remember Joe telling me one time that his father imported the First Onions — Valencia variety — from Chile in 1934.
The Grace Line in New York was the carrier. He told me the owner of the line (Peter Grace) called his father and said they had a passenger boat in Chile coming to New York and it needed ballast (weight in the bottom of the boat) to make the trip.
1934 was the height of the Depression, and Turino did not know if he could sell the onions once they arrived into New York (Washington Street Market). He told this to Peter Grace, owner of the Grace Line, and his reply was we need the ballast…if you sell them then pay us something for the freight. So they filled the boat hold with the onions.
The deal was done, so — as the story was passed down to Joe — they loaded 200 truck loads (40,000 lb units) and the boat sailed for New York.
Several weeks later the boat arrived with its passengers and the onions. Joe went down to the pier to meet the boat. Also to see and inspect the onions.
He told me that the passengers came off the boat first and to his surprise one of the first to come down the gangway was Carry Grant and Mae West. Both were actors in Hollywood at the time and were on vacation in Chile.
Joe’s father was representing the Jimeno Brothers in Chile. In those days the Jimeno Brothers were like General Motors here. They grew thousands of hectares of onions.
When the onions were unloaded they were sold quickly to various handlers in New York. The Great Atlantic and Pacific Tea Company, Grand Union, Fierman Brothers to mention a few.
It was to great surprise that Joe’s father called Peter Grace to give him the good news. Not only did he sell all the onions, but was able to pay the ocean freight to the Grace Line.
Joe will be truly missed by his family and friends who knew him from the produce industry.
Our recollection of Joe was that he was a man of dignity. In an industry with a lot of ruffians, he had a kind of elegance to his bearing.
The produce industry has lost that rarest of things, a gentleman.
May Joe and Betty both rest in piece. Our condolences to his children, Susanne, Thomas, Michael and Stephen, daughters-in-law Barbi and Amy, siblings Rita Moore and Dr. Gerard Turino and 7 grandchildren.
Donations in his memory may be made to the South County Conservancy.
The United States has many serious economic problems, yet few are as serious as unemployment. This is because markets will recover, but people, once beaten down, often have a hard time bouncing back.
Politicians often pay lip service to unemployment, but few dare take the serious steps that can help solve the problem. They tend to hope for a general rebound in the economy because that doesn’t require them to weigh in on specific changes, which will surely alienate one interest group or another.
We decided to analyze the unemployment problem head on and came up with a 10 point plan for causing employment to boom and unemployment to drop dramatically.
It received some nice pick up, including a tweet from Harvard Business School professor Bill George, who was the CEO at Medtronic and is a best selling author, having written many leadership books including 7 Lessons for Leading in Crisis.
Although not thinking all our ideas were plausible, Professor George declared the ideas “a step in the right direction.”
The piece also received some nice private comments. Stephen Moore was the founder of the Club for Growth. He was also a senior economist of the U.S. Congress Joint Economic Committee and is now an editorial board member and senior economics writer for The Wall Street Journal editorial page. Steve wrote:
“I am so much in agreement with your policy prescriptions. These all make sense.”
We don’t worry too much about political plausibility. We note that half the policy ideas current today can be found in the scribbling of Milton Friedman back in the 50’s and early 60’s when he was mostly thought an eccentric pushing obviously “implausible” ideas such as a volunteer army.
We don’t worry too much about plausibility. We note that half the policy ideas current today can be found in the scribbling of Milton Friedman back in the 50’s and early 60’s when he was mostly thought an eccentric pushing obviously “implausible” ideas such as a volunteer army.
Sometimes, it is important to just get the ideas out there and let them percolate. As John Maynard Keynes wrote:
“The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas.”
So, we were honored when the American Thinker decided to publish our piece, Solving the Unemployment Crisis. Perhaps one day, it will be considered as part of our contribution to the “gradual encroachment of ideas.”
This year is a special PMA for all of us here at the Pundit. Twenty-Five years ago, at the 1985 PMA Convention and Exposition in San Francisco, we launched Pundit sister publication, PRODUCE BUSINESS.
It is from the launch of PRODUCE BUSINESS that everything else has flowed, including the Perishable Pundit, PerishableNews.com, The New York Produce Show and Conference, plus other activities, such as DELI BUSINESS, CHEESE CONNOISSEUR, which is our first consumer publication, AMERICAN FOOD AND AG EXPORTER, speaking and lecturing on every continent save Antarctica — and much more.
Each anniversary issue, we always put in a special note to thank the PRODUCE BUSINESS staff. Well here I wanted to say a special thank you to two members of the team, who are really integral to the success of the Pundit.
James Elmer, who we have referenced as the Pundit’s aide-de-camp because job descriptions simply are inadequate to measure his contribution, has been with us for 4 years. Although he has worked on all our projects, his keen research abilities and cheerful acceptance of impossible deadlines has made him invaluable.
Mira Slott is our editorial counter-ego, helping us think through approaches to issues affecting the industry large and small. She has been with us 10 years and is a precious jewel, an intellectual filament that helps us illuminate the world.
This Pundit owes both of them very much. They will both be at PMA, and if you enjoy the Pundit please give them a hat tip.
Come meet James, Mira and the whole PRODUCE BUSINESS team at booth number 3463. We are all staying at the Peabody. And we all would be happy to spend time with friends old and new while we celebrate together our Silver Anniversary.