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Cutting Through The Agendas:
What’s A Buyer To Do?

Jim Prevor’s Perishable Pundit, November 21, 2007

Our pieces on the Food Safety Leadership Council, which you can read here, here and here, brought to the fore the issue of the role of buyers in establishing food safety standards, which we earlier dealt with rather extensively as a result of the Buyer-led Food Safety Initiative — launched in October of 2006 — and the produce safety efforts of the National Restaurant Association, which came to head as the California Marketing Agreement was about to start.

Now the latest pieces have brought this thoughtful letter from a long-time force in produce retailing:

When the food safety buyer group was formed last year, I thought it to be a bad thing. My reasons were as follows:

  1. I was fundamentally opposed to buyers imposing production guidelines on suppliers. My reasons were 2-fold: Once you start going down that road, it will certainly escalate. And buyers have neither the expertise nor the breadth of experience to do this with wisdom.
  2. I was also opposed that this was being done in the public spotlight. This needed to be done quietly for 2 reasons: first of all, it would continue to put the glare of public scrutiny squarely on the produce industry. And two, it would lead to using food safety as a marketing issue.

Now fast forward to November of 2007:

It appears that buyers making demands on suppliers in the area of food safety are escalating. And they are doing so without any more wisdom than they had just over a year ago.

Food safety in produce continues to be in the public eye. And now, our wonderful state and federal governments have all sorts of plans to “involve” themselves in this! And it sure looks to me like buyers are trying to use food safety as a marketing issue.

When the buyer-led food safety initiative launched last year, people’s hearts were in the right place, but their methods were not likely to lead to positive results for the industry.

What really has me fried is the response that WGA is taking to all of this. I find it interesting that WGA embraced buyers telling growers what to do in 2007, but now are outraged! Hmmmm….. why might this be?

All you have to do is to look for hidden agendas:

For years, WGA has wanted to provide “certification” to products grown in California and Arizona. From a marketing perspective, you can understand why. Simply put, they want to promote western-grown products as better than products grown in other places. It can also provide a revenue stream for them.

So here comes the spinach crisis and some well intended buyers “demanding” that something be done. So WGA drives a California marketing order, with WGA leading the charge. Doesn’t matter that by doing so, Texas Veg, Florida Veg, or Eastern Veg get thrown under the bus! PMA kicks in bucks for a food safety center, Canada requires western leafy products to participate in the California marketing order, and off we go.

Not one peep from Mr. Nassif about those big, bad buyers who tell growers what to do.

WGA should have told them publically to bag it! Then quietly, get interested parties together quietly to work on this .Then go to the government quietly and lay out the necessary activities that need to be regulated federally.

You have written in “the Pundit” that the buyer initiative was a good thing. But it has opened this “Pandora’s box” and, frankly, I see no end in sight. Just wait till when this starts being marketed in ads, or on TV.

I can see it now……..

“Hey customers of ‘our’ store ….. you can ‘get better prices and have a better life’ because our produce team has led an industry initiative to make fruits and vegetables safe by getting after those greedy, non sustainable growers to follow these ridiculous standards that won’t make produce a bit safer, but that will make you think we are doing something about it. So go buy your fruits and veggies from ‘our store’ because it is safer than what you will find at the competition!”

EGAD, I think I am going to be sick!!

Seriously, though, just go back to the Alar scare. Raley’s is promoting Nutriclean Certified Produce. Safeway and others began to advertise that their produce was being inspected by Primus, as if to say that this was better for their customers. And I promise you that this is going to come back again, only this time, it will be that “company A’s buyers” are imposing more stringent standards than “company B’s”.

Anyhow, enough of my ranting on this! I just feel it’s important for people to think through the consequences of the actions they take. Good intentions are oft times not reason enough to take particular actions.

And as for WGA, it can’t have it both ways!

Our correspondent’s letter is pointed and his experience is substantial, so these are arguments that must be paid substantial attention. Basically, the letter makes the following points:

  1. Buyers have no particular expertise or experience in food safety — certainly on the horticultural end of things. Thus this is an inappropriate function to hand to buyers.
  2. Buyers making pronouncements will attract publicity that is detrimental to the industry.
  3. WGA has an agenda separate from food safety — namely the promotion of western product. Thus WGA is an inappropriate steward of the trade’s food safety interests.
  4. Buying organizations have their own commercial interests and will approach food safety from the perspective of gaining a competitive advantage.

The letter is both frank and incisive. Yet it is not clear that there is any real alternative to what the buyers are doing. Let us look at the options:

GOVERNMENT

We could declare industry incompetence and simply allow the government to impose what standards it will — yet it is far from clear that this would turn out better for growers. Besides, there is zero evidence that the broader industry has any enthusiasm for government regulation.

On a national level, when United called for mandatory regulation, the reaction was clear: Most commodities and states not directly affected by the food safety controversies saw no reason to encourage government regulation. The later endorsement of such regulation by PMA as well did little to change this dynamic.

Even in California, the initial plan of Western Growers Association was to move from a Marketing Agreement — which always poses the danger that companies won’t join or will withdraw from participation — to a Marketing Order that would be mandatory for all. Marketing Orders customarily call for the growers to vote to establish and maintain the Marketing Order. Typically, there is some type of “supermajority” provision, whereas a majority of the growers representing a majority of the crop must endorse a plan.

WGA killed that plan because it was certain the plan would be voted down. In other words, even among spinach and leafy greens growers, even in California, there is no consensus for a mandatory food safety solution that we can take to government. Much less is there a consensus among pear growers, carrot growers and mango growers that the government should regulate.

The California Marketing Agreement is the trade’s crowning collective achievement in food safety. Yet it is best we recognize that we pulled it off through a kind of a slight of hand. Marketing Agreements and Marketing Orders were put into law to allow growers to manifest their will through collective action. We’ve found a way to use the same programs to force growers to do what they would not vote to do on their own. Don’t be surprised if, one day, someone calls us to task on this matter. One never knows how a judge — or a congressman — or a USDA Secretary — might view our strict conformance to the law, but departure from the spirit in which these laws were established.

In any case, both nationally and in California we have the same split. Industry leaders, defined as those who serve on important boards and committees, such as PMA, United and WGA, endorse some kind of regulation — whether USDA through marketing agreements and marketing orders espoused by WGA board members or FDA through mandatory regulation espoused by PMA and United board members.

But the vast majority of the industry does not. Even among specific industries affected by the E. coli 0157:H7 events of last year, we are forced to invent mechanisms that put the small number of sophisticated handlers in charge, lest the vast majority of growers reject any regulation.

In light of all this, it seems impossible to argue that the route the industry wants to follow is to have government regulation. Even if we did want to follow this route it is not clear the government is really interested in the job. After all, the FDA didn’t leap to grab the bait handed it by United and then PMA. Between industry reticence on the issue and the government’s lack of interest, it seems unreasonable to say we are counting on government to solve this problem.

Besides, even if the FDA announced a tough new standard for fresh produce, it would instantly just become a new baseline from which others would advocate even tougher standards — such is the nature of food safety issues on fresh produce where there is no “kill step” and thus we can always be more vigilant.

GROWER/SHIPPERS/PACKERS/PROCESSORS

We could hope that production agriculture will solve the problem. Yet this is problematic as well. Leave aside the question of whether there is a will to do so, the problem is that in produce — where we deal not in sharp lines but in a continuum of safety — no vendor can deliver more safety than the client is willing to pay for.

In the midst of the spinach crisis, we wrote a piece entitled The Role Of Retailers And The Future Of Food Safety, in which we pointed out the problem:

“…in the end, the strength of our food safety systems is at least as dependent on what retailers demand as they are on what the government does for the simple reason that what retailers pay for is what they are going to get.”

Then, in Pundit sister publication, PRODUCE BUSINESS, we wrote a piece entitled, Food Safety is a Retail Issue, and explained the point this way:

“…what holds suppliers back is not that they need an FDA regulation — it is that they need to see a willingness on the part of buyers to pay more to obtain a higher level of food safety and security. So far that is missing.”

We don’t have perfect knowledge, but we know most of the risks and can take action against them. But they are not self limiting. We can test water every year, every quarter, every month, every week, every day, every hour, etc. We can make buffer zones ever larger. We can put traps every 50 feet or every 25 feet or every ten feet, etc. If there is a flood, we can agree not to grow ready-to-eat produce on that land for a year or two years or five years or ten years, etc.

The point is that a grower has no basis for electing any point along the continuum. Except, from a business perspective, he will probably stick to whatever the current Good Agricultural Practices are because that is where the market clusters and thus the grower reduces his risk — on the one hand he doesn’t have to worry very much that his product will be unsalable because it won’t meet food safety standards as most buyers will accept the product. On the other hand, he doesn’t have to worry that his cost basis in food safety will be too high and he won’t be able to get the money back as all his peers will have roughly the same cost basis.

Note, though, that the decision to follow GAPs is a business decision — not a scientific decision. The grower is not declaring that the GAPS are the single most optimal set of practices if one’s only goal is to safeguard public health. Just declaring it is the safest for him to do.

The truth is that plenty of producers put in special procedures for lots of clients. Darden, McDonald’s, Tesco, Marks & Spencer, Costco — these are all famous for these things.

We don’t think that growers “disagree” with these procedures — most in fact are proud of being able to perform to “above average” standards. Most would argue that their operations, overall, have been upgraded by learning to operate at the high levels demanded by these clients.

All over the industry are firms that learned replenishment from Wal-Mart, food safety from Darden and Social Responsibility from Tesco — these vendors never would have become as good as they are without demanding clients.

It even becomes a sales point. In an interview we ran with Del Taco’s Janet Erickson, she stated it plainly:

We’re not as large a company as many of our competitors. We don’t do our own specific testing at the supplier level. The way we approach our supplier food safety is different than some of the larger companies. Our quality assurance director does go to the facility to do his own “audit”. He’ll spend a few hours there, mainly asking a lot of questions. In some ways most important, he asks who else you do business with, if the list of customers includes those that conduct stringent audits.

… Our suppliers are already doing business with many companies much larger in size that conduct extensive food safety measures. Best examples are Jack in the Box, McDonald’s, and Darden, all doing thorough jobs on food safety and quality assurance. That doesn’t mean we’re going to accept everything at face value. We always visit our suppliers and look at their operations with our own eyes, but also factor in their relationships with other customers.

Yet, this only works if buyers are willing to pay a price. If Janet Erickson had said that Del Taco prefers to work with suppliers that have been vetted by Jack in the Box, McDonald’s and Darden — unless, of course, someone happens to be cheaper — the message to vendors would be totally different.

Growers and processors clearly have enormous capabilities and the model of anyone — buyers, government, anyone — sitting in an ivory tower and then issuing a set of dictates to them is bizarre. Obviously, the best approach is a consultative one, in which vendors work with producers to enhance safety.

Yet, in the end, producers have to produce what their customers are willing to buy. If the thirst is for the cheapest product, the producers can’t easily move up on the continuum of produce safety and, frankly, most won’t be motivated to try. These are businesspeople. They will meet the requirements of the law and of their customers — to expect more is unreasonable.

Those individual producers that have high food safety standards also have a clientele willing to support these standards — otherwise they would be out of business.

So to expect growers and producers to be the source for higher food safety standards is unreasonable if their customers don’t value it.

BUYERS

So if the government won’t deliver food safety and producers won’t deliver food safety, all we have left is the buyers.

Our letter-writer’s points about competency are well taken, and certainly the efforts of the Food Safety Leadership Council have been ham-hocked — needlessly rude, done without reasonable consultation and, in general, guaranteed to insult producers and make progress more difficult.

Still, one has to recognize that this is probably due to a historical lack on involvement in produce food safety issues. If you read our interview with the British Retail Consortium, you quickly realize that a group such as the Food Safety Leadership Council, properly staffed, can become real pros at food safety.

Our writer’s second point concerns publicity, and we have concerns here as well. Yet even the publicity issue strikes us as overstated. Any pronouncements — from the government, from a grower dominated board or from a buyer’s group — could attract attention of the media.

All players… the WGA, retailers, politicians, etc… have their own agendas and own reasons for doing things. We have to judge what they do, not their motivations.

Most of the leadership on food safety has come through foodservice. Just read the interviews we’ve done. This is both because they have legal responsibility for product that they are serving — which supermarkets do not — and because they have the reputational risk that supermarkets do not.

Although we are concerned about marketing food safety to the consumer, by working through some sort of retail consortium, which the Food Safety Leadership Council may be the genesis of, there is much less likelihood of this happening in an irresponsible manner.

Basically, the United Kingdom has a retail-driven food safety system and, although we can argue what country has good, better and best systems, the situation in the UK is certainly not a cluster of retailers making wild and unfounded claims about food safety.

And, of course, we have an FTC and a court system that can serve as a check on unwarranted food safety claims.

Besides, if we want to sustain freedom, we really have no choice. No matter what standards the government or the produce industry might impose, retailers and foodservice operators will always be free to establish their own standards.

First of all, there are different legal liabilities for foodservice operators, preparing their own food, private label product at retail and reselling product to others. So it is to be expected that organizations will develop different food safety criteria.

In addition, there are different things at stake with different organizations. Disney has a market capitalization of over $60 billion — virtually none of which is related to fresh produce sales.

So, maybe Disney, either for its own use in theme parks, hotels and cruise lines or, as a standard for licensees, such as Imagination Farms, has a right to err on the side of caution. If Disney says to its suppliers, “Look, we know the science isn’t that certain, but we feel safer if we can not have any product we are going to use in ready-to-eat uses grown more than a mile of a cattle feedlot. What will it take to make that happen?” well, maybe producers will want to charge them more, maybe some producers will be happy to have the business and will charge them the same as everyone.

But it is Disney’s brand, Disney’s reputation and Disney’s $60 billion-plus market cap at risk — and it is a free country. The industry might think Disney is wasting its money, paying a premium for things that won’t truly enhance safety. Perhaps, but it is Disney’s money to waste.

Many thanks to our writer for helping us to think through this important topic.

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