It is a tradition that each year we run the original announcement issued back more than six years ago to announce the establishment of what would become a great industry institution:
New York, NY — The Eastern Produce Council and PRODUCE BUSINESS magazine announced today their collaboration to launch The New York Produce Show And Conference….
“New York City is the epicenter of the region that buys more fresh produce than any location in the country,” explains Dean Holmquist, director of produce and floral for Foodtown, Inc., [now Allegiance Retail Services], and president of the Eastern Produce Council. “The extraordinary diversity of the population in this region assures a dynamic market for mainstream, ethnic and specialty produce,” points out John McAleavey, executive director of the Eastern Produce Council.
Paul Kneeland, vice president of produce/floral at Kings Super Markets and vice president of the Eastern Produce Council, indicated that “the sophisticated clientele of the northeast region combines with a plethora of quality retailers, restaurants, foodservice distributors and wholesalers to introduce product from local growers, growers across North America and growers from around the world.”
Jim Prevor, founder and editor-in-chief of PRODUCE BUSINESS magazine and the online PerishablePundit.com, celebrated the establishment of such a high caliber event in a region long lacking its own trade show and conference: “My great grandfather, Jacob Prevor, immigrated to America and established a wholesale facility in the old Wallabout Produce Market in Brooklyn. My grandfather, Harry Prevor, was a wholesaler and auction buyer in the old Washington Street Produce Market in Manhattan. My father, Michael Prevor, was an original tenant when The Hunts Point Market opened in the Bronx. Over the decades we operated farms and had supermarkets in the region and worked hard to make the ports and airports of the region major hubs for the import and export of fresh produce.
“It is an incredibly exciting moment that we should have the opportunity to join together with our friends at the Eastern Produce Council, the preeminent organization in the region, to bring a world-class event to the region, and it is an honor that we can bring the industry together in a city known both as the ‘Capital of the World’ and the ‘Big Apple’.”
“Jim Prevor has built a reputation for industry thought-leadership that is recognized around the world, and PRODUCE BUSINESS magazine was launched on the Hunts Point Market,” said Robert Goldstein, owner/president of Genpro Inc., and secretary of the Eastern Produce Council, “so the board of directors of the Eastern Produce Council voted unanimously to join hands with Jim and his team at PRODUCE BUSINESS and the online Perishable Pundit to better serve this region with a high-end trade show and conference.”
“The Eastern Produce Council represents the most important players in the region,” said Ken Whitacre, vice president of publishing at PRODUCE BUSINESS and PerishablePundit.com. “Their engagement with the event ensures that exhibitors will encounter a cross section of the movers and shakers that make the industry a vibrant and robust contributor to the national and international industry. We are honored to work together with such an important association and with such an instrumental membership.”
Both PRODUCE BUSINESS and the Eastern Produce Council are committed to enhancing the industry by providing the region with a world-class venue for marketing, education and media exposure. That venue is The New York Produce Show And Conference.
Companies change, people change positions, but this year has brought more change than most, for this is the year we lost John McAleavey. The longtime chief executive of the Eastern Produce Council, whose commitment to make the industry better, was the animating factor that allowed us to create The New York Produce Show and Conference.
It is common to say that we are all replaceable, and indeed life goes on, as it must. And we are luckier than most in our loss, for John’s most able daughter Susan McAleavey Sarlund, who long served by John’s side, has assumed his position at the Eastern Produce Council. Indeed, we still have working hard at each EPC event John’s devoted wife, Joanne, and his son, John McAleavey Jr.
Susan is talented and smart, and there is every reason to expect that with the reservoir of love and support she has beneath her, she will go on to great success and lead the Eastern Produce Council to triumph after triumph, and we hope she knows that she can count on this Pundit’s support wherever and whenever she may need it.
Yet, even if we all can be replaced, and even if those replacements will know great success, we cannot be replaced perfectly.
John was from another time and, perhaps, that was the reason we always got along so well. For it has been said that this Pundit was born in the wrong age. So, together, thinking of nothing but how to do things the right way, do things the best way, we embarked on a journey that led to the creation of this event, this industry institutions.
The first job we did when we started was a brainstorming session with John as to whom should sit on the “thought leaders” panel, which has always highlighted The New York Produce Show and Conference.
None of the requested speakers turned us down that first year, and we marveled with John at what a great industry we were part of that these smart, busy and important people, who didn’t have to come and share their insights and didn’t even have to come to show support, all chose to do so, and they have chosen so each year since.
There have been many memorials made for John, and there will be more made at the show, but we are certain that no industry trophy would fill his heart as much as knowing that the values of industry advancement and support that he held dear were living on in another generation.
Well they are, and they will continue to do so, for great men pass on duties to those they leave behind, and they pass on a willingness to perform the labors required. They also pass on honor, and those who had the privilege of knowing such a man are forever changed and made better for having basked in the reflected glow of a life well-lived.
John is not here, but on behalf of the example John inspired, it is our privilege and pleasure to announce the Perishable Pundit’s Thought-Leader Panel for 2015.
We know John is smiling that so many are willing to serve so well:
Group Managing Director
Capespan Group Limited
Johan Dique is Group Managing Director of the South African based Capespan Group, since January 2011. Johan has served as a CEO in the agri-business environment for the past 21 years and earned his reputation through the successful implementation of turn-around strategies, growth strategies and leadership development that creates sustainable value for stockholders.
A chartered accountant of training, who followed a career in financial management and later broke away into general management, Johan has experience in Milling and Baking, Animal Feeds, Grain handling and marketing, Agri-retailing and lately the fresh fruit industry.
Morton Williams Supermarkets
Marc started his career at Waldbaum’s in 1978, where he worked for 10 years until opening his own foodservice wholesale business. Eventually, he took a position with Food Emporium, where he worked for three years.
Marc joined Morton Williams for the first time as a produce manager more than 15 years ago. While he briefly left the company to join Shoprite, he returned to his current position at Morton Williams five years ago.
Vice President of Produce & Floral
Wakefern Food Corporation
Starting his career at Wakefern in 1982, Derrick got his first taste of what the world of produce was all about when he worked as a junior accountant reporting to the produce division. From that position, he rose up the ranks to his current position of Vice President of Produce and Floral. Derrick credits his mentors, Herman Fadem and Al Ferri: "They worked with me at the early stages of my career and helped me lay a foundation upon which I could build a successful personal and professional career."
Derrick is a member of the Eastern Produce Council, is 1st vice-chairman of NAPAR, and is a member-at-large of the Board of PMA and Secretary/Treasurer of PMA Fit. He is married and has four children.
In 1994, Chris was hired as a produce clerk at Albertsons in Boise, ID. He immediately knew the fit was good and decided to earn a degree in Business Management at Boise State University. As a clerk, assistant manager and manager, 14 years at store level was instrumental in developing a full understanding of merchandising, pricing and assortment, along with the importance of anticipating customer needs, wants and expectations.
Gaining that experience and insight led him to the next career chapter in September 2010 as a merchandiser at Ahold USA. "I work now as fruit category manager, in which I am responsible for developing plans to profitably drive sales in an ever-changing retail landscape."
Giving back to the communities is important to Chris professionally and personally. He works with his team and vendor partners to support initiatives through various company-supported charitable programs.
Vice President of Fresh Merchandising
An industry veteran for more than 30 years, Paul began his retail career at Roche Bros. and then became Head of Produce and Floral Operations for Kings Food Markets. His position at Fresh Formats is for a start-up operation that has begun opening stores in Massachusetts and Connecticut.
Paul is a Past President of the Eastern Produce Council and Past Chairman of its New York Produce Show and Conference committee.
Paul is a Past President of the Eastern Produce Council and chair of its New York Produce Show and Conference committee.
Total Produce Plc
Denis is a qualified accountant who began his career in the food industry. He entered the produce industry in the 1980’s working initially for Glass Glover before joining Geest where he moved from Finance into General Management in the late 80’s. During this period he was Managing Director of various Geest Fresh Produce divisions, including Worldwide Fruit and Geest Wholesale Services.
In 1995, he led the management buyout of the wholesale businesses and rebranded that business Redbridge. In 2007 having grown Redbridge to over $300m in sales, he sold the business to Total Produce. Following its acquisition, Denis became chairman of Total Produce UK business, which last year received the accolade of the UK’s largest produce business.
Denis continues to work for Total Produce as Strategic Development Director focused on acquisitions particularly in North America, in addition, he is Non-Executive Chairman of the Total Produce UK business and sits on the board of several of Total Produce businesses around the world and recently became an Non-Executive Director of Openfield, the UK’s largest independent Grain Cooperative.
Denis is married with 4 children and enjoys swimming, travel and being with his family.
Caribbean Produce Exchange
Gualberto is the third-generation operator of Caribbean Produce Exchange, which is dedicated to the distribution of fresh fruits, eggs and vegetables in Puerto Rico. He successfully leads a team of 240 employees.
He completed a Cum Laude BA in Economics from Fordham University in New York City in the Bronx — while working at the Hunts Point Market in the evening — and he received an MBA from the Yale School of Management.
Before going back to Puerto Rico, Gualberto worked in economic development in the public sector for three years, and after that, he worked for the Government of Puerto Rico in New York, attracting the industry to the Island.
Vice President of Produce Procurement
C&S Wholesale Grocers
Anthony has been in the produce industry for 18 years, first starting with C&S in 1997, where he has held various positions of produce responsibility, ranging from Procurement, Special Projects, Category Management and others.
Anthony holds a Bachelor’s Degree from Becker College in Worcester, Massachusetts, and an MBA from Nichols College in Dudley, Massachusetts.
Director of Produce and Floral
Allegiance Retail Services
Vic has more than 35 years’ experience in the supermarket industry. His responsibilities at Allegiance include managing sales, coordinating advertising, merchandising, operational activities and managing the procurement of product for more than 85 member stores under the Foodtown and D'Agostinos banners in New Jersey, New York and Pennsylvania.
Previous to Allegiance, Vic was employed for more than 22 years at Wakefern Food Corporation, where he served most recently as a Category Manager during his last 15 years of service.
Vic is currently President of the Eastern Produce Council, and he serves as chairman of the Expo Committee, Membership Committee, Strategic Planning Committee and is Co-Chairman of the Eastern Produce Council Golf Outing Committee. Vic is a graduate of William Paterson University and resides in West Caldwell, New Jersey, with his wife Maria, their son Dante and daughter Mia.
Produce & Floral Sales Manager
Jay started his career in 1983 as a clerk and has over 25 years of produce experience with Acme Markets. He has held various positions within the company such as Produce/Floral Operational Specialist, Imported Field Buyer/Inspector, then moved up to assistant produce lead, and his current role is Produce & Floral Sales Manager.
He is responsible for sales and merchandising for all 183 stores in Pennsylvania, New Jersey, Delaware, and Maryland.
Eric Stone is the Produce Merchant at popular online grocer FreshDirect. He spends about half of his time traveling the country, developing relationships with farmers to source produce that is differentiating and of the highest quality.
He joined FreshDirect after graduating college in 2008, working his way up in the department during the past 6+ years. During that time, he has doubled the department’s sales and transformed FreshDirect’s supply chain to a direct-from-the-source model, improving quality and reducing cost.
Eric earned his degree in Finance and Philosophy from the University of Maryland and currently lives in Manhattan with his girlfriend enjoying everything the NYC food scene has to offer.
Director of Produce Merchandising
John is responsible for all sales-related decisions for the produce department. In 1972, John started his career at D’Agostino as a parttime stock clerk. A year later, he was promoted to assistant store manager. In 1978, he was promoted to the position of store manager. In 1985, John was promoted to the position of produce director. Most recently, John has also taken on the responsibility as manager of food safety and emergency planning.
Vice President Perishables
Greg joined Bozzuto's in 1993, as produce merchandiser for the corporate stores. He advanced to store manager, and in 1995 became a junior buyer for the wholesale operation. He later was promoted to buyer, and in 2001, he accepted the promotion to sales and merchandising manager for the independent stores, and advanced to sales manager for all of Bozzuto's produce and floral accounts.
Markon Cooperative, Inc.
Tim is the President of Markon Cooperative Inc., a purchasing, marketing, and logistics cooperative serving North America’s leading independent foodservice distributors. Based in Salinas, California, Markon distributes produce to over 70 facilities in the U.S. and Canada.
Tim has nearly 40 years’ experience in the produce and foodservice industries. He began his career in 1977 at H. Hall & Company, a grower/shipper of strawberries and mixed vegetables. In 1985, Tim joined Markon as Purchasing Director. He was promoted to his current position of President in 1990.
Tim has held numerous committee and task force positions, including Chairman of the Produce Marketing Association’s Foodservice Division and later, Chairman of the Board of PMA. He served as a member of the USDA Fruit and Vegetable Advisory Council and is currently a member of the Canadian Produce Marketing Association Board of Directors.
The New York Produce Show and Conference has grown every year since its founding. We have co-located with the “Ideation Fresh” Foodservice Forum — ask for info here — and the Global Trade Symposium — ask for information here.
For the new Foundational Excellence Program, get information with an e-mail sent here.
You can inquire about Industry Tours here, a spouse program that you can ask about here, plus cooking demos, media tours, student programs and more.
You can register at the website, or let us know if you would like a room in the headquarters hotel.
And we have many travel discounts to offer.
But come to The New York Produce Show and Conference and help us pay homage to a man for whom honor and excellence were his most constant companion.
We receive virtually every study done related to the produce industry and produce retailing. Almost all studies that involve the consumer suffer from a tragic flaw: they are surveys of some sort, and so tell us what consumers WANT to say. But because these surveys have no hard data on purchasing, they can’t tell us the degree to which a consumer’s claim corresponds to actual behavior. Alternatively the studies are pure data and leave to speculation why consumers do what they actually do.
The Food Marketing Institute has made an enormous contribution to the industry by squaring that circle. They have combined direct consumer research with the data coming off register rings to address what consumers say and what consumers do. It is a powerful combination to which they add analytic capabilities.
The study is extremely impressive, and we have discussed it in our Research Perspectives/Comments & Analysis pages in the December issue of Pundit sister publication, PRODUCE BUSINESS. You can see the point/counterpoint piece below:
The Power Of Produce Part 1: Before They Shop
It’s What’s In Store That Counts
We were quite fortunate to be able to get the three people spearheading this study and analysis all to The New York Produce Show and Conference to present their findings. We asked Pundit Investigator and Special Projects Editor Mira Slott to see if she could get a sneak preview of this most important presentation:
Below, you will find Mira’s three-part Q&A for the micro session at The New York Produce Show on FMI’s consumer-centric study with Rick Stein of FMI, Anne-Marie Roerink of 210 Analytics and Sherry Frey of Nielsen Perishables Group.
Vice President, Fresh Foods
Food Marketing Institute
Q: Could you give us a snapshot of the micro session you will be conducting with Anne-Marie Roerink, Principal and Founder of 210 Analytics Company, and Sherry Frey, Senior Vice President of Nielsen Perishables Group at the New York Produce Show? What revelations can attendees glean from your consumer-centric study: The Power of Produce 2015, An In-Depth Look at Produce through the Shopper’s Eyes?
A: We think this is one of the first consumer studies focused on shopper perceptions not only from the time when they enter the produce department, but even before they arrive at the store.
Also, rather than bringing commissioned work to the FMI Fresh Executive Council (FEC), we came to the Council and asked, ‘What are you interested in finding out?’ Retailers and wholesale/grocers drove the questions —this is what they want to know specifically. Most times they just receive the information.
Q: Is that a salient point?
A: Yes. This is an important aspect. FMI facilitated the study using the Council’s intellectual capital. [Editor’s note: FEC includes executives from the following companies: Giant Eagle, Hy-Vee, Affiliated Foods Midwest Coop, Publix, Associated Wholesale Grocers, Harris Teeter, Brookshire Grocery, Longo Brothers Fruit Markets, Wakefern, Unified Grocers, Heinen’s Fine Foods, Delhaize America, Lunds/Byerly’s, Ahold USA, Lancaster Foods, Albertsons/Safeway, Meijer's, Giant Eagle, Bristol Farms/Lazy Acres, Burris Logistics, Schnucks, Price Chopper/Market 32, and Wegmans.
We think this report is unique because almost all research out there is focused on quantitative sales results, by segment, IRI and Nielsen data. This gives insight into how consumers are thinking, and is driven by practitioners in the retail and wholesale industry. That’s why it’s got so much life and interest.
Q: What did FEC members want to know?
A: First, how does the consumer figure out where they’ll shop? When our customers don’t shop with us, where are they going, and what channels are emerging? What trends are happening that we need to get on board with? And they are always interested in how millennials behave -- one in three Americans are millennials; what motivates them and how to keep them?
Every time a study is done for the first time, it triggers what questions are still out there, and we’ll start to address those. We’re doing this study year after year, and will use this as a benchmark with the same questions and add new questions.
Q: How will the micro session unfold?
A: Anne-Marie and I can talk about all the key topics. I’ll give you the top level, but Anne-Marie can go to the level below and provide the deeper insight. Sherry Frey will come at this from the statistical information side. Nielsen Perishables Group holds all that sales and industry data to compare and contrast with our results.
When we do the panel discussion at the New York Produce Show, the goal I’ll facilitate is to open with an introduction of why we did the research, what we tried to accomplish, and Anne-Marie will walk attendees through the content.
Q: OK, why don’t you start us off then with a preview of what attendees will learn, and then I can follow up with Anne-Marie and Sherry to round out this pre-show piece…
A: The big areas to holistically concentrate on are first, pre-trip planning. When it comes to produce, consumers make a list, at a very high level. They may not make a list for all grocery shopping, but with produce they make a list, and they use ads, mostly newspaper inserts in compiling it.
The research determined advertising clearly drives direction. If consumers need apples, they start looking at all the different ads to compare apples on sale. Of course, it could be the consumer is in a location with only one store, but if there are choices, the consumer is not loyal.
Q: That consumer will actually go to that particular store because of its promotion on apples?
A: It could be Fuji apples at $1.66 a pound, and the consumer will plan the trip based on the ad.
Q: What happens when they get to the store? Do they veer from the list?
A: Data showed a key insight: While consumers base the store choice on the pricing of the ad, once they walk in the store, it’s all about quality and appearance, and price goes out the window. If the display is not neat, and culled to eliminate the items with brown spots, they immediately change their mind.
This tells the industry how important it is for retailers to pay attention to merchandising. That shopper won’t necessarily buy the Fuji that was on ad, and chances are they may not even switch to a Jonagold or Red Delicious. They’ll measure you once they are inside and may change where they shop all together. The reverse of that… the good news is… if Fujis look great, they’ll buy a lot more than they were originally planning.
Most consumers will buy 50 percent more produce than what is on their list once in the store. Produce is huge for impulse buys.
A key takeaway is the condition of the store and the quality of product drive consumer behavior. Some of this is intuitive. Retailers have known this for years, but it’s nice to have data confirm how important it is in outlets to maintain high quality displays and products.
This covers one big bubble in our research, which we call planned purchase and impulse.
Q: What are some other big bubbles?
A: The next area I’ll talk about is mega trends in produce. ‘Local’ really resonates over all in trends. Consumers when given a choice of local or organic will buy local. And given price differentiations between regular, local, and organic strawberries, they’ll buy local.
Q: Did you find out what consumers think local and organic mean?
A: We learned the consumer often has the perception local is organic whether it is or isn’t. The number one reason consumers say they buy local is it is fresher, and number two is it supports the local economy.
And the last thing about local, the ‘aha’ moment, is the retailer can define the parameters for what constitutes local and the consumer will believe you, although there are some regionality issues.
The consumer walks in and sees the POS -- our local product is within a certain number of miles from the store, or our local product is grown out of these five states, or my local product is from the USA, and the consumer says OK and is generally fine with that. The only catch is when you’re operating in big growing areas, such as California and Texas, where consumers want retailers to confine the definition of local, and not include other states.
If you go to Boston, for instance, or an area with fewer local growing options, your definition of local can become much broader.
This knowledge helps retailers. They can widen the scope of what constitutes local. In addition, organic continues to grow.
The other mega trend seems to be farmers’ markets as a secondary channel. Consumers believe farmers’ markets have fresher product and are closer to growers. This is quite different from reality, but that’s the perception. Farmers’ markets could get rejects from supermarkets because product doesn’t meet their Quality Assurance.
When the consumer walks into a farmer’s market, it connotes a certain feel. You may have a few growers show up at a farmers’ market and the consumer believes all product is local.
The unexpected was how much local resonated over all the other segments. A significant number of consumers at some point has walked into a farmer’s market, which is a huge wakeup call for the retail industry. One takeaway was the more you can create an atmosphere that what you have is local, with POS or with displays, the more it will resonate with consumers. Mimicking the decor of a farmer’s market, and how some retailers are crafting that experience, is proving a winning strategy.
The other trend is snacking and juicing, especially popular among millennials and families with young children. Both are huge growth opportunities.
The last piece is value-added. Consumers are really interested in saving time. Wegmans, for instance, does a good job with in-store cut fruits and vegetables. A store could take bell peppers, mushrooms and onions, wrap them up and call it fajita mix and consumers love that. The value added really resonates. A Wegmans store was selling asparagus on the front stand at $1.99 a pound. Diagonally from that, store associates were cutting asparagus stalks for $5.99 pound, and that was selling three to one. Shoppers were willing to pay $4.00 more.
Q: You’re talking about a Wegmans customer, though. Wouldn’t it vary depending on the type of store and consumer demographic the store is catering to?
A: Interestingly enough, value-added resonated throughout varying demographics. The value-added segment is up 13 percent, where produce overall grew 4 percent.
From the FEC, we received input in breaking out more information on demographics and regional differences — a consumer in Florida versus one in California.
Q: Did you oblige?
A: Yes. We saw clear cut differences with age. At the micro session, we’re able to pull out distinctions with millennials and different generations. Millennials are really driving the growth and are very much willing to switch store loyalties. Our study shows millennials are very impulsive. If a produce employee encounters a millennial in the produce department, be aware they could lack knowledge and may need help on how to cook, so any way to engage them is desirable because they don’t have as much experience in that regard as older generations.
Q: Did you explore the impact of social media, cell phones with apps, etc.
A: Social media goes wide but not deep. Millennials know to ask questions, but don’t know how to prepare the items. In the next year, we’ll be doing more work on how the consumer is responding to social media.
The new parents are very interested in the whole health and wellness trend. They know fruits and vegetables are healthier, what vitamins are in broccoli, nutrient values in potatoes; they know the department is healthy but want nuances, anyway we can help educate.
Q: How important a role does fresh produce play in shopping decisions and where one shops?
A: Next to location, produce is the number one reason the consumer selects to shop in a particular store, paramount to other departments. That’s why produce is high on list-making. Perishability is only good for a certain amount of time, and that’s a reason why location is still number one.
This is where FMI in general sees retailers try to differentiate themselves; in produce, deli, the perimeters, and they create theater with the quality, freshness and layout.
Q: So if you win in produce, you’ll win overall.
A: It’s not rocket science to know how important high quality produce is in that respect. The research resonates here. If you don’t have that, you won’t get the sale, but more importantly, you’ll potentially lose your customer. It’s very meaningful to hear that’s what consumers are saying and the scientific research confirms.
Q: What consumers say and do are not always in sync…
A: I worked as a retailer for many years, and I can speak from experience: consumers often say and do two different things. But in this study, what consumers say is validated by the statistical data. For instance, consumers say they want value-added, and they’re walking the talk, which you’ll find when you talk with Anne-Marie and Sherry.
Just reporting what consumers are saying wouldn’t make the study useful; you must connect those comments to the reality of their actions.
Q: Key reasons to attend this seminar?
A: One aspect, suppliers often feel disconnected from consumers. They have all their relationships with the people who are going to sell their product. Any time the supplier can get closer to the consumer helps them drive their business.
We all know the consumer drives the business, and the business will only go where the consumer takes you. The minute you take your eye off the consumer, you go the wrong way. Stay consumer-centric, drive strategies and tactics by what the consumer wants and needs.
Mira then reached out to Anne-Marie Roerink to garner her perspective…
Principal and Founder
210 Analytics Company
Q: We greatly appreciate your additional insights to incorporate into the educational micro-session. What was the impetus for the study, and how did you approach it? What parameters did you consider and why?
A: For the past 10 years, FMI, together with the North American Meat Institute, has been conducting the ‘Power of Meat.’ This study is immensely popular among meat packers and food retailers alike — as the one-stop source for consumers' take on buying and consuming meat and poultry.
The study hadn't gone unnoticed by the produce counterparts, and FMI and I often received requests from produce managers if such a study was available for their field as well. This prompted the inaugural sister study to the Power of Meat — the Power of Produce — last year.
The set-up is very similar, in that we target consumers, ages 18 and up. We make sure they are either the primary shopper or share that responsibility equally with someone else and require a minimum level of involvement in the category — in this case, fresh fruit and vegetables. The sample is nationally representative and a reflection of the Census, with the exception of gender, which falls out naturally, based on shopping responsibilities, which typically means a 60/40 female/male split. It also covers similar areas, including pre-trip preparation, channel choice, the influence of marketing tactics, organic, rating the performance and more.
Q: Could you touch upon the team approach in conducting the study and the different players involved?
A: While the initial questionnaire design loosely followed the Power of Meat, we made sure to get retailer feedback at all stages of the study from questionnaire design to initial findings to the eventual report and presentation. We had a total of five retailers, ranging from national chains to small regionals, volunteer to work with us on the study. They provided questions and ideas on key takeaways for the report.
Q: What challenges do you face in doing a study of this nature, and how do you overcome those challenges?
A: The key challenge is always having more questions than space. So we have to be very strict in what topics we want to cover, what angles we want to cover and create schedules on topics that we need to trend every single year and ones that can rotate in and out on a year or multi-year basis.
Q: Could you talk about the methodology? Who participated in the study and why? Did you segment participants by demographics, geography, age, wealth, etc.?
A: The sample is a national representation and yes, for every question and every topic, we look at things like age, income, gender, area of the country, primary shopping channel, shopping spend, etc. So every topic provides national level statistics, but also indicates the deeper trends. For instance, with organics, we'll cover how the market is trending, but also cover who the organic buyer tends to be.
Q: Are you able to account for discrepancies between what consumers say and do; for instance, good intentions to buy/eat more produce compared to the reality, i.e., obesity epidemic, etc.?
A: Yes, we worked very closely with both IRI and the Nielsen Perishables Group. As such, the report includes a lot of "real life" study data that compares the point-of-sales data with what the consumers are saying. And surprisingly, in the case of meat and produce, consumer claims are very much in line with actual buying behaviors — unlike what we see in some other areas of the store. For instance, we have actual sales data on things like organic sales, new item incrementality, etc.
Q: It looks like you had an orchestrated structure for segmenting the report and its findings…
A: Each chapter contains a section at the beginning that includes the key highlights for the chapter. The chapter then covers the findings by demographic, if relevant differences were found. We also provided a Top 10 Findings with some of the things that jumped out to us.
Q: Could you elaborate on Rick’s comments regarding the role fresh produce plays in shopping decisions and where one shops?
A: Produce, along with meat, is the most researched item on people's list. People tend to use one of two systems. They either have a list of fruit and vegetables in mind they wish to purchase and search for matching promotions -- in which case, produce plays an enormous role in store/channel choice. Or, they look at the sales promotions and plan their meals/consumption around what is on sale.
Either way, produce has an enormous influence on the ultimate basket, particularly, as many people readily admit they often buy unplanned produce items when in the store. In other words, produce has both the benefit of a planned purchase and the added benefit of impulse sales.
Q: Did you have hypotheses going into the study? Did they unfold as expected?
A: We had assumptions based on the study committee's experience and industry knowledge and for the most part, these panned out. But it was extremely interesting to see how the interplay between promotions that get shoppers in the store, and the importance of in-store execution plays out in the mind of the consumer.
Q: From your perspective, what were the most enlightening parts of the study for produce industry executives? What advice could you impart to retailers and suppliers?
A: There are many key takeaways highlighted throughout the study, but one of the major red flags to me was the influence of the alternative channels on the produce purchase -- particularly because produce is such a key store- and basket-driver. For instance, many fresh executives believe that shoppers want to select produce (and meat) themselves, and as such don't think that online sales are a big competitor for their stores.
In reality, the online basket is as much about fresh as it is about stock-up. Likewise, few retailers worry about the impact of farmers' markets. And granted, their impact on the total store is probably pretty minimal. However, one in two supermarket shoppers visits a farmers' market with at least some regularity — often specifically to buy produce.
This means the retailer loses out on the produce dollar, but potentially the entire trip as shoppers may now pick another channel/store to purchase the rest of their basket. Shoppers believe farmers' market produce is fresher and like supporting local farmers. Understanding how to compete on similar levels, touting freshness as suppliers and retailers, along with food safety, are important ways to protect and grow sales.
Q: What areas of the study are you looking to explore deeper?
A: We have not yet started to explore topics for next year. But as I mentioned earlier, there will be some that we'll repeat every year to trend, while rotating in hot new topics. We're always open for suggestions!
Q: Why should New York Produce Show attendees make it a point to attend this session?
A: It's a great one-hour overview of the consumers' take of buying and consuming fruit and vegetables. Additionally, we have collected many pictures and examples from retailers across the country to drive home some of the findings and how to best respond to meeting and exceeding consumer expectations.
Mira then got in touch with Sherry Frey to further round out the piece…
Senior Vice President
Nielsen Perishables Group
Q: Thank you for teaming up with Rick Stein and Anne-Marie Roerink to share your research at the New York Produce Show and help the industry reach new plateaus. Could you describe your role in the research, and the reasons for your collaboration?
A: Thanks so much for reaching out to us. The Nielsen Perishables Group is playing a supporting role in the ‘Power of Produce’ research efforts of FMI and 210Analytics. We believe it’s important to support this type of research in the fresh industry, as the industry continues to better understand the changing consumer attitudes and perceptions.
Q: How is your information integrated into the research analysis?
A: The Nielsen Perishables Group data adds context to the consumer research survey, by showing what’s actually happening today in grocery stores, based on consumer attitudes. The data helps to validate the consumer attitudes and resulting impact on behavior, and also helps to identify where there may be a say/do gap in consumer attitudes versus actual behaviors.
Q: How do you go about collecting your data?
A: The supporting Nielsen Perishables Group data is built using retailer store data as well as consumer behavior data.
Q: What is your take on the challenges of doing a study like this?
A: I commend FMI and 210Analytics for tackling this type of study. The produce department is a critical part of the grocery store, but is in a rapid state of evolution. Challenges in doing this type of research are to create findings that are relevant to the diverse suppliers and retailers who now play in the produce industry.
Q: Both Rick and Anne-Marie note the potential conflicts that may arise with consumer perception studies. Rick points out several instances where consumer perceptions of local and organic, and of farmer’s markets, sometimes clash with realities. Anne-Marie explains the importance of verifying what consumers say with their actual behaviors. To that end, she said by working closely with both IRI and the Nielsen Perishable group, the report includes a lot of ‘real life’ study data that compares the point-of-sales data with what the consumers are saying. Could you follow up with Anne-Marie’s answer and provide additional thoughts?
A: It’s very powerful to pair the retail sales data with the consumer research results to validate the say/do behaviors and also to identify if there are areas of consumer interest not yet fully being met by the produce department.
Q: And what did you discover?
A: One of the most intriguing results, which also show in our sales data, is the emerging fragmentation of channels. As new retail outlets begin to carry more fresh produce, we find consumers are very comfortable splitting their ticket. This requires a new dynamic when thinking about how to win with consumers, and drives an increasing importance on quality as well as convenience (including convenience of retail location).
Q: What parts of the study are you looking to develop further?
A: In an initial year of research, it’s good to establish a baseline of understanding. There continues to be opportunities to explore the in-store (quality, price point) triggers for consumer decision-making versus the out-of-store decision. This will become even more of an interesting area as both suppliers and retailers leverage new digital tools to directly engage with shoppers.
Whether you are a retailer or foodservice operator with direct consumer contact, or a shipper or wholesaler, this is an important workshop.
We agree with Sherry Frey that the key finding is this idea that consumers are increasingly prepared to split their shopping trips. The old vision of a supermarket across the street from another supermarket vying for customer loyalty is just out of date. This has been ongoing for years — we wrote a piece in Pundit sister publication PRODUCE BUSINESS titled Death By A Thousand Cuts, 22 years ago about the phenomenon.
Yet what is becoming increasingly true is that it is not a matter of certain customers preferring supercenters, warehouse clubs, dollar stores, health-oriented concepts, convenience-oriented concepts or online services — it is the same customer at different moments in their lives.
Some of these are long term moments — parenting children in the home — and some are short term moments — a guy trying to impress a date he has promised to cook dinner for. Some are cyclical — the same person the day the paycheck comes in and the same shopper the day before the paycheck comes in.
In any case, this is a must-attend moment at The New York Produce Show and Conference, where a truly insightful study of relevance to all the industry will be presented and discussed with the top people involved.
Don’t miss out.
You can register for The New York Produce Show and Conference right here.
Learn about the new Foundational Excellence program here and let us know you are interested right here.
We can help you with hotel rooms — just e-mail us here.
And travel discounts are available here.
Come and be a part of the conversation. Come to New York!
Dr. Roberta Cook’s data-dense presentations are consistently among the most anticipated at The New York Produce Show and Conference. In both the New York and London Produce Show, she has stimulated discussion on a wide range of topics, including these:
Will Amazon Outgrow Tesco And Carrefour? Dr. Roberta Cook Will Present Comprehensive Data And Analyze Worldwide Retail And Produce Trends All At The London Produce Show And Conference
The Intersection Of Technology And Trade: At Global Trade Symposium Roberta Cook Of UC Davis Talks About Mexico’s Broadening Role In A Diversified Global Market
Dr. Roberta Cook Will Talk About Increasing Produce Consumption At Global Trade Symposium
Riding The Roller Coaster: Roberta Cook Of UC Davis Explains How Economic Fluctuations Create Marketing Opportunities.
When the Trans-Pacific Partnership was announced, we knew that Dr. Cook would help make it all make sense.
We asked Julie Cook Ramirez, Contributing Editor at Pundit sister publication, PRODUCE BUSINESS, to find out more:
Roberta Cook, PhD
Cooperative Extension Marketing Economist
Department of Agricultural and
University of California, Davis
Q: Your presentations are always so highly anticipated and well received. Would you give us a sneak peek as to what topics you will be talking about this year at the Global Trade Symposium?
A: The working title is: “Consumer Demand, Lower Trade Barriers, and More Competitors are Driving International Fresh Produce Trade.” Basically, there are various forces changing the international fresh produce landscape. I thought I would focus on what’s happening in terms of changing market access.
By that, I mean the access that different individual countries have for specific products in a specific market. Can you get in there? Do they allow imports and how high are the tariffs? When we as AG economists talk about market access, that’s what we are referring to.
One of the things I want to look at is the proposed free trade agreement now between the Pacific Rim countries. It’s the Trans-Pacific Partnership agreement, which we call the TPP. I want to take a look at one component of the TPP and discuss some of the thoughts we might have about how that component would impact produce trade.
I want to also include an overview of recent trends in global fresh produce trade, taking a look at how exports of fresh fruits and fresh vegetables changed over time in recent years. What do we know about the recent trends in terms of total volume? Then discussion would focus on the changes in relative rankings among the top players in that trade. The story then will be that, yes, trade has been expanding.
However, there’s relatively slow economic growth in many parts of the world today, in particular among developed countries. That has slowed the rate of growth in imports into some of the developed countries such as Europe and Japan.
Simultaneously, we have developing countries that in many cases have had more robust economic growth rates. They have often been countries that have been expanding their market access. They have reduced trade barriers. Other countries have now expanded market access into those markets. China is a good example of that. It is a country that joined the GATT in 2001 and has been reducing trade barriers. Many countries throughout Latin America have been reducing trade barriers.
When you have developing countries that have more robust economic growth rates than many developed economies do, and they’ve been reducing their trade barriers, that means they are becoming more important markets for fresh produce. We have countries that didn’t used to be big players on the export market which are now becoming much more important players. Peru is a very good example. Mexico has always been a very important exporter to the United States.
Countries such as Australia have also been expanding their exports of fresh produce into more countries. In part, they are doing that because they are gaining better market access. Peru has free trade agreements with many different countries. So does Australia. That’s something that has helped to facilitate their international competitiveness. We have a situation where the players are changing.
The relative importance of different exporting countries is changing and the relative importance of import markets is changing, with the developed countries still being the most important, but with developing economies starting to take a higher share now of fresh produce imports. Then you have greater competition for everybody in the marketplace underlying all of this.
It’s a fairly dramatic story when you look at how much competition has increased in the fresh produce international trade during the past decade as more markets have opened, as some markets have become relatively more important than others, and as more players, competitors, exporters have emerged on the scene.
Q: That’s quite a huge topic and one that will be of great interest to attendees. You mention reduced barriers and changing market access. Would you tell us more about those factors and how they come into play?
A: Some time ago, the North American Free Trade Agreement (NAFTA) went into effect. As of 1994, market access between the North American countries — Canada, Mexico, and the U.S. — began to expand dramatically for all fresh produce commodities. Today, in fresh produce, there are no trade barriers left.
What has been happening since that time is more countries have been negotiating Free Trade Agreements, FTAs, with each other. The United States has FTAs with the Central American countries, with Colombia, Peru, and a variety of different foreign countries. We’ve been expanding our market access into those countries, and they’ve gotten improved access into the United States. However, simultaneously, many countries such as Mexico, Chile and Peru have been negotiating FTAs with more and more countries. In recent years, we have lagged in negotiating FTA’s compared to many countries, putting us at a competitive disadvantage.
The big picture over the past 20 years has been that we got a big trade block negotiated with the NAFTA, but then after that, the story has been more individual free trade agreements between specific countries. Today, with the TPP, we would now be getting a bigger block again. The TPP involves the United States and 11 other Pacific Rim nations: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. That list includes several major U.S. trading partners, especially Canada, Japan, and Mexico, which are our largest partners. In the case of Canada and Mexico, we already have free trade through NAFTA, so it’s not giving us anything new. However, we don’t have a free trade agreement with Japan, so that’s significant.
Some of the countries included on this list, such as Brunei and Singapore, are very small- to moderate-sized markets and those are very open economies anyway, so that’s maybe not significant. But if you look at all of the countries combined in the TPP, they comprise about 40 percent of world GDP.
While the agreement contains some major trading partners, on the other hand, several large countries, some major trading partners that we have, are not in the agreement. China is not included. That’s a very large country and a very important trading partner for the United States. Indonesia, the Philippines and Thailand are also not included. Those are not so important as trading partners, but they are large countries and large potential markets.
South Korea is the other large economy that’s omitted, but that matters less to the United States because we have an FTA, which we recently acquired, with South Korea. We have an FTA with Colombia, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, Panama, and we have FTAs with Australia, Chile, Peru and Singapore.
In the presentation, I want to give people a more informed picture of the TPP, because especially right now with the Republican debates going on, you hear all of these things being thrown out by politicians about the TPP, which are entirely erroneous.
Donald Trump has expounded at length on the TPP, calling it a terrible agreement, focusing completely on China and its alleged currency manipulation and chastising the government for not addressing this issue in the TPP. Well, as it turns out, China isn’t even part of the TPP. While the TPP would comprise about 40 percent of world GDP, there are already a lot of FTAs between countries that are part of the TPP. As a result of that, the impact of the TPP will be less than anticipated because so much of the trade between these countries already has relatively free access before this proposed agreement would ever even take effect.
We then can look at Australia, which competes with California on many products and does have an FTA with Japan and Malaysia, while we currently do not. With the TPP in place, the United States will have relatively similar access to Japan and Malaysia whereas in the past, we have been at a disadvantage competing with Australia in those markets because they had FTAs with Japan and Malaysia and we didn’t.
Mexico also already had an FTA with Japan, so they had better market access than the United States does. That’s important because Japan is the biggest economy included in the TPP, with the execption of America. Japan also has FTAs with Malaysia and Vietnam, which we didn’t have. Basically, we have a story which in terms of how it will affect the United States is that we will have more access into some of the important markets within the TPP countries. So we will be more on an even playing field with other countries that are servicing those markets, such as Japan. Not having the TPP meant the United States was at a disadvantage because other competitors of ours did have good market access into countries like Japan.
Q: If any politician tries to claim these agreements cause cannibalization of one country’s sales by another, that’s not an issue, right?
A: Trade diversion does occur. But in general, the US is one of the most open markets and has been at a disadvantage relative to some of our competitors. What free trade does is generally improve economic growth in all countries. That’s well-documented. On the other hand, the effects of this TPP will be relatively moderate, despite the fact that it includes 40 percent of the world’s GDP.
You would think it would be a major game-changer to get this agreement, but the story is not really, because of the fact there has already been so much improvement in market access among many of these countries during the past 20 years.
The important point for this audience is there will be some gains for some specific fresh produce commodities, where we haven’t had as good of access as some of the other members of the TPP have had with each other because they had FTAs and we didn’t. However, nobody should get too excited one way or the other about this agreement.
The other thing to keep in mind is for any sensitive commodities — if a commodity is important to a country, they tend to protect it for a longer period of time. So any time trade agreements are negotiated, the commodities that are sensitive and that could be most negatively impacted by expanded import competition are put on very long phase-out schedules, sometimes up to 20 years.
Q: When you cited consumer demand as one of the drivers, is that primarily because consumers expect year-round availability of nearly all produce items these days?
A: Yes. That’s true in developed countries such as the United States and in Europe. The other thing is people are diversifying their diets. We eat a greater number of fruits and vegetables today, for example in the United States, than we did many years ago. There were fewer products offered in produce departments many years ago and product availability varied a lot between the summer and the winter.
Now, nearly everything is available and most items are available year-round. There are exceptions, such as cherries, but in general, people have so much choice. That increases competition between products because there are a lot of substitutes today. It’s been challenging to increase consumption of items that already have high consumption in the United States, such as apples, because now there’s just so much more competing with apples and citrus during the wintertime.
There are changes in terms of consumer demand for quality, appearance and flavor and those types of attributes. Within any category, we are seeing big changes. For example, within apples, today, we have so many types of apples we consume today relative to many years ago. We are not just talking about substitutes between commodities now. We are talking about lots of substitutes within commodities.
The trend has been toward the higher flavor items winning out — red delicious, golden delicious apple consumption is declining, while we had growth in the managed varieties like Sweet Tango and all those that are higher flavor, the Honey Crisp, etc. Consumer demand is really changing the specific product mix we are eating, between produce items and among produce categories. In addition, consumer demand is driving us toward more value-added product forms — more fresh-cut, for example.
As a result of that, we are also seeing a gradual decline in the commodity side and we are seeing growth in the packaged side of what is sold in the produce department, where convenience and preparation are increasing. Packaging is also playing a much more important role. That’s one of the factors we have to keep in mind with regard to international trade because international trade tends to be primarily on the commodity side.
Q: How does the international aspect of the global produce scene relate with the popular push for locally grown?
A: They are simultaneous trends. Consumers hear a lot about locally grown. Survey data shows consumers highly value locally grown. During the summer-fall, when parts of the country that are in extreme climates can grow certain products, they play a role, but remember there is really a very limited number of products in Eastern regions growing for very short seasons.
If people want to eat fresh produce the rest of the year, there are key periods of the year when we don’t grow any of these items in the United States and we only have imports available. For example, we don’t produce blueberries from the fall until the spring in the United States. Over half of the fresh tomatoes we eat in the United States are imported because we can’t produce enough in the wintertime. We don’t grow table grapes in the wintertime in the United States. If people are going to consume them, we must import them.
Each commodity has its own story to tell. Leafy greens — lettuce, broccoli, cauliflower — we can produce those in the wintertime in the United States. We produce them in the desert in the Yuma area of Arizona and in the California desert. We can’t produce tomatoes in California in the wintertime. We only produce them in Florida. Each commodity is different based on climatic factors and how that relates to the individual commodity and whether it’s warm season or cold season where it can be grown. That’s why we have all this seasonality in fresh produce.
The general point is that if you didn’t import, you would have to go back to the way we were 30 years ago, and we would be back with this very limited amount of products available in the wintertime in the United States. That would mean lower and less diverse consumption. They are simultaneous trends, but consumers benefit from both. You are not going to consume locally-grown mangos or papayas or limes or lots of different tropicals at any time in the United States.
Diversity… this is the big story. What are the factors affecting demand for fresh produce? The commodity price, consumer income, prices of substitutes and complements, population growth rates. In some of the developing countries, they are growing more rapidly than developed economies, both because they may have higher economic growth rates combined with higher population growth rates, so they are becoming more important import markets.
Ethnicity and culture... That’s another thing that has driven growth in avocado consumption and all the Asian vegetables and Hispanic vegetables. All those things affect demand.
Then you have the quality issues — appearance, flavor, color, shape, size. People want more interesting items today. They like having all these colored peppers, for example. Information on produce selection, ripening and recipes impact demand. That’s one of the areas that produce exporters need to be very involved — if they are going to export their products into another country, they need to help consumers in those countries understand how to select, ripen and prepare their products.
Then we can talk about convenience and preparation. Usage suggestions, packaging, and all of those things are becoming more important. Post-harvest technology is improving and enabling more products to be shipped globally than in the past.
New marketing channels… supermarkets in developing countries are becoming more important. They want to import during the off-season just like our supermarkets in the United States because they have to have their shelf space full year-round, so the growth in supermarkets in developing countries, in Latin America and Asia, is driving more import demand. For foodservice to handle fresh produce, they need to have the items available year-round. More international trade helps expand produce offerings in foodservice channels.
Convenience stores are starting to sell fresh produce in the United States. If they succeed and more fresh produce is sold in convenience stores, then you’ll have more fresh produce items in arm’s reach of consumers. That will impact demand, both for domestic production and for imports.
Marketing channels play a role in all of this as well. You have to have the perspective of total demand for fresh produce; international trade can only take place if you have market access, if your product is allowed into a specific country. The more countries that can receive your product, that expands total demand for fresh produce, too.
There are so many trends that are taking place simultaneously that are making it more challenging for firms to understand the markets and to get the right product to the right country, being able to compete effectively with other players in those marketplaces. International trade is not only increasing in volume, but it’s also becoming more complicated than in the past because consumer demand is changing and because there are more competitors.
Q: What a wonderful, rich presentation! What do you hope attendees will take away from it?
A: I hope they will take away that, basically, we are going through a period of an accelerated pace of change. There is margin pressure at all levels of the food system. Many produce suppliers now are facing lower profits while they are being asked to do more. There are growing expectations about food safety, traceability and sustainability. All of these things are increasing costs, not just for US growers but globally as well
We have more mergers taking place in the United States, so there’s more consolidation in the supply chain, with fewer larger buyers. The European grocery retailing industry is much more consolidated than the United States. At the same time, we have the international trade landscape changing, with expanding market access, but more competitors as well. There is more complexity in understanding consumers, whether they are in the United States or another country where you are trying to service them.
I want people to take away that there are many opportunities, but also challenges, and that it will be important to utilize information technology more effectively than in the past in order to be able to stay on top of all these trends and respond to them with great speed. Speed to market is a very important factor in relative competitiveness.
I hope to identify some of the opportunities for firms, but also point out the need to become more sophisticated in how they manage information and data so that they can, on a very rapid basis, understand changes in global produce markets both from a competitive standpoint and from the perspective of changing consumer demand.
The produce eco-system in which we work is in flux. All of the sudden, a new Trade Agreement is signed, and berries from Mexico that some US supermarket thought were theirs, are instead on their way to China.
One looks at a place like Peru and one sees these enormous plantings… they may not ever be profitable, but the costs are sunk, the infrastructure built and the produce world is changed forever.
Come and join us at the Global Trade Symposium and the whole New York Produce Show and Conference and confront the future of the industry.
You can register for the Global Trade Symposium and the entire event right here.
Don’t forget to check out our all new Foundational Excellence program and express your interest here.
Remember to stay at the headquarters hotel to maximize interaction with the trade; let us know what you need by e-mailing us here.
And check out the travel discounts here.
Each year The New York Produce Show and Conference invites a special guest from outside of the USA to inform and inspire the attendees. The very first year of the show, we profiled this special guest in this piece:
Dr. Johan Van Deventer Travels From South Africa To Join Thought Leaders Panel at The New York Produce Show And Conference
Now, seeking an individual who could speak to the subject of how a company and industry can survive and thrive in the face of extraordinary change and disruption, we once again return to South Africa.
We asked Tommy Leighton, Managing Director of the Pundit’s sister operation in the UK, to reach out and speak to a leader whose organization has not merely endured, but prospered in the face of extraordinary change:
Having served as a CEO in the Agri-business environment for the past 21 years and earned his reputation through the successful implementation of turn-around strategies, growth strategies and leadership development that created sustainable value for stockholders, Johan Dique has been Group Managing Director of the South Africa based Capespan Group since January 2011.
Capespan procures fruit from within 40 countries globally and services markets in 34 or more countries all year-round. The nature of the global markets and the decentralised and autonomous nature of the group structure call for strong leadership across different cultures around the globe, and Johan will address the Global Trade Symposium, during The New York Produce Show and Conference, on Capespan’s response to the various disruptive challenges it has faced since the South African fruit export business was deregulated in the late 1990s.
Group Managing Diretor
Q: For any Pundit readers whose experience in the fruit industry is pre-dated by deregulation in South Africa, can you explain the process and how it created Capespan?
A: For many years, South Africa’s fruit industry operated through a single desk export system, with two organisations, Unifruco, for deciduous fruit, and Outspan, for citrus, owning the exclusive right to export fruit around the world. So while the growers played on the local market, the control boards exported their fruit for them.
Following deregulation, in 1999 Unifruco and Outspan merged to form Capespan, with growers and co-operatives as shareholders, and became one of a number of companies that could export South African fruit. The market at both ends of the scale began to act differently towards Capespan as a result, and the company was faced with the need to adapt its strategy to maintain market share, by changing from a powerful and exclusive intermediary to an independent supplier to the big retailers in the marketplace.
Q: Did Capespan respond to deregulation in the right way strategically?
A: Having lost ownership of the fruit, the first strategic approach was to try to own the logistics channel, and Capespan tied up harbour facilities in different countries in the belief that this would secure it guaranteed volumes of fruit in certain European ports. That strategy failed; mainly because the directors had believed that they would be able to maintain an 80% share of the fruit exported from South Africa, and it dropped way below that in a short space of time. Ultimately, today, we have a 14% share of the South African fruit export volume and that is, of course, a substantial change.
Secondly, it was expected that Capespan’s major competition in the international marketplace would come from other multinational companies – the likes of Total Produce in Ireland, Univeg and Dole. Again though, that was not how things turned out. The growers in South Africa moved away from Capespan and set themselves up as grower/exporters, and they became the main competitors.
The third mistake was to believe that the way to maintain or attract the major retail customer accounts was to broaden the basket of fruit Capespan was able to deliver. The retailers didn’t like that. They said ‘if we want to talk about bananas, we want to talk to the people who are strong in bananas’ and that was the same in other categories too. They didn’t want to talk to one supplier about all commodities.
Q: After the first few chastening years as an independent exporter then, what were the major challenges still facing the global group?
A: The biggest ongoing challenge by far to a supplier like Capespan was and is the strategy of disintermediation being followed by major retailers. This was driven to a large extent by the UK retailers, and their counterparts in other countries have followed. Tesco, for instance, began first looking to go direct to the source country, and then direct to the growers in that country.
The group took way too long to react to that, preferring instead to resist what the retailers were trying to do rather then explore ways they could facilitate their customers’ requirements and add value to their programmes. Capespan in the UK lost its Tesco account overnight, having invested a substantial amount in facilities at the port of Sheerness. Having repositioned itself during the first decade post-deregulation, Capespan found itself becoming irrelevant overnight and having to reposition itself again if it was going to survive.
Q: And what is the prevailing strategy that is going to allow you to deal with the disruptive forces in your marketplace over the next several years?
A: The retailer strategy affected all of our marketing subsidiaries around the world in different ways.
Our fruit division comprises a number of subsidiaries strategically placed both in the markets with a global footprint, as well as in procurement countries in servicing the fresh fruit needs of retailers, wholesalers and foodservice companies across the northern hemisphere. As well as the UK, we have operations across continental Europe, in North America, Hong Kong and Japan.
The Fruit Division has invested backwards into primary agriculture in South Africa and Namibia in table grapes, pome fruit and citrus; as well as forwards into service provision and in market value-added services.
Capespan is also invested in harbour and inland logistical infrastructure in South Africa and Mozambique. The Logistics Division has transformed itself from a dedicated fruit logistics business into also handling bulk- and break-bulk general cargo all year round.
Further from home, since 2008-9, all of our marketing subsidiaries are now following a strategy of global procurement, to gain strength in counter-seasonal product and allow us to be a 12-month supplier into retailer programmes. South African fruit still accounts for 48% of the fruit that is sold by the group, but we decided we could make better progress if we were no longer known predominantly as a South African exporter.
We are increasingly providing our customers with value-added services such as logistics, branding and packaging and selling them fruit that is merchandising-ready. In 15 short years since deregulation, a lot has changed, but we recognise that you have to add value as an intermediary.
We believe that our new strategy will take us to the next level around the world.
At the height of the cycle of disintermediation in the UK, for instance, we found our UK operation had lost a number of retail programmes and went into a loss-making position. At the time when I joined the business, in 2011, we had to make a decision – should we reshape or should we exit the market?
It was decided the way forward was to reshape. We had an overhead structure at the time that we simply could not afford to maintain, so we moved out of Sheerness to much smaller offices in Maidstone (also in Kent) and began to use third-party cooling facilities and warehousing, where we set up packing lines and infrastructure that meant we really could offer a retail account an effective 12-month supply programme.
It worked; we stabilised the business and it now makes a profit again. Capespan UK supplies citrus, for instance, on a 12-month basis to retail customers, with no great fluctuation month by month.
In Europe, we have performed pretty well, despite losing some retail programmes. We have become more of a service provider to retail suppliers, rather than to the retailers themselves and managed to make new inroads as that reputation has built up. It has been a similar process in Honk Kong, while in Japan, we’ve moved away from supplying the wholesale sector and been very successful building relationships with retailers.
There are obviously some areas where we see particular growth potential – Asia being the most obvious. We have invested in Golden Wing Mau in China, which is the biggest fruit distributor in China and growing at a rate of 30% per annum. Most of its business is still Chinese fruit, but we have the responsibility of developing its import business and at this point, that makes up about 15% of its basket.
Golden Wing Mau has just signed an agreement as the value chain manager for South China for Vanguard, the country’s largest retail group. There is a desire once that has settled down to turn that into a deal that covers the Vanguard account for the whole of China.
We also see growth in other Asian countries in smaller ways. And we have begun talking to possible partners in India, which runs a different model to China, but has very big growth potential.
Q: That leaves us with North America. How has the business progressed on this continent and how do you expect to see the business go forward?
A: In North America, we are based in Montreal, but 60% of our business is done out of Philadelphia. We basically started there as an importer of South African citrus, but over the past decade we have brought a lot of product in from Chile and Peru, particularly table grapes. We were still pretty small, though, and we got to the point where we decided that, in North America, we needed to go big or go home. The managers of that business are shareholders in the company and they took that to heart. In a short space of time, they have doubled the business in size.
We formed alliances with California partners, in both citrus and table grape, and we have managed to become exclusive 12-month providers into some Wal-Mart distribution centres as a result. We think we can grow that relationship and we also see similar opportunities for us in both the US and Canada. As a business, though, we haven’t really grown into a 12-month supplier in North America yet. We have quieter times, but we have fruit at all times of the year, as we have not quite built up that consistent counter-seasonal supply.
From a small base, our growth rate is good, and as much as it is measurable, our market share is growing. In North American terms, however, it is still tiny.
Q: Do you control your international operations centrally from Cape Town?
A: We do make some central decisions in Cape Town, be they strategic, acquisition or budgeting decision, but in fact, we do follow an autonomous structure in each market, as different sets of circumstances will create certain needs. When we are involved in the decision-making processes, we move quickly, and we recognise that as we are spread all over the world, our subsidiaries have to have that autonomy.
Q: The early deregulation days were pretty brutal at times, and Capespan took a few body blows from its local industry. Now that the dust has well and truly settled, how is Capespan viewed in South Africa?
A: In South Africa, the press still spontaneously refer to us as ‘the biggest exporter of fruit from South Africa’ and we are still exactly that. There are companies that are bigger players than us in certain commodities, but in terms of overall exports of fruit, even with 14%, we’re the biggest. South African fruit, as I said before, represents 48% of our sales portfolio, even though we can also claim, for instance, to be the largest exporter of Chilean fruit to Europe. So we are still embedded in the South African export business.
Change takes many forms. We tend to think of change as something imposed on the industry, as when Dr. Roberta Cook of the University of California at Davis speaks about the impact of Free Trade Agreements, or something we do within our own organizations, as when Richard Thompson of Gilbert Thompson speaks of opening a business in a different city. John Dique, though, focuses on industry dynamics, such as when he explains the greatest challenge facing many companies in the industry:
“The biggest ongoing challenge by far to a supplier like Capespan was and is the strategy of disintermediation being followed by major retailers.”
This issue is crucial. Indeed, we have dealt with it many times in the Global Trade Symposium, including via this incisive presentation:
Former Sobeys And Wal-Mart Executive Wayne McKnight Will Speak About The promises And Pitfalls Of Global Procurement Operations
Yet this is a very big industry, and even the large players are relatively small. So there are many opportunities. John Dique will tell us how Capespan discovered some opportunities and, perhaps, point the way to how all of us can discover the opportunities that exist for us to do better work and help our businesses to prosper.
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Last year we were pleased to have two London wholesalers to add context to The New York Produce Show program: Gary Marshall of Bevington Salads and Chairman of New Covent Garden Tenants Association and Chris Hutchinson of Arthur Huchinson Ltd. and Chairman of Spitalfields Market Tenants Association Ltd. They went on a tour of the new Philadelphia Market. You can see their perspectives detailed in our sister publication, PRODUCE BUSINESS UK:
Refining the Art of Wholesaling
This year we are delighted to have a wholesaler from Leeds, a bit over 150 miles north of London, join us. He is representative of a new, younger generation, both in the innovation he has shown in transforming his long established family business and in his assumption of industry leadership as he recently joined the board of the Fresh Produce Consortium.
We asked Tommy Leighton, Managing Director of the Pundit’s sister company in the United Kingdom, to find out more:
Gilbert Thompson (Leeds) Ltd
Yorkshire, Great Britain
Richard Thompson is a director at family-run Leeds (Yorkshire) wholesaler Gilbert Thompson, which began trading in 1909. He also sits on the board of the Fresh Produce Consortium, the UK’s trade association for fruit, vegetables and flowers.
He runs the company with his brother Daniel. During the Global Trade Symposium at The New York Produce Show and Conference next month, he will talk about the various disruptive factors that have affected the wholesale trade in the UK over the past few years, look at the prevailing trends outside of the major London marketplace, and he will describe how his own company is taking an expansive route to future prosperity. Here’s a preview:
Q: Many people would say that, for a plethora of reasons, it is tough to open a new traditional wholesale business in the UK market in the current climate. But the Yorkshire Produce Centre took on another trader just 18 months ago. How is that going?
A: Thirty years ago, people said wholesale was finished and some still say it now. But we didn’t believe that and to this day, we see growth for our business and for the fresh produce businesses evolving around us. There are certainly far fewer businesses, but those businesses are a lot bigger – we’ve seen that in Leeds, especially.
Some 30 years ago, there might have been 30-40 companies, whereas now there are three.
H2H, one of the three companies remaining in the market, closed a couple of years ago, and we were left with just ourselves and Scrutons. So when the Gibbons family, which runs a local retail business, told us they fancied turning their hand to wholesale, we were happy to welcome them into the fold.
They formed Rhino Fruit Co and took on one or two of the former H2H employees, so they came into an established market with employees who gave them access to an established customer base. In the end, there was only really a six-to-eight-week gap between one company closing and the other opening. I think this illustrates that it is possible to open up a new wholesale market business and be successful.
It was good for the market as a whole, because to attract the full range of customers, we must have something for everyone, as wide a choice as is possible. It’s the same for markets up and down the country – there is an extremely diverse range of customers to serve, so there is room for every type of trader from the high-class caterers to the market traders, from traditional English produce to the latest exotics.
Q: Unusually for a family-owned wholesale business in the UK, though, you have expanded not just within your traditional marketplace, but into other wholesale centres in recent years. Why have you taken that route?
A: We began to expand in Leeds around 2010, when we supplemented our produce and flower businesses in the market with GT Prep, which prepares a range of vegetables for customers. We then opened a flowers and plants business in Sheffield in 2011, another Yorkshire city around 35 miles from Leeds, which operates under the same GT Flowers banner as our Leeds firm. This year in July, we have gone one step further, by buying Sharrocks, a wholesale fruit and veg business in Preston, Lancashire.
This is the first time that we have owned a business outside of Yorkshire, and it’s an unusual move for a family-run wholesaler in the UK. I suppose there has always been the fear that you could buy a wholesaler in a different market and all the staff would leave, taking the business with them. But Sharrocks was a fourth-generation family business like ours, with an established team and low staff turnover. It shared the same ethos as us – selling good quality produce at the right price and believed in the consistency of service, range and quality, as we did.
There was a particular set of circumstances that led to us buying the company. Sharrocks had grown into a £40 million business, but 60% of that turnover was earned by being the distribution hub for northern supermarket chain Booths. When Booths decided they wanted to take ownership of their own supply chain, they bought the business, but divested themselves of the wholesale business at the time by disposing of it to one of the existing employees. Within a short period of time, personal circumstances dictated that he was no longer able to run the business and Graham Eastham, one of the former owners, who we had a good relationship with previously, suggested us as a possible buyer.
So now we are the owners of that business, and we are looking to open up GT Flowers in Preston early next year as well. I think there will be a bedding-in period now, but we will always be interested in opportunities to expand further.
Q: It is undeniably rare for this to happen – why do you think you have become an exception to the general rule?
A: I think the reluctance for companies to expand is in part down to the age of management. A lot of the UK’s wholesale companies are being run by people who are 55+ and therefore at a stage of their career that they are not looking to expand. I’m 42, my brother is 45, and the other managers in the firm are all around 40. So we are looking at the next 15-20 years, not how much we can make in the next 12 months.
We also have the security of owning our own premises, whereas most companies in authority-run wholesale markets are not in control of their own destiny in that respect. They are being asked to commit to five and 10-year leases and do not know whether they might be asked to leave at some stage because their landlords want to move the market site. We bought the Yorkshire Produce Centre 15 years ago, we own the building and we lease what we don’t use ourselves out to the other tenants.
In the UK, there is only really Total Produce that has expanded geographically in the wholesale trade in recent time. They have bought up companies in and around the major traditional wholesale centres. There are companies that have invested in their own premises outside of the wholesale market environment – Sharrocks was one of the first to do it in the late 90s, Bristol Fruit Sales did it in the south west and McCarthy’s have done it successfully in Norfolk.
It’s a bold move to invest in your own premises in this business, but if you look at it, the people who have done it have been the more forward-thinking amongst the wholesale traders and largely they have done pretty well out of it.
At Gilbert Thompson, we’ve looked at other areas to improve ourselves too. We were an early adopter of IT, using some of the first hand-held terminals available. We invested in a Prophet system in 2009 and have continued to upgrade our use of IT, currently focusing on online sales channels.
We have also invested in our facilities; the latest example being a £100,000 spend on our coldstore in Leeds, which is halfway towards completion. Again, I think if you look around, the businesses that are moving forward are those that are showing the desire to reinvest money back into their business.
Despite the consolidation that’s taken place, or perhaps because of it, the businesses that are left in wholesale are stronger and often well-placed to invest. That's the way wholesale is going, I think. Even though existing markets might continue to shrink a bit, you’ll still be left with decent-sized, well-capitalised companies that are investing for the future.
Q: What do wholesalers need to do to stay competitive in this ultra-competitive marketplace?
A: Wholesalers need to ensure they offer something for everyone. You can’t have a one-size-fits-all or one-quality-fits-all policy. There are some people who want the lower value and there will people who’ll always want that … but there are still plenty of people who are prepared to pay money for good quality produce. The key is to understand exactly what that level of quality is and to be ready with it when the customer wants it.
Delivering what the customer wants and [offering] value for the customer means different things to different customers. I think the industry is responding [well].
Q: Many suppliers around the world have lost track of the ways to supply the UK wholesaler during the past 30 years of increasing supermarket domination. There is clearly opportunity to revisit the sector – how should an international supplier go about finding it?
A: Any supplier looking to work with the UK wholesale market sector should do the research, to identify a business of a size and scale to be capable of dealing with your product.
Getting in touch with the FPC would be a good starting point, as they have good relationships across the wholesale sector, and they will be running a workshop for people wishing to supply the UK market at the London Produce Show and Conference in June, next year. There is always the traditional option of dealing with importers in the UK who have dedicated marketing desks for the wholesale markets, like Poupart.
You might not want to, or be able to deal directly with an individual wholesaler, but the marketing desks will have regular customers and can deal with branding and pricing issues for you, for instance.
Wholesale markets got a bad reputation for some years as the ‘dumping ground’ for produce rejected by the UK supermarkets. That does not apply now. Wholesale markets are mostly selling quality produce and often at prices that are competitive with other sales channels. Most wholesale operators also have an established year-round customer base these days too, so they are looking to carry a year-round offer of certain lines to service that. We still, of course, operate as that release valve for the industry at times of oversupply, when there is a need to find a home for quality produce without impacting on your existing customer network.
To neglect the wholesale markets is a mistake. I think any supplier from overseas should at least investigate how UK wholesalers can fit within their portfolio of distribution channels.
Richard Thompson earmarks the top 10 disruptive forces he feels will impact on his marketplace in the years to come.
1) International politics – the two-way sanctions with Russia meant that a big growth market for produce was suddenly closed off. The regional wholesaler has no control of that, but we did get hit by the impact it had on produce supply and prices.
2) Food safety – the E Coli outbreak in 2011 that was originally blamed on cucumbers from Spain was actually nothing to do with Spain. But the media coverage that was generated put consumers off cucumbers and Spanish salads for an entire season, and wholesalers again took a big hit.
3) Immigration – this isn’t always looked on as a positive, but for the wholesale markets in the UK, immigration from Syria, Afghanistan and other places has boosted trade in some centres, because it has brought in new communities of people who want to buy large volumes of fresh produce through more traditional channels.
4) Legislation – We have no control over the UK government’s imposition of the minimum wage, and the more recent living wage and decisions taken in Europe on MRLs or Citrus Black Spot, for instance, can cause significant disruption.
5) Climate change – It's had an effect already, but over the coming decades, the changes will undoubtedly change the sources we have for our products dramatically.
6) Technology – wholesale-market businesses have not been great at using software to progress, but nobody can ignore the impact of technology forever. Amazon is looking to deliver fresh produce, for example – how will wholesalers and their customers respond?
7) Production changes – while yields increase and GM foods reduce the peaks and troughs of supply, the ways for wholesalers to make money are reduced.
8) Obesity – it is at epidemic proportions in the US and becoming far more prevalent in the UK. Fresh produce could obviously play a big part in addressing it, and in the UK we are looking at a sugar tax, which could definitely create opportunities if it shifted consumption from manufactured foods to fresh produce
9) Population growth – The populations of sub-Saharan Africa, India and other developing nations are due to grow exponentially in the next 20 years, and as the middle classes in those countries create demand for more product, as an English importer, some of the products we take for granted will be harder to come by, or we might have to pay more. We can’t put our heads in the sand in the UK and think everything’s going to stay the same. It isn’t.
10) Food security – A lot of governments around the world are taking up the challenge of food security and how it is affecting their own populations. You can’t have a freely competitive environment and guarantee that your own population will be fed, so I expect changes there.
Regardless of the challenges, I’m confident the future remains bright and profitable for the UK wholesale sector for those players who remain flexible and adapt.
Many wholesalers still go home in nice cars to nice houses, so there’s still money to be made in wholesale, if you do it right!
In a world being transformed, traditional points of entry into many markets are being transformed as well.
Part of the issue is the old definitions don’t work. To call Gilberts Thompson a wholesaler is true – but the word means something different when the scale is different. The company owns fresh-cut operations, floral operations, facilities in other cities and so forth.
Another part of the issue is that, with the growth of ethnic markets, internet shopping, foodservice and specialized retail – wholesalers suddenly have new roles to play in serving their customers and in facilitating producers who want to access the market.
What we most strongly note about Richard is that he is not content to leave things as they are. He wants to move his company and the industry forward.
He is right, if a bit coy, in saying that his relative youth plays a role here, but his vision plays a bigger one.
All too often people think of trade shows and industry events in a strictly short-term commercial sense, “can I buy or sell something on the floor.” There is a place for that, of course, but there is a bigger “win” in being able to engage with high-level minds, and with those building the future of the trade. The New York event is special because, in the business capital of the world, it provides an intimate setting where that really happens.
So come to New York, engage with Richard and the rest of the speakers, exhibitors and attendees. Begin building your business anew.
You can register for The New York Produce Show and Conference here.
We have our new Foundational Excellence Program that you can show your interest in right here.
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The best thing about being the Pundit is that smart people from all around the world reach out to us. So we’ve been honored to feature the thoughtful perspective of Jack Bayles, an American who has long made Japan his home. You can read Jack’s comments in pieces such as these:
Americans Providing Assistance In Japan
China Scare ‘Off The Charts’ In Japan
So when the Trans-Pacific Partnership was announced, we thought we would reach out to Jack, with the hope of gaining an American’s perspective on doing business in Japan.
Japan is a mature market and its population is shrinking, not growing, as a result producers in the US have de-emphasized Japan and pursued faster growing markets, such as China. However, because we do not have a Free Trade Agreement with Japan, one of the big breakthroughs for America is that the TPP would result in more liberal access to the Japanese market.
But how does one translate this theoretical gain into an actual gain? We asked Pundit Investigator and Special Projects Editor Mira Slott to find out more:
Alishan Organic Center
Q: We’re so eager to garner your insights in person at the Global Trade Symposium. You’ve contributed important information to many articles in our online publication over the years, from revealing concerns over organic certification in China, to pioneering development of food banking in Japan.
I was first taken aback by your compassionate and influential role in relief efforts after the earthquake and tsunami in Japan in 2011, during my riveting interview with Charles McJilton, CEO/Executive Director of Second Harvest Japan.
As a U.S.-born citizen spending your last 35 years in Asia, you bring attendees A View from the East: What to look for and look out for as you try to do business in Japan. How a love of logistics and an acceptance of extreme demands for product information and safety data lead to a successful business.
Could you start by sharing your diverse background and what led you to launch Alishan Organic Center?
A:The simple background history… I’m from New England, I studied animal and veterinary sciences at the University of Maine, planning on becoming a veterinarian, took a break and went to Africa to think about things, came back and decided to pursue a new direction.
I went to Harvard Public School of Health in the department of physiology and toxicology study, working on early sulfur dioxide and ozone studies, left that and became a stock broker at Merrill Lynch, and by the end of the 70’s, I had decided to travel around the world, and after a few years ended up in Japan.
In Japan, I was involved in the restoration of Japanese art and ceramics, and exports and sales around the world. That’s where I basically developed a love of logistics, and moving things globally, including two leading spots, Tokyo and New York. By now I’m a 35-year-old man. I was hungry for logistics and shipping things. We started to ship different food items back in the empty containers we used — garbanzo beans, oatmeal, peanut butter, classic Western-style foods, and out of that grew a mail order home delivery system I founded with my wife, Fay Chen, from Taiwan in the late 80’s.
That has grown over the years to a vertically integrated farm to retail consumer importer of organic foods from 20 countries and five continents; maybe 300 items, frozen, chilled, dry, bulk and branded. We sell to all levels of the distribution chain — re-packers, wholesalers, retailers. We also operate a home delivery service, a retail store and a restaurant.
Q: Could you run down the main points of your talk, and then perhaps share a few memorable vignettes from the bevy of stories you’ve accumulated over the years?
A: There are some stories I’ll only tell when I’m in an intimate group of people, so I’ll wait until the Global Trade Symposium for those.
Q: That’s one of the major advantages of coming to the Global Trade Symposium.
A: Jim Prevor had remarked that meeting and mingling is an important part of the experience. I can schmooze till the cows come home.
Q: You’ll find you’re in good company, bridging cultures and forming new relationships and business opportunities. This seems a good segue to learn more on the themes you’ll be addressing in your presentation…
A: There is what I call the ‘punch points.’ One of the things I want to emphasize when discussing the food industry in Japan… it’s not about the size and the price. They are both important, but ultimately on these TV shows, where you see a $100 or $200 cantaloupe, no one is buying that for food. You buy that for someone as a gift. It sits on a person’s mantel piece. It does get eaten but it’s not a food item; it’s a gift item.
Q: What is important to the Japanese when discussing food?
A: The Japanese as a people are convinced the world is trying to poison them. They’re like Woody Allen. They’re convinced their stomach is where the problem is. They have a higher rate of stomach cancer here, and just all the negative and positive emotions of their body go to their stomach.
In the West, I think we’d say emotions go to our heart. We’d say that person has a bad heart. That could mean emotionally, physically, mentally. Here in Japan, we talk bad stomach.
Q: Why is that?
A: There are probably other countries that have other things. I’ll mention a stomach issue at lunch today, and they don’t look at me and ask, ‘What are you talking about?’ They respond, ‘Doesn’t everybody have that problem?’
It’s not that they’ve been poisoned by other people. It’s because their emotions are centered in the middle; they’re not centered in the heart. That’s just the way the country evolved a long time ago. It’s not a contemporary thing. It’s not related to a food poisoning incident. They’re just concerned. The rates of heartburn and all sorts of stomach-related problems are massive here.
I feel like I’m in a Woody Allen movie sometimes when I hear the stories; the way he would go on and on about his ailments. So safety, stability and trust are important traits, but I’ll come back to that later.
My next punch point… now we’re talking business-to-business, and business-to-government when making an application. There is a total focus that Americans will be OK if they have the documentation. To go to meetings and find out your numbers are slightly wrong, you made a math error, is embarrassing. To have your spec sheet keep bouncing around doesn’t work.
We have very easy customs activity. We do our own customs brokering. We’ve been working with people a long time, and they know our spread sheet is rock solid; there are no mistakes anywhere. Once in a blue moon they’ll check it. There is a total focus on getting documentation correct. The 99.9 percent list of ingredients, they will push back and say it doesn’t add up. For 3.1, Americans will just put down 3. That is not acceptable here. They just say make it equal to 100.
Q: This weaves back to the critical role trust plays in business transactions. Could you provide more insight on that front?
A: One of my punch points, or areas I’m going to talk about, is never underestimate that trust factor. It is important to develop relationships with companies approximately the same size as you. If you happen to be an extraordinary avocado exporter, you should be dealing with an extraordinary food importer of about the same size, for instance, 50 to 100 employees, $10 million in sales.
You don’t want to be with a Mitsubishi. Mitsubishi should be with a Kroger or a comparable mega company. U.S. traders should find people in companies of around the same size. The relationship you have with your supplier or your customer will be essential because we all know there are going to be problems. It’s not that they will accept inferior activity from you, but they will sit there and listen to it if they know it will be a good deal.
There’s a saying in Japanese, ‘You have to sit on the stone for three years,’ meaning no business of note is going to happen for three years. It will take that amount of time for a project of value before you start to see true action.
They don’t like change here. My staff doesn’t like change here. Last year, the figs were deep black, and this year they’re light brown, and oh, no, there are going to be people calling, and asking what happened, did you change suppliers? So the punch point is no one likes change, and that covers all staffers, all employees, and all organizations.
If I were to advise someone coming to Japan, I would say never underestimate the fear of change, the avoidance of the unknown, the love of long relationships, and the responsibility everyone will feel if you do have a long relationship.
I think anybody who reads the news could say, oh you’re talking about the country being so reliable and everything else. What are we supposed to take away from the failed management of nuclear power, Toshiba totally cooking the books, and the Takata airbag cover up?
Q: These examples of mismanagement and scandal are directly counter to the cultural edicts you describe and to your own honorable, long-term business experiences…
A: Most Japanese of the middle level are appalled by those types of news reports. Certainly with the mid-size firms I deal with, except for a criminal rip off, everyone does exactly what they say they are going to do. And I know that sounds like a pat on the back to them, but it’s just very simple.
When a meeting starts at 1:00, it starts at 1:00, if you’re told your car will be ready on Friday at 5:00, it will be ready on Friday at 5:00. In fact, they probably planned on having it ready at 4:00 on Thursday. You have to make sure you mean what you say.
Talking excessively about how good your product is, is not important. The buyer will decide how good your product is. What’s happening in a meeting, they are deciding whether they can trust this person; are they reliable? Reliability… that’s the biggest thing. It connects back to food safety.
This country is hyper focused on food safety because of the fear of food. I know food safety is a serious issue in the US, and Jim Prevor talks extensively about food safety from how you manage your supply chain to what the buyer is willing to accept, but in this country the fear of food safety problem motivates everyone from the lowest level position in the food factory up. It is astonishing, and when there is a failure, no matter how minor or unscientific, it is in the national news for days and days on end.
In the US, there were 3,000 deaths from foodborne illnesses last year, according to the Centers for Disease Control (CDC). Japanese statistics used at an FAO (Food and Agriculture Organization of the United Nations) meeting showed number of deaths from foodborne illnesses is in the single to low annual double digits; that’s 3 to 20 versus 3,000 in America. In 2009 in Japan, there were zero reported deaths from foodborne illness.
Q: Statistics on foodborne illness are not always accurate. Oftentimes the illness is misdiagnosed or not reported. And the cause of death may be attributed to secondary factors, complicating findings. In addition, reporting procedures, data collection, and study methodologies differ between countries. Are you sure the Japanese stats are valid? Considering the Japanese stomach issues, maybe the foodborne illnesses were thought to be something else?
A: I believe the numbers are correct, but I know this is related to the method of collecting statistics. Let’s say the statistics are totally skewed in Japan and resonate different things than they do in the US. Even though the US is three times the size of Japan and the statistics may be hard to calculate, the dramatic difference in those numbers between the US and Japan is still something of note.
I’m very interested to hear Brad Rickard’s talk at the New York Produce Show about shelf life labeling and usage of terms. In this country, all children from age seven onwards, when going to buy something, will look at the "best buy" date.
My kids in elementary school and their friends would flip over the package and examine it for food safety. Of course, my kids are in the food business, but everyone here checks "best buy" dates. Even if the bottle looks good, they’ll put it back, and say, I’m not going to buy that.
One of the things I’ll talk about is related to this focus on their stomach, for some consumers off-the-scale paranoia for food dangers and contamination. Worse than America, some food recalls have absolutely no basis in science. The product in tests could show totally acceptable fungus colonies per gram, but if there is a visible spot of mold in an unopened jar, it’s enough for the health department to say you should do a recall. I speak from experience.
Science is not essential for some decisions on food safety in this country.
Q: Alas, that is often the case in the US as well. This must be challenging for you as a company. What actions have you taken to alleviate this problem?
A: One of the reasons for our success is we have been here long enough and deal with a level of closeness and knowledge of our suppliers because we don’t jump around. I have suppliers I’ve been with for 20 to 25 years. These are our Central Valley fruit and almond producers. We deal with dried nuts and dried fruits. We don’t deal in any fresh produce.
Q: Do you think there would be major differences you would have to confront if you were dealing in fresh produce?
A: Australia and Chile are nice because they are counter-cyclical, their summers are Japan winters. I had some discussions with the American embassy specialists in produce. Their comment was America fills in the gaps. For instance, Japan grows a lot of onions. Onions are an important item here. Imports are just when supply has a hiccup here in Japan, so Japan turns to America. A deep onion supply chain coming from America will be a hard one to develop.
When I go to a supermarket in a middle class, middle income supermarket chain of maybe 50 to 100 branches, if you go beyond the papaya, avocado, and banana and the garlic from China, there’s not a lot of U.S. produce. When I go to Costco, there’s plenty of US produce here in Japan.
Produce doesn’t have to be labeled with country of origin. There are many stores that do labels naming the farmer in Japan. Japanese love that. Different states have different names for certain fruits and vegetables, and it’s followed closely.
People here are heavily into food. It costs a lot as a percentage of their income.
Right now the supermarket business is very rough. It’s a repeat of England. Margins are incredibly tight. People like small bags, they buy for the equivalent of a dollar a bag, single serve, but will still pay for perceived quality in a product. But some of that is old hat. Everyone knows the Japanese will pay for quality, and that the almonds have got to be the right size.
I think the punch points for me are size and price point are important, but really expensive things are related to gifts; the total focus on documentation; the acute failures at the high levels of business like the issues with Takata airbags just don’t happen at the level of businesses I deal with; recalls don’t have to have a basis in science; and the guiding light is to never underestimate the Japanese fear of change and voidance of the unknown. They want to have things figured out ahead of time.
Q: What are some ways Japanese business culture is markedly different than American business culture?
A: Figuring things out as you go is a very good trait. That’s why America became America. That’s inconceivable to the Japanese. If we think hard enough and long enough and have enough meetings, we can anticipate all possible outcomes and plan our responses to all of those outcomes. That is part of Japanese society.
The American ethos is you think through a product part way, you venture a rollout, you know you can’t figure it out completely so you’ll figure it out along the way. Silicon Valley is an extreme of this. They just barely have the software done, they put it out and will update it over time. We’ll do version one and version two and get feedback and improve it. The people who buy it will know it won’t be perfect, but it’s better than waiting. Nobody in Japan wants to think like that.
In Japan, we have a product or process we’re going to sell. Let’s think through every possible outcome, permutation, what could happen, and let’s develop an answer to that or improve the product to eliminate that problem. Things are very rarely released half-baked. Half-baked is just not acceptable as an option.
Q: Does this lead to bottleneck in getting things done?
A: The world is glacial over here. Why did Jack and Fay succeed? We started small, developing nutritional-needs products and supplying to five shops that wanted them. We succeeded because we were the first ones on the block with dozens and dozens of items.
A Japanese organization, in contrast to a Chinese or Taiwanese organization, is much, much slower to react. Adopting your idea is much slower here in Japan than it is elsewhere in Asia. That might be worth a million dollars to a businessman. I find Japan a noncompetitive environment because it doesn’t react quickly. It reacts slowly, and carefully. They think things through.
Q: Was it important you were doing organic as a means to your success?
A: I think the fact we started importing food that had very definite super clean labels, Western-style foods that had clean labels or were organic nuts and fruits allowed us to be in the marketplace when it was incredibly small to develop a dominant position early on. I have a strong aversion to tooting my own horn.
Q: Just like a modest Japanese business man…
A: We were here before there was a market, and we were able to get incredible suppliers from America. Did organic matter, certainly.
Q: Is it hard for the consumer to get organic foods in Japan?
A: It’s not like Europe, where organic is in absolutely every store. The organic market in Japan is small in comparison to Germany, Denmark, or America, but for the size of our company 1 percent of $1 billion is still a lot of money. However, everybody knows that line so that’s not important.
Anyone who starts early and can maintain cash flow has the advantage. We were able to maintain cash flow because we started as a mail order home delivery service. That means we were buying at wholesale in America, importing it ourselves without using trading companies, and selling onward to individuals at retail at a staggering percentage.
Q: Could you talk more about being vertically integrated, avoiding the middleman and having more autonomy and control over the process?
A: The first step… we don’t find the Japanese government import procedures onerous or difficult, since it’s our staff down there on the docks dealing with customs. Our staff knows the product and can answer in real time. If it’s a bit too much, they call me and maybe I can answer right away or I can find out quickly. I say hold on, and call my supplier.
Most of our suppliers we have their home numbers. I don’t make a habit of this, but we have all the answers and can do the application all in one day. Rather than the typical process, where a middleman hires a customs broker, who doesn’t know the product from Adam and every question takes two to three day cycles to get answered.
Q: How does your distribution system work? Aren’t transportation logistics more streamlined and efficient in Japan?
A: The management of logistics in Japan is an art form; it is practiced. There is nowhere in the world that has a better delivery system than Japan. Amazon is fooling around with drones and making a push, but as a small company, you make a relationship with a trucking company and have guaranteed delivery over 80 percent of the nation.
You can say you want a delivery block between 9:00 and 11:00 or between 1:00 and 3:00 or between 3:00 and 5:00. And for less than $10, you can add on refrigerated or frozen surcharge for a 20 kilo box, and you can also collect the money if you want. The transportation system and its reliability has never been exceeded or matched by anyone in the world, and it is very competitive. There are a number of players out there. You can pick and choose and play one against the other.
Q: What advice do you have for people at the Global Trade Symposium wanting to enter the Japanese market? Where do you see the biggest opportunities?
A: Sell food, not a commodity, and stories sell. In this country, half the TV shows are about food, not necessarily cooking, recipes, or going to restaurants, but the story behind the food. That’s what it takes to get the attention of the buyer.
My short list: work with someone your own size, sell a food not a commodity; show an incredible level of documentation. They are not trying to steal the secret recipe. For anyone selling processed foods, you must list all ingredients. The government will require a complete and thorough list of ingredients in the import documentation. On the label, you can get away with saying spices, but the Government is extremely regulated on item documents, from Chili powder to peanut butter to corn.
In business meetings, listen, and don’t talk. You shouldn’t be there saying, I have great watermelons all times of the year. They’ll ask you those questions. When I talk to my friends and business partners here, and I’m not trying to be mean, but they say, he talks too much. You don’t need to blow your own horn excessively. Ask questions and listen and never promise what you can’t do. And if you can show how your food is safer than others, you’ve got people’s attention in spades.
Q: Can you discuss future business ventures, anything interesting in the pipeline?
A: We are taking some strategic steps because of the acute financial turn. Two years ago, the Japanese yen was incredibly strong against the dollar, unimaginably good. The yen has now collapsed. Things are 50 percent more expensive than two years ago.
Two years ago, we’d sit in our office and it was wonderful. At the retail level things were steady. I’m not in the carrot business where the price goes up and down each week. I’m in almonds, and most of us change our prices yearly.
Exchange rates are very different. Japan is a very reasonable place to do food manufacturing. Their production runs are smaller, their attention to how they make the product and doing what they say are exceptional. We as a company are looking at how we can manufacture products in Japan as much as possible, with ingredients we import.
That would be our pipeline; looking more and more to manufacturing in Japan items we would have purchased abroad. It will give us better quality and better shelf life. We’re adding value inside our native currency rather than adding value overseas.
Q: Could you update us on your work with Second Harvest Japan.
A: The second sentence in my one paragraph bio, says it all. I like being in the food business because I enjoy supplying good food to people. It’s nice to make a profit, but it’s even nicer to give food away to those in need. Doesn’t it feel great? Second Harvest Japan developed in the early 2000’s and became critical to relief efforts after the nuclear meltdown and tsunami, and it produces from 1,000 tons to over 3,000 tons on a yearly basis. We’re very happy a number of our suppliers in America generously contributed food and we didn’t even have to ask.
Here’s an interesting story: Organic Valley donated a container of organic, shelf-stable, long life milk. We brought it over and customs was absolutely easy going. A few months later, we said maybe we could sell organic long life milk here in Japan. We had already gone through the Ministry of Health for donations. So we imported a small bit.
When they realized this was a long life product, the approval office of food imports said, this has to be produced at a licensed facility by a Japanese inspection organization company. They said, actually, there’s no one who’s ever been approved oversees, so there’s no way you’re going to be able to import it, unless you maintain it in a chilled state.
If someone imports milk from America and they air-cargo it chilled, that’s fine. So the only way to import shelf-stable milk to Japan — the kind you don’t need to refrigerate and you can put in your cupboard — is in refrigerated air cargo. That’s an example of the unscientific decision-making I’m talking about.
Our biggest problem is that Japan has a poverty rate where 16 percent of the population lives below the poverty line; many are single mothers, single parents and old people. In food banking, first you need to raise money to run it; you have to organize food manufacturers to support it, and find people to give to.
The hardest part in Japan is organizing the battle line of distribution even though there is a massive need. We have 700 companies that have gone through the registration process for donating food. The hardest part is ramping up that distribution.
Q: Why? Isn’t that ironic, since Japan has such an efficient transportation/logistics distribution system?
A: I forgot one point when we talk about the fear of change and the unknown. Japanese society feels strongly everyone should be treated the same. Examples of that not being true would be during World War II. This would mean in an office, when a salesman drops off a dozen donuts, and there are 13 people, the donuts will be divided so everyone gets their fair share. In America it is first come, first serve.
There are numerous agencies we work with distributing food. If we bring in 47 bottles of spaghetti sauce, and there are 50 families at the shelter, they say that won’t work for us. How can we accept something if we can’t share it equally with everyone? This is talking about a Japanese trait; this is not just about food banking.
Evacuation centers would refuse food if there weren’t enough packages to go around for each person. No one likes to stand up and take charge here. They like to stand up as a group. I don’t want to make this a sociology talk, but mention these cultural aspects in understanding ways to do business in Japan.
John and Fay's 30th anniversary party
We’re 45 people in our company. The revenue in our company comes from importing distribution, but the image of our company comes from our restaurant and shop and activities for organic healthy eating.
I’m just an old hippie. I traveled the world and ended up in Japan. I’m excited to tell my story at the Global Trade Symposium and to hear more about Jim Prevor’s story and of those in the audience. When the invitation came in from Jim, there was a fair amount of moving schedules around because I so wanted to do this and figure out a way to get to the New York Produce Show.
Jim and I have known each other for many years through correspondence, but we’ve never met in person, although we’ve come close on several occasions. It seems the perfect moment in time.
Japan is a difficult market for Americans, because although we are among the most closely aligned countries in the world, the culture is so different. Japan is an island nation, mostly homogeneous and, to this day, keeps itself apart. Little things separate us…. for example, bank ATMS do not generally accept non-Japanese cards (although Japanese convenience store ATMs usually do).
The time frame that Jack talks about – three years for anything to happen — is just so different from an American entrepreneur’s mindset. Many decades ago, our family business was selling all over the world, but very little to Japan. We sent Mark Mayrsohn, now of Mayrsohn International Trading Co. in Miami, to develop the market. After following elaborate protocols with letters of introduction and whatnot, we pulled him out because we lacked the patience to wait around three years for things to happen. We sent Mark to Miami, and things happened in three weeks exporting to the Caribbean.
And there is this notion of shame that is so foreign from the American experience. When the Germans surrendered in World War II, there was a submarine, German Submarine U-234, which was in the middle of the North Atlantic when the war ended. On the submarine were both Nazi military and scientific envoys headed for Tokyo and two Japanese naval attachés that had been in Germany for several years.
The submarine also contained a half-ton of uranium that Hitler had ordered delivered to the Japanese.
The submarine made its way to the US to surrender, but the two Japanese on board committed suicide rather than face the dishonor and shame associated, in their mind, with being a prisoner of war. It is not likely they thought they would be tortured or mistreated… indeed the submarine’s commander made for the US coast because he wanted to surrender to the Americans, expecting the best treatment.nd death was preferable to dishonor for these Japanese.
How to interface with this culture, what crossing the thresholds of doors opened by the TPP will require, relooking at Japan as an opportunity market — all this will be discussed at Jack’s talk.
Come to the Global Trade Symposium, learn and engage.
You can register for the GTS and The New York Produce Show and Conference right here.
Remember we have a new Foundational Excellence program with Cornell that you can express your interest in here.
Note also that if you e-mail us here, you can still get into the headquarters hotel.
And here are many travel discounts available right here.
Professor Gómez searches for ways the industry can do well by also doing good. So it was no surprise to learn he had turned his formidable intellect to the subject of gleaning.
Professor Gómez has made substantial contributions to the trade by helping to transfer insight gained through academic studies to be utilized by the broader industry. You can see some of the things we’ve written about his presentations for the New York and London Produce Shows right here:
The Renaissance Of The Wholesale Sector — Why Those Who Support 'Locally Grown' Should Support Investment In Market Intermediaries. Cornell University Professor Miguel Gómez Reveals Research Findings At The London 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
Cornell Professors To Present At The New York Produce Show And Conference: New Ways of Thinking About Local: Can The East Coast Develop A Broccoli Industry?
Cornell Professor Miguel Gómez To Speak At New York Produce Show And Conference On Fruit & Vegetable Dispute Resolution Corporation
Professor Miguel Gómez Returns To The New York Produce Show And Conference To Unveil A New Study That Points Out A Path For Getting More Produce Into Hospitals
We asked Julie Cook Ramirez, Contributing Editor at Pundit sister publication, PRODUCE BUSINESS, to find out what he is focused on for this year:
Miguel I. Gómez
Charles H. Dyson School of
Applied Economics and Management
Ithaca, New York
Q: All of us at the New York Produce Show and Conference are excited to have you back in the micro-sessions, and looking forward to this year’s talk. What will be the subject of your discussion this time around?
A: I will be talking about improving food bank gleaning programs for fruits and vegetables. Gleaning is an ancient practice, dating from biblical times, where farmers and large landowners allowed the poor to gather crops in the field after the harvest.
In contemporary times, gleaning is generally performed by organizations (often using volunteers) that donate the goods to food banks or pantries serving the needy. Gleaning in modern times may also refer to farm-food donations out of farmers' packing lines and storage houses.
Q: What have you and your team at Cornell done in the way of researching this topic?
A: This past year, we started new research focusing on what food banks can do to increase produce offerings through successful gleaning programs for fruit and vegetables (F&Vs). My team worked in collaboration with Deishin Lee and Erkut Sonmez from Boston College, and Xiaoli Fan from Cornell University.
Food banks are increasingly turning to gleaning as a mechanism for simultaneously reducing food loss and alleviating food insecurity.
A number of gleaning programs, in many cases supported by local and state governments, were created in recent years as a result. Our research contributes to the many ongoing efforts currently underway to run successful F&V gleaning programs.
Q: Why is gleaning such an important topic for the produce industry today?
A: Recent research suggests that recipients of food assistance exhibit increased rates of obesity and related health problems in the United States. At the same time, most of the food donated to and distributed by food banks consist of processed/packaged foods, which often are calorie- and fat-dense.
Meanwhile the USDA tells us that about 6 percent of fruit and vegetables are left unharvested in the field. The primary goal of our project is to identify ways in which food banks can increase offerings of fruits and vegetables to food-insecure people by running effective gleaning programs with local farmers.
At the same time, gleaning fruits and vegetables can contribute to reduce food losses — a top priority for government and for the produce industry.
Q: What is one of the big challenges with this course of action?
A: Running successful gleaning programs presents challenges for food banks. Managing gleaning operations can be challenging, because the arrival of gleaning opportunities (i.e., farmers calling to announce gleaning opportunities) and the attendance of gleaner volunteers (altruistic citizens who donate their time to glean fruits and vegetables) are both random.
Our most recent research tackles this problem. We developed a rigorous model that can be used by food banks to establish optimal scheduling of gleaning trips, taking into account the characteristics of farmers and the pull of volunteers. By optimal, we refer to the food bank’s ability to glean and distribute as much F&V volumes as possible during harvest season.
Q: Food waste is obviously a problem on the mind of a lot of people in the industry. Do you feel industry influencers and companies are doing enough to help?
A: Yes! The produce industry plays a key role in successful gleaning operations, and indeed, F&V donations through gleaning increased in recent years nationwide. According to the American Farm Bureau, New York farmers donate nearly 3.6 million pounds of F&Vs annually to food banks through gleaning.
In 2012, the California Association of Food Banks' gleaning program (Farm to Family) distributed 127 million pounds of fresh produce to 41 food banks around the state. Similar gleaning programs operate in Arizona, Texas, and Ohio — all with strong support from the industry. However, much more can be done to grow gleaning programs and contribute to alleviate malnutrition among food assistance recipients.
Q: How does “cause marketing” play into these efforts?
A: This is a very good question, which allows me to discuss the relevance of donations of F&Vs through gleaning to the marketing strategy of growers, packers and shippers. As its name suggest, “cause marketing” connects businesses with a cause, which is typically linked to a nonprofit organization.
The benefits of employing cause marketing are twofold. One, the business is helpful and works for the common good in the community; and two, the business is benefiting economically. Economic benefits come from improved customer relations, positive public relations, additional marketing opportunities, and making more money.
With this in mind, it is a no-brainer that businesses in the produce value chain can benefit from F&V donations by incorporating “cause marketing” principles in their marketing strategies.
Q: Scheduling of gleaning appears to be an issue, and I know it’s one of the things you will be discussing in your talk. Can you explain why it’s such a problem?
A: As I mentioned previously, food banks often rely on a pool of volunteers to run a gleaning program. Meanwhile, the availability of gleaning opportunities depends to the vagaries of F&V production and on the willingness of growers, packers and shippers to donate. There is a lot of uncertainty to manage in a gleaning program as a result.
Our research can help a food bank select a gleaning schedule that matches gleaner volunteers to the gleaning opportunities in the most effective way.
Q: Please give us an example of how this works. Are you talking about having schedules that match various growing regions and their windows of opportunity for gleaning?
A: For example, when we apply this model to the gleaning program of a food bank in New York State, we find that scheduling gleaning trips between 3 and 4 times per week maximizes the volume of F&V gleaned. Scheduling too many trips (e.g., every day) allows the bank to take advantage of more gleaning opportunities, but the number of volunteers per trip is too low to ensure enough volume per trip.
Conversely, scheduling too few gleaning trips (e.g. once or twice per week) ensures to have enough volunteers to glean enough volume in each trip, but the bank may miss many gleaning opportunities. Thus food banks need to balance gleaner volunteer availability with the amount of calls from farmers announcing gleaning opportunities.
Q: For those attending your presentation, what’s the main takeaway you want to resonate with people?
A: My audience will consist of a variety of businesses in the F&V supply chain. I want them to walk away from my presentation with the idea that they can simultaneously do a wonderful service to society and benefit their businesses by donating F&V to their local Food Banks through gleaning.
Q: What are you personally looking forward to about the show this year?
A: Participating in the New York Produce Show is one of the highlights of my industry outreach activities of the year. I look forward to learning about recent trends and the future of the industry. I also look forward to participating in the new Foundational Excellence program with Cornell.
We are not sure we see the utility in conflating traditional gleaning — meaning harvesting from the farmer’s fields after the farmer is done harvesting — with produce donations off the packing line.
It is tempting to see the food left in the field as “waste” and therefore free, but so much of the cost is packing and transportation that if we are also going to organize teams of people to volunteer, one wonders whether we couldn’t simply purchase a whole lot more produce that is already produced through these efforts by asking the same volunteers to just work a few more hours at their regular jobs and send in some money.
The religious school the Jr. Pundits attend hosts an annual gleaning. It certainly makes us all feel good, but is it really the most efficient way to get food to the poor? That is a question we haven’t seen really addressed.
We also wonder about food security issues now. Many farms today won’t allow the FedEx or UPS guy — vetted, uniformed, with a certain purpose — onto a field or in a packing house. Yet we are going to let hundreds of unvetted people roam around the fields?
When Jr. Pundit Primo, aka William, had his Bar Mitzvah, he had to explain the meaning and significance of his Torah portion. By chance, his portion dealt with gleaning. Here was his take on the issue:
…coming from a family that has long been in food — bakers on my mother’s side and produce on my father’s side — the part of my portion that most resonates with me is the admonition commanding the farmer to allow the gleaning of his fields. Indeed, as part of my Tag 13 program, I elected to go gleaning in a local field as my Mitzvah day project. This part of my portion translates in this way:
When you reap the harvest in your field and overlook a sheaf in the field, do not turn back to get it; it shall go to the stranger, the fatherless, and the widow — in order that the Eternal your God may bless you in all your undertakings.
When you beat down the fruit of your olive trees, do not go over them again; that shall go to the stranger, the fatherless, and the widow.
When you gather the grapes of your vineyard, do not pick it over again; that shall go to the stranger, the fatherless, and the widow.
Always remember that you were a slave in the land of Egypt; Therefore do I enjoin you to observe this commandment.
Of all the many mitzvot in this portion, there are only two occasions in which they are accompanied by the phrase: “Always remember that you were a slave in the land of Egypt; therefore do I enjoin you to observe this commandment.”
I believe this speaks to the little appreciated nature of these commandments.
On first reading, they sound like generalized obligations to help the poor, yet they are remarkably specific. For example, the commandment is that if you “overlook a sheaf in the field,” one should not go back to get it. This is different from saying one should intentionally overlook good produce and leave it in the field.
What we are actually admonished here is to seek ways to help those in need, but without hurting the conduct of commerce or others who have worked hard to achieve success. In effect, we are warned against being so greedy that we would hurt ourselves by engaging in business practices, such as going back and forth over a field to find every stray grape or olive, when such efforts would be expensive and wasteful.
So these gifts that Torah orders the landowner to give, though deeply valuable to the poor, are actually a gift to the landowner as well. For the commandment reminds us to keep our focus on efforts that produce value and not begrudge that others might benefit a bit from the fruit of our labors…
Gleaning, food waste… these are all hot topics now. Professor Gómez, though, is an economist and this Pundit will want to ask how he views these efforts in the context of Comparative Advantage.
We pay migrant laborers relatively low salaries to harvest. How can it make sense to have doctors and lawyers and engineers do this work instead? Is this really a sensible way to help the poor and hungry? Or does it just make us feel better?
Come to New York and let us all analyze these issues and how best to proceed.
You can register for The New York Produce Show and Conference here.
You can see the new Foundational Excellence program, where Professor Gómez will also speak.
Hotel rooms in the headquarters hotel are available if you e-mail us here.
And travel discounts are available here.
We look forward to seeing you there!
Brad Rickard is a superstar, and his research is always interesting and carefully done. He has presented in both New York and London and provided scintillating talks, including those we have featured in these pieces:
Will Reducing Food Waste Be Sufficient Reason To Embrace GMO Produce? Cornell Professor Brad Rickard To Guide A Controversial Session At The London Produce Show And Conference
Cornell’s Brad Rickard Returns To The New York Produce Show And Conference: Will 'GMO Free' Be The New Organic?
What’s In A Name? Professor Brad Rickard Of Cornell Produces New Research That Indicates Shakespeare May Have Been In Error… On Apples At Least
Cornell’s Brad Rickard To Unveil Generic Produce Promotion Research Done By Cornell And Arizona State University At New York Produce Show And Conference
Now that he is part of the Foundational Excellence faculty, he has a specific role to play in bringing out the best in the attendees.
We announced the Foundational Excellence program here and had an incredible interview with Professor Ed McLaughlin to not only lay out the program but discuss the state of the industry, which you can read here.
We asked Keith Loria, Contributing Editor at Pundit sister publication PRODUCE BUSINESS, to get the low-down on Brad’s involvement:
Associate Professor of Applied Economics and Management
Charles H. Dyson, School of Applied Economics and Management
Ithaca, New York
Q: Let’s talk about your presentation topic for the Foundational Excellence program. It sounds like you are really covering the waterfront with a few different areas that are interconnected and certainly should pose a lot of interest for attendees. Would you give us a synopsis?
A: I’ve been talking to Rod Hawkes, who is going to present in the first time slot. His plan is to give an even wider snapshot of several different issues that these folks might be thinking about, or the colleagues they work with might be thinking about. A lot of them are trends and issues in supermarkets and retail with a focus on fruits and vegetable products.
The idea is for me to follow him and spend a little more time focusing on three different issues where I’ve done some research and then present the results. And then follow up and strengthen or help support some of the things that Rod introduced in the first session. We’re hoping there is some nice flow and that there might be some questions from the audience as I present results — once they’ve had some time to think about the particular issues.
Rod will introduce more issues that I can cover in-depth. My main areas of focus are 1) the effectiveness of fruit and vegetable advertising; 2) consumer response to new fruit and vegetable varieties; and 3) consumer response to GMOs in fruit and vegetable markets (given the recent deregulation and the ongoing R&D efforts happening in that space and then some of the controversies.)
Q: I’d like to go through each of those and focus on some of the highlights to whet people’s appetites. With regard to the advertising of new varieties, you’ve talked about commodity-specific advertising and broad-based advertising. Would you differentiate between the two for us?
A: That’s a good question. This is an ongoing debate in the United States, but it’s also an issue in western European countries, Canada and Australia. How do you most effectively promote fruits and vegetables? One way this has evolved is specific fruits or vegetables, and occasionally very similar fruits and vegetables, will partner up and do some form of generic advertising for, say, Washington apples or California strawberries or peaches, plums and nectarines, and there will be some promotion efforts usually to highlight the taste qualities.
It happens more often with fruits than with vegetables. Occasionally, they will also promote the health benefits of fruits and vegetables, but largely, they are trying to promote the taste of these products.
They can do it alone or they do it with one or two very similar products that are very close to them in product space. These efforts sometimes are funded by the people who grow these products. Sometimes, they are funded in a matching program where a state or a federal government will kick in some money because they see this as healthy-eating advertising.
That’s the rationale where there might be public money spent and then it is matched with some money from the people who grow the crop. We think of those as commodities because they are fruit- and vegetable-specific promotion programs.
The other type of program we’ve seen ebbs and flows in this country, and seems to be more prevalent in other countries, is an across-the-board promotion of all fruits and vegetables collectively. “Eat 5-A-Day,” “eat more fruits and vegetables.” They come in different names, but generally, the idea is they are trying to promote all fruits and all vegetables. They are trying to raise sales or raise demand in that category more generally.
We did some research with consumers in a laboratory setting, and we exposed them to different types of advertising as compared to no advertising, and we watched what happens to their demand for various fruits and vegetables. I’ve done a few different research projects in this general area.
What we find is that the broad-based, or the eat 5-A-Day, actually does sell more produce collectively; it increases demand for produce as a category, whereas those individual efforts seem to just compete with each other. If there is advertising for apples, it increases apple sales, but then it will dampen banana or orange sales, whereas 5-A-Day or “Fruits & Veggies—More Matters” tends to raise demand for the category.
That’s one finding, but the other finding is it is very difficult to figure out or understand how to fund one of these generic programs. That’s really the thing that’s holding back these programs; that it’s not clear to people who should be paying for it and in what capacity.
Even though it has these benefits of increasing the category, part of the problem is some of the producers of certain fruits or certain vegetables are thought to benefit more than others. Then, there are questions about fairness and equity and who should pay for it, and who free-rides based on clever advertising.
It’s much easier in milk or some market like that where the product is more homogeneous. In fruits and vegetables, you get up to 200 or 300 different crops that could be potentially benefitted by this program. It’s hard. In other countries, governments have stepped up. They’ve seen this as a public health initiative and they’ve funded a lot of the 5-A-Day-type programs in Canada, Australia, England, Italy, Spain. That’s the point of struggle. Is it worth it, and if it’s worth it, who is going to pay for it?
Q: Would you give us an example of a commodity-specific program that was particularly successful or noteworthy?
A: There are lots of examples. Many of the major fruit and vegetable — especially fruit — categories have some type of mechanism where they collect money from growers. I live in New York State and there’s a pretty impressive promotion program for New York State apples. You’ll see ads on television. You’ll see celebrities. We recently had the soccer player, Abby Wambach, promoting New York State apples. You go to New York City and you’ll see banners and billboards promoting New York State apples. That’s even more specific than a commodity. That’s a state-level program for apples. Washington State has a similar one for their apples, though following a lawsuit, now it is a program only for outside the United States.
Q: Let’s talk about broad-based advertising. 5-A-Day was introduced in 1991. That was replaced with Fruits & Veggies—More Matters in 2007 in order to align more closely with the U.S. recommended daily allowances. Have those proven successful? It sounds like neither type of promotion beats out the other. Does the answer lie in combining the two?
A: I guess that’s where we are right now. We are doing a combination of the two. These programs that do exist in the United States -- the 5-A-Day that switched to More Matters — they are programs in name, but they just have so little funding, they don’t have a budget to really do anything.
Whereas in other countries, there are bigger budgets, so you see television and magazine advertisements that promote this idea of 5-A-Day or More Matters. In the United States, it depends on volunteer contributions from firms, and it’s a pretty small program. Our idea is if this program is made bigger — and how much bigger is a good question — people will respond to the general idea. But right now, it’s small because it doesn’t have funding to be a big program.
In general, those 5-A-Day programs have been effective at promoting fruits and vegetables. Some people have shown that on the margin, they have increased fruit and vegetable consumption, but other people wonder if it could happen on a larger scale if the programs were ramped up. Most people seem to think it would, but then the question is how do you ramp these up because that costs a lot of money and how do you fund it?
Is this something the government should be interested in or is it something that producers of fruits and vegetables should take on? If it is something the producers of fruits and vegetables are going to fund, then there’s this question of how do you do it? That’s where it becomes difficult. It’s an open-ended question. But our research does show that it’s an effective way to increase demand for the category. People do respond to this type of advertising.
I’ve been talking to some colleagues in the southern states and they have a particular interest because there’s even less per capita consumption of fruits and vegetables. They have access to one of these functional MRI (fMRI) machines where they monitor a consumer’s cognitive and emotional responses to advertising. This could be a really neat opportunity to collect that information and see if people are thinking and processing these things, or if it’s more of an emotional response to advertising.
That’s something we are just starting to think about. We know that people do respond to advertising, but is it done in a more cognitive or a more emotional way? That helps us to better understand the long-term implications of advertising and promotions.
Q: You are also going to be talking about new fruit and vegetable varieties.
A: This is interesting to a lot of people. It’s interesting to people at a university like Cornell because Cornell has these breeding programs and is coming up with new rice varieties, vegetable varieties, fruit varieties. There’s this entrepreneurial spirit on university campuses because if you come up with a new crop, a new rice variety or a wheat variety or an apple variety, then you put a patent on it and the researcher nowadays is able to collect some royalty stream from that new invention, so it created a bit of a buzz.
This wasn’t the way the world worked several years ago, but there was a change in federal legislation such that university researchers working on federally-funded programs could put a patent on innovations they come up with in their lab. For someone who runs a supermarket, this is very exciting because there is a certain sub-set of consumers who are very keen on new things and especially with new fruit and vegetable varieties. I’ve been doing quite a bit of research in this general area.
One of the things I talked about before — and I’ve done some follow-up work that the audience seemed to be interested in — was looking specifically at new varieties in the apple market. There are several institutions in Europe and in the United States, including Cornell University and the University of Minnesota and Washington State University, the University of California, that are all very engaged in breeding programs.
They are coming up with new varieties that will sell for a premium because they will be patented varieties, and they will be marketed in a ‘niche-y’ sort of way. The price point will be higher than the other varieties. For instance, these apples varieties sell in the $2.99 per pound range. They have some really impressive characteristics. They often have the right coloring. They have high brix, so they are sweet apples. Some of them have that sweet and tangy profile. A lot of them have been specifically chosen because they have really high density.
There’s consumer research showing that the apple of the future is moving towards these bi-colored apples that are very crunchy and quite sweet, so these programs are trying to come up with the perfect apple that fits this profile.
There are some really exciting varieties that are coming. Apple people are familiar with Honey Crisp. It’s often used as a parent for breeding new varieties. The University of Minnesota has a new variety called Sweet Tango for which Honey Crisp is one of the parents. Sweet Tango has got a huge following. It’s a beautiful apple, but it’s a patented variety, and only a handful of producers have access to this variety.
It’s interesting from an agricultural perspective: Who gets access to these varieties? How are they chosen? How do they decide how these farmers are going to pay to have access to these apples? I’ve done quite a bit of work trying to understand whether, as a farmer, should you pay for this new variety by paying an extra tax or an extra royalty to get the actual tree to your farm or should you pay a royalty every time you sell a box of fruit?
These royalties would then go back to the university. There’s an interesting question about how universities should charge farmers to have access to the varieties. Then there’s this other question about how producers and fruit marketers should market these within supermarkets and how should they find the consumers that are most interested or most willing to seek out and pay for these new varieties. With apples, in particular, apples are often introduced to consumers using a varietal name. That’s less true with a lot of other fruits and vegetables.
For apples, the name is quite an important way to attract new consumers or at least to get them to try the apple in the first place. This is an ongoing interest of mine, both how the fruit is managed with the farmer and then how the fruit is sold and marketed to consumers. Apples, in particular…. but this is true with strawberries and various citrus products and table grapes, but apples are closer to home and we’ve done quite a bit of research. It seems to be on the minds of people.
I’ll talk a little bit about this background story and then talk about how the people who market these apples decide its name and what promotional materials they will use to introduce these apples to society. There have been some mistakes or some cases where a firm has introduced a variety under one name, but it wasn’t really working, so the next year, they reintroduced it using a different name.
Pinata is marketed under Pinata now, but it had been marketed as Pinova and Sonata in previous iterations as a fruit. We do some laboratory experiments with consumers, and we introduce them to one of these new patented varieties and we introduce it to different groups of people using different names.
Apples typically are marketed to consumers in different ways. Sometimes, they are introduced to people and the varietal name is something that reminds people of a person or a place, like the Fuji apple or the Empire apple or the McIntosh apple or the Granny Smith apple. Some fruits are introduced to society through an appearance kind of name, such as Golden Delicious or Ruby Red. There is often some color description. And then some apples are introduced using more of a sensory, like a Honey Crisp. You’ve got the sweet and the crunchy.
It’s a very clever name because it talks about both the sweetness and the crunch. What we’re finding is apples are gravitating away from those namesake names towards these appearance and more sensory names.
Our question was to try to understand — given the exact same apple that people were introduced to and were allowed to taste and think about — how did their perception of that apple or their demand or their willingness to pay for that apple change, based on the name that it was given?
We found that it mattered in a non-trivial way. If you gave people the same apple and you controlled for the differences in these people, when you gave people a name that had more of a sensory type of a name, their demand and their willingness to pay for that apple was much more than if you gave them a namesake name. And if you used an appearance name, it was somewhere in between, but it was closer to the willingness to pay and the demand that you would see if the apple was presented with some type of sensory name.
This is being borne out with a lot of these new varieties. Some of them are still using namesake names, but many of the ones, especially the ones being released by these universities, tend to be shifting toward names that often have sensory and appearance properties in the varietal name.
Q: What are the industry implications?
A: Not always, but in many cases, it’s surprising how much the name matters. There are so many new products, and there are so many different products. There are some of these habitual shoppers in the grocery store, and there are others who are more variety-seeking. They have so many options to choose from, it’s surprising how much this name can matter and, in particular, when there are traditional apple varieties, and then there are some new patented or managed apple varieties that are entering, and there are more and more of them entering in the grocery store every year.
Consumers are confronted with a lot of choices, and it’s surprising how much that name really matters. I might finish my presentation by saying Washington State has just released a new apple variety and the name they chose for it is Cosmic Crisp. They also adopt this crisp as a texture or sensory kind of property, but then they chose Cosmic Crisp.
There are some people who are concerned that Cosmic Crisp is a little bit suggestive of a genetically modified apple. There is news about genetically modified apples being deregulated and possibly entering the market. They haven’t but they might, if it becomes commercialized. You are using “cosmic” to try to appeal to the younger generation, but an older generation who makes a lot of the decisions might associate cosmic with this issue of genetically modified (GM) products entering the apple space, which also serves as a bridge to my third topic about consumer response to genetically modified organisms (GMOs) more generally and particularly in the fruit and vegetable market.
Q: GMOs are a subject you’ve talked about numerous times in the past. Where do things stand at this point?
A: It’s an ongoing debate. It’s something that has been in discussion for 10 or 20 years. I draw people’s attention to the volume of research that is happening in this space. When you look at the scientific journal articles about trials and experiments and the benefits and costs associated with GM products for fruits and vegetables, it’s substantial, so there’s a lot of scientific interest in this area.
The main hurdle still seems to be consumer acceptance of these products. In the United States, there seems to be widespread consumer acceptance for GM-processed products that use GM corn and soybean ingredients. There is some resistance, but those products are quite widely available in the United States.
We also see GM versions of papaya and sweet corn. There’s a GM squash variety that’s been deregulated and been commercialized. It’s not widely distributed, but these products do exist. The reason this is particularly newsy is because in the past year or so, there’s been the deregulation of a GM potato, the N8 potato from Simplot, and the deregulation of the Arctic Apple, which was an innovation that came out of British Columbia. Both of these innovations applied for deregulation or approval status by the FDA, and they both received that.
Neither of those products has been commercialized, has become a grocery store product yet, but that path has been opened now that they’ve been deregulated. There still are these questions about consumer acceptance.
Q: Why are consumers more willing to accept GM in processed foods than in fresh fruit and vegetables?
A: That’s a really good question. We’ve done a bit of work where we tried to ask consumers the general acceptability of GM fresh products. I don’t know if it’s related specifically to GM. Some people have an aversion to technologies. That includes GM, but it also includes other food technologies that are used, like irradiating food or the use of materials in long-term storage of apples. Once people learn about these technologies, there is often some aversion to these technologies.
We have some evidence from research that it is true that people are less likely to demand or to be willing to pay for or even to be willing to try a GM version of something that is fresh or less processed. Having that stage of processing sort of dampens the potential effect, if they feel there might be some negative effect associated with GM.
It seems like the general willingness to demand or try GM products goes up the further the product is processed. Intuitively, that makes sense to me at some level. It could also mean that if it’s processed, then it is a smaller component of the final product, and they feel like it’s watered-down, so to speak, in the final product.
GM soybeans and corn have been around a lot longer, so maybe people start to feel more comfortable the longer these products have been in the marketplace. We looked at GM acceptability in grain markets, fruit markets and meat markets, and there is definitely much more aversion to GM meat products. There is some aversion to fruit products, but the least aversion was to grain and meat products, and it was even less so for the processed grain products, which are the products that are most commonly sold and seen in grocery store shelves.
It’s an interesting question, and I am particularly intrigued by the promotional materials that Arctic Apple and N8 Potato are showing to promote the technology as part of their PR campaign or communications strategies to firms and procurement types and even final consumers.
A major focus of the promotional materials is that these GM apples and potatoes will reduce food waste. Food waste is another one of these hot button societal issues related to food. Now, you’ve got the deregulation of GM fruits and vegetables, which some consumers are pushing back on and then you have that tied to this debate about food waste.
People are looking for ways to reduce food waste. You have a genetically modified apple that doesn’t turn brown as quickly so it could be more effective in the fresh sliced industry. And there’s a lot of evidence that children are much more likely to eat apples if they are not brown and they are more likely to eat apples if they are sliced.
You’ve got this potential decrease in food waste, potential increase in fruit and vegetable consumption by children. On the other hand, you have this pushback about this general idea about GM being introduced into the apple market.
The same story is true for the N8 potato. A main part of their promotion program is these potatoes can handle transportation and storage much better than conventionally bred potatoes. There is less of the potato that needs to be cut away as a result of bruising, so there’s 30 percent less waste or whatever number they present. Part of the promotion of these is really tying itself to its potential effect on food waste. This is evolving right now.
I’m planning to do some additional work on it. It’s one of these things where consumers are given multiple packages of information. Some of it could work in a cognitive or an emotional way differently for the consumer. It’s a trade-off the consumer ultimately has to make. I’m curious how this is all going to shake out, and it seems like people who are new to the fruit and vegetable retail category, this is something that will already be on their minds and I can help them think about a little bit more and share some of the research findings that we have.
Q: The bruise-resistant and the anti-browning certainly ties into the produce waste. Will those kinds of innovations help move the needle, lead to further deregulation and consumer acceptance?
A: There are some consumers who don’t care and some consumers who will never buy GM products and there’s this big group in the middle, these swing voters if you will. The question is still out there for that group. There are some people in that group who might value a reduction in food waste as a more important societal issue. They might see the benefit of the GM products.
The food waste might be more important to them than whatever downside risk they perceive might be associated with GM fruits and vegetables. I think that’s why it’s such a big part of promotion programs. Because these firms also think there’s a subset of people out there who would make this trade-off and might be convinced this is a reason to purchase these products. But it’s not everyone, and it’s trying to figure out who those people are and the size of that subset of consumers.
Many of these issues are very complex, and in the Foundational Excellence program one of the goals is not merely to present information but to help people learn how to apply critical thinking skills to these issues.
After all, these are the people who will decide issues such as branding, advertising, product positioning and so much more.
The subject of GMOs is a great place to start because, with the Arctic apple, Simplot’s N8 potato, also called Innate, which we wrote about here and non-produce items such as Salmon, these are going to be top of mind.
Yet how a produce company or an individual company should address the issue is not clear. For example, it is said that there is a lot of consumer concern around GMOs and, for example, the organic community has defined them as forbidden from receiving organic certification.
Yet the hard evidence that consumers will reject GMO produce doesn’t exist. The Hawaiian papaya shippers don’t seem to have a big problem selling their papaya — what they have had a problem with is vigilantes coming to destroy their crop.
It is well worth noting that there was widespread prediction of similar rejection of irradiated meat. Yet when Wegmans started carrying irradiated hamburger meat as an option or when Omaha Beef started irradiating all its ground beef, it is fair to say that nothing happened.
GMO technology was really introduced to consumers as something that provided consumers only theoretical benefits — farmers using Round Up could have higher yields. How consumers would have reacted had the first products had tangible benefits, such as Golden Rice, which can prevent blindness, is completely unknown.
Then an important part of the issue may be to look at it not just from a consumer standpoint but from the standpoint of a retail CEO.
One new variety of apple is unlikely to account for even a tenth of one percent of total store sales. So if there is a small minority that would be likely to picket and make trouble or do anything that would make consumers decide to go to another store, think about the retail calculation:
Upside: selling one new apple variety that boosts sales inconsequentially
Downside: lose big business as a percentage of customers stay away from the store… and some of them may learn they like another store better and so never come back!
On the other hand, if GMOs are going to be important, a store is hesitant to not offer these new items.
Learning how to think like other members of the supply chain – retailers like grower/shippers and grower/shippers like retailers, and wholesalers like everyone else — is an important part of gaining the toolset to do business effectively.
So we will showcase the issue, then showcase the decision tree that needs to be considered. Then we will point the way to success.
Come to the Foundational Excellence program or send someone on your staff. Just send an e-mail here telling us of your interest.
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