Jim Prevor’s Perishable Pundit, December 25, 2008
The year end holidays are a time for a break but also a time for reflection.
On the one hand, everyone in this industry has something to be thankful for. Selling a non-discretionary product is just about the best place to be in a recession. We’ve been making this point for the last few months in PRODUCE BUSINESS Magazine. You can read the columns here:
Produce Is A Silver Lining
Counting Our Blessings
Yet we have a very challenging situation in produce right now, one which will require structural change for the industry to thrive. Because right now, our very best producers, packers and shippers are being put under exceptional stress.
The industry is bi-furcated. We have a top tier of producers who have taken to heart the admonitions of buyers and trade associations and taken on the burden of supply chain improvement.
These are the leaders in food safety, sustainability, traceability and other standards.
Yet these leaders are not getting thanks; they are getting beat up and we need to stop it.
The problem is that the produce industry still has a large secondary producer capacity that operates oblivious to all these supply chain standards and initiatives.
At this moment in history, most retailers feel the necessity of offering “Value” to consumers. But they don’t mean value broadly considered. They mean price.
So what these buyers are doing is pushing the top vendors to meet the price of the “irregular” sector of the industry. This is, however, unsustainable.
Meeting supply chain responsibilities is not cheap, and if suppliers that have made the investment to meet these high standards have to compete with companies that have not, the best producers in the industry will realize subpar returns and, in time, will be unable to sustain the whole business model.
We think the focus of the industry has to shift from industry pronouncements about traceability, sustainability, food safety, etc., to ensuring commitments from buyers to constrain their supply chains to be certain that top quality producers are not forced to compete with producers that are not fulfilling supply chain responsibilities.
Consumers are depending on retailers to deliver the best value, but if the product is in the store as a result of a waived food safety requirement or decision to postpone a sustainability review for a year or comes in vulnerable, without a proper traceability trail, then consumers are being cheated, because they are not being given the value they expect — they are just being given a cheap price.
If the industry can’t find a way to deal with this reality, one suspects that a more activist government will see an opportunity to flex its muscles.
Perhaps our 2009 New Year’s Resolution ought to be that we, as an industry, will protect our consumers against elastic standards so that consumers can know they get the invisible product quality they expect, the quality producers know they won’t be undercut by competitors not expected to meet the same standards and retailers know they can always wear their white hats as a defender of the consumer and customer of the best suppliers.
At this time of need, it is time for retailers to donate their black hats, the ones retailers wore when pummeling good shippers to the ground, unto some association of needy undertakers. Here in the industry, the resolution should be that we won’t be needing them any more.