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Perishable Pundit
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Does Anyone Oppose Responsible Labor Practices?
PMA/United’s Joint Initiative Will Have To Navigate A Difficult Path Between Shielding The Industry And Actually Trying To Improve The Lot Of Laborers

The Produce Marketing Association (PMA) and the United Fresh Produce Association (United Fresh) sent a letter to their members about an initiative on labor practices:

As Chairmen of our respective associations, we would like to provide all of our members an update on an important new project we have undertaken together.

In late 2015, the Boards of Directors of PMA and United Fresh formed a Joint Committee on Responsible Labor Practices. The committee's charge is to evaluate appropriate labor practices across the produce and floral supply chain, potentially leading to an industrywide, global approach to responsible labor practices and consistent expectations among trading partners and the public.

The committee is being co-chaired by Brian Kocher of Castellini Group of Companies on behalf of United Fresh, and Wesley Wilson of Walmart on behalf of PMA. The committee was launched with 16 members, equally divided among produce suppliers and buyers. After two meetings discussing goals and objectives, the group is now being augmented to include additional specific expertise as we begin our work ahead. The entire list of members will be publicized once final. Our staff CEOs Tom Stenzel of United Fresh and Bryan Silbermann of PMA are leading the project for our associations.

Responsible labor practices are an important issue for our industry, and we recognize the growing interest of stakeholders in transparency throughout the global supply chain. This Joint Committee is working to help ensure our industry has a clear and well-defined commitment to treat all workers with dignity and respect as they work to bring fresh produce to consumers. As an industry, we want to proactively address this issue.

Members have met to discuss the wide range of information available on labor issues, which supports an industrywide approach to help drive consensus across the produce and floral supply chain and increase consumers' confidence that the produce they buy is responsibly sourced. With support from both associations' Boards, the committee now intends to engage with a broader set of stakeholders inside and outside the industry to develop specific goals and action plans to achieve those goals.

The input and collaboration of many stakeholders on this issue is important in order to drive real change. We know that multiple perspectives are critical to bringing consensus and positive movement. It is also important to acknowledge the huge diversity among commodities, growing regions and cultural practices in the broad produce and floral industry. We want to meet with grower organizations, labor employers and others serving different aspects of the supply chain to ensure that we understand their specific views and incorporate their thinking into any future action.

With foundational work behind it, the committee has now issued a Request for Proposals aimed at engaging a consultant with expertise in this field to help support the committee's outreach and work products. The consultant hired will assist the associations in arranging stakeholder engagement sessions, developing a Code of Conduct, and creating a detailed action plan for next steps. A decision on the consultant is expected by June. The committee will meet in late June, and will review and approve a workplan for the consultant.

We want our members to know that this will not be a short process or an easy one. But, we believe this is a critical discussion we need to have as an industry. We anticipate this will be the beginning of a continuing dialogue with our members, the broader global produce industry and other stakeholders.

We thank you in advance for your support, and welcome your views along the way.

Brian Koche
Castellini-Group of Companies
Chairman United Fresh Association

Russ Mounce
Sam’s Club
Chairman Produce Marketing Association

We received a number of letters on this matter, including this one from a former chairperson of one of the national associations, which seemed to summarize industry concern:

My interest was piqued today by this press release from United and from PMA.  I fervently hope that the Pundit will feel compelled to impart his usual cogent analysis about this issue.

I am genuinely concerned about this task force.  Again, I have absolutely no “inside” information about the genesis of this initiative, nor do I know anyone who is serving on this task force.  However, this certainly appears on the surface to be a very dangerous trend line getting our national associations involved in what essentially is a marketplace economic issue. 

Once again, my bet is that some large organizations are looking for someone else to do their dirty work for them.  However, this is precisely the wrong thing to have an association get involved with because this is an individual buyer/seller issue.  I know that there are some real outspoken social justice advocates out there among industry leadership.  I have a sneaking suspicion that a handful of folks are driving this agenda, and Bryan is riding it as a “legacy” initiative.

Here’s the rub: Our company, just as an example, has a very rich package of employee benefits, and we also reward our employees very generously for their hard work.  That’s something that my Board of Directors and I have decided is in the best interest of the company in order to attract and maintain a very talented team of produce/transportation professionals.  This policy has served us quite well for many decades. 

I also have the freedom as the employer to do the exact opposite.  That would be both foolish and short-sighted, but it also is my right as long as I do not violate any Federal or State laws doing so. If a buying organization did not like how we treated our labor, then they are perfectly free to discontinue buying from us until we changed our practices. That would be a marketplace decision for our company to either adjust our labor practices or walk away from that portion of our business. That’s free enterprise at work.

What I cannot accept is having our joint national organizations set a group of standards that our company has to meet. Obviously, our company would far exceed anything determined to be a minimum by this group, but this is such a dangerous precedent whereby a 501(c)3 organization determines how an industry should structure their labor practices. 

This is the old complaint surfacing once again about the operational arrogance whereby a trade association that has the temerity to deem what is appropriate for all organizations in the industry.  Obviously, I am not advocating for anything less than fair treatment for all workers in our industry.  However, it’s not up to a 16-member Task Force to determine worldwide work standards. 

I know there is no one else in the trade press industry with the courage to write about this issue.  Perhaps you vehemently disagree with me.  Fair enough.  However, I’d love to hear how this Task Force came to fruition and who is the driving force behind it. 

Obviously, we have had a multitude of buying organizations with a litany of questionnaires asking about a whole host of “social” issues. Do I like these inquiries into our business practices?  No, because I do not view them as a value-added and I am very proud of how we conduct our business. 

However, I do feel that any buyer has the right to ask us how we do business before a relationship is established.  However, I also strongly believe that this is a marketplace decision between buyers and sellers -- not something that a Task Force determines will be the minimum requirements for. 

Sorry to be long winded, but this just smacks of overregulation by industry volunteers.  There’s enough of this garbage coming out of DC.  We don’t need it from our trade associations.

We found the press release rather confusing and reached out to both Bryan Silbermann, CEO at the PMA, and Tom Stenzel, President and CEO at the United Fresh. Bryan was on a plane, so Tom provided some context, which Bryan later endorsed when he landed. We had asked three sets of questions:

At one point the memo refers to “the global supply chain” – does this imply that one of the goals of the initiative is to define appropriate labor standards for, say, workers on farms in Senegal that ship green beans to the US? What about if they ship the green beans to Kuwait?

There is also a reference to working with “grower associations,” but not retail or foodservice operator associations – as you know there has been a great deal of attention to worker pay issues in fast food, etc. Is this to imply that retailers and restaurants are considered “post” produce industry and are not included in this initiative?

Finally, is this initiative encompassing office and warehouse workers in produce firms that do not work on farms? What about vendors to the produce industry? Truckers for example?

And Tom responded this way:

Probably the first thing we should say is that we are at the very beginning stage of an extensive dialogue with the industry. We anticipate many questions, and in fact, plan to create a list so that we can work with the committee to make sure we address everything.  We likely can’t answer everything, especially because we won’t know many of the answers until we go down this path.  But, we felt transparency with the industry was important to say we are embarking on this effort and welcome their views.

Having said that, I’ll try to provide clarity to your questions where I can.

We do mean “global produce industry,” while recognizing that’s a hugely complex task.  But, there’s little intellectual space to say that workers shouldn’t be treated appropriately wherever they are.  Of course, there are tremendously different laws and cultures around the world, and anything we do must recognize and respect that. 

We definitely intend to work with all sectors of the produce supply chain, including wholesale, retail and foodservice organizations as well as grower organizations.  This is probably an oversight in our letter.  These groups will be an important part of our efforts to dialogue with all sectors to understand and take into account their views.

But I will also clarify that we are looking specifically at the produce and floral supply chains, not worker issues in another sector such as restaurants.  We are focused on companies and people who work directly in the produce and floral supply chain.  That can certainly include off-farm workers directly in the produce/floral supply chain.

Two other thoughts that might be helpful in clarifying goals:

First of all, we all believe the produce industry has a very positive story to tell about workers in our industry.  We all probably know thousands of companies that are committed to the welfare and responsible treatment of their workers.  But, we as an industry don’t currently have a framework to tell that story.  We want to be able to talk about what our industry stands for in worker welfare, and reinforce that produce industry jobs are good jobs with dignity and respect.

Second, we also know that many consumers and companies are interested in learning more about their food, how it is grown and distributed, etc. That can inadvertently lead to companies seeking to verify practices in their supply chains in many different ways.  The last thing we want to see is another balkanization of multiple audits and verification schemes in the social accountability space similar to what happened with food safety. 

So for those trading partners who do want to discuss those issues, our second goal is to see if we can find common ground across the industry that can serve both ends of the supply chain with greatest efficacy and efficiency, without adding needless cost.

As I said at the beginning, we are anticipating many more questions and lots of learnings as we go.  The fact is that we don’t have all the answers now.

The drivers behind this initiative are not hard to intuit:

1) Part of the general consumer interest in knowing your farmer and knowing where your food comes from is interest in knowing that the food one eats is grown with labor treated in a satisfactory, non-abusive, manner.  This is hard for consumers to know on a farm-by-farm, product-by-product basis, so if there was some kind of recognized standard that could give all consumers peace of mind, no matter what they buy or where they shop, that would seem appealing.

2) Producers are haunted by what has happened in food safety in which they are vexed by countless different standards with countless different auditors performing multiple audits. Following the big controversy of the LA Times reports on worker conditions in Mexico, which we discussed, here, here, and here, producers saw the writing on the wall. They desperately would like to avoid multiple audits and multiple standards, so an industrywide initiative is appealing.

3)  Should attacks be made by the media or advocacy groups against labor standards, it may be advantageous to have a third-party take some of the heat. Better the media reports be about the XYZ standards than to have an individual company name dragged through the mud.

This being said, we hope the committee will narrow its focus.

First, our letter writer, a highly intelligent person, read the association’s open letter and thought they were talking about his sales people, office workers, executives, etc. – that hardly seems likely. There is no known issue of abuse or complaint, so why get involved?

Second, the inclusion of restaurant, supermarkets, etc., doesn’t really make sense either. These organizations are important because, in the end, it is their insistence that vendors sign on to these standards that will give them heft in the marketplace. But no produce industry committee has any competency in setting labor standards for restaurants and supermarkets. Leave this to the National Restaurant Association and the Food Marketing Institute.

Third, setting global standards is hard enough if we constrain our interest to food that is going to wind up in America. Trying to set standards for trade between Rwanda and Burundi or the domestic trade of produce in Mali seems a bit of a reach.

It is worth noting that others have tried this approach in other industries — most notably in the textile/clothing arena. In this area the initiatives have been driven heavily by colleges and universities. Heavy lobbying by students, some with a push from unions in America that have an interest in higher wages overseas, led to heavy demand for action by universities. These universities have the power to withhold licensing rights to their names and logos if clothing producers don’t adhere to a particular standard.

There are two big organizations that have been established to deal with these issues. The largest, most reputable, most sane and sober is the Fair Labor Association:

In 1996, President Clinton convened a meeting of multinational companies and NGOs at the White House and challenged them to work together to improve working conditions in the apparel and footwear industries. This group became the Fair Labor Association, a 501(c)3 nonprofit organization incorporated in 1999. Learn more about the Fair Labor Association history in our Annual Public Reports.

Today, FLA is a collaborative effort of universities, civil society organizations and socially responsible companies dedicated to protecting workers’ rights around the world. Our work is not limited to any geographic region or industry; we operate around the world and are making a positive difference in industries from agriculture and technology to apparel and footwear.

Learn more about FLA’s mission and our work.

Of particular interest to the produce industry is that FLA has moved into agriculture. You can read here its Principles of Fair Labor & Responsible Sourcing for Companies with Agricultural Supply Chains and its FLA Workplace Code of Conduct and Compliance Benchmarks

The organization is quite strong, and the new produce effort should carefully consider its work.

Another organization is the Worker Rights Consortium. Whereas the FLA is corporate in its approach  if problems arise they try and resolve them  the WRC is very much into shaming companies and, whereas FLA has a board that includes companies as well as universities and NGOs, WRC excludes companies. Its membership is all advocacy groups and universities, academics, labor unions, etc. Greg Asbed, co-founder of the Coalition of Immokalee Workers, for example, is on the WRC Advisory Council.

Perhaps a better model for the produce industry might be Worldwide Responsible Accredited Production, or WRAP:

WRAP was formed out of the desire to create an independent and objective body to help apparel and footwear factories around the world verify that they are operating in compliance with local laws and internationally-accepted standards of ethical workplace practices. We trace our origins back to the mid-1990s when reports surfaced of sweatshop-like conditions in numerous apparel factories around the world, including excessive working hours, unsafe conditions, and the denial of several legally-mandated benefits to workers.

Recognizing that such a scenario could jeopardize the apparel industry as a whole, the American Apparel Manufacturers Association (now the American Apparel and Footwear Association) moved to coordinate an industry response to the issue. A task force was formed which received input from a variety of stakeholders including brands, suppliers, NGOs, academia, and government officials. Based on their findings, the task force recommended the creation of an independent third-party organization free of government or corporate influence that could identify and reduce the prevalence of sweatshop conditions in factories around the world. The first Board of Directors was named in 1999, and WRAP was officially incorporated in 2000.

Recognizing that the program’s credibility depends on ensuring objectivity, WRAP is specifically organized to be independent  both financially and in terms of governance  of the apparel industry. This starts with the make-up of its independent Board of Directors. Although the apparel industry is represented on the Board to provide insight and perspective, by charter the majority of the Board is comprised of individuals not affiliated with the industry. Further, structurally, WRAP is not set up as a membership organization (yet, despite receiving no income from dues, memberships or government grants, WRAP is financially sound, with its revenue being generated entirely through facility registration fees and training revenues).

Today, WRAP has grown to become a global leader in social compliance and a trusted independent supply chain partner for dozens of companies around the world. Its comprehensive facility-based model has made it the world’s largest independent social compliance certification program for the apparel/textile industry (according to a 2010 UNIDO Study, Making Private Standards Work For You, WRAP is the “standard most often cited” for social compliance certification in the textile sector). In 2013 alone, over 2,300 facilities from 50 countries participated, and there are currently around 1,900 WRAP-certified facilities, found throughout the world, employing over 1.65 million workers.

Basically, a factory gets WRAP certification, just as many factories get ISO9000 or similar certifications, and then they can offer their services to any buyer with this assurance. We could do something very similar with farms and packing houses.

This certification is based on WRAP’s 12 Principles. These should be read carefully by the new produce committee because it is highly likely that this is very similar to what we will wind up with. Ninety percent of it is just an agreement to comply with the law.  Although even that is somewhat problematic as in many jurisdictions, the laws are honored more in the breach than adherence  the laws are written to satisfy foreigners.

To the extent this is done to make consumers feel better or avoid duplicative audits etc., that is fine. It is, unfortunately not very likely that any effort will actually net out to an improved workplace situation.

There are two big issues:

First, we need to provide better alternatives, and that really is outside the scope of any likely proposal. All these codes always, for example, prohibit child labor. Sounds right, of course, but whether it actually helps the children depends on lots of things: will the family have enough money without the children’s income? Are there safe, educational and healthy alternatives for children?

We once wrote a piece about child labor in Michigan titled When Child Labor Laws Don’t Necessarily Help Children. The gist was that parents working in the fields brought their children to work alongside them. The family made a little extra money, the kids were under the watchful eye of their parents (and often uncles, aunts, cousins, etc.) and it was entirely unclear that leaving the children home to get in trouble would have helped anyone.

Sure, if we were building beautiful schools and camps and creating great alternatives, we would want to make sure the children had the opportunity to participate, but, in their absence, banning something like child labor, without ensuring a better alternative, is just turning our eyes from the problem.

The second issue is broader and makes the whole idea of standards rather vexing. It is very difficult to produce anything – food, shoes, clothing, etc.  in many developing countries.  They may not have good port facilities or excellent roads, trained labor may be sparse, and production can be interrupted because there is a shortage of cartons or bags, and it is difficult and expensive to get these things.

So these areas enter the global marketplace by using the assets they have available  such as cheap labor  to deliver a product at a price that makes it worthwhile to deal with the problems. The reason all these codes wind up basically saying that everyone agrees to follow the laws is because that is a way of punting back the decisions as to what minimum wages should be, how many hours is OK to work, etc., to accommodate local conditions.

And it is important to let developing countries use this labor as their resource. It begins a development process where, gradually, hubs that specialize in production of clothes, shoes or produce start to develop. The areas have more trained labor available and manufacturers start pre-positioning supplies and, ultimately, some suppliers build factories. Industry and labor both become advocates for better infrastructure, etc., so their roads get better, the electric grid more stable, the ports are enhanced, etc.

If we just intervene and declare that everyone should get paid $15 an hour, they may not decide to invest there at all. Then the theoretical rise in wages and improvements in conditions never happen.

In the clothing industry, companies such as Nike all have their own standards, so it is questionable if this effort will avoid the growers’ fear for duplicative standards and audits. And, of course, no committee can definitively judge the ethics of paying a few dollars a day to workers in the Central African Republic and starting up an export industry there or paying more in an established work environment.

On the other hand, it can be a useful tool to have some kind of standard and a method, such as WRAP to ensure verification. So the committee’s work is laudable, and we should see how the process plays out.

Is it likely to much improve the lot of laborers? One is reminded of the story of Charles Parnell, a leader in Ireland who was much beloved by the masses. It is said that Parnell was on the way to Dublin to find out if he had won the Prime Ministership, and his coach passed a work crew, with pick axes breaking rock. Parnell was a man of the people, and he stopped to extend greetings to the men.

The workers were overjoyed and applauded and hooted and hollered, clapped and stomped their feet. Parnell cautioned them about this abundance of enthusiasm: ”Calm down,” said Parnell, “Whether I win or lose, you will still be breaking rocks.”




WHAT IS IN A LABEL?
Does Promoting No-GMOs Impact Perception Of The Rest Of The Department? 
Would A Positive Message Smell As Sweet?
St. Joe’s John Stanton To Address The London Produce Show And Conference

Among those at The London Produce Show and Conference for the third year in a row will be Jim Allen, President/CEO of The New York Apple Association and is the vice chairman of the US Apple Export Council (USAEC) after having served three times as chairman.  Maybe he keeps coming back because he finds it helpful in his drive to help New York and the USA to sell more apples overseas, but surely it also helps that we have quite the speaker program.

It was way back before the first edition of The New York Produce Show and Conference when we ran a piece announcing that Dr. John Stanton of Saint Joseph University would be presenting. Almost immediately Jim Allen sent us this note:

With great excitement and anticipation, I await The New York Produce Show and Conference and the presentation on Local Preference Versus Organic, by Dr. Stanton.

John Stanton, undoubtedly in my book, is one of the best, if not the best authority on consumer behavior when it comes to purchasing foods and produce.

He continues to “Delight” his audiences with thought-provoking data, information and advice on how to reach consumers in a way that will influence their purchase decisions. Time after time, Dr. Stanton has identified consumer traits that if properly applied in marketing, will end in success!

His presence, along with the other outstanding presenters at the New York Produce Show, is certainly worth the registration fee alone, while the excitement of the show will be a bonus!

— Jim Allen
President
New York Apple Association, Inc.
Fishers, New York

John Stanton has often spoken at The New York Produce Show and Conference and The London Produce Show and Conference, giving presentations we previewed with pieces such as these:

Research To Be Unveiled At The New York Produce Show And Conference Shows ‘Local’ Preference Versus Organic

Pundit Mailbag — Professor John Stanton’s Presentation At New York Produce Show And Conference ‘Worth The Registration Fee Alone’

Branding And In-Store Marketing: Perfect Together... St. Joseph’s Superstar Professor John Stanton To Present At London Produce Show And Conference 

Bringing Produce To New Markets: Opportunities And Obstacles In The New Retail Environment... St. Joseph Food Marketing Guru John Stanton Gives Featured Presentation At The New York Produce Show And Conference

Now he is ready to unveil the results of his latest research into labeling, with a twist: What happens to consumer perception when we start adding negatives to our labels — things such as “No GMOs” — does that make consumers think better of the product or worse? How does it impact perception of the rest of the products in the category, department or store?

We asked Pundit Investigator and Special Projects Editor Mira Slott to find out more:

Dr. John Stanton
Professor and Chairman
Food Marketing Department
Saint Joseph’s University
Philadelphia, Pennsylvania

Q: Every year, whether you are presenting at The New York Produce Show or The London Produce Show, your lively, engaging speaking style and fascinating research keep attendees on the edges of their seats. Your 2015 London talk on Branding and In-Store Marketing sparked the best interactive Q&A session. You never shy away from industry “tough love” when your study results show areas in need of industry improvement.  Will this year’s talk continue in that vein?

A: My talk will examine how different packaging statements and label claims significantly impact consumer purchase decisions. An important finding in the research shows that when companies put negative label claims, such as no pesticides, or no GMO’s on certain products, it negatively effects consumer perceptions of the whole category and adversely influences the intention to buy.  

Q: Isn’t that a trend occurring across many food categories in marketing and packaging to differentiate items on retail shelves?

A: I believe the food industry is shooting itself in the foot when they insist on ‘no this’ and ‘no that’ in our foods. Consumers don’t seem sophisticated enough to evaluate the negatives.  

Q: OK. That confirms this year’s session will continue in your thought-provoking, ‘tell it like it is’ genre. What triggered your study?

A: The research was prompted while I was studying the category of milk. The category has been declining for years, and we were trying to analyze the reasons why.  The manufacturers and processors were putting more and more negative labels on milk compared to positive ones, such as “no hormones” versus “builds strong bones.” This phenomenon appeared to be happening in other food categories as well. In the case of produce, “no pesticides” versus “high in a vitamin or mineral,” for instance. 

The project came about because we wanted to explore the difference in people’s perceptions of these labeling strategies in aided and unaided environments. Unaided means we simply ask study participants to just talk to us about different products; milk was the main one, and apples and tomatoes secondary.

We said to people, ‘Tell us about milk or apples or tomatoes,’ and when they sat there and actually talked about the products, most everything they said was positive. We then wanted to see what would happen if we introduced product labels with negative claims.  It’s kind of important to know, we followed a specific scientific method.  We created labels both of the positive and negative claims using a technique called discrete choice experimentation.

Q: How does discrete choice experimentation work?

A: This method systematically places combinations of claims on a variety of labels asking consumers to choose which of the labels is most likely to increase their intention to buy. From this data, we can calculate how much influence each of the claims has on the intention to buy.

Q: And what did you glean from that?

A: The results showed that negative claims had the most significant impact on intention to buy when placed on a label. However, when consumers are in an unaided situation, these negative claims are hardly ever mentioned.  A hypothesis is people are really concerned about these negative claims -- pesticides, herbicides, GMOs, etc. In order to test whether the concern is just simply a negative statement about the product or really the negative claim, we did two additional tests.

One, we created labels that had no relationship to the product in the test. For example, when doing the test with dairy, we said the product had no acrylamides.  Acrylamides have no association to dairy at all. However, given a similar test, the products that had “no acrylamides” labels had a negative effect on consumers’ intention to buy.

Q:  What are acrylamides?

A: That’s the whole point!  We did another test with an invented chemical sounding name with no meaning whatsoever, and placed it on the label with a negative claim. It was a made up word, and again we found those non-existing chemicals also had a negative impact on intention to buy.

Q: Would that steer them to another milk brand, or outside of the category to a milk substitute like soy milk or juice?

A: We didn’t ask them those questions because they were just picking labels.  Let me tell you what we did do, and this was just for milk.  Milk was on a steady decline going down. However, in the year they introduced on the label ‘no hormones,’ the change in the slope became much steeper.

Milk sales are going down for a lot of reasons, so we would expect no matter what we put on the label, milk sales would continue to decrease; people are not eating cereal in the morning, they’re not eating breakfast at all, etc.  But in the year they started putting on the no-hormones label, the sales started decreasing even faster.

Our hypothesis is: You walk in the store to the milk section and some milk has hormones and some doesn’t. I think I’ll buy the almond milk. We think when you have two products and tell consumers this product has none of these things in it, the implication is all your other products have it.

Q: That sounds problematic then when major manufacturers are jumping on the no this, no that, bandwagon…

A: When General Mills came out with no GMOS in Cheerios, and they made it a big deal, they must have thought GMOs were bad or why put that on the label. So in doing that, what does it say about all the other foods they make? They are demeaning the very products that make the most money for them.

One more example… there’s a small business called Tasty Baking Company, in Philadelphia, Pennsylvania, with the brand TastyKake.  They wanted to jump into the health market, so they made a sweet snack cake that apparently was supposed to be healthier for you. They called this new line the Sensables. Did that mean the rest of their product lines were non-sensible?  That’s the idea about shooting yourself in the foot.

Q: Could you translate this problem to the produce industry? For instance, could organic fresh fruit and vegetable claims imply dangers in their conventional counterparts and denigrate the whole produce category?

A: I think it’s absolutely parallel. Any time you speak of parts of your product line as better because it doesn’t have something in it, it demeans the other products. What else can a consumer think? This is pesticide-free, so does that mean the other products are all filled with pesticides?

The thing that’s not logical for the food industry is it’s my opinion that most of these concerns -- no pesticides, no-GMOs, etc. — are not calls from the major part of the market. They’re calls from a very loud niche part of the market, and because those segments are growing faster, all the food industries get distracted by the growth and lose track of doing a great job of marketing the product categories that generate the most sales. For instance, organic produce is a relatively small percentage of the total produce market in the U.S., and it is even smaller in the UK…

At another time, we did some research on apples. The study looked at consumer perceptions of local versus organic. We created scenarios using this discrete choice experimentation. Local beat organic by five times.

Q:  Yet consumer perceptions of local and organic often are not based on the facts. Doesn’t this connect back to the consumer confusion you discovered with negative labeling claims?

A: No doubt about that.  Part of our labeling study was quantitative, but we also did some focus groups. One of those areas was on GMOs, and the participants had no idea what that means. But as soon as you put on your label no GMOs or GMO-free, which is the equivalent, they must not be good for you. I don’t know what they are, but why would the company go to so much trouble to tell me it isn’t in there if it doesn’t mean anything? I don’t need to know what it is to have that claim or chemical… whatever it is will affect me.  

Q: What labeling strategies and messaging work best? What is the right thing to do?

A: One of the things we have to do is admit to ourselves that produce and our food products in general, are some of the most nutritious, tastiest, cheapest and healthiest food in the world. And we have to stop pandering to a small group of people who pick at many of the issues that don’t seem to be in the public interest or public awareness level. We have to keep talking about how good our product is, not the negative things about our product.

As part of the label experiment, a variety of claims were included in the analysis. These claims included sustainability, nutrient content, production, quality/ freshness, structure/function, health and taste. Let me give you the method. It’s really complicated... If you have 20 different claims you want to put on a label, you have to create thousands of labels, because each label has to have every possible combination of claims. Part of the method allows you to only show each consumer a very small number of those labels and by following this method, each person only has to evaluate three or four labels but in reality you get to measure the impact as it relates to all the people.

Q: How many people participated in the study?

A: Roughly 2,000 people. In order to use this technique you need a lot of people. We used an online panel.

Q: What types of labels had the greatest influence on consumers’ intent to buy?

A: For milk, building strong bones had a more positive impact on intention to buy than the specification of the nutrient itself such as high in calcium. I’ve done all sorts of research over years, which reinforces this point. I studied it in mushrooms, unrelated to this labeling research, so I don’t want to get the audience confused. But it may be of interest.

One of the things we discovered five years ago is that the more a nutrient is known and recognized, like Vitamin C, the less important it is to give the attributes. However, as you get the nutrients that are not well recognized, it’s much more important to specify what the benefits are.  Mushrooms are high in mineral called selenium, but very few people know what selenium is. If you say mushrooms are high in selenium, in at least half of the cases, that was viewed as negative. Instead, it’s better to say, rich in the nutrients that reduce cancer. It has to do with the better well-known the nutrient, the less important it is to specify.  Everyone knows bananas are high in potassium and that’s related to blood pressure.

Q: What’s your critique of produce department labeling?  

A: In general, I really chide the produce industry for not using signage and labels effectively. The only sign you’ll see with the asparagus is a sign that says asparagus. You use this valuable space to tell consumers the one thing they already know.  

Let’s just say you highlight that asparagus is very rich in a particular nutrient to help build your immune system. Eventually you will create a positive response to asparagus in addition to how good it tastes. You don’t have to have the person buy the asparagus every time, but they keep walking by that labeling and the message sinks in. The thing amazing to me is all the processed foods manufacturers spend millions and millions of dollars creating packaging and labeling so they must think it works.  

Q: Now there is such a deluge of product claims, it can be perplexing. What is your view of the increased push for legislation on GMO ingredient labeling?  

A: That’s independent of this. Whatever the regulation, you have to comply with the law. As companies put more and more negative things on labels that aren’t legislated like no GMO’s, you’re suddenly going to have states like Vermont getting involved in this.  As soon as General Mills started placing GMO-free on its boxes of Cheerios, it raised the question: what does it mean for a product to be GMO-free, does every product need to be GMO-free? Does five percent of the product need to be GMO free? When making ice cream, does the half of a percent of vanilla bean you use need to be GMO-free?  Can you imagine if no one put anything on their label about GMOs? You would probably have a small group of people complaining about GMOs, and it wouldn’t be worth it for the government to be concerned about it.

Q: I seem to have side-tracked you from the focus of your talk!

A: That’s OK. These issues all connect. For my talk, the key discoveries I’ll be sharing are:

1) In an unaided setting, consumers generally think positively of our foods.

2) When presented with labels with negative claims, those negative claims have more impact on the consumer than the positive beliefs.

3) Not only can the negative claims influence the specific product but they can also cast dispersion on the entire category.

Q: How important is the specific phrasing of the statement on the label?

A: Very important when you put on the label what the product is really about. For example, ‘all natural’ basically means no artificial ingredients. But when you put no artificial ingredients on the label, it has a much more negative impact than if you put all natural, even though it basically means the same thing. When you state something in the negative, it has a bigger negative impact.

Our test was ‘all natural’ versus ‘no artificial ingredients.’  When you place it in the form of a no, it has negative impact on intention to buy. When you put ‘all natural,’ on it, it has a positive intention to buy, but the no artificial ingredients has a much greater negative effect than the all natural’s positive effect. It’s because we’re telling people we have bad things in our products.

Q: It seems like a relatively easy problem to fix-- just by changing the phrasing of a label, you could significantly impact consumers’ intent to buy your product, and also influence the perception of the category. Extrapolated, you could boost sales of the entire produce department…

A:  The produce department needs to start using labels to talk positively about our products.  

Q: Do you think your study results would differ if you conducted the research in the UK or other countries?

A: We have no reason to believe there would be a significant difference with UK or European consumers. It could be interesting to expand our research internationally. I’m not a research house, and we use graduate students, so it’s worth noting we could do this fairly inexpensively if there is interest. 

*****

It is an axiom of marketing that one sells benefits, not features. So even positive declarations, such a being rich in a particular nutrient, are not likely to be as effective as positive benefit claims, such as the ability to reduce the risk of heart disease. However, there are a lot of legal restrictions as to what kind of health claims can actually be made.

This study points to an important lesson, though, which is that most supermarkets do not do the kind of research to allow them to really evaluate the impact of their own promotional decisions.

We ran a piece: WHERE'S THE SCIENCE? Wegmans Asserts Organic Produce Tastes Better Than Conventional.... Doesn’t This Imply Disparagement Of Most Of The Produce Wegmans Sells? In this, we questioned whether it was appropriate for a retailer to disparage most of the products sold in its store by making claims for which there was no real evidence about organics. Now Professor Stanton raises the ante and finds that doing so may not even help your business.

It will be quite a robust discussion in London!

Join us at The London Produce Show and Conference; you can register here.

And book a hotel room here.

For more information on the event, check out the website here.

Be part of the debate or, as we say, join the conversation, #CelebrateFresh!




Former Wal-Mart Executive Bruce Peterson
Presents At The London Produce Show And Conference:
ASDA As A Case Study — The Pressures On Retail And The Path To The Future

When we announced Bruce Peterson’s retirement from Wal-Mart, he had already had a formidable career. As the organizer of the largest produce procurement operation on the planet, he had had an impact that would never fully dissipate.

But Bruce has gone on to continue to impact the industry. It is fair to say that the Produce Traceability Initiative was Brace’s brainchild, to use just one example. He remembered the constant flow of recalls Wal-Mart experienced on packaged goods and contrasted the calm way these were recalled with the almost hysterical problems caused when some produce item had a problem. He realized that the difference was traceability… that a canned soup manufacturer could confine a recall to the lots that were suspect, whereas the produce industry often could not. It remains a work in process, but as better traceability becomes institutionalized; we may never again have another Spinach Crisis.

He has his consulting business and, of course, in that capacity has helped many firms, but another way Bruce assists the trade is with his teaching. Some of this is at schools and some of this at industry events. We have been honored to have Bruce participate in both The New York Produce Show and Conference and The London Produce Show and Conference since their inception.

Some would argue for different speakers, but we stand committed to different ideas. You can’t duplicate the perspective of someone such as Bruce, as nobody else in produce can tell you what it is like to be hired by Sam Walton and to discuss a plan to build the biggest supermarket in the world.  So we consider ourselves very lucky to have Bruce back in London this year.

We asked Pundit Investigator and Special Projects Editor Mira Slott to find out what Bruce is focusing on this year in London:

Bruce Peterson
President
Peterson Insights
Former Senior Vice President and
General Merchandise Manager
of Perishables for Wal-Mart Stores, Inc.

Even before you did your presentation at the 2015 London Produce Show, the preview Q&A of your talk generated an avalanche of letters from industry executives, praising your pull-no-punches acumen:

Bruce Peterson, Founder Of Wal-Mart Produce Program, Will Urge Industry To Rage Against Mediocrity, Value Experience Over Education, And Merchandise To Wow The Consumer At The London Produce Show And Conference

Pundit’s Mailbag: Bruce Peterson Hits 'Nail On The Head' When It Comes To Retailers Hiring Credentials Over Experience, and Pundit's Mailbag —On Bruce Peterson And The Importance Of Being Mentored But Is Mentoring A Dangerous Activity These Days?

Your wisdom and willingness to tell it like it is without pretenses in order to help the industry move forward is refreshing, albeit you acknowledge doing so isn’t always easy. Your talks have certainly hit the nail on the head many times, keeping attendees on their toes in London and also at The New York Produce Show & Conference, and we have profiled many aspects of your career:

Bruce Peterson Focuses On Traceability

HEADLINER AT THE LONDON PRODUCE SHOW AND CONFERENCE: Former Wal-Mart Exec Bruce Peterson Speaks Out On Consumer Value Perception And The Future Of UK Retailing

Wal-Mart’s Bruce Peterson Resigns

YottaMark Advisory Board Adds Bruce Peterson To Roster

Bruce Peterson Focuses On Traceability

Bruce Peterson Lands At Naturipe As Its New President/CEO

Naturipe’s Peterson Builds All Star Management Team

Peterson Steps Down As President/CEO Of Naturipe, But Joins Its Board Of Directors

Q: How will you be challenging attendees in London this year?

A: Let me tell you how the topic came to be. Jim (Prevor) said he was interested in me speaking again in London.   Tommy (Leighton, managing director of the London Produce Show) called me up and said, ‘I think the audience would like to hear more about ASDA and the reasons behind its current difficulties and would appreciate your perspective, even though you’re not at Wal-Mart anymore. Would you write something on the subject for a magazine we’re putting together in connection with the Show, and the talk could correspond to that?’ The content is essentially the core messages I’ll be getting out in my talk.

I don’t want the talk to be about ASDA per se. I don’t want people to think, this is just going to be a pile on ASDA thing because it’s not.  There are so many positive things about ASDA, rich in its own history as well as its access to the global Wal-Mart network. However the challenges I am most interested in that  ASDA is facing are actually the same challenges Wal-Mart is facing, and in a different kind of way Whole Foods is facing, and in a different kind of a way Tesco is facing. They are the challenges of retailing at this moment of the 21st century.

Q: So, in a sense, you are going to use ASDA as a case study, a prism through which to view retailing today,  both in the UK and elsewhere?   It sounds like you’ll be putting a new twist on a provocative topic you delved into at the inaugural London Produce Show in 2014:

HEADLINER AT THE LONDON PRODUCE SHOW AND CONFERENCE: Former Wal-Mart Exec Bruce Peterson Speaks Out On Consumer Value Perception And The Future Of UK Retailing…

A: There are basically four things that happen. I’m thinking of starting out with a slide talking about Sears, Roebuck. & Co. In the late 1950’s, 95 percent of consumers who spent money in United States spent it at Sears, in its stores or in its catalogs. Now Sears is just a shell of what it used to be, and there’s a significant question of whether it is going to be a viable enterprise in a few years. You could make that same statement for JC Penney and others. I’m not saying Sears is going to go away entirely. But I am thinking, “how the mighty have fallen.”

Here’s how I’m trying to spin this talk around. What’s happening in the UK is not materially different than what has happened in a lot of other places in different parts of world. Retailers with a tremendous reputation in the marketplace, hitting all their numbers like crazy, all of a sudden are losing position and market share, and not achieving the kinds of numbers they were used to. Everyone starts to call into question what’s wrong with these guys. One of the key messages is… nothing is wrong with them per se. They are experiencing things other retailers before them experienced; they just didn’t think it would happen to them.

I think there are four components to that. The first one is the only controversial thing in my talk, and it’s what I call arrogance.

Q: Arrogance is an inflammatory word…

A: I always say there is a fine line between supreme confidence and arrogance.  If we take ASDA, for example, or Tesco, for example, or Sears for example, they had earned the right to be supremely confident. Let’s focus in on ASDA for a moment. ASDA started out as a dairy company and grew to where it had the Number Two position in market share in the UK. ASDA was taking on some of the finest retailers in the world. Tesco was a world-class retailer. There was Marks & Spencer, and Sainsbury's, a long established company. Safeway (which was ultimately sold to Morrisons) was there too.

Q: How and why did that fine line between supreme confidence and arrogance get crossed?

A: People who knew Sam Walton would say his biggest worry was the success of our company.  It’s almost axiomatic. As a company becomes more successful, decisions get worse.  You may ask, “How can this be? That doesn’t make sense.”   But if you think about it, when a company is small, take ASDA, it was growing and trying to get a foothold in the UK marketplace; every single decision it made was critical. If it made a wrong decision at that point in the company’s history, the company would instantly feel the financial impact and it could be severe, even fatal. 

As you get bigger, if you make a bad decision, oh well, so what, we’ll just recover because we’re dominant in the marketplace. Think about McDonald’s, another great example of this. McDonald’s had so many stores, you could burn 200 to the ground and it wouldn’t affect business. Look what has happened to McDonald’s. And Coca-Cola and its decisions.

Sam Walton and the people who had reported to him used to spend two seconds on what we were doing right and hours on what we were doing wrong.

I remember a meeting in Kansas City. I was with my boss and several of my direct reports, sitting in a room having a beer with the president of ASDA at the time, along with several of his senior managers. We were all food people. The head guy at ASDA at the time said to the group, “Wal-Mart is really fortunate it acquired ASDA, and now ASDA can teach Wal-Mart how to sell food.” My boss was standing next to me and I whispered in his ear, “Would it cause much of an international incident if I beat the hell out of this guy?!” You had to laugh.

Q: It’s probably good you maintained some restraint.

A: Yeah, at that time for my career, it probably was prudent!  I remember talking with my boss… “These guys think they’re pretty good.” That’s where I got the sense of what I call the arrogance of ASDA.  And this is the important thing to stress. They did a lot of things really well. I spent some time looking into its operations. A number of us actually got into ASDA before Wal-Mart bought it. I was impressed… These guys were doing some really cool and innovative things.

Q: What did ASDA do well? Could you bullet point some of those really cool things?  

A: ASDA had a huge emphasis on price.  The expression we used to use with Wal-Mart, and I’ll coin the phrase -- it’s called item and price merchandising. Basically it means you put up a big display of a single item and put a sign that has the greatest price on the planet, as opposed to what you’d call assortment merchandising, where you have five or six items on display with signs on sale. ASDA was very good at item and price.  

Q: But Wal-Mart was doing that strategy. So they took the idea from Wal-Mart?

A:  Well, I don’t know that. But what we said as a group when we walked over to the display, was that ASDA must have been studying Wal-Mart. I thought they were very, very good at item and price merchandising. I was amazed at their associates; the people who worked in the stores. I think they call them colleagues. They were friendly, cheerful, and seemed excited to work there. ASDA had this “us-against-the-world” mentality, which I really admired. Wal-Mart was like that.  They were absolutely determined to succeed and do better.

I thought the assortment was good without being ridiculous. The size, grade and condition of products wasn’t the best; it wasn’t Marks & Spencer. I thought their buying office was doing a very good job of setting standards for what they had and still delivering on price that was right in line. They were very, very good at that.

This brings me into the second point that is important. It was clear ASDA had a core value proposition, and it was price.  They had this thing they called the “pocket tap,” which referred to the tapping of the wallet in your back pocket.  And the associates would do the pocket tap, which meant, we’re saving you money. I thought that was great.  So that was their deal. They were noted for that.  

Q: Did ASDA veer from that focus?

A: Yes, and Wal-Mart probably had as much to do about this as anybody. ASDA started getting excited about two things: general merchandise and supercenters. It was principally a grocery store, but entered into the supercenter arena. At first, they were called ASDA-Wal-Mart Supercenters — then ASDA took Walmart off the name. They got into this chain of George stores, based off George Day, a designer of clothing in London with the George brand. What happened was ASDA started to focus on other things outside of its core competencies. Wal-Mart helped them with that. Don’t misunderstand me. There were people at Wal-Mart working with ASDA on some key decisions.

The fact of the matter is, they were branching out to a whole lot of different types of stores. Supercenters weren’t uncommon in the UK; people were familiar with the concept, but they were basically companies like Auchan, and Carrefour, and Intermarche to a certain degree.  There really weren’t any UK retailers in the supercenter business per se. ASDA decided to get into this, and that decision is coming back to haunt them. I’ll come back to that.

ASDA started to become distracted from its core competency. Part of that is because of arrogance. They thought, “We’ve got this figured out, we are so good at this, we can now take on other kinds of things because we’re such a success, we don’t have to worry about it.” The ASDA executives took their eye off the ball.

Q:  What other factors contributed to ASDA’s difficulties?

A: The other thing I want to talk about is a big deal.  ASDA’s “cheese” got moved. There was a business book in the 1990’s “Who Moved My Cheese” by Spenser Johnson.  The idea was if a company was doing something successfully in the marketplace but the marketplace changes, you’ve got a problem. In the book, it used the analogy of a mouse running through a maze. If you put the cheese in the same place, the mouse will learn the maze to get to the cheese, but if you move the cheese, the mouse still runs to the end, but doesn’t get the cheese because someone moved it.

That was the metaphor for what happens in business. ASDA was successful in the UK marketplace because the UK marketplace had stabilized. Now, guess what happens when Aldi and Lidl move in and Waitrose proliferates? You’ve got a problem, because what was your value proposition? Price.  But you can’t compete pricewise with Aldi because Aldi’s operating structure is much less than yours. And remember, a lot of ASDA’s stores now were supercenters, and products consumers used to buy in supercenters, they often buy on line now.  

When I’m talking to a class of students, I’ll ask, by a show of hands, how many people buy CDs? Nobody does. They download music online. The thing about a CD is it has revenue and margins for your store. Now you have a whole category of products people aren’t buying anymore, or not as much. Clothing is the same way. People buy clothing online. What happens if you have a supercenter like ASDA (and Wal-Mart has the exact same problem), and you have entire categories of merchandise people are no longer coming to your store to buy anymore? You have entire categories of merchandise not selling and some categories just vanishing.You still have your operating expense, and you still have to keep the lights on in the store even though you’re not selling as much.

Q: What’s the solution? What’s ASDA’s best path going forward? For instance, will a low-price value proposition, which helped ASDA shine originally, still cut it now that Aldi and Lidl have made such strong inroads?

A: Some categories have vanished, so what do you do? It’s not such a matter of ASDA being a bad company but the marketplace changed. When somebody moves the cheese, you have to figure out how to navigate the maze or you’re going to starve. 

The final thing is new channels of distribution. People talk about Amazon Fresh and home delivery. You can go to a lot of different stores now and buy fresh fruits and vegetables. There’s a dairy chain here in Arkansas called Braum’s. Imagine a store where you can go in and buy an ice cream cone, but you can also go in there and buy produce, meat, and frozen food products. Many formats are now carrying products that you used to have to go to ASDA or Tesco to buy.

Q: There was a recent news story in the Telegraph: Amazon prepares to deliver fresh food across UK

A: Jim Prevor wrote a column more than 20 years ago titled Death By A Thousand Cuts and he perfectly predicted the fragmentation of the marketplace that was to come. I have adopted his nomenclature, it is death by a thousand cuts. It’s not as if the average customer in London is buying all their food someplace else, but they have different options. So when that happens, it’s very difficult to drive your revenue. If you can’t drive your revenue, you have to increase margin to cover expenses, and when you do that, you become less competitive. This happened to ASDA. It happened to Wal-Mart too, but Wal-Mart is so big you don’t see it as much.

In the UK, you’ve got Aldi and Lidl on the low end of the price scale, and you’ve got Marks & Spencer and Waitrose at the upper end of the price scale. So where does that put ASDA? It puts it in the middle. And the last place you ever want to be is in the middle. Of course ASDA is not alone with this problem. It describes the mainstream supermarket business in the UK, in America and many other places. Of course because ASDA and Wal-Mart were specifically identified as the low price leaders in their markets, their  positioning is more vulnerable when others can effectively claim the low-price mantle.

Q: Will you be intersecting your points specifically to the produce department?

A: What I’ll do in the talk is give a higher concentration of emphasis to the produce department, although it applies to every department in the store.

Q: Aren’t there unique circumstances in discussing produce as compared to some of these general merchandise items such as CD’s? For example, produce as a category is not vanishing or changing dramatically like in the field of technology…

A: Actually, produce has changed dramatically when you think of different channels of distribution. There are also different ways consumers, and especially millennials, are getting nutritional benefits from fruits and vegetables. It’s true in the UK as well. For example, juice as a category is going off the scale. If you look at produce departments today, the amount of space given to juice and juice-type products, you would never see 10 years ago. The amount of packaged goods has proliferated. Now in the UK, it’s different because retailers always had packaged goods in produce.  

Produce departments are going to be smaller, particularly in the conventional supermarkets like the ASDAs. They are going to have less SKUs, and those SKUs are going to be more concentrated in prepared items. Consumers aren’t going to be cutting and slicing and dicing like they used to be; they’ll be buying more fresh-cut products, for sure.  And retailing is going to be more highly fragmented.

Q: Could you elaborate on how that fragmentation is going to pan out?

A: The word fresh means different things to different people. If you’re an urban dweller, what we’re starting to see in the States is more urban farming. I know different operations where they actually buy an old warehouse they use to grow produce, picking items out of the back to bring to the retail front, which is kind of cool.  

Fresh markets, farmers’ markets, natural markets, organic markets, you name it; it’s becoming almost boutique-like in how people are shopping. It puts conventional supermarkets in a tough place because the whole idea at one time was to get all your stuff at this one store. Now people are willing to buy their meats in one place, their fruits and vegetables in another place, and it depends on the occasion too. If someone’s having a dinner party, they might go to Whole Foods or Fresh Market to get their tomatoes, but may pick up tomatoes at Wal-Mart for the family during the week.

Basically what’s happening is the demise of the mass market.  That’s really the biggest change. The consumers can get whatever they want whenever and wherever they want and at the price they want to pay for it.

Q: To clarify, you’re saying these trends — smaller produce departments, less SKUs, more prepared foods, etc. — will occur across the board?

A: This is what’s going on right now. In conventional supermarket produce departments in the U.S., you’re seeing more and more space given up to juice and prepackaged product.  Everything is packaged. I think one of the things driving that is health and safety concerns. It’s just become more and more challenging. The amount of prepackaged and pre-sliced items continues to proliferate. The U.K. and Western Europe have always been leaders in packaging technology for years. The packaging is slick.

What I would call the traditional brick-and-mortar stores, how do they combine the convenience of Internet shopping with the desirability of seeing the products fresh off the counter. People do like to browse the produce department and pick out the items themselves.

Q: But that also goes to those trade-offs of merchandising packaged items versus loose product in a farm-stand atmosphere, where consumers touch the fruits and vegetables, soak in the aromas, etc. Couldn’t this be stifled in an overly packaged produce department and counter to the specialty natural market trends you point to?

A: As long as they operate it and do it well… you’re not going to see these giant displays of whole peppers anymore.  Places like Whole Foods and Fresh Market will be the upper end of that.

In conventional stores, you have a real problem because how are you going to leverage your expenses?

Consumers have a lot of ignorance in terms of what is fresh and what is not.  They like to be able to go in and determine whether this is a good thing or bad thing.  And a lot of people simply don’t know.

Q: Doesn’t that also relate to labor issues and service, and having trained associates who can educate consumers…

A: Yes it does. But another way to look at it is this: if I’m a consumer, why should I shop at that store? A couple of reasons… one, it’s on my way home and it’s convenient for me; two, they procure the products I need and at the price I want; and three, it could be, I don’t know how to prepare that, so someone needs to tell me how.  That’s another reason why you’re seeing a lot of packaged things, because on the package it tells you how to cook it.

Q: Packaging allows marketing opportunities to provide recipes, promote attributes of the product, where it’s sourced, etc. Do you think sustainability issues and a company’s corporate social responsibility platform are becoming more important in consumer shopping decisions?

A: Social responsibility is a big deal for certain people. It’s not the driving factor for what would get someone into a store, but it could be a factor in stopping someone from shopping at that store. A consumer could say, “I like to go to this particular store because of the value and price, but I don’t like GMOs in my food, so if the store has GMOs, I don’t want to shop there.” 

What I call social responsibility is an undercurrent for the principle value proposition of going into that store in the first place. Because someone claims they have more stable packaging won’t get you to shop there, but it will keep you from shopping there if they don’t. It actually affects the stock price more than anything else. If investors don’t perceive the store as a “good corporate citizen,” they may not invest in the company’s stock. 

For the sake of the talk, corporate social responsibility isn’t a distinctive competitive advantage. It’s no longer a differentiating factor. Take Fair Trade; everyone jumped on the Fair Trade bandwagon. In Europe, GMOs were a big deal 15 years ago; in the U.S., we’re just getting around to talking about that right now. The fact of the matter and the perceptions are two different things, but perception drives reality.  It becomes sort of a point of entry more than anything else. You can’t be on the other side of certain issues.

Q: What role did the produce department play within ASDA, and in the context of the changing retail market? Could produce be a winning ticket to gain a competitive advantage?

A: ASDA didn’t do anything in the produce department that drove its success. They just did a nice job like they did in everything else.

Q: We often hear in the produce industry (and perhaps some objectivity is lost here) that fresh produce can be a retailer’s star differentiator; create a gorgeous, colorful, sprawling produce department, drawing consumers in, right when they enter the store, and that could make your store great…

A: I’ll give you an example that was true when I was at Wal-Mart.  When I was there, the way we used to look at food, and produce more specifically… produce was never the reason why customers came to a Wal-Mart store. What drove people to Wal-Mart was the price on basic consumables; Tide detergent, and cotton balls, and toilet paper. 

We were a national brand house, so when someone came in and compared the price of what we sold Tide for versus what any other store sold Tide for, we were the best price on the planet. Once they’re in the store, let’s not give them a reason to go anywhere else. So, we had nice produce offerings at great prices. Now they don’t need to go to Kroger to buy grapes.

It was really funny to watch. Whenever we opened up a store in a new marketplace, supermarkets wouldn’t feel threatened because they’d see Wal-Mart as general merchandise and wouldn’t think we take that much market share away from them. A year later, those stores would close.  People weren’t in the habit of buying the fruits and vegetables and meats and baked goods in our store. They were in the habit of going to Wal-Mart to buy merchandise and consumables long before Wal-Mart carried food. We just added on food. 

We made a point of offering exclusively Chiquita bananas because Chiquita was one of the top 10 brands in all food. If I had gone in with a less familiar brand at a cheaper price, consumers might think they were cheaper because the brand was cheaper. Back then the Number One item by revenue was bananas, and it may still be. It was the same strategy we used for Tide.

Q: Building the produce department was secondary in Wal-Mart’s case because of its value proposition. What if your value proposition is different?  

A: It’s not just ASDA, but Tesco and others are having the same problem. If your calling card is price, and that’s your value proposition; and someone else has a better price, that’s a problem.

Q: But doesn’t Tesco have a tiered product strategy, so a higher-end premium brand wouldn’t necessarily be impacted by the price calling card…

A: Yes, that’s true that Tesco is a whole different animal.  But Tesco still has the same problem. Whatever its lower tier product means to its total revenue, it’s losing that to the other two discounters. It’s not like ASDA or Tesco are going to close. They’re still doing a lot of business, but they’re not doing as much business and that hurts. It’s death by a thousand cuts.  

I don’t know what percent of consumables and food are being bought online in the UK. Here in the U.S., people get a lot of things delivered to their homes. You can order everything online and don’t need to go to a store anymore. Where did that revenue go, not just revenue, but the margins? A lot of these online products are high margin. You start taking revenue away from brick-and-mortar, and it’s a problem because they can’t make the store smaller. The fixed costs of operating the store are the fixed costs of operating the store.

Q: They could try to be more savvy on the operational side…

A: What ASDA, Wal-Mart and Kroger are doing, well everyone is doing it, redeployment of space.  If we’re not selling CD’s anymore, what goes there? I’ve been saying this for years, and I hate to say I was right, but when everyone was worried about home delivery, I kept saying, don’t worry about that. What’s going to happen is consumers are going to order most of their groceries on line, but they’re going to go to the store to pick them up. There is a proliferation of stores testing different concepts; some involve drive-hrough pickups and designing traffic flow, in other cases, consumers go into the store, where they end up browsing for other items to build incremental sales.

The message here is, how do brick-and-mortar retailers redeploy physical space to maintain productivity? It goes back to somebody moved the cheese.

Q: It’s a whole new way of thinking…

A: Exactly. One of the concluding things I’d like to say, and one of the reasons I’d bet on ASDA is because it’s always had this culture of it’s us against the world.  It got fat, dumb and happy for a while. Competition makes you better.  ASDA has to rethink its business. It’s not that everything is terrible, but once you get it in your mind you are vulnerable, you are not fire-proof or bullet-proof, you’re well on your way to making better decisions. I wouldn’t discount ASDA. People keep decrying Wal-Mart. I would never bet against Wal-Mart. 

******

As usual Bruce brings us back to the essentials. In this case, what is the role for the conventional supermarket in the next few decades?

We have deep discounters; we have warehouse clubs, epicurean and health concepts; we have Internet plays, delivery services, a booming foodservice segment and produce increasingly being sold at drug stores, gas station mini-marts, convenience stores and more.

So what is the plan that supermarkets can use to define their own future?

Sotto voce, the question is applicable to the whole supply chain. Who will we sell? How will we supply them?

If we can throw a pebble in the lake, let us suggest that this is not simply a retail question. After all, a lot can happen in the supply chain that influences what consumers want to do in the future. Let us imagine that Wal-Mart, for example, secures exclusive global rights to certain genetics that provide extra-tasty grapes or berries.  Wal-Mart may have started out with a national brand price position, but it could use its scale and financial resources to secure unique access to proprietary products.

Perhaps ASDA could piggyback on these lines, and the availability of products not available elsewhere could be a magnet to consumers who can only get the products at ASDA.

In other words, if the problem is someone moved your cheese, maybe you need to move to a location that is a winning one for you.

Please join us at The London Produce Show and Conference and discuss ASDA and the future of retailing with Bruce Peterson.
You can register for the event here.

You can book a hotel here.

And check out the event’s website here.




Can Labeling Impact Food Waste?
Is Zero Waste The Optimal Standard?
Cornell’s Brad Rickard To Present
New Research At The London Produce Show And Conference

Cornell’s Brad Rickard has graced the stage at both The New York Produce Show and Conference and The London Produce Show and Conference. Presentations we have profiled in pieces such as these:

What’s in  A Word? Sell By, Use By, Best By And Fresh By.. Can A Word Alter Food Waste Significantly? Cornell’s Brad Rickard Speaks Out

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

When we learned he was willing to come to London and present research he is doing on food waste and how food labels can interact with that, we asked Pundit Investigator and Special Projects Editor Mira Slott to find out more:

Mira reconnects with Brad Rickard for a sneak preview of his London talk…

Brad Rickard, Ph.D.
Associate Professor of Applied Economics and Management
Charles H. Dyson School of Applied Economics and Management
Cornell University

Ithaca, New York

Q: How terrific you’ll be back in London to present your unique, science-based consumer research on food waste. Your controversial session last year, which analyzed consumer perceptions of GMO’s, jumpstarted the food waste topic from a different angle: Will reducing food waste be sufficient reason to embrace GMO produce?

At the New York Produce Show last December, you took on the food waste issue head on, unveiling initial results of your quantitative, ongoing consumer research. In examining the role of date labels, package size, and product category on food waste, you sparked a lively discussion among attendees.

Now you travel across the pond to share your latest research with a London Produce Show audience, which promises to bring new perspective to the food waste phenomenon.

Will your talk explore a more European slant? For instance, do you think you’d find different study results if you conducted the research with UK consumers instead of U.S. consumers?

A: Yes, and I do believe our results would change if the study participants were from the UK, which will make for an elevated discussion during my session. When I was in London last year, my research looked at U.S. consumer acceptance of GMOs in the face of genetically engineered deregulation of certain produce items. It opened questions about the contrast in consumer perceptions based on type of product, but also based on the country and region in which someone lives. I ended the talk by tying in the problem of food waste, and foreshadowed the research that I’ll be discussing in-depth this year.

In New York, I presented our food waste study and it generated a stimulating debate. So, I thought it would be interesting to revisit the debate in London with slightly updated research and a more UK/European-oriented outlook.

Q:  Food waste has become a hot topic in the U.S., but are we playing catch up? Hasn’t global food waste and its massive scale been top of mind in the U.K. and Europe for a long time? What was the impetus for starting your research?

A: You make an astute observation. This is an ongoing project. It started when a friend and colleague of mine came to do a sabbatical at Cornell. Norbert Wilson, Professor, Agricultural Economics and Rural Sociology, College of Agriculture at Auburn University in Alabama, was interested in various food marketing and food quality questions, like me.  At one of our meetings, he had just come back from a public health conference, where there was a presentation on food waste. It wasn’t an economist giving the talk, but someone in a health discipline interested in food waste from a public health perspective.  

They had done surveys and focus group work, looking at how people were thinking about food waste. There was discussion of policy options, the idea of trying to sell less-than-perfect produce — the Ugly Fruit campaign — increasing donations to food banks, thoughts about using technologies to limit food waste and increase shelf life, and discussion of these date labels stamped on product as a way to communicate shelf life of food and beverages. The focus group work wasn’t a quantitative study; it was to elicit informal feedback. 

Q: Did you think the survey inquiries warranted more controlled studies to build statistically valid data?

A: There was a sense that people thought labels were confusing. People were throwing away food that otherwise might not have needed to be thrown out. The surveys indicated consumers respond to labels on food, the information stamped on food, and so from the policy side, labels may be one of the most effective ways to reduce waste. However, the information gathered was subjective, there were no hard numbers, and Norbert and I are scientists, so we wanted to dig into this in a quantitative way.

Q: How did you go about that? Collecting accurate consumer data on produce consumption and food waste can be challenging.  Is your study premised on generally accepted food waste data, or is that data hard to pin down as well?

A: We came up with an economic experiment to study the impact of labels on food waste in a pretty controlled and careful way. We did this for various types of food products, different package sizes and different expiration dates. By way of background, there’s been some statistical work done by the USDA Economic Research Service. Their analysis estimates the cost of food waste in the United States is approximately $160 billion per year

Q: That’s a big number.  Could you break that down into categories?  How much of that waste is concentrated in fruits and vegetables? [Editor’s note… see study here]

A: Meat is the top category, about $50 billion of that $160 billion. About $30 billion is in vegetables, and dairy is also about $30 billion, and fruit is about $20 billion. People also talk about food waste in terms of the calories.

USDA and others talk about the average food consumption in kilocalories per person per day, and then they use this other measurement called the number of calories available per person per day, the measure of the food supply divided by the total amount of food available divided by the population. A common number is 3,800 kilocalories available per person per day. It’s not what we consume. It’s just what’s available. I think on average what we consume is less than that. Of the 3,800 kilo calories that are available per day, 1,200 calories is considered food waste. That’s a lot of calories.

When people give that statistic, they often point to the 17 million people in the United States who are food insecure.

Q: Could assessing food waste by calories create a distorted picture of the problem?

A: In the USDA report, looking at the $160 million of food waste, added sugars and sweeteners amount to only $6 billion, and added fats and oils only $13 billion of the total. When you go to the calories that are wasted per person per day, the largest categories now are not meat, dairy, vegetables and fruit. We’re throwing a lot of value away in meat, dairy, vegetables and fruit, but in calories the things we’re throwing away the most are actually added sugars and fats, but in terms of value, those two categories are relatively small. 

If there’s any saving grace in this food waste story, most people would agree if we’re going to throw away calories, it would be good if it were in those two categories rather than in fruits and vegetables.   

Fruit is 12 percent of the value and vegetables are 18 percent of the value of food waste. When you go to calories, fruit is 3 percent and vegetables is 3.5 percent. It makes sense fruits and vegetables are higher value products, but less calorically dense. My bigger point for bringing this up is that at least when we’re wasting calories, we’re wasting them in food groups that are less healthy.

Fruit is 12 percent of the value and vegetables are 18 percent of the value of food waste, and when you go to calories fruit is 3 percent and vegetables is 3.5 percent. It makes sense fruits and vegetables are higher value products, but less caloric dense. My bigger point for bringing this up, at least when we’re wasting calories, we’re wasting them in food groups that are less healthy.

Q: How does this change the conversation on food waste goals?

A: It helps when people talk about the optimal amount; we waste 30 to 35 percent of all food, which is a big number. That’s obviously too much food that’s wasted, but the next question is, should we have zero waste, 10 percent, 20 percent…?  Sometimes in this discussion, there’s this complicit assumption that we should have zero food waste when we try to develop policies to reduce food waste. My point of giving these percentages of total calories is that maybe some food waste might not be such a bad thing. Because when we waste food in terms of calories, it’s in added fats and added sugars. 

Q: One way to alleviate that problem is getting consumers to replace fatty, sugary foods with more fruits and vegetables…

A: If people have too much food on their plate, and a zero food waste directive, people could feel compelled to eat all the food on their plate, which could have negative consequences in terms of obesity and health. I say this with some hesitation, but I think a zero waste initiative might not be good. Sometimes when we waste food, it saves us time, or makes our life more convenient. Having free time and convenience are things we value as well. If you have a zero food waste policy, it could take away other things of value. I’m trying to wrap my arms around an optimal amount of food waste.  It does sort of force us to make decisions about food.

Q: It’s a different discussion when talking about food waste from a consumer perspective as opposed to a retailer trying to reduce food waste within the store, or more broadly at the wholesale level, and down the supply chain…and in the context of sustainability and corporate social responsibility, donating to food banks, etc.

A: It will be nice for me to have more conversations with retailers, because this study was looking mostly at the ultimate consumer and how they make decisions when they take the product home. USDA statistics say about 31 percent of food is wasted, and 21 percent is due to consumer waste; the other 10 percent happens through retailers, and after product leaves the farm.

Some people say, ‘well the bulk of food waste is from consumers, so the policy initiatives should be targeted to that group because they make up two-thirds of the food waste story.’  But other people say, ‘well maybe, but there are a lot fewer retailers in the world than consumers, and if you can have a policy that makes a difference for that 1/3 of the story, you might actually make more progress because you’re dealing with a much smaller set of people.’ You could work with more incentives in a clearer way than with consumers. 

Q: It sounds like it makes sense to attack the issue from multiple directions. For instance, from the retail, distribution and supplier side, a disrupted produce cold chain could degrade product and lead to food waste…

A: That’s a good point we should make, that there’s this estimated food waste at different stages along the supply chain. Consumers respond in a lot of different ways to food waste policies, and even though 2/3 of food waste happens with consumers, the other 1/3 is still a really big number, and it might be better to develop policies there that could make a bigger dent. We haven’t looked at retail incentives, but that’s sort of the next stage of our research, to move into that space of what kinds of marketing or policies could influence waste at the retail level.

Q: I’ve sidetracked you from previewing the consumer research you’ll be presenting to London Show attendees…

A: It’s all part of the story. And I think people at the London Show will have thoughts about this consumer issue, but they almost might be more interested in the policies designed to mitigate food waste at the retail level.

Q: I’m certain attendees will be fascinated to gain insight on the consumer side. Your research can provide important knowledge to produce industry executives at both the retail and supplier levels on how they can impact consumer buying patterns and food waste behaviors through package labeling strategies and merchandising practices…

A: Given that context, we’re interested in all of these different policies. Something I didn’t say earlier, there is the question about what is food waste, and then the question of how to measure food waste. There’s a lot of back and forth. For instance, in the fresh meat category, some people estimate the loss is around 40 percent, and others estimate it is closer to 20 percent, because a lot of that meat isn’t designed to be consumed, such as the bones or fat, and if never intended to be consumed, it’s not fair to count it as food waste.  Similarly, you don’t eat the banana peel.  With a lot of these fresh products, maybe we’ve overestimated the amount of food waste.  

With some of the more processed products; some people think we might be underestimating the amount of food waste. There’s an ongoing debate, and it’s something we struggled with in our research experiment as well. We’re still actually doing work on figuring out, what is the best way to measure? If we’re interested to learn how much policy X effects food waste, then we need to find a way, to have a tool or metric to determine how much food is wasted before and after the policy is implemented. 

Q: What metric did you settle on for this research?

A: We have a pretty good idea of how much food is wasted in terms of dollars, calories and percentages, and I’ve given you some of those USDA numbers. We were trying to think of a way in a laboratory setting to get people to tell us how much food is wasted in their household. It’s kind of a tricky thing because when you ask people directly, ‘how much food do you waste?’ for different types of food, we find they tend to under report compared to what the average USDA numbers are.

Then we tried asking, how much food do you consume? Here’s some food, would you buy it, and how much would you be likely to consume? If they said they were going to consume 80 percent of it, then we’d assume 20 percent is food loss, so we’re indirectly asking them how much food they waste. They tended to underestimate. We found these numbers to be slightly lower than average USDA numbers.

We’re trying to get answers that are pretty well aligned with the USDA numbers. What seems to be working best for us is a two part question approach. We give participants different food products, and ask what value do you place on this product in dollars and cents –if you went into the grocery store, how much would you be willing to pay for this particular food item, and then the second part, how much of it are you likely to consume based on your household experience. 

Q: How does this give you more accurate answers?

A: A lot of people think about price when they make that retail buying decision. It’s a secret way to find out if someone really likes the product or not, determining value that may be different than the sticker price. We ask how much of the product their household will consume, and if they say 82 percent, then we take the other 18 percent in conjunction with the valuation to get an estimate of the cost or value of the food they throw out. And we find this seems to be the best way to characterize the amount of waste in a household when doing a survey like this.

We find this is the best measure to compare different strategies on the cost of household food waste. One way to think about it is the cost of discarded food, not just the sheer calories or grams but the grams with some financial value attached to it, that was quite a bit of work in itself on how to measure collection of food waste.

I started this story by saying Norbert went to this conference and these focus groups showed date labels were a pretty important attribute leading to the amount of food waste in the U.S.  That combined with some additional research we did, if you go into a U.S. supermarket, you’ll see a wide variety of date labels used by manufacturers.

Q: Are there any rules on the use of these labels?

A: The truth is there is absolutely no regulation on when or why to use these different labels. You’ll see a date, and then some text, such as use by, fresh by, sell by, best if used before, a variety of these words. All these words have different meanings to different people, but outside of a handful of products, there’s no regulations on why, how, or when to use these words. In fact, it’s a fun exercise to go into the grocery store, and go into the yogurt section or you name it. Sometimes the same manufacturer uses different words for different sizes of the same yogurt product. Maybe part of this is just a marketing effort to communicate some kind of message.

There are really no federal regulations mandating something be true when using these labels.

The Idea of ‘use by’ with consumers may have something to do with food safety, but there are no rules that say ‘use by’ has any food safety meaning or connotation. If you see the words ‘best by’, or ‘fresh by’, or ‘better if used by,’ you’d think that’s a message about food quality, but again, there are no rules. And you’ll see the different labels used in the same category. Sometimes you’ll see the words ‘sell by’, and we suspect consumers may ignore that because they think that’s a deal between the retailer and food manufacturer, perhaps.

Some states have rules about eggs, and there are federal rules on dates you use for instant formula. Outside of a very small number of food and beverage items, it’s just how we interpret them. It was surprising to me how loosely they’re used and then how consumers respond to this type of information.

Q: Is the problem similar in the UK?

A: This lack of standardization could be interesting to the British audience, because it’s been written about by more people in England and there’s more thought going into how these labels are determined, and a bigger push to harmonize these labels as a way to reduce food waste. There is a group based in the UK, called the Waste and Resources Action Program (WRAP). It’s a UK-based charity program. One of its sub programs is called Love Food, Hate Waste, and it’s really at the forefront of this labels harmonization. I will definitely reference this in my talk. 

Q: Has this organization done any studies to document the issue?

A: They have spent some time looking at this particular issue. They claim this is a problem but they don’t do the quantitative studies we’re doing to measure how the date labels affect food waste. It’s just more of a description of how they think or how panel or survey groups think, but they haven’t gone to the same trouble of measuring in a quantitative way.

Q: Isn’t this why what you’re doing is important when trying to determine proper allocation of limited resources? Science-based studies can corroborate or disprove subjective or anecdotal evidence…

A: Our research is not perfect. There are holes in what we’ve done but at least we’re making a start in trying to quantify these qualitative concepts, and figuring out how big a deal is this particular issue, which can help in making policy decisions.

Q: What did you discover in undertaking this research?

A: We set up this project to ask several questions, and now looking back, we may have tried to do too much, a problem we all have. We had six food products we included in our experiment:  yogurt, salad greens and breakfast cereal. And for each we included a small size, regular size and a larger size of that exact same product.

We were curious about the varying degrees of perishability, the salad being the most perishable, then yogurt, then the cereal. And second, how does the size of the package impact food waste. Looking at this Costco effect, as we move towards buying bigger sizes of things to save money, does it also lead to excess food waste.

Some might say salad greens are the most perishable, but also believe there is inherently more risk in consuming salad greens than yogurt in terms of food safety. We’re trying to get an idea on the range of perishability and in some consumers’ minds there may be a range of safety concerns across these three categories. We think possibly these date labels may have differential effects across these products because of inherently different risk profiles.

To make things more complicated, of each of these six products, we actually run the experiment with three different dates for each product. For example, with the large tub of yogurt, we introduce the product to subjects when the expiration date is two weeks away, and reintroduce that large tub of yogurt when the date is 1 week away, and then again with one day away from expiration. They all include a date label and numerical date. There are three dates per product and six products, basically 18 opportunities for them to weigh in on the value of the product and likelihood to consume.  

Q: Not to complicate things more, but a quick thought: Someone buying the large package of salad from Costco, might have a big family so it’s going to be fully consumed at dinner, compared to a single person buying a smaller size and only eating half of it, where the rest goes bad in the opened bag sitting in the refrigerator and needs to be thrown out…

A: Good question. After we go through this series of questions and valuation levels, at the end we ask people about their household, how many people live at your house, how many children, how often do you eat out, on a scale of one to ten, how much do you like salad, yogurt or breakfast cereal. And then we use all this information to control the statistical model. We basically make all the households equal, so that when we have an effect we can say it’s purely due to the product or the treatment.

We’ve already paid these people for a day of their time, and we leave time at the end to ask them these questions. Generally we believe they’re truthful. We never record who says what, it’s anonymous so people tend to be honest about these types of household questions.

One thing I haven’t said yet, we bring people into our lab, show them these products, ask them to tell us the value and percentage their household will consume as way to measure their discarded food. On different days we use different date labels. So if people come to the lab on Monday, we only use ‘best buy’, and when a different set of people come on Tuesday, we only use the words, ‘use by’. And the next Monday, always at the noon hour, we only use ‘sell by’. All the groups go through the same exercise, the only difference being the date label. As scientists we call this the treatment effect.  We ran each treatment two or three different times to get a reasonable size sample.

Q:  What was the demographic makeup, and number of participants?

A: We didn’t use any Cornell students. We used adults in the community. That sample is not necessarily representative of the U.S. population but it’s not terribly far off. We had about 200 to 250 people participating, a midsize experiment.

My guess is if we had UK consumers in the study it would change results. I’ll ask people in the audience at the London Show what they think. They could have different levels of trust in government agencies that regulate labels. In the UK they had some pretty serious food scares, especially the beef scare in the late 1980’s/1990sand questions on what government was doing with monitoring food items. A label on food in the UK talking about food safety would probably present a bigger trigger response than one suggesting food quality.

Q: What did your research show in this regard?

A: I’ll give you an overview of the key results looking at the average cost of discarded foods across all dates.  Maybe not surprising, the cost of discarded food is about 60 cents when participants saw the label ‘use by’. It was about 45 cents when they saw the ‘fresh by’ language. It was about 40 cents with the ‘best buy’ language, and about 30 cents on average across all products with ‘sell by’. The cost of discarded food on average was twice as much when they saw ‘use by’ relative to ‘sell buy’, and with the other two labels, ‘fresh by’ and ‘best buy’, half way in between. That ‘use by’ label had the highest cost of discarded food, which makes sense to me, because people associate that with food safety. That makes them a little more nervous, and they’re more likely to throw out a greater percentage of that food.

For my presentation in the UK, I’ll give more specific results. A noteworthy one: The label ‘use by’ on salads had the greatest effect across the three categories on food waste.  When participants saw ‘use by’ on salads the cost of discarded food was about 80 cents, compared to yogurt at about 50 cents.

Q: Did you examine how often in the real world ‘use by’ is put on salads compared to on yogurt or cereal, or these other labels you tested? It could be interesting to see how much a certain label is used in the produce department, for instance…

A: That’s a very good question. That’s something we are pulling together. Which categories are more or less likely to use certain words?  What we can say is we found products in all three categories with different brands using all these labels.  The majority of salads we saw in Ithaca, NY, used some language close to ‘best buy’, but we did see instances of ‘use by’, and ‘sell by’, although not ‘fresh by’. We put ‘fresh by’ in our experiment for fun, to test this food quality hypothesis. “Fresh by’ language you’ll see sometimes in the fresh juice category, but it’s less common terminology. There also wasn’t any consistency in labeling in terms of package format between bagged salads and clamshells.

Q: Did you consider altering the quality in packages of lettuce, but using the same label to see if the quality of product made more of a difference than the label?  If some of the lettuce leaves looked brown in a package with a better ‘use by’ date than another package where the quality looked perfect…

A: Visual cues would be an interesting experiment, if we offered lettuce with the same date label, but altered the quality. You do find quite a bit of differentiation in quality between packaged greens even when it has the same date. It would be a good category to examine in this way. Another would be meat. We’ve thought about that, but haven’t gotten to it yet.

The other issue is the effect of package size.  When we split it up between the small package sizes and the large package sizes, on average the cost of discarded product was 60 cents. It went up to 80 cents for the larger sizes and went down to 40 cents with the smaller sizes.  Perhaps obvious, but here we’re trying to quantify that. I don’t think it’s necessarily obvious that the cost of discarded food was twice as much between the larger and smaller sizes. The same thing holds, regardless if it’s a small package or a large package, the biggest cost of discarded food is with the ‘use by’ label and the smallest cost is with the ‘sell by’ label. Those differences are smaller in the small sizes and larger in the large package sizes.

Q: Has your research changed your mind in any way regarding regulations on food labeling?

A: When I first went into the study, I didn’t think harmonizing this kind of labeling was a good idea. Now I’m starting to wonder if there are some merits to a policy that regulates these words.  

Q: But then there’s the issue of who decides the parameters for the actual ‘use by’ date, and how that could differ based on different commodities, packaging technologies, and numerous other variables impacting shelf-life, etc.

A: And something else…how people respond to the actual date of expiration. I think that merits more work, fine tuning to see if it makes a difference if the expiration date is a couple of days away. What we did learn, when the product expiration was a week or two weeks out it didn’t seem to be as big of an effect as the words that went along with it. I went into this research thinking the date label wasn’t going to make much of a difference. Our results proved otherwise. Especially the impact that ‘use by’ and ‘sell by’ labels had on people’s thinking about food consumption.

It’s interesting to note, I was a little surprised that nearly all consumers, when asked, how much do you think your household will consume, they said a number less than 100 percent. They go into the supermarket to buy a product because of the value but right at the point of purchase, they already know they’re going to be wasting food.  That was an eye-opening finding.

The last thing I’d say, is that I recently was at the USDA for a conference, and they actually have a poster hanging in the cafeteria from the World War 1 era, with six points about food: buy with thought, cook with care, use less wheat and meat, buy local foods, serve just enough, and use what is left.  And at the bottom of the poster in bigger font it says, don’t waste it. I sit in my office thinking I’m doing something novel. And then I see a poster 100 years old and people are thinking about the same things as we are today, so I don’t know how far we’ve come. I guess it just means there are a lot of unanswered questions that require more study. 

******

Doing this presentation in London is interesting… as when Tesco came to the US as Fresh & Easy, two of the issues it encountered were relevant to this discussion.

First, it required almost all fresh produce to be packaged before sale, so a consumer could not buy just one plum, say, but would need to buy an eggshell-type plastic package of four plums. This packaging of items that in America are typically sold bulk brought Tesco much criticism, especially as Tesco was also trying to portray itself as particularly green. Now this study brings to mind another thought: By selling pre-packed produce, was Tesco also compelling consumers to buy more than they would have preferred and thus increasing food waste?

Second, whereas in America only certain produce items, such as bagged salads, carry expire or best-by dates, Tesco insisted on placing a date on all fresh produce. This caused great confusion among consumers as nobody could figure out what this date meant on, say, an apple. Was it dangerous to eat after that date? Would it not taste good? Nobody knew, and it seems likely it depressed sales and increased in store shrink.

The issue of giving these labels meaning will be an interesting one to discuss.

Also crucial is this concept that the world ought to aim for zero food waste. At every stage of the supply chain, this makes no sense.

Start with harvesting…a field may hold, say, a million bell peppers, but the goal is not to harvest a million peppers. There is a cost every time a field is harvested. To do extra pickings, which don’t return financially, is to waste valuable resources, such as labor. Avoiding food waste may be important, but it is not obviously more important than avoiding waste of money  which, after all, we could use to buy food if desired!

Equally, at retail the goal is not to zero out waste. We already know that if you incentivize produce managers on shrink reduction  in other words to reduce waste  they can do this. How? They order bananas green, they reduce the assortment so that all those interesting items that attract consumers to the department are no longer on display, and they order lower quantities and accept more out-of-stocks. The goal, though, is actually to maximize sales and profits, not to minimize waste.

And consumers want to maximize their happiness. Accepting that there will be waste allows consumers to stock up on the fresh foods they love, even though the vicissitudes of life mean they know they are buying product they may wind up not needing.

Contrary to what seems to be an implicit assumption  if all households decided to reduce their purchases to move to a zero-waste goal, these households would buy less produce — that does not mean that the poor will have more food.

This food is grown for customers who can buy it. If those customers want to buy less, less will be grown, and the impact on the poor will be non-existent except beyond the very shortest term.

Join us at The London Produce Show and Conference to hear Professor Rickard and participate in this important conversation.

You can register for the event here.

Book hotel rooms here.

And  review the website here.




How New Trade Agreements May Set The Stage For A Produce Industry Boom, But Will The People And The Politicians Let It Happen? 
Miguel Gómez Of Cornell To Present The Facts And Moderate The Discussion At The London Produce Show And Conference

Miguel Gómez works tirelessly to take the research done in the Ivy League halls of Cornell and make sure it gets out in the industry where it can actually change the world. He has spoken at both The New York Produce Show and Conference and The London Produce Show and Conference,and we have highlighted these presentation in pieces such as these:

UNIVERSITY HEAVYWEIGHT PUTS SCIENCE BEHIND OPTIMIZED GLEANING SCHEDULES: Cornell’s Miguel Gómez Talks About How The Produce Industry Can Put Itself On The Side Of The Angels By Reducing Food Waste While Helping The Hungry

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

This year Professor Gómez is doing a  sabbatical year in Zaragoza. This year he not only brings his ideas, but he has helped expand our University Interchange Program. 

The students are coming from the MS program in Agro-Food Marketing at IAMZ. The IAMZ is part of a European Union Institution, called the  International Centre for Advanced Mediterranean Agronomic Studies. The students come primarily from the Mediterranean region,and they are really outstanding students. Professor Gómez has been teaching a module in this MS program for the past eightyears.

We are always looking to expand both the intellectual capital of the industry and the talent pool from which the industry draws its future, and with Professor Gómez, we get a too-fer!

We asked Pundit Investigator and Special Projects Editor Mira Slott to find out what the good professor has in store for us this year in London:

Miguel I. Gómez
Associate Professor
Charles H. Dyson School of
Applied Economics and Management

Cornell University
Ithaca, New York

Q: It is always an honor to have you present your eye-opening research at The New York Produce Show and Conference and The London Produce Show and Conference as well as the Global Trade Symposium and Foundational Excellence Program, and various thought-leader panels. You have played an important and supportive role in addressing myriad issues facing the industry. What is the scope of this year’s talk?

A: I will critically examine how trade liberalization and globalization of food supply chains impact produce businesses, looking at global trade patterns and trends in countries driving global demand, and factors affecting the competitive landscape. These include import regimes, global food industry structures, nontariff barriers, and government policies. In that context, I will highlight opportunities and threats for produce businesses resulting from globalization.

Q: You’re certainly covering a lot of ground, which is par for the course as attendees enamored with your information-packed presentations can attest. Could you walk us through the points you’ll be discussing?

A: I will be talking about trends in global trade for fruits and vegetables in exports but also in consumption. I will discuss cases of countries that have increased exports dramatically in recent years, specifically Mexico and Peru. The first point I want to make is global exports of fruits and vegetables have increased dramatically.

Q: Do you have comparative numbers on sales and volume growth?

A:Global trade overall has more than doubled in value in the past 10 years. In 2004/2005, the amount of exports was $50 billion per year, while just in 2014, we had $106 billion in trade.

This is incredible growth in dollars. In terms of volume, in metric tons exported, this increase is only about 50 percent in that same period between 2005 and 2014. It means international trade is driven primarily by high-value products; high-priced fruits and vegetables. Examples of low value would be bananas and onions, which are important for export volume, but the growth is not there.

The growth is in high value items, such as asparagus, broccoli, mandarins, special harvest apple varieties, and grapes, which have spiked in growth the last few years.

Q: Are there government statistics on which products are experiencing the fastest growth and from what countries?

A: In general, international trade for most fruit and vegetable products has increased. However, according to the USDA Trade database, the fastest increases taking place for fruits: dates, figs, pineapples and grapes (fresh), and for vegetables: carrots, turnips, onions, shallots, cabbage, cauliflower and fresh tomatoes.

As you can see, the growth has been driven by ‘not-so-exotic’ products, but their value in the international market has increased substantially. It’s noteworthy that China, according to FAO data, has experienced the fastest growth in both fruit and vegetable consumption in the past decade. Products driving increased per capita consumption of produce in China, according to the FAO database for fruits: citrus products, apples, pineapples, and for vegetables, peppers, peas and tomatoes.

Q: Compared to other countries, is China unusual in its increased per capita consumption of fruits and vegetables?

A: I will talk about trends in consumption. First in vegetables, when you look at public consumption, according to the Food and Agriculture Organization of the United Nations, the only country increasing vegetable consumption is China of the main country importers, based on per capita. Total imports are still increasing because there are more people.

Asian countries tend to have highest per capita consumption of vegetables. Mainland China and Asia are driving up demand for vegetables more and more. I have aggregate numbers per capita consumption. I’m building my numbers from Food and Agriculture Organization data bases.

Q: What is important for attendees to know in relation to this data you’ll be providing?

A: The insight, first off, is that the industry will depend more and more on international trade. Second, most of the growth in fruit and vegetable imports is happening in China and Southeast Asia. The third point is increasing export opportunities from Mexico and Peru.‚Äč Industry businesses in different countries are taking advantage of growth in these regions.

Basically, what I want to tell the audience, international trade of fruits and vegetables is becoming more important. People interested in the sector should be thinking globally.

Q: In the U.S., amid presidential election politics, free trade agreements have become a hot button of debate. What insights can you provide here?

A: These trade agreements are going to be good for the produce industry because more trade equals more wealth and more business for the industry. Free trade increases consumption and supply so everyone benefits in the end. So perhaps we can talk a little about the Transatlantic Trade and Investment Partnership (TTIP)the agreement to remove barriers between investment between the U.S. and the European Union. This is an important issue for the industry.

We should explain that generally for economies this is good for the wealth of countries; more trade is for everyone to be better off. I would like to talk a little about the TTIP concerns and opportunities, and what the agreement could imply for the industry. There is a lot of trade already between the EU countries and the United States.

The U.S. exports more to the EU than it imports from the EU. But it’s pretty balanced. Exports from the U.S. to Europe and imports to the U.S. from Europe are pretty much in line.

The produce industry in the U.S and Europe is very well integrated. There is a lot of trade going on already. The point is the TTIP, if it is signed, may further increase this trade. The last two aspects of this trade between the U.S. and Europe involve the level of tariffs and phytosanitary regulations and barriers for imports.

When you look at tariffs, they are very low already for fruits and vegetables. The average tariff level in the EU for fruits and vegetables is about 10 percent, and the average for the U.S. is only about five percent. If tariffs are eliminated, according to these levels, it will benefit U.S. exporters. However, when you look at the change in tariffs, that won’t generate a lot more trade. What really will generate more trade will be elimination of phytosanitary barriers.

Q: Would that have any impact on food safety?

A: No, phytosanitary rules involve procedures for keeping an insect or disease that doesn’t exist in an importing country out of that country or growing region. But there are rules and regulations that are different in Europe and the U.S.

In the context of the EU and the U.S. trade negotiations, the argument is phytosanitary barriers are the biggest and most costly obstacle to bilateral trade between the EU and U.S. The European claim is that barriers and regulations are much stricter and more costly in the U.S. than in Europe. The U.S. tends to operate what is called a closed import system.

Companies have to undergo lengthy procedures, applications for assessment; even sometimes it requires U.S. representatives to go to the export country to approve production and postharvest procedures to be acceptable in the U.S. For example, U.S. inspectors need to be flown into Europe to inspect shipments, at the European’s expense.

Usually, U.S. exporters to the EU have more lenient rules and procedures to get approval.

Q: It’s interesting the EU phytosanitary rules are more lenient than those in the U.S. I thought Europe was more aggressive than the U.S. on restricting certain types of pesticides and chemical use…

A: I think that is true. Europeans are concerned about pesticides yes, there are whole industries such as the export of McIntosh apples and Empire apples to the UK, where only two or three exporters will take the risk as the residue levels are so tough. On phyosanitary concerns, though, the US is perceived to be tougher. This is all part of the negotiations.

The TTIP focuses not only on decreasing levels of tariffs but also developing common phytosanitary procedures for trade. This is something I want to share with the audience, because it is important for the industry. On the one hand, Europeans are asking for a more common set of import/export rules for fruits and vegetables. They think that will help them export more to the U.S.

I think it is an advantage to both sides; the U.S. will benefit from lower tariffs, but at the same time, Europe will benefit from less costly procedures to export to the U.S.

Q: Is there any concern in relaxing the phytosanitary rules?

A: I don’t think so, quite honestly. Europe has a reliable produce industry.

Q: Why then has the U.S. had such trying phytosanitary rules and procedures for European trade to the U.S.?

A: When we think of trade agreements, our tariffs have come down to easing barriers to trade, and phytosanitary rules have become more important. I think it is hard to generalize; in some cases it may be of value to impose very strict regulations, but in other cases phytosanitary rules are used to protect the local industry from competition.

Q: That being said, is there some pushback from local industry concerned that the agreement could make it harder for them to compete?

A: Yes, of course. In some cases, it will lead to more competition, but you are protecting local industry at the expense of having higher prices for consumers. In the end, opening trade is better for the industry, consumers, and for society.

Q: Could you elaborate on the broader picture of global trade opening up?

A: I also would like to talk about how some countries are increasing their presence in international trade. They are doing things right, improving technology and infrastructure, and also signing trade agreements.

Mexico exports tomatoes to the U.S. and Canada year-round. Controlled agricultural techniques, shade houses/greenhouses are a very important development in parts of Mexico. Mexico had infrastructure limitations in the past and is catching up fast and providing products at very competitive prices to the international markets. Other countries fall into this scenario.

In the case of Peru, it has a fantastic infrastructure for postharvest and exports and has made huge investments in the ports to allow Peru to become a leading exporter of high value vegetables such as asparagus. These are countries, particularly Mexico and Peru, with the capacity to produce high quality products, complying with safety regulations of importing countries and becoming important players not only for exports to the U.S. and Europe but also increasingly exporting to Asia.

Q: How is this changing the competitive landscape?

A: This is important globally because if you look at regions such as the U.S., Canada or Europe, demand for fruits and vegetable consumption is not growing domestically. These countries are looking for places to export their products and need new markets.

There are new players developing very strong competitive advantages in some countries. The growing demand in Asia is generating change with suppliers in countries not traditionally strong in exports.

Q: Is there a risk of flooding the market with too much supply?

A: I don’t think so. I don’t think there is risk of excess supply because global demand is growing. Businesses just need to be strategic to capitalize on the growth and fill the gaps.

The produce industry is less likely to suffer from new players entering the global market, because it is much more integrated than many other sectors in the food sector that have higher barriers to trade. I think closing trade would be very bad for the industry, but I don’t think that’s realistic with fruits and vegetables when you have multinational companies in every continent in the world. More trade agreements will facilitate trade and allow consumers to have year-round fruits and vegetables.

Q: Since growing windows are limited for most locally grown produce items in different regions, global trade is necessary for year-round availability. Doesn’t this create a precedent for international trade agreements less urgent in many other industries?

A: There are a few examples of items like cabbage or potatoes you can put in storage, but in general, these are very fresh items, and even with storage, the products don’t have the same value, quality or nutritional content and they decay. The industry is highly seasonal so trade is essential.

As I was preparing this talk and working on these issues, I am so surprised how important Asia is as a source of demand for fruits and vegetables. I’m amazed how the businesses are shifting toward China in the produce industry. Five years ago, it was not that important. In the past 10 years, I’m really surprised in the shift, and the level of importance Asia is gaining with consumers for fruits and vegetables. They have very strong domestic industries, but I think there are many opportunities on tap for the U.S. in China, as well as in Latin America and Europe.

The other agreement I’ll mention is the Trans-Pacific Partnership (TPP). China is not a part of that. TTP is generating a lot of potential but we need another hour in my presentation to discuss that. With the new Trans-Pacific Partnership, it is estimated for the U.S. by 2024, vegetable exports will be higher by 20 percent and fruit exports will be higher by 25 percent. This illustrates how powerful these agreements are for the industry.

Q: What advice do you have for produce executives attending your talk on how to capitalize on this international trade growth, and to gain a competitive edge?

A: My first piece of advice: Businesses should look at the global picture, don’t forget how important these trade agreements are, and how they shed light on the future. Second, when looking at particular export markets, try to develop relationships with local farmers that know the distribution system in the importing country, especially because produce quality is so difficult to maintain and to judge.

So it’s important to build these contacts, certainly at the beginning. It’s good to have a strong importing partner in the initial stages. This is particularly crucial in Asia, and in countries where the infrastructure and transportation systems are not as developed.

Retailers are in unique position to tell the supply chain what areas have high demand, what fruits and vegetables are enticing consumers to buy more. Especially when producing from far away, the retailers play a key role in sharing marketing information to sell the right product at the right time of year.

Global standardization is the next stage. For instance, organic trade has incredible potential, and is poised to grow but the problem is the assurance issue. We need common organic certification everywhere. We have USDA certified organic and certain guidelines and rules, but we need to work on a common definition of what organic produce is to promote it internationally, but the demand is there. GlobalGAP and standardized food safety certifications and procedures of compliance and transparency remain a critical step in harmonizing international trade.

******

That more trade equals more prosperity is a truism among economists. And there is little doubt that the produce industry will be more prosperous if it can ship freely throughout the globe.

Yet, in the age of Trump and Brexit, it is not clear that even establishing that freer trade will boost GNP is sufficient to move forward with trade agreements, both on the table and proposed.

On the one hand, the concern is that this trade-induced rise in GNP may not, in fact, trickle down to unskilled or lower skilled laborers. Living in an advanced western economy was unique in that it provided opportunities for even unskilled people to make a decent living. Now the fear is that globalization, expressed via trade and immigration, make that harder to happen.

The other fear is that increased global prosperity sounds great in abstract, but whether it is really a good thing depends crucially on a political, not an economic, decision, which is: What do countries do with their increased prosperity? 

Bringing, say, China into the global economy has increased prosperity on both sides, and some would argue that this economic integration is a force for peace – one is less likely to try to destroy a profitable trading partner.

Still, if China uses its greater prosperity to build islands in the South China Sea and cow its neighbors into expanded Chinese hegemony, if it uses its resources to build more and better nuclear weapons, then is it possible we would have been better off denying ourselves the fruits of trade in order to deny them the surplus to invest in these things?

So on a micro level, the course is clear: Produce companies should recognize that it is a global world and pursue all the opportunities out there. On a macro level, the pros and cons of free trade and free movement of peoples are the heart of modern political debate.

We hope you will join us at The London Produce Show and Conference to get a produce industry spin on these important discussions.

You can register for the event right here.

You can book hotel rooms here.

And get caught up on all the details of the event right here.




CALLING PROPAGANDA RESEARCH
Swedish Supermarket Should Be Ashamed...
Organic Study Won’t Pass Scientific Scrutiny...
Disparages Conventional Produce Without Cause

Coop Sverige AB, a Swedish supermarket chain that “promises to do everything it can to support organic farming and urges others who sell food to do the same,” puts out videos such as this one called, The Organic Effect:

Here is a copy of the English language version of the report on which the video is based. 

The study was simple… they took one family that didn’t eat organic and took urine samples. They then had the family eat strictly organic food for two weeks and then took more urine samples.

They tested for several conventional pesticides and determined that eating organic dramatically reduced the amount of these pesticides in the urine of this family.

Obviously, the study was small, with just one person of a particular age and sex, so no real lessons can be drawn. But, more importantly, the study is flawed in its design:

1) No long-term outcomes

If one wishes to study the health effect of something, one actually has to study a long-term outcome. Did people with a certain chemical in their urine die earlier than people without this chemical in their urine?  Did they get cancer more frequently? Develop dementia more frequently? Otherwise, we don’t know if there is any harm at all.

2) Odd thing to study

Urine is an odd thing to study since if something is in the urine, we know that the kidneys have done their job of getting this substance out of the body. In this sense, the study indicates the opposite of the implication the video tries to make. The study indicates the body is capable of excreting substances it doesn’t require or which might be dangerous.

3) Selective testing

The study tested the urine for certain common synthetic pesticides known to be widely used in agriculture and, low and behold, the study found residues of these substances in the urine. Then, when the test subjects switched consumption to organic product, grown without these substances, the incidence of these substances in the urine either declined or disappeared.  But this is a bizarre study. After all, those organically grown substitutes were not grown without pesticides and fungicides, and many of the substances used in organic farming are toxic. Obviously any reasonable study would study pesticides used in conventional agriculture and organic agriculture. Then an assessment would have to be made if residues of one are more dangerous than residues of another.

Consumers like all kinds of things, and this Pundit will battle to the death for their right to buy organic if they so choose. But there is something wrong with retailers funding one-sided studies and putting them out as offering an important insight into the health effects of consumption of conventionally produced foods.

It seems like a scare tactic to move consumers to higher margin items, a marketing trick to try to differentiate one chain from another.

The reality, though, is that it needlessly downgrades the conventional items sold in the store and attempts to play on the emotions of consumers rather than their intellect. That seems an unlikely path to lead people to make prudent decisions about their food choices and their budgets.

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