Business people tend to spend a lot of time on incremental change. It is progress, but achingly slow. Very often the big wins come from seeing things in a totally different light.
When we learned that Catherine Powell had left Disney, we knew that if we could get her to join us at The Global Trade Symposium of The New York Produce Show and Conference that this would be a moment for the produce industry to open up and absorb new ideas and new ways of thinking.
It all worked out and, now, in her first public appearance since leaving Disney, Catherine Powell has agreed to share the leadership arc she has traveled.
We asked Pundit Investigator and Special Projects Editor Mira Slott to find out more:
Global Business Executive
Most Recently President of Disney Parks,
(Walt Disney World, Disneyland Resort, and Disneyland Paris)
Los Angeles, California
Q: We’re elated and honored to have you present at the New York Produce Show. It’s hard to know where to begin with this preview interview. I’m intrigued to learn more about your worldly, visionary leadership journey intersecting through your tenure at Disney, and as an advocate for diversity and women’s empowerment.
A: It’s so nice we connected in time for me to be a part of the Show. I will be doing a mixture of presentation and Q&A on stage with Jim. We can discuss the themes we want to cover and then draw out those that are relevant to the audience.
I can talk a little bit about me and my career and what it was like to work in different cultures, and in a broader sense, how that informs an understanding of who your consumers, or customers are.
Anecdotally, how I had to change my business dialogue in negotiations and of what my expectations were, whether I was working in Europe, or when I went to Australia, how different that was than Paris. Weaving in my story, through the different consumer cultures, which I think is very relevant to produce industry executives, and then weaving in my leadership learning. When you become an expert in one line of business, how then you transfer to general management, and the muscles that I had to build.
On stage, I can take you through my journey, with a call out of pictures of myself in different roles and different countries, and then Jim can ask me questions, as well as the audience on what most interests them, and where they would like me to dig deeper.
Q: I imagine you can provide many insights about the role of food and restaurants and wellness in the Disney universe. But the ideas and vast experiences you bring from outside of produce will surely be as helpful to produce industry executives.
It sounds like your childhood immersion in different countries, and decidedly magical “Disneyesque” marriage to Hugh Powell, a foreign diplomat, was a foreshadowing of your adventurous career direction.
A: That’s true. I’ve lived all over the world, I grew up in Hong Kong, and I married someone in the diplomatic service. With Disney, I lived in Australia, then back to Paris and then the U.S.
My father was in the army, so I grew up in the UK and Germany, but when I was eight, we moved to Hong Kong. I lived in Hong Kong for eight years; at that point my father was not in the army. I went to school there a couple of years, and then went back to boarding school in the U.K.
But living abroad, living in Hong Kong and spending holiday in Southeast Asia, it marked me considerably in terms of being very aware of different cultures. When I went back to school in the U.K, I had an experience that was very, very English. English boarding school… you can’t get any more British than that.
And then living in this world where I was enveloped in different cultures, different languages, different foods, strong smells permeating in the humid hot summers, things you don’t recognize in the UK, that my friends at my English boarding school couldn’t understand. I learned at a very young age having the opportunity to travel in Southeast Asia, seeing other countries, Indonesia, Thailand, the Philippines, to see the diversity of cultures, people, religions, it was an important influence on me being open minded, and culturally sensitive to different people. I could see this in marked comparison to friends in the UK, worlds that were rich but kind of had parameters around them in a way that mine didn’t.
Q: Any strong memory that left an impact or was it more a blend of experiences?
A: Southeast Asia is so different. I remember the first time getting off the airplane and hitting that wall of humidity engulfed in the smells, and spending time in boats as I love the sea. It’s like going to India; your senses are bombarded with the noises, and the smells and the tastes. Having that incredibly visual and intense sensory perspective. Ages eight to sixteen are very formative years when you’re going into who you become.
The other part of the impression of living in Hong Kong and Southeast Asia was that I was always curious about other cultures and other countries. I think it’s why I’ve been so willing and ready to live abroad. I’ve spent a huge amount of my life abroad.
Funny enough, my husband was brought up in the foreign service as a child of diplomats. He was born in Finland and lived in the US, Bonn and Brussels. He too is a diplomat, still currently on sabbatical from the foreign office. He also has this curiosity of different cultures, and what does another country have in store. We both share this, and it’s part of why we’ve been willing to make these moves.
Q: It’s wonderful that you found someone that you’re so connected with in that way.
A: Yes, it has been amazing that we found each other, but it has involved compromise. I couldn’t have done what I did without him. But the first half of our marriage, I followed him with his posts, I gave up job opportunities, and then he followed me, and he gave up his job for me.
I think it’s all part of the willingness to travel and live abroad, and that’s something I share with my husband. So, there was probably a subconscious desire to marry someone in the foreign service, knowing that what comes with that is travel. We had our first post in Paris, and then my husband worked in the British embassy, then we lived in Berlin, Germany, and then back to the UK. Then that was the point where I said, OK, I need to focus on my career now because it was constantly changing. And then my husband went to Afghanistan, not in the military but in a civilian capacity. That was quite tough.
When I joined Disney, it was the longest period I spent in one place, for 10 years, from 2004-2014 in London, where I held multiple roles in Disney Media Distribution. That’s during the time when my husband was in Afghanistan. I then picked up and went to Australia [from 2014-2016 as managing director for Disney’s operations and business division in Australia and New Zealand], and then to Paris [from 2016-2018 as president, Disneyland Paris], and then we all moved back to the U.S. to LA [2018-2019 as president, Disney Parks Western Region.]
Q: You’ve had such a rich life..
A: The opportunity to work at Disney has been phenomenal. Living in Australia was the biggest family adventure. I remember talking with my husband, who at the time was deputy national security advisor, and he was the one who said, if we don’t go now, we will never go. We’ll never have an opportunity again to live in Australia for a family adventure. We should do it. He took a sabbatical, and we moved as a family to Australia. Staying on the theme of family, my 18-year old was happily out the door to Sydney, and the other two were far less certain about moving to Australia. My children went to school there. My eldest went to university there, and my 17-year old still has an Australian accent.
My youngest ended up staying on his own when we all moved back, at a unique kind of boarding school, out in the country side for a year-long program, they had no electronics, no phones, no TV’s or Play Stations, and every weekend they would ski, hike and at the end ran a cross country marathon.
My three boys move around, but they’re all in the U.S. now. Josh, my eldest, is doing post grad now at USC. My middle child is coming up now working in Orlando in Disney World and my youngest is at high school here in Los Angeles.
Q: Your kids have followed in your footsteps.
A: They’re really global kids, who have grown up, where moving around is the norm. And they’ve seen their parents move for each other and leaving jobs for each other.
Q: Also, the ability to adapt..
A: I started my career in TV production in England at BBC Worldwide, traveling around in different countries, touring Africa in war zones, as far from Disney as you can get.
Moving to Paris involved learning a new language, and a new skill set for media distribution how TV in France worked and what was relevant for consumers. I needed to understand the cultural sensitivities, what people were watching on French TV was very different than on the BBC in the UK, and markedly different than in Australia.
When I went from what I was doing in Paris to BBC catalogues across Europe, it was interesting from a format perspective, to take a quiz show or reality show or scripted drama and convert it and sell an adapted version. For example, we were pitching Fawlty Towers to the Germans, and the reason it was so ironic is because there was a famous scene about not mentioning the war, the idea that we make a comedy series that kind of laughed about the war.
For format sales, you couldn’t just do a template, whether it was a scripted drama or a studio show, you had to adapt it to ensure that it was going to work. Another example, the U.S. version of The Office compared to the UK version.
In terms of adapting, I had my first baby in Paris, my second baby in Germany and my third baby in the UK, along with the challenges medically in three different countries with three different languages.
Q: That could make a good TV Show to distribute in various iterations.
A: It’s really quite funny to talk about it.
Another interesting thing… when I started to work at Disney in the digital space, the iPad had just launched, Desperate Housewives was one of the first deals, and based in London, we were really trying to break new ground, what content should go through, what were consumers willing to watch on their mobile devices, and prepared to pay for, which countries had higher broadband for mobile penetration, and really building that business at that time.
Q: Keeping up with the fast pace of technology is something the produce industry can relate to
A: Yes, trying to keep the contracts up to date, and future proof them in a world where we had no idea where it was going.
At that time Disney had some of best shows, the best content in the world. People were talking about content being king. And we were in a very strong position with that content. Since then, the way of consuming content has significantly changed, devices have become important. The whole eco system for the consumer is much more complicated.
We can talk about this, and how can you anticipate the consumers behavior, rather than play catch up; how can you try and get ahead and create an experience, before they realize they wanted it.
Q: Do you have examples of ways you did this?
A: In Paris for example, we had one product, the Park that we marketed. One of the big shifts when I was there was to understand our consumers, and who was not coming. We had so many different consumers out there from different countries, with different expectations, with different behaviors, with different cultural specificities, and different incomes. How can we talk to them and create product packages and experiences relevant to them, as opposed to just one product at one price available?
There are other things you could do, something when kids are going back to school in France, which is such a big time culturally, a huge retail opportunity to ride that wave. In Disneyland Anaheim, for customers who celebrate the Chinese New Year, how can you have these immersive experiences that are culturally relevant and talk to the consumer, and market it so it’s also relevant?
What we found in Germany is they like catalogues with a lot of information, while the British might be happy to do things online.
If you want to grow your business, you need to understand and meet your customers’ needs.
On the retail side, you’ve gone from brick and mortar to e-commerce and you have your omnichannel, where it’s about the ease and the convenience, I can order on the website and my mobile and pick up here...
Where Disney is moving to is a truly integrated eco system, where you have this relationship with your guest, your consumer, where you’re with them through their journey, not just when they’re at the park, how to you meet them where they’re thinking, whether they should go to the Park. When they’re there, how do you ensure you’re giving them the most relevant experience to them, and when they leave how to keep that conversation going.
We talked a lot about shifting from a transactional relationship to a relationship arc, having ongoing conversations that are emotional not purely transactional.
Q: Disney and emotions are indelibly tied together for many people...
A: That’s true. Disney is already an incredibly emotional brand, what people feel is extremely strong, and connected with creating memories with their families.
Q: Your reflections and parting words as you left Disney for new adventures are inspiring. I thought it would be nice for you to expound on those beliefs with some examples of what makes a good leader and intuitively a great team.
A: The first is to view your career path as a series of stepping stones rather than a ladder to climb..
When I was at BBC Worldwide, very early on I was a sales executive selling programs to different countries. From there the logical career path, I could become a sales manager, and then a director over time. My husband had gotten posted to Berlin. And because I was already selling programs to Germany, the BBC said I could take my job to Berlin and do it from there, which meant I could work for the BBC in Germany. My decision veered from a straightforward move up the sales ladder but allowed me the opportunity to work in a new territory and do another country.
Another example at the BBC, I had the opportunity to work on format and try something different. That was my first experience getting close to content, to learn what a product was all about; it could be a film, it could be a ride, it could be a piece of merchandise. In this case it was a catalogue, how do you make that relevant and adapt to diversity, a format for Russia is very different than for countries in the Middle East. That ability to adjust position and content for the consumer, that triangle has stayed with me and helped me through my career.
In some ways, going to Australia, was a sideways career move, less relevant than what I was doing at the time I left Europe, where I was one of the digital people with a seat at the table. In Australia, I could learn general management skills. I was not head of a vertical business that was very important and at the heart of Disney’s strategic vision going into a digital world. I made a shift from being an expert deeply involved in a small business, to becoming a general manager for eight lines of business in Australia where I was able to be a leader even where I wasn’t an expert.
Q: You’ve shown a willingness to take career and business risks, not easy for many people..
A: You can’t disrupt or transform without courage, even if there is a risk of failure. Having courage goes hand in hand with seeking change. When it happens to you, embrace it. It could be personal change, as well as taking a risk in your career, or taking your business in a different direction. How does one do this. How do you find the way to go? A good starting place is to ask why do we do things this way? It is not about saying this is wrong. What were the policies we were making that have defined our structure? In Australia, for example, there are companies that have doing business with contracts in a certain way, that are no longer relevant. What were the kinds of assumptions that defined these policies, what were the contributing forces, and are they still relevant?
I try not to be negative. This is not saying what you did in the past is wrong, but is it time to change, and as a leader can you accept it. In Australia, I gave permission to the team to walk away from a bad deal. Look, we need to do things differently. Let’s think if there is a better way, to fish in a completely different pond then keep fishing in the same pond and hope you catch a bigger fish.
In a business to business situation, you need to be prepared to hold your ground and walk away and say no. If it’s about consumers, how do you re-train them to see that what you’re offering them is something that still has value. In Australia, we lost this idea that the Disney brand had great value. And in Paris, we were offering discounts. How do you break out of that and not lose your core, premium consumer base?
One thing I said in Australia, we should not just equate value with cheap. Value means you feel good for what you pay for. That’s good value.
Q: There are some parallels here with produce, and value-added products that could lead to some interesting discussions.
A: You want to feel good about any product in the world. Marketing and communication are parts of that, but you have to start with the willingness to do things differently.
Q: If there is a big initial investment before seeing a return, some companies are hesitant to jump in.
A: The bigger the investment, the less appetite for the risk when a business is doing OK. When you have a gun to your head, when you have a sinking ship, it is a lot easier to make radical decisions.
Q: But it’s certainly better not to wait until it gets to that point.
A: Absolutely. You need leaders, unless it’s a technology tried and tested and everyone’s doing it, and it’s a no-brainer, and you’re late to the party. When something is new and hasn’t been seen before, it’s difficult, and you need strong leaders with a belief in their vision and courage.
Q: You also say it’s important to be authentic.
A: Yes, as a leader you want to build trust and loyalty. Your teams have to believe in you, that you’re true to yourself and to them. You need to be open to all ideas. People will recognize authenticity immediately, it makes you vulnerable if you’re authentic. People will see when you struggle with things if you’re more transparent.
For your team, you become much more inspirational. When leaders are on pedestal and inaccessible (although there are many good leaders that are inaccessible), it is much more difficult.
Enjoy and encourage the success of others. Sharing success and building that team spirit is one of the things I learned under an amazing leader in Europe who really pursued integration.
Integration as it related to focusing on the overall success of the European business. That meant that for one line of business to do that, it meant another line of business might have to compromise. An example would be to take a Disney exclusive channel and make it non-exclusive where more people and more families could see it. The people licensing the content suddenly lose their premium, but overall the brand is better recognized, and everyone is going to be better off.
Q: Issues surrounding the value of exclusive licensing agreements with produce varieties is a topic that will be discussed at the Show, but there are some unique circumstances specific to the fresh produce industry here..
A: I had been trained coming from media distribution… let me do my deal, I got 50 percent increase in licensing fees, and that’s amazing. When I was in Europe, we talked about integration and really understanding the value of shared success. An example, whereas before, running media distribution, my teams wanted the best possible deal, and increased margins, but did you talk to your colleagues in consumer products because they might need support on their retail campaign? Did you talk to your colleagues in the studios because this could be connected to their franchises that might want to work with your media partners? It was understanding if you work collaboratively that the whole is greater than the sum of the parts.
I can share a most personal experience. One of my feedbacks 10 years ago was that I was incredibly enthusiastic about ideas that I wholeheartedly agreed with. I would get behind things, but it was if I really agreed with them or it was my idea. It was really training myself… if initially you may say I don’t agree with that, you’ve got to listen, you have to listen all the way through, and encourage people to come up with ideas. That was something personal to me, but the other reflection goes back to change. If you have a structure that is hierarchal and top down, you don’t encourage people to come up with ideas. If you want your business to grow or stop from failing, you need ideas from people on the ground, who are living and breathing it, and empowering people.
An example: We learned that people on the ground were buried in reams and reams of paperwork taking up their valuable time, and we were able to change that by digitizing with an app. I believe that ideas can and should come from everyone and anyone, and to create a truly diverse environment.
Bob Iger is on the record saying Disney content had to be diverse because Disney consumers are diverse. And to produce truly diverse product, Disney’s work force base also needs to be diverse. But it extends to beyond employees. I believe vendors also have a role to play in being diverse. Diversity and Inclusion seeps into your value chain…. This could be vendors lead by women. It doesn’t necessarily mean the product they are producing is different.
Diversity helps to create the right experiences and products that are relevant to your guest base. Broad diversity is key, to have an employee base that is racially and multi-culturally diverse. Diversity embraces all sorts of communities: women, people of color, LGBT, those who work with accessibility issues and more. All of these diverse groups are part of Disney’s employee and consumer base. We need to talk to all of them in a way where they feel understood and that they belong.
Q: Is there a trend toward more healthy and nutritious products?
A: With food and beverage, it’s more about having choices and making healthy products available, but it’s not about telling people what they should and should not eat.
Q: That coincides with the idea that when people are on vacation at a Disney Theme Park, it’s about fun and treats..
A: In terms of the future and trends, it’s about understanding where people are with their values and what they care for in life, and catering to people of different nationalities, ages and sexes.. Millennials, for instance, may be very vocal about what the brand represents. It’s absolutely essential as a business to understand your value to consumers and whether you are representing that value in your brand, and also taking the opportunity to re-enforce that value.
Q: Your presentation will stimulate great discussion for attendees to take away with them. To conclude this amazing preview, what would you say were the biggest challenges you faced in your leadership journey so far. And what are the biggest opportunities as you start your new adventures?
A: The biggest challenge was, when making such big decisions and changes in my life that my family was happy. I could never have done any of the moves if my husband or my kids were unhappy. It’s all very well to say be courageous, but if you have a family, they need to come with you. Therefore, that balance of making sure the family is happy is most important for me.
I often talk about the challenges of that work-life balance, and for me that happiness balance, which comes down to the decisions we make as a family; and compromise and bringing up children in an environment where they see that. Thanks to my husband, I believe that compromise tipped in my favor!
What’s next, I want to try and take the time to find something exciting and meaningful. I’m so appreciative of what I’ve learned and my opportunities at Disney.
Success is a challenge not easily met. Catherine’s life makes us think about real issues, such as how important it can be to create situations in which not just your employees, but their families can thrive. After all, how can you get the intense dedication of your people if they struggle worrying about their families?
This story also makes us all reconsider our own commitment to success. On the superficial level, would you be willing to travel, to go where the opportunities are when they are there? How could you collaborate with your spouse to organize your life so you can take advantage of such opportunities?
It is often a challenge to know how to apply lessons from one venue to another. A big company can take some chances, play roulette, but know it is not Russian roulette. A smaller family business or entrepreneur on his own may live under the cloud of fear that this mistake may be his last.
The Global Trade Symposium is an intimate event. Catherine Powell will join us for lunch, then give her presentation and then this Pundit will moderate a discussion with her and the attendees.
Catherine Powell is rock star global executive; this opportunity is like a chance to chat with Bon Jovi in an intimate theatre. The opportunity is unlikely to come around again, so you miss it at your peril.
Come join us at The Global Trade Symposium and open up to new ideas and a future filled with potential.
The website for The Global Trade Symposium is here.
The website for The New York Produce Show and Conference is here.
If you need a hotel room, please advise us here.
If you are already registered for the New York show and wish to add The Global Trade Symposium to your registration, please tell us here.
And you can register for the whole event here!
Come and take the steps to build your personal leadership journey. Join us in #CelebratingFresh
To get a little insight into how this might go, we asked Pundit Investigator and Special Projects Editor, Mira Slott, to find out more:
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Q: “Heading out to blueberry visits near Guadalajara,” you wrote me, as you scribbled a litany of notes at the Durango airport for your Global Trade Symposium presentation . Now squeezed in between your planned 8-hour layover in Dallas -- part of your regular travel strategy to comb local retail scenes in search of revelations — I’ve nabbed you early Saturday morning for a sneak preview…
A: I’m getting prepared for challenging quick-fire questions from Jim!
Q: No surprise, your presentation is covering a lot of ground:
Changing Grape Industry-from Genetics to Retail-branding/varieties
Sustainability, Food Waste, Packaging and Plastics
The Rise of Peru
Business Models for Success
B2B vs B2C
Channels of Distribution
Travel and Life of A Produce Man
I figure if you reel off a few smart insights with your indomitable wit from the 10 segments, especially the last one, we’ll be all set to go:
A: OK, Number 1 — The Changing Grape Industry-From Genetics to Retail-branding/varieties.
Grapes are easy to grow on a large scale in a lot of places in the world, so you have major competition on the supply side. Many years ago Produce Business columnist, Robert Zwartkruis, the importer from Sweden, wrote all about storage efforts. In this case, it used to be all about storing grapes.
Today, we pretty much have a constant fresh flow of product. Why store something when there’s always something fresh-picked somewhere, almost always? The need to store for the gap has kind of disappeared.
Q: How does varietal licensing exclusivity play into the picture?
A: For most of the world, there are very few public varieties. Most of the new varieties are licensed in one way or another. Not that it has to do with licensing, but our varieties are now like agrochemicals, they are private. The problem and the challenge for the industry will be if retailers want to assemble certain groups of varieties, and the varieties are licensed to different companies and each of those companies wants to leverage that and says, “If you want my varieties, you have to buy all these other things,” now there has to be a very tough negotiation.
I was talking to one of the apple buyers. Apples, you know, have been a tough category, he bemoaned. “I want this variety, this variety and this variety, but then I have to buy a whole program from three different producers, and I can’t do that.” So, that becomes the assortment challenge.
Q: What about unique items like Cotton Candy grapes?
A: Going into genetics and the retail deal, and the rush to niche specialties, it’s kind of a response to Cotton Candy grapes. There have been specialty varieties in the past, but nothing that excited the grape industry like the Cotton Candy. Consequently, a lot of breeders that once stayed clear from this small niche now work on niche varieties like this. Consequently, we’re going to have a lot of these varieties.
It will be interesting from a grower perspective and retailer perspective exactly how much market is there, how much appetite is there for grapes that taste like, I don’t know, green eggs and ham.
The comparison would be the personal-size melons. When they came out, they were all the rage. All the breeders jumped in and were working on growing small melons. It got to 10 percent volume in the market.
Q: That’s a pretty big percent.
A: It is, but guess what? They’re going back and breeding big watermelons that are green on the outside, red on the inside and taste like watermelon.
Are we going to be a world of Cotton Candies, and Carnivals and those types of grapes?
Q: What is your prediction?
A: It will probably be a specialty category and top out at three to five percent. That would be my call. There will be a lot of trial and reduction. Breeders are in fast-follower mode, trying to get things out on the market now, and trying to create unique specialty varieties.
I would note my prediction is for the US/North American market. Other global markets are different. I went to Spain, and that was a big part of their deal, pushing what they call specialty varieties.
I have a graphic, showing grapes being grown in all these different places — Peru, Mexico, California, Chile — all going into a big blender of the market. It used to be progressive —California, then Peru. Now sometimes you have three origins overlapping at the same time. So, that’s the graphic of the blender instead of these seasonal windows.
There’s not enough room in the market. You can have several different origins simultaneously competing for retail shelf space. That’s pressure for the grape suppliers, where there’s probably more supply than demand.
The grape guys don’t talk about it, but the blueberry guys do. They talk about survival of the fittest, and you’ll see exit and abandonment of certain lines. We will see who the winners are. You have to be really good at what you do. But that’s agriculture, not something new.
Q: On to the next topic.
A: Let’s jump to The Rise of Peru...
What is really different about Peru is they can scale up fast. They have the varieties, and they will have them in production, up and running, by the next year. They have the climate, the land, the water and the resources available to do it. Whereas, if you go into California and you want to plant a variety, you have to take something else out of the ground.
At least in my lifetime, we’ve never seen agriculture that can scale up so fast. OK, we say “Peru 1.0” was Red Globes into China, Russia. That’s all they seemed to be interested in. Well, Russia went away. Now Peru is a major player in seedless grapes. Their seedless deal has gotten to the size of what Mexico took 30 years to accomplish, where Peru did it in about 10. It’s different people, and there is a money commitment to go in, and there is private equity.
OK, that’s a good teaser to get people thinking.
A: On GMOs…
This is absolutely a key to get people interested. I came across an inflight magazine, where I saw a promotion for GMO produce.
Q: That’s unusual. What kind of promotion? Where were you traveling?
A: This was WestJet airline in Canada. The ad was giving away Hawaiian Papayas to promote Hawaiian tourism. And the ad said Proudly GMO. Here’s an North American supplier, based in Calgary, proudly promoting GMO papayas. The fact is we wouldn’t have a papaya industry if it was not for GM disease-resistance plants that we have.
Q: As an aside, I know you enjoy the educational sessions. There will be two fascinating Educational Micro-sessions related to consumer messaging on GMO’s with the new GMO mandatory labels starting January 2020.
A: That’s one of my favorite parts of the show. I’ll be attending the sessions as always, formulating my questions for the Q&A part.
I took a picture of this Proudly GMO Papaya ad and put it up as slide for a European business presentation. I explained, this is not to discuss the merits or GMOs, but to show you just how different GMO reality is in different parts of the world.
The European audience was kind of aghast. But the next day, some of the Italian growers came up to me and had some really interesting reactions to that, saying, thank you for bringing this up because we get these retailers that are part of group think, and just follow what the activists tell them to do.
Q: In the US, retailers can face strong backlash from vocal activists on a cause like GMOs...
A: This really gets me bothered. Are we going after big problems, or just reacting to whatever the activist cause dejour is? This week we’re worried about plastic; last week it was food waste; next week it will be labor; then it will be water; then it’s going to be all these e-commerce guys… that will eventually be a fight.
Q: Well, all those issues are not going away, but I understand your point.
A: One of the problems of the grocery business is that it doesn’t take that many activists to change the behavior of a chain. If an activist has a cause, grocery stores are easy targets. They have a list, and a guy calls one store and that’s about all it takes.
We saw it with country-of-origin labeling. There were activists hiring people to call their local stores and say, “You have foreign product. Why don’t you have American?” I’m sure you could get some old retired lady in legion hall to do it for free.
Q: OK, where next?
Q: Last year, we devoted an entire conference in Amsterdam to the retail omni-channel future in produce.
A: We used to think there was just going to be a grocery channel, a foodservice channel and an e-commerce channel — three separate channels. What’s happening is grocery stores are moving into the omni-channel space and doing it with their own employees. What we’re seeing is regular retail stores that have dedicated trained shoppers for their online ordering service, and that is what seems to really be growing in the online space.
Lately I’ve been seeing this disruption with some on-demand guys and independent contractors — unregulated or less regulated delivery services — with millions of people in “gig economy” delivery jobs, uninsured that may not be paying taxes, or health care, not properly trained, not properly insured… all doing gig work for these apps.
I scratch my head… farmers can’t get enough labor and retailers can’t get enough labor, yet these delivery apps seem to have an unlimited number of personal shoppers and delivery boys.
Q: How does this connect back to omni-channel and the produce industry
A: The e-commerce base will be dominated by supermarkets, but what seems to be winning in the space is click-and-collect in-store. You would think the grocery industry would have more expertise than anybody. But frankly, the online guys are not doing a good job of merchandising.
I look online and see two grape items with the exact same picture, and neither is the product I’m going to receive. Perhaps they’re stock photos or supplier-based photos, some graphic artist putting the site together that doesn’t know anything about produce. Looking at that, I thought, “OMG online produce is doomed. The online guys are going to destroy us.”
Q: Sounds like a complex problem to overcome. This is a call for produce suppliers to work with retailers and to take control of how their products are being sold online...
A: Let’s go to Value Retailing...
Since I’ve been in business, if you went to grocery conferences, they were all frightened of some value proposition taking over the market. In the 90s, it was the Walmart Supercenters; in the 2000’s it was dollar stores; and the past 10 years, it’s been Aldi and to a lesser extent the online guys.
We see it in grapes. Retailers say they want the best and newest varieties and they say they don’t care what it costs. They’re all coming back and they’re now saying that they also need a value-break tier product. We want a premium and a value product.
We’re seeing these guys going all in on the best varieties and the biggest sizes, but all looking for a value. In some cases, it’s the selection. In Canada, all the retailers have a value-oriented chain banner. Saving money never goes out of fashion.
Guess what, private label is back! In pharmacy, it’s generics; in cookies, I don’t need the Oreo brand, just the no-name chocolate one with the white filling.
In produce, we need things we can offer economically. Our biggest challenge is the value package.
Q: How about these convenience items — fresh-cuts, pre-packaged fruits and vegetables that are creating a value-added profit margin?
A: We’ve had decades of value-added pre-cut offerings, but a head of lettuce is still a big item — buy it whole and cut it yourself.
If you look it at from a dollar standpoint, it exaggerates the amount of value-added product sold, because the per pound pricing is so different. You’d have to look at pounds, not dollars, to understand the demand from a quantity perspective.
You can buy a head of lettuce for 89 cents. That’s a pound-and-a-half, or you can buy 8 ounces of chopped up lettuce for $1.
Do you know any store that doesn’t carry a head of lettuce? It’s the same with Red Delicious apples. As much as they talk about it, most stores carry Red Delicious apples.
Q: Joining you at the Global Trade Symposium, we have another presenter, Susan Brown, an apple-breeding expert, and that’s a pet peeve of hers that some of these old “tired” varieties are still on the market, and that the industry needs to be brave and phase them out in favor of the exciting new varieties.
A: Obviously, someone is buying them, and the problem is, the logo of Washington State is the Red Delicious. I needle these guys, “You built your business on crappy apples. Your grandfather made garbage apples. It’s a crying shame he made so much money on that. Of course, you probably know it’s a 13-month apple. Who decided that was a good idea?”
I’ll do the counterpoint… when you have a Red Delicious 13-month apple, the starch levels are no good. Why am I eating a 10-month apple in the summer? And then you wonder why people are going over to packaged and frozen food.
Q: I suspect there will plenty more counterpoints at The New York Produce Show...
A: The New York event is full of thought, with so many experts looking at the industry from so many angles. For me, there’s nothing else close to it. I find the quality of presentations top-notch. That’s what I focus on. There are probably more worthwhile seminars at The New York Produce Show than at all other produce shows combined. The Show builds on the content of your publications.
Q: Hopefully, you’ll still have time to make the retail rounds on your travel layover. Next time, if we squeeze in a preview interview, it may be prudent to plan a 9-hour layover!
Come to New York and be intrigued as John Pandol and this Pundit engage with real world industry issues.
You can register here.
Here is the Global Trade Symposium website.
Here is the New York Produce Show and Conference website.
Ask us for a hotel room here.
You can learn a lot and, with the Official Humorist on stage, we are bound to have some fun as well!
Sometimes what you need to succeed is just some good data. We were excited when Euromonitor told us they had some high quality data to share, so we asked Gill McShane, Contributing Editor for Pundit sister publication ProduceBusinessUK.com to get a “sneak preview” of the presentation:
Q: At this year’s Global Trade Symposium, you will present your analysis of U.S. fresh produce consumption within the larger context of the global fresh produce market, as well as provide key insights about the top trends and developments in fresh produce.
Can you give our readers a rundown of how your presentation will unfold?
A: Essentially, what I’m hoping to do is give the audience a global overview of the fresh produce market looking regionally at how different parts of the world are consuming fresh produce, which regions are consuming more or less, and the direction in which this is headed. Then I want to focus on the U.S., as that’s my personal focus area here at Euromonitor International. I will look at what fresh produce consumption looks like in the U.S. and where it is headed. Also, I will break that down into fruits, vegetables and starchy roots and how those categories are performing, and then even further in terms of which specific items are comprising those different categories.
One of the more interesting parts of the presentation will be diving into some of the key trends I’ve picked out in terms of fresh produce. The three trends are healthy living, convenience and sustainability. I chose them because I think they are pretty overarching in terms of overall fresh produce. I think there are some key, interesting points, and throughout the presentation I’ll be utilizing quite a lot of results from our consumer survey. It will be really telling to see some of the stats in terms of how consumers perceive health and fresh produce consumption.
Q: How recent is the analysis and data you’ll be presenting? Is there a specific report to which the data relates? Is Euromonitor the source for all data?
A: All of the data is very new. We research the fresh foods market on an annual basis, and this research was all done within the past few months. Something to keep in mind is that this presentation will include 2019 data, and, of course, that is based on partial-year projections. The data is all from Euromonitor International. It has been pulled from a variety of internal sources, including our fresh food system within Passport, which is Euromonitor’s syndicated research database. The data presented will be uploaded onto our online database very soon, which subscribers can access through ourwebsite.
Q: And the data refers to whole fresh produce, not canned, dried, frozen or juiced?
A: Yes. While we do track all types of shelf-stable and frozen fruits and vegetables, the data I will present refers to fresh, uncooked produce, including items like bananas, apples, potatoes, onions and tomatoes.
Q: So, how is fresh produce consumption in the U.S. performing within the larger context of the global fresh produce market?
A: Looking at the U.S. in the global context, you’ll find that we’re not above average in terms of per capita fresh produce consumption. I think quite a bit of that stems from the way we consume food. I think that oftentimes fruits and vegetables aren’t the base of many dishes, and certainly at-home cooking habits have an effect on that.
Also, if you look at disposable income, fruits and vegetables are often cheaper than other fresh foods like meat. So, in certain [global] regions where’s there’s less wealth, there’s often a higher consumption of produce because of the lower price point. In the U.S., compared with certain regions like Asia Pacific, where produce consumption is unusually high, there is more money being put toward more expensive packaged food options.
Q: Are these results what you expected?
A: It does make sense when you look at the numbers. If you look at consumption in Asia Pacific, the numbers are pretty staggering. On pure volume basis, you could be tempted to think that because Asia Pacific has a massive population, then, of course, fresh produce consumption will be high. But if you break it down to per capita, you realize that the average person there is consuming quite a bit more fresh produce than someone in the U.S. If you just look at grocery purchasing habits and cooking habits, then the numbers do make sense.
Q: So, what are the produce consumption habits in the U.S. at the moment?
A: In general, we’re seeing a mixed bag. On the one hand, you have the convenience trend. We are seeing consumers with busier lifestyles who often want to eat on-the-go, and consumers wanting to spend less time preparing meals. A lot of the time people want eating to fit in with their lifestyle, and they don’t want to have to adapt to eat healthily. At the same time, a lot of consumers realize that at-home preparation can be an easier way to eat healthily in comparison to eating out or snacking on packaged foods that maybe are more calorie-dense and less dense in nutrients.
Q: And, what is the current rate of fresh produce consumption in the U.S.?
A: Total per capita fresh produce consumption in the U.S. (2019) stands at 136kg (about 300 pounds) per person.
Q: Is that rate increasing or decreasing?
A: Currently in 2019 we’re projecting a bit of an increase in fresh produce consumption. But it’s pretty flat-lined, so I don’t want to call that super significant growth. In general, though, in our forecast, certainly we are expecting to see some increases. However, the growth of vegetarian diets sometimes gets overstated in terms of how much that will really lead to increased total consumption.
Q: What is your forecast?
A: All that I will share before the presentation is that it’s growing in the future; it’s going to be positive!
Q: How did you come to that conclusion?
A: There’s quite a bit that goes into our forecast. We look at historical trends, and we look ahead to take into account qualitative trends, and also socio-economic factors such as population growth, GDP growth, and what we expect disposable income to look like in the future. It’s based on a lot of metrics, and we try to make it very comprehensive.
Q: So, if produce consumption is projected to grow, what are the drivers or influencers?
A: We are expecting to see some growth as more consumers shift towards natural, healthy foods and especially away from some of the sugary, processed, packaged foods. Consumers are seeking out more natural, healthy and whole foods, and that’s going to be key.
Q: How does the U.S. forecast compare globally?
A: Actually, I would say the U.S. has a lower projected forecast for fresh produce than some of the other regions. I think consumption is pretty solid right now in the U.S. Certainly, there’s room for growth. I’ll discuss the shift toward natural products in my presentation, and the other trends that will certainly help the growth.
Q: Can you expand on these trends, and advise produce executives how they can help to drive the consumption and sales of fresh fruits and vegetables?
A: I wanted to keep the trends fairly overarching in my presentation. Convenience and health are important ones on which to focus. These are the trends that are going to be top-of-mind for end consumers. Fresh foods are often viewed as a commodity, whereas packaged foods are a bit more dynamic in terms of new product development; companies can do quite a bit more to alter their products to benefit consumer needs. But if fresh produce businesses can focus on these trends, they will have a better chance of playing to what consumers are looking for. That’s going to be key to maintain that growth through the forecast period.
Q: You mentioned that sustainability is another significant trend. What does sustainability mean to U.S. consumers?
A: When it comes to sustainability — and I don’t want to give away too much from the presentation — essentially we’re looking at plastic usage and the growth of local produce. With sustainability, definitely the health of the environment is going to be really key. Consumers want to have a positive environmental impact with their purchasing habits.
Q: Do any of these trends surprise you?
A: I’m not super surprised by them. We’re seeing these healthy living, convenience and sustainability trends, not just in fresh produce but within the entire food universe, across fresh food and packaged foods and even in the whole CPG [Consumer Packaged Goods] world. It’s nothing that should be super surprising to those who are familiar with consumer goods, but it’s really interesting to put them in the context of fruit and vegetables in terms of where the opportunities lie.
Q: What’s driving these trends of healthy living, convenience and sustainability?
A: I think part of it is changing lifestyles. People are changing. When it comes to sustainability people are more and more conscious of how their daily actions are impacting the environment. With healthy living, people are more aware, and – I think this is really key for fresh produce – people are more aware of how their diets impact their health. It’s no longer just about weight loss anymore. It’s about holistic health; it’s about what goes into your body and how that affects your general feeling of wellbeing and mental clarity.
Q: Going back to the current rate of consumption, how does performance break down by produce category?
A: Overall, we’re seeing a growth in the consumption of fruits and vegetables, and a decline for starchy roots (which includes regular potatoes, sweet potatoes, cassava and other root vegetables). There’s quite a bit of variety within fruits and vegetables, and consumers generally do consider fruits and vegetables to be quite healthy, while starchy roots have gained a somewhat negative reputation for their carbohydrate content.
I know sweet potatoes have gained a reputation based on their high concentration of vitamins and minerals, and they are showing some solid performance, but it’s definitely waning from what we saw 8-9 years ago. Certainly, potatoes are still an important part of the American diet but, in general, consumption is going down a bit with that carbohydrate avoidance.
Q: Does produce consumption vary by demographics and geography in the U.S.?
A: I do think so, yes. With fresh produce in the U.S., access to a grocery store in certain cases is not always a given for some people. I’ll talk about this when I discuss the trend of convenience. People often cite convenience as a reason for eating a less healthy diet because some people don’t always have the time to cook with fresh foods, or access to grocery stores, or access to high quality fresh foods at a low price point. I certainly think income is an important factor when you look at fresh produce consumption.
As for geography, we don’t have the data broken out for the different regions in the U.S. But I would imagine that certain areas with more fresh food distribution infrastructure will make it easier for consumers to access high quality fresh food in comparison to somewhere where grocery stores might be scarce. But even if access to a grocery store is scarce, fresh food could still be available in other less traditional grocery formats.
Q: Does your data indicate which fruits and vegetables are the highest and least consumed in the U.S.?
A: By volume, bananas are the largest [consumed] fruit, and onions are the largest in terms of vegetables.
Q: And where is the volume growth when it comes to consumption? Are there any specific products that are driving the consumption?
A: Something interesting that we are seeing in fruit is stronger growth for the more “snackable” fruits. That’s another thing that ties into the convenience trend. Oftentimes, consumers are on-the-go and they want something to help sustain them for even a few hours. A lot of the time, they want to turn to a more natural product, not necessarily a packaged, processed product. So, fruits like a banana are super easy to take on the go. Also, smaller fruit like berries and grapes are easy to take with you and grab as you go about your day. That’s a key area within fruit that follows the trend we’re discussing.
Q: Did you go as far as to look at the forms which US consumers are eating fruits and vegetables, e.g., are they consuming potatoes in the form of baked, mashed or fried?
A: We don’t have data on that. Essentially, we were tracking sales through retail, foodservice or the institutional channel. We don’t track what the end consumer does. Even in the case of foodservice, we’re tracking sales of potatoes to a restaurant but not what the restaurant does with those potatoes.
Q: On the basis of all your analysis, what are the key challenges and opportunities for the U.S. fresh produce market going forward?
A: In terms of challenges, the main one is how to drive growth in a market that by many consumers is viewed as a commodity market. It’s really easy to drive consumer interestwhen you’re dealing with real product innovation, but when you’re just looking at simple fresh produce, of course, there’s a spectrum of quality and the ways that it’s delivered, but the way to keep consumers engaged is really key.
That will lead to the opportunities. You are working with a product that is simple. By nature, it’s natural and fresh, and can’t be altered too much. I think the foundation is there because of healthy living being so important. Consumers want to be healthier. The key opportunity is to make that simpler for them. Looking at the inherent good qualities of produce is definitely going to be key.
Q: Finally, what are the key takeaways that you hope attendees will remember following your presentation? What do you want them to learn and apply in their businesses?
A: I’d say the key takeaways are that we’re expecting fresh produce sales to grow in the future. That should be key for the audience. And I really think that these trends I’ve picked out should be looked at as a focus area. I hope by discussing them in my presentation, it will provide a jumping-off point for further discussion.
This is an information-dense presentation, and its richness can’t be conveyed in a short article.
Come make yourself more knowledgeable by attending The Global Trade Symposium at The New York Produce Show and Conference.
Register right here.
How do consumers come to value different products.? It is a question the produce industry doesn’t ask often enough. All too often producers produce what they know how to produce or want to produce, rather than producing what consumers actually want.
In politics, it has become obvious that the ability of politicians to communicate directly with people has reduced the influence of those institutions that previously held a monopoly on getting information out to consumers. So President Trump doesn’t have to be as concerned with staying in the good graces of the editors of The New York Times because he has, in Twitter, a direct line to voters.
Nowadays, restaurants worry more about their Yelp reviews than the local newspaper restaurant reviewer.
When we learned that two Cornell professors were collaborating to better understand how peer reviews — common in social media — impact value perceptions, we were intrigued. We asked Pundit Investigator and Special Projects Editor, Mira Slott, to find out more:
Ruth and William Morgan Associate Professor
in Applied Economics and Management
Ithaca, New York
The Cornell School of
SC Johnson College of Busines
Q: It’s nice to meet you Aaron. We’re excited you’ll be teaming up with Brad for an educational micro-session. Brad has been a treasured veteran of the New York Produce Show since its inception, as we celebrate the show’s 10th edition. Brad, your research has run the gamut on topics important to the produce industry. Sometimes, your research extends beyond produce, but with myriad lessons for our industry embedded within.
Aaron: This is the case with the study we’ll be presenting: Dissonant opinions and the home bias — Consumer response to crowd-sourced reviews for wine.
Brad: At first, we weren’t sure this research was enough about the produce industry to be a candidate as an interesting presentation for The New York Produce Show. Then, Jim Prevor was on campus visiting and we invited him to review our study, as we were collecting some data. Jim came up afterwards and started asking some thoughtful questions, raising the idea that even though it’s not about produce, perhaps the research has a lot of implications for produce.
Q: What’s behind those thoughtful questions? Can you describe the study and how it came about?
Aaron: The way that consumers make decisions about purchases is complicated in markets that include a wide variety of choices and credence, or non-observable, attributes. In many markets (such as books, movies, hotels, automobiles and wine), we observe a substantial amount of information that is made available to consumers. This can be objective information with facts and details, or subjective information based on opinions.
In the age of the Internet and social media, we see a rise in the dissemination of non-expert opinions from peers or crowd-sourced reviews in many markets. And there is some evidence that such reviews can be very influential and have the capacity to increase or decrease demand for credence products.
Brad: We live in a world now where people are giving opinions about a lot of stuff. Not too long ago, while there were still plenty of opinions, they were mostly expert opinions; someone trained and versed in an area who we would look to for their judgement on a new hotel, for instance, or a new cultivar of apples. But recently, we’ve seen many more amateur opinion-makers in the world. These crowd-sourced reviews. We see it on Amazon. I often view what the ratings are among the consumers who purchased product previously.
Aaron: You see this in the restaurant business and in the hotel industry. You do see it with online food, although it’s a relatively small market now, but it’s growing. You see it in Whole Foods, actually within Amazon, and a little bit in Amazon Fresh.
Q: The fresh produce industry is just starting to tackle the complexities of an omni-channel future and learning quickly the myriad potential pitfalls in online selling. Last year, we ran an intense Amsterdam Produce Summit solely devoted to this important topic. World thought- and practice-leaders gathered to share retail, as well as foodservice strategies, to seize omni-channel success.
Unique issues inherent to fresh fruits and vegetables, i.e., the perishability factor, Mother Nature’s whims, quality inconsistencies, and the ability to develop and control brand status and reputation amid a commodity heavy business, create a new layer of complications for online selling. There was some tough talk about the potential impacts of positive or negative consumer reviews on product sales... In some instances, the negative product review can have more to do with the problems that occurred during the handling and delivery process to the consumer’s home...
Brad: In examining food and beverages and where this idea is most prevalent, the wine market is an ideal case study. There are lots of experts that will give you their opinion about wine. But there are also lots and lots of crowd-sourced reviews from consumers voicing their opinions about wine. So, we’re curious what is the impact of these crowd-sourced reviews on demand for food and beverages, and it just so happens this study focuses on wine because that seemed like the easy choice.
In the real world, there are many expert opinions and crowd-sourced reviews that exist already for wine.
Aaron: These reviewing sites for wine are incredibly well-developed. They’re still emerging in other food and beverage fields, but certainly for wine they are well-established and have been around for a number of years now.
Q: When you say well-developed, can you provide some perspective, from a structural standpoint, do you mean consumers can find these reviews in many places, from reputable sources and wine experts, as well as from wine connoisseurs and more mainstream consumers?
Brad: Yes. I think that’s right. There are several services that offer these types of reviews. And there’s a lot of evidence that wine consumers use this information in some capacity to make their decisions.
There are many of these websites, but there’s this one called vivino. It’s a platform where people can give their opinion about a particular wine. I think there are millions of reviews on this website for thousands of wines. So, it’s very active, and that’s just one example. There are also other websites that do similar things.
Aaron: Yes. And most places where you can purchase wine have a consumer review component. Wine.com, for example, is a big one that has lots of reviews. We’re seeing this in other alcohol markets as well. Beer is another example where there’s a huge following. There are significant consumer review sites for beer.
Wine has a really nice counterpart of having a well-established expert review component, places like Wine Spectator and Robert Parker Wine Advocate.
Q: Do you think there’s also a connection with the pairings of food and wine?
Brad: I do, especially in places where food and wine are sold in the same store, when that store does the messaging. They might have reviews of a particular food and a particular wine, and those reviews could appear together.
When you go to Amazon, sometimes you’ll pick a product, and there will be some reviews for that product, and then it suggests, you might also like this product, and you can go through and see some of those reviews. I think this could be one of the areas of interest from this study for the produce industry, where there could be greater linkages between food and wine or other pairings. What we’re finding in the alcohol market may tell us insights applicable to the produce industry.
As people buy more and more produce online and these crowd-sourced reviews become more common, some of the things we’re discovering in the wine market may also be true for online sales of produce.
Q: It should be interesting to engage an audience of produce industry executives with the key findings and analyze how they translate over to the produce industry...
Brad: I do think so. I believe there are potential similarities, in particular some of the things we’re studying here. We can give you a big overview without getting too bogged down in many of the details if that’s helpful.
Q: OK. That would be great.
Brad: We do this experiment where we introduce consumers to three different wines. All the consumers are in the United States. One of the wines is from New York, one is from France, and one from Spain. They are sparkling wines, if that matters.
Aaron: Our experiment tests participant’s willingness to pay for products in a bidding process when exposed to multiple pieces of information and peer-review treatments.
Brad: We share information with consumers, each time asking what they would be willing to pay for each of the three wines. For example, we tell them about where the wine is from, how the wine was made. We give them an opportunity to taste the wine. We tell them what the experts think about the wine, and what the community and their peers are saying about wine. With each of these, then we follow up with questions of what they are willing to pay for this wine.
In the first bits of information of what the experts we’re saying about the wine, we use information that says these wines are similar. They have similar expert scores, they’re made in similar ways. They’re produced in different parts of the world, but the words we use to describe these wines are mostly the same.
In this final round of information that we share with them, it’s peer scores that come from the community, these are non-expert crowd-sourced reviews. Different people will get information that suggests their peers like all three the same, or they like one of the wines more than the others, or one less than the other two. This is the place where we’re really trying to narrow in on what’s the impact of the peer reviews on demand for the wine, or how does it affect their willingness to pay for the wine, when the peer scores are the same, or if one of the scores is rated higher or lower than the other.
We do this equally, where we make Spanish wine rated higher, or we make the French wine rated higher, or we make the New York wine higher or lower, etc. We try to have enough people exposed to each of these different possibilities.
Q: I’m intrigued to find out what happens...
Brad: A couple of things we’re curious about here, and I think all of these have some links to the produce industry… We can use this data that we collect from this little game that we play with these consumers to ask three questions. The first one: Are consumers more influenced by subjective information or more persuaded by objective information, and facts? Are they persuaded by the real stuff of how it’s produced, or by somebody saying something positive or negative, which of those two, subjective or objective information matters most?
The second question - which I think we will focus on at the show because it has interesting implications for produce -- is trying to understand the relative importance of a positive or negative review. When I say relative, it’s because in our study, we had Spanish, French and New York wines in the mix.
Q: So, this could perhaps parallel consumer perceptions with local produce versus imported produce. In the case of wine, aren’t there long-established, pre-conceived notions of where the best wine comes from?
Brad: When the peers say something positive or negative about the home product or something positive or negative about the foreign product, in our case the French product probably has an established reputation. Some people might think a French champagne is the best product compared to a New York sparkling wine. And if that French champagne with the highest reputation gets a positive or negative review, what does it do to that product, but more importantly, does it also impact the other two products? What is the relative impact of a positive or negative review? Does it have any spillover effects on the other products?
I’ll give you an example: If the French champagne gets a really low score, presumably that’s going to decrease demand for the champagne, but does that increase demand for the other two wines, having a relatively negative review for the French wine, and neutral scores for the other two. What is the tradeoff between these three products?
Aaron: The way I would frame it, the idea is really this: Does a low score in one wine cause consumers to reevaluate their assessment of another wine? If the score on the New York is higher than the French wine, does that cause an absolute shift of demand for that wine? What’s the interrelation between those two wines?
Q: You mentioned that in your lab experiment, you had the consumers taste the wines to see how that influenced outcomes. There are no wine tastings when ordering online. The same occurs with buying fresh produce off a website. With fresh fruits and vegetables, consumers have been used to the visual, tactile and aromatic experience of shopping the produce department. Also, with fresh produce, there are additional issues of sizing, packaging, and quality variants, among other variables, which can be difficult to distinguish online...
Aaron: In the larger context and why this might apply to other sectors like the produce industry, to assess a food item, you actually have to consume it. I can look at piece of fruit and assess it, but my opinion is not fully formed until I consume the goods. This all falls under this umbrella of experienced goods, and why we think it might be relevant in produce as well.
Brad. The third thing I want to do is try to use the data we’re collecting to see when people are more familiar with New York product. Are they more or less impacted by a positive or negative outsourced review? So, if you live here in New York and you probably already have an opinion about this local product, are these crowd-sourced reviews more or less important for the people who live in the local market.
You might think, oh, those people already have formed an opinion, and if it gets a positive review online, great, they’ll say, oh great, and like it even more, and if it gets a negative review online, one hypothesis might be they ignore it. Relative to someone living in California, a negative review on New York wine might lower its value, and a positive review might help its value. It might be different for someone living closer to the product.
Q: Did that hypothesis ring true? Could you share some of the key findings from your data?
Brad: To start, it’s important to say, we did this survey with some 500 people distributed in different age brackets. There were about 300 people between the ages of 21 and 35, and maybe 80 percent were under 50 years old.
In general, if you ask people before giving them too much information, they would say the French wine in their mind was worth $29, and the Spanish wine was worth $24 dollars, and the New York wine was work $21. That was the average starting point for the people who took part in this exercise. When we started to give them some information, when we told them how the wine was made, and the scores from Wine Spectator, and then the online peer scores, all these things had a positive impact on how much they valued the wine. This is true for all three wines on average.
And then, what we think is interesting is the following:
When the Spanish wine, for instance, got a positive, glowing report from the peers, then people on average would be willing to pay $5 extra for that wine, which brings it in line with the initial average price we had gotten for the French wine. This is a positive, glowing report for Spanish wine relative to the New York and French wines, when they got decent average peer reviews in line with what the experts were giving them.
But when the New York wine got a positive, glowing report from peers, and relatively the Spanish and French wines got a decent grade, in that case, it increased people’s willingness to buy New York wine by nearly $7 a bottle. That’s an average boost of 33 percent in their willingness to pay.
Q: Does the number of positive peer reviews matter?
Brad: That’s a good question. We’re giving them a lot of peer reviews; what we’re doing is summarizing them and calling it the average of recent scores from the online community. They’re under the impression this is not just one person’s opinion.
The other thing we wanted to highlight when the Spanish wine got a low score, this again is a relative test, where the French and NY wines got average decent scores in the online peer community, in that case the value or the willingness to pay for the Spanish wine went down by $5.
Aaron: It’s almost symmetric. When the Spanish wine gets a good score, it goes up by $5, and when it gets a bad score it goes down by $5.
When New York gets a high score, it gets a bump of $7, but when it gets a low score it only goes down by $5.
Q: Why is New York getting a bigger bump? Is it because it’s domestic?
Brad: I think it may be that people didn’t have a great expectation for New York wine to start with, so if it gets a negative score, they almost half expected it anyway. That’s perhaps one explanation. Aaron, what are your thoughts?
Aaron: I was just going to say, I think New York is not as well-established as a wine region, so that informs expectations. French champagne is highly regarded across the world. So, a negative review is really punishing them in a sense because it’s supposed to be an excellent wine with the best reputation.
Whereas, with New York wine, people are not as familiar with it. I won’t say New York wine has a bad reputation, but it also doesn’t have a very strong reputation either. It’s just that people aren’t very familiar with it. They’re not going into it with that many expectations.
Brad: There is one other result I will share with you, because I think this is interesting.
When the Spanish wine got a relatively glowing report it increased demand by $5, but surprisingly for me, when the French wine got a relatively low score from the online crowd-sourced reviews, that actually increased the value of the Spanish wine in consumers eyes by $6. But a good score for the Spanish wine only increased the value of the Spanish wine by $5. So, Spanish wine is better off when the competition gets a low score.
It’s almost true for New York wine too. A low score for French wine in the minds of the consumer, also boosts your willingness to pay for New York wine. New York wine itself gets a high score and it gets a boost of $7. And a poor score for French wine boosts New York wine by $6. So, New York wine is better off when it gets a high score, but a close second is for the French wine to get a low score. In the case of Spanish wine, it’s the opposite.
Brad: I think consumers see Spanish and French wines as closer substitutes.
Aaron: These are hypotheses, and we have to dig into the data a little bit more. We collect some additional information about all of our participants after the experiment, how familiar they are with each of the wines and how that plays into that as well.
Brad: We’ll have more of this analytic work to share at the New York Produce Show, looking at issues in the produce industry that mirror what we’re focused on in this study.
If you think about the same type of story, where you have a produce item that is grown domestically and there might be a couple of international options. Maybe one of those has greater familiarity with customers, or perhaps has a higher-level reputation than the others, and then looking at how do people purchase and experience these goods. They taste them and then give some reviews. There’s this idea that a positive review for one thing might have some positive implications for it, but a negative review for one of the competing products might actually have a much bigger impact, depending on how familiar or what sort of reputation it had in the first place.
For instance, you might think of Italian apples or French apples, or U.S. apples, or New York apples compared to Washington State apples...
Aaron: There are lots of analogies we can think of, maybe San Marzano tomatoes from Italy compared to Italian-style tomatoes grown in the U.S.
Brad: That’s even a better example as it relates to our study, because there is champagne from France, and then there are these other versions of sparkling wine that are like champagne but they’re not. This would be especially applicable to those products for which there is a patent or some protected variety, or appellation name associated with them.
Aaron: The other thing… there is a lot of new specialty produce that might be branded. Historically, produce has been more of a commodity, but more and more we’re seeing this specialized branding of produce, specific cultivars of fruits and vegetables. It does have some similarities to wine, in the sense that there are branded differences between some of these different products.
Brad: We’re hoping industry executives can weigh in on this and help us make these links. We’re thinking of some of these specialized produce items, or products that have an application or place of origin that is really distinct to them, and that there are other examples of products in the world that compete with those, that share the same product but don’t share the same level of reputation or familiarity from the onset.
Going back to those three questions, we’ll walk through our research results with the audience, and that should make for a nice discussion, whether to get answers or just food for thought.
What matters more for consumers of wine and consumers of produce… is it more objective information or subjective information?
Q: Is it fair to say the crowd-sourced peer information is more influential than the expert information?
Brad: I think that’s a fair statement. However, it’s not simply the presence of the expert scores, but it’s the relative expert scores. We also find some evidence that expert scores matter, and we think those expert scores also might be important in produce.
On the second question, I think these relative opinions matter. How your product fairs matters — what reviews you receive, but also what scores others get. In particular, whatever the flagship product is in that category. Those scores seem to matter a lot, especially to the competition. It depends how closely you’re associated with that product.
Aaron: It’s also the prestige of that competitor. If it’s just some random competitors in a category that don’t have much market share and recognition, getting a bad score doesn’t have as significant effect on you. The product that you’re competing with in your category seems to be an important factor.
Brad: On the third point, we have some preliminary evidence with these online peer reviews that suggests there is some sort of home bias effect. People tend to discount negative reviews when they feel more closely connected to their product, when it’s a local product, and they tend to accept positive reviews. They are influenced by negative reviews, but less so than a non-local consumer. We’ll dig into this more at the New York Show.
Aaron: There is sort of an asymmetry of how positive and negative reviews effect consumer demand. We didn’t go into it, but there is certainly a large amount of literature of asymmetry in how consumers respond to positive and negative reviews, so this kind of fits nicely into that larger context.
Broadly speaking, there have been some studies, not in wine and food, but in general how consumers respond to negative reviews versus positive reviews. There’s some evidence to suggest that consumers tend to essentially jump on positive reviews, and pay more attention to them, and discount negative reviews. In a simplistic model, a consumer is willing to pay $10 for that product, and if it gets a positive review, they’re willing to pay $15, or $5 more. But in the reverse, if that product gets a negative review, that consumer only decreases their willingness to pay by $1, rather than by $5. That asymmetry could go in either direction, but you’re not equally effected by positive and negative information.
Brad: Aaron and I will have new data and analyses to bring to the session for an interactive discussion.
Q: We can’t wait.
There are so many interesting questions. One wonders how a pre-existing reputation influences the crowd-sourced reviews. When we do focus groups, we have to have attendees write things down on pieces of paper and then reveal all at once. Otherwise, one person’s opinions may influence other opinions.
It also would be interesting to study how durable the impact is of crowd-sourced reviews. Do people disregard them after more experience with the product?
There is a truism in politics that the influence of a recommendation is inverse to the importance of the job. So one may well listen to one’s union, or an expert editorial page, or your politicly savvy cousin when deciding who to vote for as a State Assemblyman -- where you don’t know much. But the same influencers don’t swing your vote for President, where you are more informed.
Maybe the same applies to wine – or an apple.
In any case, this will be a robust discussion. Come be a part of the discussion at The New York Produce Show and Conference.
You can register right here.