We recently wrote a column on Pundit sister publication Produce Business UK titled, TESCO MUST GO ‘COLD-TURKEY’ TO OVERCOME CRACK-COCAINE-LIKE ADDICTION TO SUPPLIER CASH.
The piece focused on the “box” retailers put themselves in when they start making their money on the buy — through vendor fees and whatnot — rather than the sell — through great merchandising and marketing, which boosts sales and profits.
The problem is obvious: if the focus is on what vendors will pay, it can’t be on what consumers will value. In the UK, the big four retailers — Tesco, Sainsbury’s, ASDA and Morrisons — are now confronting a tough competitive environment, with discounters such as Aldi and Lidl surpassing 10% of the market, upscale experiential retailers such as Waitrose and Marks & Spencer growing and American interlopers such as Costco and Whole Foods also finding success. A focus on back-end earnings will almost inevitably lead to market share struggles.
We focused on the fact that retailers get addicted to this cash and dare not turn off the spigot because it means a few quarters of disastrous earnings while they go through detox.
Showing great minds think alike — though from different perspectives — Bruce Peterson sent over notice as to what he wanted to present this June at The London Produce Show and Conference.
Unwittingly he revealed a focus on the other side of the question, that one reason retailers remain in their comfort zone of looking for vendor cash is that this is easy. Any MBA can look at a spreadsheet and determine that if the fresh-cut guys or the detergent guys give us a fee for X, then we can definitely book X as revenue.
To actually go out there and make money by doing a better job delighting consumers is very hard, and Bruce points out that there is good reason for C-Class executives to want to make the money on the buy: Many of these organizations have been drained of the expertise necessary to do a great job at merchandising and procurement,
We asked Pundit Investigator and Special Projects Editor Mira Slott to get us a “sneak preview” of Bruce’s presentation in London:
Former Senior Vice President and
General Merchandise Manager
of Perishables for Wal-Mart Stores, Inc.
Q: Your presentation in London last year delved into an extensive market analysis of the UK market, disruption of the Big Four retailers rocked by deep discounter penetration, coupled by specialty store segment growth. You also integrated a contextual discussion comparing and contrasting the U.S. market; all in all, a wealth of insights. In the end, though, you emphasized strategic opportunities hinged on understanding and mastering the consumer value proposition. Will this year’s talk pivot off that core principle?
A: When I give talks to groups or businesses, I always say, it’s not a matter of what I want to talk about, but what the audience wants perspective on. I ran through subjects, and one I centered on is an interesting phenomenon. I guess I’ve been around the business too long. There’s really been an evolution in what a produce buyer is today versus what one was back in the day. Now that’s not necessarily a bad thing, and I’ll elaborate on that in a second.
Essentially at one time, experience trumped education. In order for you to become a produce merchandiser or a produce buyer, you had to spend a lot of time learning your craft. It was often the case someone mentored you and took you under his or her wing. It was not uncommon at all for people to hold very senior roles in companies with no college education at all. I’ve been in the produce business a long time, and that was not unusual.
Q: Is it unusual now?
A: What you’ve got now is a highly educated pedigree as advanced as I’ve ever seen. You’ve got more MBA’s in the produce business, particularly in retail, today than I’ve seen in my entire career. Yet what’s missing is the experience. I’d call it death of the merchant, but those are strong words, and my hope is to present an inspirational message and helpful strategies to strengthen the produce industry. The thing I have to guard against is sounding like I’m criticizing today’s buyer. This really starts to come into an interesting challenge.
Q: Is it important to differentiate between the supply side and the retail side?
A: When you look at the suppler side of the business, I’m not saying the people haven’t gone to college. But often times, they’ve been raised in the business. Their father and/or their grandfather started the business and they’ve been in it all their lives. They packed onions or grew lettuce or whatever they did. At some point, they went off to college and came back. They connected that experience with their education to serve the company’s interest. That’s not what’s happening in retail.
Now people are coming out of the Wharton School of Business (in Philadelphia, Pennsylvania), and they are smart. Business today is a much more intellectual experience as opposed to experiential; I trust this, I’ve done this before, I know how this works.
The other thing is the produce business was looked at as a career opportunity. You’ve got guys like me. I’ve been in the business since I was 16 years old and I’m 61. Now you have people come in and they look at produce as a stepping stone to go on to something else.
Q: So is this leading to a revolving door of produce buyers? What toll does that take on building long-term supplier/buyer relationships and strategies, not to mention honing the nuances of the produce business?
A: There’s this huge transition of buyers coming in and it’s extraordinarily frustrating for the supplier. And that’s the way it’s going to be. You have people coming out of Proctor & Gamble to run these food divisions. Again, that’s not necessarily a bad thing, but it can be a real challenge. This is true in the UK as well.
The way the business is running today… if I was a young person, if I had my career to do over again, the things that attracted me to the produce industry don’t exist anymore.
Q: That’s a sad thought to imagine the produce industry without Bruce Peterson’s mark on it. Please elaborate…
A: The best way I can describe it, it was a much more personal business. Involving myself in organizations such as PMA and United, not only did I meet people with access to competitors’ work, but these people became lifelong friends. All these people lived and breathed produce at retail. We were in it for the long haul. Take Dick Spezzano or Bob DiPiazza. Reggie Griffin’s another guy. When I was at Wal-Mart, Reggie and I were direct competitors, yet here to this day we are still very close friends.
On the supplier side, I’m on my third and fourth generation produce executives from the same companies. Whether a Steve D’Arrigo or a Jack Pandol or a Joe Boskovich, I knew these people personally. In all fairness, these bonds can cloud your judgement sometimes; maybe you weren’t as ruthless or cut-throat. But I do think the ability to establish longer relationships is paramount for smart business. These relationships weren’t based on friendships, but the friendships augmented the business relationships.
Q: What changes when these bonds are not formed?
A: Now, it’s strictly business. It’s a numbers game. Buyers make decisions based on what the numbers say, and a lot goes out to bid. It’s a very different climate.
I’ve been retired from Wal-Mart eight years now, and I still get calls about this. The frustration the supplier has with strategic long term relationships. If I don’t get the right bid, I’m out. There’s not this idea of collaborating together to approach the consumer.
One of the things Wal-Mart was very diligent about was instilling the mantra that we are merchants first. What does that mean? There was really a huge focus on items. This is where the experience comes into play when working with the supplier. You would go out when navel oranges were at peak of flavor and collaborate with your supplier and collectively put out promotions and displays to make those navel oranges sell. I remember selling four-pound bags of navel oranges by the pallet full.
What I thought I’d take the group in London through is merchandising techniques that can help drive your business. What’s happened… let me talk about ASDA since they’re owned by Wal-Mart. ASDA has negative comparable store sales right now. It’s just getting creamed by the competition. You have to focus on being a merchant instead of being a marketer. There’s a big difference between the two.
Q: In what ways?
A: What the trade associations and the industry press are talking about all the time is sustainability. You hear about organic and Fair Trade. Those are all social issues. How about we change the conversation. Let’s talk about the fact that this time of year grapes taste good; what I call a move towards the mechanics of the business.
When I used to work at the terminal market in Detroit, I’d have some Sicilian guy put his arm around me and say, “This is not the time to be buying that product.” Buy it next week and you’ll be better off. You listen to and learn from those people. In all fairness, back in the day, there was a whole lot of doing things by your gut and intuition and developing some intricacies around that. I think the pendulum has swung the other way.
Q: Doesn’t part of this discussion depend on the structure and size of the retailer?
A: Yes, and I’m glad you brought that up. Now, because of consolidation, you have publically held companies. It’s very important for them to show a roster to their shareholders, and, say, here are the credentials of our executives. We have a vice president of produce with an MBA out of Wharton Business School; this guy was born in India, worked in Proctor & Gamble in China, and now he’s coming over here to run our produce division.
It is increasingly common to have people running produce for major retailers who just have zero experience in working in and running retail produce operations. They look good in the annual report and they are certainly smart, learned people, typically with global experience, often experience with a big name vendor, but they really know very little about the challenges of running a store’s produce department.
Q: Yet wouldn’t this kind of international experience with a big supplier, and knowledge of supply chain logistics and interactions, give any executive valuable perspective for a high-level retail produce position?
A: The problem is the supply chain for a produce company doing citrus, for instance, is not the same as the supply chain for one doing leafy greens. The important point is the produce executive never worked in a store. For the retailer trying to impress its stockholders, it doesn’t matter. At one time, if you were to become a buyer at Wal-Mart, you had to work in the store for three months to learn what happens in the store. You’re making decisions on what happens at retail. The perspective is different.
Where this shows up, people really struggle. You’ll see produce being merchandised on a promotional feature that really isn’t even in season and doesn’t even taste good right now. You don’t do the customer any service. The thing about it is, the buyers aren’t in those positions long enough to learn from what they did for a number of years. They want to get on to something else in the corporation. It’s a real dilemma.
The produce industry on the supply side is being run with your heart. The produce industry on the retail side is being run with your head right now. The answer is somewhere in the middle.
Q: Beyond harnessing passion with brain power, and hands-on retail experience with algorithms and spreadsheets, aren’t there other variables to consider? For instance, an experienced merchant with savvy intentions may be less nimble working within a large corporate entity layered in bureaucracy versus a smaller independent chain cultured in the ability to react on a dime…
A: Without a doubt. One piece of advice I give to suppliers is the importance of portfolio diversification. Wal-Mart is a good customer to have, and Kroger is a good customer to have. But you also want to have the smaller food markets, the green grocer guy out there. They often trump the big guys because they’ve got the experience. They’re close to the customer.
What’s happened is the buyer today has gotten further and further away from the actual customer experience.
At Wal-Mart, I always tried to help the supplier understand that their customer and my customer are the same customer. It’s the person shopping in the store. We needed our suppliers to work with us in addressing the end user better. That’s who we’re trying to sell our product to, you and I together. Today’s buyer has drifted away from that experience. What looks good on a spreadsheet doesn’t necessarily translate in the stores.
Q: That’s great when suppliers understand their end users and develop consumer-focused products, but it’s the buyers they have to win over. In this new climate you describe, those products may not make it to the retail shelves.
A: I have a whole litany of ideas to share on that front. As for the suppliers, it’s not a one-size-fits-all any more. As a seller, you have to tailor your sales team to the entity you’re doing business with. If I worked at a company, I would be the worst person to pick to talk to a buyer at Wal-Mart, even though I worked there.
Q: Really? You have the inside scoop. Wouldn’t that give you an incredible edge?
A: With all of my background and performance record, I wouldn’t even get an interview to be a buyer at Wal-Mart today. First of all, I don’t have the education. I don’t have an MBA. Number 2, I’m too old. Number 3, I’m too White. That’s not sour grapes. I just don’t fit the profile of who they’re trying to hire.
Q: What is the profile?
A: The ideal candidate would be someone between the age of 25 to 33 years old, has an MBA, preferably from a prestigious university, Wharton, Harvard, University of Michigan, something like that. Diversification is really important. If you happen to be female, a person of color… that is a plus in your favor. If you were born outside of the U.S. and worked in another country, that is really a big plus. Experience at a big manufacturing company is helpful too.
Q: None of those attributes appear to be detriments. Couldn’t any of those qualities or experiences on a resume be positively viewed in the hiring process?
A: All those characteristics look good on paper in retail shareholder reports. Historically, people think the produce business is more mysterious than it is. By the same token, there is a lot of nuance in this business. It is not a manufactured process. There is the element of agriculture in play. Weather and soil conditions change a lot of things. There are many variables that don’t fit into a spread sheet.
If you try to run the company solely on data and information, you’ll miss out on major opportunities. Oftentimes you have to take what I would call an educated guess. You have to have some degree of experience either you possess yourself, or you gain from suppliers to predict what’s going to happen. If you’re wrong, you have to be able to react very quickly to fix it.
Q: Can you give some examples? In your own career, did you run into scenarios of this nature at Wal-Mart?
A: I have a million of them. In terms of acting from the gut, I remember years ago, I was with one of my buyers in Philadelphia at the peak of the Chilean stone fruit season. We were walking through the Chiquita warehouse and we saw pallet after pallet of this premium stone fruit. Chiquita had 60 or 70 pallets of this, and at the time we only had 50 or 60 stores. The product looked beautiful.
Intuitively, we knew if we put that product in the stores in a prime position, it would fly off the shelves. To put this into perspective, it would have been 10 times what we would have ever bought in this commodity. So I walked up to the guy and said, we want to buy all of this! Driving in the car to our next stop, we looked at each other second guessing ourselves, what are we going to do with all this stone fruit? It could have been a disaster.
We made the call and we ended up selling it all, 10 times the amount originally planned. Here’s another thing people don’t do anymore. I don’t think there’s a produce buyer in Wal-Mart today, and maybe not in Kroger, that has ever walked a terminal market in their life. You have to understand, half the stuff you learn is BS, but half the stuff is real insights into what’s going on.
A green bean is not a green bean is not a green bean. Today’s buyer talks about strawberries as if every strawberry is the same and it’s just another item in the store. Certain times strawberries are certain things and certain times they’re not.
Q: Varietal aspects also influence taste and flavor profiles, among the numerous considerations…
A: Absolutely. Being a merchant means getting up from your desk and going out into the fields and seeing things first hand. One of the nice things about being in the produce business is when you’re traveling; you’re usually traveling to some place warm, because few things grow when it’s cold.
I’ve been around a long time, so I know a lot about a lot of things. But the beautiful thing about the produce industry is you can learn something new every single day if you want to. Just because you’ve got the formal education, if you think you’ve got all the answers, I have news for you — you’re missing 50 percent of the business!
In the stores today, I don’t see what I call merchandising expertise. Now I’m generalizing, by the way. There are some people that do it well. It’s the point you raised earlier in our discussion. It’s usually the smaller companies that are more nimble and experienced in their produce positions than some of the big companies.
Q: Could you talk more about what’s involved in merchandising expertise? It sounds like your definition goes much deeper than décor and produce displays…
A: People think just because you put out a nice wood fixture with warm lighting in the produce department, it makes you a merchant. We used to sell stuff right out of the RPCs, but we bought the right product and put the right price on it.
At Wal-Mart, I got exposed to the best merchants I’ve ever seen. It starts with Sam Walton, and certain principles of being a merchant that are just as effective today. You don’t learn that at Wharton. You learn that from the person, who’s your boss, or in the department longer than you, and sharing with you and mentoring you in the nuances of the produce business.
You get that more on the supplier side, again because oftentimes, family members have been there a long time. The new people come in but gain the benefit of generations.
In retail, I think it’s very sad because these young, intelligent, culturally diverse people are missing out on the mentorship that can be provided to them to complement their formal education. That’s the key.
Q: Couldn’t there be an advantage to bringing in new blood, and fresh ideas, younger generations, keen on social media and different ways of thinking?
A: Business must evolve. Experience can be a bad thing too. An attitude of stubbornness — this is the way we do things, that’s not the way we do it here — is not good either. That’s the other side of it. For generations companies have done things a certain way and have a hard time changing.
I tell people, when I hear the expression, that’s not how we do it here, it’s a sign of a sick culture. It means they’re closed off to innovation and new ideas.
There’s a tremendous advantage to diversifying your workforce, both culturally and from a gender standpoint, from an educational standpoint, and from an international experience standpoint. But there’s also an advantage to complementing that with people who have been around the block a few times, and through the years, have made mistakes they can share.
I’ve been fortunate in my career. I’ve been mentored, criticized, and educated by some pretty established people. I don’t want to start name dropping, but I could give you a who’s who of great people in the produce industry from the supply side and the retail side. Not only did they share their gifts of experience but their friendship
I got the opportunity to meet and get to know Bob Carey and Bryan Silberman from PMA, and Tom Stenzel from United Fresh, and Jim Prevor and Mira Slott… all you guys have had an impact on my career! There’s this unwillingness of retailers to talk to the trade press, but the people I’ve known have always been fair.
Jim Prevor calls a spade a spade. If he felt we were doing something stupid at Wal-Mart, he’d write about it. I’ve worked with you for a long time, and the questions you ask and challenge me on help me grow as a professional.
Right now today, it’s the single biggest thing missing on the resumes of people making the decisions in the produce industry today. They’re missing that mentorship and that experience. It doesn’t mean everything someone says is right or relevant. What I tell people through my career is I promise you I don’t get any smarter or wiser, but I guarantee you I get perspective.
Q: Well, you probably do get wiser, from all the wisdom you’ve gathered…
A: OK, in that respect you’ve got a point. These buyers are in a position that affords them the opportunity to learn from so many people. I could tell you more decisions were made over a cocktail.
When he was president of CPMA, Danny Dempster came over to my house in Arkansas for a visit. We were sitting in my swimming pool, drinking a beer, and he said, I believe I could get a group of people together to start an international trade group. We started brainstorming, and that’s how we formed the CPMA North American Trade Committee, chatting in my swimming pool. You have such an opportunity to learn from so many people, if you can get your ego out of the way and realize you don’t have all the answers.
Q: I wanted to revisit your story, of when you used your instinctual experience to spontaneously purchase all those pallets of stone fruit, 10 times the quantity you had originally planned. The first thought is that you had autonomy to make that decision on the spot, as opposed to running it through a series of bureaucratic levels. And also, you were dealing with a relatively small amount of stores at that point. Aren’t those criteria integral in one’s ability to take risks and capitalize on such opportunities as they arise?
A: That’s right. The structure is different today. But there’s an expression I believe in: Power is not given; it’s something you take. One of the things you have to have is the trust in your own conviction that you’re right. A merchant has a belief in their convictions because those convictions are grounded in experience.
Q: Doesn’t that also involve taking risks?
A: Yes. But a merchant can have confidence that if the decision turns out to be wrong, they know what to do about it. Being a buyer, being a merchant, is all about taking risks. If you’re not going to bed sweating, you’re missing out.
Q: Going the safe route, you won’t have as many lows, but you won’t have as many highs either.
A: That’s right. You become mediocre. It’s this whole idea, dare to be great. You have to have the courage to do things based on your experience. It’s easy if you put someone relatively new on the buying desk, to spit out numbers from a data base. Anyone can do that. Data always tells you what you did, not what you could have done.
Q: And also, it might not be a reflection of what’s in the future, either.
A: That’s right, because produce is a moving target, and different based on commodity.
Q: Market dynamics, changing competition, consumer demographics and lifestyle influences complicate the picture further… With such complexities, isn’t there a strong argument to utilize advanced technology tools for category management, data collection and sophisticated analyses to drive strategy in the produce department?
A: It’s very helpful. However, do you know the best way to find out what’s going on in the market?
Q: Go to the stores?
A: Exactly. I used to spend the majority of my time in my competitors’ stores, not my stores. What are they doing, and what are we missing? I used to be out of the office three days a week, every single week, all year long. I lived on the road.
Maybe the buyer today doesn’t want to or doesn’t care. It was very helpful for me. Don’t forget, I spent 17 years in operations. I worked in the stores for 17 years, as a supervisor and such, so I saw the customer firsthand. I knew how hard it was for the clerk to unload the truck, because I unloaded the truck.
It’s one thing to look on paper to send someone 100 cases of strawberries. You’re just making a numerical decision. It’s another to find space in your cooler. I was able to temper a lot of my judgement in knowing what was going on in the stores.
I had the advantage working for a company with some of the best merchants on the planet. And they pointed out what my errors were.
Q: There’s also the culture of the company…
A: Oh yeah. I can tell you, I wouldn’t have traded that culture for anything. It’s not so much I criticize today’s buyer. I actually feel sorry for them because there’s a huge part of the produce business they’re missing. They just don’t see it. The beautiful thing about produce is it’s a living, growing thing. I think it’s an opportunity on the supply side to help teach and train, and an opportunity on the retail side to swing the pendulum back a little bit.
I’m not saying you go back to the way it was in the 1980s. Those days are long gone. But there are still a lot of common denominators. It’s still about satisfying the consumer. The produce industry can be so wonderful if you give some buyers some experience.
Q: Since you’ll be presenting in London, do you think there are any notable differences you can draw from what’s happening in the UK compared to what’s happening the U.S.?
A: The market in the UK was fairly stable for years. You basically had four retailers in the market by themselves. Now for the first time, they’re running into competition and don’t know how to deal with it. Here in the United States, the market has been so diverse. Even with retail consolidation, you’ve still got so many formats and different ways products come to market, including the online channel. We have an ice cream place down the street and you can buy produce in that store. You can go to Dollar General and buy produce. The UK is not used to that. They certainly are not used to the idea that powerful discounters such as Aldi and Lidl will steal lots of market share if you don’t find effective ways to compete!
Q: How do you translate the different dynamics in the UK retail market to the crux of your talk this year?
A: It is very important for the buyers in the UK to reach out more to their suppliers. Instead of telling suppliers what to do, the buyers should collaborate with them and jointly make marketing plans for their stores. (Editor’s Note: See Enduring Strategic Partnerships Can Help UK Buyers Achieve Ultimate Goal by Tommy Leighton for more on this subject.)
People talk about the excellence of European retail data. Retailers have the good numbers to know why their consumers are shopping in that particular location. Retailers, though, need to share this data with suppliers so suppliers can best help retailers, and both, retailers and suppliers, can act together to best serve consumers.
How can we set that store to take advantage of our knowledge of what this consumer wants in this store? I don’t care if you’re Tesco, or Aldi or Sainsbury’s. They all ultimately become victims of their own success. The danger comes when you think you’ve got it all figured out.
Q: Isn’t that exemplified to a greater extent when looking at the perils of U.K. retailers trying to penetrate the U.S. market?
A: The UK and U.S. markets are so different. There’s really not a single European retailer, with the exception of Aldi, to find success in the U.S. with a launch concept. How did Fresh & Easy work out? Even with acquisitions, both Sainsbury’s and Marks & Spencer failed. Jim Prevor once wrote a piece when he was discussing Tesco’s efforts in the US to launch Fresh & Easy and he said that the big problem was that because we both speak English it is easy to assume that what works in one country will work in the other. I think he wrote that in the context of explaining why Fresh & Easy had at its launch a bunch of watercress-based fresh-cuts that nobody in America eats. It is notable that Ahold and Delhaize, though perhaps not burning down the barn with their results, are still here. Perhaps not coming from an English-language country, they felt the need to trust experienced US executives much more. The value of experience is enormous
What we started at General Electric with Jack Walsh — this whole concept of using the best practices from around world — sounds good and seemed like the right thing to do. But these markets are so very different. India is such a different market from South Africa, from China, from Eastern Europe, from the U.S.
Yes, there are different things you can learn from a demographic standpoint. If you have operations in China, you can see what items sell well to the Chinese. So, if you have a store in the U.S. with a high concentration of Chinese shoppers, it gives you some idea of the SKUs you want to carry. It doesn’t mean the way the Chinese retail, putting their fish on ice in the middle of the floor, makes sense. All of this has to be tempered with experience.
That’s another illustration from a global perspective, why as you continue to diversify your buying group, or selling group for that matter, through educational pedigree, international experience and gender diversity, don’t discount the importance of experience. That’s really the big message. As I present my talk, I don’t want to come across as negative. It’s not as if everything is all bad. We’re just missing an important element.
Bringing in people who are a reflection of the people you’re going to sell to is a good idea. That’s why it’s important to have women in the produce industry, because women know how women think and guys don’t! In the U.S., you have a melting pot of so many different people and cultures. You want to have as much true representation of the population in the communities you serve.
The way Sam Walton talked, the buyer is the agent for the customer. You want your brain group to be a reflection of people shopping in your stores. If I have a store with a high concentration of Hispanic shoppers, I want to be sure the buyers and decision-makers are able to understand and meet their needs.
Q: In concluding this fascinating sneak preview of your presentation at the London Produce Show, what are the key takeaway points?
A: One key is to point out the buyer of today is different in many ways than the buyer of the past. I’ll be showing why there is a bit of frustration developing between the supplier side and the buyer side. I’ll talk about the changes in the retail buying group, and the move away from merchants to marketers. Marketers talk about sustainability and Fair Trade. Merchants talk about the consumer experience.
Q: You might get some pushback from retail produce executives who say sustainability programs are directly related to the consumer experience…
A: My response to that is 10 years ago sustainability and corporate social responsibility were evolving, but today people talk about it as a given. The only issue would be if you’re not socially responsible. I’ll give you an example of taking it to the extreme. If I go into Starbucks and order a cup of coffee, I’m encouraged to have a conversation on race relations.
Remember when the news came out that Wal-Mart had been purchasing from sweat shops, people still shopped at Wal-Mart. It’s just like organic. People will say, if I have the choice, I’ll buy organic. But it represents five percent of all produce in the U.S. These sustainability stories have more impact on the shareholder. If a retailer has a negative social agenda, people won’t buy stock in the company.
Let’s get back to being merchants. If you’re a retailer and struggling with sales, get buyers in the stores and out in the fields. Let them see with their own eyes and touch with their own hands. They will make better decisions.
The overriding theme is not that today’s buyers are making bad decisions. They’re not. But they could be making better decisions. What separates good from great companies is not the difference between good or bad. Bad companies fail. Great companies make better decisions than good companies.
Q: It goes back to being mediocre…
A: The only thing average means is the best of the worst, and the worst of the best. If you’re in a competitive situation, and you’re a buyer and don’t understand the nuances of how produce items move through a store, you’re missing a major opportunity. That’s where experience comes in.
The truth is that, for the produce industry, the problem goes beyond a decline in individual buyer expertise to a growth in organizational types that separate procurement and merchandising.
Bruce’s Chilean stone fruit story was a success, but only because he had the ability to both spot the great deal and buy it, and he had the ability to remerchandise the stores to highlight the new product.
Indeed Bruce’s contracted buying strategy depended crucially on this ability.
He developed a program that called for contracting, say 80%, of expected demand at a fixed price. If markets zoomed, Wal-Mart tried to remerchandise to minimize or eliminate the need to buy on the open market. Bruce chose to heavily promote another product that wasn’t so pricey and thus save Wal-Mart money and deliver a better value product to the consumer.
Alternatively, if the prices dropped below contract price, Wal-Mart could buy heavily on the open market and average down its procurement price. Merchandising could assist by promoting this great value product more aggressively to consumers.<
There are also big industry issues related to the trends that Bruce mentions. For example, much of the real leadership of the industry grew out of retailers. It is no surprise that long after Dick Spezzano or Bob DiPiazza left Vons and Dominicks, both individuals are still very active in the produce industry.<
But as produce and the broader fresh food category have become places ambitious retailers have to punch a card on in order to boost their career, like having an MBA or working out of the country for three years, it raises the question of where the next generation of leadership will come from.
It used to be that people who worked buying produce acquired both product expertise and personal connections, so that meant the value in their careers would best be recognized by staying in produce. Now they acquire a facility with numbers and gladly accept the transfer to run lawn mower sales at Wal-Mart rather than build a career in produce.
Bruce’s point is important and an issue for the industry. If retailers dismiss the value of experience in order to upgrade general business skills or to impress Wall Street and The City with stellar credentials, it is not just that a bad job will be done, it is also that the intellectual capital of how to do a great produce offer will be lost.
In the private label, all packaged world of the UK, one senses that such expertise is in short supply, but it diminishing everywhere.
We worked in many aspects of the produce industry but really learned the business working in our family’s retail operation. We remember putting out three-pound baskets of mushrooms and watching consumers come pleading for the product, and we would open a second basket, then a third, then after half a pound, the customer base was saturated for the moment and we would put the open basket on the shelf. Then we would watch as sales inched along.
Should we open another basket and throw that one away to get the excitement going? To see the perishability of the product, to experience customer excitement at the new basket of mushrooms… this is understanding the produce industry in a way working in an office, looking at spreadsheets, just doesn’t produce.
Bruce was for a time the largest buyer of produce on earth, but he never forgot the basics he learned on the Detroit Market and at store level. Most retail buyers today won’t have to worry about forgetting, for they never knew.
Come hear Bruce’s presentation live at The London Produce Show and Conference.
Here is a short brochure of what the event was like last year.
You can register here.
Get a great deal on the 5-star Headquarters hotel here.
Sign up for a tour here.
And we have a terrific “Better Half” program that you can sign up your significant other for right here.
We look forward to seeing you in London.