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A Call For An Industrywide Sustainability And Social
Responsibility Initiative

Our piece, Michael Pollan’s Sustainability Arguments Unsustainable In Context Of Economics, led to an important letter from Tim York, President of Markon Cooperative.

In this letter, Tim proposes nothing less than a new industry initiative. He warns us that if we do not work together to create industry standards for sustainability, buyers will wind up imposing numerous separate standards on producers:

I read with interest your recent piece on sustainability and appreciate the opportunity to share some thoughts on the challenges our industry faces.

Sustainability — which some define as balancing the needs of society, the environment and economics — is a trend with traction. When Markon thinks about it, we consider not only the evolving demands of our customers (today and into the future), but our responsibility for economic stewardship. If the produce industry dismisses or even moves too slowly toward adequately addressing sustainability, it will do so at its own peril — exposing vulnerabilities in our social policies (e.g. labor), the environment (e.g. water usage) and economic viability.

As consumer awareness about sustainability — with all its various definitions — has increased, food retailers and foodservice buyers have begun to develop sustainability programs. If our experience with food safety is any indication, grower-shippers will at first be asked to describe their activities in specific areas (for example, related to hiring and labor policies, pesticide use, water use, etc.) then eventually be asked to implement a patch-work of programs as additional buyers jump into the fray. Some of these programs will be based on that buyer’s unique definition of sustainability, some based on a competitive differentiation strategy, and others on even shakier ground.

If we let this phenomenon play out on its own, we are likely to see a proliferation of standards rivaling what we saw in food safety — arguably, with even less efficacy in accomplishing the stated goals. Dueling standards for sustainability in the buyer community isn’t sustainable — by any definition of the word — and may do nothing to advance the industry.

There is an alternative, and last year’s progress in food safety provides a model. We saw the collective industry work together, perhaps as never before, and create a common standard for a sound food safety program and independent verification, the California Leafy Greens Marketing Agreement.

Inspired by that collective action, we believe a meaningful sustainability program must include specific, measurable and verifiable criteria. True, the task of developing systems to credibly define, measure and monitor sustainability may be too large for most individual foodservice and retail companies. A more practical strategy lies with one or more of the major trade groups investing resources in the development of basic industry metrics. Such metrics would enable us to wring out inefficiencies across the supply chain and meet meaningful goals in sustainability while still affording companies the opportunity to create competitive advantage with “green” products and services.

Our Buyer’s Coalition, in cooperation with the Food Safety Leadership Council participants, and partnership with grower-shipper companies, may be an alternative approach. However, absent a uniting crisis like the one we faced last fall, we may lack the impetus to join forces and set aside our perceived competitive advantages.

Absent some cooperative effort, individual buyers (including Markon), third-party auditors, and others currently working on sustainability will impose their demands on the produce industry. Moreover, we can imagine a scenario in which food safety and sustainability are treated as discrete initiatives when in fact they should be viewed holistically — as complementary steps toward a healthier industry.

Maybe it’s wishful thinking, but I’d rather see us collectively take the initiative now, while it’s still possible to create sustainability metrics that dovetail with food safety best practices — and together move the industry forward ahead of consumer or regulatory scrutiny.

— Tim York
Markon Cooperative
Salinas, California

Tim is raising an exceedingly important issue. Although sustainability and its more encompassing parent — Corporate Social Responsibility — don’t get the headlines of food safety outbreaks, in the long run, sustainability and social responsibility are likely to pose an important management challenge for every executive in the industry.

Not only are we already seeing pressure from trade buyers — both foreign and domestic — such as Tesco, Costco, Whole Foods and Wal-Mart — in this arena, but we are also seeing — as in the Florida tomato industry as we discussed both here and here — how interest groups can use consumer concern on these issues to affect trade practices.

The Pundit gave a presentation at PMA in Houston on this issue, focusing on preliminary results of some research we are conducting on the issue in both the U.K. and North America. In addition, as part of the faculty of the United Fresh/Cornell Executive Development Program, we are going to be looking at ways executives can begin to address these issues strategically.

In doing so, we are echoing what business leaders all over the world are pointing out:

We thought we could sit in Bentonville, take care of customers, take care of associates — and the world would leave us alone. It doesn’t work that way any more.

— Lee Scott, CEO, Wal-Mart

When Richard Yudin of Fyffes Tropical Produce wrote us, he asked a question: Why Don’t American Retailers Just Standardize On EurepGAP?

We answered, in part, by pointing out that EurepGAP, now GlobalGAP went well beyond food safety into, what for Americans, was unknown territory:

Chile set up a program modeled on EurepGAP, called ChileGAP. Now, theoretically, the US could set up a similar program. But look at what ChileGAP encompasses:

There is substantial discord in the U.S. on what is an appropriate food safety standard, and there is zero consensus on things such as “Labor Aspects/Workers’ Welfare”, “Corporate Social Responsibility” and “Natural Energy Resources.”

To an American, it all sounds like a bunch of meddling in affairs that are properly left to individual companies to negotiate on their own. And there’s a deep suspicion that EurepGAP is a way to sneakily impose European perspectives of social welfare on unsuspecting and unwilling Americans.

A company such as Fyffes — indeed most producers — would like one single standard, one single audit, which would make their product acceptable to everyone.

But in the absence of a universal consensus on these matters, and a willingness by retailers to forgo the possibility of higher standards, standardization on GlobalGAP or anything else seems far, far, in the future.

Yet it has become clear that American society has become sufficiently affluent that merely maximizing Gross Domestic Product is not going to be sufficient.

Look at an issue like energy. Despite $100-a-barrel oil and a big problem with dependence on foreign oil sources, Congress won’t act to approve drilling on the North slope of Alaska, much less many areas of the continental shelf.

You can agree or disagree with this, but it clearly shows that society has many interests — including environmental interests — and that getting the cheapest oil possible is not necessarily the top priority.

Now if the citizenry takes that view toward a vital commodity such as oil, think about what they would think about environmental standards related to growing fresh produce!

Sustainability and corporate social responsibility touch many areas. As we warned in this column in Pundit sister publication, PRODUCE BUSINESS, there are real vulnerabilities for the industry when it comes to labor issues.

Yet seeking success for the industry in economic, social and environmental terms is important… and difficult. Although food safety is part of these issues — after all, it is neither sustainable nor socially responsible to kill or sicken our customers — food safety creates unanimity of opinion that is harder to get on environmental and social matters.

Indeed, it is not clear if Tim’s proposal is feasible. Can the industry come to consensus on issues such as Fair Trade, environmental standards and labor issues? Maybe not. But we haven’t done that on food safety either. We might, however, come together on some baseline standards, recognizing that individual companies may choose to demand different criteria.

A lot of what has been written on sustainability and social responsibility is unrealistic. Properly understood, the movement is a recognition that the way the world functions has changed:

  • First, corporations will be held responsible for the actions of their suppliers.
  • Second, the Internet and other advances in communication have made it easier for those with a grievance to bring it to the attention of the world.
  • Third, when there is a problem, western governments feel an obligation to “do something,” so problems not addressed by the private sector will likely become the object of government regulation.

This being the case, we think following up on Tim’s thought is wise for the industry. But we have a lot of background work to do in defining our terms, understanding the problems and knowing how other industries are dealing with this issue.

In order to help the industry focus on this issue, the Pundit and its sister publications are going to sponsor an industry conference on sustainability and social responsibility.

We are working on it now, and will announce specific information soon. If you or your organization would be interested in working with us as a speaker, a member of the steering committee, a sponsor or otherwise being involved, please send us an e-mail here.

We are looking forward to working together to help the industry address this important issue and we thank Tim York and Markon Cooperative for posing such an important and thoughtful question on such a crucial industry issue.

Wegmans Phasing Out Tobacco

Speaking of Social Responsibility, Wegmans, which is so often a leader in the food industry, issued an announcement that it will no longer sell cigarettes and other tobacco products.

Wegmans to Stop Selling Cigarettes

Rochester, NY — It was announced today that beginning Sunday, February 10, cigarettes and other tobacco products will no longer be sold at Wegmans. Until February 10, only remaining inventory will be available for sale; no new product will be ordered.

Explaining the decision CEO Danny Wegman said simply, “As a company, we respect a person’s right to smoke, but we also understand the destructive role smoking plays in health.” Signs posted in stores notifying customers of the decision express a similar sentiment.

Jo Natale, Wegmans’ director of media relations, acknowledged that tobacco is a ‘very profitable category’ for the company but did not share specific numbers.

It is a somewhat problematic issue. Cigarettes are legal, and one function of a retailer is to serve its customers.

Wegmans may well lose a lot of business. Not so much the tobacco sales themselves which, though profitable, probably aren’t that large a share of sales, but customers who use tobacco products may choose to do all their food shopping elsewhere.

They may do this for reasons of convenience or they may take umbrage at Wegmans being a “Nanny Retailer” and, in a sense, criticizing their activity.

Maybe not, though. Smoking is so universally recognized as bad today that many smokers would like to quit and may see the new policy as helping nudge them in that direction.

Perhaps some families, liking the idea of their children not seeing cigarettes — although Wegmans moved them from the checkout to behind the service counter a long time ago — will prefer to shop at Wegmans, considering it a better place for the kids.

Of course, supermarkets sell many items that can be harmful — beer, wine, Twinkies, etc.

Cigarettes and tobacco are unique though in that they are the only product sold in the supermarket that — when used as intended — are harmful.

Nutritionists struggle with programs that rank food with stars that are all the rage now. Hannaford kicked this off as we pointed out here.

Nutritionists struggle with these kinds of programs because they violate the Prime Directive of Nutrition — there and no good or bad foods, only excessive consumption.

So an occasional beer or an occasional Twinkie will do no harm.

Is this simply the Wegmans family expressing its personal beliefs about what products they want to be a part of selling? What they want to have on their hands?

Is it an assertion of social responsibility? Of saying these products shouldn’t be sold?

Is it a clever business strategy, to make consumers think better of Wegmans as it takes moves that are uncommon in retailing?

We are not sure and wonder, intellectually, how the decision can cohere.

Does it mean that if the Wegmans think that organic meat is healthier — the store should stop selling non-organic?

The notion that a retailer will sell all legal items in its categories has a kind of intellectual coherence. Selecting out products not to sell based on value judgments, seems less cohesive as an idea.

Perhaps tobacco, uniquely harmful when used as intended, is a special case.

Traceability Group Meets Tuesday

Today, in Atlanta, is the first meeting of the trade’s traceability initiative.

It is a milestone for the industry and one The Pundit has been dedicated to preparing the ground work for, for a very long time:

The Steering Committee was ultimately expanded to include all facets of the trade, and the group meeting in Atlanta is a powerhouse of industry professionals.

That doesn’t mean their task will be easy. We have a fractured and diverse business, and assuring traceability will not be easy.

It is, however, important. Until the industry can assure regulators and the public that food safety outbreaks can be identified and contained, there will be no solution to the trade’s food safety problems.

So those meeting in Atlanta do serve us all. Let us wish them God speed in their deliberations. Much depends on their sagacity.

Making Bitter Veggies Sweeter May
Be Key To Increased Consumption

We’ve written many pieces on industry efforts to get children to eat more produce — from a Produce for Better Health award-winning school teacher to a whole series on cartoon marketing to the Food Dudes program in Ireland, UFFVA’s efforts to get federal funding for school and other programs and PMA’s deal with Scholastic.

Yet we have always been a little concerned that many of these efforts seem focused on snack fruits when many of the important benefits of eating produce come from more bitter tasting vegetables.

We named our very first Pundit post The Bitter Truth About Promoting Produce To Children, and in that piece we referenced a spirited exchange with Bryan Silbermann, President of PMA, in Pundit sister publication PRODUCE BUSINESS on the subject. The Pundit wrote this:

In the National Cancer Institute’s 5-A-Day for Better Health Program Evaluation Report, the following dilemma was identified: “. . . the potentially undesirable sensory qualities of some vegetables and fruit (e.g., bitterness, sourness, pungency, astringency) may act as significant barriers to the adoption of a diet that is high in vegetables and fruit, especially among children. The dilemma here is that the strong-tasting compounds as a group overlap extensively with the compounds that are potentially protective against cancer; therefore, removing strong-tasting compounds may reduce the protective effect.”

Put another way, all produce is not created equal when it comes to health effects, and the produce items that may be easiest to get people to increase consumption of, namely sweet-tasting fruits, are probably the least valuable health-wise. That is why the USDA’s latest food pyramid for kids urges the consumption of 1 1⁄2 cups of fruit each day and 2 1⁄2 cups of vegetables — 67 percent more vegetables than fruit.

And although marketing is important, it is very doubtful that putting SpongeBob on cauliflower will do much to increase consumption, and having Brussels sprouts in the school vending machines probably won’t make a big difference in eating habits.

Although putting Brussels sprouts in school vending machines is close to pointless, if we can change the flavor profile of Brussels sprouts while making them taste better, we might have a breakthrough in getting children to eat more vegetables. This piece from the Telegraph in the U.K. says things are really happening on this front:

Sprouts are considered to be one of the
healthiest vegetables around.

Red sprouts designed to tempt fussy eaters

A growing menu of brighter, sweeter “child-friendly” fruit and vegetables is being created by scientists to tempt children away from less healthy options.

Red Brussels sprouts, with a sweeter flavour and a colour close to that of red cabbage, are the latest in a long line of ever more bizarre varieties that are appearing on supermarket shelves.

By carefully combining different crops, botanists are able to select the traits they feel will be most appealing to youngsters. They hope that these “Fisher Price” varieties can gently introduce children to less appealing fruit and vegetables.

Shops now stock baby carrots bred to be sweeter and packaged in colourful bags, especially for children’s lunch boxes. Some have featured versions in purple, green, yellow, white and black.

Mini-bananas, again ideal for the lunch box, have also recently arrived in the UK, as have mini-cucumbers, bred to be sweeter and less juicy.

Red bananas were launched by Marks & Spencer two years ago, along with the “strawmato”, a strawberry-shaped, super-sweet tomato designed for children.

Dr Ian Puddephat, head of research at the crop developer Syngenta — which came up with the red sprouts, and hopes to have them on supermarket shelves next year — said traditional crops were being altered to suit changing palates.

“As a society, we are now less accepting of bitter flavours,” he said. “So we are trying to breed these out while maintaining all the good qualities about the fruit and vegetables.

“Combining the red-purple colour with the milder-taste attributes, we hope the finished variety will be more appealing to children.”

Sprouts are considered to be one of the healthiest vegetables around, containing four times more vitamin C than an orange.

Professor Janice Thompson, from the department of exercise and nutrition at Bristol University, said that the new varieties helped to introduce children to fruit and vegetables from an early age.

“Children’s tastebuds are much more sensitive than adults’,” she said, “which is why they tend to prefer sweeter tastes. They are also naturally attracted to bright colours.”

But Paul Clerehugh, the celebrity chef who helped Jamie Oliver as a consultant on his school-dinners campaign, said: “I am always wary of anything that has been given a sweet flavour to make children eat food.

“It encourages that sweet tooth in kids. They need to be taught how to appreciate the food without sweet flavours.”

We need to see some studies to make sure the alterations that have changed the color and flavor profile haven’t affected the nutritional content –- but, basically, this is marketing at its most effective: changing the product to meet the demands of the consumer.

If we can do this, increasing consumption of healthy fresh produce will get a lot easier.

Florida Produce Promoted
On Big Apple Big Screen

If you were in Times Square this holiday season, you probably looked up at the giant CBS Super Screen and saw a Fresh from Florida message:

New York City’s “Big Apple” had some culinary company — namely citrus, tropicals, and other fruits and vegetables that are “Fresh from Florida.” Visitors to Times Square Plaza during the bustling holiday shopping season received a virtual taste of these fresh Florida favorites when they viewed the CBS “Super Screen” at 42nd Street between Seventh and Eight avenues.

Four 15-second video spots promoting “Fresh from Florida” agricultural products aired regularly on the 26-by-20-foot screen from November 18 through December 1 — which included the world-famous Macy’s Thanksgiving Day Parade on November 22.

“This prime location is visited by more than 1.5 million people daily during the busy shopping period,” Florida Agriculture Commissioner Charles H. Bronson said. “This high-visibility video promotion tied in with our fresh produce marketing campaigns that target consumers in the northeastern United States as Florida’s harvest gets under way.”

The four video spots feature holiday wreaths and trees made up of fresh produce items including oranges, grapefruit, tangerines, tropical fruits, bell peppers, cucumbers, lettuce, tomatoes, sweet corn, strawberries and squash. Florida is a major domestic producer of fall fresh fruits and vegetables, and is the largest domestic supplier of fresh produce during the winter and spring, providing over 80 percent of U.S.-grown fresh fruits and vegetables during those months.

The video spots incorporated the holiday messages of “Savor the Season” and “Healthy Holidays” along with the “Fresh from Florida” logo that is also widely featured in advertising circulars and retail grocery stores.

In addition to the Times Square run, the spots were also broadcast by cable television affiliates throughout Florida from Thanksgiving through the end of December.

You can see the spots here and here.

Pundit’s Mailbag —
Is Wal-Mart To Blame
For The Decline Of The Middle Class?

We ran a piece that both recognized the enthusiasm Wegmans elicits in media reports and pointed out that Wal-Mart just doesn’t get the credit it deserves:

…all this talk about customers who have “exuberantly danced” into the store, who “squeal with delight” and who “swoon” over the produce tells us less about the quality of Wegmans than about the cultural predisposition of the media.

They have no interest in doing a story on how the arrival of a Wal-Mart supercenter lowers the prices in a community so that a poor family can buy new shoes for school this year. They don’t know or care what it means for a 15-year-old boy whose mom squeezes out only enough to buy some decent athletic shoes at Wal-Mart. They don’t have interest in a story about how much better a poor kid can feel about going to school because he has an extra change of clothes and doesn’t get made fun of for wearing the same things every day.

That piece brought a searching letter from another retailer:

I read your piece, Wegmans, Wal-Mart And Media Bias. I do understand your thought regarding Wal-Mart helping poor families afford school supplies and clothing, etc…

I am working on articulating and backing up a different statement I think is accurate regarding Wal-Mart, but I am not ready to prove it yet. I’ll go ahead and try it out on you.

My belief is: “Wal-Mart is one of the largest contemporary contributors to the decline of the middle class”. The “have nots” work there and shop there as other similar jobs in the communities they’re in, go away. In a sense they create their own customer base. (?)

You’re thoughts?

— Mark Boe
St. Cloud, Minnesota

We appreciate Mark’s letter as it gives us a chance to clarify precisely what has been happening with the American economy. Yes, the middle class has been declining, but the implications aren’t as ominous as it might seem.

Pulitzer Prize-winning columnist George Will dealt with the issue in a recent column:

Economist Stephen Rose, defining the middle class as households with annual incomes between $30,000 and $100,000, says a smaller percentage of Americans are in that category than in 1979 — because the percentage of Americans earning more than $100,000 has doubled from 12 to 24, while the percentage earning less than $30,000 is unchanged. “So,” Rose says, “the entire ‘decline’ of the middle class came from people moving up the income ladder.”

This is one reason why Wegmans, Whole Foods, Costco, etc., are doing well while Wal-Mart has been struggling.

Wal-Mart has around 1.2 million associates in the U.S. and around 100 million shoppers every week in the U.S., so it is self-evident that Wal-Mart did not “create their own customer base” except infinitesimally.

Some have theorized that, in retail, the opening of big box stores such as Wal-Mart led to the closing of “main street” stores.

We are sure that has happened. But first of all, it happened because Wal-Mart — and lots of other chains such as Home Depot and Barnes & Noble — provided superior products and services at better prices in more convenient shopping venues. So it was a plus for the shoppers — that is why they switched.

Second, these independent stores were not particularly high paying venues either. Yes, there was the unionized supermarket that paid higher wages than Wal-Mart, but it is not clear that people who worked at independent book stores, clothing stores or hardware stores were so highly paid. Certainly the possibilities for advancement were a lot less.

Third, it is unlikely that very many of the entrepreneurs who owned those stores wound up permanently working as clerks at Wal-Mart. As people with education and experience, they doubtless found other, more lucrative, ways to make a living.

It is easy to misunderstand the process of “creative destruction” that drives capitalism. We discussed this process a bit in a piece we wrote about U.S. growers setting up shop in Mexico. There we pointed out that change is unsettling, though not necessarily bad:

On food safety, American growers moving into countries seems encouraging, raising standards and, in a sense, creating islands of U.S. technology and techniques that U.S. processors can access.

Still there is something a little unsettling about it, as there is with all Schumpeterian change.

Joseph Schumpeter was perhaps the most incisive thinker on entrepreneurs and capitalism to ever write. He is most famous for coining the term, “creative destruction,” to define how capitalism works by constantly destroying old ways of doing things to free up resources to do new things.

As he put it, all businesses must, at all times struggle “…to keep on their feet, on ground that is slipping away from under them.”

After we ran that piece, we received another note, this one from an important industry leader in the Pacific Northwest, advising of a new book about Schumpeter:

Your readers may want to learn more about Dr. Schumpeter. A great biography on this noted economist is out this year, entitled: “Prophet of Innovation: Joseph Schumpeter and Creative Destruction” by Thomas K. McCraw.

— Christian Schlect
Northwest Horticultural Council
Yakima, Washington

Many thanks to Chris Schlect for sending this along. It is a great book and its author, an Emeritus Professor at Harvard Business School, gave an insightful interview on Schumpeter, which you can read here. Here is an excerpt:

Q: Today, what would Schumpeter tell us about the evolution of capitalism in the 21st century?

A: Several economists, including Larry Summers and Brad DeLong, have said that the 21st century is going to be “the century of Schumpeter,” and I agree. The reason is that innovation and entrepreneurship are flowering all over the world in unprecedented fashion — not only in the well-publicized cases of China and India, but everywhere except those areas that foolishly continue to reject capitalism.

The word “globalization” is accurate enough, but if anything it understates the case, in part because of the information revolution wrought by the Internet. This situation makes management harder and more challenging than it’s ever been before. As a historian, I don’t say that lightly.

Read the interview. Even better, buy the book right here.

Most important, though, is to understand that what looks simple, say a supercenter opens and supermarket closes, is only part of the story.

When that supermarket closes, resources — real estate, human beings, capital, etc. — are freed up for other uses. The obvious occurrences are what get the media attention, but they are not a full understanding of the situation.

We thank both Mark Boe and Chris Schlect for helping us think about these issues.

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