Pundit Interviews

Pundit Letters





Perishable Pundit
P.O. Box 810425
Boca Raton FL 33481

Ph: 561-994-1118
Fax: 561-994-1610


email:
info@PerishablePundit.com

a

Produce Business

Deli Business

American Food & Ag Exporter

Cheese Connoisseur



Fresh & Easy’s 98-cent Sale
Causes More Consumer Confusion

What kind of store is Tesco’s Fresh & Easy? With all we have written on the subject, one of the obvious problems of the concept is that we can’t really answer.

At the present moment, Fresh & Easy seems to be aiming for the ambiance of a dollar store. The chain issued an announcement:

NEW YEAR’S RESOLUTION 101:
STRETCH YOUR BUDGET AND STAY LEAN IN 2009

Grocer offers range of 98-cent Produce Packs to start the year off right

Budgets have tightened over the last year due to tough economic times and people are changing the way they shop. People are cooking more at home and are purchasing products with longer shelf life. Fresh & Easy Neighborhood Market has noticed a sharp spike in its sales of canned foods over the past few months, particularly canned fruits and vegetables. In response to the needs of its customers on a budget for fresh quality products, the company is launching a line of 98-cent Produce Packs. Customers don’t have to make compromises to provide fresh fruits and vegetables for their families, particularly in the New Year as people recover from a food-filled holiday season.

“It’s clear customers are trying to stretch budgets but they also tell us they don’t want to compromise on quality or freshness,” says Simon Uwins, Chief Marketing Officer at Fresh & Easy. “We are introducing the 98-cent Produce Packs to help our customers start the year off right without breaking the bank. We’re making changes so customers have more choices in the way they are feeding their families.”

The 98-cent Produce Packs are delivered fresh daily to stores and currently include apples, oranges, peaches and tomatoes. With the new line, customers can always choose from six different fruits and vegetables which will rotate depending on season and availability. “

Now that the holidays are over, people are starting to reevaluate their eating habits to get back on track to better health,” says Fresh & Easy Spokesperson and Registered Dietitian Janice Baker. “When shopping, families need to choose foods that are high in fiber, vitamins and minerals, yet lower in fat and calories. These foods usually keep the stomach full longer as well. Consuming lots of fruits and vegetables is a great foundation to a healthy, well balanced diet.”

According to the Centers for Disease Control (CDC), in 2005, only one in seven Americans exercised enough and ate at lease five servings of fruits and vegetables daily1. Poor diet and a sedentary lifestyle, the CDC reports, can lead to increased health risks such as obesity and diabetes.

From January 2 to January 13, the 98-cent produce packs promoted include Apples — 3 count; Yellow Onions — 2 lbs, and Baja Classic Tomatoes — 1lb. The promotion is difficult to understand as it says, “Excludes all Fresh & Easy apples & tomatoes.” We assume this means the company did a special buy of less expensive apples and tomatoes and the company doesn’t want to sell the normal product at this price. Still very confusing.

And, besides, Fresh & Easy says the whole point of the promotion is “…no one wants to compromise on quality. And we don’t think anyone should have to.” Yet if all the apples and the tomatoes are of equal quality, why should some be excluded from the promotion?

Just as we were trying to figure this all out, we received a letter from one of the nation’s premiere retail produce experts:

Fresh & Easy currently has a big outdoor sign saying that it will feature six 98-cent items each week.

This week it is: 2# cello carrot, 1# roma tomatoes, 2# bag yellow onions, 4 pack of very small peaches, 3 each gala apples, and 1.5# of minneola tangerines.

They have all of the 98-cent items as the first in line in produce with 6 RPCs and signing.

My thoughts:

It is hard to make a price impact with just 6 produce items especially with Fresh & Easy as they sell so much by the package, not by net weight so consumers can’t figure out if it is a good deal or not.

Fresh produce is the opportunity to make a quality statement for the store. Promoting it solely on price means the store misses out on that opportunity. It degrades the produce and the store.

Fresh & Easy now features a grocery end with “Everything under $1”. They have canned tuna mustard, pasta, canned green beans, rice, and pasta all in private label on the end.

As we said, it is turning into a dollar store.

We know value is the hot thing today and, certainly, consumers like a deal. However, one day the store is promoting its green credentials; the next day it’s the place you get stuff for under a buck.

This is no way to build a consistent image.

We also wonder if it is actually addressing the problem consumers experience in shopping for fresh produce at Fresh & Easy.

If it is true as the press release implies — that consumers have been switching from fresh to canned to avoid spoilage in tough economic times — we suspect that what consumers really want is the ability to buy the quantity they need.

Maybe they want one apple, two Minneolas, an onion, two peaches. Whatever the price, people feel cheated and wasteful if they have to throw out half the product because the only option was a prepack of produce.

Let consumers buy what quantity they want, as most stores in America do, and consumers won’t have the same problem with waste. This 98 cent plan may be a solution to the wrong problem.




Tree Fruit Industry In Turmoil

During a recent quick trip to California to visit the Pundit’s sister and celebrate the Pundit parents’ 51st wedding anniversary, the Pundit, Mrs. Pundit and the Jr. Pundits, Primo and Segundo — aka William, age 7 and Matthew, age 5 — all had a delightful visit with Al and Mary Vangelos.

Al is sagacious and Mary is a woman of omnifarious kindness. She extended the Pundit an invitation to visit the Vangelos home back in 1990 when Al and the Pundit — except we weren’t the Pundit yet! — were working day and night to help the old United Fresh Fruit and Vegetable Association prevail over troubled times.

It took 19 years to make the visit happen but, as they say, the longer the waiting, the sweeter the kiss. And, of course, Mary had extended the invitation to a single guy and got a whole family. Still and all, it was an unseasonably cold day in California but we were warmed that day by the ember of friendship and mutual respect that has glowed more brightly with the passing years.

Al has had and still maintains many roles in the industry, but the most prominent is the President and CEO of Sun World, so our conversation inevitably strayed to a discussion of some of the challenges facing growers and, particularly, the California tree fruit industry. We knew the problem was serious and Al provided additional insight.

On the flight home we reflected on how we ought to write a piece discussing the matter when what should be waiting in the mail but a letter from another prominent tree fruit executive explaining what is going on the industry:

Indeed California tree fruit is in tough straights.

Estimates are that perhaps 7,000 acres were scheduled to be pulled out of production at the end of 2008 (some wish it was 10,000 acres), especially among some white-flesh varieties, which are currently dramatically over-produced. Even when acreage is pulled out, it is usually replaced with more productive varieties, so it seems there is always pressure from more volume even if from fewer acres planted.

For a number of years the popularity (and high price returns) of white-flesh peaches and nectarines primarily in the Taiwan market produced heavy plantings, but as volumes of whites have hit dramatic levels, there has not been significant market expansion domestically or in other export markets.

The variety of all summer fruit choices and availability has grown dramatically over the last 5-7 years, and a real battle has emerged over ‘shelf space’. As we all know, the average shelf space dedicated to produce has not changed significantly over the years, but the list of items offered in that same shelf space has probably more than doubled in the last decade.

Retailers have steadily moved away from standard ‘margin markups’ to a philosophy of ‘space utilization’ and ‘yield per square foot’. With more items to manage in a fixed amount of ‘real estate’, the value of real estate becomes more valuable and costly to manage; therefore it demands a higher yield per square foot of utilization. Big promotions are increasingly harder to implement. We have discovered that tree fruit demand is increasingly inelastic, and retail prices rarely have any correlation to FOB prices or producer costs.

From June to September, there is increasing commercial production and home grown supply of peaches, for example, in all of the contingent 48 states. With transportation costs being a significant cost component (not to mention the plethora of ‘promote local’ programs), consistent access to many markets is at times dramatically restricted for long periods of time throughout the season.

Unfortunately, eating quality is highly variable and difficult to manage in most tree fruit cultivars. The factors of variety, bloom timing, where fruit sets on the tree, pruning and thinning techniques, harvest timing, Brix-acid variability and post-harvest treatment all conspire to make the optimization of flavor a constantly moving target. At times it seems as if every single fruit is an individual, and achieving consistency in the eating experience is ever more challenging. Not meeting a consumer’s expectation, consistently, is but one reason total per capita consumption of most tree fruit cultivars has remained flat for years.

The last 2 seasons, California tree fruit producers have been crushed with a market oversupply that has not been mitigated through increased consumption, market expansion, or significant acreage adjustment, and the financial consequences for growers has been extremely harsh.

The consequences of the confluence of all of these factors has resulted in acreage being pulled out, some growers large and small pressured out of business, thus forcing the consolidation (or closure) of many packing operations.

With very low, and in many cases, negative returns, capital reserves have disappeared to meet all of the production inputs for many growers. Traditional crop financing with banks or serviced by packing houses have dried up. Even if you have some remaining capital reserves, or the ability to borrow them, finding the ‘will’ to risk scarce cash resources to prune, thin, and culturally manage a crop to harvest with little encouragement for a profitable season is wearing on everyone. Then, there is the economy; unemployment, and a worldwide recession (for some, depression has arrived).

There will be survivors. Certainly, there are opportunities. I suspect Warren Buffet is buying at Berkshire Hathaway, not selling.

In the California tree fruit business, those growers who have held together the right mix of varieties, market timing, who are teamed with a knowledgeable packinghouse company will continue to find ways to enhance the eating experience of their peaches, plums, nectarines, pluots, and apricots and will achieve adequate market penetration to be profitable (even if marginally).

The 2009 season will be a severe test, but it will sharpen everyone’s focus on improved ways to capture and retain their hold on the very competitive ‘battle for shelf space’, and an opportunity to present their best fruit this coming summer. We can only hope.

It is quite a letter. It correctly details so many of the trade’s problems:

1. We seem like hamsters on those wheels sometimes. The dominant variety is in overproduction compared to demand. So everyone looks to produce newer varieties that are getting better returns, that puts these new varieties in over production so the returns shrink, then the cycle begins again.

2. Retailers have become more sophisticated. The relationship between the FOB, the retail price and retail profitability is complicated. Even if lowering a retail price does increase movement, it doesn’t necessarily increase retail profitability and even if expanded space for a product increases movement for that product, this doesn’t establish that the retailer wouldn’t be better off devoting the space to something else.

The letter didn’t mention it, but there is something else: Many retailers just care less about the supplier community than they once did. The relationships aren’t as personal, the accountability to higher-ups more intense and the connection of buyers to the produce industry more casual. Lee Scott just finished his time as CEO of Wal-Mart. Once upon a time, he was prone to say things such as, “We need our suppliers more than they need us.” By the time he left, he had stopped saying such things.

3. Inelastic demand. Most produce items are very inexpensive and have limited traditional meal opportunities. So cutting the price of tree fruit may help for a short promotion but it just doesn’t boost demand very significantly — especially because if you cut prices on, say, peaches, the place the increased sale often comes from is from plums or nectarines! The industry tries but doesn’t really have the resources to boost consumer demand.

4. The locally grown programs are causing many problems not fully realized. This disruption of markets is one of them. It is very difficult for traditional growers and packers of a single line of product to plan volumes and manage sales.

5. The inability of the tree fruit industry to offer a consistent-quality eating experience is increasingly problematic.It makes consumer promotion difficult and makes retailers hesitant to push the product. Not to mention that it makes consumers hesitant to buy.

Interestingly enough, when we speak to growers, they barely mention these things as their problem; they tell us that the problem is that the banks won’t finance them. Several growers have mentioned that at this time of the year they would have been getting money for pruning but that the banks won’t lend.

Though we know we are being told the truth and, certainly have written enough about the financial crisis to know the seriousness of the situation, it strikes us that this is not the complete story and that the problem points to why solving this financial crisis is so difficult.

The situation is not that growers, who every year for 30 years have borrowed money for pruning and what not, finished the season, paid it all back every year and owed the bank nothing for months till the next cycle started, are now suddenly unable to borrow.

If that was the problem, then a burst of liquidity would solve the problem.

Unfortunately, due to the profitability reasons referenced in the letter, the banks seem to have often been rolling over these loans or portions of them. Often they seem intertwined with land value, and as long as land values kept rising, the banks were collateralized and thus prepared to roll things over.

Now we hear that the banks are demanding real business plans showing a real likelihood of repayment.

In other words, the problem is not bank liquidity; it is that a lot of lending has not been done in a method that would traditionally have been considered prudent.

The Pundit’s family once had a substantial produce business, advanced millions to growers, provided millions more in credit for export customers and used a bank to help finance the operation. The bank was typically willing to lend but they had one rule: One day a year, they wanted us to owe them zero. We don’t sense that a lot of growers, tree fruit and others, could really meet that test.

The bright side is a little tough because it means hardworking growers will go broke. If the problem is oversupply, banks not lending to those unable to establish a prudent likelihood of repayment will cause weak players to exit the business. This will leave strong ones in a better position to charge what they need to if they are to make a profit.

It is a tough outcome, but what, really, is the alternative?




Audit Of California Avocado Commission Raises Questions Of Use Of Funds And Governance Policies

The last few days have not been filled with great publicity for the avocado industry. The New York Times ran a piece entitled, Report Outlines a High Life for Advocates of Avocadoes, which gave this report:

Luxury suites. Shopping sprees. Four-star hotels. Such was life in the high-flying world of the California Avocado Commission.

That, at least, is the image presented by a blistering report released last week by the California Department of Food and Agriculture, which painted the commission, a state-established trade group financed by growers, as a kind of free-spending, avocado-gone-wild farm party….

… an internal audit had uncovered about $300,000 in dubious expenses, and the state report outlines scores of charges including some $39,000 spent by commission employees at upscale clothiers like Ann Taylor and Nordstrom.

The audit also found $17,000 improperly spent on home improvements, including a garage renovation, for an unidentified commission employee who also charged the commission for the purchase of an iPod, a satellite radio, a plasma television and a vacuum cleaner. Those charges were later reimbursed.

The Los Angeles Times headlined its piece, Audit of California Avocado Commission Uncovers At Least $1.5 million in Questionable Spending, and also focused on the “high-life’ angle:

Something has been rotten at the state agency behind a splashy $7-million annual marketing blitz on television, billboards and in food magazines to promote California-grown avocados, a new state audit indicates.

Employees and board members at the obscure, Irvine-based California Avocado Commission enjoyed lavish perks and benefited from as much as $2 million in questionable spending in the last three years, the audit concluded.

Among the benefits to staff members cited by the auditors were home remodeling projects, tickets to sporting events, gym memberships and vitamins, regularly delivered restaurant meals, clothing from high-end retailers described as uniforms, generous auto allowances and $850 hotel rooms at four-star resorts.

During the three-year audit period, the commission’s 18 employees used commission credit cards to run up more than $1.5 million in charges for “a significant amount of discretionary expenses that appeared questionable at best and even personal at times,” the report said.

About $17,000 was spent on gifts, meals and flowers to celebrate employees’ birthdays, employment anniversaries and other special occasions, the report said. An additional $39,000 purchased clothes at Nordstrom, Talbots, Ann Taylor and other stores that the commission dubbed “uniforms” after spending $8,700 to embroider the commission’s name and logo onto them.

Commission board members, their spouses, guests and employees spent thousands of dollars on “massages, nail service, facials and body treatments” during meetings at the Ritz-Carlton Laguna Niguel and at luxury spas in La Jolla and Del Mar in San Diego County….

[Rick] Shade, the commission board’s chairman, said no employees had been fired for the spending cited in the audit. He noted that the commission’s former president, however, resigned from his $300,000-plus-a year job last May after 20 years so he could “devote more time to his church.”

Shade also said that it was the home of Mark Affleck, the former president of the commission, that was mentioned in the audit where $17,000 was spent on permanent improvements and listed on the commission books as “home office expenses.”

The board currently is negotiating with Affleck to repay the commission money, he said.

Affleck, reached at his home in Mission Viejo, said he could not comment because he was unfamiliar with the audit findings.

The San Francisco Chronicle focused its piece, Audit: Calif. Avocado Commission Misspent Money, more directly on Mark Affleck:

The former head of the California Avocado Commission misspent tens of thousands of dollars in farmers’ contributions to remodel his home office and purchase an iPod, plasma TV and other personal items, according to a state audit released Friday.

The California Department of Food and Agriculture audit claims that 18 employees, including Mark Affleck, who resigned abruptly last year after 20 years as the trade group’s chief, misused funds. They bought groceries, designer clothing, restaurant meals and other items.

Affleck, who now directs a global humanitarian ministry for the Rev. Rick Warren’s Saddleback Church, declined to comment Friday.

The commission chairman said Affleck has already repaid some of the expenses but the board is trying to secure more.

A spokesman for Warren, author of the best-selling “The Purpose Driven Life,” who will give the invocation at President-elect Barack Obama’s inauguration, said Affleck is a longtime parishioner “in good standing,” whose contract work with the church “has nothing to do with avocados or accounting.”

… The 89-page audit paints a picture of a freespending organization whose employees dipped regularly at the trough, charging up birthday gifts and flowers for colleagues, running personal mail through FedEx accounts and regularly charging lunches for the entire staff.

It says employees racked up more than $1.5 million on commission-issued credit cards from 2005-2008, the three fiscal years covered in the audit. Some of those charges were called “questionable at best and even personal at times.”

Seven executives received $9,500 a month car allowances, plus $750 a month to pay for gas and oil changes, the report said, adding the steep payments do not “seem to be in the best interest of the state.”

Rick Shade, a Santa Barbara avocado farmer and the organization’s current board chairman, said he believes a final tally will show staff misspent more than $300,000.

“I don’t expect the growers who are barely getting by to be happy with this at all,” Shade said. “Some things were outright wrong, and some an abuse of discretion.”

The board is negotiating with Affleck to pay back more than $17,000 he spent to build, paint and install air conditioning in a new home office in his garage, Shade said. The audit says Affleck — who Shade confirmed was “Employee A” named in the audit — also spent more than $24,000 on about 50 pieces of equipment including a plasma TV, an iPod and Bose headphones for use at home. Some items have been returned to the commission.

Affleck also approved cash bonuses for select employees, gave certain staffers $10,000 to buy cars and authorized senior staff to be paid as much as $3,000 to join gyms and spend on workout clothing, the audit said.

Between 2005 and 2008, commission staff also spent about $123,000 on season tickets for the Los Angeles Angels and Anaheim Mighty Ducks, and Affleck set aside “large amounts of tickets for his own use,” the audit said.

Affleck already has repaid “several tens of thousands of dollars” in questionable expenses, and the commission’s lawyer plans to report the cash bonuses to the Internal Revenue Service, Shade said.

… The trade group’s $17 million annual budget is funded by avocado growers, who are obligated to contribute 3 percent of their sales. When Affleck resigned in May, he was getting an annual $400,000 salary.

After Shade became commission chair in November 2007, he said new board members noticed a few accounting anomalies and decided to take a closer look at spending. Another commissioner then asked agriculture officials to move the Avocado Commission audit to the head of the line, and auditors arrived in May, just as the board revised expense policies and started yanking back staffers’ credit cards.

“You feel a sense of betrayal,” said Carol Steed, a San Diego grower spared by the wildfires that ravaged other farmers in the region.

Affleck took the reins of the commission when avocado prices were 23 cents a pound and the fruit had a reputation for being fatty and unhealthy. Today the price tops $1 a pound, bolstered by commission studies and marketing plans that tout that fat in avocados as contributing to healthy cholesterol levels.

“He was, in a lot of ways, an incredible leader,” Steed said. “It’s sad he could be potentially remembered for something like this.”

The report has been forwarded to the California State Department of Justice, and they will be looking for cause to bring charges.

Right now all the information isn’t out there and, so far, nobody has actually been charged with any crime. In fact, nobody has even been fired.

It is all very titillating but our take in reading the reports is that if 18 people in an organization the size of the California Avocado Commission were charging all these things on company credit cards, then it was almost surely authorized behavior. One person end-runs the rules, 18 people execute a policy.

So it seems highly likely that Mark Affleck decided to run an organization that offered what most private companies would consider rather lavish benefits.

If at the Pundit we tell our employees they are allowed to watch a movie in the hotel room and bill the Pundit, movies get watched. If we said that we would pay for a daily massage to deal with stress, there would be many more massages taken.

Of course, this still leaves three open questions:

1. Was the proper IRS policy followed? In other words, a company is allowed to give people a non-accountable car allowance and let them charge clothes at Nordstrom. It is just required to file a 1099. It seems not to have done so.

2. Were the policies either authorized by the board or within the scope of authority delegated to the CEO by the board? Our impression in reading the material is that these extra payments were attempts to end-run grower frustration over what the growers perceive to be high salaries. As well as to deal with a salary freeze imposed after a bad crop.

3. How much did Mark Affleck take personally in these benefits, and was he simply piggybacking on the organizational policies that applied to all executives? Or did he do extra things for himself without getting approval of the board or compensation committee?In a case such as this, careful attention has to be paid to what is the correct question, or people’s reputations will be unfairly sullied. If the CEO of the organization tells the executives it is OK to buy a new suit at Nordstrom for PMA, that employer may be generous and the organization may have an obligation to report it to the IRS. But the employee who gets the memo and buys the outfit is not prima facie doing anything wrong.

The real sadness of all this is that growers all over the country will be more skeptical that their commodity promotion boards are acting with their best interest at heart. They will assume there is fat to be cut and what is already an often substantial cultural breech between growers and association executives will loom larger.

So even if Mark Affleck acted with the best of motives, he violated a cardinal rule of business by doing things that would cause embarrassment if they were on the front page of The New York Times.

There is a little irony to Mark Affleck getting caught in this web. At one stage of his life Mark Affleck wanted to be a public speaker and consultant, so he did what is recommended all such people do… he wrote a book. The name of the book is Radarscan Issues Management, and the publisher describes it this way:

Early action is the theme of this book by Mark Affleck, who writes, “If an organization waits until all the issues and forces reveal themselves and then acts, it’s always too late. RadarScan Issues Management helps you develop a culture that not only accepts, but looks for harbingers that may signal a new trend or threat even when it seems implausible.” Affleck shows how to anticipate issues, paint scenarios, generate intelligence on strategic issues, and plot issue trajectories….

Yet, is it really possible that he never saw this one coming?

You can find the book here.




Pundit’s Mailbag — New Thinking On Small Formats And Produce Distribution

We received a most interesting letter from France, filled with interesting ideas for increasing produce consumption and a twist on the au courant small format store concept. Beyond its specifics the letter also pointed to a very different role that trade associations in Europe seem to have seized as opposed to that played by the North American associations:

Your article, Small Format Stores And The Ever Changing Retail Environment, was intriguing.

Besides a reduction in the footprint of the store format, wouldn’t it be a good idea for specialty fruit and vegetable retailers to offer a drastically more selective assortment, giving preference to legibility over visibility of the offering? In other words, focus on the right mix between quality and price, rather than just shopping on prices and on appearances.

So perhaps a store should have small apples, and not have 10 varieties. Let the retailer be saying to the consumer, this apple is in the store now because it’s the best choice for you. Make it much more simple. There are so many apples on display at the big supermarkets… how can one even remember the names and varieties? For consumers, too many choices can become overwhelming.

This new strategy would differentiate specialty stores from (non-specialized) supermarkets, supercenters and hypermarkets. Consumers would delegate choosing to the retailer, letting [the retailer] make the selections in a universe characterized by gustatory uncertainty and cruelly lacking reliable means of reference. And thus the retailer would commit himself.

A meaningful assortment could be built up as follows:

  • Offer different varieties of the same fruit to enable consumers to compare the taste and to improve knowledge of different varieties (e.g., Only yellow apples for a two-week period: Belchard, Golden Delicious, Tentation, and then a limited assortment of bicolored apples for two weeks, a selected choice instead of simultaneously offering 12 varieties, which few consumers have ever heard of and even fewer are able to recognize).

     

  • Offer off-season fruits and vegetables as a helping hand to developing countries; this would be our “fair trade” reference and could feature, for example, green beans from Kenya.

     

  • Not offer products for which production volumes are below average in a given year, because they will inevitably be expensive (this year, stone fruit in France suffered from Spring frost, so no apricots would be offered by our “new” retailers).

     

  • On the other hand, fruit and vegetables in overproduction (such as lettuce and melon this year in France) would be highlighted with special offers of the day, or of the week, explaining why this is profitable for both the consumer and domestic growers (provided of course that product quality is good).

     

  • Focus on a few vegetables and explain how to eat them, and with what other dishes they go well — instead of proposing 10 different vegetables that are all equally mysterious to young adults.

     

  • Promote category II products, but of excellent gustatory quality.

     

  • Have one “521” offer, i.e., 5 fruits and vegetables, for a price of 2 Euros. In a volume of 1 kilo.

     

  • Offer packages based on season, proximity, Vitamin C content, “detox”, carotene content (to enhance tanning), etc.

     

Such a selected offer would make sense for consumers.

The specialty retailer could use the gained space to invest in a fresh-cut processing area, in order to recycle truly ripe-to-eat fruits, create nice smells of fresh soup, fruit sauce or compotes, recruit customers who are looking for service, and increase buying frequency: for lunch plus an extra ingredient for dinner. In France, the decline of fresh fruit and vegetable purchases is a generational problem, and the whole industry is trying to find solutions.

This project is currently under study at UNFD, the French Specialty Retailers’ Association.

We’re still in the preparation phase. Our Second Life stand in 3D is not ready yet. As soon as we have some results available, I’ll let you know. We will relate our experience at a conference in Dubai soon. With luck we hope to go to Monaco for the Imagina awards.

I hope I will be able to send you our project in 3D soon.

Last April, you were kind enough to analyze our vending machine venture for fresh fruits and vegetables in a piece you entitled, French Vending Machine Pilot Project. We see all efforts to have produce more conveniently available, via vending machines or new retail store formats, as part of an attempt by the industry to wrestle with this real generational problem.

When we look at the data that indicates that each successive generation is consuming, on a per capita basis, less produce, we have a real dilemma to face: Is there really a future for fresh fruits and vegetables?

In France, fresh produce, as opposed to canned, dried or frozen, still presents the majority of weekly fruit and vegetable purchases. Unfortunately, over the last decade, the frequency of shopping trips has declined.

How often do you purchase fresh fruits and vegetables

L1- Tous les combien achetez-vous des fr uits et légumes ? Diriez-vous

 

1989

1993

1996

1999

2002

2007

ts les jours

11

10

8

5

5

6

every day

3 fois/ sem.

18

18

15

13

12

14

3 times a week

2 fois/ sem.

27

28

27

30

28

24

twice a week

1 fois/ sem.

33

35

39

43

42

43

once a week

2/3 fois par mois

5

3

4

6

8

7

two or three times a month

moins souvent

6

6

7

3

4

5

less often

 

In a 2007 study of shopping behaviors, 42.5 percent of buyers are trending away from regular trips to the supermarket a few times a week to only shopping once a week. They drive to a big store in the suburbs and load up their cars with a week’s worth of food all at once.

This trend is ominous for consumption of fresh fruits and vegetables.

To really enjoy fresh produce, it needs to be purchased more than once a week. The general problem is that fresh produce, especially if purchased ripe at the peak of flavor, is not easily storable, so consumers buying it only once a week eat it in a day or two or three and wait until the next week to buy more; in the meantime preferring to use canned or frozen products, products with preservatives or prepared salads with longer shelf-lives.

So how would it be possible to address this problem and turn the fresh factor into a real product benefit?

Our goal, as an association and as an industry, is to make it easier for these consumers to find fresh fruits and vegetables near the places where they live or work, providing more access to convenient, easy-to-eat and take away products. This is a good way to increase consumption, especially for young people who consume less produce.

In France we still eat for pleasure, but there are generational differences with fresh produce consumption. In France now, the elderly, such as my mother at 82, eat more fruits and vegetables. But I buy fewer fruits and vegetables than my mother did when she was my age. And my niece buys still fewer fruits and vegetables than I did when I was her age. The young don’t want to bother with shopping, but they would like to eat healthy.

A lot of people work in the Paris area and in other large cities in France and are using public transportation. They live outside Paris but work in Paris, so if people pass by small shops and just buy what they need for the evening, that might be incentive to buy more fresh fruits and vegetables more frequently. They could buy some for lunch and then some for dinner, and it wouldn’t be that heavy to carry. This concept would work well for young people and couples, perhaps not as easily for big families.

People in the suburbs have less choice than they had before. The traditional small shops of France are disappearing outside the cities. In France, people only work 35 hours a week. We have more time, so people could shop more frequently.

Unfortunately, people do not enjoy this type of shopping at big supermarkets; there is no pleasure, no romance, in buying food. They do it once a week, as a chore, and are done.

One could assert that with the big increase in fuel costs, people will go back to proximity, so the future is not that clear. I think it is clear, however, that people don’t want to waste time in food purchases.

Our project idea early on was to have these small shops on the streets where you walk, like newsstands, where you buy your newspaper and also buy your fruit or your salad, all ready-to-eat. The aim is to make it very easy and very quick.

I thought about delicate fresh fruits like strawberries. If you buy strawberries on Saturday, you eat them on Sunday or at latest by Monday. People might buy strawberries more often if they could find small shops on their commute to take with them conveniently on the train to go home.

The idea would be to offer real ripe fruit so they could eat it on the same day. We could get them to come to our shop at lunch time, and then we could have a second offer for dinner, like fresh soup, or ready-to-eat salads, or fruits. We could make fresh fruits and vegetables have real meaning. If we have these sort of shops, we have to make money on the services and not on the quantity, because the shopper can’t carry a lot of things to bring home. The key is to offer fresh foods that create value.

The French fruit retailers’ association is trying to find a solution based on one of their strengths, namely proximity. At their request, Ctifl is currently studying the feasibility of copying the dense network of newsstands in urban zones and the use of these stands as outlets for fresh fruit and vegetables. What would be the ideal assortment for the small booths, how would they be fitted out, how would they be restocked, etc.?

We are planning to: 1) carry out a semiological study of the different outlets selling fruits and vegetables (not only fresh), in order to get a better understanding of the values conveyed by the different points of sale, and 2) “install” on Second Life (using 3D) such a stand, as well as a “corner” in a conventional outlet. Depending on the results, a real-life prototype will be tested. You can see a prototype video here:

As for specialty retailers in France, they represent 10 percent of fresh fruit and vegetable sales. They would be the obvious type of retail stores to implement the concept, but small format supermarket outlets such as “Carrefour Market” or Monoprix might also show some interest.

Small stores, vending machines and newsstand clones are all attempts at dealing with the same problem: Only by developing a viable supply chain for small, omnipresent outlets can we encourage the frequency of consumption that is crucial to offering fruits and vegetables, both whole and fresh-cut, at the peak of their flavor. And only by offering fruits and vegetables at the peak of their flavor can we hope to build consumption.

I am once again indebted to my colleague Nelly Ottens for help in translating this letter.

— Catherine Roty
Chargée d’études
Ctifl
Paris, France

We are indebted to both Catherine Roty and Nelly Ottens for sharing so generously of their insight with the industry at large.

We think Ctifl deserves much praise for being willing to look to issues of product quality and structural impediments to purchase.

Going back to the old 5-a-Day program, we have long felt that simply looking to promotion was insufficient. As long ago as this column and even before, we said that the industry promotion would be more successful if we resolved structural issues that kept gas station mini-marts stocked with cookies and chips but no fresh produce or, half-rotten fresh produce.

Ms. Roty implies the best explanation we have heard for why per capita European consumption of fresh produce is higher than US consumption: because patterns of frequent shopping — cultural patterns growing out of physical realities such as small refrigerators and urban living without cars — allow for higher fresh produce consumption, because one need not worry about the produce going rotten before the next trip, and literally allows for better produce as it can be sold closer to the peak of ripeness.

Now they have had hypermarts for some time in France and there have been quite a number of cars and a move to more suburban living for decades — but habits change slowly; perhaps, as Ms. Roty implies, they change generationally.

In addition, Ms. Roty is really proposing that retail should be more like foodservice. Retailers, in general, will carry a multitude of items and see what sells. Foodservice, by its very nature, involves a Chef or menu-planner making a selection for the consumer. This is the vegetable of the day; these are the fish we choose to sell.

So in proposing that, as she wrote: “Consumers would delegate choosing to the retailer, letting [the retailer] make the selections in a universe characterized by gustatory uncertainty and cruelly lacking reliable means of reference. And thus the retailer would commit himself.” Ms. Roty is suggesting little short of a revolution in retail thinking.

And there are real reasons to think that she may be on to something. Many years ago, when Internet shopping was in its infancy, the common perception was that it wouldn’t work for fresh produce as consumers would want to make sure they picked out a melon of the proper ripeness or that the consumer would want to see the quality.

Yet a young Cornell University professor by the name of Ed McLaughlin did some research that turned this point on its head. It turned out that consumers were thrilled to order fresh produce on the Internet precisely because it was so difficult to select a ripe melon or to know that a particular pineapple was of quality; they were happy to delegate these chores to an expert. Of course, not too many Internet shopping services actually had experts on these matters, but that is a story for another day. For now, the point is that the research seems to indicate an opening for a retailer who offers to exert expertise on behalf of the consumer.

In critiquing small store formats, including Tesco’s Fresh and Easy, Safeway’s ‘the market by Vons’ concept — as we did here and here — or Wal-Mart’s Marketside concept — which we discussed here, here, here and here — we have questioned whether American consumers would accept an abridged assortment. Yet, Ms. Roty raises an intriguing question: Might people be more inclined to accept such an abridged assortment if small format stores stated that the selection was not just smaller but better? In other words, right now one looks at these small format stores and one thinks they didn’t have room for all the options. Suppose instead there were signs posted indicating that the buyers had made choices and selected particular items for display based on that day’s quality and value — might it turn a negative to a positive?

We are enthused by the idea of these newsstand-like kiosks. When they open the first one, we hope Ms. Roty will let us know as we shall go to Paris to see such a thing.

Yet, as hopeful as we are, we must acknowledge a degree of skepticism.

On the logistics side, nobody has been able to develop a system that allows for frequent distribution of fresh fruits and vegetables to low-volume locations at a price that is not prohibitive. And it strikes us that many high-volume locations already have an array of available fresh produce. In most of Manhattan, for example, you have many small fruit shops and quite a number of fresh fruit carts on the street.

We have some doubts about the willingness of people to carry things. We remember when Eatzi’s opened in the Cellar at Macy’s on Herald Square. They had the theory that many commuters at nearby Penn Station would stop and pick up dinner before boarding commuter trains out to Long Island. It didn’t work, and we fear that it will be too much of a bother to carry such things. Although, perhaps, technology could be used. At the new Jetblue Terminal 5 at JFK airport, you can order a sandwich with a machine by the gate and they deliver it to you. Maybe we could have people order fresh produce upon departure or via mobile devices and have it waiting upon arrival?

We have long been troubled by the amount of good eating product that is difficult to sell because it is the wrong size or variety. However Ms. Roty speaks to the heart of the value proposition that retailers such as Aldi, Liddle and Netto offer in fresh produce. These retailers vehemently object to the notion that what they sell is of lower quality than the product a supermarket might sell, they explain that they might, though, buy a size or variety that is unpopular and thus get a better deal. We have doubts though, that, cosmetically unappealing produce has a bright future as looking is apart of enjoying as much as eating.

Mostly though, we are a bit skeptical because the barriers to opening small stores are not high. However, as they say, the devil is in the details. If there was money to be made executing the concept, surely somewhere, someone would be doing it. Perhaps beyond the upscale neighborhoods where such retail concepts exist, the consumer needs low prices more than service or expertise.

Skepticism over new business concepts is always warranted, because most fail. But some succeed; we most ardently hope that this is one of the exceptional few.

Many thanks to Catherine Roty and Ctifl. Your work is an inspiration to the industry.




Perishable Thoughts — Higgins Boat
Story Tells A Tale Of Perseverance

Our piece, Perishable Thoughts — Keeping Things ‘In Perspective’ For 2009, referenced a contemporary quote pointing out that for all the problems of a financial crisis, it was nothing compared to the dangers of getting out of a Higgins boat on Omaha beach. In other words, nobody is getting shot here.

The reference to a Higgins boat led to the following note:

Your mention of Higgins boats reminded me of the late Victor Krulak — recent New York Times obituary below. Note that he made one observation, which was thrown away by the bureaucracy but followed up by him when he returned to the States.

He also worked on the two defense reorganizations in the late ‘40’s and early ‘50’s, in which he helped keep the Marine Corps from being abolished. Part of the war that is fought in bureaucratic trenches. My memory of the quote is:

“Sometimes it’s more difficult establishing your right to fight than actually fighting.”

— Dan Cohen
Maccabee Seed Company
Davis, California

Dan has contributed to the Pundit before including pieces such as these:

Pundit’s Mailbag — National Marketing Orders And Agreements

Pundit’s Mailbag — Two Windows And Two Issues

You May Never Look At Spin The Bottle The Same Way Again

Now we send him a hat tip for this quote as well as for the sharp eye in making a connection to the January 5, 2009, obituary of Lt. Gen. Victor H. Krulak, who died December 29, 2008, at the age of 95. The New York Times obituary is entitled Victor H. Krulak, Marine Behind U.S. Landing Craft, Dies at 95:

In 1937, while a lieutenant in an intelligence outfit in Shanghai, when the Japanese were trying to conquer China, he used a telephoto lens to take pictures of Japanese landing craft with a square bow that became a retractable ramp, enabling troops and equipment to be dispatched quickly onto an enemy beach.

Envisioning those ramps as answering the Marines’ needs in a looming world war, Lieutenant Krulak showed the photographs to his superiors, who passed on his report to Washington. But two years later, he found that the Navy had simply filed it away with a notation saying it was the work of “some nut out in China.”

He persevered, building a balsa wood model of the Japanese boat design and discussing the retractable ramp concept with the New Orleans boat builder Andrew Higgins. That bow design became the basis for the thousands of Higgins landing craft of World War II.

“There would not have been a Normandy or an Okinawa or an Iwo Jima without that boat,” his son Charles said in an interview on Sunday.

Son Charles, by the way, did his father proud; he is General Charles C. Krulak, the Marine commandant from 1995 to 1999.

The quote actually comes from Victor H. Krulak’s book, which is a history of the Marine Corps:

“Fighting for the right to fight often presented greater challenges than fighting their country’s enemies”

First to Fight: An Inside View of the U.S. Marine Corps
By Victor H. Krulak
Published by Naval Institute Press, 1984, 1999
252 pages, pg 15

It derives from this section:

“Standing beside Marine Lieutenant General Holland Smith on the bridge of the command ship Mt. Olympus, off of Iwo Jima on the morning of 23 February 1945, Secretary of the Navy James Forrestal said that the raising of our flag atop Mt. Suribachi “means that there will be a Marine Corp for the next five hundred years.” Moments later, out of Forrestal’s hearing, Smith commented, “When the war is over and money is short they will be after the Marines again, and a dozen Iwo Jimas would make no difference.”

The resolute general was voicing the frustrations of the many generations of Marines before him who had learned through hard experience that fighting for the right to fight often presented greater challenges than fighting their country’s enemies.”

The quote can be viewed here:

First to Fight: An Inside View of the U.S. Marine Corps (Google Books)
By Victor H. Krulak
Published by Naval Institute Press, 1984, 1999
252 pages, pg 15

Here is the original version of the story of the development of the Higgins boat. The best telling of the story would be from the man himself, and includes a picture of the original boat that prompted the design from 1937!

First to Fight: An Inside View of the U.S. Marine Corps
By Victor H. Krulak
Published by Naval Institute Press, 1984, 1999
252 pages, pg 90

Here are several other renditions of the story by admirers of Krulak:

From Whaleboats to Amphibious Warfare
By Anne Cipriano Venzon, J. Michael Miller

(Above link begins Krulak’s involvement, several paragraphs earlier begins Andrew Jackson Higgins story of his development, prior to meeting Krulak, of a shallow draft boat)

Leadership Embodied — The Secrets to Success of the Most Effective Navy and Marine Corps Leaders
By Joseph J. Thomas
Article on Victor Krulak contributed by Shawn P. Callahan

In troubled times, we thought this quote has a special resonance. The book goes on to explain in the sentence after the quote that:

“Viewed more philosophically, it may be said that the unending struggle for survival has done much to strengthen the Marines’ character. As in the greyhound races, every time the Corps started to coast, it seemed that the rabbit, in the form of a threat to their survival, sped up and challenged them to higher levels of performance.”

And so the struggles we endure are not solely negatives; they are the stuff that causes us, in our quest to overcome the problems, to rise to meet the challenges. If we were never challenged, we would never begin to know the depth of our own potential.

As we struggle with tough times, that is a rather uplifting message.

Of course, there is a side story to Victor H. Krulak’s life. As The New York Times obituary explains:

In the fall of 1943, General Krulak, a lieutenant colonel at the time, commanded a battalion in a diversionary raid on Choiseul Island in the Solomons that enabled a larger Marine contingent to capture the more important island of Bougainville. Although wounded, he continued to lead his marines in battle, bringing him the Navy Cross. Some of his wounded men were evacuated by a Navy torpedo boat skippered by Lt. John F. Kennedy.

In the late 1940s, General Krulak helped pioneer the use of helicopters to carry marines and supplies into battle, a maneuver employed in the Korean War, when he was chief of staff of the First Marine Division.

When Kennedy became president, General Krulak reminded him of their meeting on Choiseul. He presented Kennedy with a bottle of whiskey, something he had promised him for his rescue work back in 1943 but never had a chance to deliver. In 1962, Kennedy named General Krulak the counterinsurgency adviser to the Joint Chiefs of Staff.

General Krulak was, of course, quite well qualified for the position. Still, if he hadn’t have met JFK as a young Lieutenant, if he hadn’t remembered his promise and brought whiskey to the White House, maybe he never would have received the appointment.

So we see the paradox. The message of the quote today is to endure and persevere in the face of ridicule, for if you fight hard enough and long enough you just might show all those geniuses they were wrong. The paragraph after the quote reminds us that suffering can be redemptive and that our true mettle may only come out in response to enormous challenges. Then we have the next paragraph, which reminds us that life is serendipitous and the key is really to take advantage of the opportunities life presents.

That is an awful lot of wisdom to fit in a few paragraphs in a book.

Many thanks to Dan Cohen of Maccabee Seed Company for suggesting we read it.

****

Perishable Thoughts is a regular section of the Perishable Pundit. If you have a favorite quote that you would like to share with the industry, please send it on. You can do so right here.

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