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Perishable Pundit
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Produce Business

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American Food & Ag Exporter

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The Failure Of Tesco’s Fresh & Easy: Diverse Voices And 'Déjà Vu All Over Again'

Our piece, Twenty Lessons Learned From Tesco’s Fresh & Easy Failure, brought many responses. Some were high fives:

This is a tremendous document  you should print this into a book.

Excellent work  glad you took the time to do it.

— Karl Kolb Ph.D.
Chief Science Officer
The High Sierra Group
Chippewa Falls, Wisconsin

From as far away as Pretoria, South Africa, some saw the matter as predictable:

The mighty TESCO had you under their noses. You were the perfect man for the job but blood was always going to be thicker than water.

— John Pereira
Evergreens – the Fresh Market
Pretoria, South Africa

We also heard from old compatriots who contributed to the Pundit in relation to Fresh & Easy. For example, David Livingston contributed to these pieces:

Wal-Mart Re-Positions Marketside

Headstrong Tesco Claims Success With 98-Cent Fresh & Easy Line

Tesco’s ‘Selective’ Market Research

Kroger And Tesco Approach Store Acquisitions Differently

Aldi Challenges Wal-Mart As Low-Price Leader

Reading Tesco Between The Lines

Then he made a wry comment on our “Twenty Lessons” piece:

You just shot a dead horse 20 times!

Were we right or were we right about Fresh and Easy?

— David J. Livingston
DJL Research
Pewaukee, Wisconsin

We heard from several investment bankers from London, including one who had some specific points:

I had been checking your site to see what you were going to write about Fresh & Easy’s demise — I was surprised you held off for so long!

But it’s a great piece of analysis — very interesting. In fact, I am going to send it to another European retailer, which is about to open stores in a distant market . . .

The only two points I would make are as follows:

1.   From speaking with Tesco, I think they are determined to get out cleanly and completely — and only mentioned the possibility of a joint venture as a way of keeping all options open.

2.   I would question point 1. I would be surprised if you could find a single analyst report which advocated that Tesco move to the US before they announced the move. The old saying about UK retailers failing in the US was very widely-held, and most people regarded the US as a very tough market due to Wal-Mart. Now, that’s not to say that some people did not fully embrace it when it was announced – but that is different to saying that the City urged Leahy to do it. I think he wanted a big trophy project to crown his career. I think Leahy takes the blame, not the analysts! (Of course, this is my memory and could be selective — but is what I remember!)

But a very informative piece — I wonder how much Tesco would have saved by following your advice . . .

The answer as to what they would have saved is forever going to be a mystery. The cost of an operation such as Fresh & Easy is not just the dollars expended but the management attention that didn’t get paid to other operations or opportunities because everyone was focused on Fresh & Easy. We also don’t know what, if anything, the company can salvage in a sale.

But there is every reason to think that Tesco could have found a profitable toe-hold in the market.  Look at the success of Mariano’s in Chicago. What made it successful? We could say it is the great soup bar or the fresh produce but, in reality, these are secondary effects. It is successful because it was put together by all the old Dominick’s people. They knew the market, from real estate to consumers; that is the key.

Tesco’s efforts were not so much to open a successful food retailer in the markets as to impose a foreign entity on the body politic. Once in a while this works. But it is as we wrote here, here, here and here … it is a “brilliant or bankrupt” strategy. Even in the exit — if Tesco had built 20 normal-sized grocery stores, the company would have a lot better chance of selling them for some large portion of the investment than it does with these small stores. So, it turned out they weren’t brilliant, and the only reason they are not bankrupt is because they had a lot of shareholder’s money to burn through.

We do agree that the odds are heavy that Tesco will just sell out or close up. We suppose Tesco’s executives will listen to any proposals, but almost any joint venture one could imagine will require Tesco to put up more cash and it probably will not want to do that.

As far as the original motivation, it is certainly true that no amount of urging by investment bankers can make a company such as Tesco do what it does not wish to do and ego-building by its ex-chairman Sir Terry Leahy is as good an explanation as any.

However, as JFK said after the Bay of Pigs fiasco, “Victory has a thousand fathers, but defeat is an orphan.” Back when there was hope for Fresh & Easy, several investment bankers laid out the necessity for Tesco to avoid seeing too large a share of its earnings come from developing countries or unstable markets lest it affect the P/E at which Tesco stock traded.

The logic here did not compel opening in the US but strongly led to it. They all claimed at the time that their analysis of Tesco’s situation helped move Tesco to the decision to open in the US. They all forgot saying this, but the Pundit was there.

One executive very experienced in retail questioned the viability of Wal-Mart doing any retail acquisition:

This is an excellent piece.  

By the way, Wal-Mart once told us that from an antitrust perspective, they are so big that they are not really allowed to buy any retailer in the U.S. and they would never get Hart Scott Rodino approvals. There is an exception allowed for units in extreme financial distress, but they said as a practical matter they really would never buy another chain.

This is almost always true. The only situation under which Wal-Mart could both get approvals and wouldn’t risk general attack would be a situation where thousands of people were imminently about to lose their jobs and Wal-Mart could ride in as a white-hatted hero to save the jobs, sales tax revenue, etc.

It is a long shot and, as we said, Tesco is so competitive with Wal-Mart we doubt it would do it anyway, but this scenario — a sudden closure of stores, manufacturing facilities, warehouses and attendant job loss — might be the exception that proves the rule.

A local expert, who as we mentioned in our “twenty Lessons…” piece, should have been on the Fresh & Easy team (much as Bob DiPiazza had been brought in to help with the launch of Mariano’s), weighed in as well:

Great article on the reasons Fresh and Easy failed. 

Thanks  for the plug regarding my consulting abilities on the local market, and I would love to work with Bruce Peterson and Tim Riley. If Tesco had done something such as you propose a few years ago they might not have failed. 

You were so right on with the reasons for failure,and I especially like #19 on the economy. If the stores had the right mix and the right prices (and I believe they had the wrong mix but the right prices), they would have appealed to the price-conscious customer in a down economy. This should have been one of the main reasons that Fresh & Easy would have succeeded, but they couldn't help themselves with the dominance of an unknown private label with no brand equity.Their concept of having a "bake off" bakery operation was too little too late.

I really feel bad for those "Category Champions" who made the investment in time and resources to be good vendors and then were left at the alter when they had an opportunity to buy cheaper. 

Fresh & Easy was supposedly all about "saving the planet," but it insisted on "extra" packaging and shipping "air" to their stores. I often saw less than two pounds of produce in six or eight packages in an RPC that could have held 10-12 pounds. The amount of pounds of produce they would get on four full pallets would be what a good conventional chain would get on one pallet.  That is a lot of wasted packaging and energy for a company that was saving the planet.

 It will be interesting to see who buys Fresh & Easy, but my bet would be Aldi or a Dollar store company, as it would give them 200 locations and a DC. I am sure that the sale negotiations could exclude the Wild Rocket Foods and Two Sisters facilities. 

It would give Aldi a foothold in California, Nevada, and Arizona, and some of those locations would make very good Trader Joe's. Trader Joe's knows these markets and could help Aldi make an immediate impact.  The same would be true of Family Dollar and Dollar General as they have shown interest in the market.

— Dick Spezzano
Spezzano Consulting Service, Inc.
Monrovia, California

We also feel compassion for the “Category Champions,” who were needlessly treated poorly. But they are big boys and knew what the risks and rewards were of getting involved. Most of the vendors are among the very best in the industry, and they will live to fight another day.

The Pundit Momma used to teach us that “wise men learn more from fools than fools from wise men,” and the top vendors learned from their interaction with Tesco, and those lessons will be carried with them. The sadness is that Tesco played the “fool” role in this drama.

We too watch with interest who will buy the stores. But our guess is that many of the stores don’t meet the traffic specifications for an Aldi. Some do and some, absolutely, are Trader Joe’s and Dollar Store-friendly locations. But we don’t think any of these value Fresh & Easy as a going concern, and most of the stores lose money every day. Very often in these situations the employees feel aggrieved, that promises were broken — true or not — and theft starts zooming.

Many locations won’t make it as food stores. Others will do so only with non-union ethnic families operating the stores.

Rather than navigating all this, we suspect Tesco will wind up putting a lock on the door, closing up and selling the whole thing in bulk to an investment group. That group will sell everything off in pieces and negotiate individually with retailers.

It is possible that an Aldi or other organization may partner with an investment group to make an offer, with Aldi taking the stores it wants and the investment group taking the rest.

We do suspect that when they start to realize how much money they are losing to shrink, they will close up sooner rather than later.

One of the shocking things about this ending for Fresh & Easy is how many Americans keep calling and writing, complaining they were treated as second-class citizens. Most insist on anonymity, but this gentlemen signed his name and is working to help Fresh & Easy folks get jobs elsewhere:

I fought, yes fought, for 5 years to combat the internal issue at Fresh & Easy. Two months ago I decided I had had enough, the organization was not interested in winning with its employees and vendors; it was interested in winning at their expense. After all, they are TESCO. As one of the higher level Americans, I was constantly a buffer trying to keep the Americans from leaving due to the routine verbal abuse from our British peers and managers.

Within the the Fresh & Easy factories, the Americans were treated as 2nd class citizens. This was a lesson I learned in my first weeks there. 

I experienced and vocally fought to change many of the items mentioned in your recent article, but the arrogance of the business was so deeply ingrained that I was finally internally exiled. My last days at the company were spent looking for co-packing opportunities for all 3 factories. This was something I voiced that they should be doing when I was interviewing with them in December of 2007. In the end, the British management team was a day late and a dollar short. I found a new home with one of our potential co-pack opportunities.

Out of this whole experience, the most eye-opening fact is that Fresh & Easy didn't listen to the consumer. It in fact told consumers what they wanted. I know because I was one of the few Americans in the product development meetings fighting for what at least one American wanted. 

While I am saddened that the organization I worked 50-60 hours a week for is ultimately going to cease to exist, I am happy that as an American, we have again shown another British retailer that Americans don't like to be told what to do… or what to eat.

I have been diligently helping many of the great people I worked with over the last 5 years find jobs as they will soon be needing them. An ex-Fresh & Easy employee, Kevin Palmer, and I are setting up a website —  www.socalfoodjobs.com — to help in placing many of our qualified friends. It has just been set up, and we are preparing to populate it with job postings. In just the last week we have helped 3 people to get interviews for positions that were not openly posted on any job boards. While this is not a big number, it is a beginning.

My new path finds me in the home grocery/meal delivery market, 2013 is set to be a big year as venture capitalists are seeing the grocery industry as prime for disruption.

—Richard Chover
Director of Operations and Supply Chain
Fresh Dish
Los Angeles, California

Well, the disruption won’t come in the form of Fresh & Easy.

This whole business of contempt for Americans, which started at the top and led to the key positions all being filled by expatriates, is rather odd. We have lots of British friends. They are nice people, so there is something about this situation that has led to such a peculiar attitude by Tesco.

On the vendor side and maybe even the employee side, the issue is probably more a matter of being Tesco than being British. The Americans they did bring in were people who worked for Tesco in places such as Thailand for extended periods. These folks were out of touch in America but were trusted by Tesco.

When it comes to consumers — and Mr. Chover clearly has it right that as Dick Spezzano confirmed, the assortment was all wrong — they weren’t listening to the shoppers. Why? We hypothesized here that the core problem was that we both spoke English. It sounds like a joke but only halfway. The executives from Tesco are smart people, and when they land in China or Poland they realize these people are obviously different — they speak a different language. This leads to an acknowledgement that everything else has to be different — assortment, design, etc.

Here we are just similar enough that they may think they know what we would or should be eating. We’ve told the story of the odd decision to devote 25% of the opening salad SKUs to watercress-based fresh-cut salads many times — the question is what motivated Fresh & Easy to decide to do what American retailers and salad producers chose not to do?

There are only a few options: 1) The British executives believed that the producers in America didn’t know how to make a good watercress-based salad, and once Americans experienced it, they would love it. 2) The British executives believed that American consumers were not exposed to this wonderful product, and once exposed would quickly chose to buy it. 3) The British executives paid no attention to their much-talked-about research and simply went with their gut.

Of course, all three options show enormous arrogance.

The structural question, of course, is: What policies did Tesco have in place to check the inclinations of a clubby group of Tesco executives, who were going to go not only from the primo place to work in Britain to America but from being the “big fish” who had real pull with vendors and even had big power to sway consumer sentiments to being, well, nothing?

Apparently there was no such policy and Tesco paid big for that structural failure.

Even the store-level employees have been weighing in:

Your take on Fresh & Easy is right on, with the view from the top.

I worked for Fresh & Easy in two of their stores in Las Vegas, one in the 2007 roll out, and a second as a new store opening in 2008.

The problems I saw and attempted to express to DM and RM were:

1) Product was not neighborhood specific, as you pointed out. This was extremely apparent at the roll out when we were attempting to sell tripe and trotters.  As a chef I knew what they were, and how to cook them, but, I was one person in one store, and there were not that many customers who even recognized them as an edible product.

2) Middle management had the same attitude as upper management as to 'knowledge'. Simon Uewins was at my store twice, the second time to show how they wanted displays done on end-caps.  Well, with Simon showing all, including RM DM and store managers how it was to be done, it did not translate at all. The managers then began working with individuals (the TL's and CA's), but each of the managers did the display differently, and none to what Simon had produced.

3) In the first months there was no way for people to contact headquarters directly, no 800 number, no web or emails, it all just flowed down from the top like the proverbial smelly mud.

4) Kitchen Table was only allowed to produce EXACTLY what HQ said to produce; do not make anything from what might be going out of code soon, or even think of being locally creative.

5) POS advertising often had pretty pictures of cakes, pies, desserts, but prices were for NY strip steaks; just one example of "what the (expletive deleted)" advertising.

6) Resetting huge sections of stores on a 2-3 month schedule, as developed by the munchkins at the mock store with no customers. I actually had several customers in the stores I worked at leave carts of groceries in the aisle, vowing never to return when they saw another reset of a department or aisle.  Granted, tweaks of spots for products need to be made when something is added or deleted, but the wholesale changes made were uncalled for.

7) Never try to send an idea, prospective location, or customer complaint to HQ, SM, DM, or RM always made sure they went into file 13; likely, as you pointed out, that upper management from UK viewed the personnel hired in the US as basically slave labor with no brains, so why should they listen to us.

Thank you for your article, very enlightening. I would also point out that even with my undergrad business degree, and master’s degree, plus culinary degree, I was viewed as no better than any uneducated, inexperienced person they might have hired in a third world country.

— Frank Carroll
Frank Carroll Photography
Las Vegas, Nevada

Tripe is stomach tissue and trotters are pig’s feet. In America few eat either.  Even with a lot of micro-marketing it is hard to think of many micro-markets where these would be important items. Again, for such a well-researched launch one is compelled to shrug one’s shoulders and say they did all the research for show. It is impossible to believe that the researchers came back and said Americans eat lots of tripe and trotters.

Now in the UK when the recession hit, you had headlines such as, Pig’s Trotters Fly Off The Shelves as Customers Seek Cheap Meat Cuts, but this had nothing to do with America.

It seems nobody listened. Whether to higher ranking American executives, store level employees or the customers themselves.

It is not all bad, but one supplier tells us that as time went by Tesco didn’t get looser; the company got tighter:

Just completed your “treatise” on Fresh and Easy, and enjoyed your completeness and writing style.  I follow your comments on most subjects  but F&E has been fascinating.  We were involved with supplying a lot of the Wild Rocket equipment, and your comments are certainly true.  More recently, as they expanded the distribution center (inside), they also expanded security.  It is much easier to get into Google manufacturing, than F&E.  Anyway, I just wanted to say thanks for your updates on pertinent and often tricky subjects.

— Tom White
Owner
ANZU
Marina, California

Well, security is good when food is concerned so we can give them some props on that one, but were they afraid of someone damaging the food or just paranoid about protecting their innovations?

You would like to believe that a lot will be learned from the demise of Fresh & Easy, but Lee Smith, who serves as Publisher and Editorial Director for Pundit sister publications DELI BUSINESS and CHEESE CONNOISSEUR and also used to work at Kings, reminded us that this is as Yogi Berra said “Déjà vu all over again:

Just finished reading the Perishable Pundit and I thought it was a good analysis of Fresh & Easy’s failure.

I remember when Marks & Spencer bought Kings and they thought American deli salads were terrible and changed the recipes.

They thought American cookies were too sweet and switched high end cookies to British biscuits.

They stopped delis from making their own roast beef, baked ham and roasted turkey and moved to brand name cold cuts, losing their competitive uniqueness.

It’s not hard to understand why Americans went to other supermarkets to buy what they liked, not what M&S wanted to sell. I remember the “new” Kings executives making fun of the way Americans do things at industry conferences.

Although they kept Kings’ key supermarket executives, their wings were clipped. Back in the good old days, on occasion, deli department sales exceeded produce sales. Deli departments often did over $100,000 per store per week. Those days gradually faded away.

It is the same scenario all over again.

— Lee Smith
Publisher & Editorial Director
Deli Business
Cheese Connoisseur
Boca Raton, Florida

Edna St. Vincent Millay was among the first women to receive the Pulitzer Prize for poetry. She advised that “It is not true that life is one damn thing after another. It's the same damn thing over and over.” Which is pretty much what seems to have happened here.

Of course Karl Marx had a different take: "Hegel remarks somewhere that all great, world-historical facts and personages occur, as it were, twice. He has forgotten to add: the first time as tragedy, the second as farce."

Which, many would say, more closely describes the Fresh & Easy experience.

Many thanks to our correspondents for weighing in on this issue. Their contributions will be mined for insight for a long time to come.




Booth Babes: Al Jolson, The Supreme Court, Self-Promotion And How Context Can Make All The Difference

The subject that just won’t die rolls on. We’ve run five pieces so far on the subject of “Booth Babes,” and the broader issue of PMA policy:

1) Pundit’s Mailbag — Booth Babes And The Disconnect With PMA’s Position On Women’s Careers

2) Pundit’s Mailbag — Nothing Wrong With Booth Babes!

3) Pundit’s Mailbag — “Booth Babes”, Professionalism and Hypocrisy: What Should PMA’s Policy Be?

4) Pundit’s Mailbag — United Fresh And Others Weigh In On Booth Babes

5) Pundit’s Mailbag — Booth Babes Issue Rolls On With Discourse About Beauty, PMA Exhibit Policy, Marketing Tactics And Proper Attire

Some commenters are those who have commented previously, as Deidre Smyrnos of CF Fresh did both here and much earlier here, but she has come back to take another swing:

I think that your comparison between "Booth Babes" and "Al Jolson Blackface" is an excellent analogy and makes for a very convincing argument! 

“But, in the end, today, most organizations wouldn’t allow the kind of fun things that offend people to go on. You wouldn’t let an exhibitor have an Al Jolson Blackface character at its booth, although that might have been perfectly acceptable at some point in time."

I sure look forward to PMA's response to this topic to which there has been much debate.

Deidre Smyrnos
Account Representative
CF Fresh, Inc.

Deidre is passionate on this issue. The question, however, is precisely what will “offend people,” and it is not easy to write out that definition in a way that PMA or anyone else could enforce. Even advocates of restrictions have written in exceptions for native dress, for example. Others seem more concerned with what the “booth babes” mentioned in the initial piece were signing than what they were wearing. It may well matter that the “Daisy Duke” dress was taken from a TV show, The Dukes of Hazzard, as, presumably, one can use excerpts from popular culture — plays, movies, music, TV etc., in a booth.

No show organizer would tolerate any exhibitor who was doing something that was widely viewed as offensive. But defining a standard is another thing entirely. PMA is not the first to struggle with such an issue. No less an august body than The Supreme Court of the United States struggled to define pornography with its decision in Jacobellis v. Ohio (1964). In one of the most famous lines from a Supreme Court decision, Justice Potter Steward wrote a concurrence that, famously, included this:

I shall not today attempt further to define the kinds of material I understand to be embraced within that shorthand description ["hard-core pornography"]; and perhaps I could never succeed in intelligibly doing so. But I know it when I see it, and the motion picture involved in this case is not that. [Emphasis added.]

—Justice Potter Stewart, concurring opinion in Jacobellis v. Ohio 378 U.S. 184 (1964), regarding possible obscenity in The Lovers.

Almost all show organizers have some line in their contracts requiring professional dress and conduct or, at least, acquiescence to the rules of the event which require the same. Beyond that, like Justice Potter, they ban offensive exhibitors when they seem offensive to the organizers or when they cause a lot of complaints.

Of course, Lorri Koster’s point, made both here and here, is that PMA should conduct itself to an especially high standard because it has decided to make one if its flagship values women’s professional development. This includes a new conference, the Women’s Fresh Perspectives event at Fresh Summit, and the Pack Family/PMA Career Pathways Scholarship program that brings in students both male and female. In this view the issue is not what is generally offensive, it is what is consistent with PMA’s pro-female executive positioning. She makes a pretty strong case.

Of course, others have different priorities. One frequent Pundit correspondent notes that one contributor to this thread, a man who contributed here, here and here, may be laughing all the way to the bank:

I am not condoning or weighing in on the “booth babes” debate. However, I wonder if the smartest guy in the room isn’t Majestic. After all, whoever hadn’t heard of Majestic before this debate surely knows the name now and that is a lot of free press.

Hope all is well on the east coast.

— Eric Schwartz, CEO
Patterson Vegetable Company, LLC
Patterson, California

Of course, during The New York Produce Show and Conference, the Pundit frequently heard the same joke as people approached us and inquired as to the presence of “booth babes” at the show. We never have very many, as our policy of restricting companies to one booth tends to keep the focus on business, and the New York milieu keeps things rather businesslike. In an age where many shows are a sea of golf shirts, standard attire at the New York event is still jacket and tie.

In fact, as best we could tell, there was only one “booth babe” at the show, a story captured by Pundit sister publication, PerishableNews.com, in a tongue-in-cheek story:

Lone Booth Babe Appears At New York Produce Show & Conference

Following recent scrutiny in the trade press, “booth babes” steered clear of this year's New York Produce Show and Conference.

To the disappointment of produce moguls who looked forward to mingling with young women dressed for an evening at a Manhattan dance club or a fantasy luau, female brand ambassadors were instead often indistinguishable from full-time salespeople.

In addition, hundreds of vendors were observed using beautiful signage, fresh samples, handshakes, and other conventional tactics to draw traffic, all of which may be worrisome for booth babes and their advocates.

Foxy Claus, the lone delegate from the old guard, appeared to have been in hiding at times. When she could be found at the Pretty Lady booth, businessmen giddily posed alongside her in photos that may soon be tokens from a bygone era. Miss Claus was later spotted hiding from this photographer and quietly leaving through a secondary exit.

The story brought a defense of at least this particular booth babe by a noted marketer and former booth babe who was involved in this marketing effort:

Just a note about our lovely booth babe "Foxy Clause" as you refer to her. Not only is she booth babealicious but she is extremely knowledgeable about the product she is representing. Our booth babes show you can be beautiful, sexy and smart all in one package. 

As a female and former booth babe, I think booth babes say a lot more about the gentlemen enjoying the visual (and I don't mean in a bad way), then they say about the confident (yes confident, it takes a lot of self-confidence to pull that off) women standing there in all sorts of variations of dress.

Thanks for the coverage on our booth babe!

—   Lori Hickey
Marketing Plus
Fresno, California

To us, this particular “booth babe” was brilliant and for precisely the reason that Lorri Koster and Dan’l Mackey Almy found the booth babes at PMA so inappropriate. They saw PMA as being inconsistent in its branding and so critiqued its decision to allow that behavior at its expo.

This “booth babe” was representing Pretty Lady grapes. She was sharp and knowledgeable, pleasant to be around, dressed in a tasteful Santa-themed dress and, most important of all; she was, in fact, a pretty lady representing Pretty Lady grapes.

It was a perfect alignment of positioning and execution, marketing genius.

There is a time and a place for everything. The challenge is to get them in sync.

Many thanks to Deidre Smyrnos, Eric Schwartz and Lori Hickey for weighing in on this controversy.




Costco, Sheri Flies, The James Beard Foundation Leadership Award And How Sustainability Differs From Charity

A hat tip to Andreas Schindler at Pilz Schindler GmbH, which promotes its Don Limon brand of limes around the world. He sent us a link to year-old video of Sheri L. Flies, accepting the 2011 James Beard Foundation Leadership Award.

Sheri is an intriguing individual. She is trained as a lawyer and for 13 years was Costco’s Corporate Counsel. In that capacity, she got involved in a project by which she studied the supply chain that began with a cooperative of farmers growing French green beans in Guatemala. In the end, she was so captivated by the work that she recreated her career and now works as Assistant General Merchandise Manager — Corporate Foods at Costco.

Costco is a fascinating company and, by all accounts, Sheri is a wonderful person -- not only highly competent but genuinely caring about the fate of people in the whole supply chain. She deserved this award, and Costco deserved the award — mostly because so many who address sustainability choose to ignore the ethical component.

Companies like to focus on energy-savings, because that can save them money. Sheri insisted, and Costco executives agreed, to focus on the ethical component of sustainability.

We have written a lot about sustainability, and we have found that in the business world, it has become intellectually incoherent. Although we have had correspondents who have argued that sustainability can be profitable, we don’t think that is a meaningful definition.

After all, if it is profitable to do something, then it is just proper business management to do it. In order for sustainability to have a meaning distinct from proper business management, you need to be able to say that an executive who believes in sustainability would do X, but an executive who does not would not follow that course.

The problem is that all these values — whether sustainability or food safety — are problematic because companies are in business to produce a return to their shareholders and because society wants food to be available inexpensively.

We once ran a piece that mentioned an incident when Karen Caplan, President and CEO at Frieda’s, inquired of a group of retailers if, in light of their deep dedication to food safety, they had changed their KPIs — Key Performance Indicators — and nobody had.

The bottom line is that whether sustainability or food safety, companies tend to adopt minimum standards and then the issue is moot. In other words, it is very difficult to get retail buyers to pay extra to exceed the firm’s minimum standard on food safety, sustainability, traceability or any other metric. This is because at the end of the year, all else being equal, if there are two divisions and one made $10 million that year and conformed to the retailer’s standards for food safety and sustainability while another executive ran a division that made $8 million but bought product that significantly exceeded the retailer’s standard, the bonus goes to the more profitable division.

We place below Sheri’s acceptance speech, and it is worth watching. She is, obviously, deeply committed to helping women; indeed we would urge those who give out the Women in Produce Award at United to consider Sheri for the award, where she would join her Costco co-worker Heather Shavey in the pantheon of great female leaders of the trade.

Yet we find the whole question of sustainability and its relationship to businesses something of a quandary. First, on the video, Sheri is introduced and given the award, and the presenter highlights that her efforts led Costco to set up a foundation to “support the farmers and their families, to insure that they have access to higher education, to clean water and health care.”

This is surely a wonderful thing, and both Sheri and Costco merit praise for starting such a foundation. But this is not sustainability. It is the opposite of sustainability. This is charity to help poor people. If the supply chain was sustainable, the farmers would make enough money from selling their crop that they would not require charity.

Now we don’t criticize Costco or any other retailer on this point. We understand fully that Costco can’t just decide to pay triple the price for green beans; it has to sell products competitively. This is why efforts to help growers often revolve around things such as Fair Trade initiatives. In these initiatives, consumers are notified that they have an opportunity to pay more and help producers in developing countries.

It is also, though, why many are hostile to big box retailing, organizations such as Costco, Wal-Mart, etc., that don’t so much pay market rate as create the market. To those who want people along the food chain to get paid more, the leverage of these large buyers is not desirable. Of course, as a society, we have allowed these organizations to flourish because with their efficiency and buying power, they deliver such value to consumers.

See the whole thing here:




The Disconnect Between Marketing Of Local And Sales Of Local And The Necessity For Promoting What We Actually Sell

An attendee at the recent New York Produce Show and Conference sent us this note regarding a discussion we had on stage with a baker’s dozen of industry "thought-leaders":

PRODUCE BUSINESS Magazine and the Eastern Produce Council are to be congratulated for the success of the 3rd Annual New York Produce Show and Conference.

I want to strongly disagree, however, with your lengthy discussion and conclusions during the Perishable Pundit “Thought Leaders” Opening Breakfast Symposium about the growing trend of “locally grown” items in the produce department. This is simply incorrect.   

Despite rhetoric and publicity to the contrary, consumers are most interested in CHOICE in their produce department. This has resulted in year-round availability of fresh produce from around the globe. During the winter, sugar snap peas and melons from Central America, asparagus and sweet onions from Peru, blueberries, grapes and pomegranates from Chile, to name just a few, are among the most important factors in the increased sales and consumption of fresh produce.   

Does the “local” aspect of a particular fresh produce item impact a customer’s choice in selecting a particular fruit or vegetable — I suspect very little. Local produce — which for now let us define as fruits and vegetables grown within 150 miles of where it is consumed — has become LESS, not more, important as a total percentage of produce sales.  Ten years from now, this trend will be even more so — not less. PRODUCE BUSINESS should examine this theory with actual sales data from supermarkets to quantify, confirm or contradict it.   

The international nature of fresh produce (and everything else) is a fact of life. Whether our smart phones, music videos, automobiles or peaches are produced in South Korea or South Carolina is interesting but not the key factor in our purchasing decisions. Goods and services are manufactured where they are most efficient and productive at fulfilling a particular consumer need or want — around the globe. The increasing availability on retail store shelves in the USA of Argentine organic apples and pears in February adds options for consumers and takes away nothing. Ask Washington state apple and California citrus growers if the global nature of fresh produce is increasing or decreasing.  

On Wednesday at the New York Produce show, I was speaking with a grower of domestic sweet onions in Georgia who also has international grower partners in Peru. His observation is that consumers care more about the “locale” nature of their produce than whether or not it is grown near where they live. They want to know about the farm and the general milieu of the fresh produce they consume. How was it grown? What is the farm like?  What are the sanitary standards? How are the workers treated?     

The overwhelming majority of consumers want choice, value, quality and convenience.  We as produce industry professionals need to continue to embrace THAT reality and increase sales of ALL healthy fresh produce, not romanticized notions of a trend that does not exist.

— Craig Padover
Account and Category Manager
Jac. Vandenberg Inc.
Yonkers, New York

Craig is astute in noting that actual produce sales have not in any way tracked the hype related to “local.” In fact, how could they? Unless consumers were to decide to forgo bananas, winter fruit, citrus, avocados, etc., they could not, in much of the country, possibly become true locavores.

Indeed many of the proclamations made by retailers as to their local sales are questionable. We joked here that Wal-Mart, which defines local as “in state,” could increase its local sales simply by opening more stores in California.

One very progressive retailer told us that many get confused between marketing and sales. His chain is promoting local very aggressively, but sales are not significantly higher than they had been before these marketing efforts.

Indeed this may be the crux of the issue regarding Craig’s concern. We may need to distinguish between procurement or sales trends and marketing trends.

That retailers are focused on local as a marketing tool is not really subject to dispute.  Even all this attention to rooftop greenhouses, etc., are mostly undertaken with the idea of positioning a store as hyper-local.

On the foodservice end, white table-cloth chefs also like to promote local, the idea being that the chef has some special connection with the local farmer and has added value by vetting his produce.

We wouldn’t say that the “Thought Leader” panel reached any conclusions on local. It was more a matter of sharing ideas on how retailers could capitalize on the marketing craze surrounding local.

Certainly, overall, The New York Produce Show and Conference was committed to the entire supply chain. In fact, the day before that breakfast panel, the event featured The Global Trade Symposium. This annual event is dedicated to the proposition that this is a global industry. You can take a look at the 2012 agenda here and the 2011 agenda here and see that we spent a full day exploring the intricacies of global trade.    

This being said, we do think that Craig is posing a key question: Are retailers doing enough to communicate how proud they are of their non-local produce?

Greg Drescher, Vice President Strategic Initiatives & Industry Leadership at the Culinary Institute of America, is fond of telling a story: Harvard’s dining program came out with a brochure lauding its operation. The vast majority of the brochure was focused on Harvard’s very aggressive locally grown program. Of course, no matter how aggressive a program, there just isn’t that much produce grown locally to Cambridge, Massachusetts, and, as a school, the population drops during the summer when a lot of that local product is available. So local simply can’t account for a very high percentage of Harvard’s usage of fresh produce.

So the question Greg posed was whether or not Harvard dining was as proud of the vast majority of its purchases, which are not locally grown, as it is of its local program.

This is a fair question for all retailers. There is now a lot of research that indicates that the meaning of “locally grown” varies quite a bit from a straight geographical interpretation. For example, in many cases, the interpretation may be political — one’s own state or country. Craig also points to the “locale” vs “local” argument, and there is a lot of indication that consumers want to know substantive things about where their food comes from — not just where the food is grown but how and by whom.

There are a lot of retailers who will hang photos of local farmers and descriptive information about the family and the farm. There is little reason to believe that consumers won’t value similar information about family farmers, properly tending their land, from all over the world.

Promoting local is fine, but what Craig is really asking is what about promoting the vast majority of produce that is actually in the stores? In the end, if we don’t promote what we are actually selling, we will one day be accused of being disingenuous. So retailers need to focus on being as proud of all their produce as they are of their locally grown programs, and then they need to start thinking about how to educate their consumers as to the fine quality of this product as well.

Many thanks to Craig, Account and Category Manager of Jac Vandenberg, Inc. for weighing in on this important issue.




Groundbreaking Study Sheds Light On The Relationship Between Bacteria And Obesity: Does The Produce Industry Have A Plan B In Case The Health Message Needs Refinement?

The one thing we know about the public health advice in terms of diet is that it hasn’t worked particularly well — thus the enormous obesity problem.

We also know that repeated entreaties to get people to eat more produce seem to have little effect on either produce consumption or on the health of the population.

We have critiqued the propensity to sell produce as if it is medicine in many columns in our sister publication, PRODUCE BUSINESS, including Two Cheers for Bacon and, jmore recently, Start Now On Increasing Consumption.

Now a small study, which obviously will have to be repeated many times in many places before we can say it is valid, is offering up an intriguing theory: That obesity is not primarily caused by diet or exercise levels at all, but is related to bacteria in the intestinal track. The Financial Times titled the piece, by Pippa Stephans in London, Scientists Link Obesity to Gut Bacteria:

Obesity in human beings could be caused by bacterial infection rather than eating too much, exercising too little or genetics, according to a groundbreaking study that could have profound implications for public health systems, the pharmaceutical industry and food manufacturers.

The discovery in China followed an eight-year search by scientists across the world to explain the link between gut bacteria and obesity.

Researchers in Shanghai identified a human bacteria linked with obesity, fed it to mice and compared their weight gain with rodents without the bacteria. The latter did not become obese despite being fed a high-fat diet and being prevented from exercising.

The bacterium — known as enterobacter — encourages the body to make and store fat, and prevents it from being used, by deregulating the body’s metabolism-controlling genes.

“This is a very important phenomenon,” said Professor Zhao Liping, who with a team at Shanghai Jiao Tong University carried out the research. “It is the last missing piece of evidence bacteria causes obesity.”

Other academics not linked to the project were quick to seize on its potential implications.

Dr David Weinkove, lecturer in biological sciences at Durham University, said: “If obesity is caused by bacteria, it could be infectious and picked up from some unknown environmental factor, or a parent. It might not be behavioral after all.”

Dr Weinkove said Prof Zhao’s research paved a way to intervene in obesity and could allow new drugs to be developed for treatment.

The study was published in the peer-reviewed journal of the International Society for Microbial Ecology.

Governments around the world are grappling with an obesity pandemic. Chronically overweight people are at a greater risk of suffering from a heart attack, cancer, and diabetes.

According to government and academic studies, nearly 50 per cent of all adults in the US and UK will be obese by 2030.

The UK government estimated that the total cost of obesity — the cost of healthcare as well as the wider burden on the economy — could amount to £50bn a year by 2050 if the pandemic was left unchecked, according to a report by the Department for Business, Innovation and Skills.

Although the Shanghai research was on a small scale, it is bound to add to a heated debate between the health profession and food and drink manufacturers and fast-food chains over responsibility for obesity.

Prof Zhao said treatment with a specially developed diet could be cheaper and more effective than surgery for the morbidly obese and could be available within three years.

There are 10 times more microbes than human cells in our bodies and they can be beneficial. There are between 200 and 300 different species in a typical person.

The Shanghai team fed a morbidly obese man a special diet designed to inhibit the bacterium linked to obesity and found that he lost 29 per cent of his body weight in 23 weeks. The patient was prevented from doing any exercise during the trial.

Prof Zhao said such a loss in an obese patient using this diet was unprecedented. The patient also recovered from diabetes, high blood pressure and fatty liver disease.

The diet of whole grains, traditional Chinese medicines and non-digestible carbohydrates changed the pH in the gut, which limited the bacterium’s activity.

Enterobacter also release chemicals, called endotoxins, which cause insulin resistance and a slower uptake of glucose from the blood after eating. Patients take longer to feel full, so they eat more.

A control for calorie intake was not possible as administering the diet with normal bacteria would cause unsustainable hunger, as the bacteria stops fat stores being mobilised and satiating the body, Mr Zhao said.

It  is a fascinating idea and one more argument for why the produce industry must find alternative stories to the health issue. In our pieces on this issue we have argued mostly based on effectiveness… that telling people produce is good for them just doesn’t motivate consumption outside of a small subset of humanity that is particularly good at absorbing public health messages.

This study, though, raises another issue — what if the public health recommendations change? Do we have a Plan B all ready to go, to market produce on the basis of flavor, seductiveness and its role in a celebratory life? This study is one more indication we need to focus on alternative promotion strategies… and fast.

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