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Perishable Pundit
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Fax: 561-994-1610



Produce Business

Deli Business

American Food & Ag Exporter

Cheese Connoisseur

Tesco Tries
‘Automatic Markdown System’

With all its talk about “green” and organic, it sounded like Tesco was positioning itself to be the Saks Fifth Avenue of fresh food. Now it seems that the company is trying to be the Filene’s Basement of freshness.

We have thoroughly covered the Fresh & Easy launch in America, and we have mentioned reports of rampant discounting at its stores. We received notice here and here about Tesco freely giving out coupons for $5 off when you buy $20 worth in the store, including even handing the coupons out at check-out.

We have now received several reports that Fresh & Easy, perhaps to combat the shrink we wrote about here, is moving to an “automatic markdown system” reminiscent of discount clothiers such as the old Filene’s Basement or Syms to this day.

This letter came from a fellow who recently sold a small restaurant chain:

My wife and I frequent the new Fresh & Easy stores near our area. First Hemet, [California], then Vista and now even closer; Fallbrook. Just yesterday, we noticed and discussed something very new at the store: DISCOUNTING and marking down perishable items at set times every day.

We discussed this with a “green” person in the store and was told, “Yes, previously, we would pull all out-dated product (bakery, produce, prepared, all meats — fish, pork, poultry, beef) on the expiration date, take them back to our distribution plant and re-distribute them to food pantries and local shelters. Beginning last week, we have started in-store discounting. Now we discount them at 10:00am at 50%, then again at 4:00 pm another 25%.”

There were two people at 10:00am yesterday walking around with this nifty bar-code printer and hand-held computer, scanning and printing. After a few minutes, people were following them around picking up ½ off product.

For several reasons, this intrigues us. Firstly, there was an article in the Hemet paper about how their expired product was directly given to the local shelter.

Secondly, a few weeks ago we were given flowers when leaving the store in Vista, California. When asked, we were told they can give away flowers nearing their end date, but can’t do that with food. ??????? OK, so now things have changed and you tell me.

I cannot think of any other grocery market that times their date-end products incrementally several times each day.

No, we can’t think of anyone else doing that — and for a whole load of good reasons.

First, this is food, not clothing. It is either healthy to eat with adequate shelf life for the consumer or it is not. If it is healthy, why discount it? If it is not, why are they selling it?

Second, this can’t end up being good. Either the product won’t sell because consumers will fear it is too old, not fresh, and maybe dangerous. Or it will sell, in which case consumers won’t buy the full priced items.

Third, Fresh & Easy, supposedly an Every Day Low Price (EDLP) retailer, is now training its customers to look for sales and discounts. The whole point of EDLP, its marketing advantage, is that it builds confidence in consumers that they are always getting a good deal. Now, however, if I zoom by a Fresh & Easy at 9:30 am, I know that my choice is to hang around the store for a half hour or get ripped off on my purchase.

The whole idea smacks of desperation. Fresh & Easy doesn’t make anywhere near enough on each item to be cutting the price by 50% or 75%. It will have to wind up raising other prices to compensate.

Plus Tesco doesn’t seem to be cognizant of what effect it will have on its shopper mix. If you want to attract more than an impoverished clientele, the key to a discount operation is to keep things hip and pleasant enough that people of all incomes want to shop. But if this works, many a middle class shopper won’t want to be in the store when the hordes descend looking for about-to-expire bread at a discount. In fact, middle class shoppers may not want to be associated with such a store at all.

The problems Fresh & Easy has in this area are simple:

  1. A ridiculous date system that makes Fresh & Easy remove perfectly good food — especially fresh produce — from the shelves.
  2. A lack of micro-marketing so the assortment in each store is wrong and thus not appealing to the local clientele.
  3. A poor ordering system that both over orders and under orders — thus the out-of-stocks and the enormous volume being removed from the shelf.
  4. A product mix lacking the brands that American consumers look for.
  5. Excessive costs caused by idiosyncratic requirements of suppliers that make it difficult to price competitively.
  6. Low traffic counts due to an unattractive store without a compelling offer.
  7. Secondary locations taken on in a mad rush to open stores.
  8. Lack of consumer information — as the company has in the UK — because of not offering a loyalty card.

These are very serious problems and represent only a portion of the challenges Fresh & Easy faces. The solution has to come from solving these problems, not from a gimmick.

Americans are not unfamiliar with these scheduled markdowns. They are still practiced in some chains such as Syms. (Did you know that Karen Caplan and the Caplan family of Frieda’s are featured prominently in Marcy Syms’ book Mind Your own Business and Keep It in the Family?)

In 1982, The New York Times ran a piece on Filene’s Basement, which was an early adopter of the automatic markdown concept. The piece was entitled Shopper’s World: Boston’s Favorite Bargain Store and described the “automatic markdown plan” this way:

According to the system, every article is marked with a tag showing the price and the date the article was first put on sale. Twelve days later, if it has not been sold, it is reduced by 25 percent. Six selling days later, it is cut by 50 percent, and after an additional six days, it is offered at 75 percent off the original price. After six more days — or a total of 30 — if it is not sold, it is given to charity.

Perhaps it didn’t show up in all that research that Tesco did in coming to America, but it is worth noting that Filene’s Basement filed its Chapter 11 petition for federal bankruptcy court protection on August 23, 1999.

We thank our correspondent for his letter.

Important Day For Georgia’s
Vegetable Growers… And Possibly
For Entire Industry

Today, Tuesday, February 12, 2008, is a seminal moment. The vegetable growers of Georgia must vote on the issue of establishing the Georgia Agricultural Commodity Commission for Vegetables and their ballots must be postmarked no later than today.

It is an attempt to secure funds — especially for research — but also some for education, marketing and promotion to help the Georgia vegetable industry to prosper.

Yet, by combining many smaller items under one commission, Georgia is taking a leadership role that may have national implications.

We asked Mira Slott, Pundit Investigator and Special Projects Editor, to see if we could learn more about this intriguing project:

CharlesCharles Hall
Executive Director
Georgia Fruit & Vegetable
Growers Association (GFVGA)
Bo HerndonBo Herndon
Georgia Agricultural Commodity
Commission for Vegetables (GCCV)
L.G. Herndon Jr. Farms, Inc.

Q: What jumpstarted this initiative to create a statewide commodity board to handle multiple vegetables?

A: BO: Some of us vegetable growers got together three or four years ago with a common concern; they’re cutting everything back with research and there are not a lot of government funds to help us do anything. As a grower you always need money for research to understand and deal with crop diseases, production problems and other field issues. You’ve got the Cotton Commission, the Peanut Commission, assessments on cows, and assessments on Vidalia onions that we grow down here. When we have a problem, we have to have someone to help us fix it so it won’t put us out of business.

Q: Are these shortfalls you’re trying to alleviate primarily related to staff and funding cutbacks at University extension ag programs and in horticulture research? How serious is the situation? Is the problem escalating or do you see signs of improvement?

A: CHARLES: Financial cutbacks have always been an issue, at least since the mid-nineties, when we experienced significant reductions in state and federal funds at universities. Fortunately, in the last few years, state funds have gone back to support agriculture in universities.

We’re still not up to where we were in 1995. Now, compared to ten years ago, we have fewer researchers, and less county extension agents. We have 159 counties in Georgia. County offices gain university faculty members through land-grant institutions under the extension program. The whole purpose is to disseminate information generated at the university. It is very grower-focused.

Resources are not at the level we need. Several researchers who work on vegetable projects basically don’t have enough funding to complete their work. We’re not unique in Georgia. Across the nation, federal support continues to be very shaky.

Q: How did the process to develop a marketing order unfold?

A: BO: The Georgia Commissioner of Agriculture handpicked a group of growers to work on this project, sending staff from the Georgia Department of Agriculture (GDA) to help us. We started pushing forward on this about two-and-a-half years ago.

A: CHARLES: We sent a letter to the Georgia Commissioner of Agriculture to have a statewide commodity board for multiple vegetables established. If the industry shows interest, the Commissioner, in accordance with state law, has the authority to do that.

The Georgia Agricultural Commodity Commission for Vegetables (GCCV) was established in 2006 to determine if there was interest in a marketing order. Five grower/producers were selected to sit on the board with the Georgia Commissioner of Agriculture and President of the Georgia Farm Bureau; those two positions will generally have a representative to attend meetings.

The Commissioner also appointed an advisory committee to help them work through the marketing order proposal. These included extension personnel and industry representatives; 12 to 15 people met with the Commission to discuss the issues. This was a collaborative effort.

We spent roughly 18 months working through all the parameters.

Q: How unique is a statewide commodity board like this? Is it similar to California Tree Fruit Agreement that handles peaches, plums and nectarines?

A: CHARLES: It is unique from the standpoint of having many different vegetables, rather than just a one-crop marketing order. Based on the Georgia Attorney General ruling, as long as the crops are identified in the marketing order, we could have a marketing order for multiple crops.

Q: Do other states have statewide commodity orders covering a multitude of smaller to mid volume crops?

A: CHARLES: We are not aware of any.

Q: What commodities are included or excluded and why?

A: CHARLES: It was a conscious decision of the Vegetable Commission not to include any vegetable or fruit that has a marketing order or is already being covered with monies elsewhere. Vidalia has a federal marketing order. Georgia watermelon growers already have measures in place through a national watermelon marketing order.

The kicker is you have to be growing 50 acres of vegetables annually — otherwise you are under our threshold and will not pay any assessment. In the end, nine vegetables met the requirements and were included in the proposal: beans, bell peppers, tomatoes, cucumbers, squash, cantaloupe, mixed greens, cabbage and sweet corn.

We requested 12 vegetables be included in the Order. They determined three didn’t have sufficient levels of production to warrant that. The feeling was that for the others, the smaller acreage might make people vote against it. Looking at revenue generated from each commodity, some of the specialty items were harder to define, like southern peas. We grow them in Georgia but they are not a major crop. Eggplant is the same way, as well as specialty peppers.

In addition, we were looking at commonality of the product and how to define marketing units for that product. Every vegetable is marketed a little different; in a one pound box, another in a bin. Growers would be assessed 1 cent per marketing unit.

Q: How much money do you anticipate generating through the assessments?

A: CHARLES: We’re estimating we’ll raise in the $400,000 range for the first year. From a staff standpoint, we’re not expecting to have much expense, with very low overhead overall. The Order would be administered through the Georgia Department of Agriculture. The money wouldn’t be spent until 2009.

Q: How will the money be divvied up? Have you determined the percentages of funds that would be earmarked for different programs?

A: CHARLES: We can use the money for marketing, promotion, education or research. Overwhelming the growers wanted to see the money used for research.

The Commission has voted that at least 75 percent of the funds will go for research.

This is not a part of the marketing order, but of operating procedure. They can change that number down the road. They wanted the growers to have assurance from those seated that they have heard the growers’ wishes to use the money for research.

Q: How are you defining “research”? What is the research?

A: BO: From the growers’ perspective, research is related to production, looking at chemicals, pesticides, seed varieties, disease control, etc. We have major problems in Georgia with diseases affecting cucumbers, watermelons, and peppers.

We do have researchers funded by the University of Georgia. This will be an additional help to that. There are only so many university positions and so much they can do. We continue to see funds reduced at state and federal level for university research. Our growers felt this Marketing Order was a great opportunity for them to put money back into the industry.

Q: Would there be any reason why a grower would want to opt out of this opportunity?

A: CHARLES: The only reason a grower wouldn’t vote for it is they don’t want to pay the assessment. That is the primary reason we anticipated hearing going into these meetings, but it isn’t. The first question was, how do we guarantee the money will be used how we want it used? That vote to earmark such a high percentage of funds for research was done for that reason.

In terms of research, growers’ interest is primarily production research, applied research to their growing practices. It doesn’t limit looking for new varieties. It would have effect in the field and packing facility. Their goal in putting money into the Commission is looking for ways to improve their bottom line, more efficient, less costly ways to farm and improve business operations.

Q: In this state-wide multiple vegetable marketing order, would funds also be used for marketing/promotion programs and, if so, how? Would the campaign need to target all nine commodities paying assessments?

A: BO: As a Vidalia onion grower, I have seen what a marketing order has done for the Vidalia onion. Over the years, the funds assessed under our onion marketing order has built consumer awareness and loyalty to the Vidalia onion and it has provided funds for research projects to address issues specific to onion production. I have served as a director on the Vidalia Onion Committee and also as its Chairman.

A: CHARLES: With at least 75 percent of funds earmarked for research, there’s still another 25 percent that could be used in areas of marketing, such as Georgia Grown promotion work, or for education purposes to support grower knowledge on how to improve production or marketing techniques.

The general feeling is that the level of funding this will generate won’t be enough to build a meaningful branding campaign. It takes a bunch of bucks to create consumer awareness. To really have the affect of ‘ Got Milk?’ or Vidalia onions, to get consumers to recognize a Georgia vegetable you’re talking mega bucks. This Marketing Order won’t generate that kind of funding.

If the Commission decides, that funding allotment could be used for in-store tastings at supermarkets, as long as it is spending for the fruits and vegetables included in the Order. We have a strong sweet corn industry. The Commission could earmark funds to promote sweet corn. It might help others along the way, but it would be focused on marketing Georgia sweet corn.

Q: With heightened food safety awareness, are you earmarking funds for more research in this area?

A: CHARLES: Research work could identify solutions to food safety issues. As far as funding a food safety program, I’m not sure that would be covered under the Commission, perhaps from an educational standpoint. Certainly funds generated could be used for research for food safety on the farm.

There have been questions at the federal level for federal marketing orders on how much food safety should be included in a marketing order. The debate has kind of gone back and forth, whether food safety issues can be identified under marketing orders.

Q: Where are you in the process now?

A: CHARLES: In fall 2007, a draft marketing order was finalized and communicated to growers in nine meetings held in November and December of 07 in order to get feedback. I was at every one of those meetings. We had the Commissioner there, and we had pretty good attendance from the growers; 120 to 125 growers, a decent showing out of 400 effective growers, reaching 20 percent or so.

At that time, the Commission decided to move forward with a public hearing. Prior to putting a marketing order before voters, you are required to have an official hearing for public testimony. We held that hearing at our convention on January 10. Bo presented testimony for the Marketing Order as part of Georgia law.

After getting the input, we were at a turning point; we could halt the idea if we didn’t have enough interest in it, or we could make changes, or we could proceed with the actions necessary to enact the Marketing Order. Based on the feedback, we made the decision to move forward.

Q: What percentage of growers needs to vote in support of the order for it to become legally binding?

A: CHARLES: For the Marketing Order to pass, we have to have at least 25 percent of affected growers voting, and of those voting we have to have a 66 percent positive vote. If we look at 400 growers affected, at least 100 must approve.

Growers are voting right now. The 30-day vote started January 14 and will run through February 12.

Q Do you have a sense of whether the order will pass?

A: BO: I think it will pass. We haven’t hit our percentage yet, but we’re hopeful.

A: CHARLES: We’re pushing it. We’re getting close, 15 to 20 votes short of where we need to be. That doesn’t mean everyone is voting for the order, but we believe most growers are voting yes.

Quite honestly, when we did meetings across the state we had no objection to the order itself. The biggest question that came up was, how is this money going to be used?

Q: With the final voting day upon us, is there any last minute advice you have for those growers sitting on the fence?

A: CHARLES: Mainly we are encouraging people to vote. We need 25 percent of growers to vote. In a meeting recently, I was talking to three growers on the list of eligible voters and I asked them, ‘did you vote?’, and they said, ‘no not yet.’ One said, ‘the ballot’s on my desk.’ Another said he didn’t have time to get around to it. Everyone waits till the last minute.

We did a frequently-asked-questions form for the Commission that can help growers sort out the issues.(You can read it here). It talks about the referendum, how the process works, etc.

There was a list we worked through to determine eligible voters. If a grower in Georgia received a ballet in the mail from the Georgia Department of Agriculture, they need to vote, for or against the marketing order. If they’re on the list but not affected for some reason, perhaps they are no longer in business, there’s a number on the ballot they should call to let us know.

If they are affected and did not receive a ballot, they need to call our office or Georgia Department of Agriculture. There is still time. The ballot needs to be post-marked by February 12.

The whole effort grows out of a frustration with getting enough funds, especially to conduct research related to horticultural issues. Federal and state funds are always tight; the Georgia cooperative extension just can’t do it all. So the growers are looking to invest in building their own industry.

It is an effort with national implications. Commodity boards with mandatory assessments have typically been limited to larger items because even frugal administrative costs, if applied to an assessment of only, say, $50,000 a year, make the whole project not make sense.

Yet, by combining nine items, they’ve managed to make what previously was not sensible into an entirely pragmatic possibility. We can expect other states to pursue a similar plan.

Tommy Irvin serves as Commissioner of Agriculture for the State of Georgia. In our sister publication, PRODUCE BUSINESS, we sat down with Tommy Irvin for a Q&A last fall.

Irvin is the longest-serving Secretary or Commissioner of Agriculture in the country, yet, interestingly enough, Georgia keeps coming up with innovative ideas. This is a particularly good one.

Georgia growers now have another opportunity to lead the industry while strengthening their home state and their own operations. But they need to act now.

Remember, ballots must be postmarked today, February 12, 2008.

Ocean Spray Loses Its
Biggest Fresh Cranberry Shipper

We spent quite a bit of ink — or on the web maybe we should say electrons? — discussing the lawsuit between Jim and Theresa Nolan, as well as their company, with Ocean Spray. You can see those articles here.

Things have been somewhat quiet on that front as both sides have been busy preparing for a trial, which is scheduled to begin in April.

Yet the cranberry industry has been anything but quiet; in fact, the fresh cranberry business has experienced what can only be described as an earthquake.

Habelman Brothers Company, Ocean Spray’s largest fresh cranberry grower, one that last year produced roughly 460,000 cases of about 990,000 total fresh volume, has left the co-op and is striking out on its own.

Ocean Spray is trying to play it cool. Chris Philips, who handles Corporate Communications for Ocean Spray, issued a statement to customers; it was notable for its brevity:

February 11, 2008
Statement of Ocean Spray Cranberries, Inc.
Re: Habelman Departure

This was no a surprise to us, and we are well prepared to source the necessary fruit and supply the highly valued fresh fruit markets we have established over the past 78 years. Ocean Spray sets the standard for the highest quality fresh cranberries on the market, and we will accept nothing less than the best as we look forward to the cranberry season ahead.

You have to give Mr. Philips and Ocean Spray credit for keeping a stiff upper lip, but losing almost half of its fresh supply, in one fell swoop, is certainly no cause for rejoicing at Ocean Spray headquarters.

And that kind of volume is not easy to make up. Even wooing some independents and offering substantial financial incentives to growers to grow and harvest for the fresh market — a much more difficult proposition than growing and harvesting for juice — Ocean Spray will struggle to make up that kind of volume.

Plus, Ocean Spray is in a Catch-22; the co-op can’t in good conscience urge its growers to grow more fresh because if, by some miracle, Ocean Spray succeeded and managed to replace the lost Habelman volume, fresh prices would collapse, as that would be an enormous increase in total fresh production.

What exactly is going on? How will Habelman market its fresh volume? We asked Pundit Investigator and Special Projects Editor Mira Slott to find out more.

Ray HabelmanRay Habelman
Vice President
Habelman Brothers Company
Tomah, Wisconsin

Q: We heard your company decided to leave Ocean Spray, wanted to confirm that and learn more about your plans.

A: That’s correct. We left Ocean Spray at the end of 07, beginning of 08. We had been with them since 1959. This was a big thing. Our company’s been around since 1907, so we actually were independent for longer. This is a decision we took very seriously.

Q: What inspired the decision?

A: We’re a very large cranberry grower; there are not that many companies that do such a sizable business in fresh fruit. Ocean Spray is primarily a juice company. We thought we’d be better off focusing on fresh cranberries.

Our size hopefully will put us in a position to do that.

Q: Could you provide a perspective on the company size, and the breakdown of fresh to processed product?

A: We’re primarily fresh fruit — on average 70 percent of our business. We sell our fresh berries in 12-ounce poly bags or bulk in 20-pound boxes. We grow 640 acres of cranberries. That’s a lot of cranberries. We’ve been averaging around 450,000 cases for the last three years.

Hanbelman Cranberry Box

A "classic" Habelman Bros. box
now bringing big bucks on E-bay

Q: Many of our readers are on the buying end of the produce industry and would be interested in a new source for cranberries. What is your marketing strategy?

A: We’re not sure right now how we’re going to market; in another week, I probably could share more with you. We are looking at a few contracts.

Q: Could you discuss the different paths you could pursue?

A: You hit the nail on the head. We could go 100 percent on our own with our own label and Jim and Theresa Nolan could represent us and sell our product, or go through another broker, or partner with a company like Dole. We have a lot of options on the table.

Q: As you build your company’s future, tell us more about the rich family history at its core.

A: It’s always been in our family with the Habelman lineage. It was my great grandfather who purchased the original marsh outside Tomah, Wisconsin, in 1907. Our company name is Habelman Brothers. That comes from when my grandfather and his brothers expanded the business and built it to what it is today.

I’m fourth generation, working on the fifth; I have two boys, Riley, age 6 and Carter, age 4.

Habelman Family

Four generations of Habelman: Ray J. Habelman,
Bob Habelman,Ray E. Habelman.
The two smaller guys are Ray J. Habelman’s sons,
Riley and Carter

Q: It sounds like you’ll be opening up all sorts of opportunities for them.

A: I invite you to call me back in a week or two. There are a lot of exciting options out there. It’s a little nerve wracking. I’m not saying Ocean Spray wasn’t taking the fresh business seriously, but the company had a lot of other things to deal with.

We didn’t feel Ocean Spray wanted us to grow as a company. We want to expand and get more of our fresh product out there. Ocean Spray is such a huge operation we felt it didn’t always treat customers the way we may have wanted. We are energized about providing customers with a new option.

There is a lot of talk swirling around the industry. There is word that a Blake Johnston from Canada is trying to build around the Habelman volume a “grand alliance” that will also include the Pundit’s old shipper, Decas Cranberry Products.

Dole has been looking for more volume in fresh cranberries for a long time. Word is that Johnston would like to see C.H. Robinson market the deal, and the Nolans, aside from vast knowledge, great contacts and long experience in the field, would also have very special motivation to make Habelman a big success on its own.

Ray is actually doing the whole fresh industry a big favor. Many years ago, we were told by an Ocean Spray executive that Ocean Spray actually didn’t like being in the fresh business. It was such a tiny percentage of what they did at Ocean Spray, but the source of 99% of the problems and complaints. The company only bothered with the fresh business because it provided a “halo effect” for the juice and other processed product.

That may be so and, in fact, maybe Ocean Spray should withdraw from the fresh business and license its name to a company focused on fresh. No business is likely to obtain its potential if the proprietor doesn’t like it very much.

It sounds like Ray, his family and management team felt the consequences of this begrudging attitude toward fresh and decided they could do better on their own.

It is a brave move but somehow one suspects in runs in the family. After all, when Ray’s great-grandfather began raising cranberries on 13 acres of marshland back in 1907, one suspects that was a pretty gutsy move as well.

Besides, the Habelman heritage was marketing its own cranberries, so it’s a back-to-the-future situation.

Carter Habelman and pal Otis

Checking on the harvest this past fall are
Ray’s younger son Carter and his pal Otis.

We’ve never had the pleasure of meeting Ray, but we print magazines in Wisconsin and with the Jr. Pundits (William, age 6 and Matthew, age 4) matching up with Ray’s boys by age, it looks like the whole Pundit family will have to take a road trip. Maybe Riley and Carter would explain a bit about cranberry farming to a couple of new friends.

It is certainly going to be a very exciting time in the fresh cranberry business. We wish Ray and all the folks at Habelman well.

Hot Peppers For Hillary!

At least one presidential candidate has weighed in on produce preferences:

My two secrets to staying healthy: wash your hands all the time. And, if you can’t, use Purell or one of the sanitizers. And the other is hot peppers. I eat a lot of hot peppers. I for some reason started doing that in 1992, and I swear by it.

— Hillary Clinton, Sunday night on 60 Minutes

If anyone else has heard any other candidate mention produce, the Pundit would like to know. Send us an e-mail here.

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