Tesco’s journey to America has not been easy. There are signs, however, that some of the problems are getting corrected, although increased success creates problems of its own.
A very experienced retailer, who has been following Fresh & Easy carefully, sent us his notes:
An update on Fresh & Easy:
They are busier during my visits than in the past, and one associate said they are growing sales every week.
The only things I have seen that they are doing differently are:
- They are inserting an 8-page mailer into the newspapers with the other chain’s mailers. The Fresh & Easy mailer lasts two weeks versus the traditional one week.
- At the entrance to their stores, they have a copy of this mailer and a one-page piece that has 30 items that are grocery, dairy/deli, frozen foods, drinks, and household products.
- Some in-store large displays are reduced prices. I have seen a couple in the grocery sections.
- A four-week promotion on 10 russets @ $1.99 and 8# large navels @ $2.99. These were packed in the growers’ label, in traditional cases (corrugate and bins), and now a 24-oz grape tomato pack (no sign for pricing) by Andrews and Williamson in their label, container, and on a traditional pallet and not one of the Fresh & Easy slave pallets.
- Instead of people at the front end to help you through the checkout process, they now ask you if you would like them to check you out. In my opinion, it is a really good hybrid system.
As part of their shrink control, Fresh & Easy has done the following:
- Cut the meals section by 8’ and are stocking wines in that area.
- Cut their bakery section by 12’ and are stocking groceries in that area.
- Reducing produce, floral, and meats by 50% on the day they will go out of code and by 25% the day before.
Prior to this surge in business, they had gotten their out-of-stocks under control. Now in the afternoon, they have out-of-stocks in produce, deli, meat, dairy, frozen foods and on the items that they are promoting in their one-page in-store piece.
It looks like their automatic ordering system hasn’t caught up to their demand yet.
They gang stock their perishables when they are delivered. They put the pallets right on the floor and stock from them. They need to look at this and develop some rolling equipment to be more efficient in their stocking. This is also how they handle the rest of the store’s stocking.
In my opinion if they don’t quickly correct their out-of-stocks, they will lose their new-found customers.
I am continuing to purchase and try their Fresh & Easy labeled products in the deli, frozen, and grocery section, and I must say that over 90% of them are really good.
Their pricing in the entire store is really very good when compared up with their competitors, and they will continue to increase business as the consumers find this out.
Many thanks to our correspondent for his sharp assessment of the situation. Although we — as well as Willard Bishop and intelligence from store managers — had settled on an estimate of $50,000 per store per week as a rough guide to what Fresh & Easy stores were bringing in once they got past the Grand Opening period, it is important to note that this is not where we expected the stores to stay.
Stores go through a normal maturation period. We would expect to see sales increase 20% the first year and on a new concept that is gaining success, as much as 35%. This doesn’t happen in one day on the date a store turns a year old. It happens gradually during the course of the year.
So increased traffic is expected, but the question we have to analyze is whether the traffic is increasing faster than would be expected, causing Fresh & Easy to grow sales more extensively than previous experience would predict.
Another question is whether the traffic increase is profitable. We previously noted $5 coupons off $20 purchases. We also noted, both here and here, automatic discounting schemes of 25 to 50% to sell product before the date stamped on it.
These types of things may boost sales and traffic and reduce shrink, but they depend on secondary effects — the same people buying other items while they are in the store — to be the basis for building profitable business.
This letter is important because it is providing additional evidence that Fresh & Easy is now changing and in significant ways:
Some in-store large displays are sold at reduced prices. I have seen a couple in the grocery sections.
Some people like to use words such as EDLP-Plus, but in the end, this is really a move away from EDLP in order to compete with the High/Low supermarkets.
A four week promotion on 10 russets @ $1.99 and 8# large navels @ $2.99. These were packed in the growers’ label, in traditional cases (corrugate and bins), and now a 24-oz grape tomato pack (no sign for pricing) by Andrews and Williamson in their label, container, and on a traditional pallet and not one of the Fresh & Easy slave pallets.
It starts out by making “exceptions,” but this willingness to sell product under the growers’ labels has a logic of its own. If product can be bought and sold less expensively without expensively repacking it, why should 99% of the produce be repacked?
Further, if Fresh & Easy is going to sell under shippers’ brands, might that lead to a reconsideration of some suppliers? After all, if everything is private label, then quality, consistency and dependability are all that count, but if you are going to let shippers put their name on the product, consumer perception of that name starts to matter as well.
- Cut the meals section by 8’ and are stocking wines in that area.
- Cut their bakery section by 12’ and are stocking groceries in that area.
As our correspondent indicates, this change is probably motivated by an effort to reduce shrink. Another way of thinking of it, though, is that it is reconciliation to the kind of volume the stores actually are doing.
The willingness to change is especially important since Fresh & Easy just rolled out without a chance to test its concept.
Yet, every change creates its own problems.
As our correspondent says, even increased business challenges the ordering system to avoid out-of-stocks.
And reducing the space devoted to fresh products may reduce shrink, but it may also mean less assortment and that can start a downward cycle of its own.
In the very first piece we wrote in the Pundit about Tesco’s new venture in America, we wrote that one of the overarching obstacles to its success would be the likely path its fresh prepared offering would take:
“…the substantially lower population densities in the U.S. will make it difficult to sell at the volumes necessary to keep the fresh food, especially the fresh prepared food. It also will be difficult to keep it fresh, safe and appealing. Then the concept will face a dilemma: Keep stocking the fresh prepared foods in variety but experience unacceptable levels of shrink, or scale back the variety, which will make the stores unexceptional. It’s a Hobson’s choice, but could well be Tesco’s.”
With this news of Fresh & Easy cutting back on the space devoted to bakery and fresh meals, it seems that Tesco is making its own Hobson’s choice.
Many thanks to our correspondent for his perceptive letter.
With a trial set to start in six weeks, why did the fates deny him his moment on the stand? It is the unspoken question everyone who knew him asks themselves, as word has filtered out that Jim Nolan has passed away.
We don’t know every detail yet, and we couldn’t bear to ask his loving wife Theresa to speak, not when the love of her life, her partner and husband has just been taken from her.
He died of a heart attack Sunday night. Which just makes his friends ask what breaks a man’s heart?
Jim spent a lifetime working with Ocean Spray and built a righteous reputation.
Grant Hunt put it this way:
Jim Nolan was iconic to the fresh cranberry industry. Throughout all of the travails of some challenging seasons, Jim always was a tower of integrity and honor. He worked tirelessly on behalf of Ocean Spray’s growers. Our industry will sorely miss Jim.
Bruce Paschal explained it like this:
He was pure. In an industry where purity is not to be assumed. He was pure. A man of principle and integrity.
We’ve written extensively about the dispute and lawsuit between Jim and Theresa Nolan, their company, the Nolan Network, and Ocean Spray.
Lawsuits are always about many things but, at base, this one was about Jim Nolan wanting to be honest and up front with all his customers.
JIM NOLAN & HIS CAT BO
We used a photo, taken by Bill Martin of PRODUCE BUSINESS during happier days back in 1999. Since the split with Ocean Spray, things weren’t as happy. It wasn’t only money… so many of his “friends” were involved with Ocean Spray, and when the dispute broke out, they felt they couldn’t be seen as “siding” with Jim.
The whole episode is horribly sad.
He wanted to have his day in court. To have a chance to testify, tell his side of the story, and we hoped the court would publicly confirm the righteousness of his conduct and his life.
We suppose the lawsuit will go on. Theresa will battle for truth and her husband’s honor. But now Jim will never get his moment on the stand.
Nobody knows why someone dies, but everyone who cared for Jim sensed that something about the whole situation sucked the life out of him. He just wasn’t meant for the kind of battle that was required.
He was, as Bruce said, pure.
When we get more information we will pass it on. In the meantime we extend our deepest condolences to Theresa.
PMA released a notice today regarding the passing of one of the most seminal figures in the history of PMA:
PMA OBSERVES DEATH OF EARLY ADVISOR, ROBERT BULL
Produce Marketing Association’s (PMA) current and past leaders joined together today to note the passing of Robert L. Bull, an influential force during the association’s early years. Bull died Feb. 26 in Temple, Maine.
A professor of marketing at the University of Delaware, Bull was the land grant university system’s representative to the board of directors of the Produce Prepackaging Association (PPA), a predecessor to PMA, in the late 1950s. Founded in 1949 to respond to competition arising from the new category of frozen food and to help the industry address quality issues, the association and its early annual conventions and expositions attracted a broad cross-section of prepackers. However, PPA nearly floundered in early 1958 when it was discovered that the first executive director had embezzled all the association’s funds as that year’s convention was being planned.
Members appealed to the dean of the University of Delaware’s agriculture school to allow Bull to take over PPA operations in the short term, while association directors developed a plan for the future. Bull moved the association’s meager remaining assets — two old desks with chairs, file cabinets, two Royal typewriters and a mimeograph machine — from New York City to a vacant barber shop in Newark, Del., where he managed the association for several months.
Bull also tapped a University of Delaware graduate student, the son of a local hog farmer and a Korean War veteran, to manage the association. Robert “Bob” Carey presided over the organization until his retirement in 1996. Under Carey’s leadership, as packaging became commonplace in the early 1960s then began to wane as consumer interest in healthy eating increased, PPA evolved — first to focus on produce retailers’ educational needs, which were unserved at that time, then later to the global, produce and floral organization for buyers and sellers that it is today. The association was renamed Produce Packaging and Marketing Association in 1967, and became Produce Marketing Association in 1971.
“I don’t know if there would be an association today if Bob Bull hadn’t stepped in to keep the organization functioning in 1958,” said Carey, who also cited Bull’s early management assistance. “When I was hired, I didn’t even know what an association was — he had much to do with my early on-the-job learning experiences.”
Bull later founded Food Business Associates, Inc., a marketing consultancy. His clients included Binney and Smith, and Johnson & Johnson, his family obituary reports.
“Bob Bull not only kept the association going in its darkest days, but he also helped shed light for those of us fortunate enough to have worked with him through the 1980s,” said current PMA President Bryan Silbermann. “He did pioneering work in produce handling for retailers and wholesalers, authoring one of the earliest guides published by the association on the subject. We owe Bob a huge debt of gratitude for his vision and his commitment to serving others.”
Carey remembered Bull as a pioneering food marketing researcher who studied retail shopping patterns and perishable inventory control, and was an advocate of packaging. He recalled Bull as an avid gardener who grew then-unknown fruits and vegetables including now-popular lemongrass, and as a prolific writer. Bull’s obituary reports that he authored more than 700 manuals, books, and magazine and journal articles on food and marketing, as well as health care and child safety. He earned numerous awards in his lifetime, including for teaching excellence, and for his advocacy for small business and children’s safety.
Bull is survived by four children, Stephen, Fred, Robert and Laura Bull, and their families; and a sister. A memorial service will be held March 8 at Fairbanks Union Church, Fairbanks, Maine. Arrangements are being made by Wiles Funeral Home, Farmington, Maine.
Here at the Pundit we feel especially grateful to Bob Bull. When the Pundit was a young man starting up PRODUCE BUSINESS magazine, Bob was a marketing consultant and he persuaded some of his clients to support the venture of a young man he thought had some potential.
Bob Bull had a knack for finding people filled with potential. Although Professor Bull did many things for PMA, none was more consequential than his selection and mentoring of a young Bob Carey to staff what was then a virtually bankrupt and quite inconsequential organization.
In selecting Bob Carey, Professor Bull taught us all one final lesson: That each of us makes many decisions which may seem small at the time but can wind up being of great consequence.
That is a lesson to live a life by. Our condolences to the Bull family.
We ran two pieces — Fresh Basil Recall Brings Additional Concerns About FDA’s Safety Procedures and Importer Of Recalled Basil Sheds More light On FDA Handling — regarding a food safety issue with basil in January. Now we have received a most thoughtful missive from an importer of Israeli and Dutch produce addressing the responsibility of importers in situations such as these and the importance of allowing growers to make a return and connecting these issues to questions of sustainability and social responsibility:
We have been following your writings and views concerning the recent basil recall from some Mexican growers and the import company Top Line, as well as your recent writings on sustainability and social responsibility. We have some concerns, and would like to share our thoughts and perhaps bring in a different perspective to the discussion.
We are an importer of organic and conventional fresh herbs, peppers, and tomatoes from Israel and Holland located in New York. We distribute our products all over North America. Israeli and Dutch imports have an excellent reputation not only of being “clean” and “safe”, but is also well known for the “clean” systems and food safety standards that are among the best in the world.
Food safety standards and systems of adherence in Europe and Israel are some of the strictest standards around, and have been used throughout the world to develop new uniform standards, and have been adopted by growers all over the world in the quest for standardized global food safety programs. In reference to a recent letter from Tim York in one of your Pundit articles, we agree that we need to have a model to emulate and evaluate if we are really going to create cleaner and safer food.
By no means are the Israelis and the Dutch exempt from product that is “unclean” or “tainted”, nor are they exempt from what we call “bad apples growers”. We do believe, however, that their standards and practices of food safety in the export arena allow for the process of food safety to actually work, so that incidents of recalls and contaminations can be handled quickly and effectively. That being said, we are back to the question that bothers us the most and a question you asked to Alberto Martinez of Top Line:
WHAT IS OUR RESPONSIBILITY AS THE IMPORTER??
We believe this is one of the most fundamental problems that currently exist in the produce world, and especially in the world of fresh herbs — specifically with basil. We find two very important factors in what we consider the responsibility of the importer: 1) The standards to which our growers adhere, and 2) The return we give back to the growers.
First of all, let’s speak about our responsibility as the importer to help shape the industry and its food safety standards. Make no mistake, we are the one segment of the industry (wholesalers, importers, and distributors) that have the most power to shape the industry. We drive the prices; we drive the quality; and ultimately, we drive the social responsibility around the products we offer for sale. We control the margins, and we control the supply.
Basil has been a major issue in the food safety world. Herbs in general have a very high risk for possible contamination, and this high risk has been neglected industry-wide. Maybe we should begin to look at what we have allowed the food safety practices to be, how we have shaped them, and where we can change them. If one has been down in Baja or Central Mexico, it is easy to spot the hundreds of farms growing basil in substandard conditions that are nothing close to what we (the distributors, importers, and wholesalers) are representing the standards to be.
Haphazard farms with dilapidated shacks for packing houses, zero refrigeration, zero sanitation for harvesters, etc. They are easy to spot, and in some cases you can even spot some very fancy labels being put on the bags. For those of us in the basil world, there are really no secrets; likewise for those growing in the Baja, for example, the culprits are well known. Both in Baja and on the streets of LA, you can find basil for sale for literally dirt cheap. Interestingly enough, one can even find basil on the streets of LA some parts of the year for less than a dollar!! What possible return could a grower get off of $0.95 after packaging, transport, customs, labor, etc.?
That being said, there are many companies growing in Mexico (even Baja) and other parts of the world with excellent standards and with motivation to evolve and constantly improve. A few important players in the basil world who have shown respect to food safety systems and adherence are companies like Jacobs Farm Del Cabo and Vida Fresh, which both grow in Baja and place a much greater emphasis on food safety and quality than many of the other Baja basil growers.
This is where certifications and testing come into play, and where we need better models and uniform standards to allow us to be educated enough to help drive the systems into place. It is about time we begin to simply do what we say. Importers, distributors, and wholesalers are all promising their customers clean, safe, standardized product — product that has been sourced from growers who are practicing “good agricultural practices”, growers that are Primus tested, growers that are certified organic, growers that have a HACCP certification, and growers that have long reputations of adhering to these practices.
Unfortunately some importers are simply not delivering on these promises, and consequently, they put us all at risk for food contamination and loss of consumer trust.
Which brings us to our second point — the return to the grower. How can we expect growers to invest in their farms, upgrade their facilities, implement training programs and uniform standards, and introduce frequent and private testing of their products when the return they are getting is so low or worse yet……open price? Open price is a very dangerous tool that importers, wholesalers, and distributors use in order to collect their due margins. However, they neglect the grower who is usually more desperately in need of any margin, especially in basil. In order to create change, we need to be willing to think about the possibilities of another model.
The average price of basil in LA has not changed in over 10 years, yet the price of everything else from fuel, labor, packaging, and freight has skyrocketed. How can we expect our growers to produce clean safe product with this kind of return? On average, Israeli basil sells for more than double that of Mexican basil. The growers are able to get a better return resulting in the customers getting clean safe product that they can trust. Additionally, if a contamination occurs, the recall system and the responsibility of the growers, exporters, and importers are not only standardized, but have been in place for decades and are constantly improving thanks to the pressure of the European markets and their dedication to food safety.
With the Israeli and Dutch imports, there are no open prices or even debate over price. The value of the dollar, the competitive demand from Europe, and the better margins within the European market have eliminated any possibility of cheap Israeli or Dutch goods. In the end, the growers (although not prospering like they used to) are able to invest something back into their farms. This is more than we can say about most of the basil growers in Mexico, Columbia, and Guatemala, where the majority of basil for the US market is grown.
It is true that in items like bell peppers, tomatoes, and other higher priced commodities, food safety programs are more likely monitored and adhered to. Thanks to the importers and distributors of these products who have had to show their customers proof and who have used these practices as a marketing tool.
We know that the American market is very different from that of the rest of the world, and as the dollar weakens and other markets become more difficult to maneuver, we have to ask the question of whether the lack of responsibility of the importer is really one of the main problems, and what can be done about it? We as importers, distributors and wholesalers have to go beyond relying solely on the FDA to ensure there are no short cuts taken in food safety, particularly when we ourselves have not done everything possible to ensure the product we are selling is safe. This surmounts to corporate responsibility.
There was a recent salmonella scare in Europe where it was thought that Israeli basil had been the culprit. Recalls were set in motion, and testing began in order to trace the contamination. At the end of a daily 3-month long follow-through of testing, no abnormalities were found. The tainted product was traced back to one grower of one exporter and no other traces of the contaminant were found.
Although it is common and standard to have frequent testing done on all exported basil from Israel, we along with all the other Israeli basil importers implemented an immediate TEST FIRST policy during this 3-month investigation whereby every shipment was pretested. By the time the basil landed on US soil, we had our test results and could provide them to our customers in advance regardless of whether the FDA took action of its own and did testing. These tests can be administered quickly if it is important, while still remaining cost effective. We remain proactive in food safety even after the scare, regular testing as always on all items and, in fact, the ministry of agriculture in Israel also overseas these practices as part of the exportation process from Israel.
In the end, we believe that although the FDA is/should be responsible for the governing of our country’s food safety, we as the people who are bringing these goods into our country and selling them for profit have a huge responsibility in seeing that our goods are clean. Furthermore we believe that there are enough resources for this outside the FDA that are cost effective and can enable us to do just that: deliver clean safe food to our American consumers.
We believe we have an obligation to do this. We have the same obligation to give the growers the kind of returns that can allow them to build/improve the kind of systems that will allow for clean safe food. Victims we are not, but possible gamblers with our consumer’s food safety??? Should we continue to allow importers to gamble with our food safety in the name of profits??
We agree with the Pundit that the next outbreak is just a matter of time unless we start to take food safety seriously. Thus our point is simply that regardless of whether the FDA takes quick action, as they should in order to standardize the systems in question, the importer has an enormous responsibility to shaping the reality of food safety in our country as well as consumer perception of food safety. Let’s take responsibility together and ask for more communication, more openness and more willingness to bring prices up where they have to be in order to pay for food safety.
— Nissa Pierson
Ger-nis International, LLC
A very hearty thanks to Nissa Pierson for thinking these issues through in such a comprehensive way.
We often find greater attention to food safety overseas. Partly this is because many markets produce almost exclusively for export, so they anticipate selling to a wide variety of customers with many different standards. We noted this when we were in South Africa, because the fruit could wind up in Japan, China, continental Europe, the United Kingdom or North America, so the highest standards were followed.
Also so much money in terms of transportation and duty was likely to be applied to this product that only the highest quality product would be shipped anyway.
In addition, many of these markets are dominated by only a few large chains, and their standards have enormous influence.
The growers of basil in Baja are in a completely different set of circumstances.
The vast majority of the product is going to the US, transportation is relatively cheap and the market is a diverse group of wholesalers, chains, foodservice distributors, etc., with various markets to pursue.
Certainly there is a moral responsibility not to defraud people, so we find especially disturbing Nissa Pierson’s claim that “…If one has been down in Baja or Central Mexico, it is easy to spot the hundreds of farms growing basil in substandard conditions that are nothing close to what we (the distributors, importers, and wholesalers) are representing the standards to be.”
Yet we suspect that not too many trade buyers who don’t want to be defrauded are being defrauded. After all, these buyers know that they are choosing to rely on an unverified assertion made by an importer. If the buyers really wanted to assure they were getting product grown and packed to a certain standard, they would insist upon either verifying it themselves or getting a trusted third-party auditor to verify the claim.
Although everyone has ethical responsibility for their actions — and so any importer who knows or should have known that something is “unsafe” and still markets it is unethical — that is a standard without much bite. After all, knowing something was not grown or packed to a specific standard is not the same thing as knowing something is not safe. In fact, as far as we know, even with a high risk item such as basil — well over 99% of the basil production causes no problems.
The issue we would have with Nissa Pierson’s letter is that in the American context, especially vis a vis Mexico, the power in the marketing relationship lies not with the importer, who in many cases is really just a commissioned sales agent for the basil farmer, but with the buying end of the industry. As we wrote in our piece:
We also see Alberto as a victim of his customers. How is it possible that over a year after the spinach outbreak of the fall of 2006, none of Alberto’s domestic customers were demanding any certifications? And on herbs — an item identified by the FDA as high risk.
Alberto basically functions as a marketing agent for the growers in Mexico. He needs to be able to go to those growers and tell them that there will be no market for their product if they don’t get certified….
At the various trade associations and seminars, people are always standing up and saying food safety is their Number One priority.
Yet the real life business experience of Alberto Martinez tells us another story — that lots and lots of industry buyers don’t insist on product meeting tough standards.
As long as that is the case, the next outbreak is just a matter of time.
And so it is. Nissa Pierson’s plea is plaintive, and there is no question that, in the end, growers, packers and processors have to be paid enough to maintain standards, sustain the earth and make a living — otherwise they will go out of business. But these standards can be enforced regardless of the mechanism of selling, such as the use of a commissioned sales agent.
In the American context, it is becoming clear that we have two options — one is to go for a regulatory or quasi regulatory approach, the California Leafy Greens Marketing Agreement being the premier example. In this approach, the whole industry or virtually the whole industry agree on a standard and a mechanism for enforcing it.
Alternatively individual buyers — say Darden — develop their own standards and mechanisms for enforcement, either by their own people or relying on third-party auditors.
In either case, the importer is then empowered by these buyers to make it clear to his growers that there is no market for anything but product certified to meet a standard.
That is the key. If the buyers constrain their supply chain to only growers, packers and processors who meet high standards, many producers won’t make the cut. This reduced supply of qualified product will bring higher prices.
Many thanks to Nissa Pierson and Ger-nis International for helping us think through such an important issue.