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GAP Program Still Leaves Questions

The California Department of Food and Ag came out with its press release announcing what we announced yesterday — that the Leafy Greens Marketing Agreement Board has accepted the industry-generated GAP for use in its verification program.

You can read the release here.

The release raises three interesting points:

POINT ONE:

The metrics, which are guidelines for good agricultural practices (GAP) to be followed by marketing agreement signatories, were proposed by a coalition of leafy greens industry members, and were reviewed and endorsed by food science experts in academia and government.

The Marketing Agreement requires that the standards be
“…scientifically peer reviewed by a nationally renowned science panel…”

Who was on this panel? Who selected the panel? Do they have any conflicts of interest? What did they have to say in their peer review on the standards? How can anyone judge if these standards are good, bad or indifferent if the composition of the panel and their comments on the standards are not released?

POINT TWO:

We recognize and appreciate the numerous GAP initiatives coming forward from trade organizations and private companies, said marketing agreement board chairman Joe Pezzini. However, the California Leafy Greens Marketing Agreement program is the only initiative that will incorporate on-site field inspections that are conducted by a government inspection and verification entity. The California Department of Food and Agriculture will be using state and federal inspectors trained by the USDA.

Joe is pointing out a crucial fact, which is that standards are only half the deal; actually implementing them is the crucial thing. So verification is required. Buyers who simply accept without verification that a vendor is doing what he claims to do are putting their customers at risk. Trust but verify should be the watchword.

One thing for the Board to be cautious of is that as we read the Agreement, it doesn’t actually require that every field be inspected. It just means farmers have to open their fields to inspection. We think it is important that the Board make sure that, in fact, every field gets inspected.

POINT THREE:

To date, 54 handlers representing 98 percent of leafy greens produced in California have signed up for the marketing agreement.

There is something really wacky here, and it is possibly hurting the industry. Fresh Express represents over 40% of the packaged salad business and it is not a signatory.

Admittedly the board is broader than packaged product. Still, the math doesn’t work.

The CDFA refuses to show even the Board its numbers and won’t explain where or how it came to these numbers.

The most logical explanation is double counting. So a grower grows product for Dole and Dole sells the bagged product. The CDFA must be counting both the grower’s sale to Dole and Dole’s sale to the consumer.

Maybe they are even triple counting: A grower sells to a processor who is labeling a product for another handler who then sells the product to consumers.

It is very irresponsible for the CDFA to act this way. In response to Eric Schwartz’s letter that we ran yesterday, one buyer told us that he saw no reason to constrain his supply chain because if 98% of the leafy greens grown are under the agreement, he would have no choice but to buy Marketing Agreement product anyway. If other buyers are thinking like this then the inaccurate CDFA numbers are making it easy for buyers to not take a position. This, in turn, makes it easy for producers to not sign up.




Reasons For Buyer Reticence
To Commit To Marketing Agreement

The Buyer-led Food Safety Initiative is taking a lot of heat because after specifically asking for the establishment of the California Leafy Greens Marketing Agreement, very few of the signatories are willing to commit to buying from only those producers that are part of the Agreement. Most of the signatories are not even willing to commit to buy only from vendors third party certified to meet or exceed the standards accepted by the Marketing Agreement.

It is sad but predictable.

From the very start, there has been a peculiarity about the effort. Why in the world did the buyers need to urge the associations to come up with a plan? If a buyer wants a certain criteria met, he simply has to add it to his specifications.

This is the way the United Kingdom retail community has handled things.

The fact that instead of just setting up standards, the buyers urged the associations to set standards, clued us in right away that many of the buyers both in the Initiative and out, were not actually prepared to do anything regarding safety. They just wanted someone else to do something or they wanted to seem to be concerned about this issue.

It may be unfair to focus just on the signatories to the Initiative, since many who never signed aren’t doing much better, but actions have consequences and these buyers actually urged other people to spend time and money to establish the Marketing Agreement, so they are a fair group to pick out.

What conceivable reasons could there be for them not to agree to restrict their supply chains to either those who have signed the CMA or, at least, to those independently audited to meet CMA standards? Let us think it through:

  1. They Weren’t Paying Attention

    Tim York and Dave Corsi are smart, well meaning and persuasive. Maybe as long as it was just a question of letters, many of the others just went along. They never focused in on the concept that they would have some special obligation of their own to actually do something.
  2. They Don’t Have The Authority And Don’t Want To Ask Their Bosses Or Their Bosses Said No

    Tim York is the President of Markon Cooperative and he is well respected by its members. Dave Corsi works at a family owned chain that takes pride in being top class. When we have guests from South Africa or Australia or other far away places, we always take them to a Wegmans because that is what they want to see. Although the chain is growing, this is still the type of chain where it is expected that Danny Wegman will visit each and every store each Christmas.

    Both Tim and Dave have special positions — many of the signatories are neither presidents of their companies nor family owned retailers with a reputation for being best in class.

    Maybe many of the others just don’t have the authority to constrain a supply chain and are unwilling to talk to their bosses about it.

    Perhaps in some cases they did, and their bosses just said no.
  3. Pre-existing Contracts

    Some of the signatories claim they can’t sign to restrict their supply chain because they have pre-existing contracts. This really makes no sense. Obviously, if they can’t renegotiate their contracts they could just announce that no future contracts will be signed unless the supplier is a signatory to the Marketing Agreement.
  4. Legal Fears Regarding Standards

    Some have speculated that buyers fear once they get in the business of establishing standards they could be liable for suit. This, once again, makes no sense. Every buyer has standards — committing to buy Marketing Agreement product creates no more liability than having the lower standard of saying we will buy from anyone.
  5. Fear That It Might Cost Money

    Restricting one’s supply chain means there will sometimes be cheaper product available…but you can’t buy it. A competitor might sell product grown under less than optimal conditions and beat the price you can offer on the product grown to higher standards.

Our sense is it is a combination of reasons One, Two and Five that hold back buyers from making a commitment.

Yet, if buyers don’t want food grown to high food safety standards enough to commit to buying it, what reason do we have for expecting, ultimately, that producers will produce it?




The Effect Of Fresh Express And Its Absence In The CDFA Marketing Agreement

A large grower in Salinas sent us this question:

I would like to know your opinion of the absence of Fresh Express in the Marketing Agreement and what effect it will eventually have on Dean Florez’s legislation. I questioned WGA’s percentage of the handlers in the MA and they agreed that there was a problem with them and they need to go back and rethink these numbers.

If Florez really knew the true numbers, I think he would run with them and insist that too much product will be in the system without the enforcement of the MA’s GAP’s metrics. We all know that Fresh Ex’s standards meet or exceed the newly established ones by the industry, but it still will give the legislators and the media the necessary tools to move forward.

Yes, as we have said many times, including here, there is something wacky about the numbers.

When all is said and done, it is going to come out that over 40% of the bagged salads sold in America won’t be eligible to use the mark of the CDFA. Some of the Fresh Express growers may have signed on anyway, but the percentages the CDFA are using just don’t make sense.

As our correspondent shrewdly points out, when this becomes evident to those looking for mandatory regulation, they will be able to claim that the industry initiative failed as evidenced by lack of participation.

Fresh Express had its business reasons for electing not to participate, which we dealt with here, but it has been an easy decision for them because none of their customers have demanded that they sign or lose the business.

In fact none of their customers have even required them to get a third-party audit attesting to the fact that they are following their very high standards.

The shocking thing here is not that Fresh Express didn’t want to sign. That was fairly predictable in light of their positioning and the lack of buyer commitment to the program. The shocking thing is that WGA went ahead with the program without getting commitments from the top bagged salad manufacturers.

The answer though is yes, when it turns out that the CDFA number is all wrong and doesn’t represent what the consumer’s experience will be, the credibility of CDFA will be shot and the enemies of the industry will have been handed a bullet to use against us.




Craig Carson’s Life And Passions

Our piece yesterday regarding the untimely passing of Craig Carson of Crunch-Pak brought this kind letter from one who knew Craig and who attended his memorial service:

In Memory of Craig Carson

I have had the pleasure of working with, and getting to know, Craig Carson since I started at the Pear Bureau in 1989.

Last night I attended his memorial service in the gymnasium of the Cascade High School in Leavenworth, Washington.

The attendees in the nearly-packed bleachers of the gym included Craig’s wife, family, along with members of his church, industry and community, all of whom I dare say would also be classified as friends. Craig touched a lot of people in his shortened life, and while I knew a part of him through his years of service on my boards, and as a mentor and friend, I learned a bit more about Craig’s life and passions listening to the brave and eloquent speakers at his service. I knew that Craig was a dedicated family man as well as a dedicated orchardist, entrepreneur, and committed industry leader who liked his occasional glass of red wine.

But the speakers also talked of Craig’s community involvement, and some of his passions including fishing, farming, gardening and more fishing. In fact, at the reception after the service there were tomato starts on the tables for people to take home and plant as a reminder of Craig’s love of nurturing his garden each spring, including his prized tomatoes.

There were also packages of Crunch Pak sliced apples for people to enjoy as Craig has been a visionary and leader in developing the sliced apple business, and Crunch Pak is just one of his legacies. Craig also liked to create bridges and bring people together. I was a first hand recipient of Craig’s mentoring, leadership and roll as a teacher…and a friend. Craig will certainly be missed by many but he will not ever be forgotten by those whose lives he touched. Rest in Peace Craig.

— Kevin D. Moffitt
President & CEO
Pear Bureau Northwest
Milwaukie, Oregon




Pundit’s Mailbag — NRA And Liability

With the National Restaurant Association’s Food Safety Conference fast approaching, our coverage has been substantial:

NRA Forms Produce Safety Working Group kicked off our coverage over four months ago, and we discussed NRA’s plans regarding produce safety.

National Restaurant Association Soon To Unveil Its Own Food Safety Plan was a substantial interview with an NRA executive who had previously worked at United. It was this piece that raised many concerns regarding what the NRA was planning.

An Open Letter To The Board Of Directors Of The National Restaurant Association came next, where we urged NRA to work with the produce industry to achieve food safety.

Second Appeal to NRA followed, and we pointed out that the produce industry welcomes the input of NRA’s scientists and those of its members.

NRA Stands Defiant was another piece where we pointed to the fact that NRA is in between permanent CEOs as a possible cause for this uncomfortable situation.

We then published Calling All Produce Executives Who Work Heavily With Foodservice, in which we asked produce executives to reach out to NRA.

This was followed by What Is Wal-Mart’s Role In The New NRA Food Safety Standards, in which we analyzed how the world’s largest retailer may wind up being behind the restaurant association’s standards.

We also published NRA’s Peter Kilgore Speaks Out, which included the verbatim publication of a letter from NRA’s Acting Interim President and CEO.

Pundit’s Mailbag — Reaction To NRA’s Reaction included a letter from a food safety consultant questioning the approach taken by NRA’s acting interim President in his letter to the Pundit.

NRA’s Food Safety Plan Still Looms In Mystery raised the issue of whether NRA’s focus on produce suppliers wasn’t misplaced in light of the serious food safety problems that arise in restaurant operations.

Much of the focus of these pieces has been an effort to point out to NRA the advantages of working collaboratively with the fresh produce industry to achieve higher levels of food safety. One of the things we pointed out is that growing doesn’t occur on the same schedule as procurement, and so NRA’s plans to come out with new requirements after the Salinas planting is done won’t help food safety.

Beyond that, we theorized it could increase the liability of restaurants as these operators will now be forced to sell the only available product which won’t meet the food safety standards that their own association has told them is important.

Now we have received a letter discussing this liability issue:

I am reading with interest on PerishablePundit.com the ongoing saga of the NRA and its development of food safety standards. As a lawyer in a former life, I am sensitive to your suggestion that the NRA might find itself exposed to liability as the result of implementing standards before anyone in the distribution chain has had a reasonable opportunity to implement them. On the other hand, it might be the case that, despite what might otherwise be driving the NRA to conduct business in the manner that it is, it recognizes that liability for damage to person or property as the result of food borne illness is strict

At every level of the distribution chain. I would encourage you to consult a products liability lawyer, as I have not studied this area in much detail for many years; however, once upon a time the law was that the seller (i.e., anyone in the distribution chain) who sold a defective product had strict liability (i.e., no negligence need be proven by a plaintiff) under the Uniform Commercial Code and most state statutes. If this remains the law, it may explain why the NRA seems to be impervious to your comments in this regard (although it does not explain why they are otherwise developing standards in a non-collaborative manner). Put another way, were the NRA to have developed its standards per your suggestions and given the industry some reaction time, would a food borne illness that crept its way into the distribution chain despite 100% compliance with the standards shield everyone in the distribution chain from liability? I tend to think not.

This raises the issue of insurance for food borne illnesses, which I am currently looking into. There does not seem to be much available on this topic, although it strikes me that, as time goes by, the insurance underwriters of the world are going to have a reaction to all of this. Perhaps they already have — if you are aware of the latest developments on the insurance front, I’d be grateful if you would share them.

I would be very interested in your thoughts about all of this.

Thanks for all the good work that you are doing.

— Joel K. Bedol
Chief Operating Officer
Sy Katz Produce, Inc
Pompano Beach, Florida

Many thanks to Joel for sharing his insights.

One clarification: We never said that NRA, as an association, would incur any liability for pronouncing any standards it might choose. We said that its members — individual restaurants — might have enhanced liability if they knowingly buy product that their own association has advised them is unsafe.

We’ve discussed the evolution of liability law on a few occasions, most notably in our piece Collateral Damage vs. Assumption Of The Risk.

And we do chat from time to time with many experts in the field, including Bill Marler, the famous product liability attorney who focuses on foodborne illness.

One of the reasons foodservice tends to be more proactive on food safety issues than retail is that they have more liability.

You’ll notice that when the lawsuits were filed in the Taco Bell case, they were filed against the restaurant chain as well as the product manufacturer.

In the case of spinach sold at retail, the lawsuits were brought against the producer but not the retailer.

Why? Restaurants are viewed under the law as the equivalent of manufacturers, the “creators” of the product. Generally speaking, they have a strict liability.

Retailers, simply reselling without alteration a bag of salad are viewed more like distributors and typically can’t be held liable without evidence of negligence.

These rules are not as simple as it sounds. For example, if a vendor is insolvent, the retailer is likely to be held liable — sort of a public policy impetus to get retailers to deal with vendors capable of shouldering their obligations.

It is certainly true, as Joel says, that compliance with voluntary standards will provide no guarantee of a shield against liability.

It is possible the NRA figures that restaurants will probably be held liable anyway and so doesn’t worry about increasing their liability — although they haven’t said that.

If the NRA takes that position, we would say it is shortsighted. First of all, in the case of a restaurant, both the product producer and the restaurant are strictly liable. So a court still has to decide how the liability will be apportioned. If a produce vendor can state in court that this restaurant bought product it knew — from the NRA — was not suitable for the purpose intended, it possibly would sway the apportionment of the liability.

In any case, in America our courts are courts not just of law but of equity, and judges and juries have significant leeway. It seems as if putting one’s members in a situation where they can’t possibly do what you recommend does no good and might do harm.

Joel’s question about insurance is interesting. When the spinach crisis broke,we assumed that product liability insurers would be a crucial player in enhancing food safety. Not wanting to pay claims, surely we thought they would demand high standards or charge those with low standards high fees.

It doesn’t seem to be the case, and our conversations with experts tell us it rarely is. It seems that the insurance industry runs on statistics and, plain and simple, there simply are not sufficient outbreaks to be able to judge the difference in likelihood of an outbreak based on the differences between the food safety plans of two different companies.

So insurance companies just don’t have the basis to go into Processor X and say “You get a 4% discount on insurance because your agitation is better.” There doesn’t seem to be that kind of direct intervention by these insurers.

Obviously, over time, if we keep having outbreaks and the insurance companies have to pay out a lot of money, insurance will get both more expensive and more difficult to get.

So far, though, we haven’t heard of a big problem in this area. Most large buyers require processors to have liability policies. If they can’t get them, it would close down the industry.

Much appreciation to Joel for his thoughtful letter.

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