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Perishable Pundit
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Produce Business

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American Food & Ag Exporter

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New Translation Capabilities

Here at the Pundit, we’ve been graced with regular readers from every continent except Antarctica. We consider it a great win for the industry to have the opportunity to explain what goes on in the U.S.A. to a worldwide audience.

To facilitate this exchange, we have added translation functionality to the site. Simply click on the appropriate national flag in the box to the left of this column, and you can translate the Perishable Pundit into Chinese, German, Japanese, Korean, French, Italian, Portuguese or Spanish.

It is a mechanized translation, of course, so not perfect, but pretty good. If you use the translation service and are unclear as to the meaning of anything, please e-mail us and we will try to help.

We hope to expand this functionality to other languages and now extend a warm welcome to readers who don’t understand English.

Justifying WGA’s Washington Office

Western Growers Association has announced that it will be opening a Washington, D.C.-based office for government relations — an event that could turn out to be deeply significant for the trade.

On the bright side, another hand on deck fighting for produce industry interests in D.C. could be helpful, and Matt McInerney, WGA Executive Vice President, who is temporarily heading the office while it staffs up, is universally liked and respected.

Regional association executives and volunteer leadership have always flown into Washington at crucial moments to help lobby for the passage of laws, to help shape regulations and to testify before Congress. They serve a vital role. A Senator from Texas will pay more attention to what John McClung, President of the Texas Produce Association, has to say than he will to what any national produce association executive has to say. Same goes for almost any state or regional association and its corresponding Representative or Senator. And many regional associations contract with lobbyists and law firms, etc.

Yet, the opening of the office is a difference in kind, not just in degree.

The problem is that opening an office is a large expense, and an association needs to justify this kind of expense to its board and membership. Putting another guy on the produce industry team seems an insufficient justification for such a large and continuing expense. Most boards would insist on hearing of key points of differentiation between what this office will do and what is already being done before approving it.

And the differentiation has to continue to provide a continuing justification for the expense. If the WGA Washington office simply agrees with everything that United does and helps United execute its government relations strategy, what kind of justification is that for a D.C. office, which will probably cost well in excess of ten million dollars over the next 20 years?

Unfortunately, the justification is likely to come about by finding a reason to disagree with United. The temptation will be to paint the picture that the WGA is the guardian of grower interests and that United, with its broader membership base, can’t be counted on to defend grower interests.

To provide a continuing justification for the expense of maintaining this office, the inclination will be to find points of differentiation between WGA and United, rather than points of unity.

This could lead to a more divided industry presence in Washington.

We all know that sometimes a state, regional or commodity-specific group may have interests that are not opposed by national groups but simply don’t reach a saliency that causes them to be focused on. But WGA, as the largest regional group, rarely has that problem and, in fact, its announcement of the new office explains its rationale without reference to any unique interests of western growers:

“Western Growers believes that it can best serve its members by having a full time Washington, D.C. presence to lobby on federal issues like the 2007 Farm Bill, immigration reform, specialty crop competitiveness and food safety.”

The Farm Bill, Immigration Reform, Specialty Crop Competitiveness and Food Safety are issues indistinguishable from what United is working on.

It is telling that WGA doesn’t mention anything about trying to co-locate or rent desk space from United. One would think this would be more efficient as support services would not have to be duplicated and rent would stay “in the family” so to speak.

Obviously the devil will be in the details on this matter and we, of course, wish Matt and the WGA the best with its new, enhanced, Washington, D.C. presence.

Extreme vigilance, however, will be required if we are to prevent the permanent staff of this D.C. office from justifying its existence, and their jobs, by creating division in the industry as opposed to fostering cooperation.

Good News For Wal-Mart

Wal-Mart could use some good news and now they’ve got it:


Today’s (4 April 2007) TNS figures (12 week) show that ASDA is outperforming the rest of the retail sector for the first time in three years, with year on year growth of nine percent.

The figures draw a firm line under what ASDA has described as a period of recovery during which it re-evaluated its customer offer and pricing strategy as well as attracting one million new customers through its checkouts.

The figures from TNS indicated that ASDA is clearly in the lead when it comes to growth.

The figures which are available from TNS World panel show:

March 25, 2007

RetailerShare of totalShare of GroceryYr on Yr change %

Commenting on the figures, Andy Bond, ASDA’s chief exec said:

“These figures just go to show that when it comes to customers through the door value continues to be king. By delivering fantastic every day low prices across all our ranges be it premium, organic or value we have rekindled the customers’ love affair with ASDA.”

During the last 12 months ASDA has re-launched its:

Premium range Extra Special, its value range Smartprice, its healthy eating range Good for You and tripled the size of its organic range and extended its locally sourced ranges.

In addition it has introduced George Homewares and rolled out its home shopping service ASDA.com

George has launched its most successful range every Must Haves.

The retailer has even started to sell houses.

Although Wal-Mart’s U.K. subsidiary has a long way to go before they catch up to Tesco, this is welcome news in two senses:

First, as Tesco prepares to enter the U.S. market, it indicates that some strategies can work against Tesco.

Second, it holds out hope that with enough innovation and hard work, Wal-Mart might turn around its U.S. operations as they seem to have done in the U.K.

Of course one caveat: A quarter does not a turn-around make, and we will see if ASDA can maintain its momentum in the years ahead.

Imagination Farms/Disney Garden
Score Big Points With PBH And Pixar

They’ve been very active growing in the Disney Garden. This is the project focused on increasing fresh fruit and vegetable consumption among children by utilizing Disney characters. We’ve dealt with the project and Imagination Farms, the non-transactional produce company set up to facilitate the enterprise, many times including here, where we pointed out that the Pundit went back a long way with Matthew Caito, one of the founders of the venture.

The Pundit and his family also go back a long way with the Kopke family, as we both were pioneers in the Chilean deal, and so we were especially interested when it was announced that William H. Kopke Jr., Inc, would be marketing Chilean grapes under the Disney Garden label during the next Chilean season.

This was quickly followed by word that Six L’s/Custom Pak would use the Disney Garden label on grape tomatoes, cherry-on-the-vine tomatoes and round tomatoes. Plus Custom Pak would join with another Imagination Farms licensee, Progresso Produce, to ship seedless and personal size watermelons from the states of Florida, North Carolina and South Carolina.

Then came word that Disney Garden and the Produce for Better Health Foundation had formed a strategic alliance based on their mutual commitment to increase consumption of fruits and vegetables:

Beyond traditional financial support, Imagination Farms has made a four-year commitment to provide direct marketing support to include further development of the kids section of the Produce for Better Health Foundation website with Disney character integration and implementing a seasonal promotion program tied to a movie or video release to drive additional excitement and enthusiasm around the Fruits & Veggies — More MattersTM brand. Additionally, Imagination Farms has committed to using the Fruits & Veggies More Matters logo on all packaging and serving on the PBH Board of Directors.

…this alliance will leverage the marketing expertise of both organizations and the brand power of Disney Gardentm and Fruits & Veggies — More Matters to develop comprehensive marketing programs that reach moms and children through a variety of packaging, consumer media and in-store promotions.

Finally comes word that Disney is showing a real depth of commitment to the Disney Garden project by having Disney Studios partner with Imagination Farms to promote a new Pixar movie, Ratatouille:

Imagination Farms has partnered with Disney Studios to promote Disney’s new Pixar movie Ratatouille (rat-a-too-ee). The movie will premiere on June 29th and Imagination Farms will offer a comprehensive marketing promotion that will run May through September.

The Ratatouille promotion, available to all U.S. retailers, will include special movie-themed packaging, a “Cook & Win” internet sweepstakes with a culinary prize package and POS support centered on the key themes of the movie that revolve around the topic of cooking.

Melinda Goodman, Director of Marketing for Imagination Farms, commented, “The opportunity to partner with Disney Studios on this family movie, focused on cooking, was a natural tie to our mission of increasing consumption of fruits and vegetables among children. Pixar’s track record in animated films and the film’s focus of gourmet foods and cooking make this an exciting promotional venue for us.”

Products available with special Ratatouille packaging will include Washington grown apples from Chelan and L&M, bananas and pineapples from Turbana, blueberries and stonefruit from Ito Packaging, grapes from Four Star Produce, mushrooms from Modern Mushroom, potatoes from Progressive Marketing, tomatoes from Six L’s/Custom Pak, and watermelons from Progreso Produce and Custom Pak.

In addition to the marketing support provided by Imagination Farms, Disney will be providing $25 million in ancillary marketing support to promote the release of the movie creating high consumer awareness. “Disney’s promotional support of Ratatouille this year is similar to the support of the movie Cars in 2006. Ratatouille will be top of mind for consumers throughout the summer, especially families with young children,” noted Goodman. “In addition, the power of Pixar over the last several years has yielded over $4 billion in box office sales and the release of 7 feature length films including classics like Toy Story, Finding Nemo, Cars and more,” replied Goodman.

Disney’s movie strategy of family fun for adults and children and aspirational messaging clearly comes through in this new animated film. Remy is a country rat that dreams of becoming a French chef. He moves his family to Paris so he has access to French “cuisine.” He and his family take up residence under the restaurant of his hero Chef Gusteau. There Remy helps a dishwasher, Linguini, create acclaimed dishes loved by critics…most importantly a vegetable ratatouille dish.

To tie into the movie theme of cooking, Imagination Farms is preparing an online sweepstakes that will be promoted through their website and through special Ratatouille themed packaging and POS. Remy & Linguni will help kids play a match game by selecting matching pairs to make a healthy salad. The promotional prize package includes a family trip for four to NYC to take part in cooking lessons from a celebrity chef at the French Culinary Institute, along with opportunities to attend a Broadway show, goodie bags of cooking supplies and more.

Glen Reynolds, East Coast Sales Manager for Imagination Farms, finished by saying, “Summer is a great time for families, movies and produce. The timing of this movie event can give retailers a great opportunity to build large Ratatouille themed displays that excite kids and encourage purchases that keep summer sales fresh. We feel this is one of the first times a movie promotion has been tied in with so many different produce items for a truly comprehensive promotion.”

Don Goodwin — the other founder of this venture along with Matthew Caito — must think he died and went to heaven. After pioneering the non-transactional produce company model with Green Giant Fresh, which provided little support as it never recognized the value of the halo effect its canned and frozen items could gain from an effective fresh program, he suddenly finds himself with the opportunity to tie in with PBH, with movies and a lot more coming.

Ratatouille (prounounced for the movie with an emphasis on rat) is the story of pursuing one’s passions against enormous odds, and Don Goodwin has done that. He should be pretty proud of where he has wound up.

Mechanisms For Trace-Back
And Trace-Forward Needed

With two recent pieces, Center For Produce Safety Established: An Act Of Faith In The Future and Fresh Express Research Grant Is Allocated To Scientists, we chronicled industry efforts to enhance our understanding of E. coli 0157:H7 and other pathogens that affect fresh produce.

It is hoped that enhanced understanding will lead to more effective methods of preventing foodborne illness outbreaks. Perhaps we will learn how to prevent these pathogens from getting on the crops to begin with or more effective methods to clean and process the products.

This stage of the recovery from the spinach crisis, in which the industry makes a very public offering at the altar of science was absolutely crucial to rebuilding regulatory and consumer confidence. It says to the world in a very public and concrete way that the industry does not find having its products used as a carrier of foodborne illness to be at all acceptable and will work diligently to find a solution.

However, the very nature of the problem — outdoor field-grown crops consumed raw without a kill step for pathogens — means that we have every reason to expect more outbreaks. The research will enhance our knowledge, but it is long-term and it can take a very long time to translate better understanding of something into a useful preventative — just ask the pharmaceutical industry.

Because identified foodborne illness outbreaks on fresh produce as a percentage of servings produced are statistically rare, even effective food safety techniques, such as better Good Agricultural Practices documents, have almost no effect on the reports of foodborne illness. They are almost random events.

In other words, the odds of you winning the lotto are so small that changes in the lotto rules making it ten percent harder to win have virtually no effect on your chances of winning the lotto. Equally the fact that the industry is doing a better job on the farm can provide no assurance against such a rare event.

So , despite our best efforts, the expectation has to be that there will be outbreaks in the future.

This said, and acknowledging that we are working to reduce the likelihood of such outbreaks, the role of industry leadership has to be to develop a response to the highly predictable incidence of future outbreaks that will minimize the damage to the industry.

How do we do this?

The logical way to reduce the impact of any future foodborne illness outbreak is to limit its scope. This is what traceability is all about. It is such an important issue that we have run three Guest Pundits on the subject written by Gary Fleming, Vice President, Industry Technology and Standards at the Produce Marketing Association.

The pieces, entitled Guest Pundit — Traceability And the Need For A Common Language, Guest Pundit — Pairing The Global Language With Technology, and Guest Pundit: Traceability — A Forgotten Piece Of Food Safety, all dealt with important aspects of traceability, and it is impossible to overstate the importance of making sure the executive level in each organization has made clear to everyone that nothing less than world-class traceability standards are acceptable.

Some of Gary’s writing draws on the Traceability Best Practices document that PMA and CPMA jointly developed. It is a terrific effort, and it has a great summary of the ten best practices:

BEST PRACTICE #1 (Page 16)

Add the lot number to fixed-weight consumer packs containing a supplier ID.

BEST PRACTICE #2 (Page 17)

On the retail / foodservice level, mark cases with human readable data including supplier name, product description and lot number.

BEST PRACTICE #3 (Page 18)

On the distribution center level, encode GTIN and lot number in a UCC.EAN-128 barcode.

BEST PRACTICE #4 (Page 18)

On the distribution center level, use human-readable supplier name, product description, and lot number.

BEST PRACTICE #5 (Page 19)

During the slotting process, scan the supplier case and link to the internal pallet number.

BEST PRACTICE #6 (Page 20)

During receiving on the distribution center level, use supplier pallet tags by encoding the company prefix and serial number in a UCC.EAN-128 barcode.

BEST PRACTICE #7 (Page 20)

On the distribution center level, receive the EDI ASN (Advance Ship Notice).

BEST PRACTICE #8 (Page 20)

On the distribution center level, scan supplier pallet data during the receiving process and match to EDI ASN data.

BEST PRACTICE #9 (Page 22)

On the supplier level, use supplier case coding by encoding GTIN and lot number in a UCC.EAN-128 barcode, as well as human-readable supplier name, product description, and lot number.

BEST PRACTICE #10 (Page 22)

On the supplier level, use supplier pallet tags by encoding company prefix and serial number in a UCC.EAN-128 barcode.

The document goes into great detail about what this all means and how to do it.

This is all vital. So much so that as much as we support PMA’s contribution, along with that of Taylor Farms, to get the Center for Produce Safety off the ground, we hope the next big food safety investment PMA makes is in the traceability arena.

One of the lessons of the spinach crisis, though, is that traceability as a concept has to be broadened beyond the issues addressed in the Traceability Best Practices document. The model on which that document is based is really the notion that we find a product at retail and need to trace it back to the producer, the field, etc.

This is vital, of course; only by having this available can the regulators feel comfortable that they can quickly discover the cause of a problem. We want the situation to be that a regulator could pick up a bag and contact the processor, and that the processor — without speaking to another human being — should be able to identify where and when that bag was packed and what product from where was used in it.

But two things happened in the spinach crisis that wouldn’t be solved by this kind of trace-back information, and PMA, with its interest in marketing and expertise in this area, is perfectly situated to help the industry by addressing them.

First, there was enormous confusion at the FDA on who produced what. Dole, which did not process spinach at all, was asked to participate in the first conference call with the FDA because the FDA didn’t know that Natural Selection Foods packed all the Dole brand spinach.

In fact, confusion over all the different brands and who packed what led to a feeling of lack of control over the situation at FDA and may have contributed to a “pox on all their houses” attitude.

In light of this experience, we can expect that the very first question the FDA will ask in a future outbreak is: Who packs what labels?

PMA should agree to act as a simple, confidential, data repository for processors. All will agree to utilize an EDI system to send a notification every time they pack under a given label. We will thus have an industry registry available for regulators of who packed for whom and when. PMA will maintain the data in a secure place providing 24/7 access to appropriate health authorities.

So next time, if the FDA gets word of different brands being implicated, it can instantaneously see how many processors are actually involved.

The other lesson of the spinach crisis is that although the FDA warned consumers not to eat bagged fresh spinach on September 14, 2006, and Natural Selection Foods issued its recall on September 15, 2006, we had recalls announced almost every day through September 22, 2006, by firms that had used some Natural Selection Foods product in spring mix or other products. That must never happen again.

Even more important to regulators than trace-back is trace-forward capabilities, especially if they might be used in processing.

Bagged, labeled product can be recalled, even bulk cartons of product shipped under a trade brand can be recalled, but product, sometimes sold in bulk, sometimes in large industrial or foodservice packages used in further processing, loses its identity when it is used in another company’s spring mix or salad dressing.

This means consumers are in danger. This means regulators will feel a need to act.

It also makes the industry look sleazy. When a processor announces a recall a week after the fact, the inclination is to think that it was laying low and hoping to avoid being noticed. One suspects that the FDA called after a bag was implicated or through working through purchase records and asked about the disposition of a purchase. So the buyer acts stunned and issues a recall.

We need to put people in a situation where they have no choice but to do the right thing. So traceability needs to include a trace-forward mechanism identifying all processing customers.

Basically, there are going to be new things that we won’t anticipate, but let us at least make sure we don’t fall victim to the same problems we experienced on the spinach crisis.

As part of its leadership on traceability issues, PMA should develop a mechanism for these two things:

  1. The FDA and other regulators can never again be confused by who produces what brands.
  2. We can never have recalls dribbling in for days because we don’t know instantly where our product went.

The Center for Produce Safety will, one day, solve the industry’s food safety problems. But it is PMA’s actions on traceability that are likely to determine the impact of the next outbreak.

Pundit’s Mailbag —
Vendor Selling Platforms

One vendor, who wished to remain anonymous for obvious reasons, is feeling frustrated:

Are you aware that the major retailers now require all vendors that have commodities to sell them now belong to a “Very Expensive Club”? It is called a “Vendor Selling Platform” for lack of better words.

The membership fees can range from $1,500 to $3,000 per year per retailer, and this is for only 120 Purchase Orders or twelve (12) Months, which ever comes first.

This sounds like a warranty at “Crazy Eddies” — remember him?

In the Northeast where space is at a premium, retailers order small amounts and this could easily use up 120 Purchase Orders in no time at all.

That charge is for the privilege of offering your merchandise to them at a fair trading price.

If you want to add another retailer to your list of opportunity, it will cost you another $500 per retailer setup fee.

What ever happened to fair trading? Why don’t they just come out and ask for the pay off. I guess that would be illegal. A while back some of them were asking for 3% off the invoice, just for doing business.

There has always been unfair trading practices in the produce industry in the past, buyer pay offs, etc.

However this one takes the cake!

Years ago I had the opportunity to get to know the Pundit’s father. Your father used to tell me that if the buyer did not want to buy the merchandise for its integrity and price, then look for another buyer.

As you might understand, I would like to remain nameless on this one.

Many thanks for the letter. For those not from the New York metro area, Crazy Eddie was an electronics retailer whose prices were “Innnnsaaaaane”… and many retail practices are, if not insane, not likely to produce the best results for retailers. But that is not the same as corruption or pay-offs, and we need to be clear with the distinction.

If an employee asks for something for himself, personally, without the knowledge and authorization of his employer, that is a pay off.

If a company asks you to structure business with them in a certain way, that is, for better or worse, the buying organization’s prerogative.

These buying platforms can be annoying. Some years ago, the Pundit got a dozen phone calls in an hour from unhappy suppliers to Safeway after the retailer held a meeting to tell them all about selling via Agribuys.

What annoyed the vendors was that the meeting began with a focus on all the savings that Safeway would realize through the use of this new electronic platform and ended with the fees that vendors should expect to pay for utilizing the platform.

“If Safeway was going to save so much money, why didn’t it use the savings to cover the cost of the platform?” attendees were asking.

Fair enough question, and similar questions have been asked many times on many issues: Why does this retailer make me pay 3% on all invoices via check? Why do I have to pay a quarter a box? Why do I have to pay a slotting fee?

If it is any consolation, it is much better in produce and perishables than it is in grocery.

But we can’t attack retailers as being outside their rights. We don’t like “surprise” expenditures, but if a retailer tells a vendor in advance that the vendor has to pay platform fees or rebate percentages, then it is a vendor’s decision what actions to take.

One of the most important business exercises is to analyze the profitability of one’s customers. If two comparable customers both ask for quotes and one gets a rebate of 3% on sales, something is wacky if they both get quoted the same price.

And if a vendor is selling at prices it loses money at, well, we can’t blame the retailer for that.

Sometimes you have to be willing to lose the business.

The Pundit remembers a business we had of selling raspberries to France. It was a perilous business, with lots of claims, lots of need to divert product back in the U.S. because it sat on the tarmac in some U.S. airport exposed to the heat. It was a profitable business only because we charged a substantial mark-up to cover all these eventualities.

Every once in a while, a competitor would come along, see our high mark-up and under-price us substantially. We never fought for the business; we just let it go. Then the new vendor would have a bad arrival, his bill would be clipped 90% and he either went broke, stopped selling the customer or, at least, realized he couldn’t work on such thin margins.

Basically, whatever retailers want to charge, whatever expenses they want to pass on to suppliers, the bottom line is, taking all this into account, is this good business for a vendor? If not, shame on any vendor for pursuing it.

The real problem with various fees is really on the retail side. Effective retailing requires retailers to be consumer-driven. Making payments and fees prerequisite to doing business with a retailer means that the retail organization is constricting its supply chain based on something other than what its customers would like.

It also changes the mental attitude within the chain to focus on selling real estate and selling services rather than satisfying consumers.

One reason supermarkets have been so challenged in responding to Wal-Mart and Costco is because so many supermarkets forgot about the consumer.

Our correspondent’s letter is a good reminder that, although it may be vendors who complain, it is consumers that are neglected when buyers start focusing on “who is a member of our partners-in-progress club” rather than who has the best product at the best price with the best services.

Many thanks for the thought-provoking letter.

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