Pundit Interviews

Pundit Letters





Perishable Pundit
P.O. Box 810425
Boca Raton FL 33481

Ph: 561-994-1118
Fax: 561-994-1610


email:
info@PerishablePundit.com

a

Produce Business

Deli Business

American Food & Ag Exporter

Cheese Connoisseur



Reading Tesco Between The Lines

As part of our extensive coverage of Tesco’s journey to America, we recently discussed comments about the performance of Fresh & Easy that Tesco released in the course of its recent earnings release. We entitled that piece, Tesco’s Earnings Report Comments Indicate Better Sales; $200 Million In Losses Expected.

Tesco’s comments implied that sales at Fresh & Easy were higher than we estimated, so we wrote this:

As we have mentioned many times, we would like nothing better than to see Tesco succeed in the U.S. In a consolidating market, a new retail concept rolling out nationally and inspiring others to launch small format chains will be a boon to the supply side. So if we were wrong in our assessment, we will joyfully eat crow. But we will hold on calling the baker to make the blackbird pie until we actually see full financials.

Those comments brought forth a great deal of commentary, including this letter from a highly experienced retailer turned consultant:

Don’t worry… you won’t be wrong about Tesco. Tesco is doing all they can to cover up their failure. Their press releases are carefully worded to put a positive spin but not to lie at the same time. Re-read what they say. Basically they are saying it’s possible that one or two stores might have cracked $200k during one week of grand opening. Unless they release sales for all stores individually for the past quarter, we will still have to go by the 2nd hand reports given to us by former employees who are leaving the company.

Look at what Tesco actually said and my translation in bold right next to it:

WHAT TESCO SAIDWHAT IT ACTUALLY MEANS
1. Sales are ahead of budgetWe reworked all the budgets to adjust to lower sales
2. Sales densities are already higher than the U.S. supermarket industry averageThat is about $8 per sq. ft. per week or about $80k per week
3. With our best stores exceeding $20 per square foot per weekPerhaps two stores during grand opening week.
4. We are seeing strong growth in the early stores as we step up, as planned, our marketing programs and as we build awareness of the brandMaybe the first stores are up 20% from $50k to $60 — easy to get a big % when sales are low.
5. This is also reflected in the strong sales performance of recent openings in all of our markets in Southern California, Nevada and Arizona. Fresh foods and own brand products have sold particularly well, confirming that the core of our offer has already gained acceptance with customersIf you have just one customer then you have at least some acceptance.

This kind of coded language is an insult to everyone in the industry.

— David J. Livingston
DJL RESEARCH, LLC
Pewaukee, WI

Although we don’t think we’ve ever met David, we bet he knew our old friend Gene Battaglia, who worked at Scrivner during David’s stint as a market analyst at the same company, where David studied under Dave Richards, who is well known for his expertise in site analysis and gravity modeling.

He surely knew Frank Gillespie, who was running produce while David was Market Research Manager at Roundy’s. Roundy’s tried to defray some of its fixed costs by operating a consulting business which David ran. When Roundy’s was sold to investment firm Willis Stein & Partners in 2002, David went out on his own providing site analysis, market intelligence, due diligence, geo-demographic mapping and other services.

David’s analysis is right on target. As we discussed here, Tesco had initially promised The City — London’s version of Wall Street — to release separate financials for the US unit. It reneged on that commitment and included the results in its massive UK unit, so nobody has any audited financial information on Fresh & Easy.

Now Tesco did release comments which seem to imply a lot.

Yet if Tesco was going to release information such as sales densities and losses, why did it renege on its commitment to release full financials?

We don’t know, of course, but it is worth noting that the reason companies have to issue audited financials and not give literary comments about their results is because what we call Generally Accepted Accounting Principles (GAAP) in the US and International Accounting standards (IAS) in Europe allow for reasonable comparisons between companies that report under relatively fixed definitions. Securities regulations also call for outside auditors to sign off on financials.

Here we are left wondering. When Tesco says, “Sales densities are already higher than the U.S. supermarket industry average,” we have no idea what measurement Tesco is using. The company put up a graph, for example, that only includes stores open before Christmas… are those the only stores included in this calculation?

Why say something as vague as “higher than US supermarket averages”? Why not say, “in the week ending March 29, 2008, we had 56 stores open and average sales in those 56 stores exceeded our $9-a-foot estimate of the average sales density for US supermarkets.”?

What is the point of making statements such as “sales are ahead of budget” without saying when the budget was drawn up or how much they were budgeted for? And if sales are ahead of budget, what expenses are so much greater than budget that Tesco now expects to lose around $200 million dollars this year on Fresh & Easy — four times the consensus estimate!?!

The more we dig into the release and the report, the less it tells us and the more inclined we are to think we have to stick to our own tracking methods until Tesco actually starts releasing audited financial statements on its US division.

Many thanks to David J. Livingston and DJL research for helping us assess this important topic.




Low Dollar And Diversion
Of Crops To Biofuels
Contribute To Food Inflation

We’ve discussed food prices before with pieces such as A Closer Look At Global Food Prices and The Perishable Pundit Visits South Africa Dispatch IX: Wrong Ways To Reduce Food Prices. Now, however, the issue has boomed.

We find ourselves discussing the issue with diverse publications ranging from the locally oriented such as NJBiz, whose headline declares Higher Food Prices on the Horizon, and Allentown Morning Call, which explains that Higher Prices Eat Into Grocery Lists — to the Associated Press, focusing on one input cost with its headline Costly Fertilizer Could Bump Crop Prices.

It is a global phenomenon and may cause instability in some nations:

S Africans march over food prices
BBC News, UK —
Thousands of South African trade unionists have taken to the streets to protest against rising food prices. The main march, organised by the Congress…


Food prices spur inflation
Bangkok Post, Thailand —
Soaring food prices could cause inflation to top forecasts of 4.5% for the year, according to Pannee Stavarodom, the director-general of the Fiscal Policy…

US increases food crisis aid as Philippines threatens rice hoarders
AFP
WASHINGTON — The United States has promised 200 million dollars to help poor nations combat the global food crisis amid mounting warnings over the…

UN to step up food aid for Haiti following riots over prices
The Associated Press —
Anger over surging food prices has threatened stability in the Caribbean nation, which has long been haunted by chronic hunger…

China’s Rising Food Prices Cause Pain
TIME —
Sixty-seven year old Beijing housewife Wang Litan faced an agonizing choice recently: Wang requires pain-killers to manage chronic back pain caused by…

Grocery bills up by £600 a year
Belfast Telegraph, United Kingdom —
Northern Ireland families face further grocery bill hikes as a global food crisis threatens to take hold. The bad news comes after it…

Djibouti: Efforts to Contain Soaring Food Prices And Drought
AllAfrica.com, Washington —
At the same time, record-high staple food prices had exacerbated food insecurity, leaving many of the pastoralists in need of emergency food aid…

India’s Inflation Near Three-Year High on Food Prices (Update4)
Bloomberg — New Delhi
That may reduce the nation’s dependence on imports and help stave off pressure on global food prices, which have caused social unrest in 33 countries from…

Imports hiked to tame inflation, food prices
Toronto Star, Canada —
India plans to import more edible oils and lentils to cool food prices and tame inflation, which is at a 3 ½-year high, Agriculture Minister Sharad Pawar…

‘Food crisis can create law, order situation’
Daily Times, Pakistan —
Experts here on Thursday voiced concern over the increasing prices of food items and said that food crisis might lead to law …

Revolt of the hungry and oppressed
Business Day, Nigeria —
It is no longer news that the world is gradually approaching a major catastrophe unparalleled in decades due to the worsening case of hunger and starvation…

The rice crisis
Ceylon Daily News, Sri Lanka —
In a far reaching move, the Government yesterday stipulated the maximum retail prices for rice, the staple food of the vast majority of Sri Lankans…

The Globe and Mail in Canada ran an excellent piece entitled, Why Costs are Climbing:

As food prices surge, starvation looms for millions. Experts call for emergency action but admit there’s no quick fix

ROME — Fatal food riots in Haiti. Violent food-price protests in Egypt and Ivory Coast. Rice so valuable it is transported in armoured convoys. Soldiers guarding fields and warehouses. Export bans to keep local populations from starving.

For the first time in decades, the spectre of widespread hunger for millions looms as food prices explode. Two words not in common currency in recent years — famine and starvation — are now being raised as distinct possibilities in the poorest, food-importing countries.

Unlike past food crises, solved largely by throwing aid at hungry stomachs and boosting agricultural productivity, this one won’t go away quickly, experts say. Prices are soaring and stand every chance of staying high because this crisis is different.

A swelling global population, soaring energy prices, the clamouring for meat from the rising Asian middle class, competition from biofuels and hot money pouring into the commodity markets are all factors that make this crisis unique and potentially calamitous. Even with concerted global action, such as rushing more land into cultivation, it will take years to fix the problem.

The price increases and food shortages have been nothing short of shocking. In February, stockpiles of wheat hit a 60-year low in the United States as prices soared. Almost all other commodities, from rice and soybeans to sugar and corn, have posted triple-digit price increases in the past year or two.

Yesterday in Rome, Jacques Diouf, director-general of the United Nations Food and Agriculture Organization, said the cereal-import bill for the poorest countries is expected to rise 56 per cent this year, on top of the 37 per cent recorded last year. “There is certainly a risk of [people] dying of starvation” unless urgent action is taken, he said. “I am surprised I have not been summoned to the Security Council to discuss these issues.”

The UN’s donor countries, he said, need to come up with as much as $1.7-billion (U.S.) to implement quick-fix food programs, such as topping up the World Food Programme, whose emergency food-buying power has been clobbered by the rising prices. Its budget shortfall, the difference between the food it intended to buy and can now afford, is $500-million.

Other UN officials have been equally blunt. Sir John Holmes, the UN’s top humanitarian official and emergency relief co-ordinator, said this week that soaring food prices threaten political stability. The UN and national governments are especially worried about potentially violent situations in Africa’s increasingly crowded urban areas. Rioting triggered by absent or unaffordable food could cripple cities. “The security implications should not be underestimated as food riots are being reported across the globe,” Mr. Holmes said.

Nigeria’s Kanayo Nwanze, vice-president of the UN’s International Fund for Agricultural Development, sees no short-term fix. “I wouldn’t be surprised if there is an escalation of food riots in the next few months,” he said. “It could lead to famine in certain parts of Africa if the international community and local governments do not put emergency actions into place.”

And it’s not just the UN that thinks so. Independent analysts, economists and agriculture consultants say the term most often used to describe the food prices and shortages — crisis — is not hyperbole.

How did it come to this? Surging food prices, now at 30-year highs, are actually a relatively new phenomenon. In the mid-1970s, prices began to fall as the green revolution around the world made farms dramatically more productive, thanks to improvements in irrigation and the widespread use of fertilizers, mechanized farm equipment and genetically engineered crops. If there was a crisis, it was food surpluses — too much food chasing too few stomachs — and dropping produce prices had often disastrous effects on farm incomes.

By 2001, the surpluses began to shrink and prices reversed. In the past year or so, the price curve has gone nearly vertical. The UN’s food index rose 45 per cent in the past nine months alone, but some prices have climbed even faster. Wheat went up 108 per cent in the past 12 months; corn rose 66 per cent. Rice, the food that feeds half the world, went “from a staple to a delicacy,” says Standard Chartered Bank food commodities analyst Abah Ofon.

The price of Thai medium-quality rice, a global benchmark, has more than doubled since the end of 2007. This week it reached a record $854 a tonne, which helps explain why World Food Programme trucks carrying rice in certain parts of Africa have come under attack.

Food prices in the first three months of 2008 reached their highest level in both nominal and real (inflation adjusted) terms in almost 30 years, the UN says. That’s stoking double-digit inflation and prompting countries such as Egypt, Vietnam and India to eliminate or substantially reduce rice exports to keep a lid on prices and prevent rioting. But, by reducing global supply, this only increases prices for food-importing countries, many of them in West Africa.

Throughout history, the world has seen food shortages and famines triggered by drought, war, pestilence, crop failures and regional overpopulation. In the Chinese famine between 1958 and 1961, an estimated 30 million people died from malnutrition. In the late 1960s and early 1970s, severe food shortages hit India and parts of southeast Asia. Only the emergency shipment of hundreds of thousands of tonnes of grain from the U.S. prevented a humanitarian disaster. Drought, violent conflict, economic incompetence, misfortune and corruption created deadly famines in Ethiopia and Sudan in the first half of the 1980s.

In each case, the food shortages were alleviated through emergency aid or investment in farming and crop productivity. While no one so far is dying of hunger in this latest crisis, the UN and agriculture experts predict years of pain, at best, and severe shortages, possibly famine in the worst-hit countries. The reason: High prices are likely to persist for years.

Swelling population explains only part of the problem. The world’s population, estimated at 6.6 billion, has doubled since 1965. But population growth rates are falling and, theoretically, there is enough food to feed everyone on the planet, said Peter Hazell, a British agriculture economist and a former World Bank principal economist.

Why millions may go hungry, he said, is because prices are so high, food is becoming unaffordable in some parts of the world.

The “rural poor” (to use the UN’s term) in Burkina Faso, Niger, Somalia, Senegal, Cameroon and some other African countries exist on the equivalent of $1 a day or less. As much as 70 per cent of that meagre income goes to food purchases, compared with about 15 per cent in the U.S. and Canada. As prices, but not incomes, rise, the point may be reached where food portions shrink or meals are skipped. Malnutrition sets in.

The dramatic price rises have been driven by factors absent in previous food shortages.

They include turning food into fuel, climate change, high oil and natural gas prices (which boost trucking and fertilizer costs), greater consumption of meat and dairy products as incomes rise (which raises the demand for animal feedstuffs), and investment funds, whose billions of dollars of firepower can magnify price increases.

Driven by fears of global warming, biofuel has become big business in the U.S., Canada and the European Union. The incentive to produce the fuels is overwhelming because they are subsidized by taxpayers and, depending on the country or the region, come with content mandates.

Starting next week, Britain will require gasoline and diesel sold at the pumps be mixed with 2.5-per-cent biofuel, rising to 5.75 per cent by 2010 and 10 per cent by 2020, in line with European Union directives. Ontario’s ethanol-content mandate is 5 per cent. As the content requirements rise, more and more land is devoted to growing crops for fuel, such as corn-based ethanol. In the EU alone, 15 per cent of the arable land is expected to be devoured by biofuel production by 2020.

That’s raising alarm bells, especially given lingering doubts about the effectiveness of ethanol in combatting climate change. British Prime Minister Gordon Brown said this week he’s worried that ethanol production is pushing up food prices everywhere, and he called for an urgent review of the issue. Economist Dr. Hazell has said that filling an SUV tank once with ethanol consumes more maize than the typical African eats in a year.

Rising ethanol demand is one of the main reasons why Wall Street securities firm Goldman Sachs predicts high food prices for a long time. “We believe the recent rise in agriculture prices is not a transient spike, but rather represents the beginning of a structural increase in prices, much as has occurred in the energy and metals markets,” Jeffrey Currie, Goldman’s chief commodities analyst, said in a research note last month.

Severe weather has clobbered crop production among some big exporting countries. Drought in Australia, the third largest wheat exporter after the U.S. and Canada, has pushed wheat production down by half since the 2005-06 crop year. Statistics Canada said Canadian wheat production fell 20.6 per last year. Exports, as a result, are expected to fall by six million tonnes in the 2007-08 year.

While Australia and Canada could bounce back in the next season or the season after, depending on temperatures and rainfall, rising global temperatures do not bode well for agriculture in many parts of the world.

The UN has predicted that climate change could reduce production in developing countries by 9 to 21 per cent by 2080 and that sub-Saharan Africa could lose more than 30 per cent of its main crop, maize. Southern Asia, it said, could see millet, maize and rice production fall by 10 per cent. The challenge is to offset the losses with higher crop yields on arable land less affected by climate change.

Mr. Ofon, of Standard Chartered Bank, said rising demand in the face of production shortfalls does not fully explain the dramatic price increases. Investors are the other driver. They have discovered they can make money from food commodities as easily as they can in oil, gold or nickel. “Fund money flowing into agriculture has boosted prices,” he said. “It’s fashionable. This is the year of agricultural commodities.”

But Mr. Currie of Goldman Sachs dismisses the theory that funds are pushing prices higher than they would be otherwise, though the funds can make prices rise and fall quickly in the short term. “The simple truth is that the funds don’t take delivery of the commodity,” he said in an interview. “Therefore they cannot sit on them and put them in silos. Therefore they can’t affect prices over the long term.”

In other words, the rally in food prices is being caused by demand exceeding production, resulting in dwindling food stockpiles. UN’s International Fund for Agricultural Development, for one, assumes prices will stay high for as long as 10 years.

Agriculture economists and the UN have not lost all hope. New irrigation systems are inevitable in Africa and have the potential to boost crop production dramatically. Ditto for the use of fertilizers. Only three to five kilos of fertilizer per hectare is used in Africa, compared with about 250 kilos in the U.S. The problem with using more fertilizer is cost. Fertilizers such as urea are derived from natural gas, and gas prices have climbed, too. The price of urea has almost tripled since 2003, to $400 a tonne.

Dr. Hazell said some big countries, notably the U.S., Canada and Ukraine, have the capacity to increase crop production substantially. Already world cereal production is on the rise, although not nearly fast enough to end the crisis. The Food and Agriculture Organization yesterday forecast a 2.6-per-cent rise in cereal production in 2008.

Cutting back on ethanol production alone would go some way to restoring supply-demand balance in the food markets. “If we decide to do something about it, we can just use less food for fuel,” he said.

But everyone — analysts, economists, agriculture experts, the UN — thinks all bets are off in the next two or three years. It’s almost impossible to boost production quickly, because of land and water shortages and competition from biofuels.

“I can say with some degree of confidence that if governments and international development agencies do not put in place a concerted effort quickly, then we are looking at a very serious problem,” Mr. Nwanze said.

The thing we try to explain to consumer reporters is that produce is mostly a commodity crop, so the cost of inputs is irrelevant in the short run. In the long run, of course, if producers can’t make a living, they stop producing and that reduced supply brings markets back to equilibrium.

So far in the US, inflation in produce prices can mostly be traced to less competition from imports. Take an item such as Spanish clementines, which came into the US this year but in dramatically reduced volumes. Why? The exchange rate. Other markets paid more.

This is just one way that the Fed’s “cheap money” policy can lead to inflation.

The other big distortion in the market is government subsidies and mandates for biofuels such as ethanol. The government wanted resources to move to produce biofuels, and it got its wish through mandates and incentives.

The reason governments shouldn’t dictate things such as this is because politicians just focus on the one thing they hope to achieve — charitably viewed as carbon reduction and less dependence on foreign oil, less charitably viewed as paying off corn farmers — but there are always unintended consequences.

The truth is that there is increasing evidence that bio fuels don’t even help with global warming. Too much energy is used in producing corn and too much forest is cleared to increase cropland in places such as Brazil.

All because governments feel a need to “do something” — even when it is very unclear what we ought to do.

There is an argument to be made that government should look to compensate for externalities by imposing costs on private parties to compensate for the harm they may do to the general public. This means you charge a fee for spewing carbon in the air or polluting. There is no case at all that government should pick specific technologies say corn-based ethanol and pick winners and losers through mandates and subsidies.

This is how well meaning people, with only the best of intensions, wind up causing food fights half way across the globe.




Little Food Safety Progress
Leads Media To Look Closer
At Our Industry

With all the efforts the food industry is taking to enhance food safety, the overall national effort doesn’t seem to be having much effect. The latest assessment is leading to headlines such as CDC Says Not Much Progress in Fight Against Foodborne Illness:

Significant declines in the incidence of foodborne illness were reported from 1996, when the surveillance program began, to 2004, but there has been little, if any, continued decline in such illnesses. For 2007, Cryptosporidium-related outbreaks actually increased from the number of incidences reported from 2004 to 2006. Minor declines deemed insignificant were seen for illnesses caused by E. coli 0157, Salmonella, Shigella, Listeria, Campylobacter, Vibrio, and Yersinia.

Reports such as these are excellent reminders that the industry must not become complacent. The incidence of these pathogens are sufficiently low that going a few years without a major outbreak can be nothing more than a statistical quirk. It doesn’t mean that the problem is solved.

These announcements have led reporters to go back and look at industry and see how it is dealing with food safety. NBC Nightly News, for example, ran a piece entitled Field of ‘Clean’ Greens. It includes interviews with Jim Lugg, food safety director, Fresh Express who we have mentioned several times including here and Dirk Giannini of Christensen & Giannini who is a prominent grower in Monterey County.

The industry came off pretty well in the news report. I suppose a PR maven would tell Dirk to emphasize a less pecuniary interest in food safety, but we thought he came across as very honest.

Jim Lugg probably spoke to the reporter for three hours so the editors could select out two seconds of Jim saying that the food safety problems in Salinas had been caused by farmers “getting a little careless about where they plant their crop.”

Although the report points out that the produce of Fresh Express “has never caused an outbreak,” we wonder if Jim Lugg doesn’t need expanded responsibilities. After all, the Chiquita side of the company had to recall Honduran cantaloupes just like many others.

You can catch the video here:




A Little Exercise
Goes A Long Way
To Better Health

Just recently we ran a letter from Tom Church, President of Church Brothers, LLC, as part of a piece entitled, FDA Status Quo Cannot Stand, which dealt with the FDA’s behavior in the Honduras cantaloupe incident.

We had previously discussed the real life experience of a false positive and what it could do to a business in a piece entitled, Church Brothers/True Leaf Recalls, Then ‘Unrecalls’ Spring Mix/Arugula After Testing Mishap.

Today we have the pleasure of talking about Tom Church and not mentioning food safety. In fact, we can give Tom a chance to kvell over the achievements of his oldest son, Timothy Church, age 40.

Timothy is an MD, a PhD, and the director of preventive medicine research at the Pennington Biomedical Research Center in Baton Rouge. Perhaps more to the point, he is also the former medical director of The Cooper Institute in Dallas.

The Cooper referenced in that name is Kenneth H. Cooper, and it is fair to say that Cooper invented Aerobics when he published a book by that name and set up the Cooper Aerobics Center.

In any case, Timothy and his colleagues, Tedd Mitchell and Martin Zucker, have written a book entitled, Move Yourself: The Cooper Clinic Medical Director’s Guide to All the Healing Benefits of Exercise (Even a Little!).

The basic thesis of the book is that people can benefit enormously from even small amounts of exercise, although the book also goes into nutrition.

USA Today picked up on the book and published a big piece on it:

ACTION SPEAKS OF HEALTH LOUDER THAN WEIGHT

Timothy Church, his wife, Natalie; daughter, Lucy Jean;
and son, Charlie, at play.

Exercise can shrink your waistline and reduce the belly fat shown in recent studies to be so toxic, even if you don’t lose much weight.

That is the conclusion reached by exercise expert Timothy Church and colleagues in a new book, Move Yourself: The Cooper Clinic Medical Director’s Guide to All the Healing Benefits of Exercise (Even a Little).

“You can lose a lot of waist without losing a lot of weight,” says Church, director of preventive medicine research at the Pennington Biomedical Research Center in Baton Rouge and former medical director of the Cooper Institute in Dallas. That’s important because belly fat, also called visceral or intra-abdominal fat, is considered particularly dangerous, he says. Research has indicated that people with too much fat in their midsection are at greater risk of developing dementia, including Alzheimer’s disease.

Walking the weight off

Church and his co-authors — Tedd Mitchell, medical director at the Cooper Clinic, and health writer Martin Zucker — reviewed research conducted at the Cooper Institute. The institute focuses on research into physical activity and health, and the clinic offers consultation and treatment.

In one study, 464 postmenopausal women were directed to do different amounts of exercise, most of it walking. The four subgroups were sedentary or exercised about 73, 135 or 193 minutes a week. The women who were active lost 1 to 2 inches around their middles, even if they didn’t lose much weight. They noticed that their pants fit better, Church says.

Other research has yielded similar findings. Scientists at the Fred Hutchinson Cancer Research Center in Seattle found that men and women who adhere to an exercise program for a year — about 45 to 60 minutes a day of walking, five to six days a week — had significant decreases in total body fat and belly fat.

The exercisers who did the most — 60 minutes, six days a week — decreased their intra-abdominal fat by 10%, says Anne McTiernan, an internist and director of the Prevention Center at Fred Hutchinson.

Regular exercisers should realize that even “if they don’t see big changes on the scales or in their measurements, they are still getting big health benefits,” McTiernan says. “We saw a decrease in hormones and other factors that contribute to cancer.”

Fat cells in the abdomen secrete chemicals that play a role in a number of diseases, Church says. “This deep visceral fat in the belly produces six times more bad chemicals than subcutaneous fat, the stuff you can pinch right under your skin.

“Plus, the plumbing of visceral fat drains directly to the liver, where these chemicals interfere with the liver’s ability to metabolize blood sugar and cholesterol.”

Danger at 35 or 40 inches

Men have too much fat around their middle if their waist is 40 inches or more. For women, it’s 35 inches or more, Church says.

Besides reducing belly fat, physical activity lowers blood pressure, cholesterol and the risk of diabetes and cancer. It reduces depression and anxiety, and it improves bone and joint health, sex drive, sleep and memory, he says.

But Church notes that fewer than 25% of Americans meet the minimum guidelines of being moderately active for 30 minutes five or more days a week, estimates show.

“The average American doesn’t understand that other than not smoking, exercise is the most important thing you can do for your health,” Church says. “They think exercising is a health suggestion on par with leaving mayonnaise off their sandwich.”

He highly recommends wearing a step counter and keeping a physical activity log, especially at the beginning of an exercise program, because these tools help quantify current exercise levels and identify opportunities for activity throughout the day.

Church is always looking for ways to do more. He used to train for Ironman triathlons, but now that he has children, 3 and 5 years old, he jogs for 30 to 35 minutes two to three days during the week. On weekends, he and his wife put their kids in a jogger and go out for fast walk/jog for an hour or more. And they plan active weekends, such as walking around the zoo for an afternoon.

“The bottom line is that most people do not appreciate that exercising, even a little, is the quick fix that they are looking for to improve their health and quality of life.”

One of the great challenges for the produce industry is how, precisely, to tie together the message of diet and exercise. It may be that the more moderate approach this book emphasizes may be more easily integrated into a general lifestyle pitch.

We look forward to reading the book and congratulate the author… and his Dad.

You can buy a copy here.




French Vending Machine
Pilot Project

We always are seeking tools that can help the industry increase consumption while improving the health of the population. This interest is especially close to the heart when it comes to helping children to eat well.

As such, we have paid some significant attention to efforts to sell via vending machine — a large market from which produce is principally absent.

We kicked off this line of coverage with a piece entitled, Dole Introduces Unique Vending Machine Concept. This was followed with a piece entitled, Pilot Project On Vending-Machine Produce Shows Promise In New Channel Of Sales, and then a letter which we ran under the title of Pundit’s Mailbag — Produce And Vending Offer ‘Great Hope’.

All this attention to the possibilities that vending machines offer brought still another letter:

In 2003 we conducted a pilot project regarding the use of vending machines to provide increased consumption opportunities for fresh fruit and vegetables in schools. I am enclosing two articles (in French) on the subject.

Alas, since 2004, in France, the law forbids all vending machines in schools. What has this accomplished? Now the children go outside to buy candies…

— Catherine Roty
Chargée d’études
Ctifl
Paris, France

Ctifl stands for the Centre technique interprofessionnel des fruits et legumes. You can learn more about this organization by viewing its website in French here or via an English-language brochure you can download here.

Roughly speaking, Ctifl can be thought of as the Produce Marketing Association of France. Of course, to avoid offense to our French allies we should perhaps say that PMA is the Ctifl of America!

In any case, Ms. Roty sent two interesting articles over. We had them translated so we offer each in both the original French and a translation in English:

Le point sur Distributeurs de fruits frais dans les établissements scolaires

Fresh fruit vending machines in school establishments

Distributeurs de fruits frais dans les éstablissements Réalité ou utopie?

Fruit in school vending machines: A reality or an impossible ideal?

In addition to the articles, Ms. Roty was kind enough to work with Pundit Investigator and Special Projects Editor Mira Slott to explain the project more completely to our readers. Because of language issues, we did it as a Guest column rather than a Q&A — although we did an abbreviated version as a Q&A in Pundit sister publication, PRODUCE BUSINESS, which you can read here.

You can also read the guest column in French here.

Catherine RotyCatherine Roty
Chargée d’Etudes, Département Produits
et Marchés Ctifl


Consumer Research Officer, Product &
Market Research Department Ctifl
Pierre-vayssePierre Vaysse
Chargé du Programme Suivi Qualité Fruits
Département Fruits et Technologie, Ctifl


Engineer in charge of the Fruit Quality
Monitoring Program
Fruit & Technology Research Department, Ctifl

Within the framework of the States General on Food, held on December 13, 2000, the French Government announced it would launch in 2001 a National Program on Nutrition & Health, the Programme National Nutrition Santé (PNNS).

The overall aim of PNNS is “to improve the health status of the [French] population by acting on one of the major decisive factors, namely nutrition”. Among the nine nutritional goals in terms of Public Health, the #1 priority was: “to increase the consumption of fruit and vegetables so as to reduce the number of small consumers by one-quarter — 25%”.

A small consumer of fruit and vegetables is defined as a person who eats less than one-and-a-half portion of fruit per day, and less than two portions of vegetables (excluding potatoes).


However, said items are not only recommended in the form of fresh produce: “fresh, canned or frozen, fruit and vegetables protect your health”. Which is, of course, a real “stab in the back” for a strongly atomized sector that faces the heavy-weights of the food processing industry. Since that slogan, all products having the slightest link to fruits and vegetables are marketed claiming a “health” positioning (Knorr Vie; Andros etc.)

Our experiment was therefore largely motivated by public/state dynamics.

In 2002, the French Ministry of Health entrusted Aprifel (agency for research and information on fresh fruits and vegetables) with the task of encouraging young people to eat fruits and vegetables, and to try to find ways to influence their behavior in the direction intended by the PNNS.

Aprifel asked the Ctifl (Centre Technique Interprofessionnel des Fruits et Légumes, Interprofessional Institute for Applied Research on Fruit and Vegetables) (the organization I work for) to, firstly, study the technical feasibility — temperature, hygrometry, ethylene, “best before” date, assortment, etc. — and, secondly, determine expectations of this young and captive target as to the fruits and vegetables to be sold in vending machines.

Two secondary schools in Bergerac (Southwest France), the “lycée général Maine de Biran” (1,500 pupils) and the “lycée professionnel Jean Capelle” (750 pupils) were the basis for our trials throughout 2003.

The town of Bergerac was chosen because of its proximity to the Ctifl Lanxade research station.

The choice of material was imposed by the fragility of the fruits: vending machines using revolving stainless steel trays with same-level delivery (i.e., without dropping the fruits) and, of course, equipped with a cooling system.

A FIFO (first-in, first-out) machine was lent to us by Jean-Pierre Hasson of Rodaprim, a fruit&veg wholesaler in Rouen. He himself had a “fleet” of about 40 machines installed all over this city in Normandy (town hall, hospital, swimming pool, schools, etc.) more or less successfully selling apples at a price of € 0.80, of which 5% was donated to Cancer Research.

Ctifl bought a shopper vending machine.

For both models, cleaning was a long and tedious process.

Refilling and maintaining the machines are normally tasks allotted to the vending machine operator, but in this case they were carried out by Arzenton, a wholesale firm in Bergerac from the Créno group [a group of fruit & vegetable wholesale companies] and member of UNCGFL (French fruit&veg wholesalers’ association).

The aim was to define on a real-life basis the threshold of profitability for a wholesaler or retailer taking care of ordering, preparing, washing and delivering the products, but also to draw up a guide of good hygiene practices. We did not solicit the traditional vending machine operators represented in France by Navsa.

Temperatures: on average, there is a temperature difference of 2°C between the upper and lower trays of the machine (even more pronounced with the FIFO model). The upper trays should be dedicated to fruits requiring low temperatures, in our case strawberries, followed by fruits that release ethylene — apples, pears, apricots — and then fruits without distinct temperature requirements — clementines, prunes and dried apricots, table grapes. The lower trays are to be used for fruits that are susceptible to low temperatures — tomatoes, cherries, bananas and kiwifruit.

The most comfortable temperature for consumption is 9 -10° Celsius.

Hygrometry: the humidity regulation systems of the currently available vending machines are not sufficient to keep fresh fruits and vegetables from drying out. Throughout the trials, a plate filled with water was placed in the lower part of the machines, and the water level was checked each time the machine was restocked.

Packaging and washing: the fruits sold per piece were placed on small plates in order to keep them from being tossed around during the rotation of the revolving trays; for fruits that are very susceptible to dehydration, such as table grapes and apricots, as well as very fragile fruits — in this case strawberries, we used plastic punnets. Juicy products were supplied with a paper napkin. All fruits were washed, except the strawberries: a pictogram recommended to wash them before eating them.

Product range: depends entirely on the restocking frequency.

Adapted to Vending MachinesRequiring ripenessRequiring fast rotation
Dried apricotsKiwifruitBananas
Prunes
ApplesPearsCherries
Table grapesNectarinesStrawberries
ClementinesPeachesKumquats
OrangesApricotsFreyssinettes*
Cherry tomatoes

*very small, sweet bananas


Sales results over the calendar year 2003 (excluding school holidays; moreover, there were strikes during weeks #23 and 24).

IN VOLUME

Number of fruits sold = 3,261

Number of fruits/day = 40

59 % of total sales were apples

IN VALUE

Turnover = 1,549 €

On total sales: 51% apples, 19% strawberries


The vending machines had 10 trays, with 12 products per tray.

In order to limit restocking to once a week, the number of fruits sold per day must not exceed 120/4.5 days = 26 fruits.

With restocking occurring twice a week, which is a rhythm more adapted to our products, the maximum sales threshold increases to 52 units/day.

In the best of cases, return on investment starts in the second year, with an average product price of € 0.80 (eighty eurocents).

The fruit & vegetable vending machines were voluntarily placed in a competitive environment; both schools had vending machines offering hot and cold drinks, as well as sweet and salty snacks of well-known international brands. The idea was to let the young consumers make their own choices, not to impose the « nutritionally correct » but to tempt them into “responsible behavior” by offering tasty fruits and eating pleasure.

The fruit & vegetable vending machines were received favorably by the young public. The machines were perceived as a welcome diversification, and the students declared they were ready to try at least once this original offer. If the offer was convincing, word of mouth would do the rest.

Gustative uncertainty, lack of convenience, “generic” products that are hardly associated with a commercial environment… fruits and vegetables in vending machines suffer severe handicaps. Among a public of teenagers, one of the key factors to success for this concept is diversity, in other words: avoid “canteen fruits”! Events can be organized on a multitude of themes: based on the season, a color, a vitamin C special in winter, a carotene special before the holidays or a potassium special during exam periods.

The objective is to improve knowledge on the world of fruits and vegetables: varieties, seasonality, origin(s), gustatory and nutritional quality. This a perfectly attainable goal. It is to be noted, however, that the labels were rarely read, and no specific displays or events were organized.

The prices were aligned with the competing products and never exceeded 1€, which was a sort of psychologic threshold beyond which the students considered the fresh products “too” expensive. Just like their parents do, the teenagers recalculate the price per kilo, they don’t compare it to the competing products.

In the end, 82% of the students declared they had “bought more than once” from the fruit & veg vending machine; 60% of them said they had bought less from other vending machines, both for drinks and snacks. That means that the fruit & veg vending machines acquired a certain customer loyalty — mainly among girls.

Against a background of pandemic obesity, and in order to avoid snacking among young consumers, a law in France (law on public health published on August 9, 2005, article 30) specifies that “vending machines for drinks and food requiring payment and accessible to the pupils are prohibited in schools as from September 1st, 2005”.

This law stopped the enthusiasm created by the project. However, it condemns a distribution method but hardly changes snacking habits. Now, students buy sweets through the student board(!), or they leave the school premises and stock up at the local bakery or sandwich shops, where, of course, fresh fruits are totally absent.

At the end of 2007, the French Minister of Agriculture and Fisheries, in a wish to improve accessibility of fruits and vegetables (and he should have pointed out « fresh fruits and vegetables », as processed produce doesn’t have the same constraints whether in terms of storage, packaging or shelf life), requested that two projects be carried out:

1. A project of free distribution in primary schools; the contact for this project is:

Jean Pierre Lebrun
Chef de projet “accessibilité aux fruits par les enfants” au MAP
Ministère de l’agriculture et de la pêche
251, rue de Vaugirard
75732 Paris cedex 15 — France
(01) 49 55 80 45
jean-pierre.lebrun@agriculture.gouv.fr

The children here are much younger than those who participated in our project. The products will be free, the distribution will take place in schools situated in less-favored areas, and the project will start in September 2008.

2. A new project involving vending machines with an offer of fresh fruits, to be installed in agricultural (secondary) schools; you may contact:

Nathalie Prudon-Desgouttes
Ministère de l’Agriculture et de la Pêche
Direction générale de l’enseignement
et de la recherche Sous-direction des politiques de formation
Bureau de la vie scolaire et de l’insertion
1 ter avenue de Lowendal
75700 PARIS O7 SP — France
(01) 49 55 50 98
nathalie.prudon-desgouttes@agriculture.gouv.fr

Conclusion:

1. Perhaps, as shown by the experiment you mentioned some time ago, minimally processed products would stand a better chance than their initial form (apple slices rather than a whole fruit, for instance)..

2. Furthermore, I’m afraid that fresh fruits as a substitute for sweets will never be a real alternative. Traditional snacks are offered in non-refrigerated vending machines: our offer will be the only one requiring an active choice. As part of a “small meal” (in cooled vending machines), the positioning is not right, because that offer is anchored in the salty food environment, where consumers often prefer to go without dessert.

The technical part of our experiment was handled by Pierre Vaysse, in charge of the programs on a Gustatory quality indicator, Quality references and sensory evaluation of fruits, and Quality measurement tools at the Ctifl Lanxade research station. As for me, I was in charge of the part on consumer expectations.

We appreciate Catherine Roty and Ctifl for sharing all this with the industry outside of France.

There is so much commonality in the issues we face that it would be a shame to not learn from one another and work together when we can.

Just look at some of the key points raised by this piece:

The overall aim of PNNS is “to improve the health status of the [French] population by acting on one of the major decisive factors, namely nutrition”. Among the nine nutritional goals in terms of Public Health, the #1 priority was: “to increase the consumption of fruit and vegetables so as to reduce the number of small consumers by one-quarter (25%)”.

In other words, the motivation behind the whole project is really the same issues that drive the Fruits & Veggies — More Matters! campaign of The Produce for Better Health Foundation.

However, said items are not only recommended in the form of fresh produce: “fresh, canned or frozen, fruit and vegetables protect your health”. Which is, of course, a real “stab in the back” for a strongly atomized sector that faces the heavy-weights of the food processing industry. Since that slogan, all products having the slightest link to fruits and vegetables are marketed claiming a “health” positioning (Knorr Vie; Andros etc.)

We’ve mentioned our concerns here, here, here and here that since PBH also includes promotion of frozen, canned and juice, the trade may need to consider alternative programs strictly to promote fresh.

The fruit & vegetable vending machines were voluntarily placed in a competitive environment; both schools had vending machines offering hot and cold drinks, as well as sweet and salty snacks of well-known international brands. The idea was to let the young consumers make their own choices, not to impose the “nutritionally correct” but to tempt them into “responsible behavior” by offering tasty fruits and eating pleasure.

This is a sound response to the criticism that much produce promotion comes across as medicinal — we find the notion of tempting people into responsible behavior by dangling the eating pleasure of fresh fruits and vegetables before them as exceedingly appealing and far more likely to change behavior than browbeating folks — especially young people.

That means that the fruit & veg vending machines acquired a certain customer loyalty — mainly among girls.

The gender gap in produce is something that could profitably get more study. What motivates this? What can be done about it?

This law stopped the enthusiasm created by the project. However, it condemns a distribution method but hardly changes snacking habits. Now, students buy sweets through the student board (!) or they leave the school premises and stock up at the local bakery or sandwich shops, where of course fresh fruits are totally absent.

This demonstrates the foolishness of attempting to restrict choice. The produce industry should reject this approach. We have to win by persuasion and by creating products people love.

…a project of free distribution in primary schools

As we discussed in our interview with United’s Lorelei DiSogra here, expanding this program is a top priority for the trade in the US.

Perhaps, as shown by the experiment you mentioned some time ago, minimally processed products would stand a better chance than their initial form (apple slices rather than a whole fruit, for instance)..

Certainly this should be tested. It might also provide a way to broaden variety by, say, including melon.

Furthermore, I’m afraid that fresh fruits as a substitute for sweets will never be a real alternative. Traditional snacks are offered in non-refrigerated vending machines: our offer will be the only one requiring an active choice. As part of a “small meal” (in cooled vending machines), the positioning is not right, because that offer is anchored in the salty food environment, where consumers often prefer to go without dessert.

An interesting thought we hadn’t heard articulated in this way before. To increase consumption, we may have to influence the choice of other meal parts.

Those who export to France should certainly consider working with their importers to participate in the new free distribution and the new vending machine program.

We thank Catherine Roty, Pierre Vaysse and the Ctifl for offering their case study as an example to help make the industry strong. We appreciate the effort and look forward to continuing cooperation. Vive la France!

Mail to a Friend

© 2017 Perishable Pundit | Subscribe | Print | Search | Archives | Feedback | Info | Sponsorship | About Jim | Request Speaking Engagement | Contact Us