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Perishable Pundit
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Activists Target Wal-Mart In Mexico While Company Accommodates Local Culture

A Wal-Mart store is the focus as The Wall Street Journal’s John Lyons files a report from a Zapotec village in southern Mexico. The story is that this particular store was opposed by many in the town but has gained acceptance in the year it has been open. Showing how Wal-Mart adapts to cultures around the world, the video shows the employees giving the Wal-Mart cheer in their native Zapotec tongue. The report points out that activist groups are fighting Wal-Mart’s expansion in Mexico as well as in the U.S.

What should be shocking, but has become par for the course, is to listen to the activists such as the one interviewed in this report who comes from a San Francisco group called Global Exchange. Theoretically looking to help “the people” as a practical matter, they quickly ally themselves with the vested economic interests in a town to try and stop Wal-Mart.

If successful, the effort of the campaign to stop Wal-Mart is to make sure poor people don’t have any options other than to buy from an unsanitary outdoor market and a limited range of other vendors. Whatever you think of opening a Wal-Mart in San Francisco, in much of the world a new Wal-Mart isn’t only less expensive, it offers a town or village products in a variety and quality never before made available to these people.

These types of campaigns are saying to the poor people of the earth that they have some sort of obligation to “preserve” a native culture for the benefit of the west, as a kind of permanent tourist spot.

Of course, today’s advanced economies borrowed liberally from other cultures when they encountered innovations that could advance their economies. Mass retailing, and its unique ability to bring high quality goods to the people of the world at an affordable cost, is just the kind of innovation many people around the world would like to adopt.

And, of course, when Wal-Mart opens a store in Mexico, the people still have to vote with their pesos as to whether they see a superior value proposition.

Yet activists who enjoy the panoply of retailers and restaurants in San Francisco seem to want to deny people in developing countries the right to make these decisions for themselves and their families.

That is not right.

You can see the video right here.




‘Take-Aways’ From United’s Short Course On Organics

As part of its annual convention, United Fresh Produce Association offered a series of “short courses” on the Saturday before the trade show started. This year they offered different segments for retail, foodservice and food safety.

A particularly intriguing workshop focused on organics and was organized by the Perishables Group. The presentation was sponsored by Eurofresh, Paul Marshall Produce, Torrey Farms and Pundit sister publication, PRODUCE BUSINESS.

The Perishables Group had organized a research project on organics and received funding from Dovex Fruit Company, Driscoll Berry Associates, Paramount Citrus and Sunripe Produce Company to conduct the research.

Representatives from those companies and two retailers, Marvin Lyons from Biggs/Supervalu and Rick Steigerwald from Lunds/Byerly’s, participated in a panel discussion moderated by Steve Lutz of the Perishables Group

The session was entitled Tapping the Organic Opportunity in Conventional Supermarkets and was particularly valuable because, in assessing the potential for organics, it excluded the Whole Foods and Wild Oats segment of the industry, which meant that both the data and the thinking could be clearer for those whose opportunities are with conventional retailing. Kudos to the Perishable Group for focusing on this segment of the industry.

To some extent, all discussions of organics are surrealistic. In the retail short course, one out of three sessions offered were on organics and a significant portion of the other two sessions involved discussions of organics… yet, the Perishable Group estimate is that only 3% of produce sales through conventional supermarkets are organics.

And this number is by dollars. If you consider the higher prices for organics and the fact that right now a very high percentage of organic sales in conventional supermarkets are fresh-cut salad mixes and baby carrots, the actual poundage of organic produce sold in conventional supermarkets is certainly less than 2% and, probably less than 1%.

So why all the fuss? Well, on the retail end this is an excellent tool for differentiating store from store, and on the production end, organics are, by their nature, an answer to the prayers of growers.

Not because they are easy to grow — they are not. As Brian McElroy of Driscoll Strawberry Associates, who worked many years for California Certified Organic Farmers, pointed out, in contrast to the crunchy granola association, growing organically is actually a high-tech endeavor.

But during a time of rising demand, organic agriculture offers the crucial break that prevents overproduction: It takes three years to transition land from conventional to organic production.

Typically in produce, especially if you are dealing with a row crop, having a great season on, say, honeydew melon, is the kiss of death for the following season. High prices lead growers to over plant and, if weather is normal, prices collapse next season under the weight of increased volume.

With organics, however, it is simply impossible to ramp up production so quickly. Remember, of all the farm and ranch land used to raise food in America, not even 1% has been certified as organic.

So all across the produce industry, companies are finding that wildly disproportionate shares of their profitability come from their organic business and this, of course, is a powerful motivator to grow in this space.

Some points from the Perishable Group research that struck a chord:

  • Although consumers are confused about the meaning of organics in general and its applicability to areas such as meat, 70% of consumers “get it” when it comes to fresh produce. Specifically, they understood that organics does not mean grown without chemicals, just that they could not be synthetic.
  • A big chunk of the initial trial of organics was by accident. Consumers found an item or product that looked appealing, bought it, and only later realized it was an organic product.
  • The market for organic consumption can be seen as bifurcated, with heavy users motivated by different factors than light users.
  • Fresh produce is often the portal through which consumers move on to try organics in other departments. Produce is often the point of first trial.
  • The organic “lifestyle” that is so heavily emphasized at specialized natural/organic outlets is not an important part of the appeal of organics to most shoppers in conventional stores.
  • The research also indicated that the northeast is the strongest market for organics and identified that it is also the region with the smallest price difference between conventional and organic.
  • The thing about organic is that there is almost no consumer opposition. The study found that most shoppers in conventional stores were accepting of a 20% price premium over conventional, although the study didn’t actually test that finding in real shopping situations.

Certainly, however, there is no reason to think consumers won’t buy organic — so the further one gets from the source of production — meaning the more the transportation component comprises of the final price — the more likely it is that organics will be competitive. This indicates, incidentally, that if we can get the shelf life and coordinate our organic standards with those of Europe and other countries, there will probably be a substantial export market for organics. Put another way, if transportation, duty, inspection, etc., outweighs the FOB, consumers in other countries will probably gladly pay 4% extra to have organic product.

We still have to be careful. There was some talk at the workshop that the fact that organic sales have grown in a slow-and-steady rate for years “proves” that organics are not a fad as opposed to the Atkins diet where affiliation with the diet and sales of related products spiked at a certain moment, only to collapse soon after.

Yet because of the need to transition acreage for three years before product grown there can be declared organic, it is virtually impossible to get an Atkins-like “spike” — yet that doesn’t mean the trend is forever.

And, as organic grows, issues of little consequence now may become issues of major consequence. Scott Owens of Paramount Citrus pointed out that his horticultural people tell him that the instant they move to organic production, yields drop 30%. The obvious issue is whether consumers will be willing to pay enough to compensate for that drop, and the Perishable Group study doesn’t give a firm yes.

A larger issue, however, is whether the implications of all this won’t sully the reputation of organics. A 30% drop in yield, if sustained, means you need to increase the acreage under cultivation by over 40% to maintain production.

Will organics sustain a reputation as “good for the world” if they require so much land, water and other natural resources to produce?

Billy Heller of Sunripe, who is quickly becoming an indispensable industry resource with his frank speaking and focused thinking (we last mentioned Billy as a result of a discussion he had with a Wal-Mart representative at the Southeast Produce Council meeting, which resulted in discussions here and here), continued his valuable contribution to industry thinking by pointing out both the increased likelihood of crop failures with organic production and the logistics issues involved with shipping smaller quantities.

Once again, how well will organics be thought of if product is either unavailable due to crop failures or has to be overproduced as insurance against crop failure? Plus, in an age of consciousness on things such as the “carbon footprint” and “food miles” — moving things around in small quantities is likely to burn up petroleum much more inefficiently than shipping full trailers. How will this issue play as organics get more scrutiny?

Some of the issues surrounding organics are almost self-contradictory. Immediately following the organics seminar, Steve Lutz from the Perishables Group moderated a session with produce managers who have been given an award, sponsored by Ready Pac, as produce managers of the year.

These managers, among other things, were speaking about their challenges in making sure that organics get rung up as such and not at less expensive conventional prices.

These were exceptional produce managers who talked about spending a lot of time instructing cashiers, etc. On an industry-wide basis, however, the solution has been things such as stickering each piece of organic produce or putting it on trays or in clamshells. Of course, though this study as presented didn’t deal with consumer perception of these devices, it seems reasonable to surmise that to the degree consumers care about organics, they don’t like packaging and stickers.

The hottest battle in the “sustainability” movement is the issue of local vs. organics. Not all places are perfect for growing organics. Washington State seems very well suited, and Tracy King from Dovex represented a successful organic program. East coast apple growers struggle with organics.

Consumers are not necessarily cognizant of this issue but, in the end, consumers at Acme or Genuardi’s may have to choose between organic apples from Washington or locally grown with an Integrated Pest Management plan from Pennsylvania. This study didn’t reveal such strong preference for organics that we are certain consumers would vote for organics with their dollars.

And, in the background is food safety. Organic produce production is still very much a cottage industry, and it is unclear that these growers will be able to implement and sustain the kind of rigorous food safety and traceability systems that government and buyers will soon demand. We constantly hear from small growers who aren’t even certified as organic because it is just more paperwork than they can handle.

One very specific focus of opportunity that came out of the workshop series was that many retailers are now carrying only an organic version of certain low volume items such as leeks and specialty items such as golden beets.

Basically, the volume on all these items is so low that it just doesn’t pay to maintain two SKUs. Since consumers are happy to buy organic anyway and the price on many of these small volume items are not easily comparable, why not just sell the organic version?

This substitution of organic for conventional could cause organic sales numbers to boom but it will also serve to distort the connection between organic sales trends and the popularity of organic produce.

In this sense organic may become like kosher. If you look at the sales of kosher products you would surmise a large portion of the population is a fan of kosher food. What you are really seeing is that producers of product such as Coca-Cola decide to make their product kosher since nobody objects and some people look for it.

Equally, if we can get costs to the point where substitution is widespread, consumption may boom but many consumers will care no more for whether their leeks are organic-certified than do if their Coke is kosher-certified.

Many thanks to United for hosting this workshop, the Perishables Group for adding to our industry knowledge and the sponsors and panelists for making it all possible.

The Perishables Group was kind enough to share with the industry their slide presentation, which you can view or download right here.




Exports Of California Leafy Greens To Canada Limited To Marketing Agreement Signatories

The Canadian Produce Marketing Association has delivered a notice to its members advising them that Canada has created new standards for the import of spinach, lettuce and leafy greens from the United States of America.

Now U.S. exporters will be required to indicate if the product is from California or from another state. If it is from California, it must come from a signatory to the California Marketing Agreement (CMA), and the name of the handler must be indicated.

Most in the industry will be happy about this standard as it creates an incentive for CMA members to remain members. And because all large handlers are members of the CMA, presumably no one will challenge this new rule, even the U.S. government.

This is a good thing because the rule probably couldn’t withstand legal challenge.

The basic rule in international trade is that product that is legal to sell in the domestic market cannot be banned by an importing country without compelling scientific evidence. Further, such science-based restrictions must be applied to all countries, not to just one.

On the face of it, this is obviously in violation of those standards because it says that product grown in, say, Arizona, is allowed in while product grown under identical conditions in California is not. In fact, product grown in Mexico is allowed in, but product that may be grown to higher standards in California, but not by a CMA handler, would be banned.

In fact, this restriction isn’t based on what growing standards are used at all. A grower could have standards much tougher than the CMA standards and the product still wouldn’t be enterable in Canada. This is based solely on whether or not a handler has joined a voluntary agreement.

It is simply not for a foreign country to dictate to U.S. companies what voluntary agreements they should join. If the U.S. objected, the rule would almost certainly be overturned. It will probably stand, as an anomaly, only because it will remain unchallenged.

The problem is that this decision may also cloud the waters regarding what type of regulatory structure the produce industry ought to pursue.

One of the problems with voluntary Marketing Agreements is that they are not enforceable against imported produce. So whatever Canada does we will not find the U.S. requiring that Canadian or Mexican imports conform to CMA standards, because such a regulation would violate our NAFTA and WTO obligations.

This is a powerful argument for mandatory FDA regulation as this can be applied to both U.S. and imported product.




Knorr’s Sides Plus VeggiesLine Walks Fine Line Of PBH Goals

We received a note and a press release from a PR firm representing Knorr, a brand produced by Unilever. Much to its credit, Unilever recently began contributing financially to the Produce for Better Health Foundation, but its new product Knorr Sides Plus Veggies doesn’t qualify for actually carrying the Fruits & Veggies — More Matters logo.

There is a dilemma at the heart of the Fruits & Veggies — More Matters program. On the one hand, all produce in all forms counts toward your daily intake. So if you are eating pancakes and maple syrup, throw a serving of frozen blueberries into the batter and those blueberries count.

Yet there is a much more stringent set of criteria for a product actually carrying the Fruits & Veggies — More Matters logo on it.

The goal of this distinction between “what counts” and “what can carry the logo” is reasonable enough. First, the goal is to encourage incremental healthy steps, and the bet is that if you add blueberries to those pancakes, you will keep your calorie intake constant, which means you will eat more healthy blueberries and less maple syrup and batter. Second, we are trying to get away from being so negative, with admonitions of what not to eat and, instead, try to be positive, emphasizing healthy fruits and vegetables.

Of course, there is a risk in this too. Consumers may get confused, especially if consumer packaged goods marketers blur the distinction in their marketing material.

Here is the note and press release we received about Knorr’s new product:

According to a survey by Produce for Better Health, the common barriers for vegetable consumption are lack of time, knowledge and the high cost of fresh produce.

Knorr has developed an easy and convenient solution for overcoming these barriers by introducing Knorr Sides Plus Veggies, a great complement to any meal and the first dry side dishes made with two full servings of vegetables per package. Knorr Sides Plus Veggies offer a low-cost fast meal solution that can be served on their own, as a side, dish or as a recipe. In fact, several recipes that can be made incorporating the sides are approved by Produce for Better Health and Unilever’s Eat Smart Drink Smart and include Asian Vegetable Noodle Salad, Chicken Vegetable Rollatini and Greek Chicken with Rice. The recipes are also available at www.knorr.com.

GETTING YOUR FAMILY TO EAT
THEIR VEGGIES HAS NEVER BEEN SO EASY

Knorr® Sides Plus Veggies are the first mainstream line of both rice and pasta dishes made with two full servings of vegetables per package*

Englewood Cliffs, NJ- May 3, 2007 — According to a survey by the Produce for Better Health Foundation, common barriers for vegetable consumption are knowledge, lack of time and the high cost of fresh produce. Knorr® Sides Plus Veggies helps break down these barriers by offering a low cost, fast solution that can be included in a larger recipe provided by Knorr.

Knorr® Sides Plus Veggies combines two full servings of vegetables per package* with the storable nature of dried foods. By including vegetables with pasta and rice — foods kids already enjoy — moms can increase the likelihood of their families’ vegetable consumption.

Knorr® Sides Plus Veggies dry side dishes of rice or pasta are accompanied by an assortment of vegetables such as green beans, shitake mushrooms, broccoli, corn and carrots. The shelf storable packaging allows consumers to have a source of or form of vegetables on-hand for any occasion. Premium flavors like Teriyaki Noodles with Asian Vegetables, Roasted Garlic Olive Oil and Broccoli Rotini, and Southwestern Style Rice appeal to today’s more sophisticated, adventurous palates.

“Moms have told us they need quick, easy and tasty ways to get their families to eat more vegetables, and side dishes provide a great way to introduce more servings,” said Barry Sands, Senior Brand Manager, Knorr. “Sides Plus Veggies add color to the dry sides category, dialing up the excitement and nutritional factor on today’s family plate.”

Recipes incorporating Knorr® Sides Plus Veggies have been created that meet the Produce for Better Health Foundation’s nutrient and vegetable servings criteria for the Fruits & Veggies — More Matters logo as well as Unilever’s own Eat Smart Drink Smart recipe program which helps consumers identify better-for-you recipes using products from Unilever.

Recipes include Asian Vegetable Noodle Salad, Chicken Vegetable Rollatini and Greek Chicken with Rice (recipes attached). In addition, Chicken and Artichoke Alfredo, Chicken Rice Vegetable Soup, Southwestern Tortilla Soup, Vegetable Risotto, and Veggie Taco Pie also meet Unilever’s Eat Smart Drink Smart recipe criteria. All recipes can be found on-line at knorr.com.

“As American’s tastes and nutritional needs evolve, Knorr has made a strong commitment to enhance both the appeal and nutritional profile of our portfolio. This is especially important as consumers are being encouraged to eat more vegetables, whole grains and fiber,” said Sands.

As the Produce for Better Health Foundation continues to encourage people to eat more fruits and vegetables through its new Fruits and Veggies — More Matters program indicating that all forms of fruits and vegetables including fresh, frozen, canned, dried and 100 percent juice, count towards meeting the recommended intakes. Moreover, studies by the National Cancer Institute call for the increased consumption of vegetables. The studies conclude that most Americans need to double their fruits and vegetables intake in order to meet the recommendations for a 2,000 kcal diet further demonstrating the need for products such as Knorr Sides® Plus Veggies to provide more convenient solutions for families.

Knorr Sides® Plus Veggies come in six chef-inspired flavors including Alfredo Pasta Primavera, Teriyaki Noodles with Asian Vegetables, Roasted Garlic Olive Oil and Broccoli Rotini, Southwestern Style Rice, Cheddar Rice with Broccoli and Carrots and Roasted Chicken with Rice. Knorr® Sides Plus Veggies provide shelf-stable vegetables that can be stored and then prepared in 9-12 minutes. They can be used as a side dish to accompany a meal, or as part of a nutritious recipe. They have a suggested retail price of $1.99 — $2.29 and are currently shipping nationally.

*US Dietary Guidelines recommend 5 servings per day (1 serving=1/2 cup). Sodium content in pre-packaged and dried foods is generally higher relative to other foods. Refer to the nutrition panel on the back of each Knorr Side Dish for sodium content. At Unilever, we are working diligently to reduce the levels to be as low as possible. In fact, we have already brought the sodium content down from previous years and are looking at alternative spices and flavors — as well as the addition of vegetables and whole grains — to continue making the dishes as optimal and tasty as possible.

ABOUT KNORR
The largest brand within Unilever with $4 billon in sales globally, Knorr is defined by its passion for great food. The history of the Knorr brand dates back to 1838 when Carl Heinrich Knorr pioneered experiments in drying seasonings and vegetables to preserve their flavor and nutritional value. Knorr has grown to become a well-loved, global brand with a wide range of bouillons, soups, sauces, snacks and ready-made meals that help people around the world enjoy the taste and flavor of good food.

Families have been enjoying Lipton sides for decades. Knorr and Lipton joined forces in August 2005 to leverage the culinary expertise, range of flavors and dedicated chefs of the Knorr

There is nothing technically wrong with what the release says, but it is not exactly clear consumers will understand that despite the liberal use of the names of the Produce for Better Health Foundation, the Fruits & Veggies — More Matters program and even the National Cancer Institute, this entire promotion is about a product that does NOT qualify for use of the Fruits & Veggies — More Matters logo.




Ocean Mist’s Joe Pezzini Honored

At the United Fresh convention in Chicago, The Packergave its Man of the Year Award to Joe Pezzini of Ocean Mist Farms. Because Joe is the Chairman of the Board for the California Leafy Greens Handler Marketing Agreement, he is the personification of all the industry’s effort to enhance food safety since the spinach E. coli 0157:H7 outbreak last fall.

We asked Eric Schwartz, President of Dole Fresh Vegetables, who serves as Vice Chairman of the Marketing Agreement board, to say a few words on Joe’s behalf:

I like to kid Joe that at the time the Leafy Greens board was looking for a board chairman, we all pulled a “three stooges” routine and took one step back and because Joe was on crutches at the time, he couldn’t step back fast enough so he got caught out in front.

All kidding aside, Joe has demonstrated exceptional leadership in this industry and has never been motivated by other than improving how we operate and gaining the trust of our consumers. He has a unique talent for bridging all aspects of our industry through great situational awareness, and he has a tremendous ability to bring together many very diverse viewpoints from both private and regulatory concerns.

We could not have asked for a better fit when it comes to progressing the value that both the Grower Shipper Association of Central California and the Leafy Greens Advisory Board bring to this industry.

Yes, in addition to chairing the Marketing Agreement board, Joe is also the Chairman of the Grower Shipper Association of Central California, which just goes to show how consistently Joe is trusted to wear his industry hat when dealing with industry issues.

That kind of respect is a rare commodity and a crucial one for bridging differences and getting the industry to work together for the common good.

Many congratulations to Joe and to Ocean Mist Farms.

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