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Produce Business

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American Food & Ag Exporter

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Is It Policy Or Profit-Making?
Positions On Laws As Diverse As Sunday Shopping In The UK And Direct-To-Consumer Auto Sales In The US
Driven By Self-Interest, Not The Public Good

In the United Kingdom, there is renewed attention to the possibility of reducing restrictions on Sunday hours for large stores. Right now, stores over 3,000 square feet are legally restricted to six hours of trading on Sunday.

To many, that does make sense. The Times of London explained the issue in a piece titled, Sunday Shopping Laws Come Under Renewed Pressure From Campaigners:

Campaigners are fighting to make Britain one of the first countries in Europe to abolish all vestiges of trading laws that single out Sunday as a day of rest.

The move is being led by Philip Davies, the Conservative MP for Shipley, in West Yorkshire, who calls the existing rules “a complete nonsense”. …

“If the shop wants to open, the customers want to shop and people want to work, then why on earth is it the business of the government to tell them they can’t?” he asked.

The main restriction is that shops bigger than 280 sq m can open for no longer than six hours between 10am and 6pm on a Sunday and must close on Easter Day and Christmas Day.

The law stems from a compromise agreed in 1994 after a previous effort to liberalise Sunday shopping ended in a rare defeat for Margaret Thatcher in 1986 as the religious right rebelled.

However, campaigners for liberalisation won a significant victory in 2012 when George Osborne ditched Sunday trading laws for eight weeks during the Olympic Games. The decision resulted in a 3.2 per cent rise in sales in September.

The old “blue laws” have faded in America and will fade in Europe. The religious consensus that once made Sundays sacrosanct has faded. In our multicultural world, laws that privilege one faith over another are not going to do well in the west.

Technology, the great disrupter and the source of so much Schumpeterian “Creative destruction,” plays a role as well. Once it was at least theoretically possible to say that a ban on shopping might lead people to have little to do and thus be more likely to go to church and tend to family, but with the Internet a 24/7 shopping opportunity, restrictions on brick-and-mortar shops seem to just disadvantage them over their internet competition.

With religion somewhat sidelined and the Internet making the law seem stilted, what does hold back complete liberalization? The answer is that it is the same source that makes people around the world unhappy with conservative parties -- the sense that they may speak of principles such as free enterprise but, in fact, act in service to business interests.

In New Jersey, there has been a controversy over laws that prohibit auto manufacturers from selling direct to consumers. The battle specifically was around Tesla’s direct sales model, but it applies to all auto manufacturers. Republican Governor Chris Christie failed to state the obvious: that there is no coherent argument for why car manufacturers should not be allowed to sell directly to consumers – without a dealer intermediary – if they would like to sell that way and consumers want to buy that way. Other states, often heavily Republican states such as Texas and Arizona, are also blocking Tesla from selling direct to consumers.

Why do these Republican governors behave this way? The answer is that people who own car dealerships, as small business owners, are the core of the Republican party, and the business owners, predictably, are more interested in using the government to protect their economic interests than in fighting for principles around free markets. The politicians are really not very principled either, so they stick with their rent-seeking supporters – even though this is counter to the economic interests of their constituencies.

Equally, in the UK, the politics around the issue of Sunday closing are unprincipled, as the Times article goes on to state:

The industry is divided. Large chains that operate smaller convenience stores in addition to large outlets tend to argue that there is no need for liberalisation. “The current situation is a good compromise,” a Sainsbury’s spokeswoman for B&Q said. The John Lewis Partnership-owned Waitrose said that it was not pushing for change.

Industry experts point out that margins are much tougher in big stores. “You’re going to pay a higher price for a basket of goods in Tesco Express than in a big Tesco store,” said a senior executive in private equity who specialises in retail.

Chains operating large, cheap superstores, such as Asda, Wm Morrison and B&Q, favour liberalisation. “Legislation should allow us to open when the majority of our customers wish toshop,” a spokeswoman for B&Q said.

In other words, those who have only or mostly large stores want the ban lifted on Sunday sales. Those that have small stores and thus benefit from restricted competition want restrictions maintained. 

What is lost in the discussion? The interests of consumers and the idea that politicians actually have principles. Debates conducted this way, over direct automobile sales in the USA or Sunday trading hours in the UK, make voters feel it doesn’t matter who they vote for, that nobody is really on their side and that nobody can be counted on to vote in line with their beliefs and values.




Lisa Cork To Address London Produce Show And Conference: Packaging As A Marketing Tool

The UK is a market where almost all the produce is packaged. Yet it is also a market where most of that packaging, whether in clamshells or other plastic packaging carrying only a small label or store brand, does very little selling.  That sounded like an opportunity to us, and we knew just where to turn: Packaging guru par excellence, Lisa Cork, who wowed the crowd at The New York Produce Show and Conference with a presentation we previewed here.

Lisa is an interesting cross-cultural dynamo. An American, long living in New Zealand, she travels the world spreading the gospel that packaging is a neglected tool in produce marketing. We know she has spoken out about the way private label can limit growth in pieces such as 5 Reasons Why Retail Branding Limits Growth, but when she comes to London, the epicenter of private label, what would she have to say? Where would she plant her flag? 

We asked Pundit Investigator and Special Projects Editor Mira Slott to find out more:

Lisa Cork
Owner
Fresh Produce Marketing
Auckland, New Zealand

Q: Your dynamic presentation and action-oriented workshop at the New York Produce Show empowered attendees to rethink produce packaging and category branding to drive sales. What do you have planned for the London Produce Show? How do these strategies translate to different retail markets? Are there characteristics specific to the UK market that you need to consider? For instance, major UK retailers have highly developed, extensive private label packaging programs lining produce department shelves.

A: It is interesting that you bring up similarities and differences in the UK and the U.S. It’s important to bring market context to packaging to make it better. In presentations with clients, when thinking outside the box and being innovative, I always go to UK websites for branding and packaging characteristics. I find intense packaging development in the UK retail market with flashes of brilliance. I always say the UK is like the holly grail of packaging, how will I bring this to life in the U.S.?

Q: So now you’ll be talking about packaging in the Mecca of packaging? You’ve presented yourself with quite a challenge…

A: I went on line in the process of discovery. I decided to do a case study, picking an innovative product in the UK and conducting a packaging and on pack analysis. Were rules and norms in the UK for packaging different than in the U.S.? The core difference between the UK and American packaging is obvious: In the UK, exclusive retailer private label branding pervades the produce department. It’s the Tesco brand or the Marks & Spencer brand. In America, you see a dominance of farmer or grower/shipper names taking up key space on the packs.

Q: Is there a better use of that space? In the UK, if the Tesco brand on the package is already a “given” for the Tesco shopper, what other differentiators are there? Could you speak to the descriptive terms used on pack? How did they compare between UK retailers in your case study?

A: UK retailers suffer with the same on-pack issues as products sold in U.S. produce departments — a very pragmatic, matter-of-fact approach. Tenderstem broccoli shoppers are willing to pay a premium for it; why not capitalize on that?

There are six different retailers that do a Tenderstem broccoli pack, using various basic or predictable on-pack phrases; one talks about the fact it is sweet, another that it has a small stem; these are practical descriptions. In looking for contrast, when you go to the Tenderstem website, POS material picks up on fun, unique, standout characteristics and catchy slogans like goodness from head to toe.

There is a list of reasons to love Tenderstem — a more delicate taste than broccoli, more like asparagus in flavor; mild and juicy, it’s loved by all ages from babies to baby boomers and easy to snack on; it’s coined the king of broccoli because of its superior health benefits, and cooks in minutes. The website touts 80 ways to serve it, providing a link to family-friendly recipes.

Q: With limited room on pack, is there a risk of message clutter? Where do you put the focus amid all the in-store signage and myriad SKUs of packaged products competing for a spot in the customer’s shopping cart?

A: You must be invested in understanding your customer and the core reason he or she buys the product to pinpoint the core message and buying characteristics you want to bring to light.

When you go to the Tenderstem website, a key message is its un-broccoli-like traits and that it is so tender and totally tasty from floret to stem and is fast and easy to prepare. Then you go and review the actual packaging at the supermarkets and you see how little of that they are picking up.

While one retailer’s pack uses the word sweet, it doesn’t distinguish the contrast in taste and flavor to regular broccoli and that kids will actually love it, and no one latched on to the fact it cooks in minutes, which could be used to win over a busy mother, or perhaps a working couple looking for easy solutions.

To me, the essence of an effective pack is not putting every message on it. Review the three to five messages that are most important, and create a hierarchy for your market and your consumer profile. What is most cutthroat with my shoppers? If you are a Whole Foods shopper, the message might be quite different than for a Tesco shopper. There is a challenge and an opportunity with packaging to bring the key messages to life on pack.

If you’re a supermarket serving a family demographic, a non-broccoli-like taste will appeal to children. There’s a whole unique marketing angle, bringing Tenderstem broccoli to life in that demographic. It’s the healthy vegetable that cooks in minutes. There’s a whole section of recipes on the website for busy moms.

Q: Isn’t it more challenging to distinguish and excite customers with on-pack messaging for commodity-type produce items, where taste and freshness fluctuate based on season and Mother Nature?

A: I believe any product, whether it’s Tenderstem or not, can be quite sexy. All products have multiple stories they can tell in ways to drive sales growth and market growth. Unlock these stories, rather than sell in one expected dimension.

Q: How do pack sizes come into play? Did you find diversity on that front?

A: Most online Tenderstem packs in the UK that I sourced were 220 grams in pack size. There may have been a 180-gram pack in the mix, but the overwhelming majority was the 220-gram pack. What if we were to find a sweet spot around Tenderstem to create a family pack — 400 grams with a unique message on pack targeting families with children; it cooks in minutes and kids will love it. Simply by changing the pack and message, you could create a new market.

Q: So it’s really about mastering different consumer lifestyles and buying behaviors …

A: Where we’re missing opportunity is in our ability to stand two steps back from our fruit and vegetable products. Why don’t we take a customer-led approach? For instance, Tenderstems can appeal to three different segments. We discussed families with kids that don’t like broccoli. What about busy couples on the run, who would appreciate Tenderstem’s quick cook time? You could do a Tenderstem grab-and-go pack, or a microwavable pack for a healthy side dish. In two minutes flat, you have a sweet, nutritious solution. Maybe a third segment is a single serving size, or a 300-gram health pack describing its super food qualities.

Rather than carry on the idea we have one produce department with a bland message, let’s be led by the shopper and approach our packaging and messaging in clever ways to broaden the market for our products. I’m driven by ways to increase revenue for the grower. Sometimes I think I was put on this earth to help growers produce more fruits and vegetables.

Q; With the UK retail sector bent on private label store branding and specific criteria, does that set limitations on the supplier side?

A: In the UK, where there is this dominance of retail branding, you could say it’s an insurmountable challenge. I go about it a different way. Bring ideas to the table. You can’t sit back and be a passive contributor. Ultimately as a grower, you know your product best. I hear growers complain, ‘I wish I had a market for this.’ The retailer only buys the middle spec, the big ones on the end of the tail don’t have a market.

You have to own that. Go to the retailer and turn that around — I think we have two additional opportunities to market this product in store. If the retailer says, ‘How am I going to have the space,’ jump outside the box to figure it out.

Q: A great example of that is when Mann Packing invented Broccoli Cole Slaw, essentially creating a whole new product category using parts of the product that previously were not saleable. Here the concept is all encompassing, starting with a reinvention of the product inside the package…

A: Exactly. We have this conflict of saying consumers need to eat more fruits and vegetables but consumption remains stagnant; maybe we’re not approaching the problem in the right way. I like to push the boundaries. I think going forward, we really have to re-examine how we do produce overall. I’m not the expert to be speaking on the numbers, but consumption is basically flat-lined.

As you point out, there are niche pockets of innovation no doubt. I think of the mini Rockit bite-sized apples out of New Zealand. Maybe one conventional size generically marketed is interesting for a certain percentage of people, but we’re missing out on so many opportunities. We’ve got to find out what resonates when drilled down to the dynamics of consumer lifestyles. Suddenly we’ve gotten increased sales, and we haven’t cannibalized the category.

Q: But is that necessarily true? If consumers now gravitate to Tenderstem broccoli, couldn’t that result in regular broccoli sales declining? Maybe all the great press on blueberries antioxidant properties leads a shopper to switch out strawberries.

A: People are justly wary of new product that rolls out and cannibalizes other product sales. Products tend to cannibalize when there isn’t enough customization to bring in new customers. New product development takes time and money.

Continuing with our discussion of repositioning Tenderstem broccoli, you could still sell 100 packs of 220-gram Tenderstem, but now you sell an additional 75 family packs in this category for increased total sales. We changed the category trajectory by creating a new market. What I’d be hoping is the families now buying the family packs may have been eating canned peas.

The reality is in the Western World we’re not going to eat any more food, so we are playing a substitution game. Everyone talks about growing incremental units. The goal is to substitute out less healthy or less profitable choices.

Q: Some of those less healthy brands have built strongholds in the market with decades of powerful marketing…

A: Brands like Kellogg’s have been around since 1906 and are embedded in the consumers’ minds. Today, I believe the nature of brands is changing. If you walk the aisles of Whole Foods, branding is a bit more inventive. There’s a new generation of brands speaking to the needs of the shopper.

In the U.S., a company called Happy Family Organic Superfoods (Nurture Inc.) captures the core motivations of a mother — Happy Baby, Happy Mama, Happy World, speaking right to her heart with beautiful packaging and messaging.

Another example in the freezer section is those fruit bars with vibrant, colorful images of blueberries, strawberries, and raspberries on the package with the message, The Power of Fruit. We should own that in fresh produce. We all know fruit is good for us. The manufacturer of those frozen fruit bars harnessed the brand of the fresh produce department!

In the produce industry, we’ve always looked at packaging pragmatically, as a protective vessel; it could be a bag, clamshell, or cello wrapped in some way, and all those vessels have a certain amount of space, for legal information, the required facts, and in America, a predominance of grower/supplier names covering the packaging.

If you went to four different stores in the UK, the product essentially looks the same except for a different retailer brand on it; it’s the same in size, weight, and name position on the pack. There are really no distinguishable shopper characteristics.

Q: When you speak of distinguishable characteristics, such as tenderness and taste in branding, doesn’t a processed or frozen food manufacturer have an advantage over a fresh produce company in insuring consistency? Mother Nature and a myriad of other factors in the product’s short lifespan create additional challenges in upholding those kinds of claims.

A: The fundamental underpinning is that if you have lousy quality product, then you’re not allowed to read this interview. You can only do revolutionary packaging knowing you’re delivering quality product; paying attention to the temperature and other issues in the supply chain.

Because we’re dealing with perishables — and from the shopper’s view, produce can taste and look different every week — your packaging needs to have visibility. In most cases, the consumers want to see what they’re buying.

I never recommend covering product up. There has to be a balance of effective branding that talks to the shopper, while showing the high quality. Consumers do expect to see the produce they’re buying, although that changes over time with trust. Then a successful brand can get away with more messaging coverage.

There will always be a percentage of consumers driven by value-pricing, and there will be those wanting to go to a Tesco or Waitrose related to convenience and proximity of the store regardless of the package. But there is potential for retailers to rethink the produce department from the consumer perspective: We’re just turning out Tenderstem broccoli. How can we work with suppliers to package it differently?

UK retailers have consumer data that I would salivate to get. They are savvy in collecting that data. How can they use it better?

Q: In the UK, deep discounters are stealing market share from the Big Four retailers, which are also feeling the pinch from Waitrose and other specialty retailers. Could rethinking packaging and branding strategies be the way out of this turmoil?

A: Tesco does product tiers — a premium, mainstream and value line. If Tesco is losing the value side to Aldi, maybe now there’s a demographic driver to target products for families with children, for instance. The retailers have lived in this space of very strong retail branding, but that’s 20 years old. Maybe it is time to reinvent themselves and work off different sets of criteria.

Q: Could you talk about your award-winning work in this field for inspiration?

A: Our work in the sweet potato market in New Zealand was based on consumer segment differentiation. In our research, consumers said the Kumara sweet potatoes were too big, and not smooth enough. They wanted smaller ones that were easier to peel, cut and serve. We went to the growers and told them they needed to grow smaller-sized, smoother potatoes and get them to grade and pack differently.

We launched two new products, and both were based on consumer feedback. The strongest story was working with growers to pack 900-gram packages of easy-peel medium-size Kumaras. That was a success story with a 26 percent increase in return for farmers. In addition to that, consumers also talked about wanting an easy-to-prepare crossover product for roasting that didn’t have to be peeled. From that research came 500-gram bags of little baby gourmets, to give a wash/scrub and throw into the pot.

This produced a 231-percent increase in farm gate return. That keeps growers profitable and farming. We’re just about to release a third product, taking the same core research and development to deliver another differentiated product geared toward families.

Q: What precipitated your targeted work on the Kumara sweet potatoes with Delta Produce? Was there a noticeable drop in sales or particular problem you were trying to rectify, or a new market segment to penetrate?

A: The Kumara in New Zealand is a staple here. A large and diverse demographic population buys Kumara sweet potatoes. The only consumer research requirement was that you were a Kumara shopper. I always look for the evidence that something positive is happening in this market and not in this market and what is the reason for the incongruence.

In the U.S. in 2011, Time magazine featured the sweet potato as the product of the year for its health benefits. It had become a popular item. However, there was a decline in Kumara sales in New Zealand at this time. Why were we seeing stagnant sales and the product in decline? It didn’t make sense. Part of the reason for the decline was the product was not being grown, packaged or marketed to consumer preferences.

Q: Why aren’t more companies realizing this?

A: One other important point I’d like to make is that growers and retailers say packaging doesn’t mean that much. I’ve searched global research, and packaging matters. If you’re truly looking to document this fact, research is really hard to find in produce. That’s why Brad Rickard’s research at Cornell University on apple variety branding, which he presented at The New York Produce Show, is so interesting. It documents the impact of branding.

Q: So for the doubters, what are the main points you want to engrain about packaging, on-pack messaging and branding?

A: Packaging is one marketing tool you have that works really hard for you if you get it right. It’s seen by hundreds of shoppers a day. Your packaging is at the point of decision. When the consumer is standing at the retail produce display, it’s where you’ll be able to influence him or her the most — the final 10 seconds in buying decision. The messaging on pack is always on your product, 24/7, 365 days that way. There is no other advertising marketing medium that does that.

In advertising, there is a big trust factor that the consumers will see the message, trust it, remember it and use it when they go shopping. Packaging is as close to the product as you’ll ever get. Retailers and growers are already paying for packaging. Turn a passive marketing opportunity into an active selling tool. When I say this to people, they often react, ‘I had never thought like that before.’

The beauty is that it’s only the innovative companies that are utilizing packaging in this way, when you have a crowded, busy grocery aisle, the well researched packs will stand out among the produce packs that are plain and perfunctory.

In the UK, there’s increased opportunity because so many products are packaged compared to the U.S., where produce departments are merchandised with more loose items. These are some of the world’s best marketers in the UK, but when you drill down there’s still plenty of opportunity.

There is a trend toward customization. The shopper doesn’t want to buy a commodity. By breaking down product by demographic household and lifestyle interests, maybe that’s our pathway to growth. We need to be customizing more to be relevant. We’re not going to drive consumers to eat more food. We need to woo them into substituting fresh produce. If we’re only turning out plain and perfunctory that doesn’t capture the consumers’ needs and motivations, we will continue to fall behind. 

******

Lisa really focuses on two facets of the packaging issue. First, she argues against one-size-fits-all branding in favor of focused elements that appeal to specific customer segments. In many cases, UK supermarkets have adopted a kind of “economic man” focus, in which the companies segment by price and quality but don’t recognize the demographic and psychographic differences that drive consumer decisions.

In America, there are a lot of people who want to fly Virgin America but hate the idea of flying Southwest. This is not because there are enormous differences in the aircraft or airport gates; it is because subtle shifts of product, combined with substantial marketing differences, lead people to feel that the airline serves a certain type of person — and they feel an aspirational connection with Virgin. Others may feel put off by the very same Virgin characteristics and embrace a Southwest ethos. Lisa’s critique is that we in produce often miss out on opportunities for sales because we don’t connect  product and marketing with specific customer segments

Secondly, Lisa wants to move the produce industry and retail buyers in the direction of creating products and marketing -- including the packaging — that recognize consumers differ from each other in ways that can’t be captured by three or five price tiers.

The focus on packaging as opposed to other forms of marketing is recognition that with tight margins the industry needs to take advantage of what assets it has. Since the industry is paying a hefty sum for packaging anyway, shouldn’t it make sure that investment does double-duty? Contain the produce safely and market it effectively. Lisa has a plan to suggest how the trade can do just that.

If you are a retailer who does private label… if you are a retailer who has to select from shipper packaging… if you are a producer who has to use packaging… you will benefit greatly by seeing Lisa Cork’s presentation at The London Produce Show and Conference.

In fact, if you are smart and interested in how the industry can more effectively engage with consumers, you don’t want to miss it. You can register to attend and hear Lisa speak at The London Produce Show and Conference right here.

Book a hotel at the event venue at our discounted rate here.

And if you are interested in exhibiting or sponsoring an educational session at The London Produce Show and Conference, just let us know here.




Pundit's Mailbag — Pundit’s Critique Of New York Times’ Reporter Annie Lowrey’s Piece About Abe Gorelick And The Plight Of The ‘Long-term Unemployed’ Draws Notice Of Produce Industry Pros

Our piece, A STORY HALF TOLD: Putting A Spin On The Long-term Unemployed, dealt with a New York Times report on a person named Abe Gorelick, who was part of the “long-term unemployed” after losing his job at age 57. We questioned if we were being told the whole story and pointed out that this man and his wife, both with Ivy League business degrees and top-tier graduate educations, seemed particularly unsympathetic candidates for federal assistance. The piece brought many letters, including these:

Thank you for the mention in your article, "A Story Half Told," on Abe Gorelick. I was 3 weeks short of 57 when I left Safeway, and you were right on that I would have stayed with the company. Things happen, and you pick up and use the talents you have acquired over the years to move forward, and that is exactly what I did.  It has been a very good living and I was able to stay in the business I love.

Thanks for the mention and including me with Peterson, DiPiazza and Griffin.

— Dick Spezzano
Spezzano Consulting Service, Inc.
Monrovia, California

We appreciate Dick’s letter and think it raises an important point in any discussion of unemployment — especially this issue of experienced people not able to find a job.

There is a sense in which jobs are often spoken of as something that someone else creates. The idea seems to be that a person can only sit passively and wait for someone else to offer him a job.

We were writing in the context of an experienced marketing executive and pointed out that he, if he had a good reputation, should have no problem running a small marketing agency out of his home. With his low overhead, he could under-price his competition and still make a living.

But the truth is that the point goes well beyond this specific situation. The world is moving to value entrepreneurial skill to a greater degree than in the past. With the internet, everyone has access to everyone, so anyone can more easily establish a micro-business. We have no delusions… not everyone can start Apple or Microsoft, but to run a babysitting service, a dog walking service and similar work is well in the means of many.

We mentioned Spezzano and others because their example raised an obvious point: If you are 57 and for some reason lose your job, if you have conducted yourself in the right way, lots of people should think working with you would be an asset. We criticized the reporter because, obviously, the elephant in the room was why nobody — his Ivy League classmates, his lifetime business associates, his friends or family — wanted to help him.

If nothing else, the story was a good reminder that smart people always conduct themselves on the assumption that they will need another opportunity one day and that you can never know who will give it to you, so you better impress everyone you can…

As you and your staff do so frequently, you have been generous in your title and treatment, perhaps to a fault.  While none of us can know all the details of someone else’s life or circumstance, it is a safe bet that many of the “incidentals” you call into question in your article would provide so much color that there would be no story, from the author’s or the New York Times' perspective, left to tell. Warning: all news “reporting” is editorial!

—Daniel L. Barth
Manager
Super King Markets
Los Angeles, California

We do try and be generous, in writing and in life. Maybe Mr. Gorelick wouldn’t be in this predicament had he been more generous? Who knows? The article, though, didn’t mention any people who Mr. Gorelick had helped during his career who were now turning their back on him.

We would tend to agree with Mr. Barth that a thorough examination of the issues we raised would have made The New York Times piece seem ridiculous. In actuality, though, we thought the prima facie case was weak. If the best case a New York Times reporter could find to justify more long-term unemployment payments is a couple that A) both went to Wharton undergrad, B) both have relevant top notch graduate degrees, him an MBA from Chicago and his wife, a law degree from NYU, C) owns a functioning business D) has a home with equity that could be sold, D) feels they can afford a place in Florida at least part of the year to be snowbirds, and E) has a son attending an expensive private college, then this is a weak case indeed.

Great piece on the NYT story about “long term unemployed”.

If words mean things, why is someone holding down three jobs referred to as ‘unemployed’?  Wouldn’t a better term be “long term unfulfilled” (but then, that would blunt the Times’ emotional story)? 

While working three jobs, Mr. Gorelick is certainly creating some value and being compensated — which separates him by a wide margin from those who do neither.  My sympathies to Mr. Gorelick, of course, for losing his job.  All your points are well-taken, and the glaring omissions you point out in the writer’s treatment of this subject are so typical of the NYT’s advocacy journalism.

All the other considerations you raised to the side, I wonder if Mr. Gorelick — ‘unemployed’ at age 57 — has found the same unspoken rejection due to his age that I have felt.  I undertook an active and energetic career search at age 60, and experienced the dawning realization that — my skills and experience notwithstanding — potential employers are placing youth higher on their priority list than other values. 

Fair? No.  But life is not fair.  And I agree that if Mr. Gorelick hasn’t made accommodations to his location and salary requirements in his job search that he is largely responsible for his current circumstances.  I have heard many excuses from people who were not willing to relocate – network of friends, community, church, proximity to children/grandchildren – which all come down to the job-seeker placing a higher value on things other than their career and salary.  Fine, now stop complaining that you can’t find a job that suits your resume.

Always a good read, Jim.  Keep it coming.

—Doug Stoiber
Vice President, Produce Transportation Operations
L&M Transportation Services, Inc.
Raleigh, North Carolina

Actually, consistent large scale irrational discrimination, in the absence of legal protections, is just impossible. Imagine if all the supermarkets wanted to discriminate against, say, blue-eyed people. The lack of demand for their services would lead blue-eyed people to lower their wage demands. Some new market entrants would be able to staff their supermarkets with labor costs, say, 30% below other supermarkets. The new entrants would quickly be able to underprice other supermarkets and be more profitable. They would quickly grow.

In fact, such things have happened. When Amadeo Giannini founded the Bank of America, it was specifically in response to a perception that Italian Americans were being discriminated against in loan availability.

What this means, unfortunately, is that whatever problems Doug encountered getting back into the labor force were probably not due to irrational discrimination.

There are lots of possibilities:

1) All new hires require training, even if it is induction into the corporate culture. If it takes two years to get up to 100%, maybe the average amount of time one gets from a new hire to defray that training and orientation is less if the new employee is 60.

2) Sometimes employers discriminate because others in society discriminate. So if, for example, customers are kinder to young whippersnappers, seeing in them reminders of their own youth, then a younger employee who performs less well than an older one might still be more beneficial to the company as customers will forgive the young guy’s errors, but not the older persons.

3) We live under some useful fictions, but smart employers figure them out. Many employers self-insure on large portions of their health insurance liability. The odds that a 60-year-old, most likely with a spouse in that range, will incur significant health insurance costs are much higher than the chance that a 23-year-old will incur such expenses.  Even if a particular company does not self-insure, insurance companies base their rates on either experience with a particular group or the cost of a particular pool; this is all impacted by the age of hires a company makes.

4) If one hires 100 23-year-old customer service workers, one may be de facto hiring 20 salespeople for five years from now, five sales managers for 10 years from now, two vice presidents for 15 years  from now and a new CEO for 20 years from now. There is value in steeping these people in corporate culture, their gaining of deep institutional knowledge, etc. Plus there are the savings on recruitment costs, including mistakes in hiring when one is forced to go with unknowns because one doesn’t have any internal candidates available.

5) Older candidates tend to come from well-paid senior positions.  They may not always realize it, but one of the reasons they are profitable to their employers is that long term involvement with a company allows them to build up knowledge and a web of personal relationships that allows them to get things done. In other words, they are effective because they know who to call and what arguments will be persuasive to cut through corporate bureaucracy and delight customers, do profitable ventures, etc. A 60-year-old who moves from Kroger to Wal-Mart loses what, say, 40 years of working through the ranks at Kroger produced — a web of relationships and knowledge internally that made him effective. Yet paying someone less than they had been earning can create resentment, and many employers just want to avoid the negativity.

6) Many people get paid “extra” just so the companies they work for can avoid the risk that comes with change. Think of a TV show, when the star’s contract is up, the show could just replace the actor and that might work, but the risk is high that it won’t, so if that TV show is generating $20 million a year in profits, throwing a million extra at the star to avoid rocking the boat is probably worth it. But that doesn’t mean that the actor’s “value” to a new TV show is an extra million. It’s the same thing in all business. If a guy runs your potato division and his salary is $200,000 a year and the division makes five million a year, paying him an extra $300,000 a year, raising his compensation to a half a million to avoid the risk that comes with change, is sensible. But that doesn’t mean the person is “worth” half a million to all employers.

7) Many employers don’t simply want to have effective people; they want people who drink the Kool-Aid, who believe deeply in the company, its mission and its ways of doing things.  A young person entering without skills or methods can be taught the “company way” — older established people have their own ways.

One could go on. Of course, there is another side and, in fact, hiring experienced, knowledgeable, well-connected people is often the only way to grow quickly. Experienced people also moderate risk.  After a lifetime working with Sysco and US Foods, we are pleased that Doug was able to find a home at L&M Transportation Services. We wish him and L&M a long and productive collaboration.

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Many thanks to Dick Spezzano, Daniel Barth and Doug Stoiber for weighing in on this important issue.

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