As Tesco prepares to open operations in America, what sounds like a reasonably similar concept by arch rival Wal-Mart seems to be struggling to get past the launch gate.
To much publicity Wal-Mart, through its ASDA subsidiary, had opened a concept in the U.K. called ASDA Essentials. Like Tesco’s US concept, Fresh & Easy Neighborhood Market, the ASDA Essentials stores were almost all private-label and each store was around 10,000 square feet. There was talk of hundreds of stores being rolled out.
ASDA opened two stores, though, before closing the first one. Although ASDA management said not to make too much of that store closing — pointing to unique circumstances of geography and demographics — closing 50% of your test stores is not an optimistic statement about the concept.
The concept also was being remerchandized to carry more branded product. This could be a problem for Tesco in the US if consumers look for brands they are familiar with or want to use manufacturers’ coupons.
It is also possible that the problems with the ASDA Essentials concept go deeper and Tesco may avoid these issues. One may be the use of the ASDA name. There are small store concepts, such as Aldi and Lidl in Europe and Aldi and Trader Joe’s in the US, that are mostly private label — but they are independent brands.
Possibly consumers used to the ASDA name expected branded items and were disappointed that the stores didn’t have them.
Fresh & Easy will be free to create its own expectations.
Another issue: ASDA insists on charging the same prices in its ASDA Essentials as in the large ASDA stores. This is not the way Tesco Express, the U.K. giant’s convenience banner, prices in the U.K., and it may make the whole concept unviable.
In fact these ASDA actions — utilizing the ASDA brand and requiring the same pricing in stores large and small — sound like something dictated by Bentonville. It sounds like the same problems Wal-Mart has imposed on its Neighborhood Market concept.
The slow growth of this concept has been because it doesn’t provide the same return on investment as building supercenters.
Yet that may be because the more convenient locations of Neighborhood Markets merit higher prices.
Having placed the Wal-Mart brand on the Neighborhood Market store, though, Wal-Mart executives are loathe to sully the name with higher prices. Is it possible that Wal-Mart has repeated the same mistake on two continents, with ASDA’s name also on its convenience concept?
The other issue is whether being a discounter is enough? Tesco is cleverly positioning its stores as green, family-friendly and fresh. Although we understand they intend to be very competitive on price, they don’t intend to build their reputation on it.
We can see the difference in corporate culture in the contrast between ASDA Essentials and Fresh & Easy.
Wal-Mart, with sales larger than the next four largest retailers in the world combined, opens just two test stores over a year and closes one down for poor performance after 10 months. Tesco, a much smaller company, pours hundreds of millions of dollars into building a distribution center, signing leases on a couple hundred stores — all before any consumer spends even a penny in the concept.
It is clear that Tesco wins points for audacity. Whether that means it will be a success remains to be seen. Prudent hands at Wal-Mart probably consider executives at Tesco to be irresponsible with shareholder’s money. Which they certainly will be accused of if the venture fails. Some will surely lose their jobs. Maybe even the CEO.
Yet one advantage of the Tesco method of plunging in is that it gives those same executives enormous incentive to find a way to succeed. It is a truism of venture capital to invest in the people, not the concept. Because bad people can mess up the best concept and good people will often find a way to alter even a terrible concept.
If you build two stores and they don’t work, maybe you just close them. If you build 200 stores, maybe human creativity kicks in and you find a way to make them a success.
Scott Horsfall is arriving to become CEO of a California Leafy Greens Marketing Agreement that is on a roll.
Initially 71 handlers signed-up for the agreement.
Then two more signed on.
Now an additional 39 have put their signature to the agreement. One company, Five Crowns Marketing, seems to have dropped off the list. In total we have 111 handlers agreeing to legally bind themselves to the Agreement and allow state inspectors on their property Here are the new additions to the list of signatories.
Access Organics, Inc, Kalispell, MT
Adam Bros. Produce Sales Inc, Santa Maria
Amigo Farms Inc, Yuma
APIO, Inc, Guadalupe
Blanton Produce Co, Salinas
Channel Islands Cooling Inc, Oxnard
Crystal Organic Farms, Bakersfield
Diamond Produce Co, Salinas
Double D Farms, Coalinga
Farside Farms, Coalinga
Four Star Growers Inc, Lamont
Fresh Choice Marketing Inc, Oxnard
Fresh Origins LLC, San Marcos
Greenstar Produce Marketing Inc, Salinas
Jayleaf Specialties, Hollister
Jimenez Farms, Santa Paula
Joe Heger Farms LLC, El Centro
John S Tamagni & Sons, Inc, Spreckels
Kawaguchi Farms, Arroyo Grande
Lakeside Organic Gardens LLC, Watsonville
LT Farm Inc, Bakersfield
Monterey Organics Inc, Salinas
Pacific Fresh Produce Inc, Oxnard
Pacific Marketing Co, Salinas
Pacific Pride Marketing LLC, Oxnard
Pacific Vegetable Growers Inc, Camarillo
Pauls Pak Inc, Salinas
Peterson Specialty Produce, Fallbrook
Premium Fresh Farms LLC, Salinas
Reliable Produce Sourcing LLC,
Saint Francis Cooling Co Inc, Oxnard
Scarborough Farms Inc, Oxnard
Seaboard Produce Dist Inc, Oxnard
Sierra Heights Marketing Inc, Porterville
Sunamerica Produce, Salinas
Sunfresh USA Inc, Santa Paula
Suprema Star, Hollister
Times Produce Inc, Los Angeles
William Consalo and Sons, Bakersfield
It is a very impressive list, including many small handlers. It couldn’t have happened without incredible effort by the board members and the whole industry.
It allows the trade to point to one unqualified success in responding to the food safety outbreaks of last year. It proves that the trade can and will respond — even without mandatory government regulation.
It is an accomplishment the industry should be very proud of making happen. Yet, its very success points out its limitations. It has obviously been so important to get even the tiniest handler signed up.
Yet it doesn’t cover product from the other 49 states.
It doesn’t cover imported product.
It only covers leafy greens.
And even if we were to have 100% participation today — someone is bound to drop out one day or to start a company without joining. Then we won’t have 100% participation.
The world is filled with skeptics who doubt the quality of a set of GAP metrics developed by the produce industry. They stand in wait to pounce upon the very first mishap and use that mishap to discredit the whole program.
Let us hope there is no mishap that will give them a chance to undo so much good.
Organic produce marketing will change next year when the United show moves with FMI to Las Vegas while the All Things Organic show stays in Chicago with the Fancy Food Show.
As we wrote in Organic Show Has Most To Lose By Breakup, the concept of an organic show is unlikely to be a success in the long term:
The basic dilemma of a show such as All Things Organic is captured in its name — the “all things” part, not the “organic” part. You wind up with a show selling everything from soap and baby clothes to baby food and beef, canned goods, frozen foods and fresh produce, to name just a fraction of the items sold at the show.
Yet retail is not generally organized this way. A Wal-Mart produce buyer has nothing to do with buying baby clothes, nor does the Wal-Mart baby food buyer have anything to do with deli meat, nor does the Wal-Mart poultry buyer get involved in frozen foods, and the guy who buys soap for Wal-Mart is a different person entirely. Obviously, if you are talking about chain stores, you would need dozens of buyers, merchandisers and category managers to attend one show.
Now United, anxious to capture booth sales to companies looking to promote organic produce and attendees especially from the buying end, focused on solving their organic procurement needs, has announced that its trade show in 2008 will feature an organic produce pavilion:
Washington, D.C. — With the shift of the United Fresh Marketplace and FMI shows to Las Vegas, May 4-7, 2008, a new Organic Produce Pavilion will be added to the Marketplace show floor for the convenience of produce buyers to visit with companies offering organic produce.
“We have enjoyed our partnership with the All Things Organic show the past four years, and wish them well with their continued location in Chicago,” said United Fresh President Tom Stenzel. “But, it is clear that supermarket retail management and produce buyers will be looking for organic produce in Las Vegas at our produce marketing and merchandising event.”
“Organic produce is bought by produce buyers and merchandised by produce teams, not generic organic buyers of meats, packaged goods and clothing,” said United Fresh Executive Vice President Jerry Welcome. “Our new Organic Pavilion in the middle of the produce show floor in Las Vegas will make it easy for produce buyers to see the best of organic produce conveniently located in one event,” he said.
produce exhibitors in the 2007 All Things Organic show in Chicago will be offered a priority waiting list for the new Organic Pavilion at United Fresh Marketplace in Las Vegas, with space assignments beginning June 15. In addition, in recognition of their support of the past Power of Five shows, ATO exhibitors will be offered a discounted rate similar to returning exhibitors in United Fresh Marketplace.
Though it surely won’t please the All Things Organic folks, there is nothing wrong with United Fresh trying to capture some more of the organic business, and offering discounts and priority status to All Things Organic produce exhibitors is a reasonable way to start.
It is worth noting, though, that only 21 companies listed themselves as selling produce in the most recent All Things Organic show. Despite listing themselves at the show, three of those companies don’t actually sell produce. So that leaves 18 companies. Of those, five companies are major vendors of conventional product or have sister companies that are major vendors of conventional product, and they elected to exhibit at the organic show, presumably to promote their organic lines and highlight that they now are in this arena.
That leaves a grand total of 13 dedicated organic produce companies that all the fuss is about.
The quote from Jerry Welcome, United Fresh Executive Vice President, states the case exactly for the inclusion of organic product in produce shows: “Organic produce is bought by produce buyers and merchandised by produce teams, not generic organic buyers of meats, packaged goods and clothing.”
Yet the same point makes us question whether an organic pavilion is really the key to serving this market. After all, if the buyers and merchandisers of organic produce are the same as the buyers and merchandisers of conventional produce, shouldn’t the presence of organic produce be integrated throughout the show?
Typically pavilions make sense when there is a dedicated buyer who won’t want to walk a whole show but wants an easy way to see the items of interest to him. So, at FMI, for example, it might make sense to have, say, a health and beauty aids pavilion because there are dedicated buyers of health and beauty aids. In fact, before United Fresh did its deal with FMI, FMI had a produce pavilion for the same reason: To have a compact area that enabled produce executives to cover their area of interest in a day, rather than having to walk the whole FMI show.
Yet, of course, United Fresh wants those buyers to walk the whole show.
There is no question that having an organic pavilion will help booth sales because the implied promise of a dedicated organic area is that there will be lots of buyers looking for organic product.
Which brings us to the dirty little secret of producing trade shows: it is much easier to sell the booths than to get the quality attendees.
Organic is hot and perhaps some sizeable number of exhibitors will give United’s new organic pavilion a try. We hope it is a success for both United and the exhibitors.
Long term, however, success depends on attracting produce-specific retail buyers and merchandisers, and if United Fresh does that, the excitement of organics, specialty items, fresh-cuts, proprietary varieties, etc., are probably best spread through the show, making every aisle interesting, enlightening and filled with excitement.
Here is an incentive program to maintain high food safety standards.
As the industry was in the midst of attempting to fashion a response to the spinach crisis, we received an assertive letter that we published under the title Pundit’s Mailbag — Farmers Are Not The Cause Of Food Safety Problems.
It was an extensive and strong letter and basically said that because the big processors were driving the effort, the onus was being placed on growers, rather than processors. Although, in fact, farmers are supposed to, and always will, deliver dirty product to processors and, therefore, food safety on fresh-cut product inevitably depends on what processors do.
That letter was written by Karl Kolb Ph.D., President/CEO of The High Sierra Group & The American Food Safety Institute, International and now, after the California Marketing Agreement is finally in place, Karl writes us again today:
You may remember me. I’m the guy who said, “The farmer is expected to bring the product to the processing plant, dirty.” Well, since that time I have had varying reactions to this comment but for the most part folks agree and say the statement adds a bit of reality to the food safety period we are currently experiencing. Some even figured it out.
Some thoughts — I have been quiet during the development and implementation of the marketing agreement but there are some things that worry me. I won’t elaborate since it should be obvious what I am driving at: 1) the marketing agreement does not take the place of a complete GAP program, 2) the marketing agreement seriously needs to evaluate the cost of this program to the small farmer. The testing can be expensive. Yes, there are those that say food safety takes priority over cost but the marketing agreement needs to consider that the cost of testing will cause some to cut corners, some to not sign on to this agreement and some to close shop. Perhaps the State of California needs to consider funding those who fall into the small category. Additionally, there are hazards with those shipping from foreign countries who have a different take on our system and its process.
Any standard is at the peril of the inspector. The implementation of a standard is only as good as the inspector. So far I am not impressed with some of the inspectors the marketing agreement is fielding. Many of them are just plain lost on a farm and some don’t understand how to apply the standard. And, there are the good ones — my hat is off to those who truly understand the workings of a quality system. Work is desperately needed in the inspector department. Good inspectors don’t become good inspectors with one or two visits to the field. It takes education at many levels and time in the saddle.
And, I would caution the marketing board. Do not rush this action. It is good in concept but it lacks robustness. Look at a risk based system remembering that one size does not fit all — anyone considered a EUREPGAP process, risk based? We don’t want to force agriculture out of the states by this agreement costing too much or being too difficult to use.
To those who think this is the end all of our food safety issues, here is another of my slogans, “It is not IF we will have another recall, but when.” Just how far do we think the marketing agreement will go?
Oh, and by the way, “The farmer is expected to bring the product to the processing plant, dirty.”
— Karl Kolb Ph.D.
The High Sierra Group
The American Food Safety Institute, International
Karl’s letter raises important points:
The tying of the industry together under the California Marketing Agreement has a positive spin as a concerted industry response to the food safety outbreaks of 2006. Yet the flip side of a concerted industry response is that the very first outbreak will discredit the whole system and everyone’s food safety efforts. As much as anything, this fear was the legitimate concern of Fresh Express in being hesitant to tie its reputation to those it considered to be making inferior efforts on food safety.
The metrics that were adopted by the CMA board are fine — as far as they go. Intrinsic in them, however, are many choices and questions and on how those are resolved in each case much depends. It is in the nature of things that properly designed GAP and HACCP systems are individualized. The metrics are a start, not the end.
The cost of the program toward small farmers is a looming issue. It is increasingly clear that Dr. Korb represents a silent majority of these farmers. Particularly telling is that WGA has not proceeded with its original plan, which was to move from a Marketing Agreement to a Marketing Order voted on by all the growers. It has not done so because WGA’s executives do not believe they can get the votes.
This is also why the organic advocates, mostly representing small farmers, were lukewarm on the Marketing Agreement at best and vehemently apposed to a mandatory marketing order.
The problem is that testing water, for example, costs exactly the same if you are testing for a 5 acre farm or a 5,000 acre farm if the water is being drawn from one source.
Buffer zones around a five acre field and a farmhouse in the middle can take up a significant portion of the land.
There is little question that food safety edicts are going to drive consolidation. The question is whether or not, as a society, we want to do that. We could, for example, as a society, elect to pay for all water testing on all farms. This would both encourage testing and, proportionately, help out the little guy.
Whatever one may think of the CMA, it doesn’t apply to other states or foreign countries. Although United Fresh and PMA have both urged Federal regulation, which would cover these sources, there is no actual legislation drafted now nor any particular effort being made to accomplish this.
The issue of inspectors is key. As we know from our experiences at the KFC in New York City, the 7th Street Market in LA, and Operation Forbidden Fruit in NY, government inspectors can be incompetent, lazy, anxious to make friends and corrupt.
There is no particular reason to think California inspectors won’t also possess this range of problems.
Yet mandatory inspection is the linchpin of this system — may we have placed too much weight on something too likely to break? Especially when so many inspectors had to be hired and trained so quickly?
The reference to EUREPGAP raises what has always been a puzzlement. Long before the CMA, the world was filled with food safety efforts such as EUREPGAP. Were the new GAP standards drafted to be tougher than all existing standards? This is where consumer advocates get suspicious of efforts where the GAP standards were driven by the WGA. It is notable that WGA never introduced a blue-ribbon panel that supposedly drafted these GAP standards, never published word of a unanimous vote and never published the claims of these experts that these standards exceed EUREPGAP and other standards.
Adjustment for risk may be the crucial element that both allows us to focus our efforts where it is most likely to be productive and keeps costs to a level where we can stay in business. As part of our efforts to improve the draft GAPs, we published A Suggestion To Improve The Draft Gap, in which Roy Costa of Environ Health Services proposed that the first step in a GAP program was to rate every farm and classify it into a High, Medium or Low risk category.
It is an eminently sensible idea, and it is unfortunate that the GAPs weren’t changed to include it. We can’t help but suspect that growers just didn’t like the idea of having their land ranked as “High Risk” — but we do not have unlimited resources, and what we are doing now is a bit like making everyone take off their shoes in the airport. Maybe those precious well trained inspectors should be sent to do monthly inspections on high-risk farms while annual inspections will suffice on low risk farms.
Finally, although we have put in this enormous program for growers, no comparable effort exists for processors. Right now we have a hodgepodge with some processors testing product, some testing raw material, some testing both, some utilizing RFID for tracking, etc. Shouldn’t there be a more uniform effort on the processing end as well?
Many thanks for Karl Kolb for his thought-provoking letter.