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Perishable Pundit
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Produce Business

Deli Business

American Food & Ag Exporter

Cheese Connoisseur

Snapshots Of Tesco’s Vegas And California Stores

As part of our coverage of Tesco’s arrival in America, we ran some nice elevations of Tesco’s new concept as well as maps and addresses of all their first 20 stores that will open in the Phoenix area. You can see all three right here.

Here is a map of the initial 15 Fresh & Easy Neighborhood Market locations in Las Vegas:

This is a list of the actual locations:

Fresh & Easy Neighborhood Market

  • Las Vegas area locations
  • Tropicana Ave & Durango D
  • Tropicana Ave & Jones Blvd
  • Horizon Ridge Pkwy & Green Valley Pkwy
  • Centennial Pkwy & Simmons St
  • Nellis Blvd & Desert Inn Rd
  • Bermuda Rd & Silverado Ranch Blvd
  • Lake Mead Blvd & Del Webb Blvd
  • Eastern Ave & Warm Springs Rd
  • Stewart Ave & Nellis Blvd
  • Sunset Rd & Arroyo Grande Blvd
  • Boulder Hwy & Race Track Rd
  • Cheyenne Ave & Martin Luther King Blvd
  • Cheyenne Ave & Jones Blvd
  • Ann Rd & Decatur Blvd
  • Fort Apache Rd & Desert Inn Rd

Previously, we ran this elevation of a prototypical new construction, free-standing Fresh & Easy Neighborhood Market store:

But many of the locations are not freestanding or are renovations of existing facilities.

For example, here is an elevation on a little strip center that will have a Noah’s Bagels restaurant, a burger place, the Fresh & Easy Neighborhood Market and still has 6,000 square feet for rent. The center is located at 635 E. Bonita Ave, San Dimas, CA 91773:

And here is the elevation on a small strip center that, in addition to the Tesco concept, will have a Longs Drug and other stores. It is located at 25050 Alessandro Blvd., Moreno Valley, CA 92553:

The real estate Tesco has been renting is an unusual assortment — some in very nice areas and some in very marginal neighborhoods. It is hard to believe that the same concept would work in all these locations. Unless Tesco intends to do a lot of micro-marketing?

‘Anyone But Wal-Mart’

We recently focused attention on the evolving nature of Wal-Mart’s Changing Treatment of Suppliers and followed up by pointing out that Calls On Wal-Mart Point To More Vendor Negativity.

Many have focused on the narrow question of whether Wal-Mart is breaking contracts. As we said in the first piece:

It should be noted that Wal-Mart would deny breaking any contracts and, in fact, to our knowledge, no fresh produce vendor has ever sued them on such a matter. Contract terms are often the subject of varying interpretations and it may well be that vendors, most of whom are not lawyers, are overstating the case to say that Wal-Mart has broken contracts.

Legalities aside, however, it is clear that many vendors are thinking that the rules of the game have changed and that the table now tilts against them.

And then, as we said in the second piece:

The basic distinction between the calls we received after our piece appeared was between those vendors who felt that their contracts were being violated by Wal-Mart and those who said that they had resisted signing Wal-Mart’s proposed contracts and eventually had gotten more acceptable agreements.

Our thoughts are that we can leave the legalities to the lawyers. It is doubtful that Wal-Mart is, in a “legal sense,” breaking contracts. After all, it is the largest buyer in the world, it doesn’t have to break any agreements, it just has to ask vendors to go along and if they ask in the right tone — you know that tone that says you really don’t have a choice in this matter if you want our business next year — most vendors will go along because they are still making money on the Wal-Mart business and want to keep it.

We don’t think it at all likely that Wal-Mart is “breaking” any contracts. They have a lot of lawyers and a lot to lose so we doubt that would make any sense as a corporate strategy.

At the same time, when Wal-Mart made a switch from a policy of treating all vendors alike to a policy of distinguishing between strategic and tactical vendors, it raised the insecurity level in the vendor community substantially.

The magic of the old Wal-Mart DC assignment system was the removal of the human element from the evaluation of existing suppliers. The metrics suppliers were to meet were published and, if those were met, the DC assignment functioned almost like a property right.

This was the great difference between selling most supermarkets and selling Wal-Mart. You could sell millions and millions to a supermarket, but if the buyer retired, changed position or got angry at a vendor, one could go from millions and millions of dollars of business to zero in the blink of an eye.

That wasn’t the way it was supposed to work at Wal-Mart. Wal-Mart became the preferred customer because selling Wal-Mart created equity value for a vendor. Since people felt that they couldn’t lose the Wal-Mart business except due to non-performance, you could build a company around this steady, reliable business. This was quite unlike most supermarkets where people hesitated to invest because your business relied on the whim of a buyer.

Although few buyers of companies wanted to gamble on a retail buyer’s whims, many were prepared to invest based on their own ability to execute to pre-determined metrics. As a result many a company was sold based on the implied value of Wal-Mart DC assignments.

Now the sense is that maintaining the business is not as automatic. As a result, methods like Wal-Mart’s vaunted “open door” policy that give vendors the right to complain up to the CEO or Chairman of the Board are not viable methods of redress for dissatisfied vendors. Theoretically these rights may exist but it is highly doubtful that appealing a buyer’s decision to Lee Scott or Rob Walton will endear a vendor to the people who actually make procurement decisions.

What has happened now is that Wal-Mart’s standard contract no longer requires Wal-Mart to deliver steady business. A few vendors, strong, diversified, etc., have refused to sign and been able to successfully negotiate better terms. Most vendors are too weak and too dependent on Wal-Mart business to risk losing it, so they sign based on verbal assurances that they will get steady business that, due to concerns with “food miles,” the business will be geographically compact, etc.

What our original piece was really about was that these same vendors, although they felt the need to sign, have seen the writing on the wall and are working feverishly to diversify their business away from Wal-Mart.

In other words, we’ve seen a switch from Wal-Mart being the preferred customer to vendors looking to sell ABW — Anyone But Wal-Mart. With Tesco about to challenge Wal-Mart on its home turf, one wonders if any increase in produce gross margin could possibly compensate for the implications of having a vendor base rooting for other retailers to succeed.

United Fresh Leadership Class Of 2007-2008

Among the pieces we have run that elicited a deeply emotional reaction were the pieces, Tim Vaux To Leave Dupont and Tim Vaux Reflects On DuPont, Leadership And Jeff Gordon.

The emotional outpouring was, of course, partly related to Tim and his unique qualities of leadership and friendship. At the same time the unique year-long scope of the United Fresh Produce Association’s Produce Industry Leadership Program allows for the building of bonds that are particularly strong.

With the generous funding of DuPont Crop Protection, United has announced the 13th class:

United Fresh Announces 2007-2008
Leadership Class

Yearlong program to focus on leadership development,
business relationships, public affairs and communications

Washington, D.C. — The United Fresh Produce Association’s Produce Industry Leadership Program has just entered its 13th year. Presented through the United Fresh Research & Education Foundation and sponsored by a generous grant from DuPont Crop Protection, the program has graduated more than 140 program participants since its inception in 1995.

Each year, United Fresh accepts 12 new candidates into the annual program. In addition to the application, candidates must submit two essays detailing why they would like to participate in the program and what they consider the most important challenges affecting the produce industry. The applications are reviewed by an Advisory Committee comprised of United Fresh board members and leadership program alumni. Through the selection process, the committee is responsible for assessing each candidate based on their experience and expertise, as well as developing a class that is balanced and representative of the industry.

"It was exciting to see such a high level of interest in this program" said Advisory Committee Chairman and United Fresh Board Member, Brendan Comito, Capital City Fruit, Class 6 alumnus. "It’s clear that the produce industry has a tremendous pool of talented individuals — which is good for the industry, but made it hard to make our final selections! I’d like to congratulate the 12 new members and thank everyone who submitted an application this year."

United Fresh is pleased to announce the new members of the 13th Produce Industry Leadership Class:

Chris Ciruli
Ciruli Brothers/Amex Distributing Co., Inc.
Tubac, Arizona
Todd Eagan
Costco Wholesale
San Diego, California

Amy Feldman
Pom Wonderful, LLC
Chicago, Illinois
Anthony Gallino
California Giant, Inc.
Watsonville, California
Phil Gilardi
Freshway Foods
Sidney, Ohio
Andy Hamilton
IFCO Systems, N.A.
Bentonville, Arkansas
Erin Hanas Archey
A. Duda & Sons, Inc.
Oviedo, Florida
James Higham
Potandon Produce, LLC
Idaho Falls, Idaho
Ken Holthouse
Doug Walcher Farms
North Fairfield, Ohio
Jennifer Moss
Southern Specialties, Inc.
Pompano Beach, Florida
Gordon Smith
California Tree Fruit Agreement
Reedley, California
Cali Tanguay
Apio, Inc.
Guadalupe, California

Over the upcoming program year, the class members will participate in a number of trips focused on the core goals of the program: leadership development; business relationships; government and public affairs; and media and public communications. Throughout the program, the class also will take part in customized field and facility tours, train with expert educators, and meet with key industry leaders and innovators. The program begins in June with the first trip to Central/Northern California, followed by trips to Washington, DC/Wilmington, DE, Southern Texas, and Las Vegas, Nevada for the 2008 United Fresh Marketplace Show.

“This is going to be a very intense, high impact year for these 12 industry members,” said Victoria Kuhns, United Fresh senior vice president, member services, foundation. “Our goal is to equip them with the tools and skills they need to be successful leaders and help ensure an even stronger produce industry. Special thanks to DuPont for their ongoing support of this program, now in its 13th year!”

This program is unique, and we’ve never heard one participant who didn’t think it worth the not insignificant commitment to participate in the program.

Congratulations to the new class, appreciation to their companies for allowing them to be a part of the program and thanks to both DuPont and United for funding and operating the program.

The individuals who complete the program know that they have benefited, but the whole industry also benefits when members of the trade acquire the skills to become leaders of the trade.

Allan Corrin Known For His Creativity

Allan Corrin passed away earlier this month at the age of 80. Where so many others looked and saw commodities, he saw ways to differentiate and then use that differentiation to build demand.

We asked Steven Kenfield, President of Nogales, Arizona-based SunFed, who worked with Allan for many years, to share a few words with us:

Allan was well known for his creativity and the ability to bring this to the marketplace. The ruby seedless grape variety, the Lunch Bunch grapes for foodservice and taking the zante currents to the fresh market as Black Corinth are well known.

Allan’s true gift was his care and generosity for people. Allan cared for people in a unique way. Allan and his wife Charlene treated the people he worked with like family, helping young people plan for the future, helping out families in need, keeping promises.

He gave back to the community at the local college level to assist bright young people enter our industry. He always had a smile in his voice and was a kid at heart. He will be remembered for his innovation, and he will be missed for his passion and compassion.

We extend condolences to Allan’s family and friends. The loss of such an innovator is a loss for us all.

Pundit’s Mailbag — Beware The Bureaucrats

I am always challenged by the Pundit, and thankful the Lord has given us people with minds as yours presenting rational arguments in an open forum challenging and willing to be challenged.

I find the USDA position on beef testing for Mad Cow interesting. “Do not test due to potential of false positives” is an intriguing rational. I know little about the reliability of the testing procedure but the USDA seeking an injunction forbidding testing compels “why?” Is testing substantially unreliable or is the commercial risk of discovery excessive?

Although this action is not in the produce industry, it surely may be occasion for a stimulating discussion applying it to the produce industry.

— John Shelford
Naples, Florida

The Good Lord giveth and the Good Lord taketh away, and John’s letter, both kind to the Pundit and inquisitive on an issue of profound importance, gives us an opportunity to go back to the very first Pundit in which we ran a piece addressing this issue entitled, U.S. Beef, Food Safety And Freedom. As we said back then:

Bottom line: the USDA is not charged with restricting consumer choice or preventing marketers from looking for niche markets or a competitive edge.

A couple of month’s ago Creekstone Farms, a Kentucky-based producer of what it calls “Natural Black Angus Beef,” announced that it has filed a lawsuit against the USDA challenging its ban on voluntary BSE testing. It is hard to imagine why it shouldn’t win.

Creekstone did win:

According to a ruling from U.S. District Judge James Robertson of the United States District Court for the District of Columbia, the USDA’s “prohibition of the private use of rapid test kits to screen cattle for bovine spongiform encephalopathy is unlawful.” (Creekstone Farms Premium Beef, LLC v. U.S. Dept. of Agriculture, et al., Civil Action No. 06-0544).

“We are very pleased with the ruling handed down by the Court and we stand ready to work with the USDA,” stated Dennis Buhlke, Creekstone’s President and CEO, “This decision confirms the position Creekstone has taken for over three years that the USDA should not prevent businesses from responding to their customers’ demands for more information about their products, such as BSE testing.”

The Court stayed the effective date of its ruling until June 1, 2007, to allow USDA time to determine whether to appeal. Creekstone already has built, with the advice of BSE-testing experts, a state-of-the-art laboratory and is positioned at this time to implement its stated plans for BSE testing of some or all of the cattle it processes at its Arkansas City, Kansas plant.

The ruling held that USDA has authority to regulate the use of diagnostic tests in general, but that it lacks authority to prohibit the private use of BSE test kits, which are not used in the treatment of BSE, but are used on cattle that are already dead to see if they had significant levels of BSE infection. Noting that many other countries test large numbers of healthy-appearing cattle for BSE at slaughter, Judge Robertson suggested that USDA’s stated concerns about the conclusions consumers might draw from private BSE testing were not within USDA’s statutory areas of responsibility.

Since the produce industry is determined to put itself under mandatory federal regulation, it is worth paying attention to how arrogant and abusive government bureaucrats can be.

USDA has decided to appeal. Meaning this issue, already over three years old, will go on some more. Look at how easily the government can bankrupt a private party.

Although the USDA says that the issue is false positives, the truth is that the USDA is serving as hand maiden for large meat packers. They don’t want to spend the money testing — even though it might open markets in places such as Japan.

These large packers are petrified that Creekstone might find Mad Cow disease, thus giving lie to the USDA’s claim that it doesn’t exist in the U.S. These large packers also don’t like the idea that another packer will promote that it has done extra testing to guarantee safer product. They fear consumers might demand that the large packers test as well.

Reasonable people can disagree on whether marketing for safety is a good idea. In the produce industry there were many battles over issues such as Nutriclean certification.

In America, however, when there is a commercial disagreement, the solution is not for the U.S. government to restrict the freedom of both producers to innovate and consumers to purchase as they will.

John asks whether the test is reliable:

A federal judge ruled in March that such tests must be allowed. U.S. District Judge James Robertson noted that Creekstone sought to use the same test the government relies on and said the government didn’t have the authority to restrict it.

The commercial risk of discovery under controlled testing conditions is far less than the commercial risk of discovery because someone gets mad cow disease. The USDA tests less than 1% of all beef for the disease. In Japan all cattle are tested. One could argue that U.S. beef producers are penny-wise and pound-foolish — losing their export markets and risking domestic confidence to save money on testing.

Yet this dispute is really not about food safety; it is really about freedom. A company wants to use a perfectly legitimate test on its products, and consumers — citizens — would like to protect themselves by paying extra for tested meat.

None of this is any business of the USDA. Let us hope the appellate court tells the USDA that in no uncertain terms.

Many thanks to John for bringing this issue to our attention.

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