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Produce Business

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Got Produce? PBH’s Hope to Be An Honest Broker Of Industry Dialog Is Tainted By Its Desire To Advocate

Our analysis of the proposal for a National Fruit & Vegetable Research and Promotion Order, also known as a generic marketing campaign for produce, has often noted that many in the industry feel frustration that the advocates of the program have seized control of the supposed “dialog” and take it as their right to spend industry money solely to present their side of the debate. More and more we are hearing from industry members about the problematic nature of this arrangement.

A concerned industry member who said he is “already paying into more than one generic mandatory marketing program” sent this note:

I am following closely, like many others, your continuing discussion about the F&V Promotion Board proposal. I completely agree with all of the points covered to date and am still having a difficult time even trying to see the positive points of this proposal except the fact that ‘ah yes, wouldn’t it be nice if there were that magical program that would indeed rise all ships’, but then reality sets in.

I am having a very hard time dealing with the process in place to facilitate discussion/feedback and decision steps along the way. When I asked the advocates of the program about that and expressed my concern, what I received back was rather astonishing. Here is what I was told:

1) They are going to spend industry money to do surveys in both June and, again, later this year. Probably around PMA.

2)They have asked national and regional trade associations to give lists of industry participants to the surveying firm.

3)They have no idea how or if the Executive Committee of PBH will share the survey information with the industry, but the decision is up to the Executive Committee of PBH.

What am I missing? Why would the Executive Committee of the PBH even for a moment want to carry this burden for our entire industry? And what kind of response is “…we have no idea how or if the Executive Committee of PBH will share the survey information with the industry…the decision is up to the Executive committee of PBH…” Are you kidding me?

We’ve written before about the issue of funding and how PBH is just wrong to take funds that were raised with the intent of funding programs and use them, instead, to fund a lobbying effort.

Even if PBH were able to get donors to specifically fund its efforts, it still would be assuming an untenable position.

Why? Because PBH can either be an advocate of the generic promotion program OR it can be an honest broker managing the process for the industry — it cannot be both.

This is the core of the problem: PBH has taken on a dual role and the two roles are incompatible.

PBH can spend all the money it wants on surveys — but the legitimacy of those surveys has been tainted by its advocacy role, and whatever is presented in favor of the proposal will be rejected by many key players in the industry who don’t trust the process. Who wrote the surveys? Selected the questions? Who vetted them to make sure they are even-handed? Who selected the research company? How do we know what has been whispered in the ear of the researchers or how the list has been biased?

And the sneaky suspicion is that the industry will get to hear only paraphrases and summaries that support the proposal.

This lack of credibility is what grows out of deciding to be both the advocate of the program and the manager of the dialog.

Besides, why are we spending industry money on a survey at this point anyway? Yes, of course, if we knew that all the big companies supported this, we might want to survey the smaller guys. After all, we don’t want to do a plan without broad-based support.

But if we don’t have support from the big guys, it can’t happen, so why even bother spending the money on the survey?

All that is required is to call up 100 top players in the industry and ask, simply, if they wish to endorse and fund this program. You go industry-by-industry and identify the top few players. So in bananas, it is Chiquita, Dole, Del Monte and you go on and on through apples, citrus, vegetables, tomatoes, potatoes, onions, etc.

If those hundred players overwhelmingly endorse the program, then we have cause to survey how smaller players think. But if the big guys aren’t interested — and so far we haven’t received one single press release from anyone saying they wish to endorse the program — what is the point of wasting industry funds on surveys?

Tesco And Others Were
Unable To See US Nuances

We have written much about Tesco’s Journey to America as Fresh & Easy, but our recent piece, Pundit’s Mailbag — Hope For Tesco Vendor Community ‘Is Gone,’ led a former Chairman of PMA and The Produce for Better Health Foundation and former Corporate Director of Produce at Supervalu to recollect a story from early in his career:

I always enjoy reading the “Pundit” and staying posted on the many topics boiling in our fascinating industry.

As I read your piece about Tesco’s inflexibility, I was dramatically reminded of one of my personal experiences twenty-some years ago. I was involved in the U.S. startup of MAKRO — a privately held Dutch firm that was immensely successful in multiple countries (and still is).

At that time they were considerably larger than P&G and very well capitalized. They were one of the first U.S. entrants with a “wholesale club” format, and I quickly saw the potential for a viable new channel of distribution.

However every suggestion for better adaptation to American consumers was strongly resisted because “that was not the way they did things in Europe”.

Unfortunately no one told the customers they had to behave like Europeans!

Sol Price was already operating in California, but otherwise they had an incredible market opportunity. Their complete lack of adaptability left them stagnant in America, the American adaptations (Sam’s, Pace, Costco, etc.) emerged immediately and performed better with most of the modifications we had previously suggested.

I moved on to more promising opportunities a couple of years before they sold their U.S. stores to a competitor. I still see their stores when I travel internationally and think what an opportunity squandered. Sound familiar?

— Ted Campbell
Executive Director
Florida Strawberry Association
Dover, Florida

After a bout in the floral category as Vice President of Sales and Marketing for Kerry’s Bromeliad, Ted is now back in produce, helping the Florida strawberry growers manage their affairs. We are honored he finds time to drop us an occasional line here at the Pundit. We especially found value in a letter he wrote us that we incorporated in a piece titled Pundit’s Mailbag — Little Tolerance For Dictatorial Buyers. Indeed as we read that piece over again, we find sections very relevant to the discussion we’ve been having about how to deal with retailers who are very demanding and won’t pay a price that allows for a profit.

In a different context here is what Ted Campbell wrote related to that subject:

While at SUPERVALU, I was a strong advocate of dropping even the largest of accounts when it was clear that their business could never be profitable. A wholesaler must provide tremendous infrastructure to supply a large customer — warehouse space, trucks, special products, human resources, etc. — and must earn a reasonable return on that investment.

Sometimes in business, you learn that the best thing to do is pass on unprofitable business. Let your largest competitor get it and they just may wind up sinking with it.

If you are a public company and give up a big account, in the short term stock market analysts who don’t really understand your business may crucify your company for losing so much business. There is often little understanding that economies of scale only work up to a point of diminishing returns. It is one thing to take on some lower margin business to increase utilization of existing facilities, but building facilities and planting acreage to accommodate low margin business can be a path to disaster.

In most cases, even to keep a big client’s business when it was functioning at a break-even was unfair to other customers that compete with that big client. Why would you help an unprofitable or break-even client drive your profitable clients out of business or even just reduce their volume?

Today, he writes us about Tesco and, more broadly, how easy it is to miss opportunities if one is not truly open to new opportunities.

For all its size, Tesco is a remarkably insular organization. Of course, if a western company is going to civilize some foreign land and bring western standards where they have never been before, it will be compelled to bring many executives and suppliers to the developing country.

The real question is why did Tesco send any British executives to the US? Why did it feel the need to have British suppliers set up camp in the US?

What is it that a Wild Rocket knows how to do that a Ready Pac, Fresh Express, Dole, Taylor Farms, Mann Packing, Apio, etc., do not know how to do?

We suspect nothing. The issue was not capabilities, it was comfort, and Tesco was comfortable with own executives and its own vendors, so it brought them to the US.

The cost, though, was not just the expense of paying the British staff or arranging for all new facilities for the British vendors. The cost was being cut off from intelligence about American consumers. Yet Tesco seemed so insecure it never caught on to this. In fact, long after troubles were clear, Tesco brought in an American to help the chain but selected an American that had been working for Tesco in Thailand for several years!

In other words, right now they should make Bruce Peterson an offer he can’t refuse and make him CEO. If they give him a free hand, he would instantly turn the vendor relationships from adversarial to friendly and would analyze whether it makes sense to maintain organizations such as Wild Rocket when Ready Pac is down the block.

In the early days, when we noted things such as that 25% of the SKUs for bagged salads were in watercress — although Ready Pac, Dole and Fresh Express, all experts in American consumer habits related to fresh bagged salads, carried a grand total of zero SKUs in this item — we knew right away that either Tesco was cut off from intelligence about American consumers or it had decided to “teach” Americans what they “should” be eating.

Alas, though the Queen may serve watercress sandwiches, we doubt MickeyD’s will be adding it to lineup anytime soon.

Of course, Tesco has been successful in many foreign markets. We have theorized its problems in America are due to the fact that we both speak English. It is just obvious that people who speak foreign languages will have foreign preferences, so the home office may defer. But in the US, it is too tempting for the British to think that we are the same and they miss so much nuance.

Indeed, companies, including Carrefour and Makro, seem to have disproportionate problems in the US. Maybe this is because the US market is particularly complex. We are, after all, not a country but a continent, filled with people of every nation in the world.

We wonder if the propensity of so many executives to learn English and study in American universities doesn’t backfire. We know little about Makro’s experience here but lots of Dutch speak English and surely some of its executives had picked up an MBA at an American university. Perhaps this led to a belief that they understood Americans and knew what they would come to accept.

Of course, sometimes these things are cultural. We are told that when tilt/telescope steering wheels were developed the engineers at Cadillac eagerly embraced the idea — seeing it as the ultimate “luxury” to be able to have the freedom to adjust things as one would prefer.

It is said, though, that the Mercedes-Benz engineers recoiled at the thought. They had carefully determined the correct angle for everything and didn’t cotton to the idea of letting every customer mess it up.

If you think you know the “right way” and are not culturally predisposed to allow for choice and variation, it is easy to get stuck with a concept of limited appeal.

Many thanks to Ted Campbell and the Florida Strawberry Growers for bringing some experience to this topic of industry discussion.

Seeking One Good Sprout Grower And One Good Retailer — Primus Steps Up

We have been extensively covering the alfalfa sprout/salmonella situation.

Anyone who has looked at the interplay of sprouts and food safety has to have a healthy respect for the difficulties in this area. Long before there was a recognized problem with leafy greens, tomatoes or melons, there was a known problem with sprouts.

So the FDA came out with its guidance document back in 1999.

The gist of the problem is that the seeds can be contaminated with a pathogen and the growing environment for sprouts is often conducive to allowing that pathogen to multiply.

The primary solution has been an FDA-recognized washing and testing regimen at the sprouter level.

In addition, as we mentioned here, some seed companies, such as International Specialty Supply, have adopted their own testing regimens.

The testing programs on seed may help, but as we discussed here, testing has to be done at great frequency to be statistically valid.

The current thinking on food safety is that the best approach is prevention. So although the sprouters following FDA rules is crucial, it would be even better if the pathogen never entered their facilities. Although the ISS system of testing may be useful, if we can reduce the contamination level entering the seed company facility, that would be better still.

The problem here, as we identified earlier, is that alfalfa is grown as animal feed. This means that, in most cases, little, if any, effort is exerted to exclude pathogens from wild life, grazing animals, etc. No water tests, no soil amendment tests, etc.

In other words, the alfalfa is grown not as food, fit for human consumption, but as animal feed.

Here at the Pundit, we build on the almost quarter century heritage of Pundit sister publication, PRODUCE BUSINESS, whose motto has long been “initiating industry improvement.” Well, we thought this was an area where we could do some good.

One call to Bob Stovicek, President of Primus Group, brought his enthusiastic participation, and on a pro bono publica basis — that means free if your Latin is rusty — Primus has agreed to lend its consulting, inspection and auditing services to one grower who will agree to participate with us in an experiment to grow alfalfa sprouts intended for human consumption.

In other words, Primus will come in and do a risk assessment with the grower and a plan will be developed to grow the alfalfa seed in accordance with all GAPs and all procedures that would be appropriate for a food that will be eaten raw.

We’ve made arrangements with ISS to process the seed.

Here is what we are seeking now::

We need one grower to volunteer to grow the alfalfa seed as food for human consumption. You will work with Primus with the goal of producing high quality seed that is less likely to harbor pathogens than seed grown for animals. You will be a pioneer helping the industry move toward a higher standard of food safety. You will learn a lot and we will report on your efforts here at the Pundit. If you are a grower interested in participating in this project, please e-mail us here.

We need a retailer to commit to the experiment as well. We will work with your preferred sprouter who follows FDA food safety practices and supply him the seed. It is likely that the costs of growing under all GAPS will be higher than growing seed for animals, so we need a retailer so committed to food safety that it is willing to agree to pay a little extra on its alfalfa sprouts to have them sprouted from seed raised for human consumption. The retailer who steps up will be showing its commitment to developing the highest possible food safety standards. Your participation will also be recognized through coverage on the Pundit. If you are a retailer interested in participating please, e-mail us here.

Many thanks to Primus and ISS for their participation. Very often, food safety is a mystery. Here is a clear step we can take to make things better than they are. Surely there is both a grower and a retailer out there who are prepared to step up and make a little history while helping the industry and consumers. We are looking forward to making your acquaintance.

Nolan Triumph Example Of ‘Standing Up For What’s Right In Face Of Overwhelming Might’

We did a SPECIAL ALERT over the weekend to let the industry know that a momentous, some would even say miraculous, event occurred. The title of the piece spoke clearly: Nolans Victorious In Lawsuit vs. Ocean Spray: This One’s For You, Jim. Following up on our extensive coverage of the matter, the piece brought forth many short notes. Here is a selection:

This one came from a man who by temperament, vocation and position might be called the ethical arbiter of the produce industry:

I especially appreciate your thoughtful article regarding Jimmy and Teresa Nolan.

For years, Jim talked with me about this confidentially at various conventions. He knew I taught (and still do) Business Ethics at Wheaton College.

Score one for the good guys.

— Jim Carr
Produce Reporter Company
Carol Stream, Illinois

Here was a reminder of how, in our youth, we can be so profoundly influenced by the character of people who take us under their wing:

A heartfelt ‘thank you’ to you, Jim, for putting/keeping this story out there; for having the guts and editorial integrity to do so.

I can hardly call this “wonderful” news, as it comes without Jim here to enjoy it…but it is gratifying to see the “good guys” win one, that “change” is possible if someone has the courage to stand up for what’s right in the face of overwhelming might on the other side to protect the status quo, to do so at the risk of losing one’s livelihood.

Jim and Theresa welcomed me to this industry 20+ years ago when they were associated with the old Lettuce Commission. Good people. Let integrity reign!

— Bart Minor
Mushroom Council
San Jose, California

And this young man wrote a few words because he wanted to tip his hat to an old friend and to us for raising the flag when others were afraid to do so:

Great piece on Jim Nolan.

— Chuck Zambito
Zambito Produce Sales
Woodbury, New Jersey

This brief note of appreciation came from the largest supplier of fresh cranberries to Ocean Spray from the state of Massachusetts. Mike Dubuc had tried to raise the seriousness of the situation with the Ocean Spray Board of Directors. He doesn’t say much, but working with the co-op, he didn’t have to say anything:

Thank you for your coverage of this case.

— Mike Dubuc
CFO and Vice President of Finance
Morse Brothers, Inc.
North Easton, Massachusetts

And, finally, a note from Theresa herself:

Your coverage of our ordeal has helped me begin to heal from all of this. When you took up our cause, I no longer felt alone in the battle against Ocean Spray. I cannot tell you how much it meant to Jim to have you on our side. Thank you from the bottom of my heart.

— Theresa Nolan

No, Theresa, thank you. In a world where it is easy to bend, you and Jim stood square. In a world where “going along” is the typical way, you and Jim chose to speak clearly. In a world where short-term thinking and situational ethics seem to predominate, you and Jim offered us all a glimpse down a different path.

Whatever happens next in this case, may the wind be ever at your back and may you know that you have many friends and admirers in this industry. You need never walk alone.

Pundit’s Mailbag — Do Inspectors Help ‘Prevent’ Foodborne Illness?

Our piece, Tracing Of Foodborne Illnesses Falls Under A Patchwork of Poorly-run, Under-resourced State Labs, brought an objection from a food safety consultant:

An interesting and informative article in most respects, but your final paragraph containing the opinion, “ — hiring inspectors to stand around plants in the hope they will see invisible pathogens is an enormous waste of money” really did not make much sense.

Anyone involved in food safety in the US in recent years knows that the purpose of inspectors is to ensure that PREVENTIVE programs (primarily HACCP, but also regulations such as low-acid and acidified canning regs) are in place and are followed. We also need more and better preventive programs.

Diverting funds from this to labs that are involved in determining causes of consumer illness is diverting funds from prevention to response. Clearly both are important, but the tone of your remark indicating that you think inspectors will be standing around trying to “see” pathogens is far off the mark.

John Manoush
Manoush Associates, LLC
Portland, Maine

We confess to have spoken a bit tongue-in-cheek. Everyone is, of course, aware that E. coli 0157:H7 and similar pathogens are invisible to the naked eye and therefore nobody would propose putting inspectors in a facility full time to look for these pathogens.

This being said, the various proposals to increase physical inspections really have little statistical basis to them. A retailer wrote us a letter during the course of our coverage of the massive pistachio recall; you can see the retailer’s letter here.

One of the things that was pointed out is that the Setton facility was inspected by loads of people. We also pointed out that AIB inspected the now infamous Peanut Corporation of America facility. The President gave a speech saying FDA was only able to inspect 5% of relevant food facilities each year. So a typical plant would be visited once every 20 years. Is there the slightest reason to think that if we doubled the budget and so the inspectors came once every 10 years, that it would make a difference?

By law, the beef plants cannot operate without USDA inspectors present. This has not stopped E. coli 0157:H7 contamination.

We don’t even mention all the auditors that every bank in America had — public and private — and they didn’t stop a bank meltdown.

Put another way, although John Manoush speaks the truth when he tells us that, today, “…the purpose of inspectors is to ensure that PREVENTIVE programs (primarily HACCP, but also regulations such as low-acid and acidified canning regs) are in place and are followed” — John is speaking of motivation, not that there is any real evidence that more inspectors produce safer food.

We also think that electing to fund state laboratories rather than more inspections is not quite the decision to fund “response” rather than “prevention.” First of all, if we identify outbreaks sooner, we can do recalls and advise consumers sooner — this can “prevent” consumers from getting ill in the first place.

Second, political funding, in the end, is, well, political. There is no stronger lobby for funding food safety activities of all sorts than people who have actually suffered from known foodborne illnesses. So, if we fund the labs and identify the illnesses, we may well get citizens to demand that government fund the inspections as well.

Many thanks to John Manoush and Manoush Associates for weighing on this important issue.

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