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Perishable Pundit
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Produce Business

Deli Business

American Food & Ag Exporter

Cheese Connoisseur



Working With Wal-Mart
May Not Be As Bad As You Think —
Tesco Could Be Tougher!

All our focus on changes in Wal-Mart’s buying practices has highlighted how unhappy many vendors are with Wal-Mart, to the point that they have strategic initiatives established to diversify their business away from Wal-Mart.

This, in fact, is what has made many U.S. vendors so excited about Tesco’s arrival in America, as it opens up the possibility of a new client that will be large, rapidly growing and financially responsible.

At the same time, U.S. produce vendors who have been selected by Tesco as suppliers report that they are already exasperated with the company. Several report having walked in on their boss and — only half jokingly — asked permission to give the Tesco account to their biggest competitor. The reason? The incessant demands of Tesco employees will bankrupt their competitors, especially considering that, so far, Tesco hasn’t spent a dime on produce.

Tesco’s method of selecting vendors has been mysterious. After wooing a British partner — Wild Rocket Foods — over to the US, they traveled around the country trying to get produce companies to invest millions with them. Most laughed. A deal was ultimately struck at unknown terms with Bonipak.

Other vendors reported receiving Fedex packages anointing them as vendors — complete with the opportunity to buy a ticket to a vendor meeting.

Yet other perfectly reputable producers are irate. They report calling the U.K., leaving many messages and no one even giving them the courtesy of a response. Reputable people call the receptionist at the Tesco US headquarters, and she is very nice, offers to accept literature etc., but she won’t tell perfectly reputable people the name of a person to contact. Not surprisingly, many are disgusted with the company.

Perhaps Tesco doesn’t care; it assumes that in the end it will get the suppliers it needs. But in the U.K., a whole industry has sprung up with web sites like Tescopoly: An Alliance of organizations concerned with the negative impacts of supermarket power. They focus on getting the government involved in getting a better deal for farmers:

Farmers have to bear the burden of unfair trading practices imposed by supermarkets.

In 2001, Tony Blair claimed that British supermarkets had farmers in an ‘armlock’. Supermarkets control nearly 80% of the British grocery market and as the most powerful players along most food supply chains are able to dictate terms, conditions and prices to suppliers. If suppliers complain, supermarkets can simply move their business elsewhere, and their dominance of the food retail sector is such that there may simply be no one else for farmers to sell their produce to.

In 2000, the UK Competition Commission (CC) reported on many of the supermarkets’ unfair practices, which were considered anti-competitive. It found 52 kinds of abusive trading practicies (See the CC report). The response by the Office of Fair Trading (OFT) was to introduce a voluntary code of practice, to be entered into by the large four supermarkets. Many of the 12 original provisions recommended by the Competition Commission were weakened. A later review by the OFT revealed that many practices identified in 2000 were still occurring, and a survey of farmers conducted by Friends of the Earth in 2003 showed that many farmers were ‘being asked to pay a rebate on an agreed price, waiting over 30 days for an invoice to be paid, incurring additional transport or packaging costs due to changes in supermarket specifications and meeting the costs of unsold or wasted products where quality of the product was not an issue’.

Actually, despite the half-hearted complaints from people already doing business with them and the whole-hearted complaints from people who are left in the cold, Tesco is being unusually cooperative. Here in the US, they are choosing most suppliers without asking who else they sell. In fact, since they want top producers, they actually favor vendors who supply leading retailers.

Yet this is almost certainly just a question of scale. In the U.K., if you sell Tesco, you probably are not selling its competitors. Tesco wouldn’t stand for it. One wonders how understanding they will be of US vendors selling to — say — Wal-Mart once they have the scale to start making those types of demands.

Vendors may yet yearn to deal again with Wal-Mart.




USDA Fruit And Vegetable Advisory Committee Falls Short Of Mandatory Regulation Recommendation

Very few industry institutions are more important than the USDA Fruit and Vegetable Advisory Committee. The produce industry often struggles to be heard in Washington amidst the enormous weight of the so-called “program crops” — commodities such as wheat, corn, soybeans and cotton.

Virtually all the money USDA doles out goes to these large crops, and they so dominate the USDA that other concerns easily get lost. This committee is different, however. Its purpose is described as follows:

Background: Secretary Veneman issued two-year charters to the Committee in August 2001 and July 2003 under the authority of the Federal Advisory Committee Act. The Committee’s role is to develop recommendations for submission to the Secretary of Agriculture on ways USDA can tailor programs to better meet the needs of the U.S. produce industry. Secretary Johanns subsequently extended charters to this Advisory Committee in June 2005 and most recently in May 2007.

So this is the produce industry’s direct link to USDA — the one way we can be certain our concerns are acknowledged and our voices heard. On the most important produce industry issue of our times — food safety — we might expect that the Committee would send a strong message reiterating the positions already approved by the two national produce trade associations — the United Fresh Produce Association and Produce Marketing Association.

And the Committee did recently meet in Washington, D.C. and did send a recommendation to USDA regarding food safety, but it was not the position that United Fresh and PMA have endorsed.

We ran a piece entitled PMA And United Agree On Federal Food Safety Regulation, which detailed the joint position:

“We are pleased that both associations have reached an independent but common conclusion that produce safety standards must be federally mandated, risk-based and allow for commodity-specific regulation,” said United Fresh Chairman Emanuel Lazopoulos and PMA Chairman Peter Goulet. “Such standards should be uniform and should apply consistently to an individual commodity or commodity group regardless of its place of production,” they said.

“Both Boards of Directors believe that our industry must work together to support appropriate action and oversight by the U.S. Food and Drug Administration in order to ensure public confidence in the food supply,” they said.

The advice to the USDA given by the Fruit & Vegetable Advisory Committee did not call for mandatory regulation and did not suggest that USDA allow the FDA to take the lead on food safety regulation in the produce industry.

Why is this?

Well, national produce organizations such as PMA and United do not have their association executives on the committee, which wouldn’t be a problem except that you do have association executives from regional grower groups. Right now, Mike Stuart of Florida Fruit and Vegetable Association and Matt McInerney of Western Growers Association are on the committee. In fact Mike is co-chair and will be the next chairman if tradition is followed.

Now both Mike and Matt are good guys, smart individuals, and this Pundit would hire either of them to represent his interests any day. The problem is that the staff members of associations probably shouldn’t be on the board. After all they are not free to evaluate the evidence and cast a vote without being obligated to vote in favor of the policies that their associations support.

Even more, there is disequilibrium when certain board members walk into the room with an agenda — get the USDA advisory board to issue a recommendation WGA or FFVA can support — while most board members are independent businesspeople, who have no predetermined agenda.

Now imagine any negotiation: one party enters with a clear goal he wishes to achieve, the other party has no such goal. Who do you think is more likely to obtain their goal as the outcome of that negotiation?

That is really what happened here. Mike Stuart fought hard to keep the word mandatory out of the document. Matt McInerney already was committed to the position, and without Tom Stenzel of United Fresh and Bryan Silbermann of PMA on the board to provide counterweight, there was no driving force for the board to issue a ringing endorsement of the United Fresh and PMA resolutions.

It is a shame. This was a shot to communicate a unified produce industry position on mandatory regulation directly to the Secretary of Agriculture.

Two boards that represent a cross-section of the trade, United Fresh and PMA, have endorsed mandatory regulation. The committee should also have supported that mandatory language.

Instead the committee issued a far weaker resolution asking for USDA assistance to the industry in developing risk-based standards — you can read that as voluntary guidance — for the industry. The committee stopped well short of asking for governmental oversight as United and PMA did.

Perhaps the regional grower groups will feel victorious because they won this vote in this venue, but what it really does is fracture the industry and make it more difficult for the trade to present a unified front in Washington.

Unfortunately, if the industry is not united, its voice is less likely to count. This means that policy that affects the industry, instead of being created in consultation with the industry, will happen without the industry’s vote. That is a problem.




Del Monte Raid Sheds Light
On Immigration Problems

Within the produce trade, the immigration issue has played as an agricultural issue, with the focus being labor for harvest. Yet, almost certainly, just as important a stake in the immigration battle is the need for labor by the farmer’s customers.

Restaurants and retail stores are obviously dependent on low cost immigrant labor. And now, a headline in The Oregonian, Immigration Raid Pushes Oregon Into Thick of Fight, that tells of a raid on a Fresh Del Monte facility in North Portland reminds us that processors also are often in a vulnerable position:

A federal raid on a large North Portland food processing plant Tuesday ended in the arrests of 167 workers, intensifying Oregon’s immigration debate, tearing apart families, unnerving employers and sparking new calls for U.S. leaders to rewrite the nation’s immigration laws.

An estimated 160 federal agents swept into Fresh Del Monte Produce Inc. and the firm that supplied its workers, American Staffing Resources, arresting three managers and locking up most of the arrested workers in a federal detention facility, where they face possible deportation.

The action was part of a six-month criminal investigation into the North Carolina-based employment agency, which U.S. Immigration and Customs Enforcement accuses of conspiring with Fresh Del Monte to hire and employ undocumented workers. Federal authorities allege that nine out of 10 employees hired by the staffing company used Social Security numbers that were fictitious or belonged to other people. …

On a given day, about 600 employees work at the Fresh Del Monte plant in Portland in two separate shifts. They cut fruits and vegetables for grocers, restaurants and other retailers.

They were recruited and hired by American Staffing Resources, owned by North Carolina-based Staffco Management Group Inc., mostly to work for the state’s minimum wage, $7.80 an hour. …

The criminal case began shortly after Christmas, when immigration agents, operating on tips from the public, sent an informant to apply for work at Fresh Del Monte’s plant on North Rivergate Boulevard.

The informant told a produce manager that he was born in Mexico and had no legal documentation to work in the United States. The manager pointed him to the nearby office of American Staffing Resources, according to a federal search warrant affidavit. There, wearing an audio recording device, the informant began gathering information that culminated in Tuesday’s arrests.

In the early months of this year, according to the affidavit, managers told the informant he could find phony identification on the streets of Woodburn. One manager eventually sold the informant a Social Security card, the government alleges.

A joint investigation by immigration and Social Security Administration agents found that during one stretch last year, American Staffing Resources had employed 596 workers. Only 48 of them had valid Social Security numbers, according to the affidavit.

Obviously the situation is bad. If the numbers are correct and only 48 out of 596 workers had valid social security cards, it is hard to believe that the staffing agency was doing all it could to make sure its employees are legal.

Fresh Del Monte issued a statement:

Fresh Del Monte Produce Inc. takes its obligation to comply with U.S. immigration law very seriously. In response to reports that have appeared in various electronic and print media, Fresh Del Monte confirms that on Tuesday, June 12, 2007, U.S. Immigration and Customs Enforcement (“ICE”) personnel visited Fresh Del Monte’s Portland, Oregon facility. Fresh Del Monte has been advised that it is not a current target of the investigation.

Fresh Del Monte has, and will, continue to cooperate with ICE in its investigation. Fresh Del Monte retained American Staffing Resources to provide a contingent labor force at the Portland facility. Fresh Del Monte does not employ this labor force. Fresh Del Monte is committed to complying with all laws and regulations.

We have no reason to doubt Fresh Del Monte, but the suspicion is always strong in these situations that the whole reason companies outsource their labor supply is because there is no easy way to avoid messes like this.

The Oregonian article goes on to give a quote:

Jim Ludwick, president of Oregonians for Immigration Reform, said the number of Fresh Del Monte workers alleged to have fake documents shows how poorly the United States enforces its immigration laws.

“This is what happens when companies are not held responsible for their hiring actions,” Ludwick said, adding that an endless supply of illegal workers helps companies such as Fresh Del Monte “keep wages low and working conditions poor.”

Yet Ludwick is almost certainly wrong. If this “arrangement” didn’t exist and if these employees were not available, the option is unlikely to be that Fresh Del Monte would bite the bullet, hire its own labor force directly and pay a bit more.

The most likely outcome is the plant would close and product would have to be brought in from somewhere else. If hiring illegals was actually stopped across the whole country, the product would have to be brought in from Mexico. And, very possibly, the very nature of the kinds of products we use would have to change to conform to a new labor situation. For example, a lot of the jarred products sold in produce departments are cut in China and imported from there.

The fact that this plant was unlikely to just “pay higher wages” due to less hiring of illegals seemed to be sensed by the mayor:

MAYOR CRITICIZES ACTION

Potter expressed anger that families were swept up in the arrests, saying the raid stemmed from a failure of Bush and Congress to craft reforms that are fair and workable for employees and business.

“I certainly understand why federal officials executed criminal warrants against three individuals who stole and sold Social Security numbers,” Potter said in a statement. “But to go after local workers who are here to support their families while filling the demands of local businesses for their labor is bad policy.”

He noted that no Portland police officers helped in the raid.

Yet, despite his economic realism, that last note, implying that Portland police would never do such a thing, also explains why Americans are so unhappy with this issue. Americans expect their police forces to enforce the law. This implies that Portland has been winking at situations like this to gain economic advantage.

If government officials are going to just ignore laws they don’t like, then how can those who want enforcement ever think they gain something by getting stronger laws?




Investing In Produce Managers

We recently heard from an old friend who has served as a produce manager for one of the “Big 3” supermarket chains for over 25 years. He works in a strong store with total sales of around $710,000 a week of which produce accounts for about $85,000.

What is interesting is that our friend, who rarely has taken off more than a day at a time, recently took off two weeks.

The vacation was well-earned but very expensive for his employer.

Turns out that produce sales dropped over $15,000 a week while he was gone.

This had nothing to do with seasonality; comparable weeks last year were strong, and the weeks before and after his trip this year were strong.

The biggest cause seems to be ordering. He orders aggressively, and when he is gone, the department staff seems afraid to order too much produce.

In one sense, this just shows the enormous importance of produce managers. So programs such as the United Fresh effort — sponsored by Ready Pac — to recognize great produce managers is valuable.

Of course, what we really need to do is study what makes a produce manager great and then develop a training program to accomplish that.

PMA’s old video program, developed by Pundit friend and partner Stan Silverzweig and funded by Chiquita back when John Bayliss called the shots, went a good part of the way there.

If a good produce manager can boost sales by 20%, then improving produce managers is one of the most profitable investments the produce industry can make.




Food’s Carbon Footprint
Not Easy To Measure

Before we in America acquire the British fascination with “food miles” — which we most recently discussed here when Richard Branson pointed out the impact of such a policy on Africa — we ought to look at what they are actually finding out in Britain as they look into the subject.

The African Channel picked up an article by The Sunday Telegraph that was headlined Locally Grown Food Has Higher Carbon Footprint Than Imported Products:

Conscientious consumers are being urged to buy locally sourced food in the battle against climate change. But, as Richard Gray discovers, produce from the other side of the world can actually have a smaller carbon footprint…

Already, the major supermarkets are crawling over each other to highlight their “locally sourced” produce, while Marks and Spencer has begun labeling air-freighted products with logos of aircraft. Yet some startling research is emerging that shows food miles might not be as bad as consumers have been led to believe….

Analysis of the industry reveals that for many foods, imported products are responsible for lower carbon dioxide emissions than the same foodstuffs produced in Britain. Even products shipped from the other side of the world emit fewer greenhouse gases than British equivalents.

The reasons are manifold. Sometimes it is because they require less fertiliser; sometimes, as with greenhouse crops, less energy; sometimes, as with much African produce, the farmers use little mechanised equipment. The findings are surprising environmental campaigners, who have, until now, used the distance travelled by food as the measure of how polluting it is.

One study by Lincoln University, in New Zealand, found that 2,849kg of carbon dioxide is produced for every tonne of lamb raised in Britain, while just 688kg of the gas is released with imported New Zealand lamb, even after it has travelled the 11,000 miles to Britain. Researchers and farmers in Britain have raised doubts over the accuracy of the New Zealand figures, but they concede that sheep farming in New Zealand is more efficient than in our own country.

“They have slightly better weather,” said Prof Gareth Edwards-Jones, from the department of agriculture at Bangor University, in Wales. “This means their grass can grow for longer and they don’t have to give their sheep as much feed as they do in the UK.

“With meat in the UK, there is also a supermarket issue. Each of the supermarkets runs its own abattoir, so if you sell your lamb to Tesco, you have to send your lamb to Tesco’s abattoir, even if you pass several local abattoirs on the way. As a result, the meat picks up a huge amount of ‘in-Britain’ food miles from farm to abattoir then to packaging before it gets to its final destination.

The style of farming in New Zealand is considered to be less intensive than in Britain because of the large areas of land. Mr McGaveston uses small amounts of hay to help supplement his sheep through the cold winter months and sends his lambs to be slaughtered and packaged at a plant just 40 miles away. Most of the electricity used is also supplied from a hydroelectric plant, which has minimal carbon dioxide emissions….

Dr Llorenç Milà I Canals, of Surrey University, said: “By May, apples harvested in Britain have been kept in refrigerated storage for more than six months, which uses a lot of energy. At that point, it becomes better to import from New Zealand.”

Earlier this year, Mr Williams revealed that growing roses in Kenya produces just 17 per cent as much carbon dioxide as growing them in Holland. Importing beans by air from Uganda or Kenya is also more efficient.

prof Edwards-Jones explained why: “In Uganda, they tend to have small farms that export beans. They don’t use tractors, as it is all done by hand, they use cow muck instead of fertiliser and don’t use hi-tech irrigation systems.”

For some products, however, it is better to buy British. British onions, for example, produce 14kg per tonne less CO2 than those imported from New Zealand….

Perhaps the key insight is this:

What is clear is that the so-called “carbon footprint” left by a product is a good deal more complicated than simply looking at the distance it has travelled. Food miles have become the villain in the environmental debate over the global food market, with campaigners counting every mile their organic blueberries and sugarsnap peas have travelled.

And for those who think that just a little better study will let us accurately judge these things, there is more news:

The disagreement over exactly how to measure the carbon footprint of food has lead to the Government stepping in. Last week, the Department for Environment, Food and Rural Affairs announced it was developing a standard carbon calculator that all manufacturers and retailers could use to label their products.

But a study by Bangor University, due to be completed this year, is set to complicate matters further. Researchers have found that the number of times a patch of soil is ploughed, and even the type of soil a vegetable is grown in, radically alters the amount of greenhouse gases released into the atmosphere.

In other words, this area is so complex it is probably impossible to reliably calculate. And the protectionists who are pushing this logic maybe should be wary of the outcome:

This could mean that clay soil in one part of the world may release more greenhouse gases than sandy soil elsewhere. Indeed, calculations of carbon dioxide emissions could also include the footprint left by employees involved in the production of food. Per capita carbon dioxide emissions in Britain are 9.2 tonnes, while for Kenya the figure is 0.2 tonnes and for Uganda it is 0.1 tonnes. By this method, importing from Africa would be far less environmentally damaging.

“Food miles” has nothing to do with the environment. It is just a marketing tool that supermarkets have latched onto in Britain. They should be ashamed of themselves for deceiving their customers into thinking they are doing something useful.




Post-Holiday Produce Promotions

The National Mango Board recently conducted a few focus groups that cover a range of subjects. You can see some of the key findings here.

Among the interesting things found:

Many participants reported eating mangos for the first time when they were on vacation. Very few grew up eating mangos

This brings up the idea of post-holiday merchandising.

We always focus on merchandising for the holidays, but if one has stores in an area where people can afford to travel and often go to tropical locales, what about greeting them upon their return home with some of the tropical items they probably just enjoyed?

Mangos, papaya and other tropicals could be put on special, different varieties displayed, recipes promoted, etc. Maybe a two-week promotion would be just the trick to turn a vacation encounter into a regular habit?




King Of The Lunchroom

Our piece, King William’s Produce Requests, detailed the requests that William, aka Jr. Pundit Primo, had made when he got the chance to be “King of the Lunchroom.”

School is now over and William is eating in camp now, but he had his chance to be King just before school closed for the summer.

After William’s pleas, was the meal healthy? Did the students each more produce?


The answer is yes, but only marginally so, and that shows the enormous difficulty of the task.

William had the kitchen staff double the vegetable offering to two — in this case green beans and corn –and his elimination of spice and sauce did boost consumption among this group of five-year-olds.

The big basket of fruit available for dessert did attract a number of takers and the little plastic cups filled with mandarin orange sections did move strongly.

The main course was still chicken fingers and they were served with Tater Tots. Everyone received a cookie for dessert.


The problem: Kids like chicken fingers and tater tots, and if students don’t eat these offerings, there’s no alternative food that is any more healthy.

As a dad, it leaves you in quandary. As Grant Hunt of the Grant J. Hunt Company told us in Getting Kids To Choose Healthy Snacks, you just can’t bring celery sticks when it is your turn to bring snacks for Little League.

So as parents we try to win small battles, and if all the kids ate a serving of green beans, we count it a win.

Our society isn’t too good at preaching a Spartan avoidance of indulgences, so we have to have produce that tastes good. Of course when he was just a prince, King William told us that in Little Taste Bud, published in Pundit sister publication, PRODUCE BUSINESS.

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