Pundit Interviews

Pundit Letters





Perishable Pundit
P.O. Box 810425
Boca Raton FL 33481

Ph: 561-994-1118
Fax: 561-994-1610


email:
info@PerishablePundit.com

a

Produce Business

Deli Business

American Food & Ag Exporter

Cheese Connoisseur



Got Produce? Will The Money Really Be There?

As we have been analyzing the proposed Generic Promotion Board for produce, we haven’t paid much attention to the details of who will be assessed, how people will be assessed, and how the board will be constituted, etc., etc.

Mostly this is because we think discussion of these matters is putting the cart before the horse. First you establish need, then you establish efficacy and only then do you start looking at mechanics.

In the context of a larger issue, we did mention our concerns that assessing based on sales had the effect of making the high quality end of the industry subsidize marketing for the low caliber guys.

Now we thought it worth mentioning that we are not convinced that when all is said and done, the board will actually raise the $30 million a year the USDA says it will.

The way the money is supposed to be raised is that so-called “first handlers” will pay an assessment on their sales, not counting freight.

But you can’t assume that business will be conducted in the same way when what are, economically speaking, “new taxes” are imposed.

In other words, right now a fresh-cut processor/juicer/canner/freezer, etc., will buy raw produce and gain margin by cutting, blending, packing, promoting and providing services. The final product may sell for many times the price of the raw material.

It is this processed/juiced/canned/frozen price that the USDA seems to have used for its revenue estimates.

Yet the minute the board passes, companies would look to change the way they do business so as to avoid or minimize this “tax.” So they may set up separate procurement subsidiaries that would resell product to the parent company for the equivalent of a small brokerage.

Or they could insist vendors grade the product, which transforms the vendors into “first handlers,” or they may make other arrangements with buying co-ops and similar organizations.

In other words processors, including fresh-cut produce processors, will change the way they procure to make sure the assessment falls against a few pennies of raw materials not the finished product.

The transportation exemption is another big question mark. If a company is buying both produce and transportation services from the same parent corporation, this proposal would provide an incentive to charge more in transport and less in product.

In fact, the proposal encourages the break-out of a lot of expenses. If a company is now selling a product with a pledge to advertise and promote that product to consumers and provide transportation services, merchandising assistance and consulting on marketing, it probably just groups all that in one price for the product.

This proposed plan would create an incentive to sell these various things under separate contracts and thus dramatically reduce the “tax.”

Of course, the consequence of all this is that the money may not be there. The USDA numbers reflect a history that was established in an environment without a national “tax” on the sale price. But the assessment will change behavior.

In this year’s annual letter from Berkshire Hathaway, famed investor and Berkshire Hathaway CEO Warren Buffet warned about the danger of assuming the future will be like the past when you are, in fact, changing the conditions. He wrote in the context of Berkshire Hathaway getting into the business of municipal bond insurance:

The rationale behind very low premium rates for insuring tax-exempts has been that defaults have historically been few. But that record largely reflects the experience of entities that issued uninsured bonds. Insurance of tax-exempt bonds didn’t exist before 1971, and even after that most bonds remained uninsured.

A universe of tax-exempts fully covered by insurance would be certain to have a somewhat different loss experience from a group of uninsured, but otherwise similar bonds, the only question being how different. To understand why, let’s go back to 1975 when New York City was on the edge of bankruptcy. At the time its bonds — virtually all uninsured — were heavily held by the city’s wealthier residents as well as by New York banks and other institutions. These local bondholders deeply desired to solve the city’s fiscal problems. So before long, concessions and cooperation from a host of involved constituencies produced a solution. Without one, it was apparent to all that New York’s citizens and businesses would have experienced widespread and severe financial losses from their bond holdings.

Now, imagine that all of the city’s bonds had instead been insured by Berkshire. Would similar belt-tightening, tax increases, labor concessions, etc. have been forthcoming? Of course not. At a minimum, Berkshire would have been asked to “share” in the required sacrifices. And, considering our deep pockets, the required contribution would most certainly have been substantial.

Local governments are going to face far tougher fiscal problems in the future than they have to date. The pension liabilities I talked about in last year’s report will be a huge contributor to these woes. Many cities and states were surely horrified when they inspected the status of their funding at yearend 2008. The gap between assets and a realistic actuarial valuation of present liabilities is simply staggering.

When faced with large revenue shortfalls, communities that have all of their bonds insured will be more prone to develop “solutions” less favorable to bondholders than those communities that have uninsured bonds held by local banks and residents. Losses in the tax-exempt arena, when they come, are also likely to be highly correlated among issuers. If a few communities stiff their creditors and get away with it, the chance that others will follow in their footsteps will grow. What mayor or city council is going to choose pain to local citizens in the form of major tax increases over pain to a far-away bond insurer?

We’ve had some questions about that $30 million number from the beginning; in fact, at first we thought the processed sector, especially juice, was being wildly underestimated. We furnished these inquiries to PBH and understand they are awaiting additional information from USDA.

If, however, we accept that the base USDA statistics are correct, then we can expect a significant decline in the amount of money actually raised for the generic promotion board as companies legally adjust their behavior to minimize their “tax” payments.

This means the board won’t actually have a $30 million budget. What does that imply for its ability to fund a program adequate to actually raise consumption?




Got Produce? Retailers Beginning To Look At The Fine Print Of The ‘Generic’ Proposal

Following our piece, Got Produce? Schnuck’s Mike O’Brien Tries To Add “Balance”, we received a number of calls from retailers anxious to discuss the proposed generic promotion board.

In general, and not very surprisingly, most produce executives at retail were for the board.

We say not surprisingly because, in general, everyone would like to see their industry promoted. It is only the paying for it that is the problem.

If someone proposed a generic promotion to get businesspeople to read industry web sites and makers of computers or internet access companies were going to pay for it, we here at the Pundit would quickly and enthusiastically support such a measure.

If you asked us to pay for it, we would have to study hard before we could endorse the program.

Equally for a produce executive working for a food retailer, a tool designed to boost consumption that someone else will be assessed for has real upside and no downside.

This being said, most retail produce executives are serious business people and they don’t want industry funds wasted. So they are sympathetic to the idea that a real serious business case needs to be made that this will provide a positive ROI for the industry and, specifically, those who have to pay for it.

When we have had the opportunity to go through the proposal with retail executives most guffaw a bit at the line that attempts to explain the effectiveness of industry promotion of this sort. The proposal puts it this way:

”The economic evidence is overwhelmingly in favor of generic promotion. Most ranged from 0.8 to 80 in benefit-cost rations.”

Of course, saying that something will have a benefit somewhere between 0.8% and 80% is just the same thing as saying one hasn’t the foggiest idea of what the benefit might be, much less whether the benefit would provide a superior return to alternative investments.

These VPs of Produce and Senior VPs of Perishables, most at public companies, all have had to request funding for initiatives, sometimes at the Board of Directors level. In these high level business dealings, few indeed would have put their reputations on the line for a project with such an amorphous ROI.

So most retail executives, whatever their personal inclinations, respect the demands of the supply base, which is going to have to write the check, for an effective business case to be made before approving funding.

Beyond that there are two other facets of this proposal that retail executives are just coming to understand and, as they do so, these retailers will find the proposal problematic:

Exemption for Sales Direct to the Consumer

Farmer’s markets, farm stands, box schemes, community-supported agriculture, Internet sales, etc. — anytime a first handler sells direct to the consumer, that sale will be exempt from an assessment.

This is a growing area and one that supermarkets compete directly against. It is already a battle. In some cases, farmer’s markets charge rents wildly less than market value or what supermarkets pay; payment of taxes is sometimes honored more in the breech than the observance; and the vendors often sneak in products, as we mentioned here, that are not really grown by the vendor.

Yet this proposal chooses to give these operations a competitive cost advantage by imposing a “tax” on the product that supermarkets, warehouse clubs, supercenters and other venues sell, but exempting the product sold by their competitors direct to consumers.

We can all understand the logistics of this. It would be hard, and quite possibly expensive, to collect these assessments from direct-to-consumer operations. Yet it still boils down to burdening the supply chain that supplies supermarkets and related industries with costs their competitors won’t have to pay. That is not going to go over well with retailers.

Imposing Differential Taxes On Higher Priced Produce

Despite a reputation for tough bargaining, most major chains pay top-of-the-market for fresh produce. In fact, they are in deep battle with independents, often ethnic stores buying off the wholesale markets, who often manage to sell produce for a third of what big chains do.

Produce is a funny item… if you insist on the best, restrict your supply chain to food safety-certified vendors, those with advanced traceability systems, those committed to sustainability, you can pay a significantly higher price than if you are just willing to buy some decent produce.

The reason almost all commodity-specific promotion boards assess by the pound or the carton is that it is perceived as unjust to the growers for the best grower to have to pay a higher fee just because he grows better stuff or invests in the product and services that bring a premium.

Now, however, as retailers come to study the generic promotion program proposal and see that first handlers will be “taxed” based on sales instead of by the pound or box, they will realize that it is one more burden on the supply chain of mainstream retailers.

Often with union workforces, a heavy regulatory burden, reputational concerns, a less flexible and more constrained supply chain, chain retailers are already having a battle with independents and ethnic stores in many parts of the country. Chain retailers just won’t like that their supply chain has to pay the cost of one more initiative while the supply chain of their competitors gets off cheap.




No Pretense At Wegmans

Wegmans’ home town paper, the Democrat and Chronicle, ran an interview with Danny Wegman and his daughter Colleen Wegman, titled Wegmans: A sit-down with Rochester’s hometown grocer.

The interview is not particularly earth-shattering in content, but it is valuable none the less, mostly because you get a sense of how comfortable the Wegman family members each are within his or her own skin. There is not a hint of pretense or phoniness.

It is such a contrast with so many retailers who seem to find it impossible to admit error.

Here is the exchange regarding the onset of the recession:

You must have a unique perspective on the recession, because regardless of how bad things get, everyone still needs to buy groceries. Did you see any trends ahead of time that told you the recession was coming?

Danny: Unfortunately, we didn’t read the signs. The signs were there, but we kept wondering whether it was us, or the weather, or something else.

Colleen: We kept making excuses.

Danny: Easter was earlier last year, and the weather was bad, so we said, “Oh, people weren’t ready for Easter.” But there were other things going on. So the change started as early as March last year. We should’ve known.

No, “We had a secret strategy” or “We knew it all along” or “We were the first to catch it.” Just “We kept making excuses,” and “We should’ve known.”

Considering its size and location, there is no natural reason Wegmans should be pre-eminent in so many areas of food retailing.

Yet the easy tone and the willingness to admit mistakes may explain a lot.

The interview goes on to report that with seasonal produce starting up and a stronger stock market, consumers are acting a little less cautious.

For Wegmans, though, the key may be an ownership and top management group that loves what they do. The interview talks about transition:

Wegmans has been a family business through four generations. Growing up, did you have a say about what you wanted to do when you entered the professional world, or was it assumed that you were going to take over the company?

Danny: It was on Canandaigua Lake, and I don’t remember the exact date, but I do remember the occasion. She was just getting done with college and the official offer went like this: “Colleen, what do you really enjoy?”

She said, “Well, I really enjoy natural foods and helping people learn how to eat them and enjoy them and so on.” So I said, “That’s perfect, why don’t you just come to Wegmans and do that?”

Colleen: I tell my boys they can do whatever they want, as long as it’s working at Wegmans. But honestly, when someone loves what they do so much, it’s contagious. My grandpa, my dad and I all share that same love of the business, so it doesn’t feel like work for us. We love what we do.

We have a lot of MBAs in the business now and a lot of clever consultants who tell everyone how to position things.

Yet Wegmans is the retailer we get more requests to tour than any other. Maybe it is that a low-key approach, a willingness to admit error and a love of the business accounts for more than most executives realize.




YottaMark Advisory Board
Adds Bruce Peterson To Roster

Some individuals seem to always attract the interest of many in the trade. So it goes with Bruce Peterson. We have covered his actions and recorded his insights many different times:

Wal-Mart’s Bruce Peterson Resigns

Bruce Peterson Focuses On Traceability

Bruce Peterson Lands At Naturipe As Its New President/CEO

Naturipe’s Peterson Builds All Star Management Team

Peterson Steps Down As President/CEO Of Naturipe, But Joins Its Board Of Directors

Now comes word that Bruce is involved with a new industry activity:

Bruce Peterson Joins YottaMark Advisory Board
Former Wal-Mart Executive to drive policy and retail strategy for the HarvestMark fresh food traceability business.

YottaMark, Inc., the leader in traceability and authentication solutions, announced that produce industry veteran Bruce Peterson has joined its board of advisors. Peterson will advise YottaMark on policy issues and strategy as the Company continues to deliver innovative food safety and traceability solutions for the produce and perishables market. Peterson was previously the senior vice president of perishables for Wal-Mart Stores, Inc., and most recently served as the CEO of Naturipe Farms.

YottaMark solutions deliver product traceability, authentication and valuable business intelligence, when and where it is needed. HarvestMark, the fresh food traceability solution from YottaMark, is the leading produce traceability solution. To date, over 300 million produce packages — including table grapes, berries, tomatoes, peppers, watermelons and more — are enabled with HarvestMark codes to enhance food safety programs and deliver on-demand product information throughout the supply chain, all the way to the consumer. Some of today’s most successful produce companies use HarvestMark as their solution of choice for both case- and item-level traceability to comply with industry requirements, speed response to potential food safety events, and connect directly with buyers and consumers.

“Traceability is an essential tool for food safety across the perishables supply chain, and a burning issue that the industry is addressing head-on with coordinated efforts,” said Peterson. “I am encouraged to see the level of progress and impact the HarvestMark solution has made in the fresh food industry. The HarvestMark solution is providing grower/shippers an efficient and cost-effective way to increase food safety and comply with the Produce Traceability Initiative. And, the solution allows retailers and shippers to create new connections with the consumer. I look forward to working with the talented team at YottaMark during this phase of growth.”

Serving nearly 40 years in the produce industry, Peterson spent 15 years at Wal-Mart where he successfully launched and built the perishable foods division. Peterson was at the forefront of the Wal-Mart Supercenter expansion which grew from 6 to 1500 stores in 15 years. He retired from Wal-Mart in 2007 to take the helm of president and CEO of Naturipe Farms, a leading grower and marketer of premium berries. He completed his tenure as CEO of Naturipe Farms in 2009 and is currently the president of Peterson Insights, a strategic consulting firm for the produce industry, which has played a key role in the development and rollout of the Produce Traceability Initiative.

“The YottaMark Advisory Board provides valuable insights to help us build solutions that meet the needs of our customers,” said J. Scott Carr, president and CEO, YottaMark. “Our advisors include former executives from Safeway, eBay, Taco Bell, and KFC; a leading Stanford University professor in supply chain management; and a world-renowned cryptographer. Having an industry professional of Bruce’s caliber join this team is an honor, and speaks to our current growth and future opportunities to bring great value to the perishables industry. His expertise and guidance will undeniably help shape the success of the company, and continue to advance HarvestMark as the premier traceability solution for the fresh foods industry. We look forward to working with Bruce in the months ahead.”

As we told USA Today, YottaMark is the leader in this field and with Bruce’s long time interest in traceability, this is a good place for him.

What the industry thinks of as YottaMark has a particular scope as a traceability tool. Although the company actually sells various options that encompass case-level and pallet-level capabilities, its marquee product is an item-level label. It is wonderful with a clamshell or bag and on products where the primary issue is a risk of contamination at the source. It doesn’t really provide a solution for repackers or situations in which contamination occurs later along the supply chain. In other words the product doesn’t track what wholesaler or purveyor or trucker handled the product.

We do suspect, though, that its “item” orientation, as opposed to the Produce Traceability Initiative’s “case” orientation, is more in consort with whatever regulations the federal government may come up with in this space. We suspect that this opportunity to sync industry technology with any future federal regulation is part of what would make this opportunity appealing to Bruce.

For ourselves, we have been impressed with the potential for YottaMark as a marketing tool. We have done much work in traceability but also much in sustainability, and we think the ability for consumers to not only trace back their food but to come to know the farmer or the farm through written narrative, online audio and video and photos is very likely to change the way consumers relate to brands and to food.

We wish both Bruce Peterson and the folks at YottaMark a rich and productive collaboration.




Moral Lessons From
The Nolan/Ocean Spray Trial

Our coverage of the Ocean Spray vs. Jim and Theresa Nolan and The Nolan Network matter has been extensive. and doubtless will continue through post-trial motions and appeals. Since the verdict, we have written four pieces:

SPECIAL ALERT: Nolans Victorious In Lawsuit vs. Ocean Spray: This One’s For You, Jim

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

Sharing The Joy Of The Nolan Victory… Plus A Note From One Of The Jurors!

Another Juror Weighs In On Nolan Victory Over Ocean Spray

For the moment, we thought the following letter, from an industry member held in high regard, would be a fitting way to tie together our coverage at this point:

The entire Nolan/Ocean Spray affair points strongly to the erosion of the ethics of good business. Right always wins out. Justice moves slowly but honestly and with deliberate steps.

Ocean Spray will reevaluate how they do their business in the future.

A cute side story:

For many, many years, thirty or so, our Ball Brokerage Company represented Ocean Spray in Scranton and Wilkes-Barre Pennsylvania. It was announced to us that they were turning the entire deal over to CH Robinson in the late 1980’s.

We were saddened, but we have watched them change the way they do business since in so many different ways.

Good ethics make good business.

We are certain that the miniscule cost to Ocean Spray and the humungous embarrassment will put them on the road to better business.

Let us all constantly see these things as a reminder to focus on everyone’s core mission.

Honor, integrity, and never, never forgetting where you came from and who helped along the way are the cornerstones to all successful business.

Kudos to you dear Pundit, for continuing in your awesome, ever-expanding search for the true story in every part of our magnificent industry.

Best wishes to Mrs. Nolan as she and her family begin the healing process. Kudos to the jury for doing the right thing. Best wishes to Ocean Spray to clean up this mess in a proper fashion and move forward.

We all have our eyes in the front of our heads to know that what happened yesterday is behind us. Let’s start smart and all continue our quest to move ahead and give our industry our greatest performance, each and every day.

— Harris Cutler
President
Race-West Company
Clarks Summit, Pennsylvania

We grew up in a neighborhood where the parents of many of the children were professionals: doctors, dentists and attorneys, etc. We are now old enough to realize that the fact that the Pundit Poppa went to work every day on the Hunts Point Market and that we had the connection with the market and the people who worked there loading trucks and delivering produce was really an invaluable gift. We actually worry a lot about how to keep a connection with reality and the real-world struggles that people endure, present and alive for the Jr. Pundits.

Many thanks to Harris-Cutler and Race-West Company for reminding us all that capitalism and its public acceptance depends crucially on codes of behavior with deep cultural roots. When capitalism becomes license to do as one chooses without moral consideration, it loses what the Chinese would call “the mandate of heaven.”




Pundit’s Mailbag — Marketer Of BroccoSprouts Calls For Strict Adherence To FDA Guidelines

Our extensive analysis of events in the sprouting industry has brought a letter with a different perspective:

I am a fan of yours, and, in the last few weeks I, like most people I know in the sprouting industry, have been following your articles on our industry with great interest.

I am writing this note in part to relay to you another part of the sprouts story. These matters involve issues that are not going to go away as long as the industry insists on varying from the FDA recommendations and not continually trying to improve the processes.

Let me start by telling you a little about me. I am in my mid-60’s and have been in the sprout industry for the last 25 years. I started by growing sprouts in the early 1980’s. I took a small sprout company (Life Force Foods) from sales of mid-300’s to over $1.5 million per year in a few years. Back then $ 1 million would buy you a lot of sprouts!

By the early 1990’s, I sold the sprout business and started a company that made equipment for the sprouting and vegetable processing industry, Sunshine Systems.

In 1998 I sold that business to Caudill Seed Company to help develop a company that was based on the discovery at Johns Hopkins Medical School that certain varieties of broccoli sprouts contained very high levels of cancer-preventative compounds and that was the basis for the founding of Brassica Protection Products (BPP), the marketer of BroccoSprouts®. We started as a science-based company with roots deep into the labs at Johns Hopkins University.

Consequently, we recognized the importance of food safety and have expended a lot of resources in developing and maintaining our food safety program. Some of the people involved in our program are Dr. Doug Archer of the UF and the FDA, Dr, Art Davis of Sholl Group & IEH, and Dr. Bob Strong of Steritech and many others. We employ a national food auditing company to independently audit our sprout growers to insure they are following the guidance completely.

BPP operates through a licensed network of 14 sprout growers in the US and 15 other growers around the worldd. In the US, these growers produce about 50 to 60% of all the green sprouts, that is, alfalfa, broccoli, clover and radish, sold. Our sprouts are sold in some of the most safety-conscious retailers in the US, ranging from Whole Foods to Safeway to Wal-Mart.

I would like to add to some of the statements of the last few weeks, for the sake of clarity:

1. Caudill Seed Company sells approximately 70 to 80% of all the green sprout seed used in the sprouting industry in the US. I have known the principals for over 25 years. I have purchased (directly or through our organization) millions of dollars of seed from him. I can say I have found him one of the most honest brokers of seed out there. He is very concerned about the issues facing the sprout industry but approaches them very differently from Bob Rust and Bob Sanderson. He will be spending a lot of his capital on new ways to combat the problems.

2. The basic science behind the FDA Guidance is based on work developed by The Sholl Group/Green Giant Fresh and Brassica Protection Products with Dr. Art Davis directing the effort. We have been a constant supporter of the guidance in its entirety. Our Food Safety Program is based on the FDA Guidances and includes an audit to ensure compliance with all the guidances. Unlike Bob Sanderson, whom I have a great deal of respect for, we believe in seed sanitation with the 20,000 ppm of calcium hypochlorite and insist it be followed. It may not be the best or the only method of seed sanitation, but right now, it is the only one that FDA explicitly supports.

3. The FDA wants all sprout growers to adhere strictly to all the guidance (including using 20,000 ppm chlorine), not just the parts they are comfortable with. FDA has noted in its investigations that there are many failures in following the guidance’s properly and that these have resulted in problems for the industry.

Our Food Safety Program is not fool-proof — nothing is — but it is good and it is based on science and the FDA Guidance. We have had problems, but far, far fewer than the industry as a whole. Every time there is a problem, we try to learn by it and adjust our program to eliminate similar recalls in the future. This is true of the latest problems. We are totally reviewing our food safety program and auditing approach to make sure we catch any future situations before they become a problem.

With regard to seed, it is completely untrue that all the outbreaks have come from Caudill Seed Company and that none have come from Bob Rust’s ISS. By my reckoning, of the 11 recalls/market withdrawals of alfalfa sprouts in 2008 and so far in 2009, seed from Caudill was implicated in only 5, seed from others, primarily ISS, was implicated in 5 and 1 was facility-related. If Caudill sells 75% of the alfalfa seed in the US and their seed is responsible for less than 50% of the outbreaks, then that’s a pretty good indicator of the care he takes with his seed. Any outbreak is one too many, but to say that Caudill Seed is responsible for all the outbreaks as some have said, is simply not true.

While we endorse the idea of your challenge to the sprout industry to have alfalfa seed grown for sprouting with particular attention to not getting farm animal contamination, I know Caudill’s seed contracts specify that seed cannot be grown within ½ mile of any animal feed lot and cannot be grown on land that was grazed by animals in the previous 6 months. I am sure that Bob Rust/ISS has a similar policy in place. We do know that some outbreaks occurred when sprouters bought seed from less experienced or less specialized seed growers who did not take these precautions. The FDA has urged sprouters to buy only from experienced and careful seed suppliers. Most sprouters I’ve talked to have learned their lesson and only buy from Caudill and ISS.

I think the sprout industry faces many challenges right now and the industry needs to band together to ensure that sprouts are grown as safely as possible, before other outbreaks destroy the industry. Right now, it only seems prudent to follow all the FDA guidances strictly. We support the industry in finding other superior methods that can be demonstrated to be supported by real science on the lab bench and in practice at sprouting facilities.

Earl Hauserman
VP Business Development
Brassica Protection Products LLC
Baltimore, MD

We thank Earl Hauserman for writing this letter as it is an important contribution to the industry debate. The Brassica Protection Products LLC growers have taken the food safety issue seriously and contributed significantly to many of the parts of the current FDA guidance of growing safe sprouts. They continue to invest a significant amount of money looking at alternative ways to sanitize seed and improve their food safety program.

The sprout industry seems to be ridden by faction and there is no love lost between International Specialty Supply (ISS) and Caudill and between the leadership of the International Sprout Growers Association (ISGA) and Brassica Protection Products LLC. In fact for weeks now we have been receiving phone calls accusing others in the industry of nefarious practices.

Earl Hauserman’s letter is important because it brings into the industry dialog a very important industry segment. Let us look at a few of Earl’s key points:

Caudill Seed Company sells approximately 70 to 80% of all the green sprout seed used in the sprouting industry in the US. I have known the principals for over 25 years. I have purchased (directly or through our organization) millions of dollars of seed from him. I can say I have found him one of the most honest brokers of seed out there. He is very concerned about the issues facing the sprout industry but approaches them very differently from Bob Rust and Bob Sanderson. He will be spending a lot of his capital on new ways to combat the problems.

Caudill Seed Company is the “licensed seed supplier” for Brassica Protection Products, so it is nice to have Earl speak up for the company. Still, it is odd that the company can’t speak up for itself. We ran an interview with a spokesperson for Caudill Seed Company, titled Alfalfa Seed Company, FDA, USDA And Supporting Cast Comment On Seed Withdrawal. This interview was very hindered because Caudill, instead of having a principal keep the industry apprised on its doings, insisted on having an outside PR agency do its talking, and that agency, though trying to be helpful, was simply not an expert on alfalfa seed, Caudill Seed Company, nor seed in general, making several claims that were simply incorrect. We have nothing against the principals at Caudill Seed Company and can’t speak to their concern about food safety. We can only say that we gave them an opportunity to speak directly to the industry and they declined to do so.

The basic science behind the FDA Guidance is based on work developed by The Sholl Group/Green Giant Fresh and Brassica Protection Products with Dr. Art Davis directing the effort. We have been a constant supporter of the guidance in its entirety. Our Food Safety Program is based on the FDA guidances and includes an audit to ensure compliance with all the guidances. Unlike Bob Sanderson, whom I have a great deal of respect for, we believe in seed sanitation with the 20,000 ppm of calcium hypochlorite and insist it be followed. It may not be the best or the only method of seed sanitation, but right now, it is the only one that FDA explicitly supports.

What is interesting about this is we have spoken with some of BPP’s licensees and they told us that they are, in fact, not using calcium hypochlorite as they have other chemicals they believe are more effective. So it does not seem that use of calcium hypochlorite is a “hard” standard for BPP. And, in fact, as it came out in our interview with Bob Sanderson, which you can read here, the FDA Guidance uses calcium hypochlorite solely as an example, specifically leaving the door open for other options.

Now, we found Bob Sanderson’s interview enlightening but we think that Bob may be interpreting the FDA guidance too broadly. Although the FDA clearly uses calcium hypochlorite as an example only, it seems that those sprouters who wish to not use it do have a burden of obligation to prove that their use of an alternative is substantially similar or superior to calcium hypochlorite if the sprouter wishes to claim to be in compliance with FDA guidance.

The FDA wants all sprout growers to adhere strictly to all the guidance (including using 20,000 ppm chlorine), not just the parts they are comfortable with. FDA has noted in its investigations that there are many failures in following the guidances properly and that these have resulted in problems for the industry.

This strikes us as a little unfair. FDA knows perfectly well how to change its guidance to say that it wishes to see the use of calcium hypochlorite and nothing is a suitable substitute. FDA chooses not to do so, which means FDA is OK with the use of alternatives.

We also would be a little careful about claiming that following the FDA Guidance is the be all and end all of food safety in sprouting. Yes, most of the food safety outbreaks come from those not following the FDA Guidance but post hoc ergo proctor hoc is still a logical fallacy.

Most of the companies following the guidance are the big players in the industry. As Earl mentions in his letter, his 14 domestic US licensees produce 50 to 60% of the green sprouts. These folks have the most capital, and access to food safety staff. They are subjected to the most rigorous oversight from large buyers. It is very possible, even likely, that if FDA never came out with its guidance, these larger organizations would have safer practices anyway.

With regard to seed, it is completely untrue that all the outbreaks have come from Caudill Seed Company and that none have come from Bob Rust’s ISS. By my reckoning, of the 11 recalls/market withdrawals of alfalfa sprouts in 2008 and so far in 2009, seed from Caudill was implicated in only 5, seed from others, primarily ISS, was implicated in 5 and 1 was facility-related. If Caudill sells 75% of the alfalfa seed in the US, and their seed is responsible for less than 50% of the outbreaks, then that’s a pretty good indicator of the care he takes with his seed. Any outbreak is one too many, but to say that Caudill seed is responsible for all the outbreaks as some have said, is simply not true.

We have had several writers that have expressed doubts about Caudill seed and they may well have been unfair, expressing broad generalities based on anecdote. Though we do note that those who wrote in skeptically about Caudill, as you can see here and here, were speaking about long term historical experience, not the 2008/2009 record that Earl is referencing. It is, of course, imperative to consider market share in interpreting these numbers.

While we endorse the idea of your challenge to the sprout industry to have alfalfa seed grown for sprouting with particular attention to not getting farm animal contamination, I know Caudill’s seed contracts specify that seed cannot be grown within ½ mile of any animal feed lot and cannot be grown on land that was grazed by animals in the previous 6 months. I am sure that Bob Rust/ISS has a similar policy in place.

The test we are organizing is designed to produce alfalfa seed for sprouters that has been grown specifically for human consumption, which is a significantly higher standard than simply trying to avoid farm animal contamination. We are aware of the clauses in seed company contracts and simply point out that a contractual clause merely gives the seed company a breech-of-contract claim against a grower who doesn’t observe the clause. It is dramatically different than requiring a third-party auditor to certify that the standard is being followed. Our interview with Caudill made it clear that no such audit was required.

I think the sprout industry faces many challenges right now and the industry needs to band together to ensure that sprouts are grown as safely as possible, before other outbreaks destroy the industry. Right now it only seems prudent to follow all the FDA guidances strictly. We support the industry in finding other superior methods that can be demonstrated to be supported by real science on the lab bench and in practice at sprouting facilities.

Here we are on common ground. The sprout industry faces significant challenges. Safety must be made a top priority if the sprout industry is to grow beyond core consumers. Large markets in foodservice simply won’t carry the items.

The FDA Guidance is all we have right now, so it is going to be the focus of these efforts.

Yet, this is somewhat problematic. The FDA has no procedure set up to regularly revise and update this Guidance. So as Earl’s producers are calling us to say they have alternatives that they believe are superior, the FDA sits on its hands. Indeed the FDA Guidance can lead to atrophy in industry food safety efforts as buyers, wanting to be safe, demand adherence to a decade-old guidance.

This means that newer ideas are frozen out. Buyers dare not deviate from FDA Guidance, which means sprouters won’t dare deviate, which means food safety innovators have a battle to find markets.

Thus the road to food safety for sprouts has to involve a way to make innovation attractive to buyers and sprouters alike.

Many thanks to Earl Hauserman and Brassica Protection Products LLC for helping to broaden the industry debate.

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