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Got Produce? Will Big And Small Producers Ever Agree On Generic Promotion?

Our analysis of the proposal for a National Fruit & Vegetable Research & Promotion Board brought this thoughtful commentary:

I wanted to add my two cents regarding the issue of a possible generic promotion board for the produce industry.

I write this as one who has worked for myriad commodity groups over a 20+ year career. The “big guys” are typically not behind generic programs because they believe that, with their sizeable marketing budgets, they can do a better job of building their own brand.

The “small guys” need help because, with small to no marketing budgets, they believe that generic promotion is the only way they can do promotion of a scale large enough that they can really benefit. Shall the twain ever meet?

Also, I am a surprised that the Produce for Better Health Foundation — key word here being “Health” — is navigating away from its core business and strengths into an area that is not their expertise, and which is apparently not helping their reputation, either.

We do need advocates for better HEALTH AND NUTRITION to help build produce consumption. Who will now take that role??

— Veronica Kraushaar
VIVA Marketing Strategies
Nogales & Scottsdale, AZ

We thank Veronica for her note as it raises several important issues.

As we mentioned in our piece focused on sufficiency, the plan, as proposed, may not include enough money to move the needle on consumption, and this assumes the money will actually be there, when it actually may not.

Now the advocates for this plan have said that they believe the new media environment, where consumers can be accessed with viral media and on Facebook, MySpace, etc., will allow for a less expensive, but still effective, program.

Yet this idea, if true, may actually cut the other way, against this proposal. After all, if what one needs to communicate effectively to consumers is access to “social media,” this means that produce companies that previously couldn’t dream of reaching consumers now can do so all on their own.

Bryan Silbermann of PMA has made a big point of the importance of industry firms telling their story to consumers, and this fits in with our work on sustainability, where we have pointed out that much of the consumer interest in “local” is really an interest in authenticity. It is quite likely companies, as they become aware of the possibilities of reaching out to consumers via social media, will prefer to keep their funds at home and use the money to reach out to consumers via these new technologies.

Put another way, the leveling effect of the Internet may be making more produce companies “big guys” defined as those capable of reaching consumers directly.

Veronica is correct that those boards that have failed tended to fail because large players didn’t feel they were getting value. Which raises the question: If major industries such as Washington Apples, California Iceberg Lettuce and California Tree Fruit have either eliminated or substantially reduced funding for their own industry marketing efforts, how likely is it that they will want to be assessed for a board that promises a much more indirect benefit?

One wild card in this matter is USDA. Although many such boards require a dual approval, say at least 50% of the growers representing at least 50% of the acreage, the law under which the advocates are proposing to act has no such requirement. Each “first handler” gets one vote.

So the mighty Dole has exactly the same voting rights as a two acre blueberry farm in upstate New York, as long as the farm meets the definition of a first handler.

This may defeat the project because companies of large size may say they will oppose it unless the voting rights are refigured to correspond to volume. Otherwise, they could be “dictated to” by large numbers of small “first handlers” even though it is the big guys who are paying the bill.

Although the law gives every “first handler” one vote, it does give USDA enormous discretion. So, although theoretically an industry of one producer with a million acres and 999 producers with one acre each could approve a board with 501 votes constituting 501 acres on a million-plus acre industry, USDA retains the right to not approve it.

In the end this is a serious matter. We are talking about calling in the police powers of the state to compel people to contribute against their will. If one doesn’t pay, one will lose one’s PACA license or be fined; if you don’t pay the fine, you may get jailed. It is not something you do without overwhelming industry support from the full range of commodities and businesses of all sizes.

On Veronica’s other point, the role of PBH, we agree. One of the sad things that is coming out of this is that the esteem in which PBH is held is declining. The executives there didn’t realize that many view a proposal to mandate payments as outside of the range of what they supported PBH for. Many who are happy to contribute to the Red Cross would object strongly to a special tax compelling them to do so.

By deciding to leap into the middle of a political battle, PBH will inevitably, and unnecessarily, alienate supporters and potential supporters. That is a sad byproduct of the way this issue has been presented to the trade.

To clear up a related point, even if the generic promotion board was approved, it seems silly to us to think that an industry promotion group could replace PBH. Much of the work the Produce for Better Health Foundation does involves interaction with government agencies on both the State and Federal level. These agencies simply won’t interact in the same way with a commodity promotion group as they do with a non-profit foundation dedicated to public health.

This means the industry will need, and should be prepared to support, PBH for a long time. This is regardless of what happens with this proposal.

Many thanks to Veronica Kraushaar and VIVA Marketing Strategies for weighing in on this important issue.

Tesco’s ‘Poor Service’ Record
And Out-Of-Stocks

Our extensive coverage of Tesco’s Journey to America as Fresh & Easy brought this note from an American who spent a couple years in the United Kingdom:

I have been following with mild amusement your series on Tesco, and thought I would take a moment to share my humble perspective.

Having lived in Bristol, England, for two years (from 1999-2001) I shuddered to think that Tesco might actually grace us with their presence here in America.

The attitude you report does not come at all as a surprise when you are familiar with the common mindset toward the standard treatment of customers — at all levels and areas of an organization — that exists in jolly old England.

A major focus of the MBA program I did there was on Human Resource Management, and I can tell you, generally speaking for the average organization, the customer is not at the top of the priority list of people to please.

How to satisfy the workers’ individual rights in the most cost effective manner is typically of much higher concern for upper management. And it shows in the quality of service… most employees I encountered in any department store seemed to be more concerned that I might require more time than was allocated to their shift rather than being concerned with actually solving my problem.

During my time in England, I avoided Tesco stores like I would a plague, preferring to spend my time and money at Sainsbury’s, Waitrose, or any one of the small neighborhood produce/butcher shops. I found the Tesco stores to be crowded and difficult to navigate.

Most produce was unattractively displayed to begin with, and sold (although this is typical in Europe) in pre-packaged quantities, such as a 3-pack multi-colored bell pepper assortment, so it was impossible to inspect the texture and quality of the product. Overall, while of lesser cost, the quality of fruit and produce was of considerably lesser quality than at their competitors.

I categorized them in my mind as a high-volume, low cost, catch-the-cheap-bargains this week kind of retail outlet. And the sloppiness of their stores was reflected in the sloppiness in the way one was treated by their employees.

Of course, they may have changed in the past 7 years, but change is notoriously slow in England. Taking into account the impossibility of even purchasing a 20th century water spout that mixes hot and cold water lines at a home-improvement store, I very much doubt it.

And given the English superiority complex toward Americans, it is no surprise they are behaving as they are. They are approaching the “lower class” here in the US as they do in England — not realizing the standards are much more level here, that stores are much more likely to cut across socio-economic groups, and that generally, here in the US, the customer comes first — no matter what their socio-economic status may be.

I will further venture a guess that few of their executives ever visited an Albertsons, Safeway or Kroger store — their nemesis is Wal-Mart.

— Theresa Willerup
Business Development Manager
Boise, Idaho

We certainly appreciate Ms. Willerup sharing her perspective. We think, however, that, mostly, the market is the best judge of the quality and appropriateness of offering that any business makes.

If Tesco offers poor service in the United Kingdom, then it must offer other values that have allowed it to obtain over a 30% market share, by far the largest, in the UK.

Of course, the strict land use rules in the UK have made it difficult for chains such as Wal-Mart’s ASDA subsidiary to compete effectively because it is so hard to get site approvals. That is why so much of the battle against Tesco in the UK has focused on practices such as “land banking,” by which it is alleged Tesco acquires sites simply to prevent competitors from opening.

Still, there is something odd about the willingness of Tesco to tolerate the out-of-stocks that are common at Fresh & Easy.

We do know that many years ago, it was acceptable in the UK to run out of fresh items at the end of day. This was supposed to “teach” shoppers to come in early in the morning. But we have been assured by many executives at UK retailers that this is no longer the case, and out-of-stocks are, today, unacceptable.

Yet, as late as last week, we were walking through a Fresh & Easy that, supposedly, was their very top store and saw out-of-stocks that would give any executive at Kroger or Safeway a heart attack.

Some of this is hubris. At an early stage of the roll-out, the out-of-stocks were a big problem and the Fresh & Easy executives blamed a software program that didn’t have historical data. When one of the vendors suggested that they issue a clipboard to every store and have them manually call in any out-of-stocks so that they could be delivered the next day, he was treated as if he insulted their technological prowess.

Still, at base, the tolerance of these out-of-stocks is a cultural matter. Whatever the reason, there is a sense that they can disappoint customers and the customers will become “trained” to come back the next day or come in earlier. That is, as our writer notes, not a very American attitude and helps to explain Tesco’s failure in the US market.

Many thanks to Theresa Willerup for sharing her British experience.

Publix Wins Sustainability Award

We recently had an opportunity to visit the Publix headquarters in Lakeland, Florida, and have a nice chat with Ed Crenshaw, the Chief Executive Officer of Publix, as well as the chain’s sustainability team.

The occasion was the presentation of the 1st Annual PRODUCE BUSINESS Retail Sustainability Award.

We’ve written quite extensively on sustainability and we were very proud to journey to Lakeland, Florida to present this award.

PRODUCE BUSINESS Presents Publix With Sustainability Award
PRODUCE BUSINESS Editor-In-Chief, Jim Prevor, and Publisher, Ken Whitacre, presented Publix Super Markets Inc., Lakeland, FL, with its 1st Annual Retail Sustainability Award for exceptional leadership in development of sustainable strategies. The presentation took place in front of the 1,002-store chain’s Sustainability Team and CEO at its Lakeland office. Pictured from left to right are Tim Henning, district manager, Lakeland division; Dan Maloney, business development director, dairy and frozen food; Michael Hewitt, environmental services manager; Dave Duncan, vice president, facilities; Ed Crenshaw, CEO; Jim Prevor, editor-in-chief, PRODUCE BUSINESS; Kevin Lang, director of marketing and advertising; Ken Whitacre, publisher/editorial director, PRODUCE BUSINESS; Al Ebeling; manager of strategy and implementation; and Sam Middlebrook, business development director, meat and seafood.

Unlike many such efforts, this award is not given for gimmicks or gadgets, not just about environmentalism and not about some new slogan grafted onto a foreign organism.

We looked extensively for an organization in which sustainability grew authentically out of the values and business systems of the retailer. This brought us to Publix.

If you haven’t read the article PRODUCE BUSINESS published, titled Publix Super Markets: Subtle Sustainability With Substance, you can do so right here. The piece was written by Mira Slott, who serves as Special Projects Editor for both the Pundit and our sister publication, PRODUCE BUSINESS.

In addition, at the end of March two Publix executives, Maria Brous, Director of Media and Community Relations, and Michael Hewitt, Manager of Environmental Services, visited the Boca Raton, Florida, headquarters of both the Pundit and PRODUCE BUSINESS, where they discussed Publix and its sustainability efforts with Mira Slott and our Publisher/Editorial Director Ken Whitacre.

The video interview lasts about 30 minutes, and you can see it here:

You can also see a column the Pundit wrote on Publix and sustainability. It includes this commentary on industry efforts to create standardized sustainability audits:

Many who pursue sustainability have sought to have an industry standard. It is an understandable pursuit considering the difficulties that multiple audits and standards have imposed on growers in the food safety sphere. Yet while uniform metrics can make measurements easier and unified audits can keep expenses down, in the end sustainability is about choices in pursuit of values, and no company can surrender autonomy in this area to an industry consortium.

Sustainability is traditionally thought of as being composed of three responsibilities — environmental, social and economic — and the inclination for those new in the pursuit of sustainability is to find a balance between these responsibilities. Such a vision, though, is a chimera. There is no balance in math or logic between them and therefore sustainability is at its core a matter of mindfulness in pursuit of values.

Read the whole column here.

FDA’s Pistachio ‘Warning’:
The Other Side Of The Story

Although our coverage of the recent issues with pistachios and salmonella has been extensive, we haven’t felt it necessary to mention every one of the now 664 recalls, though these continue to drip-in as various repackers continue to announce recalls. Then, for the first time in memory, we received a “warning” notice from the FDA advising that consumers not eat the product of a specific company:

Products linked to the previous recall by
Setton Pistachio of Terra Bella Inc.

The U.S. Food and Drug Administration is warning consumers not to eat California Prime Produce and Orange County Orchards brands of pistachios repacked by Orca Distribution West Inc., Anaheim, California, Orca received and repacked pistachios recalled by Setton Pistachio of Terra Bella Inc., Terra Bella, Calif.

The pistachios may be contaminated with Salmonella, an organism which can cause serious and sometimes fatal infections in young children, frail or elderly people, and others with weakened immune systems.

Healthy persons infected with Salmonella often experience fever, diarrhea (which may be bloody), nausea, vomiting and abdominal pain. In rare circumstances, infection with Salmonella can result in the organism getting into the bloodstream and producing more severe illnesses such as arterial infections (infected aneurysms), endocarditis and arthritis.

The FDA visited Orca as part of its audit checks to follow up on Setton Pistachio’s recall. The FDA found that products subject to Setton Pistachio’s recall had been repacked and distributed by Orca under the California Prime Produce and Orange County Orchards brands. Orca has not made a public announcement regarding these products. Therefore, the FDA is issuing this press release to alert consumers so that they can take appropriate action.

The products were distributed to retail locations in airports and hotels nationwide. The California Prime Produce and Orange County Orchards brands of pistachios were packaged in clear 6 ounce flexible plastic Ziploc bags, UPC Number: 8 10826 01116 2 with Sell By Dates of 7/30/09 and 8/30/09.

Consumers who have purchased these products are urged not to eat them. They can also report problems, including adverse reactions, to the FDA district office consumer complaint coordinator in their area of the country.

To date, more than 660 product entries have been included in the FDA’s list of recalled products because of their association with the recall by Setton Pistachio of Terra Bella Inc. For the most updated list of all the recalled products and pistachio products not subject to the recall, please visit: http://www.fda.gov/Safety/Recalls/MajorProductRecalls/Pistachio/default.htm

Basically, this appeared to be one of the rare cases in which a company was refusing to issue a recall despite FDA pressure. It is such a rare occurrence that we asked Pundit Investigator and Special Projects Editor Mira Slott to find out more:

Jan Caselli
Orca Distribution West
Anaheim, California

Q: FDA said it released a warning to consumers not to eat California Prime Produce and Orange County Orchards pistachio brands because Orca did not comply with its request to do so. Is this correct, and if so, why did you choose not to issue a consumer alert?

A: This consumer warning was totally vindictive on FDA’s part. We have been vilified by FDA. The FDA press release is erroneously worded to make it appear that Orca did not comply with FDA. I don’t have any recourse. I could hire the best attorney and nothing will change. We are wholesale distributors, and on April 6, I got notified from one of my suppliers, Specialty Commodities, that Orca received 50 pounds of Setton product in January and another 100 pounds in February that could have been contaminated with Salmonella.

It came to our supplier’s attention in their audit with the FDA. At that point, I did my own audit and learned a total of 340 bags were produced from those lot numbers. I immediately contacted our accounts that we sent this product to and they did a full blown recall at the retail level. In fact we not only recalled the 340 bags we believed contained the Setton product but, in an abundance of caution, we recalled all our pistachios that had a sell by date of 8/09 or 9/09 even though many of these came from other sources unrelated to Setton. This was a voluntary recall and still remains that way. I’ve had no reported incidents of illness nor have my customers.

At the end of April, FDA contacted me because they had been given a customer list from Specialty Commodities. I gave my customer list to FDA as they requested. FDA asked me to do a press release and I explained that my customers pulled everything from the shelves. I replaced the recalled product with new product at my own expense. Mind you, I didn’t know the exact origins of those 340 bags in question.

Q: Why not? Don’t you keep records?

A: I place a master order for pistachios from my supplier. I pulled every pistachio from that time frame. FDA implied I intentionally repacked contaminated pistachios. When I sent out product in January and February, I didn’t even know there was a problem. I was only notified from my supplier in April.

Q: Wouldn’t there have been a possibility that some of the products from your shipments could have ended up in consumer homes? Did your customers catch the products early enough in the process where consumers wouldn’t have had a chance to buy them?

A: To clarify, once my supplier, Specialty Commodities, notified me that I had received 150 pounds of Setton product, I notified my customers to pull all product with the sell-by date of 8/09 or 9/09 as those could have contained Setton pistachios. The small amount of Setton product we had received from our supplier was in that period.

Q: What percentage of your pistachios during that period came from Setton?

A: I had received other types of pistachios, not just from Setton. I have another supplier, Garvey Nut & Candy, that does not buy from Setton… ever. I gave FDA information on all orders that had pistachios and all the ones we recalled. There were pistachios that I didn’t need to recall, another 75 pounds I purchased in January and February in addition to that 150 pounds from Setton.

Garvey Nut & Candy has dealt with the FDA on this issue and assured me I did not receive product from them related to the recall. I pulled everything on the shelf with those sell-by dates regardless.

We use a six-month shelf life on our packages. We took no chances on whose product they may have received, so I instructed them to pull all pistachios shipped during that period. I instructed them to destroy and give me a count of product on hand and we did replacement. My audit says there were a few bags purchased.

Q: For perspective, how many bags did consumers purchase before product was pulled from the shelves? Not to belabor the point, but before this FDA consumer release, how would consumers, who may have purchased product from those January/February shipments, learn that these products were involved in a recall? How many consumers could have been at risk of eating contaminated product?

A: Out of the 340 bags shipped, our records document we recalled and destroyed 272. Potentially there could have been 68, six-ounce bags floating around out there. This is the basis for all the hype. We have no reported incidences of illness. I’m all for protecting our consumers… my God, I’m in a business where it’s so important to me.

Q: Isn’t it also relevant where these bags were sold and the fact they were travel-size, snacking portions, rather than large packages that might be stored for extended periods in a kitchen pantry? In other words, would it be possible or even likely, especially at this juncture, that any bags unaccounted for in the recall have already been consumed?

A: These are single portion, six-ounce bags. They are sold in hotel lobby shops and airport gift shops in individual serving size. If you had a bag in the pantry, you’d throw it away, but these are the kinds of bags that would be consumed right away. These items would not likely be brought home and stored for future consumption. These products are carried in travel gift shops. They are in one airport, Palm Springs airport, and the rest are hotel lobby gift shops. I handled things correctly, especially in this context.

By the way, FDA said “various airports”, when it was only one. People were looking at other airports to see if my products were there.

Here’s little Orca, and they used pictures showing pallets of Setton product. It doesn’t make any sense at all. They showed the boxes, which had nothing to do with our product. That doesn’t help the consumer. We’re wholesalers. When we buy Setton product, we put it in our own package. Consumers don’t see the Setton brand on a retail shelf, they see our brand.

Q: Earlier you pointed out that the pistachio recall was voluntary. Yet, many companies say they feel compelled to abide by FDA’s recommendations for fear of retribution. Are you claiming that FDA’s June 22 news release warning consumers not to eat your brands of pistachios was only done to punish you?

A: I’ve been maligned by the FDA because I said I didn’t know what good it would do to issue a press release. I was cooperative. It’s not like I refused in a belligerent way; I just didn’t see the value in it. What chance would there be of someone having the equivalent of four handfuls of pistachios from January or February? FDA’s actions were way overkill. I was shocked when FDA put out that release.

Of course, if it’s one bag or 1,000 bags that could be tainted, it’s just as important to take action, but it seemed too long in the stream of things to issue a consumer warning that would have any benefit. If this had anything to do with saving someone’s life, I wouldn’t hesitate to do a press release.

Q: When you asked your customers to destroy product, did you get a dump certificate or another type of official receipt to verify they actually did it?

A: I didn’t get a dump certificate, but I did get a dump list.

Q: The Western Pistachio Association (WPA) was quick to disassociate itself from your company by releasing its own statement June 23 following FDA’s press release:“This is not a new recall. Rather, it is an announcement due to a company that apparently did not comply with the FDA’s original recall requirements…The WPA does not condone any entity that knowingly shipped recalled product or withheld information related to the product recalls…” How do you reply to this?

A: I’d like you to make it obvious I did not knowingly repack contaminated product. I learned two months after it had been shipped. The source of the pistachios depends on the supplier I use. One of my suppliers doesn’t even buy from Setton. In those two months — January and February — I had received product from Specialty Commodities, and Setton is who they were buying from at the time. They ship me whatever product they have in the warehouse and I don’t care where it originated because I have confidence in my suppliers that I’m getting quality products.

Q: What you receive is not labeled delineating the product’s origins?

A: I receive bulk product from Specialty Commodities, which purchased it from Setton Pistachio. It doesn’t even say Setton on the labeling. By the time Specialty notified me that they had shipped me that product, it was April.

Q: Why the big time lapse from that time forward? FDA didn’t issue its press release warning consumers about your brands until June 22.

A: My customers are supporting me. They saw these reports and starting calling me asking, is this something new? And I said no. I feel like FDA is using me to put out another big blurb disparaging Setton. There had to be another agenda because this action wasn’t done for public health. The implications are nowhere near the facts. I have customers that can stand behind that. These are very large companies that don’t mess around. We don’t use pistachios in any other form except in shell; not in our mixes. There are other major suppliers that utilize Setton pistachios as an ingredient in a wide range of products.

The fact is that FDA didn’t contact me until April 21, and the day they came, I started turning over records. When they came to my door, it was the first time I heard from them. I had all the supporting documents, recall letters and evidence of the replacement shipments. I had already done my business with the pistachio recall and I thought this was all in the past.

I have a cover letter stamped May 20, 2009, from Alonza Cruse, District Director, FDA, that states they’ve completed their investigation and the agency concludes the inspection from April 21 closed under Title 21.

Q: What changed since that time?

A: On June 12, a Friday, the Los Angeles County investigator from FDA with the title of Consumer Safety Officer came back to my facility demanding more information. I was not there at the time. My employees said she barged her way in here to the packing room and demanded employees speak with her. She made them nervous.

My manager took her on a tour of the facilities. According to him, she said that our facility was immaculate and she couldn’t find anything wrong with it, but that’s not why she was there. My employees totally cooperated. She told me she interviewed my manager who said he didn’t have any science background.

I was actually out of the Los Angeles area, but my employees called me to let me know she was there. I asked her, what is the nature of your visit? I thought they were done with the investigation. She said they’ve expanded the recall, and your employees don’t have access to the records I need. I said my customers didn’t inform me of that, but I would fax her all the information she wanted, and she made an appointment for the following Monday (June 15) to meet with me at 1 pm. I pulled all the records and faxed them to her.

A series of unfortunate events followed. Apparently, she called on Saturday to change the time of our meeting to 10 am on Monday. She received everything from me on Friday night, and decided she’d just come earlier instead. I didn’t get the message because I was in the desert at the hospital because my father had a heart attack.

That Monday, I got a call from my employee that she arrived at 10 am. He put her on the phone and I said, I thought our appointment was for 1 pm. I can’t get there for a few hours because of the situation with my father, but she insisted, we have to do the meeting now.

She decided she wanted my customer list of anyone receiving product from September, 2008, to date. I explained that my supplier told me I didn’t receive any of those products until January 2009. It didn’t make sense. I wasn’t buying product from Setton in September 2008. I only got Setton product in small amounts in January and February of 2009.

Q: I’m so sorry to hear the news about your father… This must have been particularly trying while you were going through such personal trauma.

A: Thank you for your concern. My father is 82, and the surgery was complicated and painful but he survived it. It’s a miracle.

My conversations with the FDA consumer safety officer were frustrating to say the least. She seemed to be a young woman, although she said she’d been with FDA six years. She couldn’t answer even the most basic questions. When I tried to get clarification, she was curt: FDA isn’t obligated to tell you anything, she said.

She also intimidated my employees. At one point she entered the building at lunch time so most employees were out because the operation shuts down from 12 to 1. She took one of my Hispanic workers, having his lunch with another employee, out of his break. He was insulted. She ordered him to show her around the facility, that she had already visited at another time and grilled him about our customers and pistachios, none of which he is savvy to because he is a packer.

Then she pressured him into signing a document, which looked very legal in type, swearing to his statements. The employee phoned me, concerned about this. He put her on the phone. I asked her not to involve my employees. I would meet with her another day. She told me she had a right to be there and to conduct her business however she wanted.

Q: Doesn’t FDA have certain limitations on its legal authority during investigations?

A: My attorney, who deals in FDA cases, said FDA has the right to come into my facility anytime to investigate, but doesn’t have the authority to take workers off of their lunch break and require them to give a tour. And FDA does not have the authority to take photos without my permission, and I asked them not to.

I tried to protect my employees’ and customers’ privacy. She wanted private cell phone numbers and I didn’t think that was necessary. I had already provided her with sufficient contact information for the customers who got product. My customers told me another FDA representative contacted them and supported the fact I did exactly what I was supposed to do.

Q: Media across the country picked up on this story, questioning your company for withholding information from the public about possibly tainted product. Reports also suggested that you consciously sent recalled product that could have been contaminated into the marketplace. What impact is this having on your reputation?

A: After the news broke, Fox 11, Channel 4, Channel 7, and other media were staked out at my facility here at 7 in the morning. I came in at 8, showing the Fox 11 reporter all my supporting recall documents and my complete customer list, explaining that FDA had contacted them. She told the studio to correct the earlier coverage; that this was not a new recall, and that I never shipped Setton product since early this year.

Local news people were saying to me they were appalled by how my company had been presented, but unfortunately they were not rushing out to air the rebuttal interview. Fox 11 came back at 10 am to do another interview. I had them film in the factory, and they did show it that night, commenting that it had to do with the earlier recall and how we handled it.

The initial negative story got so much hype that it didn’t seem to matter. My Fox LA just continued to have the original bad news story on — the one they got at 7 in the morning when they didn’t have a chance to get comments from Orca. Later that day, at 8:30 in the morning, Fox 11 did air my interview, which vindicated me. The studio reporter told viewers, you can go eat your pistachios now. But the other stations were just airing the original inaccurate 7 am report. I understand the bad report was repeated again on the next day’s news cycle and had continued to remain on the websites.

At this point, I’m not sure how much damage this may have caused to my business and reputation. My customers are supportive and believe my brands will be OK.

I sense FDA’s actions were an attempt to prove their power. FDA has been heavily scrutinized for how it has handled food safety, and it wanted to show it was doing something. Even if FDA felt compelled to do a press release, they didn’t have to do it in such an inflammatory way, with a headline that implied that all our product should be avoided whenever it was produced. They took this to the fullest, like they were out to get us. I wonder if this FDA woman had a problem with me because I’m a woman in business and I know what I’m doing. She thought she had the right to intimidate my employees and to treat people however she wanted without any recourse. The way she spoke to me was disrespectful. I’m proud of what I do here. I operate my business with integrity, and I believe FDA’s behavior was absurd.

It is actually a very fascinating story with several key points:

First, on the substance of the matter, Jan Caselli is wrong, particularly when you consider that pistachios are a semi-perishable item that can be kept for an extended period. No matter what she did, no matter what her customers did, as long as even one packet reached consumer hands, there is the possibility that the pistachios are sitting in a purse or a pantry. Pistachios are semi-perishable, not a product like spinach that just rots. These consumers certainly should be informed of known risks — including that these pistachios may be part of the Setton Pistachio recall.

Second, on a food safety basis, Jan Caselli is right: The FDA’s action are absurd. As we mentioned here, the FDA makes the ridiculous assumption that its mere knowledge of a problem with one firm’s production of a product means that this particular product is more dangerous than some competitive product. In fact, discovery of such a pathogen is such a Black Swan Event that its discovery means nothing. You might test that firm’s product for a hundred years and never get another positive or, you might test its competitor’s products and find you receive positives just as frequently or more frequently. In either case, recalls do nothing to enhance food safety.

Add in the fact that this particular repacker sells only small bags at airports and hotel gift shops — so these are not giant bags or jugs that people are likely to keep for extended periods — and the fact that FDA issued its “warning” almost four months after the last of these baggies were shipped and that there are only 68 bags unacounted for and presumed sold and only a portion of the repacker’s pistachios during the period in question came from Setton — and the risk from this repacker’s products is exceedingly small. We must have a safe food supply indeed for FDA to bother with such a small matter. Indeed, next time FDA is crying about its lack of resources, we might remember that it sent staff not once, not twice, but three times to this little repacker who sells six-ounce packages in hotel gift shops. If the FDA uses its resources in this way, the FDA will never have adequate resources.

Third, Jan Caselli’s experience with the FDA field office operation adds to the experience we found with the Honduras Cantaloupe matter that local FDA officials are often tyrants. We have been told by leading experts in epidemiology that many border on incompetent and are unable to understand their own epidemiology, so they seem to fall back on bullying tactics. We have suggested that trade associations consider having epidemiologists and attorneys on retainer so that when confronted with a local FDA official, companies have a competent team pre-assembled to help them.

At very least it points to a neglected portion of crisis management programs most of which start with the food safety crisis — how about the crisis starting when FDA shows up at your door. What to do then?

Fourth, Jan Caselli is quite right about FDA being vindictive. The very headline of its release, “FDA Warns Consumers Not to Eat California Prime Produce and Orange County Orchards Brands of Pistachios,” is very different from the actual message in the release: “The California Prime Produce and Orange County Orchards brands of pistachios were packaged in clear 6 ounce flexible plastic Ziploc bags, UPC Number: 8 10826 01116 2 with Sell By Dates of 7/30/09 and 8/30/09. Consumers who have purchased these products are urged not to eat them.”

Blaring a blanket headline “not to eat” two brands, when the actual advice is very circumscribed, is clearly FDA’s way of saying that companies better obey FDA or FDA will make things much, much worse for the firms that don’t go along..

The problem is, of course, that Congress has, to date at least, specifically elected to not give the FDA the authority to order recalls and FDA’s own regulations state that it will only request a recall in “urgent situations” — a difficult case to make in this situation. The agency can scream “public health” all it wants. The odds that by issuing this warning, several months after the event, someone was saved from salmonella are, for all practical purposes, zero.

FDA seems to view the law and its own regulations as not so much a limitation on its powers but as an inconvenience, and it is prepared to come down hard on anyone who thwarts its will, even if it has no statutory or regulatory authority to act in a particular arena.

If FDA is aware of any product that is adulterated, it has authority to seize such food. Normally, it uses that lever to “persuade” companies to make recalls. In this case, all the product is long gone and there is nothing for FDA to seize.

Still, in America, just because an agency is powerful, it should not use its powers to threaten law-abiding citizens, and Jan Caselli was well within her rights in deciding not to issue a press release. There is something uncomfortable about FDA officials believing their role so important that they are prepared to go around the plain language of the law to find ways to “punish” those who refuse to comply with the desires of the FDA.

Many thanks to Jan Caselli for sharing her story.

Pundit’s Mailbag — Setting Policy vs. Setting Incentives

We have run many pieces related to Wal-Mart. Recently one of the pieces drew on an anecdotal experience whereby a manager, in complete contravention to company policy, demanded that employees work off the clock. The piece brought this note:

I am a regular reader and very pleased with the in depth analysis of the produce industry that you provide for such a great price.

I was so surprised this year when I called my regular salesman at Ballantine to place my initial order. I had bought from Ballantine for many years and had come to rely upon their quality to make sure none of my east coast customers were ever hurt by poor arrival. It simply never happened. The fact that they only shipped, for me at least, the best quality I could find indicates they had very high standards. I was very sad to hear what happened to them.

In your piece, Pundit’s Mailbag — Poor Management Attitude Leads To Food Safety Failures, you refer to Wal-Mart and their rogue managers that sometimes cause such heartache for the parent company. It reminds me of a truism. Have you ever entered a store and find that the employees are surly or rude or conversely very happy to help you? The attitude of the employees can almost always be traced back to the owner/manager of that establishment.

If there were no shortcuts taken by the top echelon of the store, the employees would never think to emulate those same shortcuts. If there is honor and loyalty on top, it always finds the way to the lowest employee. It is time for Wal-Mart to realize that the leaders set the examples. It doesn’t matter if their employee can speak English fluently; they can watch and learn. How they learn is up to the leaders. If you cannot practice loyalty, you must never expect it from your own employees.

The old ”We have always done it this way” has to be shown the door and a new mindset established. This pertains to all produce. Food safety has to be sought over the lowest price and safe food handling practices have to be respected as the new “bargain”.

— George Worthy
Worthy Enterprises
Gonzales, California

Much of our coverage of the struggle between Jim and Theresa Nolan and their company, The Nolan Network with Ocean Spray, has focused on issues of ethics and morality.

This letter points to the undeniable point that attitudes are set from the top and that leaders that behave in an ethical way set a tone for the employees and the company.

Yet this admonition to be ethical and not take short cuts, though good advice, strikes us as incomplete.

In the Wal-Mart situation, it still doesn’t answer the question as to what motivated the store managers to behave in violation of not only ethical behavior and company policy but in violation of the law. Certainly we have no reason to believe that the top executives at Wal-Mart in some way modeled that behavior.

As we discussed in the piece, the more logical assessment is that although the policy is clear, the incentives are divergent from the policy.

We discussed this issue in this piece in which we discussed how Domino’s Pizza had a clear policy that pizza delivery drivers should not speed, but also had an incentive structure and culture built around getting the pizza there in 30 minutes. In the end, the incentives to get there in 30 minutes won out over the admonitions not to speed, and someone died.

In business we find that employees listen carefully to ascertain what really matters to their bosses. In the Domino’s case, they heard that whatever the policy, there was no reward for not speeding and lots of reward for getting the pizza there on time.

When it comes to food safety, the problem is that outbreaks are so sporadic. All the produce out there is very safe by any rational standard, so the decision to adopt a higher standard than that the product must be legal is a somewhat arbitrary judgment call.

If we have a buyer and tell him to make food safety our top priority, what are we actually telling him? If a vendor walks in and says, “I have a 100-yard buffer around my farm,” and the next vendor says, “I have a 200-yard buffer around my farm” — all other things being equal, is the buyer obligated to buy from the vendor with the largest buffer?

Isn’t there any requirement to prove efficacy in enhancing safety?

And what about price? Suppose we acknowledge that a 200-foot-buffer vendor is safer. That whereas a 100-foot buffer will produce one illness every 100-million packages, the 200-foot buffer will produce one illness every 200-million packages. Does that simply disqualify the 100-foot buffer vendor? Does it mean we prefer the 200-foot-buffer vendor unless he is more expensive? How much extra should we pay for this additional margin of safety?

We were out in Los Angeles recently and had an opportunity to visit a lot of the ethnic independent markets, often selling produce for a fraction of the cost of the big chains. Even if we could demonstrate that the produce being sold by these independents was less safe than that sold by the major chains, it is not obvious to us that consumers, even if we sat them down individually and fully explained the matter, would not elect to take some additional risk in order to get their produce at half price or less.

Outbreaks have such catastrophic impacts on the industry that it is hard to imagine any price not worth paying to avoid the business disruptions and reputational harm caused by these outbreaks. Yet, at some point, someone will have to ask whether what consumers want is to pay higher and higher prices to make infinitesimal improvements in food safety. We somehow doubt it.

Many thanks to George Worthy and Worthy Enterprises for weighing in on this important issue.

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