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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



Fresh & Easy Must Go ‘Cold Turkey’ To Overcome Crack-cocaine-like Addiction To Discount Coupons

We’ve covered Tesco’s journey to America extensively and our most recent piece — Tesco Puts Up ‘Tens of Millions’ And Purchases British Transplants Wild Rocket And 2 Sisters Foods — Was A Secret Promise Made To Make The British Suppliers Whole? Did This Constitute Fraud Against Its Own Shareholders? — raised implications regarding Tesco’s behavior in taking over two British “transplants” that might justify investigation by the Serious Fraud Office.

Yet, for the US vendors, Tesco’s decision to acquire Wild Rocket Foods actually makes selling Fresh & Easy a more viable prospect.

As we mentioned in this piece, there were severe payment problems with Wild Rocket, and many vendors just didn’t want to tolerate the extended payment terms Wild Rocket was utilizing.

Now, presumably, vendors will get paid more quickly and thus more vendors will be interested in selling Fresh & Easy. Much to the chagrin of those vendors who signed on to do the work of “Category Champions,” Fresh & Easy had already abandoned its initial premises in vendor relations and started buying opportunistically.

This broader range of willing suppliers is the primary upside of ending a produce-procurement relationship that has poisoned relationships with the trade and led many good vendors to simply wash their hands of any relationship with Wild Rocket. We know of many vendors that Tesco didn’t want to lose and who Tesco executives sat down with to try and dissuade the vendors from stopping sales. In the end the conversations all went the same way: Tesco may be great, but Wild Rocket is actually my customer, not Tesco. If Tesco isn’t prepared to guarantee Wild Rocket’s performance on things like payment terms, we don’t want to continue.

Of course, being able to buy from more people is a great thing, but success will still depend on what they choose to buy and how they choose to price and market it. One of America’s most recognized experts on produce retailing has followed the situation closely and sent this note about Fresh & Easy:

Fresh & Easy has a big problem because it still has a customer base addicted to discount coupons. Staff members have told me that the executive team is aware of the problem and they would like to get off the expensive $3 and $5 coupons but when they try, when they stop giving away the discount coupons, their business drops 10-15%.

In my experience a retailer loses a great deal of “consumer respect” when it advertises a seemingly great price on a produce item and then provides a product that is less then their usual quality for the ad. This is especially true when they almost rub it in the face of the consumer by also offering their normal quality at a higher retail.

A good example is that they recently had 1# strawberries on ad at 99 cents. It was a branded berry for the ad, mediocre quality and size; they also had on display their typical Fresh & Easy brand berry, which was a nice size and very good quality at $1.99.

They do this quite often with grapes and, recently, with cherries. The cherries on the ad were in a bag, a small size and really bad quality; in contrast their regular cherries were in a clamshell and very good quality. The difference in retail was $1.30 a pound.

There are two issues here:

The discount coupons are like crack cocaine. If Tesco wants the Fresh & Easy concept to succeed, it has to bite the bullet and drop them. To compensate for the sales drop, it will need to spend a lot more money both on traditional advertising, promoting the concept, and on providing better value in the stores. It will also probably have to accept a full year cycle of unfavorable comparables until it has a new base to build from. We are not certain Tesco headquarters — or the City in London — have the stomach for that.

But the coupon-driven customers are probably what is making Fresh & Easy sell all this cheaper, low quality produce. It is creating a schizophrenic store in which both the high-end and low-end customers find much to be unhappy about.

Good old Sam Walton used to believe in selling branded products because he wanted to be the cheapest, and he felt consumers could judge that best in an environment of easily comparable product.

Bruce Peterson, when he took on the task of building a produce operation for Wal-Mart, tried to follow the concept and piggyback on the brand equity that branded produce operations have. He wanted a consumer — who hadn’t previously associates Wal-Mart with fresh produce — to see that the store sold Chiquita bananas and that they were less expensive than at other shopping venues.

The Fresh & Easy tactic smells of bait-and-switch; convince the consumers that you offer beautiful large cherries in clamshells, attract the customers in with an ad for discount cherries, and then let them see they are not discounted, they are different cherries, lousy cherries, and hope the consumers will buy your full profit item.

Maybe people with lots of free time will tolerate this treatment. But good customers, the ones who spend more freely to get what they want, when they want it, will only be attracted to a store once with this kind of shenanigan.

It is a conduct so profoundly disrespectful of consumers that it can only reduce the goodwill in which a retailer is held. It is the kind of short-term marketing that turns consumers off to big business generally and, in this case, to Fresh & Easy.

Will management in the UK give the new produce team the free rein to absorb some negative comparables while they cut out these short term games and treat consumers with respect?

Will the UK management tell Tim Mason to get off the crack cocaine of discount coupons even if it means another year of bad comparables?

If there is any hope of success, it depends on not managing this operation to get this Quarter’s numbers up.




The Oddity of “Performance Related” Pay At Tesco: Tim Mason Got Paid More Even Though Losses Grew At Fresh & Easy

We don’t know whether The Serious Fraud Office will elect to investigate Tesco to determine whether its executives and board perpetrated a fraud against its shareholders by failing to disclose promises that could have been made to the owners of British transplants that Tesco may have induced to open in the US. We discussed the matter in this piece: Tesco Puts Up “Tens of Millions” And Purchases British Transplants Wild Rocket And 2 Sisters Foods — Was A Secret Promise Made To Make The British Suppliers Whole? Did This Constitute Fraud Against Its Own Shareholders?

What we do know is that a lot of Tesco shareholders are irate that Fresh & Easy CEO Tim Mason gets paid so much money. The Financial Times put it this way:

Tesco has suffered a sharp shareholder rebuke as close to half of its investors refused to support its pay plans.

A third of the votes cast on the remuneration report went against the retailer, while a further 15 per cent of investors abstained in protest at what they regard as excessive bonuses for board executives.

The shareholder rebellion ranks among the five biggest in more than a decade, according to Manifest, the voting agency.

…This year, the company came under fire from a US union-affiliated investment group over executive pay, focusing on the loss-making US division Fresh & Easy and its chief executive Tim Mason.

The CtW Investment Group, which works with union-sponsored pension funds representing only a very small shareholding in Tesco, said on Friday that the vote represented a “stinging rebuke”.

These types of votes, where gadflies call for negative votes against required resolutions or place resolutions of their own before shareholders, will typically result in a tiny percentage of votes. Most share are held by large institutions — pension funds, educational endowments, mutual funds, etc. — and the trustees of these organizations are loathe to vote against management and in favor of some irritant that may have ulterior motives — like unions.

So when almost 50% of the shares either vote against or sustain on a matter that management would like to see passed, it points to serious concern with the way management is ruining the company.

A not insignificant portion of this concern resolves around the performance of Fresh & Easy. Change to Win clearly has its own priorities. It is a group that includes the union that represents many unionized supermarkets. Of course this self-interest is obvious, and if its arguments were not persuasive, it’s urging of to people to vote against this salary measure would have been disregarded.

However when its investment group issued a public letter to Patrick Cescau, the Senior Independent Director on Tesco’s board, its plea had impact:

We call on you, as incoming Senior Independent Director, personally to step forward at Tesco’s Annual General Meeting this Friday to describe the steps the board of directors is taking to exercise independent oversight of Fresh & Easy and restore the link between pay and performance for its chief executive, Tim Mason.

Poor performance and inadequate disclosure at Tesco’s US venture are at the heart of mounting investor concerns over the board’s strategic oversight and commitment to transparency and pay for performance. Last week’s report in the Financial Timesthat Tesco has acquired two key suppliers to Fresh & Easy has only exacerbated these concerns; by approving the acquisitions, Tesco’s board is effectively doubling down on a US venture whose viability is increasingly in question.

As incoming Senior Independent Director, it is incumbent upon you to address these concerns before they further erode investor confidence in the board. And as a member of the board’s Audit and Remuneration committees, you are well-positioned to do so. The specific issues we would like you to address at the AGM include:

• the steps the board has taken independently to assess the viability of Tesco’s US business strategy, including its recent decision to acquire the two suppliers;

• the performance metrics and targets that the board will disclose going forward to allow shareholders to evaluate Fresh & Easy’s future performance; and the steps the board has taken to ensure that Mr. Mason’s incentive pay, and that of other senior executives, will be tied to appropriate metrics that are both measurable and disclosed.

The Need for Greater Transparency on Fresh & Easy’s Targets and Performance

Since first announcing its Fresh & Easy venture, Tesco’s board has been unduly reluctant to disclose the unit’s performance targets or acknowledge the setbacks it has experienced, which have been serious. Fresh & Easy lost £165 million in the last fiscal year, on the heels of a £140 million loss in the previous year. As you know, Tesco previously projected that Fresh & Easy would break even by the end of 2009. Additionally, despite Tesco’s claim that Fresh & Easy is enjoying sales of $11 per square foot per week, we estimate that actual weekly sales are closer to $9 per square foot.

In the face of these disappointing results, the Remuneration Committee awarded Mr. Mason increased “performance related” pay specifically tied to the U.S. business. During the 2009/2010 fiscal year, his total remuneration grew from £3.8 million to over £4.2 million, or by nearly 13%. This £480,000 increase was entirely accounted for by increases in short-term cash and preferred share awards which, according to the Remuneration Committee, are supposed to be tied to operational performance for which Mr. Mason is responsible. Over the past fiscal year, when Fresh & Easy’s trading loss deteriorated by 18%, the short term component of Mr. Mason’s performance related pay grew from £1.8 million to £2.3 million, or by 27%.

Fresh & Easy’s continuing performance and disclosure problems have eroded the confidence of independent analysts and investors alike. Last month, MF Global downgraded Tesco from Neutral to Sell in part because Tesco’s “US strategy lacks credibility and transparency.”

A month earlier, Citigroup’s Food Retail analyst asked, “Should owners of Tesco be calling for a U.S. exit?” While noting that Fresh & Easy’s cash consumption is small compared to the company’s resources globally, Citigroup’s analyst warned that “there is no end in sight to the drag [Fresh & Easy] exerts.”

The apparent decisions to abandon the US market by 2 Sisters and Wild Rocket Foods, Tesco’s principal meat and produce suppliers, are the latest votes of no confidence in the US venture’s viability. As a consequence, Tesco was apparently compelled to buy out the suppliers’ US operations. Given that both firms are major suppliers to Tesco globally and established their US operations solely to supply Fresh & Easy, we can only conclude that they did not arrive at their exit decision lightly. We can only assume these effective insiders saw the writing on the wall and concluded that Fresh & Easy was unlikely to achieve critical mass to be viable.

Adding to our concern is the fact that the two acquisitions represent a departure from Tesco’s historic approach to retailing. Tesco has generally eschewed direct ownership of suppliers, preferring instead to forge long-term relationships with suppliers who are committed to meeting Tesco’s standards for quality and timely delivery. The commitment to long-term supplier relationships has allowed Tesco to maintain a high level of influence over the standards its suppliers adhere to, without having to undertake the costs, complications, and distractions of vertical integration.

Summary

Shareholders have long been concerned by the failure of Tesco’s management and board to provide shareholders with concrete targets by which to judge the viability of the US venture and the performance and compensation of its chief executive, Tim Mason. But there is no question that Fresh & Easy has grown much more slowly than planned and has continued losing money when it was supposed to break even.

With its two key suppliers abandoning the US market, the need to provide shareholders with full disclosure of concrete performance and compensation metrics has become acute. …

We consider ourselves capitalists at heart and begrudge Mr. Mason not at all for getting whatever deal he can from Tesco. However, we think Tesco’s board should realize that these kinds of compensation schemes bring disrepute to capitalism.

If Tesco wanted to offer Mr. Mason a base of $200,000 and then a chance to make up to, say, $50 million based on phantom equity in the Fresh & Easy division, we think most Tesco shareholders would be thrilled to see him max out his payout — after all, it would mean the shareholders had done well too. We would man the barricades to protect him against those who simply resent achievement.

But this section of the letter is telling:

Fresh & Easy lost £165 million in the last fiscal year, on the heels of a £140 million loss in the previous year. As you know, Tesco previously projected that Fresh & Easy would break even by the end of 2009. Additionally, despite Tesco’s claim that Fresh & Easy is enjoying sales of $11 per square foot per week, we estimate that actual weekly sales are closer to $9 per square foot.

In the face of these disappointing results, the Remuneration Committee awarded Mr. Mason increased “performance related” pay specifically tied to the U.S. business. During the 2009/2010 fiscal year, his total remuneration grew from £3.8 million to over £4.2 million, or by nearly 13%. This £480,000 increase was entirely accounted for by increases in short-term cash and preferred share awards which, according to the Remuneration Committee, are supposed to be tied to operational performance for which Mr. Mason is responsible. Over the past fiscal year, when Fresh & Easy’s trading loss deteriorated by 18%, the short term component of Mr. Mason’s performance related pay grew from £1.8 million to £2.3 million, or by 27%.

What it tells us is that this is an “insider’s club” and that Tim Mason, the son-in-law of a former chairman and a favorite of the current chairman at Tesco, is simply not going to be held accountable for his success or failure within the sphere of his operational responsibilities.

This makes the current Tesco board look like a bunch of lackeys, but it makes capitalism in general look like a highly suspicious activity to many people — and that is a real loss for the world.




Who Will Kroger Pick As New VP Of Perishables?

Kroger sent out news regarding a new position opening for its Group Vice President of Perishables:

Kroger Names Joe Grieshaber President of Dillon Food Stores

The Kroger Co. today announced Joe Grieshaber has been named President of Kroger’s Dillon Food Stores Division, replacing John Bays, who is retiring after 42 years with Kroger.

“Joe’s merchandising and management experience will serve our associates and customers well. We look forward to Joe’s leadership at Dillons as we continue to focus on improving our customers’ overall shopping experience,” said Rodney McMullen, President and Chief Operating Officer of Kroger.

Mr. Grieshaber, 52, began his career with Kroger in 1983 as a store manager trainee in Nashville. During his career, he has held a variety of leadership roles including meat merchandiser, zone manager, and vice president of merchandising. Most recently, Mr. Grieshaber has served as Group Vice President of Perishables Merchandising and Procurement for Kroger, a position he has held since 2003. In that role, he has been responsible for fresh and natural foods throughout Kroger’s family of stores. Mr. Grieshaber has actively supported community organizations during his career, including the Special Olympics. He and his wife Vickie have three grown daughters.

Mr. Grieshaber joined Mr. McMullen and the Kroger team in wishing Mr. Bays and his family all the best as he retires. “We are very grateful to John for his tremendous contributions to our company during his career with Kroger. Under John’s leadership, Dillons continued to grow and sharpen its focus on serving customers.”

We, of course, wish Mr. Grieshaber good fortune in his new position and look forward to working with him in that capacity.

Many in the produce industry, of course, will note that Mr. Grieshaber came up through meat, and we are bound to ask if this time won’t be the turn for someone who rose up through the produce side of the perishable business? We can think of at least one internal candidate who is well qualified for the job.




Wendy’s New Salads Look Like Winners: But Will They Help Reduce Obesity?

Wendy’s announced its new entrée salad offerings:

Wendy’s Raises the Bar on Salads
Four New Salads Deliver High Quality Ingredients, Freshly Prepared

Wendy’s, the chain that first brought the salad bar to fast food customers over 30 years ago, then pioneered the premium salad offering with their Garden Sensations line in 2002, is reinventing QSR salads once again. The new fresh and flavorful line-up — Apple Pecan Chicken, BLT Cobb, Spicy Chicken Caesar and Baja — is now available in restaurants nationwide.

The four reinvented salads combine real ingredients and fresh preparation to deliver an unrivaled taste in every bite. With Wendy’s new salads, customers can experience high-quality ingredients and flavor combinations similar to what they would expect in a café or casual dining restaurant, but with the great value and convenience they expect from Wendy’s.

The salads are prepared fresh in-store and topped with a variety of premium ingredients not usually found at fast food restaurants: spring mix with nine types of greens; fruits like cranberries and two types of apples; real blue cheese crumbles and shaved Asiago; fresh Pico de Gallo and guacamole; roasted pecans and warm chicken. Then each salad is served with Marzetti’s all natural and preservative-free dressings, made especially for Wendy’s, including Pomegranate Vinaigrette, Avocado Ranch, Lemon Garlic Caesar and Creamy Red Jalapeno.

The new line-up was first revealed to four test markets, Nashville, TN. Columbus, OH, Salt Lake City, UT and Richmond, VA, earlier this year and produced strong results. Sales of the salads exceeded expectations and customer reviews were highly favorable, spurring Wendy’s to launch the salads as a permanent menu item.

“We are raising the bar on salads again,” says Ken Calwell, chief marketing officer for Wendy’s.

“Wendy’s new premium salads offer the high-quality ingredients and choice that our customers crave. After a successful round of testing, we are thrilled to be bringing these new options to consumers nationwide.”

Wendy’s new salads are available nationwide at the suggested retail price $5.99. Prices will vary.

About the salads:

Apple Pecan Chicken Salad
A blend of fresh lettuce and spring mix salad greens, topped with real blue cheese crumbles, U.S. grown, hand-picked Granny Smith and sweet red apple pieces, roasted pecans seasoned with sea salt, cayenne pepper and sugar, dried Ocean Spray cranberries and warm grilled chicken. This salad comes with all natural, preservative-free Pomegranate Vinaigrette dressing.

BLT Cobb Salad —
A blend of fresh lettuce and spring mix salad greens, topped with two strips of Applewood Smoked Bacon, freshly chopped tomatoes, real blue cheese crumbles, chopped hard boiled eggs and warm grilled chicken. This salad is served with all natural, preservative-free creamy Avocado Ranch dressing.

Baja Salad —
A blend of fresh lettuce and spring mix salad greens, topped with natural cheddar and pepper jack cheeses, guacamole made with Hass avocados, freshly prepared Pico de Gallo, all natural tortilla chips, and Wendy’s famous rich and meaty chili. This salad is served with all natural, preservative-free Creamy Red Jalapeno dressing.

Spicy Chicken Caesar —
A bed of fresh romaine lettuce topped with vine ripened grape tomatoes, natural shaved Asiago cheese, French bread croutons seasoned with sea salt, black pepper and garlic and Wendy’s famous Spicy Chicken. This salad is served with all natural, preservative-free Lemon Garlic Caesar dressing.

Wendy’s will also continue to offer the Garden and Caesar side salads:

Garden Side Salad —
A blend of fresh salad greens, topped with grape tomatoes, matchstick carrots, and French bread croutons seasoned with sea salt, black pepper and garlic. This salad is served with the customer’s choice of dressing.

Caesar Side Salad —
A bed of fresh salad greens, topped with shaved Asiago cheese, grape tomatoes, French bread croutons seasoned with sea salt, black pepper and garlic. This salad is served with all natural, preservative-free Lemon Garlic Caesar dressing.

The salads look very nice. Personally we would like to see a wider variety of fresh produce on the salads — artichoke hearts and cucumber and peppers and onions, etc. — but they are certainly nice salads and a mile away from what fast food places were serving just a few years ago.

We did think it notable that the release made no mention of nutritional data — when presumably the pursuit of a healthy lifestyle would be a prime motivator in consuming these salads.

We requested the information and Wendy’s quickly accommodated our request:

Apple Pecan Chicken Salad
1 cup of vegetables
1/2 cup of fruit
1/2 cup of milk
4 oz. of meat

TOTAL CALORIES = 580 calories
(Calories include two packets of dressing)

Without Toppings = 350 calories

• Two dressing packets = 120 calories
• Pecans = 110 calories

Baja Salad
2 cups of vegetables
1 cup of milk
2 oz. of meat

TOTAL CALORIES = 740 calories
(Calories include one packet of dressing)

Without Toppings = 550 calories

• One dressing packet = 100 calories
• Tortilla strips = 80 calories

BLT Cobb Salad
1-1/2 cups of vegetables
1/2 cup of milk
5 oz. of meat

TOTAL CALORIES = 670 calories
(Calories include two dressing packets)

Without Toppings = 460 calories

• Two dressing packets = 200 calories

Spicy Chicken Caesar
1-1/2 cups of vegetables
1/2 cup of milk
3-1/2 oz. of meat

TOTAL CALORIES = 740 calories
(Calories includes two packets of dressing)

Without Toppings = 450 calories

• Two dressing packets = 210 calories
• Gourmet croutons = 80 calories

The salads are perfectly normal. It does seem to us that they point to the enormous difficulty of hoping that dietary change will help resolve obesity issues.

First, we note that a Wendy’s “double stack” hamburger, which includes two quarter-pound patties plus bun, cheese and veggies, comes in at 750 calories — roughly the same as the Baja salad and Spicy Chicken Caesar.

Although many who eat that hamburger might also eat French fries and drink a soda — there is no guarantee that people who eat a salad will forgo other foods and drink only water. We would have hoped it to be a major advance in the war on obesity if we could get everyone who bought a Wendy’s Double to buy a Spicy Chicken Caesar instead — but it would barely make a difference.

More generally, we went into MyPyramid.gov and put in Mrs. Pundit’s height and age. It advised that a woman of her height and age should have a total diet of 1,600 calories! If we revised it to put her down as highly physically active, the website advises that she should have a diet of 2200 calories a day.

So if she had the lowest calorie input of these salads three times a day and ate nothing else — she would still exceed the 1,600 calorie-a-day limit. If she had the salads on the high end of the range — and nothing else — she would also exceed the 2,200 calorie goal.

Now we don’t blame Wendy’s for this. There is absolutely no point in its marketing salads that nobody will buy. It is also true that consumers can drop the salad dressing and some of the add-ons such as pecans and tortilla strips and get the calorie count down.

Some will do so, but plenty more will have a side of fries or a Coke to drink or a Frosty for dessert, not to mention wanting a midnight snack or a Saturday night indulgence or a daily glass of wine… or two… or three.

Are we really being realistic in expecting people to eat in accordance with these public health suggestions and, if not, are we discouraging more people than we are helping?




New Scientific Report Shoots Down EWG’s ‘Dirty Dozen’ List As Misleading And An Impediment To Public Health

The amount of “research” that is publicized today is enormous, and much of it is more designed for political rather than scientific purposes.

Just recently, we asked how Yale could tolerate propaganda being dressed up as research in a piece we titled Flawed Yale Study On Junk Food Promotes Policy Without Evidence.

Earlier we analyzed the claims by the Center for Science in the Public Interest that it had identified particularly risky foods in a piece we titled, An Opportunity Missed: ‘Ten Riskiest Foods’ List Highly Deceptive, Worse Than Useless to Consumers — CSPI’s Quest For The Headlines Means America Misses Out On a Rational Discussion About Risk.

The Environmental Working Group (EWG) has been publishing a list of 12 produce items that one should always buy the organic version of, rather than a less expensive conventionally grown item. That “Dirty Dozen” list of produce items has been much publicized by the media. The argument goes like this:

• They assert — without providing evidence — that eating exclusively USDA-certified organic produce will result in better health.

• Then they acknowledge that doing this could be a financial burden on some families.

• So they recommend always buying organic on these “Dirty Dozen” items that are the produce items most likely to cause a problem.

It is so self-evidently a problematic recommendation that one doesn’t have to be a scientist to see its flaws.

In fact, four long years ago when we heard Joy Bauer on NBC’s Today Show pushing the “Dirty Dozen,” this led us to write a column in Pundit sister publication, PRODUCE BUSINESS. Here is an excerpt:

The recent appearance on NBC’s Today show of nutritionist Joy Bauer telling viewers which organic items to buy and which conventional items not to buy because of relatively high pesticide levels illustrates part of a cultural penchant for saying things for which there is no evidence.

Ms. Bauer told viewers it pained her “as a nutritionist” to advise it, but consumers who couldn’t or didn’t get organically grown potatoes should peel potatoes before eating them. This was fascinating because the reason this advice was difficult to give “as a nutritionist” was that she was acknowledging the substantial, valuable nutrients a consumer would lose by peeling the skin. Yet Ms. Bauer was asserting the danger of pesticide residue in the potato was sufficiently large to outweigh any benefit derived from the skin.

But she doesn’t know that. Nobody knows because there has never been a peer-reviewed, randomized, double-blind, lifetime-length, human study on the issue. As she revealed her list of the “dirty dozen” produce items one should buy organically grown versions of, this representative of the science of nutrition said pesticide residue on these items “can’t be good for us.”

Real scientists, however, don’t talk that way. “Can’t be good for us” is a surmise based on nothing. We know it is based on nothing because if Ms. Bauer had evidence some particular level of pesticide wasn’t good for us, she would, presumably, tell the relevant authorities and they would change the allowed level. But that would require her to give more than an emotive grunt, to actually have a methodology, to actually have done studies, to actually know something instead of jabbering on TV to sell diet books and her nutrition services company.

Life is a series of trade-offs. My brother had heard X-rays might cause cancer so when he went to the dentist, he declined to get X-rays. One day, severe pain in a tooth required an immediate implant. When my brother asked the dentist how such a severe thing could come out of nowhere, the dentist pointed out that with X-rays, they might have been able to deal with the problem when it was small and avoid the implant.

My brother was not wrong about X-rays. Scientists universally acknowledge X-rays are dangerous; that is why they give you lead aprons, don’t let pregnant women in the room, etc. My brother, smart though he is, was not weighing the relative costs and benefits of getting regular dental X-rays versus the risks of not getting them. Maybe the acute risk of an implant procedure outweighs the risk of increased cancer. Or maybe you get cancer from having foreign substances such as implants in your body.

But my brother is allowed to make these trade-offs and judgments for himself. The reason Joy Bauer is a menace to society and a threat to public health is that she assumes the mantle of a nutritionist and then purports to tell millions of viewers what to do. This has almost nothing to do with the relative merits of buying organics. Organic consumption is booming, but key purchasing motivators are increasingly related to issues of environmental sustainability, not to health claims, for which there is just no evidence.

If an individual wants to eat organically grown fresh produce in the pursuit of better health, more power to him. There are many things in life we do not have definitive information about, but “you pay your money and you take your chances.”

If the issue were simply a penchant for saying things without scientific support, one would expect the falsehoods to break equally on all sides of the arguments. But the chatter breaks decidedly to the politically correct side instead of the science-based side.

The flaws in this “Dirty Dozen” thesis are obvious:

1) There is no evidence that eating only organic fruits and vegetables makes any difference in human health. So the premise on which the whole thing rests simply dissolves.

2) Even if one posited that to be true, there is no evidence that eating only organic versions of these 12 items would have any impact on human health.

3) The ranking of the “Dirty Dozen” makes no sense because it is based on an assumption that every pesticide is precisely equal to every other pesticide in its effects. There is no attempt made to study the risk posed by any particular pesticide. It is like ranking light beer and hard whiskey each with a check off as an alcoholic beverage.

4) Without any testing or evidence, the assumption is made that the chemicals used on or naturally produced in produce grown organically poses less risk to humans than the synthetic pesticides used in conventional agriculture. Organic agriculture uses substances such as copper, and the plants may produce natural pesticides as they are stressed. The “Dirty Dozen” just assumes that organic will enhance human health.

5) Toxicologists often use the phrase: “The dose makes the poison.” Obviously everyone knows that pesticides, which are designed to kill bugs, can be dangerous. The “Dirty Dozen” assumes, without evidence, that the residues on food are significant enough to harm human health.

6) There is no attempt at cost/benefit analysis. If people get scared and won’t buy conventional items but find organic too expensive or unavailable or unappealing, then they eat Twinkies. Is this a net gain for their health? Without quantification of the claims underlying the “Dirty Dozen,” nobody can possibly know.

Although peer review is no panacea, it is notable that these claims saying health is enhanced by eating organic versions of these dozen produce items have never been subject to peer review.

We are hardly the only one to have noticed the frivolous nature of these claims. Jeff Gillman, an Associate Professor in the Department of Horticultural Science at the University of Minnesota and a prolific author and one with an inclination toward organics, had this to say about the matter:

Dirty Dozen?

Nobody in their right mind considers pesticides safe. They are, after all, poisons which we have created to kill things, be those things plants, insects, fungi, rats, or whatever. The idea that we could have foods with no pesticides on them is attractive. Now I’ve got to admit that, as a general rule, I don’t think that the levels at which most pesticides are found on foods is concerning. Our methods of detecting poisons are just too sensitive today and so we end up saying that a poison is “present” on a tomato or whatever even if it’s there at a harmless parts-per-trillion level. Still, I won’t deny that I’d prefer it if there were no synthetic pesticides on any food.

A couple of days ago, a report came out from CNN about the “dirty-dozen.” This is a list of the twelve fruits and vegetables which are most likely to have detectible levels of synthetic pesticide residues. Along with this list there is a suggestion that, when purchasing these fruits and veggies, you should select those that are organically produced whenever possible.

I don’t have a problem with this list being reported. In fact, I think it’s a good idea to give people all of the information that we can about pesticides. While I, personally, am not particularly afraid of conventionally produced fruits and veggies because of the synthetic chemicals which they may contain, I appreciate the fact that others might be. I do, however, have a major problem with the idea that organically produced fruits and veggies are necessarily safer than those produced with synthetics.

You see, organically produced food is not tested for residues of potentially damaging organic pesticides, and those same foods that are slathered by synthetic pesticides in non-organic growing systems are typically slathered by organic pesticides in organic systems, particularly if you’re dealing with foods produced using what has become known as “industrial organic production,” which fill most of our large grocery stores with USDA Certified Organic Produce nowadays.

These organic pesticides may be present at higher concentrations than synthetic pesticides and may have similar effects on humans, and even worse effects on the environment than synthetics (though it depends on the exact pesticides used and how often they are used of course).

The myth that organic foods don’t have pesticides used on them is one that really needs to die. No farmer, organic or non-organic, wants to use pesticides, and sometimes they can get away without using them. Certain crops are rarely sprayed regardless of whether they’re produced organically or not. Pesticides cost money and are dangerous, but when faced with the potential loss of a crop, producers will do what they need to do to avoid losing their crop, and if that means applying pesticides then so be it.

Organic farmers may choose to use different pesticides, and they might wait longer before they spray (although often they spray sooner because the relative efficacy of their sprays are inferior to synthetic sprays) but let’s not say that organically produced foods are free of pesticide reside. Just because we’re not testing for it doesn’t mean it isn’t there.

Alas, despite such sensible voices, the media is just a sucker for these types of lists and so every year the “Dirty Dozen” or the “Ten Riskiest Foods” get lots of headlines and lots of air play, regardless of their lack of scientific merit.

Into this wilderness of ignorance wades the Alliance for Food and Farming, a small but stalwart band dedicated to preventing the defamation of the farmer. It takes on the yeoman’s work of bringing together experts to look at widely distributed news stories to ascertain their veracity.

Recently, we ran a piece, Analysis of CDC Database On Foodbourne Illness: Most Outbreaks Not Associated With Produce; Foodservice/At-Home Mishandling Is Chief Cause Of Produce-Related Outbreaks that discussed how the Alliance had undertaken to study the degree to which food safety problems were caused at farm level.

Now the Alliance has undertaken to support a study on this whole “Dirty Dozen” concept:

NEW REPORT FINDS “DIRTY DOZEN LIST” MISLEADS CONSUMERS ABOUT DANGERS OF PESTICIDE RESIDUES

An expert panel of toxicologists, risk assessors and nutritionists has concluded that a report concerning pesticide residues and produce, known as the Dirty Dozen List, is misleading to consumers, is an impediment to public health because it discourages consumption of fresh fruits and vegetables and that there is no scientific evidence that pesticide levels found on produce pose any risk. Based upon these findings, there is no reason why a consumer should use this list to guide their purchasing decisions for fruits and vegetables.

More information behind these findings will be revealed July 15, when an independent report commissioned by the Alliance for Food and Farming will be made available to the media and the public. This report and corresponding efforts to provide consumers with better information regarding pesticide residues on produce was the subject of a free webinar held today for produce industry members.

“The Alliance for Food and Farming exists to provide farmers with a voice to communicate their commitment to food safety and care for the land,” said Matt McInerney, Executive Vice President for Western Growers and current chairman of the Alliance for Food and Farming. “Findings from this new report and the outreach tools surrounding its release will go a long way in helping farmers demonstrate they produce the safest food in the world and that the real danger to public health is that people are not eating enough fruits and vegetables.”

Along with the release of the report, the Alliance for Food and Farming will launch a new website devoted solely to the issue of pesticide residues on fresh produce and in assuring consumers of the safety of these healthful products. These items will also be the subject of a media webinar where reporters will be presented with findings from the independent expert panel review.

Participating in today’s industry webinar is Dr. Rick Reiss, of Exponent, Inc., who was the facilitator of the Alliance for Food and Farming’s Expert Panel Report. Dr. Reiss is an experienced environmental health scientist with expertise in risk assessment. He is currently President of the Society for Risk Analysis. Dr. Reiss and one of the report’s expert panel members, Dr. Carl Keene, Professor of Nutrition and Internal Medicine at University of California, Davis, will be on hand to present their findings to reporters during the July 15 press conference.

In addition, the Alliance for Food and Farming has turned to Elizabeth Pivonka, President and CEO, of the Produce for Better Health Foundation, to explain to reporters the challenges her organization faces in its work to increase consumption of fresh fruits and vegetables — a difficult task without obstacles such as those promoted in the Dirty Dozen report.

“Today’s webinar, the July 15 report release and launch of the new website are just the beginnings of a renewed effort to help farmers tell the story of the care they take in growing a safe, healthy product,” said Mark Murai, President of the California Strawberry Commission and Vice Chairman of the Alliance for Food and Farming Management Board. “The website and the information we present will become a great resource for the media, consumers, retailers and the entire produce industry. “

Murai explained that the Alliance for Food and Farming is a non-profit organization which operates on voluntary contributions. Its membership includes approximately 50 agriculture associations, commodity groups and individual grower/shippers who represent farms of all sizes and includes conventional as well as organic farmers. He noted that all funding for this effort has come from farmers or groups representing farmers.

Bob Whitaker, Chief Science and Technology Officer for the Produce Marketing Association, expressed his organization’s support for the efforts of the Alliance for Food and Farming to help provide consumers with facts and information on this important issue. PMA is a member of the Alliance for Food and Farming and provided funding for the development of the new website.

We wanted to understand better what this report is all about, so we asked Pundit Investigator and Special Projects Editor Mira Slott to find out more. Mira first contacted Dr. Carl Keen, MARS Chair in Developmental Nutrition, Professor of Nutrition & Internal Medicine, and a Nutritionist in the Agricultural Experiment Station at University of California, Davis.

Q: The “Dirty Dozen” starts with the premise that organic is healthier than conventional. Isn’t that a big leap? Is there any evidence that supports this?

A: You really have hit a major point. Effectively we need to address two different themes. We must start with the premise that organic is healthier than conventional. And yes, it is a big leap.

There is no data to show any additional health benefits. In fact, there have been two very large studies done on this recently, where data showed organically grown produce did not produce a superior health profile than conventional. One study, Winter and Davis in 2006, concluded it couldn’t find any real differences in the nutritional value of organic and conventionally grown.

And the same conclusion was reached in the Dangour study in 2009. No one has really demonstrated differences in health benefits, which doesn’t necessarily mean there aren’t any. Certainly you could create a scenario where food grown with pesticides might not be healthy, but that would be exceeding what anyone would sell in the marketplace.

What confuses people is that if asked whether there are any differences in nutrient composition of foods grown organically and those grown conventionally, the answer is you may see differences.

If insects are munching away at a plant and stressing that plant, one response is a higher concentration of defensive compounds [that the plant produces]. In that way, one can show chemical differences. It’s the next leap that’s missing. There are no studies showing the difference in polyphenolics translates into a measurable improved health profile. I’m not denying it’s possible, but I take the show-the-data approach.

Is there any scientific logic that it’s healthier, assuming there is something in the food inherently different, other than the absence of a toxin. The EWG never really makes the distinction. It is one thing to say there is a change in composition and another to conclude that somehow that profile is better.

A completely different argument is that organics are less toxic. Less toxic agents are hard to define, because you need to consider the increased risk for contaminants. It’s like saying that using non-pasteurized dairy product is safer, when there is an increased risk of contamination. The typical response is that it’s safer if you’re careful and you do it right, but that doesn’t change the fact that there’s still an increased risk. What frustrates me is that these groups don’t get into risk-benefit analysis.

Q: How valid are tests for determining pesticide residue levels? Perhaps more important, is the difference in pesticide residue levels significant enough that people should be concerned?

A: We’ve become absolutely smashing when doing analytics. We can measure molecules, where there is no risk associated with it. The trouble now is with people making assumptions that if this amount is bad, any amount is bad. People have deficits of certain vitamins in their diets, which could result in serious health problems, although consuming too much represents a risk. It’s fallacious to say any amount is bad.

Trying to prove a negative is kind of worrisome; there are people who will argue, why take a chance on consuming any pesticides? How do you know if you did a bigger study it would show a particular environmental agent caused harm? Essentially, you can do that forever. We can’t let fear of the unknown paralyze us.

Assume you have pesticide residues, if you peel a banana the more important number is what amount is in the food when consumed. Even if you ask if one item has more pesticide residues than another, it’s not necessarily a relevant question if the amount of residue is not significant enough to cause risk.

The EWG doesn’t have perspective. I want to throw my hands up when the underpinning issue is not addressed. Yes, if I peel the item, I’m exposed to less residue, just like if I wash the item I’m exposed to less residue, but what’s the difference if it’s not enough to matter either way.

Q: Even if there are studies done that show higher residue levels, how does that translate to human health, whether eating these 12 items as organic will do anything good, or in fact create an impediment to consumers who might otherwise eat the conventional produce?

A: I don’t think good comprehensive studies have been done to prove that it scares consumers away. But what we do know is that increased consumption of fruits and vegetables lowers risks of diseases. No matter how we look at it, at best, fruits and vegetables have been hovering around a few servings a day for 20 years, and produce consumption may have even declined recently, and this is well recognized as a public health issue. If I was a consumer and didn’t have a lot of information but heard these plants have a lot of problems, even if I knew there was a list of 12, I wouldn’t memorize that list, so I’d just be panicked about all of them.

People just hear a message that something is bad. I find the “Dirty Dozen” terminology troublesome; the implication not really stated is that the government is not doing its job. We would be outraged if all these foods in the grocery store were unsafe. Once that idea gets seeded, it’s very scary.

Is there really harm in propagating this un-scientific information? Think of vaccines. Tens of thousands of parents stopped immunizing their kids because of a very questionable report now taken back by the journal, with the author quietly retreating. A lot of damage can happen with erroneous reports. People are extremely well intentioned, but consumers often over respond and don’t weigh unintended consequences.

In theory, the “Dirty Dozen” list hits lower economic groups the greatest because organic usually is more expensive. Rules around what is organic are complicated, oftentimes arcane. Just because it’s natural doesn’t necessarily imply it is better or safer. Some of the deadliest compounds are natural compounds. That’s not the bright light; that’s not the right debate.

The EPA is constantly evaluating the efficacy of pesticides, and has taken some off the market when there are scientific concerns. There are differences in pesticides and herbicides. If you have a pesticide with emerging scientific evidence to present risk, then focus on it but you still need to look at the amount of exposure.

In my mind, there needs to be rational decision-making in place. I’m sure the folks behind these lists are well intentioned, but they are unable to present reasonable data and evidence of why there is a risk factor.

I can show some people will die with seat belts on, but we know that the overall effect of wearing seat belts saves thousands of lives. We have no data that pesticides at these levels have shown any damage. Our society has become so adverse to risk, we’ve lost perspective of cost-benefit ratios. I do developmental research, and we study these produce compounds, which are protective for the cardiovascular system. Any impediment put in the way of consuming fresh fruits and vegetables is detrimental to consumers’ health. We need to find ways to increase consumption.

To get further perspective, Mira contacted Dr. Richard Reiss, Sc.D., Principal Scientist, Chemical Regulation and Food Safety, Exponent, Alexandria, Virginia.

Q: What is your assessment of the “Dirty Dozen” list?

A: The list is based on findings of residue, but it doesn’t take into account toxicity of levels found. There are well-accepted and routinely applied methodologies to assessing risk associated with chemicals. EWG made no effort to connect the residue levels to a health risk on accepted methodology. The reason they haven’t done this is that EPA has already done it. EPA heavily regulates pesticide residues. It is the most stringent of any risk assessment process in this country and probably the world.

From someone who studies this, I can tell you that for every pesticide, EPA requires an extensive battery of toxicity tests, and EPA uses those results to restrict application rates; whether certain pesticides can be used on a certain fruit, the rates that can be applied, intervals and ways to apply.

Q: Doesn’t there also need to be a risk assessment in terms of what alternatives are used? For example, couldn’t certain organic growing methods increase risks?

A: The jury is still out on using manure for fertilizer, but it may be more important to focus on the quality control system of a farm. Plants have there own defense mechanism of chemicals they use to deal with a pest. Organically grown foods are stressed and the plants produce more natural pesticides to combat pests, so it’s not so straight-forward. Our conclusion is there is no difference in health benefits between organic and conventional.

The risk of not eating fruits and vegetables, however, is an obvious risk. There can be no clearer evidence when talking about diet and epidemiology that produce is good for you. Studies have shown for 20 or 30 years that those people that eat diets rich in fruits and vegetables are healthier. And if you make the correlation that those people who consumed all those fruits and vegetables were exposed to more residue levels, it is obvious the risk associated with not eating them is vastly higher than the risk of residue levels you might consume. That is a point that people miss.

Q: What is your involvement with this report?

A: As the principal scientist at Exponent, I helped put together the panel of scientific experts and served as an organizer to facilitate the study.

Q: What would you say to those who discredit the report by saying that its sponsor, the Alliance for Food & Farming, is biased?

A: Science is an objective process that speaks for itself. Attacking the messenger, in my view, is an admission they don’t have scientifically based arguments in response.

First the Alliance did a webinar for the trade, you can see the slides here. Then the Alliance released the study entitled A Review of the Science on the Potential Health Effects of Pesticide Residues on Food and related Statements Made by Interest Groups, you can see that here.

The basic conclusions of the study panel:

• The EWG’s list may reflect a relatively accurate ordering of the listing of the 47 commodities from the “highest” to “lowest” levels/numbers of pesticide residues. However, the list is misleading to consumers in that it is based only upon exposure data while remaining silent about available information on the assessment of the toxicity of pesticides presented in the diet, and, as such, does not provide a basis to assess risk. There also is no acknowledgment of the fact that the data show that the residue levels detected are, with very rare exception, below or, more likely, well below, the legal limits established only after calculating the potential total nonoccupational exposure that an individual might experience to a pesticide approved for use on an agricultural commodity. Furthermore, it is disconcerting that EWG does not describe its methodology in sufficient detail so that others can duplicate their analysis and independently judge its credibility, particularly given the widespread press coverage that its Shopper’s Guide to Pesticides has received.

• The Panel does not agree with EWG’s assertion that there is a “growing consensus among scientists” that the amount of pesticide residues currently found on food constitutes a significant public health issue. While there will always be some uncertainty associated with evaluating the possibility of small health risks, the available scientific data do not indicate that this source constitutes a significant risk.

• The U.S. EPA’s current process for evaluating the potential risks of pesticides on food is rigorous, and health-protective. The EPA’s testing requirements for pesticides used on food are more extensive than for chemicals in any other use category, and include testing targeted specifically to assess the potential risks to fetuses, infants, and children.

• The currently-available scientific data do not provide a convincing argument to conclude that there is a significant difference between the nutritional quality of organically grown food and food grown with conventional agricultural methods.

That the Alliance is doing good work by supporting this type of study is without doubt. We can hope that by providing fair-minded assessments of things such as the “Dirty Dozen,” the media will become less likely to give credence to such claims.

At very least, we can hope that the media sees another side to the story and that it will try to incorporate the scientific viewpoint into their articles and reports.

It is not an easy task and the road will doubtless be long, but The Alliance for Food and Farming is walking in the path of righteousness as it begins down this road.




Pundit’s Mailbag — Wal-Mart or Walmart?

Lately we have been getting some helpful e-mails on our spelling; they all relate to one company:

Hey Jim, Walmart does not have a capital M.

Jim Vangelos
President & CEO
Polymer Logistics
Arro Grande, California

It is always a pleasure to hear from Jim Vangelos. He has written us before, including here. Plus we have had opportunities to mention his father, Al Vangelos, Chief Executive Officer of Sun World on several occasions, including here, here, here and here.

Jim Vangelos’ note expresses a commonly held perception in the food industry, but it is not quite correct. In the interest of helping everyone make sure that their correspondence is properly written, we will explain the situation:

Yes, the hyphen has disappeared from the brand and from the stores and with it the capital “M” in Mart.

However, the legal name of the corporation remains Wal-Mart Stores, Inc.

So, if you are referring, as we typically do, to a corporate policy or corporate initiative, it is appropriate to use the corporate spelling.

Wal-Mart puts it this way:

Wal-Mart Stores, Inc. (NYSE: WMT) is the legal name of the corporation. The name “Walmart,” expressed as one word and without punctuation, is a trademark of the company and is used analogously to describe the company and its stores. Use the legal name when it is necessary to identify the legal entity, such as when reporting financial results, SEC filings, litigation or governance matters.

Even so, we would add a caveat to the matter… Trademarks involve more than letters; they can include the font, the color and other attributes commonly called “trade dress,” and they are inherently marketing tools.

Although, in general, we try to honor requests to call people what they prefer — so if they prefer we will call someone “Jim,” even though their name is “James,” or “Dave” even if their name is “David” — and we even respect unusual punctuation as in e.e. cummings or k.d.lang, when it comes to corporate trademarks, we don’t necessarily feel obligated to assist in the organization’s efforts to promote itself. So we don’t write out Coca-Cola in its distinctive script, even though it is a trademark.

Wikipedia deals with the issue through its style guidelines:

Follow standard English text formatting and capitalization rules, even if the trademark owner considers nonstandard formatting “official”:

• avoid: REALTOR®, TIME, KISS

• instead, use: Realtor, Time, Kiss

Although these rules can get tricky — for example traditional usage would call for all sentences to begin with a capital letter, but there is a fierce dispute as to whether it makes any sense to capitalize, say, iPod. The Chicago Manual of Style says that one should either recast the sentence or capitalize the “i” in iPod. We would generally rewrite the sentence.

Supervalu legally changed its name to all capitals, but we don’t write it that way because it makes Supervalu look exceptionally dominant on the page. Although that was probably Supervalu’s goal in changing its name, the whole issue of utilizing trademarks reminds us of a short but famous poem by Stephen Crane, known to most as author of The Red Badge of Courage.

A Man Said to the Universe
by Stephen Crane

A man said to the universe:

“Sir, I exist!

“However,” replied the universe,

“The fact has not created in me

“A sense of obligation.”

So we are free to resist the entreaties of corporations to use our pages to promote their trademarks.

In any case, the distinction between a trademark and a legal corporate name is worth remembering. We thank Jim Vangelos for helping us to discuss this commonly confronted issue.

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