There is a big battle in the UK between ASDA and Tesco due to a Tesco ad campaign claiming the lowest prices:
ASDA KICKS OFF WAR OF WORDS WITH TESCO
Supermarket attacks rival’s price comparison ads and accuses its sales of ‘stalling’
Retail colossus Asda has taken a swipe at Tesco’s aggressive range of Price Check ads — insisting that the retailer is on the offensive in order to cover up poor sales.
Tesco has been on the front foot for the last few weeks, with a comprehensive cross-media blitz suggesting that it has the upper hand on price compared to rivals Asda, Sainsbury’s and Morrisons through its online Price Check service.
But at Asda’s music, video and games conference in Leeds this week, business unit director Mike Snell told a crowd of entertainment suppliers: “It’s no accident Tesco has been attacking Asda on price — their sales are stalling.”
Snell also pledged to improve Asda’s supply chain and its in-store offering, while issuing a stark ultimatum: “We will only back those who back us.”
He added: “That’s not meant to be a threat. You have got to decide whether we are the right partners for you. If you want to work with us, you’ve got to do it now.”
To us, whatever the reality of who is less expensive in the U.K., the business unit director’s comments, “We will only back those who back us,”portends what is likely to happen in the U.S. if Tesco’s operations take off. There will be increasing pressure by both Tesco and Wal-Mart to make suppliers choose which company they wish to work with.
Part of the issue is confidentiality — how can these companies “partner” with suppliers working with their blood enemy? Part of the issue is getting product. If a supplier is short or has a special offer to make, its retail partner will want it all.
And part of it is looking for suppliers with razor-sharp focus. They don’t want vendors to build a centrally located warehouse; they want warehouses built convenient to serve them.
The business will never be the same once these two begin a real battle.
As promised, Monday, July 23, 2007, marked the first day of mandatory compliance audits for the California Leafy Greens Marketing Agreement. Lots of articles, such as this one from San Diego featuring Jack Vessey — who we heard from here — also show a lot of confusion about the agreement. Read this quote from the article:
Because 98 percent to 99 percent of California growers and processors of leafy greens have signed the agreement, nearly all leafy greens in the U.S. food-distribution chain will be covered. Northern and Central California growers supply 90 percent of the leafy greens that Americans eat during the summer and fall, and Imperial County and western Arizona supply 90 percent of those products consumed in the winter and spring.
Well, perhaps, if you, bizarrely, define California to include western Arizona! Define nearly all as 90% and exclude product not in the “U.S. food distribution chain” because it is sold directly to consumers, sold via farmer’s markets, sold directly to restaurants, etc.
The launch of the mandatory compliance audits is a milestone but it also indicates what a Catch-22 the industry is in.
If these standards and audits are truly rigorous, we have to assume that some percentage of handlers won’t be in conformance. We can hope for them to quickly rectify the problems but, still, if a standard is rigorous, it virtually means that a lot of people won’t be able to meet the standard.
That is what bell curve distributions are all about — everyone can’t get an A+.
If everyone passes, it will raise questions about the rigor of the standards.
Yet, if everyone doesn’t pass, the failing producers do not have their product condemned; they just aren’t listed as conforming to the agreement. That product, in all likelihood, will find its way to market, if not through a major retailer, then through wholesale markets.
So while we need handlers to fail to prove the rigor of the standards, if any significant number fails, the usefulness of the agreement to reassure consumers and regulators is lessened because less product is covered by the agreement.
Which points out a major difference between an FDA standard, such as what PMA and United have called for, and the California Marketing Agreement: If a company doesn’t meet FDA standards, it can’t sell the product and can be forced to recall product produced in violation of FDA standards.
If a company doesn’t conform to the California Marketing Agreement, the company gets punished, but the product gets sold and eaten.
This seems a powerful argument for why we can’t stop our efforts with the California Leafy Greens Marketing Agreement.
Many historians believe that the success of the American republic can be traced back to the unique characteristics of George Washington. His decision to retire back to Mount Vernon after two terms set a precedent for the peaceful and regular transition of power that characterizes our nation.
If tyranny is not our concern, the personal characteristics of the first Executive Director for the newly established Center for Produce Safety — whose launch we dealt with here — will also establish the patterns likely to determine if we are to have a great new industry institution.
It is a crucial position and UC Davis has just posted the job description for the CPS Executive Director, which it can be found here.
We urge Pundit readers to think hard about who they could urge to apply for this position. Many millions of industry dollars are being spent here, the future of our products may be decided here, and the credibility of industry efforts on food safety are likely to rest on the shoulders of the person selected for this position.
It is a chance to make a real difference. Do you know someone appropriate for such an opportunity? Speak up now. Applications are due by August 13, 2007.
Just as the inspectors began working in California to actualize the California Leafy Greens Marketing Agreement, our piece Marketing Of California Leafy Greens Will Cause Consumer Confusion brought this letter of clarification:
First of all, thank you for your positive reporting on the Leafy Greens Marketing Agreement and for your kind works about my hiring and my presentation at the recent PMA Foodservice Conference in Monterey. Your description of me as a “dynamic presenter” bought me some serious street cred with my two teenage sons who, if asked to describe me, would probably not use the word dynamic!
I do, however, have a concern about your report headlined “Marketing of California Leafy Greens Seal Will Cause Consumer Confusion.” I don’t begrudge you your right to have a strong opinion about the marketing of food safety efforts — you’ve obviously thought long and hard about this. Reasonable people can have different points of view, of course. Perhaps, given the fact that the California leafy greens industry received an incredible amount of negative publicity last year because of the E. coli crisis, members of the industry can be forgiven for thinking that it might be helpful to let consumers know what they’re doing to regain lost confidence.
Still, that’s a debate that we can have. I do take issue with you attributing to me a statement that the California Leafy Greens Marketing Agreement will be mounting an advertising or PR campaign behind a consumer seal. This is simply not true. The Marketing Agreement is an unprecedented commitment to food safety by the leafy greens industry. Our mandate is to conduct audits and to raise that food safety bar for the industry. Our members will communicate that to their customers through the service mark that is being released next week for use on bills of lading, and we will communicate with the trade as well to let them know what that service mark signifies. This is what I presented at the foodservice conference.
And, as I also said in Monterey, a certification mark that members can voluntarily use to identify product grown to the marketing agreement’s standards is under consideration, although no timeline has been set for its release. But no, there is no plan, not even in the discussion stages, to mount a consumer campaign behind that mark. It is not the mandate of this organization to conduct such a campaign. If, at the Foodservice Conference, I gave the impression that that’s what we are considering, then I chose my words poorly.
Thanks for letting me clarify our position on this point.
— Scott Horsfall
California Leafy Greens Marketing Agreement
Scott’s letter is much appreciated. We had an opportunity to chat for a moment at the PMA Foodservice Conference with Bruce Obbink, longtime President of the California Table Grape Commission and, together, we kvelled at what a good job Scott did in his presentation.
Alas, Scott is now in a position where he can deliver a four-hour scripted address and the media reports will only focus on the off-hand response to a question. In this case, Scott was asked if he anticipated having his organization expand its mandate to cover other produce items.
Scott wisely declined to take over the whole produce industry and then went into an off-hand explanation of the “long–term” expectations for the California Marketing Agreement and, specifically, for the use of its seal or mark.
And to clarify, Scott did not detail any specific plans, but he did mention the words “consumer advertising” and spoke of the seal eventually appearing on “consumer packaging”. This is the way we characterized his statement:
At this stage there is no problem. Scott explained that the insignia would be used on letterhead and invoices and things of that sort. Yet, he also said the expectation is that the insignia will be used in the future on consumer packaging and will be advertised to consumers.
So what we said was that there was an “expectation” — not a plan — that in the fullness of time, this mark would wind up on consumer packaging.
We take it from Scott’s letter that he didn’t intend to even characterize the matter to that extent — so we are glad to correct the record.
Yet, here, we think Scott may be going too far when, speaking of a consumer advertising campaign behind the mark or seal, he writes that “It is not the mandate of this organization to conduct such a campaign.”
We wish that was so. But the reason this is an issue so essential to resolve is that the documents that define the California Leafy Green Products Handler Marketing Agreement are biased toward consumer efforts in this area.
First, it is not even clear if the board has the power to stop companies from using the mark on their products. Here is what the documents say:
Section B. LICENSURE OF OFFICIAL MARK
The Board will license Signatory Handlers to affix the Mark to their leafy green products, subject to the inspection, verification, suspension and revocation requirements specified in this Agreement. A Signatory Handler’s compliance with the Best Practices is a condition precedent and subsequent to the Signatory Handler’s entitlement to affix the Mark to the Signatory Handler’s leafy green products
Note the words “will license” — in law there is a chasm between “may license” and “will license” — we read this and do not see how the board could deny a signatory who is in good standing the right to use the mark on its consumer packaging. This section begs out for amendment.
And as far as consumer advertising and education efforts go, they are specifically allowed:
ADVERTISING AND SALES PROMOTION
Pursuant to Food and Agricultural Code section 58889, the Agreement may advertise and promote consumer recognition of the Official Mark and its meaning.
QUALITY IMPROVEMENT AND EDUCATION PROGRAM
Pursuant to Food and Agricultural Code section 58893, the Agreement may engage a program of educating the public and producers concerning the Best Practices.
There may be no plan to do any of this, but it is most decidedly part of the mandate of the organization.
Scott’s letter references the poignant feelings of many California growers that wish to defend the honor of their state:
Perhaps, given the fact that the California leafy greens industry received an incredible amount of negative publicity last year because of the E. coli crisis, members of the industry can be forgiven for thinking that it might be helpful to let consumers know what they’re doing to regain lost confidence.
We can understand the feeling, but would urge everyone to let it pass. The more the subject is talked about, the worse it will be for California product. Time heals all wounds and if the industry does the right things to avoid another outbreak, the events of last fall will fade in memory.
If there is another outbreak and especially another serious illness or fatality, the seal will be immediately discredited anyway and, in fact, the more aware consumers are of the seal, the more likely they are to lump the whole industry together.
In fact, the industry is likely to be accused of deception. Why? USDA seals on meat, for example, actually represent that a USDA inspector looked at that meat carcass that has been stamped.
This California Leafy Greens Seal only means that a handler is a signatory to an agreement and is willing to be inspected. Even if every handler is inspected, each bag of product is not inspected.
It is a completely different message from a USDA meat inspection and another example of how the use of this seal in consumer marketing will cause confusion for consumers.
We appreciate Scott’s letter and the opportunity to clarify the record. We also note the difficult job he has in navigating a multitude of interests and emotions. There is a great photograph of Scott Horsfall on Governor Schwarzenegger’s motorcycle. It is good he got some practice; he is going to need to do some superhero stunts to make this all work out. We wish him every good fortune.
Our piece, An Industry Discussion: Pros And Cons Of A PMA/United Merger, brought a torrent of comments that we will be dealing with for some time to come. We thought, however, that we could profitably begin our discussions with these two letters. The first from a respected retailer:
“Begin with the end in mind”, I recall from a noted business course. As a retailer, my primary concern is my customer. As I go to market everyday, I have an obligation and expectation from our vendor partners that they are taking care of everything on their end to ensure my (our customers) are safe and satisfied ( yes, it appears the burden is one sided but this is reality).
Any organization representing this industry should have this as a common goal. The people in our industry need to value this representation as more than just an annual trade show that gives them a break from the daily routine. There should be one voice that represents the multitude of complex concerns this industry faces.
More than one voice is confusing to its members and the public at large. I have to believe there is a business model from another industry that has figured this out. Obviously the past has shown this is not an easy task, but I applaud the effort of both PMA and United for bringing it to the forefront again.
— Dick McKellogg
Lowes Food Stores
In his best selling book, The Seven Habits of Highly Effective People, Stephen R. Covey did urge us to “Begin with the end in mind” and, in a sense, this is the argument for a marketing and supply-chain-driven association.
One could argue it is the only argument for a vertically integrated association — that we all share the ultimate consumer and thus all are committed to delivering value to that consumer.
Yet Dick’s reference to the business model of other industries is telling. Because, by far, most industries do not have vertically integrated associations; they have horizontal associations.
In other words, FMI, the supermarket association, and NRA, the restaurant association, do not attempt to give a unified voice to the supply chain. They just represent their members. There is nobody from, say, Coca-Cola or Kraft on the board of FMI or NRA.
The crux of the problem with regard to PMA and United is really a matter of industry expectations. On the one hand, PMA, as the larger association, surveys its members who may not be members of United and it gets feedback saying, “PMA should represent us in Washington.”
On the other hand, United, although more focused than in the past, having defined its representation function as the representation of vendors of produce sold in commercial quantities, is not quite prepared to make a complete break with its vertical past. That is why it has retailers on its board. That is why it did its deal with FMI on the trade show side.
One conceivable solution to the industry’s dilemma would be for PMA to be the marketing and supply chain vertical association and for United to take on a horizontal role representing growers or growers and packers before government.
But these things are easy to say and hard to do. What about United’s wholesale members? Just abandon them? What about the new processors United just merged with — do they get tossed aside?
To say it is to realize how unlikely any of these things are to happen.
And United has great programs. People love the annual leadership class, and United got great reviews for its Cornell executive development program. These are not specifically “grower-shipper” programs, and they are only vaguely related to government relations.
In an industry as diverse as ours, where issues such as PACA separate buyers and sellers and issues such as NAFTA separate growers in one state from growers in another, there are issues and times when we need to be united and speak with one voice, and there are issues and times where we need to disagree and fight it out with each other. We need industry mechanisms flexible enough to do both.
Many thanks to Dick for his thought provoking letter.
Our second letter comes from a well-known industry leader who has worked the inside of this issue for some time:
Regarding your column published July 20, 2007:
Allow me to quibble with one paragraph that particularly bothered me. You wrote, “For one thing, this is a far more professional process. In the past, industry members have met together and tried to ‘make a deal,’ but few had any experience in creating new association structures, merging associations or starting new associations. This time United and PMA voted to bring in a professional in this area to help facilitate discussions. They brought in a neutral party, experienced in these matters, being paid by both sides who can help structure the process, keep emotions in check and help organize needed information — a person who does not feel the weight of history in every decision.”
“This ‘professionalization’ of the process in and of itself significantly improves the likelihood of a successful conclusion to the process.”
Having been on a previous committee representing PMA in merger discussions, I can attest that the entire process was extremely professional and deferential. At no time were we there to “make a deal”. That statement is a disservice to me and to all the other volunteers who spent countless weeks thoroughly examining this issue and going through an exhaustive process of analyzing everyone’s input. Was there some concern over “turf” among the professional staff? Of course. Was there some distrust over some of the hidden agendas? Of course. However, I can assure you that the volunteer leaders of both PMA and UFFVA were very candid with each other.
Never did “emotions” dictate the outcome. The vast amount of time was spent discussing member needs and how these could be met by either merging or by realigning priorities. The bottom line always was maximizing member benefits and what would serve our great industry the best. True that we did not use a professional facilitator, but our objective was not to reach “a successful conclusion to the process”. In fact, we took a strategic rather that tactical approach to the question of whether a merger was in the best interests of the majority of our respective memberships.
As your article explained, then, as it is now, the reasons for having two organizations grossly outweighed merging the two. In fact, the only overwhelming reason given to merge at that time was to serve the short-term financial needs of the very largest exhibiting companies who had redundant booths at the respective trade shows. However, by reviewing the varied needs of a vertically integrated industry, it became rapidly apparent that the varied responsibilities of government relations coupled with the multiplicity of opinions in the industry were anathema to a merger.
This process also begged the question in my own mind: Is there a need for a national lobbying organization? I don’t pretend to have that answer, but I will say that there are plenty of questions in my mind. Is a large, effective organization speaking with a united voice critical during a crisis; whether it be food safety or Alar or immigration or whatever a good thing? Absolutely. However, I question whether you can fund such an organization on any basis other than on an ad hoc basis because we have so many players with so many contrary agendas playing.
As your article says, Florida tomatoes and Washington apples have competing agendas on NAFTA. That’s only one of a myriad of instances where key players who would/should fund such a national lobbying organization will naturally split on issues. You can’t have it both ways to be buddies on one issue and enemies on another. Thus, an ad hoc approach is probably the only way of doing things. We both know that this is incredibly inefficient and expensive. So what to do?
The easy answer always was for PMA to “give” a large donation to United to cover their lobbying expenses. As you say, what if that effort was to protect PACA and there was a retailer Chairman who’s CEO was on the FMI board that was funding knocking PACA out? (That’s a real life example, by the way.) Do you think that this would provide some anxious moments for the PMA Chairman? Might not some very large players start questioning why their money might be spent lobbying an issue that is contrary to the best interest of that same large player.
Like any organization, the 80/20 rule applies to trade associations, whereby 20% of the firms account for 80% of the net revenues that fund association activities. Thus, you would have a handful of stakeholders that would exercise outsized influence on United because they would have such a large stake in deciding what issues got lobbied and which ones were watered down.
Additionally, when there are multiple agendas at play, the resulting product becomes muddled into a meaningless mess. You see examples of this coming out every day from various trade organizations.
I don’t have any quick answers for you, but you have pretty well identified the conundrum faced by the volunteer leadership of both organizations.
Many thanks for this “insider’s view” and a Pundit apology for any implication that previous negotiations were unprofessional. That wasn’t our intent. Our point was only that a professional facilitator, with experience in merger talks between trade associations, has been brought into this process and that this may change the dynamic. It may not. We will all see.
Our correspondent raises an interesting point regarding the need and feasibility for a national lobbying group:
This process also begged the question in my own mind, is there a need for a national lobbying organization? I don’t pretend to have that answer, but I will say that there are plenty of questions in my mind. Is a large, effective organization speaking with a united voice critical during a crisis; whether it be food safety or Alar or immigration or whatever a good thing? Absolutely. However, I question whether you can fund such an organization on any basis other than on an ad hoc basis because we have so many players with so many contrary agendas playing.
Bruce Peterson would often address questions regarding the associations this way: If this association did not exist, would we create it now?
And this is the core issue on United’s lobbying efforts. Clearly growers feel a need for a lobbying group, but most large growers seem vested in their local groups if, like WGA or FFVA, they are large enough to handle D.C. representation. Our letters at the Pundit consistently show that the most passionate United support will come from produce growers and shippers in states too small in the industry to have a well-funded national lobbying presence.
But these are small states, and if California and Florida growers don’t want to fund a national effort, it is hard to imagine that enough funds will be raised in smaller states.
Our correspondent also points out how problematic it is for an association to give money to another association to fund lobbying it may not, itself, agree with.
In the end, those who want to be represented in D.C. probably should pay for it themselves, and they should do so explicitly, funding government relations efforts.
Our first letter-writer today spoke of other industry business models and, truth be told, in most industries the big companies fund trade association government relations efforts because they feel it more effective to do lobbying through an association than directly.
In other words, are there vital issues that, in the produce trade, would justify large companies each spending a million dollars a year on lobbying but they would rather have a national produce trade association perform the lobbying because they want 20 small farmers brought up before Congress to testify rather than one agricultural behemoth?
It seems not. Which indicates our second letter-writer may be on to something. We may have to rethink what it means for “the produce industry” to be represented in Washington, D.C.
Considering this issue has been dealt with for decades, we shouldn’t expect quick answers. The goal, after all, is to find the right answers, not the fast ones.
Many thanks to our two correspondents today.