As we headed off to Monterey to attend the PMA Foodservice Conference, we made a point about the way the generic promotion program was going to be dealt with in that venue:
…the efforts being conducted are not designed to build consensus. At PMA’s Foodservice Conference, for example, PMA was kind enough to set up a National Fruit & Vegetable Research & Promotion Board “Town Hall” session to discuss the generic promotion program. These “town hall” events are really panel discussions and, as we’ve written before, not really the most effective way to hold anyone’s feet to the fire and get answers.
The odd thing about this program, however, is that the moderator of the session is none other than Mark Munger.
Now Mark, Vice President of Marketing at Andrew Williamson Fresh Produce, was also the chairman of the Produce for Better Health Foundation, while the generic plan was being developed. Mark has been one of the plan’s primary advocates traveling to association meetings to advocate on behalf of the plan.
Now we know Mark and, as we wrote here, we like Mark and we are sure he will try to be fair. Inherently, however, his advocacy role is in direct conflict with a moderating role.
It is like saying we are going to have a panel discussion on whether we should have health care reform and Barack Obama will be our neutral moderator. It makes people feel that the fix is in.
This is really a shame because people either ignore what they perceive to be a biased process or they throw up their defenses. It means that the opportunity to persuade is lost.
This “town hall” was considered a separate event and PMA basically outsourced to the Produce for Better Health Foundation the time and space to let the foundation present its case as it chose.
To Mark’s credit, he saw the absurdity of moderating the session and with the support of Elizabeth Pivonka, President of the Produce for Better Health Foundation, some quick changes were made.
We would instead have a quasi debate. Mark would speak in the affirmative as to the merits of generic advertising in general and of this proposal in particular and explain how and why decisions were reached and alternatives rejected. Lorri Koster, Co-chairperson at Mann Packing Co. and the current Chairman of the Grower Shipper Association would present concerns over the economic viability of additional assessments from the perspective of production agriculture and specifically from the perspective of a segment of production agriculture that has low barriers to entry and tends to solicit rapid supply responses.
They were kind enough to ask the Pundit to facilitate the discussion, a role we were honored to fulfill.
Although we wish we had a few months’ notice to let the industry know what we were going to do so we could have had a larger attendance, we had about 80 people, most of whom stuck out a two-hour session after a long day of PMA Foodservice sessions.
We have little trouble saying that it was the most illuminating of the many sessions that have been done on the generic promotion program. Mark came off very well, articulately representing the hopes and dreams of those who yearn to see a healthier world and hope that the fresh produce industry can experience prosperity as it leads us to this healthier state. Lorri Koster came across as a poignant figure, representing production agriculture as Atlas upholding the world and questioning both the fairness and the practicality of increasing his burdens.
Your friendly Pundit was there to question assumptions, point out contradictions and to clarify the issue at hand.
The feedback on the session was very good and, to a large extent, this was because Mark left his PowerPoint, brimming with lots of details about the proposal, in his briefcase. This left us free to examine first principles and led to a discussion that might have actually persuaded someone — one way or the other.
Just the fact that the stage wasn’t monopolized by advocates of the plan served to open the minds of those who were opposed. It is amazing sometimes how far people will go to help you if they feel they are being given a fair shake.
This is why we are pleased that PBH has released headline results from its industry survey regarding the generic promotion program. We urge PBH to release the complete and unabridged report, including all cross hatches it received from the research company.
The results are not surprising. We have a good intelligence network here at the Pundit and it has been clear for some time that most people in the industry are not engaged on this subject, so the response rate would be very low. It wound up being only 8%.
This is not surprising. First it is a long term and abstract issue. Second, most people can’t do anything about the subject. Unless they are the owner or CEO of their company, they get no vote. So it will be very difficult to ever engage the great mass of salespeople and buyers and operating executives throughout the industry. Most view the proposal for generic promotion as more a condition in the marketplace that they may or may not work under than a choice or decision they have to make. Third, the survey was not carefully directed to the decision-makers after vetting their e-mail addresses. No effort was made to make sure the e-mail was received. We are confident half the e-mails wound up in spam folders or were never forwarded to the proper authority.
Of those who did respond, many didn’t have strong opinions either way. Partly this was people holding their cards to their vest. In other cases, it is that nobody is authorized to really have an opinion. If you are dealing with a publicly held company or one with multiple partners or, perhaps, one with a large private equity holder, positions on this may require an actual vote. Until that happens, nobody has authorization to declare a commitment or even an inclination either way.
Of the 248 people who responded, 45% said they never heard of the idea and 47% were undecided.
Although these types of surveys have a response bias to the sponsoring organization — surely most of the PBH Executive Committee members quickly voted — the proposal predictably lost. The default position is the status quo; those who advocate a change are the ones who have to persuade. We are a long way from that: 31% of those responding (77 people) were opposed and 22% (55 people) were in favor.
Win, lose or draw, PBH should release all the info it has. Such transparency will build confidence and make people feel we are an industry working together to figure this out as opposed to one group trying to force it on the rest of the trade. Besides other people might look at the data and see things that have been missed; it is all upside and no downside.
A friend reminded us that it took 10 years to get the National Mango Board set up. This project will do better if viewed in the context of a long term effort to learn and discuss rather than a speeding train with a schedule that must be adhered to.
Wal-Mart announced a major new sustainability initiative by holding a “Sustainability Milestone Meeting” and issuing a statement from Wal-Mart CEO Mike Duke:
Remarks as Prepared for Delivery by Mike Duke, President and CEO of Walmart
SUSTAINABILITY MILESTONE MEETING
July 16, 2009
You know as I was listening to Leslie’s presentation, I was just struck by how far we’ve come over the last few years and how sustainability has become a part of everything we do.
We continue to learn so much from our network of partners …our suppliers, NGOs, and of course, our associates.
I appreciate that so many of you made the trip to be with us today. I also appreciate all of our associates watching from locations as far away as Brazil.
And I have to tell you what I most appreciate is what this record attendance says about our common commitment to sustainability.
It feels good to work together and make a difference, doesn’t it?
But you know, this wouldn’t be a Walmart meeting if I didn’t ask us to look beyond the headlights once again and take a long view into the future.
Most of you know that I’m a retailer at heart, but you may not know that I’m an engineer by training. My Georgia Tech roots run deep… And the engineer in me likes data. I like research. I like metrics. More than anything I love an elegant process for arriving at innovative solutions that are both profitable and sustainable.
As I look back at our progress over the past few years, I think the most difficult challenge has been to measure the sustainability of our products. It’s in this area where I believe we can truly accelerate and broaden our efforts in sustainability… with a more elegant, research-driven approach.
Today, I will lay out the groundwork of a major new initiative that can lower costs, raise quality and bring customers the products they need to save money and live better in the 21st century. And, in the process, make us a better business.
I believe this initiative will allow us to build on all we’ve already accomplished together. And it will enable us to get ahead of several shifts that are changing our businesses and our world.
Let me first talk about why we should get in front of these changes. And then I’ll move into the specifics of the announcement.
Society’s expectations of retail are changing in three fundamental ways.
First, the economic crisis is leading consumers toward a “new normal” where they not only want to save money… they are getting smarter about saving money.
Second, in this age of social networks and instant information, consumers increasingly expect more transparency on the products they buy. Today, there is no trust without transparency.
There’s a third…longer term shift. We’re living in a world of increasing population and decreasing natural resources.
6.7 billion people now live on this planet. Every second, four new human beings are born and the global population is expected to reach more than 9 billion by 2050.
That means new generations of consumers in both developed and developing countries will aspire to the middle class. More families at kitchen tables around the world will count on fresh foods and quality products to make their lives better.
At the same time, the human footprint… our use of natural resources for everything we grow, eat, drink, make, package, buy, transport and throw away… all of that is outpacing the earth’s capacity to sustain us.
As more people reach for a better life, there will be even greater pressure on the planet’s resources…with more energy usage, more carbon emissions and more waste.
Experts, like the World Wildlife Fund, say that if our environmental demands continue at the same rate, we will need the equivalent of two planets to maintain our standard of living in another 25 years.
Now does that mean we have to turn off the lights and move into caves?
Does it mean that all those people who aspire to the middle class, don’t deserve a better standard of living?
Of course not.
Fresh food…quality products…shouldn’t be available to only a privileged few, they should be available to all. That’s what we do. It’s who we are…our brand, our mission in this world.
What this does mean is that we have a responsibility to our customers and to society to keep the “live better” part of our mission relevant in a changing world.
Last week, I had a chance to visit one of our local return centers, and it was just amazing to see thousands of products that were defective or did not live up to the quality standards that customers expect from us.
I look at every item and I think of it as a disappointed customer. What could be worse for sustainability than having to buy the same product twice?
Customers do want low prices, but not by sacrificing quality. They want products that are more efficient, that last longer and perform better. And increasingly they want information about the entire lifecycle of a product so that they can feel good about buying it. They want to know that the materials in the product are safe… that it was made well… and that it was produced in a responsible way.
We do not see this as a trend that will fade. Higher customer expectations are a permanent part of the future. At Walmart, we’re working to make sustainability sustainable, so that it’s a priority in good times and in the tough times. An important part of that is developing the tools to help enable sustainable consumption.
Now remember when I said that the engineer in me likes data and an elegant process? That’s what we need.
Despite all the work that’s been done, we see only bits of information, but not the full picture across the supply chain. We don’t know the patterns, hidden costs and impacts of the products we make and sell. Nor do we have a single source of data or a common standard for evaluating the sustainability of products.
If we want to help the customer of the future live better, we need that data. We need that big picture view.
So today, we’re announcing that we will lead the creation of a Sustainability Index. The Index will bring about a more transparent supply chain, drive product innovation and, ultimately, provide consumers the information they need to assess the sustainability of products.
If we work together, we can create a new retail standard for the 21st century.
We will roll out the Index in three main steps. Some of the work will start right away. We expect the rest to happen over the next five years.
As Step One, Walmart will ask all of its suppliers to answer 15 simple, but powerful questions on the sustainable practices of their companies. In the United States, we will ask our top-tier suppliers to answer quickly. And internationally, each country will work with its suppliers on developing timelines.
Like our customers, we now expect more of ourselves and our more than 100,000 suppliers around the world.
So as a first step in moving forward with the Index, our buyers will provide every supplier with a tool to assess their own sustainability.
We will ask questions around four areas:
1. Energy and Climate
2. Material Efficiency
3. Natural Resources
4. People and Community
Under these buckets you will see familiar questions. For example, you will see that we are asking our suppliers to know the location of 100% of their factories and we are asking if they’re measuring their greenhouse gas emissions.
You will also see some new areas that we are asking about, including water use and solid waste.
These are not complicated questions, but we have never systematically asked for this kind of information before.
You’ll hear more from John Fleming about this in a minute.
We see these questions as an important first step in assessing the sustainability of suppliers. But for true transparency, we need an additional, much larger tool for assessing the sustainability of products.
So today, we’re also announcing as a second step that Walmart is helping to create a consortium of universities that will collaborate with suppliers, retailers, NGOs and government to develop a global database of information on the lifecycle of products…from raw materials to disposal.
Walmart has provided the initial funding for this Sustainability Index Consortium, and we invite all retailers and suppliers to contribute. We will also partner with one or more leading technology companies to create an open platform that will power the Index.
Let me say this clearly. It is not our goal to create or own this Index. We want to spur the development of a common database that will allow the consortium to collect and analyze the knowledge of the global supply chain.
We think this shared database will generate opportunities to be more innovative and to improve the sustainability of products and processes.
It will shift us from traditional retail thinking that is centered around the things that we know we can control….like transportation, packaging and sales…to the invisible impacts on the environment. This will give us a much deeper understanding of the opportunities to making consumption more sustainable.
The third and ultimate step of the Index is to translate the information stored in the database into a simple tool that informs consumers about the sustainability of products.
This will provide customers with the transparency into the quality and history of products that they don’t have today. It will help put them in control and consume in a more sustainable way.
In a moment, our chief merchants for Walmart, Sam’s Club, and International will tell you more about what this means for them. You’ll hear more throughout this meeting about work that’s already underway. And you’ll learn about products that represent the kind of innovation we hope the Index will multiply.
Now I know that some of you may be thinking… the last thing we want is a series of new, costly scorecards that add little value …with hundreds of iterations for hundreds of different retailers.
I couldn’t agree more.
So, we will be working with all of you to develop the right information. We want to make sure the database focuses first on the product categories where we can get the most value and benefit. And information that is proprietary will remain that way.
I want to make an important point here.
We can’t do this without partners. This cannot and should not be a Walmart effort. It can’t be a U.S. effort. To succeed, the Index has to be global. It has to involve many stakeholders as vital partners.
I want to call on all of us… retailers, suppliers, NGOs, and universities… to work together to create the Index, to share our information, and to shape it into a powerful tool.
In the end, it’s all about doing an even better job for our customers.
If we get this right…
…the Index will drive higher quality and lower costs.
…It will mean more innovative products that lower carbon output…that promote clean air and water…and that create a more transparent and responsible supply chain.
…And it will make us even stronger businesses, bringing us ever closer to our customers and what they need to live better …20…50…100 years from now.
The gist of the proposal is to do three things: First, ask 15 questions of suppliers; second, work to establish a consortium of universities that will establish a database of the lifecycle impact of products; and third, make this information available and meaningful to consumers.
We’ve spent a lot of time working on sustainability. In sister publication, PRODUCE BUSINESS we recently gave an award to Publix for its practice of sustainability. In the Pundit, just the other day, we were praising Gills Onions for “sustainability done right.”
We’ve heard that Mike Duke is a man of integrity, so we accept at face value that Wal-Mart means good for the world by promulgating this initiative.
It is, however, a train wreck waiting to happen and will probably do real harm to the world.
Partly the problem is with the initiative itself:
First, sustainability — dealing with three separate spheres of responsibility, the social, environmental and economic — is inherently complex and value-driven. Despite many attempts to posit an analogy between sustainability efforts and accounting balance sheets, there is no “triple bottom line” that can reasonably be said to represent sustainability efforts. We’ve lectured on this subject at Cornell University, as part of the Cornell University/United Fresh Produce Association Executive Development Program and have often referenced this academic paper that made the argument powerfully.
This means that any attempt to create an index meaningful to consumers at large will be inherently deceptive. One product may emit more carbon, but the company producing the product may not treat its employees well and may engage in tax-evasion… and there is no number or rank that can make those things add up.
Second, the data Wal-Mart hopes to collect literally changes all the time. Harvesting at different times of the day may impact carbon output; this week the plane carrying the product is a passenger jet, next week it’s a freighter. This week orders were low, so the shipment was an LTL that took a circuitous route; next week the orders were better, they filled a trailer and went direct.
Third, the focus on the product is itself deceptive. Very often the environmental impact of a product depends on the consumer. Do they drive in an empty car to pick up the item? What about the cooking and storage procedures in the house? It is very common for these things to account for 25% or more of the impact of the product on the environment.
Fourth, the initiative is biased against the economic sphere of sustainability, and this will make the world a poorer place. Take a look at the initial 15 questions being posed to Wal-Mart suppliers:
SUSTAINABILITY PRODUCT INDEX: 15 Questions for Suppliers
Energy and Climate: Reducing Energy Costs and Greenhouse Gas Emissions
1. Have you measured your corporate greenhouse gas emissions?
2. Have you opted to report your greenhouse gas emissions to the Carbon Disclosure Project (CDP)?
3. What is your total annual greenhouse gas emissions reported in the most recent year measured?
4. Have you set publicly available greenhouse gas reduction targets? If yes, what are those targets?
Material Efficiency: Reducing Waste and Enhancing Quality
1. If measured, please report the total amount of solid waste generated from the facilities that produce your product(s) for Walmart for the most recent year measured.
2. Have you set publicly available solid waste reduction targets? If yes, what are those targets?
3. If measured, please report total water use from facilities that produce your product(s) for Walmart for the most recent year measured.
4. Have you set publicly available water use reduction targets? If yes, what are those targets?
Natural Resources: Producing High Quality, Responsibly Sourced Raw Materials
1. Have you established publicly available sustainability purchasing guidelines for your direct suppliers that address issues such as environmental compliance, employment practices and product/ingredient safety?
2. Have you obtained 3rd party certifications for any of the products that you sell to Walmart?
People and Community: Ensuring Responsible and Ethical Production
1. Do you know the location of 100 percent of the facilities that produce your product(s)?
2. Before beginning a business relationship with a manufacturing facility, do you evaluate the quality of, and capacity for, production?
3. Do you have a process for managing social compliance at the manufacturing level?
4. Do you work with your supply base to resolve issues found during social compliance evaluations and also document specific corrections and improvements?
5. Do you invest in community development activities in the markets you source from and/or operate within?
Note that there is not one single question devoted to the supplier’s prosperity? No concern that capital might be wasted. Yet capital is always the scarcest of resources.
This is a crucial component of sustainability and one often neglected.
When we went to Oxnard to see the Gills Onions Advanced Energy Recovery System, we were thrilled but, not insignificantly, we were thrilled because Gills could convert this onion waste to energy and earn a 20%-plus return on doing so.
Before they encourage suppliers to waste money to score better on some metrics and thus impoverish the world, we hope that the executives at Wal-Mart would remember this: If Gills Onions had built the EXACT SAME system but it cost ten times as much, it would not be an example of sustainability. It would be a horrible waste of resources that could be used for many beneficial purposes.
Yet there is nothing in the way Wal-Mart proposes to go about this to make us think it would score against a company actively wasting money to get a better “mark” on this index.
In other words the index, if it ever happens, will not represent some kind of “natural” level of sustainability but, instead, the result of decisions to spend money to achieve a higher ranking. In many cases, however, this higher ranking will be achieved at the horrible, humanity impoverishing cost of wasted capital.
If Wal-Mart doesn’t change this, it will actively make the world poorer as capital is wasted to improve one’s grade on the test.
There should be a 16th question on that survey to suppliers. It is the most important question Wal-Mart could ask: “Are you earning a high enough return on capital that you can justify raising new capital to expand your business? This happens to also be the question Wal-Mart could most directly help its vendors with.
Beyond the specifics of the plan, it is sad to see that Wal-Mart executives have bought into some kind of Malthusian despair.
When Mike Duke says:
At the same time, the human footprint… our use of natural resources for everything we grow, eat, drink, make, package, buy, transport and throw away… all of that is outpacing the earth’s capacity to sustain us.
He is simply expressing the conventional wisdom. Yet such thoughts are not new. US Appellate Judge Alex Kozinski wrote a great review of The Skeptical Environmentalist for the Michigan Law Review, and he began it with a critique of the famous Club of Rome report:
Unless you’ve been frozen in carbonite or are hopelessly gullible, it must have occurred to you at some point during the last three decades that environmental activists are exaggerating just a bit when they claim that, unless we dramatically change our way of life, we’ll soon see the end of civilization as we know it.
I’m not sure when these doomsday predictions got started — probably they go back to Malthus and beyond — but I first became aware of environmental Jeremiadism in college in the early 1970s, when tout-le-monde were reading a little book called The Limits to Growth. Authored by a group of scientists going by the pretentious name “The Club of Rome,” the book was designed as a shrill wake-up call to a complacent humanity headed for environmental disaster.
Filled with charts, tables and diagrams, and supported by computer-generated predictions (a new-fangled tool at the time), The Limits of Growth made some very concrete and highly alarming predictions: “there will… be a desperate [arable] land shortage before the year 2000”; we would run short of gold by 1979, of silver and mercury by 1983, of petroleum by 1990, of zinc by 1988, of tin by 1985 and of natural gas by 1992.
The book’s forceful message was that we were headed for a world-wide calamity, and must fundamentally — and immediately — change the way we live. Nor was this merely a question of physical survival; at stake was humanity’s very soul: “The crux of the matter is not only whether the human species will survive, but even more whether it can survive without falling into a state of worthless existence.”
“Wow! Heavy!,” as we used to say in those days. The book definitely made you feel guilty about taking a trip in your gas-guzzling, air-polluting, resource-wasting Millennium Falcon to go hiking in the Great Outdoors. It was almost enough to make you walk the twelve parsecs to the Forest of Endor and back.
With the benefit of hindsight, we know that The Limits to Growth was a bunch of hooey; virtually nothing the Club of Rome predicted with such alarm has come to pass. Of course, its members did not then come out with a big press release: “Oh what fools we were! We apologize for worrying the world unnecessarily.”
Instead, doomsday predictions proven wrong by the passage of time are quietly forgotten, denying the public the important lesson that one ought to be wary of predictive models because they often reflect, not reality, but the preconceptions of the model’s creators.
We’ve been through all this before. Julian L. Simon and Paul Ehrlich entered into a famous wager. Ehrich, author of The Population Bomb, like Mike Duke today, believed that we were going to run out of everything and that our use of resources was “outpacing the earth’s capacity to sustain us.”
Yet Julian Simon, a business professor at University of Maryland and a Senior Fellow at the Cato Institute, knew better. He proposed a wager:
The face-off occurred in the pages of Social Science Quarterly, where Simon challenged Ehrlich to put his money where his mouth was. In response to Ehrlich’s published claim that “If I were a gambler, I would take even money that England will not exist in the year 2000” — a proposition Simon regarded as too silly to bother with — Simon countered with “a public offer to stake US $10,000 … on my belief that the cost of non-government-controlled raw materials (including grain and oil) will not rise in the long run.”
You could name your own terms: select any raw material you wanted — copper, tin, whatever — and select any date in the future, “any date more than a year away,” and Simon would bet that the commodity’s price on that date would be lower than what it was at the time of the wager…
Ehrlich and his colleagues picked five metals that they thought would undergo big price rises: chromium, copper, nickel, tin, and tungsten. Then, on paper, they bought $200 worth of each, for a total bet of $1,000, using the prices on September 29, 1980, as an index. They designated September 29, 1990, 10 years hence, as the payoff date.
If the inflation-adjusted prices of the various metals rose in the interim, Simon would pay Ehrlich the combined difference; if the prices fell, Ehrlich et al. would pay Simon…
Between 1980 and 1990, the world’s population grew by more than 800 million, the largest increase in one decade in all of history. But by September 1990, without a single exception, the price of each of Ehrlich’s selected metals had fallen, and in some cases had dropped through the floor. Chrome, which had sold for $3.90 a pound in 1980, was down to $3.70 in 1990. Tin, which was $8.72 a pound in 1980, was down to $3.88 a decade later.
Many opinion leaders somehow look at people and only see mouths to feed, when people also have hands with which to build and brains with which to discover. Natural resources are not really natural at all. Oil was a worthless inconvenience until people figured out how to use it.
Onion waste was just an inconvenience until some smart folks figured out how to make it into electricity.
We wish Mike Duke had taken a different tack; instead of bemoaning limits we supposedly are living under, we wish he had directed the initiative toward cultivating the natural resource of intelligence in children wherever Wal-Mart operates.
For the future will be sustainable not because we tread lightly on the earth, but because geniuses yet unborn will find ways to overcome obstacles. We will find ways to make what now looks like useless sea or barren planets a cornucopia of resources for mankind.
It is perfectly obvious that with new coal plants going up every week in China and a growing middle class all over the world, we are not going to reduce carbon output sufficiently to make an important difference in global temperatures. But, through the application of intelligence we can certainly mitigate the problems.
Wal-Mart’s gift to the world has been to make living easier for many people close to the waterline. We wish it would run a kind of talent search throughout that customer base, not to find the best singers, but to find children with the highest IQs, who could most benefit from a fantastic education paid for by Wal-Mart and who, if given the chance, will build a great, and sustainable, future for us all.
Back in June, the Pundit volunteered his services to help out the Fresh Produce & Floral Council by keynoting one of their luncheon events.
We were told that we attracted the largest crowd in years and the association issued an embarrassingly kind press release:
Fresh Produce & Floral Council LUNCHEON A HIT
Over 260 attendees from the produce and floral industry attended the June 17, 2009 Southern California Membership Luncheon at the Sheraton Hotel in Cerritos, California.
The third luncheon of the year, this event far exceeded estimated attendance. “Normally we have about 200 attendees at an event,” said FPFC president Carissa Mace, “to have close to 270 is amazing and we are quite pleased. In addition, we had a great deal of retail attendance, which is always important to attendees and sponsors. A great deal of independent markets were here today and it is nice to see that they are finding the events of value.”
The event featured Master of Ceremonies Jeff Schroeder, Manager, Southern California Produce Division of Unified Grocers. This was the first time anyone from Unified Grocers participated as an event master of ceremonies.
Jim Prevor, “The Perishable Pundit” and founder of PRODUCE BUSINESS magazine, was the keynote speaker at the event. Mr. Prevor spoke about the paradigm of the retail industry, illuminating the history of consolidation on the marketplace and where he sees the U.S. retail market going in the future. FPFC President Carissa Mace said, “Jim was extremely well received and although I have not seen the ‘official’ evaluation results, by all of the comments I have heard, attendees found the information useful and informative and Jim Prevor is always entertaining as well as educational. I’ve already had people ask when we can have him back!”
Keynote Luncheon sponsors were: California Leafy Greens Marketing Agreement, Coast Produce Company, Litehouse, Inc., Mann Packing Co., Inc., and Wild Rocket Foods. Association Sponsors were: A.M.S. Exotic LLC, Fresh Gourmet Company, ICD/Davis Lewis Orchards, Marie’s Dressings/Ventura Foods, Marzetti, Produce Marketing Association, Simply Fresh Fruit, Taylor Fresh Vegetables and Western Growers. Photo Sponsor was North Shore Greenhouses, Inc. and Décor Sponsor was Kendall Farms.
The next FPFC Southern California Luncheon is set for August 12, 2009, and will feature a program turned over to the City of Hope, a premier research hospital in the Los Angeles area.
We were certainly glad to help sell some tickets to the event and enjoyed the hospitality of so many of our friends from Southern California.
One serendipitous event was that one of the Keynote Sponsors happened to be none other than Wild Rocket Foods, one of the British transplants that Tesco brought with it from the United Kingdom when it launched its Fresh & Easy operation in the US. Now those who have been following our coverage of Fresh & Easy are familiar with Wild Rocket, but the luncheon marked the beginning of an offensive by Wild Rocket to sell to customers other than Fresh & Easy.
Now, though much of our coverage of the Fresh & Easy program has been critical, that is not because we have any bone to pick with Tesco; it is because the concept has not been successful and our job is to analyze the reality of the situation and see what we can learn from it.
Now we have always encouraged support of industry associations, and indeed, in many pieces, including here, here, here and here, we have called for Tesco to follow the American practice and join the produce trade associations, including the Fresh Produce & Floral Council.
Tesco has chosen instead to isolate itself from the flow of information and contacts that such activity can provide, which, in part, accounts for its failure to date in the United States.
Although Tesco’s decision is regrettable, it is, of course, laudable that Wild Rocket is a member and is now a sponsor, and we were happy to be seated up on the dais with representatives of all the keynote sponsors.
Now we see that as part of this effort to sell to customers other than Fresh & Easy, Bob Aiklen, who became CEO of Wild Rocket Foods in May, is doing a little press offensive. Bob recently gave an interview to Kimberly Pierceall of The Press-Enterprise. It ran the interview under the title Wild Rocket Foods CEO is Shooting for Success:
Bob Aicklen wants to make it clear. His company, Wild Rocket Foods, is not Fresh & Easy. The latter is the company’s largest and, for now, only customer.
Aicklen, who became chief executive officer of the company in May after working at PepsiCo for 20 years, hopes to send his company’s fresh produce, packaged salads and juices to other grocery store shelves nationwide, and Fresh & Easy is fine with that.
“They’re very interested in our success. Having new business is important to our future,” he said.
Q: What’s the biggest challenge you see so far for this industry?
A: It’s a constant challenge to make sure your food safety and quality is perfect. And so we work at that everyday, you just can’t rest. Fortunately at Wild Rocket Foods, we put together a state-of-the-art world-class facility … The other challenge is just how do you handle growth. We are a young company, we’re doing well and we have a terrific opportunity to grow and grow fast. So how do we get 350 people ready to handle that growth, and that’s what I’m working on.
Q: Would growth involve moving outside your Riverside headquarters or stay here and expand?
A: We will expand this probably 30 to 40 percent. We have the capability based on the footprint. We are not at full capacity. We have lots of capacity left in the plant. So over the next few years we’ll probably be here, but we do have plans for Northern California and the Midwest and then farther down the road in the east — New Jersey, Atlanta, depending on where the business is. We clearly are a growth company and intend to expand.
Q: What’s the advantage to being in Riverside?
A: The reason we came is because of Fresh & Easy, so we put ourselves within a half a mile of Fresh & Easy, which makes the distribution challenge very easy to the major customer. But California is the place you want to be in the produce business. I’d say 80 percent of what we get is within 300 to 400 miles from here, coming out of Northern California or the valley or even east into the Arizona area.
The proximity to the growers is very important. Any business that we would do across the pond, we have excellent shipping opportunities out of Long Beach and Los Angeles.
Q: How do you supply Fresh & Easy, which advertises food and produce at a value, by keeping prices low considering the volatility in the commodity markets?
A: You have to know what’s coming, you have to be in front of the game, you have to have different suppliers also. We go for quality first but we also have to get the value to our customers, so it’s a constant game, if you will.
It’s a constant discussion and knowing what’s coming, what the weather patterns are, what’s going on with certain commodities so that we can get the best value for us and the customer … Pineapples have been a challenge. We would buy pineapples from Hawaii and we weren’t happy with the quality. They had some rain back in October that caused some problems now, which is an interesting thing I’m learning as I get into this business, so we shifted to Costa Rican pineapples.
Q: Where do you see Wild Rocket in five years?
A: I think in five years we could be anywhere from six times to eight times where we are today as far as revenue and size.
We suppose it is a fine interview for a local consumer paper but to the trade it comes across as somewhat surrealistic.
We are quite sure that Fresh & Easy is OK with Wild Rocket selling to other people. Wild Rocket is a key component of the Fresh & Easy system, and so Tesco would like to see them stay in business, preferably without a need for Tesco itself to lend money to Wild Rocket. Last year, Tesco filed a lien against the inventory and proceeds such as accounts receivable of Wild Rocket. Normally a customer wouldn’t have such a lien, so this indicates that the relationship between Wild Rocket and Tesco goes beyond that which is typical in a supplier/customer relationship.
Of course, the importance of Wild Rocket to Fresh & Easy/Tesco and the fact that Tesco may have some financial and operational interest in seeing Wild Rocket succeed both weigh against other major retailers supporting Wild Rocket. Clearly, Wal-Mart, Safeway and Kroger will all be happy to see Wild Rocket’s problems become Tesco’s problems.
Despite the brave talk in the interview about the great difficulty of handling growth, Wild Rocket’s challenges to date have been a fantastic business school case study of the opposite: What does a business do when it is all geared for growth and the growth doesn’t come?
Vendors tell us that produce sales at Fresh & Easy are about 20% of where they were projected to be by this date. That sounds horrible but, in fact, produce is the superstar of the Fresh & Easy debut; many grocery items are in far worse shape. Still, Wild Rocket’s efforts to sell people other than Fresh & Easy is best understood as an attempt to utilize spare capacity made available by Fresh & Easy’s failure to grow as scheduled.
Can Wild Rocket succeed in this effort? It certainly has some nifty products. At the FPFC meeting it was showing off a nice juice line, which is a fairly hot category.
We would think pursuing sales outside of Fresh & Easy market areas, to foodservice and to independent and ethnic supermarkets, probably through wholesalers, would be the best shots.
Certainly, Wild Rocket could identify a wholesaler on each market it thinks is geographically viable and start consigning product. Wild Rocket would probably lose money initially but, in time, could build up a trade as its brand gets better recognition. It could also try to ride the private label wave.
Unfortunately, although Wild Rocket has improved its payment practices since we wrote about it here, it has left a bad taste in the mouths of many top shippers. There is an interesting part of the interview in which Bob Aiklen speaks about the need for “different” suppliers:
“…you have to have different suppliers also. We go for quality first but we also have to get the value to our customers, so it’s a constant game, if you will.”
Of course, to many vendors who took on the “Category Champion” role and invested substantially to meet the standards and specifications that Tesco, working through Wild Rocket, dictated, it is no game at all to find themselves unable to recoup their investments because a chain that claimed to value high standards decided it really valued low prices.
Several of the best vendors are no longer working as Category Champions with Fresh & Easy or Wild Rocket Foods. There were just too many meetings, too many idiosyncratic demands, for too little business.
After a career at Pepsi and P&G, Bob Aiklen is just learning the produce business and has stepped into a difficult situation. It is said that Steve Jobs wooed John Sculley, another former Pepsi executive, to Apple by suggesting he had two choices: To sell sugar water or to change the world.
Tesco and Wild Rocket rolled into the American produce industry insisting they knew better than everyone how things should be done and insisting the industry change to accommodate the Tesco way. They alienated produce industry executives all across the country. Maybe it will take another man from Pepsi to worry less about changing the world and more about finding the value in the experience of so many produce people.
We wish Bob Aiklen a long and prosperous tenure at Wild Rocket Foods.
We remember when RFID was all the rage and the expectation was that between Wal-Mart and the Department of Defense pushing the technology, the whole industry would be rapidly transitioned to the radio frequency future. It didn’t quite work out, and all we can say is we wish we had a tiny portion of the money organizations like C.H. Robinson spent to meet Wal-Mart’s expectations regarding the technology.
So when we heard that the Reusable Packaging Association had done a study that implied there could be a dramatic reduction in the cost of RFID by utilizing tags multiple times on RPCs, we were intrigued.
Then with the Produce Traceability Initiative all in the news, we wondered if a more cost effective RFID/RPC combo might not provide a pathway to a more comprehensive traceability solution. We asked Pundit Investigator and Special Projects Editor Mira Slott to find out more:
Q: What is the significance of the RFID study [Editor’s note: Members of the RPA can have access to the full study at no charge. Others may contact RFA for additional information.]
A: Basically, the whole reason it was conducted was to determine if RFID tags designed for single use could perform in multiple-use scenarios. Because RPC’s travel through the system many times, could RFID tags work in conjunction for optimal efficiency? That type of research had never been conducted. Both lab and field research needed to take place to determine just how robust the tags were for multiple trips. That’s what the research proved out.
Q: Wal-Mart instigated pilot testing of RFID in the produce industry many years ago. [Editor’s note: See cover story:Is RFID the Key to Our Future? February 2005 issue of PRODUCE BUSINESS]. A handful of Wal-Mart produce vendors jumped on board early to stay ahead of the curve, including Tanimura & Antle, Fresh Express, New Star, CH Robinson and Lo Bue Bros. Despite investing massive resources into research and development, financial and technical obstacles pushed back initial mandates stalling any meaningful implementation. When did this RPC-based RFID study first get started?
A: The study itself took two years to do, but was three years in the making. [Editor’s note: participants included Wal-Mart Stores, Frontera Produce, Stemilt, Tanimura & Antle, Georgia-Pacific, IFCO SYSTEMS N.A., ORBIS, Alien Technology, Avery Dennison, Impinj, UPM Raflatac, Michigan Sate University School of Packaging, The Kennedy Group, California State Polytechnic University, QLM Consulting and the RPA.]
Q: How important are the findings in generating acceptance of RFID throughout the produce supply chain? Did researchers discover any surprises?
A: Obviously, we were pleasantly surprised by the results. Generally speaking, RFID tags have been positioned for one-time use. The key issue… when you put the tags on reusable packages, do you have to replace the tags each time? And the findings showed, no. The tag didn’t wash off or fall off because of handling. It wasn’t affected by cold and wet environments. One would think or expect more to malfunction. Read rates were in the high 90 percentiles. Only a couple fell off. When so many tags survived, well into the high 90 percent range, it’s easy to assume the technology could be deployed in produce business environments.
Q: Did the study examine application for tracking and tracing product through the supply chain? Could there be larger implications for improving food safety and meeting new regulatory traceability requirements proposed in the Food Safety Enhancement Act of 2009?
A: Traceability wasn’t in the scope of the study, but to the extent tags could be read through the supply chain, it is conceivable to make the link that they could be used in that manner. There are benefits to the owner of the RPC asset and the produce supplier to really track where product is in the supply chain. And down the road, with the coding of more information, greater potential exists for using this in a track-and-trace system for regulatory compliance. As FDA and Congress push regulatory trace-and-track programs, there will be a role for these technologies in the future.
The study has shown the tag works, not whether or not it can be used for track-and-trace. Technology firms, often competitors, are working on this, looking at the whole enterprise system to track data. Companies like YottaMark and Afilias represent different strategic approaches.
Through RFID, data resides on that container, and when you receive that product you pull it into your system. You use your own data system to track these things. The RFID tag is a mechanism for which data is collected. Trace-and-track is a function of data. The actual encoded data for monitoring how and when product gets from field to retail shelf could be on the RFID tag, or a barcode, but there still needs to be the system to pull that data together.
Q: Now that you’ve released these findings, what actions need to be taken?
A: There is a next step, should RFID be part of that track-and-trace system, is it reliable to actually track product from field to retail shelf, or is it just going to be used to control assets, as a more robust inventory-tracking system? RFID traceability now needs to be tested. Can you actually demonstrate that product can be traced back to the field and forward to the retail shelf? One scenario is that RFID could be used for compliance with regulatory requirements. I assure you, RPA would be interested in working with the produce industry in this capacity.
Q: Do you envision more retailers converting to RPCs to capitalize on multiple-use RFID tags in light of new regulatory measures? Currently, only a few supermarket chains have embraced RPCs.
A: Wal-Mart’s commitment to RPC’s was predicated on benefits unrelated to RFID technology. We are seeing RPC interest starting to pick up more and more based on economics, quality and ease of handling. In the produce arena, boxes get weighty and product integrity can become damaged with stacking. Kroger executives tell me one advantage of switching over to RPC’s is less product loss.
RFID multiple-use tags add dimension. The owner of the RPC asset accrues a distinct advantage. He can track product and know how many times it is used. The grower/shipper knows where product is in transit and when it gets to facilities.
The question will be if the retailer embraces RFID, takes the technology and does something with it. Are retailers using it currently? No. They haven’t adopted RFID as a technology critical to their business operations.
Q: Couldn’t that change with legislative mandates, buoyed by technological advancements and economies of scale?
A: Early on, it was all being pushed by Wal-Mart. Wal-Mart wanted their supplier base to get behind it and do it, but eventually backed off of it. There were huge costs involved, and suppliers didn’t want to dive in full force without guaranteed return on investment. Yes, suppliers felt pressured if they were big customers to Wal-Mart, but in an industry where margins are so thin, they couldn’t afford the extra nickel on every container, when only making 10 cents on each. Economics matter. Now tags and readers have come down in cost. Transforming the produce industry through RFID can be compared to starting out with barcodes. Implementation was viewed as a nightmare.
We haven’t seen that critical mass of acceptance at retail. When retailers start demanding it, then RFID will take off. With government food safety traceability initiatives, that will be what drives the adoption of this technology. When government says you have to tell me where and when your product was in the system, companies will be scrambling to do it. RFID is positioned to effectively trace product.
There was the whole issue of how tags were to be coded, finding the right system and creating global standards. The actual codes had to be universally acceptable so when things got coded, all readers could read them and everyone would know what the codes meant. Now we need to decide what constitutes the best technology to utilize those codes. Is it RFID or something else?
With the advent of acceptable product codes, now the industry is in the position to really start to put these codes on coding devices starting at the grower level until it reaches the retail shelf. And someone walking down the aisle with technology can track it. The whole point of this thing is to get to the root of a problem as fast and effectively as possible. Why destroy whole industries like we did during the spinach crisis?
No one wants to invest the cost if there is no value to it. Over the course of 10 years, each RFID study gets closer to a solution that could have a real value, but what drives value is government saying you will track all produce. RFID will be a much more valuable piece of technology when that mandate comes down.
RPAGP6411Drop Test … The photo captures the testing of the impact of supply chain handling on RFID tags. Each container was dropped in a free fall from the position in the photograph. Each container was loaded with the maximum amount of weight (in plastic bags) that the container was designed to hold. All specifications were based on standardized practices.
RPA orbis 6428 …. Loaded ORBIS 6428 RPCs on Vibration Table at Michigan State University School of Packaging. The small labels on the right are the RFID tags. The larger labels contain identification data needed solely for the purpose of the test.
RPA Two tags on container … Two different brands of RFID tags that are being tested are shown on this Georgia Pacific container.
RPA Worker Affixing … A staff member affixes an RFID tag to reusable containers. The small labels on the right are the RFID tags. The larger labels contain identification data needed solely for the purpose of the test.
Q: Did your study include an analysis of short-term and long-term cost savings?
A: The researchers did conduct a cost analysis. However, because it wasn’t originally part of the scope of the study, and the results were not fully documented, we didn’t release the data. There are obvious savings with the mere fact you can use the tag multiple times; from the cost of the tags to the labor to put them on, to the sustainability aspects, etc.
Q: What feedback have you received from suppliers and retailers since you released the study?
A: We haven’t gotten reaction back as of yet. As the news gets out in the marketplace, we anticipate more discussion will take place on what steps to take next.
This research is another piece in that traceability puzzle. There is viability here, but all of this is a moot point if the retailer doesn’t require and adopt it. Maybe companies will do RFID to track assets. ORBIS or IFCO can use it effectively to track pallets, but it must be adopted across the system or the traceability chain can be broken during a food safety crisis. This study is another step in proving out the technology. It clearly shows the RFID solution can be used in the produce environment.
Q: Why the retailer resistance to RFID? Is it a matter of costs and logistics?
A: Wal-Mart is progressive and may have jumped a little too quickly in what they were demanding of the industry. They’re big enough and powerful enough where they can do that. Wal-Mart still has a dedicated RFID group working on this.
Retailer resistance to RFID is complicated. It’s not just the cost of putting tags on and installing readers. Once you get the data, what do you do with it, where do you store it, how does it fit within the enterprise-wide system? The challenge is making sense of it all. I don’t think it’s a hardware issue; it’s a software and management issue.
This new technology is not totally proven out in the produce industry. Then there’s the question of cost, and then what codes are going to be used. That part of the system is further along, then what do we do with this stuff once we’ve got it?
We’ve taken the technology as it has existed over the past two years and applied it to a real world environment, on the RPC crate used by the farmer in the field, to a cooling place, to their warehouse, on the truck, to the distribution center, and then recouping the asset, getting it washed and reused. Using tags with the right adhesives, information remains optimally in tact at every point along the way. Research showed that RFID tags placed on those RPC containers produced a read rate between 96 to 98 percent.
Q: You had good buy-in for this study. Is Part 2 in the works?
A: Would the produce industry be interested in doing more studies? We can’t afford it on our own. Retailers have to be a committed part of it. As this traceability legislation goes through, the government won’t say you have to use RFID. It is not going to care how we do it, but it will care if we can show this system works. Certainly RPC producers would like to work with government to prove it out. It warrants further scrutiny.
The government has a vested interest in seeing this system work and should be putting money in it to find an unbiased solution. RFID has been around a long time, used extensively by the Department of Defense. It may in fact use RFID for tracking product through their supply chain.
The produce industry is often embedded in traditional ways. The industrial industry embraced RPC’s years before the produce industry. I used to be with the International Fresh-Cut Produce Association. Food processing is a whole different mindset. A lot of growers/shippers are slower to change. From a regulatory perspective, the RFID tag didn’t seem a viable solution if every case of lettuce was losing money. Now with the ability to re-use the tag multiple times, new opportunities arise.
It is funny how things work out in life. We met Jerry Welcome in his capacity as President of the old International Fresh-cut Produce Association (IFPA), which ultimately merged with the United Fresh Fruit and Vegetable Association to form the United Fresh Produce Association.
Back at the very last IFPA convention in Baltimore, we had the opportunity to do an interview with Bruce Peterson, then with Wal-Mart. You can see that interview here. Soon enough, Bruce teamed up with Michael McCartney of the same QLM Consulting involved with this research and was leading the charge for traceability that would later precipitate into the Produce Traceability Initiative. You can read our interview with Michael here.
And, of course, it was back during Bruce Peterson’s tenure at Wal-Mart that the RPC was adopted. In fact, whatever the actual motivations for adopting the RPCs, we always thought Wal-Mart got a significant bonus. At the time, virtually nobody used RPCs, so product packed in RPCs was basically unsalable to anyone except Wal-Mart. The one thing no shipper wanted to have was a Wal-Mart rejection, so the product quality Wal-Mart wound up getting was often way above spec and taken care of with extra love.
So now, it all ties together: Jerry Welcome, RPCs, Bruce Peterson, Michael McCartney, RFID, traceability.
We find RPA’s test results very encouraging as they do indicate economies may be available that will bring down the cost of RFID if we combine it with RPCs.
At the same time we wonder… if RPCs were actually going to be used with RFID, wouldn’t it make sense to design the RPC with an internal slot for some kind of RFID tag? The slot could be internal yet easily replaced if damaged. Why run the risk it may fall off if we can build it into the container?
It seems like some kind of traceability dream, but one could imagine some kind of industry database with readers everywhere feeding into it. So if product goes from a shipper to a wholesaler to a smaller wholesaler to a purveyor and even into a store or restaurant, one could imagine readers everywhere effortlessly tracking the RPC.
Then we remember that even with as simple a supply chain as a shipper selling to Wal-Mart and Wal-Mart delivering to its own stores, they couldn’t make it work well enough or cost effectively enough to make it happen.
Of course technologies mature and, perhaps, they were just all on the bleeding edge.
There were paranoid objections when it was proposed that milk containers should have RFID chips and that every refrigerator should have a reader. The technology could be used to send a consumer an alert when the milk passed its expiration date or it could automatically reorder when the milk carton disappears for a set period of time.
We suspect it is inevitable and, we think, rather useful. Here is a quick video on how it works:
Of course the RPA test was not really about these whiz-bang applications.
Yet incredible advances usually depend on mundane things like durability and economy. Wouldn’t it be something if this small demonstration project — by showing that RPCs and RFID working together offers the prospect of real economies — set the produce industry on a path to utilizing the pair of technologies to not only conform to government traceability requirements but to better serve consumers?
Many thanks to Jerry Welcome and the Reusable Packaging Association for sharing this learning with the industry.
With all our discussion of generic promotion we have been intrigued that much of our feedback has identified the industry itself as the cause of low per capita consumption of fresh produce.
We published one such letter here, and when we received a Martha Stewart quote on the same subject it seemed worth some attention:
“I think it’s very important that whatever you’re trying to make or sell or teach has to be basically good. A bad product and you know what? You won’t be here in 10 years.”
Academy of Achievement Interview with Martha Stewart By Martha Stewart June 2, 1995
Taken from this larger section:
What are the most important characteristics for success?
“Martha Stewart: For me it’s a dedication to your real interests. It’s an ability to be open-minded. Without an open-minded mind, you can never be a great success. The great artists have been open-minded, even though they may seem, like Picasso, to be very directed, you can be directed and open-minded at the same time. I think you have to be really intensely serious about your work, but not so serious that you can’t see the lightness that may also involve your life. You have to have that lightness too. You have to not be so heavy-handed and so ostentatious. It’s very important not to be.
I live in the same house I’ve lived in for 25 years. I haven’t gone off and bought mansions. Even though my subject is living, living in a mansion wouldn’t do for my readers. I have to keep my credibility alive with my readers, so we’re in the same place. I just make that place nicer and nicer. And that’s a secret. People don’t know that. People think, oh, she lives in this fabulous place, but it’s the same old place. It started out like a farm, it got to be a farmette, then it got to be an estatelet. I built a wall; it helped a lot. But it’s the same place, the same grounded nature.
As I evolve, I hope my readers evolve, I hope my viewers evolve. And also, I think it’s very important that whatever you’re trying to make or sell, or teach has to be basically good. A bad product and you know what? You won’t be here in ten years. You might be rich, you might be famous, but you’re not going to be here in 10 years.”
The gist of the industry self-critique goes like this:
We start with varieties selected for good yield or easy transport, rather than flavor. We pick too early to catch high markets and then don’t properly refrigerate at retail.
Each commodity has its own list of sins: Peaches have so many varieties, some good, some bad, some indifferent, yet they are sold in a non-differentiated manner as simply “peaches” — so consumers are often disappointed as the flavor is irregular.
An apple shipper told us his best customer to display his apples in large tables at the front of the department — but the tables are not refrigerated. He knows that this gives the consumer a lower quality product but is afraid to speak up lest the retailer put another product in those high-traffic tables.
We suspect Martha Stewart is wrong. Sins and all, there will be a produce industry in 10 years, but we think she is right to focus on the quality of the product.
Delivering a consistently delicious product is the key to boosting consumption. Let us hope that talk of a generic promotion board doesn’t make industry executives think that somebody else will solve their marketing problems.
“Consistently Delicious” could be a great slogan… but only if the product can live up to it.
Perishable Thoughts is a regular section of the Perishable Pundit. If you have a favorite quote that you would like to share with the industry, please send it on. You can do so right here.