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Produce Business

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American Food & Ag Exporter

Cheese Connoisseur

Port Danger

Now that the 5th anniversary of the 9/11 attacks has passed, it is wise to review our security precautions. And one area experts agree is very vulnerable is our ports. The National Center for Policy Analysis has issued a report that it headlines: Danger Abides at Los Angeles’ Ports.

This is the real societal danger. The West won’t be brought down by hijacked planes, but as this report states:

If terrorists were to explode a 10-kiloton nuclear bomb in the Port of Long Beach, Rand Corp. researchers recently calculated, it could kill 60,000 people instantly, expose 150,000 more to hazardous levels of radiation and result in more than $1 trillion in economic losses, at least 10 times the financial loss in the attacks on the Pentagon and World Trade Center five years ago.

Of course, we should do all we can to secure our ports and make the terrorists’ job more difficult. But, inevitably, no amount of defense of that sort will protect us. After all, we have to be right every single time. The terrorists only have to be lucky or smart once.

This is why the Bush administration attitude toward North Korea and Iran developing nuclear weapons is unacceptable. This constant jabbering to no purpose is just giving these countries more time to develop weapons and disseminate them.

Part of the issue is that, inevitably, we are looking at a breakdown in the nation-state system, and the Bush White House doesn’t seem willing to accept this.

In the past, we accorded nations the right to do things as long as they did them within their borders. This made sense when transportation was slow and weapons had limited range and utility. It could take weeks or months to assemble an army and move to a neighboring country; even then, the army was only lethal in a limited sense.

But with today’s weapons, there is no margin of error.

This means the US has to exercise the one thing our culture has made most difficult to exercise: judgment.

We have no choice but to trust in our own judgment and say that to us it is simply unacceptable that nations such as North Korea and Iran should have missiles or nuclear weapons.

There is nothing wrong with working with our allies or having some discussions with interested parties. But those allied talks will only be successful if we make the bottom line clear to those involved.

China doesn’t pressure North Korea, and our European friends and Russia don’t pressure Iran because we have not made clear what we will do if the talks fail to produce accord.

Nobody wants war, but we will not be able to stop nukes from our ports by inspecting containers. The problem must be stopped at its source. If we lack the courage to insist upon this, I cry for my children.

Vendor Managed Replenishment
vs. Global Procurement

There is a battle at the heart of perishable food procurement today and it is a war between two business models. Call it vendor-managed replenishment versus global procurement.

Basically, the Wal-Mart model has been built around vendors taking responsibility for one product category. But the issue goes far beyond Wal-Mart. While in South Africa, I learned that Capespan, the successor organization to the once-monopoly fruit exporter from South Africa, is handling almost a third of its volume in non-South African products.

Why? Because Capespan has taken on the responsibility of managing procurement programs for companies such as Tesco. If you are going to be a category manager for, say, apples, for Tesco you can’t just ship from South Africa; you need apples from the UK, France, other parts of Europe and North America. We dealt with Tesco’s efforts to enter the U.S. market here and here.

When vendors manage replenishment, they generally take on real responsibility. They have to meet metrics on how frequently things can be out of stock, what percentage of shipments get rejected and much more. Usually they must develop some sort of annual business building plan to increase sales by a certain set percentage.

And, customarily, the vendors agree to a fixed price.

Good vendors take these responsibilities very seriously. When the hurricanes hit last year and many items were in short supply, my phone rang off the hook with vendors looking for overseas connections so they could honor their commitments — often at substantial risk of loss.

Even if the retailers ultimately declare a natural disaster a force majeure and agree to pay more, that often happens months down the road long after these vendors spent their own money to keep supply flowing.

These vendors manage the supply chain through a delicate dance: they usually own farms, they may also represent growers, they buy product on the tree or in the field, and they buy on the free market. They deftly move from growing region to growing region to keep the retailer supplied with satisfactory product.

Now global procurement, as a direct function of major retailers, is searching for a niche in this world. In grocery, global procurement is king. Why? Because brands are paramount, and so a global procurement office can negotiate on behalf of all divisions of a global retailer with Proctor & Gamble.

Here is the problem: if the retailer’s global procurement office goes down to Chile and buys all the grapes for North America, how can the retailer hold the vendors in America responsible for replenishment? And how can the retailers hold the vendors responsible for meeting the metrics?

Is there a way to integrate both into the retailer’s procurement program?

Best Wishes To United Fresh Produce Association

The United Fresh Produce Association now exists, a consequence of the merger of the United Fresh Fruit and Vegetable Association and the International Fresh-cut Produce Association.

It is a nostalgic moment for me. My family was a member of United for generations and for decades my grandfather, Harry Prevor, was chairman of an association that eventually merged into United. I remember as a boy saying goodbye to my parents each Febuary as they jetted off to some distant city for the United convention. As a young adult, I was the first person ever named Member of the Year by UFFVA.

Back in the days when Al Vangelos and Al Siger were chairmen, I spent countless nights in a Sheraton Suites hotel in Alexandria Virginia working on various projects at United headquarters. My 30th birthday was celebrated at Anne Day’s (Anne was an important staffer at United for many years) house near United headquarters.

Now it is a new day and, as a lot of industry money gets spent on these organizations, we have to all do what we can to help each organization find its place.

The industry leadership starts out as a board of 46 members. Initially Maureen Torrey Marshall (one of my old cabbage suppliers for shipment to Puerto Rico), who had been chairman of UFFVA, and Mark Miller of Fresh From Texas/Energy Sprouts, who had been chairman of IFPA, will be joint chairmen.

In May, Emanuel Lazopoulos, Del Monte Fresh, will assume the chairmanship.

President and CEO of United Fresh Produce Association will be Tom Stenzel, who had the same position at UFFVA. Jerry Welcome, who headed up the IFPA, is now vice president, business development for United Fresh.

The merger concentrates resources and, assuming the association will move quickly to reduce the size of the board to manageable size, should operate more effectively than either association did alone.

Although it has been many years since United’s glory days when it was the only national produce trade association and had, by far, the dominant industry trade show, etc., United’s members have often struck me as a particularly passionate lot.

Perhaps it is because governmental affairs arouse the passions more than marketing. In recent years, it may be because the DuPont/United Leadership Program brought many people close to the association at a very young age.

Over the years, many people have bandied about the idea of a merger between PMA and United. It may happen one day. It is not a better-or-worse situation. These things are often matters of timing and personality, and perhaps one day the timing and personalities will be right.

Yet, despite the fact that multiple associations inevitably drain industry coffers, decades of carefully watching industry trade associations have not convinced me that one association would really be better.

Partly it is the capitalist in me talking. In every other facet of our economy, we find that competition produces better outcomes. Why should association management not also benefit from robust competition?

In addition, this is a substantial industry, filled with passionate and devoted people who want to be part of industry leadership. The pundit’s mailbag overflows on this subject. We have dealt with it here, here and here, and there is much more to come.

Maybe a second national association serves as a kind of escape valve for the pressure that would build up otherwise when someone is denied a seat on a national association board or denied a chance to go on to become chairman.

If there was a monopoly, all that person could do is fume, or be destructive. Now that person can take his business — and his passion, leadership and willingness to work — elsewhere and contribute to the industry in another way. This is a big win for the trade, perhaps more than enough to compensate for some operational inefficiencies.

So to Maureen and Mark, to Tom and Emanuel, to the whole board and staff and to those who love this association, God Speed and may this new association, built on a base rich in heritage, find its way so that its good work shall light a path for this industry in the years to come.

Newfound Niche At Supervalu’s Sunflower

Retailers are increasingly looking for new concepts that can help them find a niche in America’s increasingly crowded retail marketplace. PRODUCE BUSINESS dealt with the issue here.

Supervalu is a leader in this effort, and one of its concepts, Sunflower Market, is expanding by opening three stores in Columbus. Sunflower explains its concept as such:

Sunflower Market offers a refreshing take on the natural and organics market: all of the quality, without the high price tag. Sunflower Market features affordable prices on exceptional products: organic wherever possible, minimally processed, and without artificial colorings, sweeteners, flavors or preservatives.

The stores have a special focus on bakery and produce:

Each store has delicious amenities including fresh fair-trade coffee and an in-store French Meadow Bakery & Café — the longest standing certified organic bakery in the country. The organic fruit and vegetable selection is as fresh as it gets; after being carefully grown, it is expertly delivered by W. Newell & Co., SUPERVALU’s specialty produce company, and then displayed in the store’s shoppable, all-glass cooler.

Though they also have antibiotic-free meat, specialty cheeses and a sushi bar, the focus is on discount prices. The Columbus Dispatch reports one student’s reaction to the news of Sunflower’s opening:

Natalie Hodgman, a University District resident and a junior at Ohio State, said she’s looking forward to Sunflower’s large selection of low-priced organic foods.

“While I love to go to Whole Foods, really all I can do there is look around because I can’t afford to buy too many things there,” Hodgman said, outside Sunflower Market’s N. High Street store.

“This store is going to be great because it’s closer to walk to from campus than Kroger or Giant Eagle, and it’ll sell the foods that I want to eat at a price that I can afford to pay.”

A comment that couldn’t have been written better by Supervalu’s ad department and which just goes to show you that every market can be segmented further.

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