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Perishable Pundit
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Produce Business

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Unprecedented Panel Of Retailers Will Keynote General Session Of New York Produce Show And Conference

It was over two years ago that we began the establishment of a new industry institution with an announcement:

New York, NY — The Eastern Produce Council and PRODUCE BUSINESS magazine announced today their collaboration to launch The New York Produce Show And Conference….

“New York City is the epicenter of the region that buys more fresh produce than any location in the country,” explains Dean Holmquist, director of produce and floral for Foodtown, Inc., [now Allegiance Retail Services], and president of the Eastern Produce Council. “The extraordinary diversity of the population in this region assures a dynamic market for mainstream, ethnic and specialty produce,” points out John McAleavey, executive director of the Eastern Produce Council.

Paul Kneeland, vice president of produce/floral at Kings Super Markets and vice president of the Eastern Produce Council, indicated that “the sophisticated clientele of the northeast region combines with a plethora of quality retailers, restaurants, foodservice distributors and wholesalers to introduce product from local growers, growers across North America and growers from around the world.”

Jim Prevor, founder and editor-in-chief of PRODUCE BUSINESS magazine and the online PerishablePundit.com, celebrated the establishment of such a high caliber event in a region long lacking its own trade show and conference: “My great grandfather, Jacob Prevor, emigrated to America and established a wholesale facility in the old Wallabout Produce Market in Brooklyn. My grandfather was a wholesaler and auction buyer in the old Washington Street Produce Market in Manhattan. My father, Michael Prevor, was an original tenant when The Hunts Point Market opened in the Bronx. Over the decades we operated farms and had supermarkets in the region and worked hard to make the ports and airports of the region major hubs for the import and export of fresh produce.

“It is an incredibly exciting moment that we should have the opportunity to join together with our friends at the Eastern Produce Council, the preeminent organization in the region, to bring a world-class event to the region, and it is an honor that we can bring the industry together in a city known both as the ‘Capital of the World’ and the ‘Big Apple’.”

“Jim Prevor has built a reputation for industry thought-leadership that is recognized around the world, and PRODUCE BUSINESS magazine was launched on the Hunts Point Market,” said Robert Goldstein, owner/president of Genpro Inc., and secretary of the Eastern Produce Council, “so the board of directors of the Eastern Produce Council voted unanimously to join hands with Jim and his team at PRODUCE BUSINESS and the online Perishable Pundit to better serve this region with a high-end trade show and conference.”

“The Eastern Produce Council represents the most important players in the region,” said Ken Whitacre, vice president of publishing at PRODUCE BUSINESS and PerishablePundit.com. “Their engagement with the event ensures that exhibitors will encounter a cross section of the movers and shakers that make the industry a vibrant and robust contributor to the national and international industry. We are honored to work together with such an important association and with such an instrumental membership.”

Both PRODUCE BUSINESS and the Eastern Produce Council are committed to enhancing the industry by providing the region with a world-class venue for marketing, education and media exposure. That venue is The New York Produce Show And Conference.

In the end, the event was an extraordinary addition to the pantheon of industry events. In the heart of the biggest buying market in the country, we conjured up a sold–out trade show, a fantastic conference, a media and “consumer influencer” program, a student and faculty outreach program, chef demonstrations and recipe development for the trade, plus tours of the industry. It was really something quite extraordinary.

If you didn’t make it to the inaugural event, here is a little video clip that gives a flavor of the event:

Of course, when confronted with the overwhelming success of the event, the leaders of the Eastern Produce Council and your friends at PRODUCE BUSINESS had only one reaction: A joint vow to make the 2011 event even better.

So last year, we co-located with the Global Trade Symposium and the "Ideation Fresh” Foodservice Forum and added a roster of Culinary Schools to our Student/Faculty Outreach Program. In the end, we had visitors from every continent except Antarctica and a vibrant ‘Celebration of Fresh’ in the Capital of the world. All this is back this year, just ramped up to an even higher caliber.

Over the next few weeks, we will be unveiling plans for another extraordinary event: The 2012 edition of The New York Produce Show and Conference. Right now we can say that the event will include a larger and more comprehensive trade show located at a new venue where everyone can all be in one room, on one level. There will be expanded outreach to the media and consumer influencers that impact demand for our products. Plus there will be new and more extensive tours of this vibrant region including opportunities to see retailers, wholesalers, distributors and urban agriculture operations.

The dates have changed slightly as well, and now New York will be at its peak, with the Christmas tree up at Rockefeller Center, the Rockettes kicking their heels at Radio City Music Hall and the shop windows on 5th Avenue all decked out for Christmas. We’ve arranged for extended hotel dates before and after the event for those looking to bring their families along.

At the founding of this event we established a tradition, and we will continue it this year with an announcement first of our Retail “Thought Leaders” Panel. These key retailers, a “Who’s Who” of the industry, help define what actually happens in this dynamic marketplace. We are incredibly grateful that they are willing to step up and share their insights and intelligence with the trade.

This year we have spiced things up a bit with the addition of Craig Carlson, a Past President of the Eastern Produce Council when he was with Pathmark. He now has a major role in the foodservice industry as the Senior Vice President Category Management Produce at US Foods. So we will be adding that perspective. We also still have some surprise announcements about the panel that will be coming out in the weeks ahead. The Pundit will personally question these insightful leaders at the Keynote Breakfast on Wednesday, December, 5, 2012.

The industry owes a note of thanks to the industry leaders who have volunteered to participate in this panel. Their willingness to share their insight is a gift which makes this industry better, year after year. We thank, in advance, the members of the 2012 Retail “Thought Leaders” Panel at The New York Produce Show and Conference:

ERIC BEELITZ
Director of Produce & Floral
The Great Atlantic & Pacific Tea Company

 

Eric started his career in 1973 as a produce clerk with Pathmark Stores Inc. After graduating Union County College with a degree in Criminal Justice he became a produce manager in many of the high volume stores in the Company. His produce expertise quickly led to several Store Management positions. For several years Eric was in charge of training future store managers in all areas of running a succesful produce department.

Eric was promoted into Produce Merchandising as a Category Manager in 1989. After developing an extensive produce category management program at Pathmark, Eric was named the Category Manager of the year for the company in 1992. He became a Senior Category Manager in 1995 due to his team building approach to the business. His ability to train and develop other members of the produce merchandising team for future success is what drives him.

When A & P purchased Pathmark in 2008 Eric became an integral part in making the merger successful. In 2011 Eric was named Director of Produce and Floral for Waldbaums, The Food Emporium, A & P, Pathmark, Food Basics, and Superfresh stores. In his current position Eric is responsible for all merchandising, procurement, pricing, and promotion for all of these banners. Eric is married and has two sons.

CRAIG CARLSON
Senior Vice President
Category Management Produce

U.S. Foods, Inc.

Craig has been in the retail industry for 25 years. He began his career at Cub Foods in 1987, where he worked his way up from produce clerk to director of produce operations of The Penn Traffic Group. Since joining U.S. Foods in October, 2011, he has developed and effectively implemented a strategic produce plan that provides the company with a powerful produce category sure to be a major component in growing sales and profitability.

Craig also worked as senior director of produce at Wal-Mart for a little over three years, where he collaborated in the development of alternate formats such as Supermercado de Walmart and Neighborhood Markets. He spent nearly 11 years as the vice president of produce and floral merchandising at Pathmark Inc.

RICH CONGER
Director of Produce
King Kullen Supermarkets

 

Rich has 30 years of experience in various positions in the produce industry. He is now responsible for the produce departments of 46 stores – 42 in Long Island and 4 in Staten Island.

Rich recently helped develop an extensive locally grown program that includes Long Island growers and New York State apple growers.

JIM CORBY
Vice President of Produce
Delhaize America

Jim Corby is Vice President of Produce for Delhaize America. He is responsible to lead the design, development and execution of business plans to drive sales of produce, grow profits and reduce costs.

With more than 40 years of experience in the supermarket industry, Jim most recently was Vice President of Produce for the Food Lion family. He joined Food Lion in 2000 as Director of Produce Merchandising. He additionally has held various leadership roles with other grocery retailers.

Active in the industry, Jim is serving on the Produce Marketing Association Board of Directors, and has served on the USDA Fruit and Vegetable Advisory Committee and the Produce Marketing Association retail board.

Jim has a bachelor’s degree in administrative studies from the University of California at Riverside. He and his wife live in Salisbury, North Carolina, and have three grown children.

JOE DELORENZO
Director of Produce Merchandising & Operations
Alpha 1 Marketing/Krasdale Foods

Joe has over 40 years experience in the supermarket industry. As Director of Produce Merchandising and Operations for Krasdale Foods in White Plains, NY, Joe is responsible for what goes on and what goes in the produce departments in over 300 stores in New York, New Jersey, Connecticut, and Pennsylvania under the C Town, Bravo and AIM supermarket banners.

Joe is a second-generation retailer. His father worked at Food City in Shrewsbury, NJ, and Joe started working with him at the age of 16.

Before working at Alpha 1/Krasdale, Joe worked at Foodtown for 25 years. He has served as president and vice president of the Eastern Produce Council and is currently on the Board of Directors of CIFI – Catholic Institute of the Food Industry. He was awarded Man of the Year by the New Jersey Growers Association in 2000.

MARC GOLDMAN
Produce Director
Morton Williams Supermarkets

Marc started his career at Waldbaums in 1978, where he worked for 10 years until opening his own foodservice wholesale business. Eventually, he took a position with Food Emporium, where he worked for three years.

Marc joined Morton Williams for the first time as a produce manager more than 15 years ago. While he briefly left the company to join Shoprite, he returned to his current position at Morton Williams five years ago.

DEAN HOLMQUIST
Director of Produce & Floral
Allegiance Retail Services

As Director of Produce & Floral, Dean has demonstrated more than 25 years of progressive produce experience in the retail food industry. His current responsibilities at Allegiance are to direct sales, merchandising and operational activities for more than 80 Foodtown-member stores in New Jersey, New York and Pennsylvania.

Dean is currently President of the Eastern Produce Council, a position held since April, 2009. Before that, Dean held the position of Vice President of the Eastern Produce Council from 2007-2008. Dean has been an EPC Board member since 2001.

Dean was awarded the Scholarship for Leadership Excellence from PRODUCE BUSINESS to attend the PMA FIT’s Leadership Symposium in Dallas, Texas, in January 2010.

PAUL KNEELAND
Vice President of Produce & Floral
Kings Super Markets

An industry veteran for more than 29 years and previously the Director of Produce and Floral for Roche Bros. Supermarkets in Boston, Massachusetts, Paul has been in his position at Kings since June 2007. In addition to overseeing produce and floral for more than 25 Kings Super Markets in New Jersey and Long Island, Paul also oversees produce and floral for 6 Balducci’s Food Lover’s Markets with stores in Connecticut, New York, Maryland, and Virginia.

Paul is the past First Vice President of the New England Produce Council and was chairman of its annual expo for the first seven years. Currently, he is Vice President of the Eastern Produce Council and chair of its New York Produce Show and Conference committee.

Paul holds degrees in Business Management from Boston College as well as Northeastern University in Boston. He was the recipient of the PRODUCE BUSINESS/New England Produce Council’s Retailer of the Year award in 2005.

TERRY MURPHY
Produce Procurement Manager
Wakefern Food Corporation

Terry began his career in the food business over 20 years ago working as a business analyst for the Wakefern Food Corporation. Over the years, he has held jobs in different capacities throughout the organization, including that of a Category Manager in the Produce Division.

Currently, Terry is the Produce Procurement Manager, managing offices in Elizabeth, NJ, Fresno, CA, and Pompano Beach, FL, for the Wakefern Food Corporation.

Terry has been a member and friend of the Eastern Produce Council for several years and was elected to the Board of Directors in 2009.

A lifelong resident of New Jersey, Terry currently resides in Branchburg, NJ, along with his wife, Laura, and their three children.

CARMINE NAPOLITANO
Senior Vice President Perishables-Produce Director
Gristedes Supermarkets

An industry veteran for more than 42 years, Carmine has been in his position at Gristedes Supermarkets since 2003. He is responsible for sales, merchandising and gross profits for all perishable departments.

Carmine started his career with Mayfair Supermarkets and soon moved up to become Vice President of Produce and Floral. While at Mayfair, he implemented the first fog/misting application on the East Coast, put in place European-style merchandising tables, juice and melon bars, and frost top salad bar and drop-ledge European refrigerated cases.

Carmine was formerly on the Board of Directors of the Eastern Product Council. He was a member of a Retail Merchandising Share Group, which included 18 members from the United States and Canada. He was featured in the Produce News as a spokesperson for the Pride in New York Program that supports all New York fresh products.

RICHARD STILES
Produce Director
Redner's Markets, Inc.

Richard’s responsibilities include overseeing and managing the day-to-day operations in produce, floral, and salad bar departments in Redner’s Markets. He also manages the corporate supervision for produce departments to carry out direction for the merchandising, scheduling and meeting of established sales and budgets for each store.

Dick has been employed with Redner’s since 1993, starting as a store co-director for two years before transitioning into produce supervision. In November, 2006, he was promoted to his current position of produce director.

JOHN VASAPOLI
Director of Produce Merchandising
D'Agostino Supermarkets

John is responsible for all sales-related decisions for the produce department, such as item selection, quality control, presentation standards, and pricing.

In 1972, John started his career at D’Agostino as a part-time stock clerk. A year later, he was promoted to assistant store manager. In 1978, he was promoted to the position of store manager. During this period, John successfully ran a number of stores throughout Manhattan.

In 1985, John was promoted to the position of produce director. Since that time John has also had stints as director of deli/bakery and meat/seafood, where he gained valuable knowledge in the workings of these perishable departments. Most recently, John has also taken on the responsibility as manager of food safety and emergency planning.

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All of us at Produce Business and the Eastern Produce Council are deeply appreciative that these retail executives, whose time is always in such demand, have made The New York Produce Show and Conference a priority.

We hope you will as well.

If you would like some additional information, here is a small brochure we prepared.

The event website is here.

Buy-side, sell-side, media and education attendees, as well as those registering spouses and companions for the spouse/companion program — organized and hosted by Mrs. Pundit and featuring High-Tea at the Plaza — can all register at this link.

We have arranged many travel discounts.

And have a discounted room block at the Sheraton New York and Manhattan At Times Square hotels.

There are still a few exhibiting opportunities left and you can let us know about your interest here.

We will soon be announcing our list of valued sponsors, without whom the event would not be possible. We still have some wonderful opportunities for sponsors to step in and assert their industry leadership and woo this vital market. If you would like to receive more information on how your organization can be part of this great new industry institution, please let us know here.

We look forward to seeing you in New York.




Waiting For Desperation? Is It Only Necessity That Can Prompt A PMA/United Merger?

We have written about relations between United and PMA for a long time.

We also analyzed the recently collapsed talks. We started with an overview piece defining the issues related to a merger or combination of the two associations:

PMA And United: To Merge Or Not To Merge? That Is The Question

Then after the talks collapsed, we analyzed why and suggested ways to jump-start the talks:

The United/PMA Fiasco: THE SPIN IS JUST HALF THE STORY — Lessons Learned: Open Up To Industry Input And Focus On Big Things First

Three Possible Reasons For The Collapse Of The United/PMA Merger Talks

An Unusual Perspective — Leader Who Has Served On Both United And PMA Boards Offers Insights On Merger Failure: HARD TO BELIEVE IT REALLY CAME DOWN TO CEO

Pundit’s Mailbag — Putting Leadership First: Consider The Example Of The Ohio Florist’s Association

Pundit’s Mailbag — Power Lies In The Pocket Book

A Modest Proposal For Reviving The Merger Of PMA And United

United/PMA Impasse More Than Just A Decision About A CEO — It Is A Battle For The Soul Of The New Association

THIRTEEN VOICES: Industry Leaders Weigh In On United/PMA Merger

Without Change, The Question Will Not Be Who Will Survive, But Rather Can Either Survive? “A Modest Proposal” Take-2 From The Pundit

As Association Staff Feels The Strain, Would Wall Street M&A Group Provide Quick Solution To Merger?

Where’s The Face Of The Industry? Is It The Face Of A PMA Or United Executive Or A Volunteer Leader?

How Much Duplication Is There?

United/PMA Merger Comes Down To Philosophy And Function

Neither United Nor PMA Represent Production Agriculture

Do We Have To Wait Another Seven To Ten Years To Make A Merger Happen?

Pundit’s Mailbag — Get It Done

Pundit’s Mailbag — ONE Global Produce Industry Needs ONE Voice

Pundit’s Mailbag — Good Ol’ Fashioned Produce Candor Needed

In the end, we invoked both Moses…

A CLOSER LOOK AT THE DYNAMICS THAT LED TO THE COLLAPSE OF THE UNITED/PMA MERGER: Buyer/Seller Disconnect And Consensus-builders Versus Nonconformists

And Jesus…

Pundit’s Mailbag — When Confronted With A United/PMA Merger Question, What Would Jesus Do?

Yet opinions keep coming in. This came from an important east coast shipper who asked that we shield his identity:

Enjoyed your articles on the merger very much. Our company has been a member of both organizations for many years and has enjoyed the benefits of being an invested member.

Our founder mentored us all.  He was a man who could add perspective with a single sentence.  I tried to think of what he would say of the failed merger.  I think he would say “Neither organization is hurting bad enough.” 

Some kind of pain to either organization or to both will ultimately force the merger. Until then they each have enough time, money and member support to continue independently and work toward making themselves right.

This is surely correct, but the question is whether it is the optimal outcome for the industry.

After all, just as most companies would strive to make changes proactively rather than wait until circumstances compel such changes, it would seem that industry ownership would prefer to find a way to organize its assets in an optimal manner, rather than waiting for necessity to compel an organizational change.

One possibility is that the industry really doesn’t want a merger. After all, we are mostly all capitalists here and a little competition stirs the animal spirits and produces better outcomes.

An alternative possibility is that the associations have “gone rogue.” One argument one could make for why associations should not be allowed financial reserves and why they should not be allowed to operate businesses is that both conditions tend to make the associations less responsive to members. Associations that depend 100% each year on dues income have to be highly responsive — because a 5% drop in dues means layoffs and big problems. So, perhaps, the views of industry ownership are just not that important.

Still another possibility is that the associations aren’t all that important to the most important players. We received several outraged calls when the talks collapsed, and although some players may take some private action — say dropping membership or sending fewer people to a trade show — nobody thought the matter important enough that they were prepared to publicly do anything.

Finally, the whole idea of merger — the idea that there is just one industry ownership — may just not be quite true.  In the end, our discussions with leaders on both sides of the negotiations came up with the realization that the two sides were never as close as they thought. They agreed to forms but not substance. They never came to an agreement on what the priorities of the new association ought to be. We saw the collapse over who should be CEO as a proxy battle for the soul of the new association.

It has become clear to us that there is one group heavily focused on advocacy in government that should be headed by a broad majority of domestic grower/shippers.

There is another group — retailers, foodservice operators, many overseas producers —each of which has its own advocacy group and is mostly interested in networking and business-building opportunities.

Obviously, nothing is 100% one way or the other, and domestic producers want to network also and retailers and foodservice operators want a political environment that sustains a supply base.

Yet there are serious and sustained differences on what the priorities of a national association should be.

We suspect that the goal of somehow papering over the different priorities was doomed to fail — if not in the negotiations then years later in the execution.  Now we have suggested here and here a revenue-sharing proposal that would create one national funding mechanism, eliminate duplication but sustain two separate boards.

We think it could work, but it is innovative and complicated, and as our correspondent points out, neither association is desperately motivated.

The sadness though, for those who love the industry, is that desperation may compel a decision, but it also constrains options and thus may, one day, lead to a less than optimal decision being made.       




Putting Mango Recall Into Perspective

Our piece, Without Clear Proof, Industry Suffers From Mango Recall And Is Left To Defend Itself, featured a letter from Dave Westendorf of Bay Area Produce, San Clemente, California. He is trying very hard to look at the Splendid mango situation and find solutions that might help the industry in the future. He was kind enough to share his thoughts with us once more:

Thank you very much for publishing my letter regarding the Splendid mango recall and for your thoughtful response. I have had many people call or email their thoughts, and I'm coming away with several observations:

1. Given the fact that foodborne illnesses are extremely hard to trace and that our food safety agencies’ main responsibilities lie in protecting the public, some insurance mechanism must be made available to companies like Splendid to cover their losses resulting from a recall. Product liability insurance is readily available, yet in most, if not all situations, it does not cover the expense of actually taking the product out of the supply chain. Perhaps United Fresh or Western Growers could underwrite such policies. While I'm not a fan of expanding our government, how about some mechanism through PACA? After all, the USDA subsidizes crop insurance for farmers. Why not recall insurance for produce distributors?

2. Health agencies should not be allowed to publicly implicate a specific grower's product without definitive proof of contamination. Nothing more than a general warning should be issued, and even then, other possibilities should be thoroughly researched and eliminated before a product is implicated. Early in this investigation, a California health official told me that California was only following Canada's lead and could not tie the California outbreak to any specific mango label. Who is to say that the 125 people who were infected with Salmonella Braenderup consumed it in a mango salsa containing items like green onions, cilantro, chili peppers, or orange juice? After all, those who will remember the Salmonella Saint Paul tomato contamination will recall that tomatoes were never the carrier, and the ultimate source was eventually proven to be chili peppers. The collateral damage done to the tomato industry was incalculable, yet tomatoes were never the culprit. Perhaps the same thing will be proven in the mango situation, albeit a little too late for Splendid's sake.

3. Sad as it may be, Splendid might not be facing the losses that they are currently incurring if they had not issued a "voluntary" recall and had waited until a recall was mandated by one of the state or federal health agencies. Splendid did the morally right thing but will pay dearly for its integrity and moral code. Some other mango shippers have proudly announced that their product is not contaminated and therefore will not be recalled. Splendid could have also pointed to every independent analysis of their product to date and said the same thing. Companies need to think twice about issuing a voluntary recall unless their product is specifically proven to be contaminated with the suspect bacteria.

4. All companies involved in the distribution of fresh produce need to look at their individual business models to determine where changes need to be made to protect themselves from a Splendid Products-type of situation. Grower and retail supply contracts need to be modified to account for recall liability and placing it where it belongs, at the proven source of contamination whether that be the grower, distributor, wholesaler, purveyor, or retail level.

5. In discussing this recall situation about Splendid, a shipper friend of mine suggested that perhaps there should be a protocol implemented by the FDA/CDC whereby when a product like mangos or tomatoes is suspected in a salmonella/listeria/etc., contamination that a "stop sell" order be issued where one or more shipper/grower(s) who "may be" a source of the contamination would quit selling, advise their customers to also quit and hold the product until testing can confirm or deny contamination. When the contamination or lack thereof, becomes certain, then either sales could resume, or a recall notice would be implemented.

I appreciate the work that the health agencies do, however when a contamination source is not verified and a shipper/grower is forced into a "voluntary" recall, he suffers serious financial penalties through possibly no fault of his own. If no contamination is ultimately proven, or another source is found, the shipper/grower is left holding the bag with no recourse against the government agency that falsely accused him of handling contaminated product.

I'm sure we haven't seen the end of this saga, but hopefully lessons will be learned and some good things might come from it.

—Dave Westendorf
Bay Area Produce
San Clemente, California

We certainly feel the angst that Dave is expressing and appreciate his efforts to think through to a solution. We think he raises points well worth thinking about:

1)  Insurance on Recalls

The need for this is obvious, and efforts have been made to get private companies to do this and to see if the government would get involved. Recall insurance is sold. But in many cases, it is inadequate — covering expenses such as stamps to mail out recall notices but not fees charged by retailers to remove product from the shelves — or triggered by events, say the finding of a pathogen on a product that often don’t apply. For example in the spinach crisis, the whole industry had to deal with a mass recall — even though no pathogen was ever found on the product of most producers. Since recall insurance is often not triggered by a recall but by a condition such as the finding of a pathogen, recall insurance, even when one has it, often won’t pay. One can piece together policies that seem to provide the proper coverage, but they are not as ironclad as one would like and they are expensive.

It is a tough thing to make happen. From a public policy point of view, what you don’t want to do is create a situation where companies want to wait for a government-ordered recall. Yet, if you don’t do that, then you are insuring against a “choice” that a company makes, and this creates the fear that if the cost of recalls can be shifted to a third party, there will be a lot more recalls.

For that matter, even if such insurance only worked in the event of a government-ordered recall, what constrains the government from ordering recalls but aggressive efforts by the companies implicated to prove the recall unjustified and the knowledge of government officials that their acts can crush companies and cost jobs. If these were no longer concerns, government officials might well order many more recalls and companies might well acquiesce. Also many of these costs are retail dictates; as it is, many shippers think them excessive. Well, what would hold down these costs if retailers knew an insurance company was going to pay them?

On the government side, the thought is that one who suffers from bad weather is blameless. So flood insurance or insurance against crop failures is acceptable. Neither the government nor the citizenry are at the point of yet saying that pathogen distribution is also without blame. Correctly or incorrectly, officials look at situations such as the Jensen Farms Cantaloupe matter and see the producer at fault. They don’t want to subsidize his recalls; they want to make a recall as threatening as possible to his business so he will be incented to do everything possible to avoid a business-threatening disaster such as a recall.

2)  Ban on implicating specific grower without proof

Here the industry needs to be careful about what it wishes for — it just might get it. The primary goal of public health authorities is to minimize illness among the population. If it believes a foodborne pathogen is threatening the population, the public health authorities will, of course, want to warn the population. This is pretty reasonable. People would be rather upset if the public health authorities knew of a threat and didn’t identify it. So the question then becomes: Should the FDA make a general warning — “Don’t eat spinach” — or a specific warning — “Don’t eat a specific brand or lot.”

There is little question that the interests of the industry lie in making the announcements as specific as possible. This was the lesson of the spinach crisis and, during the salmonella Saintpaul crisis, the big effort was to continuously get the FDA to limit its area of interest.

There exists some question as to the effectiveness of this. During the Jensen farms cantaloupe incident, sales collapsed for cantaloupe in general despite the FDA being very specific in its announcements. Still, it seems logical that more limited announcements are better for the industry than broader announcements. Indeed the entire Produce Traceability Initiative was founded in this belief. It was Bruce Peterson of Wal-Mart fame that noted that every day at Wal-Mart there were hundreds of recalls, but most were uneventful because the manufacturer quickly supplied lot numbers that were to be recalled and this constrained the impact of the recall.

If anything the goal should be that instead of implicating Splendid, we could define a series of lot numbers that meaningfully distinguish between lots and just recall those lots.

We have addressed the issue of lots in pieces such as this and this. The problem is that if lot numbers simply signify some quantity run on a belt, they are meaningless for food safety purposes. We need to know that lot 100 is differentiated from lot 99 and lot 101 by some procedure of significance to food safety — say a sanitization of the line. Otherwise being able to identify problems with specific lots is of little value. It is significant that when Splendid Products issued its recall, it did not list specific lot numbers, just PLU numbers. In fact, it is not clear why it listed PLU numbers at all since they are not specific to the mangos being recalled.

Other than not having pathogens to begin with, the ability to identify breaking points in production or processing so that we can say that lots differ meaningfully is probably the best way to limit the impact of recalls.

3)  Limiting Voluntary Recalls

From a business perspective, delaying might well save money — although only at the season end or if the lots are meaningful and one can say that the new product is definitively not contaminated.

If the season is ongoing and the lots not meaningful, one would just have to recall the presently available product.

Of course, if there is a real risk, then failing to recall could have financial consequences when one gets sued because someone dies. It could have reputational consequences if retailers think you are the company that won’t do the right thing and, of course, if someone gets really sick or dies, the executives who made this call have to live the rest of their lives knowing they may have caused a severe illness or death.

4)  Supply Contract Modification

There is little question that everyone should review their business and consider what would happen in the event of a food safety problem. Although having liability placed at “the proven source of contamination” sounds like a great idea — in the vast, vast, vast majority of cases the cause of contamination is never “proven” — plus such clauses would likely lead to endless litigation as people tried to get a court to declare who was at fault. Plus, perhaps fault is sometimes shared. A pathogen is always unacceptable but may have less impact if the cold chain is always perfectly maintained. A farm may be the “cause,” but the washing facility may have failed to remove it.

Besides most vendors have little choice but to sign what customers demand and then pray they don’t get called on to have to execute.

5)  “Stop Sell” Orders

It is an interesting idea but testing cannot confirm or deny the existence of a pathogen on a wide basis. Otherwise every shipper could do test and hold, and we would never have a food safety outbreak. We dealt with this issue in an interview titled A Closer Look At Finished Product Testing.

The problem is that pathogen contamination is often seemingly random. You can take a spinach field and do a random sample and it will find no pathogen. Do the same field a second time you will find one. Then the third time, it will be clean again.

It is too expensive to do statistically significant testing — and even statistically significant testing is no protection against Black Swan events.

This is all beside the point that logistically doing such testing in thousands of stores, warehouses etc., would be difficult and unfair to consumers and trade buyers who would be left losing shelf life and providing warehousing while waiting for results.

**

Over the years, we have felt that many things could be done to make it less likely that government would cause damage, include crushing businesses and loss of jobs by erroneously fingering particular businesses or commodities. We also thought that steps could be taken to reduce the impact of even correct advice.

For example, government epidemiologists could have to submit their case before a panel of independent epidemiologists for a review. There have been cases where government asked for a recall and then backed down when persuaded their epidemiology was in error — but few companies have epidemiologists on call to fight such things.

Government epidemiologists could be required to publicly sign such recall orders so their reputation is on the line.

Instead of declaring that there is a risk and a recall is required, or declaring a recommendation not to consume, any risk could be put in perspective. If the FDA was to announce that there is a .00056% chance that one’s fruit or vegetale is contaminated with a pathogen, and a .000021% chance one might get ill from eating this crop, consumers might view such announcements in perspective.

Many thanks to Dave for trying to think through a better way for dealing with such issues.




The Florida Tomato Growers Are In The Right Legally, But More Than Tomato Production May Be At Stake In This Battle

Our piece — After 16 Years Of Compliance, Florida-Mexican Tomato ‘Suspension’ Agreement Gets Challenged By Florida Growers Claiming Dumping Is Occurring: Is This Just Rent-Seeking? — dealt with the efforts by the Florida tomato growers to overturn the suspension agreement that has governed the tomato trade between the US and Mexico since 1996.

It is in many ways an unusual situation. In the first case, it is odd because the action that Florida is calling for — to drop its anti-dumping case and thus end a restriction on the prices Mexico must sell tomatoes at — is something that Mexico normally would be in favor of. In fact, we can’t recall another case where a US industry started a dumping case against a foreign exporter and that country objected when the US-based industry wanted to drop its case.

The reason Mexico opposes the petition of the Florida tomato growers is not that it wouldn’t like the suspension agreement lifted and the dumping complaint dropped; it is because the Mexicans look at the situation and know there is another shoe ready to drop. Immediately upon the granting of the petition to drop the last anti-dumping case, Florida, perhaps with tomato growers from other states, can be expected to file a brand new dumping case.

In fact — and here is another oddity in the law — as best as we can determine, there is no exemption in US anti-dumping laws for product sold under a suspension agreement. So even though the minimum prices were established by the Department of Commerce, somehow the Mexicans can be held at fault for selling at US Department of Commerce-approved prices.

The issue of dumping is problematic in all cases because it is not clear it is an activity that actually harms the US. After all, if consumers get the opportunity to buy a product — cars or tomatoes — less expensively, isn’t that a benefit to those consumers?

Even if it can be proven that a foreign government is subsidizing sales to the US, the point remains. If the Japanese government is silly enough to want to subsidize the purchase of each Japanese car by $5,000, isn’t the correct response to say “thanks”?

In the case of subsidies, the complication is that such subsidies may be withdrawn. So if foreign governments subsidize car exports to the US, they could make the US industry non-competitive. US producers would close up, the intellectual capital and industry supply chain needed to build cars in the US would dissipate and then, when producing cars in the US is no  longer easily feasible, the exporting country could stop subsidizing exports and later boost up prices to very high levels and profiteer against the vulnerable Americans who have no place else to buy cars.

It’s a theory — but it is hard to think of even one incident in which such a thing has happened in the modern world. After all, those exorbitant profits theorized by this plan create a magnet of a market to bring product in from all over the world. So, even if the Japanese car industry crushed the US, when the Japanese aim to get their exorbitant product payback, they will find Americans buy fewer cars or buy cars from Korean, German, Mexican manufacturers, etc. The payback wouldn’t be there.

Still, at least a focus on government subsidies appeals to one’s sympathy for hard-working producers. Business will be permanently stymied if there is a perpetual risk that random foreign governments will subsidize competition to drive producers out of business.

The problem is that there is no requirement in the anti-dumping statutes to prove that producers or exporters are receiving government subsidies.

The criteria for “dumping” is either that one sells product below the cost of production or that one sells product for less than one sells it in its market of production.

On perishables, though, neither of these definitions make any sense. Because produce is perishable, one can’t hold it just because it would cost more to produce it; one has to think of how to cut one’s losses. There is not the option to warehouse tomatoes as one can, say, chairs. All produce producers, all over the world, sell below production cost many times.

And the price in the home market is irrelevant as well. A big grape exporter in, say, Chile or South Africa, will lay out a marketing strategy allocating grapes to the US, Europe, the Far East, the Mideast, Eastern Europe etc. The exporter may get different returns in different markets.  For that matter, the exporter can ship grapes to Philly and to LA and get different returns, but all this has, literally, nothing to do with the price of grapes in Santiago or Pretoria.

The truth is that the Florida tomato growers know this is all silly, but they are using the tools the law gives them to try to protect their industry.

Indeed, with its rapid building of shade houses and greenhouses, as well as the development of new varieties, the Mexican deal has now become so large and consistent that tomato growers over the whole US feel threatened. They also feel insulted. The Wall Street Journal op-ed by Jim Kolbe titled, The Sunshine State’s Rotten Tomato Fight with Mexico, which we reprinted in our original piece on this subject, actually did the Mexicans few favors.

Many US growers who had preferred to stay out of the battle thought their product and industry was being maligned and have joined with Florida to press this petition. Indeed, the Department of Commerce, under pressure from Mexico, had declared that substantially all of the domestic tomato industry would have to join Florida’s petition. They defined “substantially all” as 85% of the industry. After the Wall Street Journal piece, Florida succeeded in getting about 90% of the US industry to sign on.

When NAFTA was being debated, it showed the limitations of a national produce trade association. How, precisely, could any national association represent the interests of both Florida tomato growers — looking to limit competition from Mexico — and Washington apple growers — looking to export apples to Mexico.

Now, we have similar issues. The law is with Florida on this one. There is no basis for dawdling. The Commerce Department has been acting in violation of the law to postpone action on Florida’s petition and there is no basis in the law for denying the petition. The old anti-dumping case should have been dismissed and the suspension agreement lifted weeks ago.

The substance, though, is not so clear. Florida’s substantive point is that tomato growers there can’t make a living at the prices permitted under the suspension agreement. They say that if we want a domestic field-grown tomato industry, we have to arrange things so that prices are higher. This is probably all true.

They make the point that they are, in fact, just the vanguard of victims of a move to non-US produce production, and that if we value US production of produce we have to draw a line in the sand and yell, “Stop.”

There is more truth in all this than many can be comfortable with.

Still, if we try to limit imports of tomatoes even more than the current reference price does, we will also hurt many. We will hurt US produce growers that want to export to Mexico as their trade will probably be disfavored. Indeed, there is no particular reason to think that Mexican retaliation would be limited to produce, so we may hurt many producers of many products. We will hurt workers, business owners and operators in Mexico. We have a great stake in Mexican prosperity. It is not good for America to have an impoverished land right on our border. And realistically, if we are not prepared to let the Mexicans sell us tomatoes then what, precisely, are we prepared to have them sell us?

And isn’t NAFTA part of a commitment on our part to the belief that the US, Canada and Mexico will all be stronger if we open our markets to one another and produce product where it is most economically advantageous to do so?

There are US growers who own assets in Mexico. There also are US growers that have growing and marketing deals in Mexico. To some degree, what NAFTA is about is saying is that the great customs union of the United States of America, which has helped bring such prosperity to us all over the years, is being broadened in the belief it can make us all more prosperous still.

What to do about the plight of the Florida tomato farmers? The most useful approach is twofold: First, carefully examine the way public policy is making them less competitive. Are real estate taxes the same as in Mexico? Water? Are there extra environmental costs? Have we a labor policy that is conducive to harvesting and packing tomatoes?

In other words, remove obstacles that are preventing the Florida tomato growers from operating profitably. Don’t focus on creating obstacles for others.

Second, we do have a long tradition in America of investing in R&D for the public good. This includes research into better varieties, more effective growing techniques, etc. This could help the industry leap frog the competition by producing a superior product.

If Florida can point to specific unfair trade practices, we would be prepared to help Florida the same way.

But, in the end, our system depends on producers of all sorts producing a product that consumers want to buy at a price that yields a profit. If that is not in the cards, then we have to look to develop alternative crops that can make everyone a winner.




Business Lessons From A Failed Grocery Store In Mendota, California

The New York Times ran a rather bizarre article about the closure of Mendota Grocery in Mendota, California, titled As Grocery Dies off, Down-and-Out Town Lives On, if Barely. The thesis of the article, written by Brooks Barnes, seems to be that things have gotten so terrible in this town that it could no longer support this institution:

MENDOTA, Calif. — Westside Grocery, serving this self-described Cantaloupe Center of the World since the 1940s, removed its gasolinepumps around 1980, the result of increased regulation. Fresh steaks and pork chopswent by the wayside in the 1990s: too few could afford them.

Fresh milk was the next casualty. No one ever seemed to hurt for money for beer, but Westside Grocery eventually stopped selling that, too. “Too many alcoholics stinking of urine and worse,” said Joseph Riofrio, who took over the business from his father, who had taken it over from his. “But the truth is that the electricity for the cooler was getting expensive.”

Now Westside Grocery is gone. Last month, Mr. Riofrio, a City Council member and former mayor of this Central Valley town, where a street is named after his grandfather, pulled the plug — done in by a 38.7 percent unemployment rate, the foreclosureand credit crises and hoped-for economic help that never came. “How can a community in the heart of the most abundant farmland on earth suffer this way?” Mr. Riofrio said, fighting back tears.

Another question: If Mr. Riofrio, 50, cannot make it here, can anyone?

The Detroit of California. The Appalachia of the West. This town of 11,100 has been called both, and it is not an exaggeration. About half of Mendota’s residents, according to city officials, live below the poverty line. Alcohol abuse is unbridled. A recent killing appeared to be tied to the violent street gang MS-13.

Mendota has garbage collection, but you would not know it from looking at some of the front yards along Juanita Street. A squalid trailer park greets people arriving from Fresno, about 35 miles to the east; to the south is a prison, built in a former cotton field. Shopping is mostly done at Dollar City or the 99 Cents Store, both competitors of the 98 Cents Store.

Although Mendota is in especially bad shape, the entire Central Valley has been hit hard by the recession and sluggish recovery. Unemployment for the region is about 15 percent. Stockton, on the valley’s northern end, filed for bankruptcyprotection in June. A homeless camp continues to grow at a Fresno exit along Route 99. Bakersfield, to the south, has perked up lately, but it has something the rest of the valley does not: oil and natural gas fields and proximity to Los Angeles.

Unemployment has long been a reality in Mendota, which was first settled in the 1890s as a railroad stop. California’s agricultural towns rise and fall depending on what crop needs picking and how much water is available for irrigation. Social problems are nothing new, either. “The fields have always been a magnet for impoverished people trying to find a way out,” said Rick Wartzman, the executive director of the Drucker Institute at Claremont Graduate Universityand the author of several books examining the Central Valley.

Still, Mendota’s unemployment rate is high even by farming community standards, which typically see a seasonal average of about 20 percent. As the worst of the worst, Mendota has gotten its share of attention over the years; in 2009, when Gov. Arnold Schwarzenegger needed a backdrop to announce that he had petitioned President Obama to declare Fresno County a drought disaster area, he chose Mendota.

But nothing ever seems to get better here. That disaster request was declined. Thousands of acres of surrounding farmland — once used to grow corn, bell peppers, tomatoes and melons — have been forced out of production because of salt buildup, the result of flawed irrigation and drainage systems. Thousands of additional acres have been left fallow because of a lack of water. This part of the Central Valley relies almost exclusively on federal irrigation supplies that have been curtailed amid environmentalist pressure to restore fish habitat.

There is no question that Mendota is a rough place and that the business community in the Central Valley has been hurt badly. In the brief excerpt from the article, there are four governmental issues identified that have hurt the viability of the business:

  1. Environmental rules that made it too expensive to continue to sell gasoline.
  2. The police have failed to control street violence and gangs.
  3. Ineffective garbage collection and public sanitation
  4. Federal restrictions on irrigation

In this political season in which every politician promises to create jobs, it is worth understanding how jobs are created. When government is expansive — say pushing regulations that raise the cost of selling gasoline — there will be fewer people selling gasoline. On the other hand, when government is weak — say failing to maintain public safety and public order — it will also reduce jobs by increasing costs — say more private guards — and reducing the willingness of people to shop at night, etc.

It is, however, highly unlikely that the high unemployment rate in Mendota had very much to do with the closure of Westside Grocery.

First, one of the great issues in America today is the growth of a culture of dependency. Almost 15% of the US population is now on Food Stamps. In 2008, that percentage was about 9% and in 2001 about 6%. There are many issues with this, but one positive effect is that it does keep demand for food fairly strong even in the face of high unemployment. In other words, this New York Times article seems to imply, without any evidence, that total expenditures on food are down and this is what caused the closure of this store. This seems highly unlikely.

Indeed, the article manages to dismiss economic progress in the community:

A 1,152-inmate federal prison opened here last year, but the expected jobs have yet to materialize. About half of the workers have been transferred from other facilities, and most of the jobs that are available require a college degree; fewer than 31 percent of Mendota residents have even graduated from high school, according to census data.

One wonders what jobs were “expected” to materialize? If workers were transferred from other facilities, then they have either moved somewhere near or are close enough to commute. In either case, their wages are surely spent nearby. These people are, in fact, part of the community now. After all, communities change and evolve.

The Riofrio family, which has owned and operated the food store, seems admirable and hardworking, but it doesn’t take a brilliant business analyst to see this story not as the inevitable decline of a business caused by bad economic conditions as much as the story of the difficulty that confronts a family business in the face of economic and demographic change.

The author of the piece doesn’t know it but the difficult economic times of Mendota have probably bought this business an extra decade, because if Mendota was even semi-prosperous, it would have its own Wal-Mart Supercenter — there are at least three within an hour — not to mention its own Vons (Safeway), Foods Co. (Kroger), Trader Joe’s, Whole Foods and Fresh ‘n Easy. Throw in a Costco and a Sam’s Club, too, plus an assortment of other alternatives. Westside Grocery would have been blown out of the water long ago in this more competitive environment.

Part of the issue is demographic change. Although the article claims that Westside Grocery stopped selling meat and pork chops in the 90’s because “too few could afford them,” a Google search shows no shortage of places to buy meat, but they tend to have names such as La Fiesta Meat Market. A reviewer on Yelp explains the place this way:

This is a small town and you can have a great dinner, send money to South America, and get your groceries in the same place. They sell most ingredients, including meats and produce, necessary for Mexican cuisine and it really improves the quality of their restaurant. Their food is exemplary of good home-style Mexican and they never skimp on portions. Since they don’t have to go out to buy their ingredients from elsewhere, their prices are also really awesome. Just beware, go there after Sunday mass and you’ll be waiting for a long time.

Google butchers in nearby towns and you see names such as Carniceria Y Taqueria, Michuacana Meat Market and Estrella Meat Market.

Another part of the problem is that Mendota is not an island. When Westside Grocery decided not to invest in its gas tanks, that just meant that people sought gas elsewhere. If it declines to sell meat, that just drives customers away. If its reaction to low sales of beer — insufficient to justify the electric in the cooler — is to pull the plug, people will seek beer elsewhere. It seems to have never occurred to the New York Times author, but isn’t it more likely that instead of saying this store was killed by high unemployment, we say this store died because it no longer served its community very well? Its customers probably all use gas, eat meat, drink milk and beer… once the store made its customers go somewhere else for all those products, wasn’t it highly likely they would buy a lot of other items while getting all these products?

Perhaps the business lesson is that we are reminded of the limits to cost-cutting to stay in business. It kept them alive for a while but, in the end, they either needed to innovate — say by remerchandising their fresh foods offer — years ago to appeal to specific ethnic groups then spending money in town. There is a New York area retailer named Western Beef that opened an outlet in swanky Boca Raton. Yet when we went into its butcher area, we saw a freshly slaughtered goat. That is targeted marketing and has made it a success.

Alternatively, the store needed investment. Safeway and Kroger compete with ethnic merchandisers by building bigger, better located stores than the ethnic operators can manage.

We think the situation in the Central Valley is a Californian and American tragedy. That a state with such natural advantages has managed things so as to create a truly depressed area is a shame. 

Its causes are complicated, with immigration and water policies, excessive regulation and inadequate public institutions, but even in the worst of situations, individual retailers can and do thrive. To blame the closing of this store on high unemployment is to ignore the contributions of the entrepreneur. 

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