Things are still moving fast and furious in the spinach/E. coli crisis, although there is now some light at the end of the tunnel. Here is the Pundit’s fourth 10-point analysis of the constantly changing situation. You can read the three previous 10-point reviews here, here and here.
- Change in FDA advisory means the industry can sell spinach again. Late in the evening on Thursday, September 20, 2006, the FDA quietly and subtly changed its advice to consumers. On Thursday during the day, the advice read as follows:
FDA advises consumers to not eat fresh spinach or products that contain fresh spinach until further notice. Fresh spinach includes bagged spinach, spinach in a clamshell, and loose spinach purchased from retail establishments such as supermarkets, restaurants and farmers’ markets.
At this time, FDA has no evidence that frozen spinach, canned spinach and spinach included in pre-made meals manufactured by food companies are affected. These products are safe to eat.
If individuals believe they may have experienced symptoms of illness after consuming fresh spinach or fresh spinach-containing products, FDA recommends that they seek medical advice.
But consumers who check the FDA web site awoke on Friday to find it reading as follows:
The FDA, in working closely with the CDC and the State of California, has determined that the spinach implicated in the outbreak was grown in the following California counties: Monterey, San Benito, and Santa Clara.
Other produce grown in these counties is not implicated in this outbreak. Processed spinach (e.g., frozen and canned spinach) is also not implicated in this outbreak.
Effectively this ended FDA’s recommendation to not consume spinach, though it wasn’t until a 6:30 PM press conference on Friday evening that the FDA verbalized the switch.
There is no specific mechanism to assure consumers that the spinach available is from non-implicated areas other than labeling signage and in-store efforts. Much will depend on retail efforts. If retailers do a good job with reassuring customers, the product will sell. In fact, though consumers will be cautious, supply will be severely decreased because the three counties implicated are big producers. At this time of year, California produces about 75% of the spinach sold in the US, and these counties account for the bulk of that production.
If we don’t get the other three counties back on line soon, even modest customer acceptance and retail promotion of spinach will lead to shortages and high prices.
- Kudos to the association community. On Friday, September 22, 2006, the Produce Marketing Association, United Fresh Produce Association, Western Growers Association and the Alliance for Food and Farm held a conference call for the industry, which followed an earlier one held the previous Friday.
It was good to see the association community working together to solve such a serious industry problem.
It is tempting in a situation such as this for one association to try to steal the limelight from the others so as to convince industry members of its importance. There was precious little of that this time around.
There were plenty of differences behind the scenes, but the industry presented a unified front and used all its resources to deal with the issue at hand. A very strong performance.
- PMA consumer research. Bryan Silbermann, president of the Produce Marketing Association, gave a sneak preview of some quick consumer research sponsored by the association. When asked where consumers got information from regarding food safety, the most frequent response was personal experience, the second-most-frequent response was the FDA and government agencies, and the third-most-frequent response was the media.
He also reported that almost 70% of consumers thought the produce industry was doing an excellent or good job in dealing with the current spinach/E. coli crisis.
These are preliminary findings and more research is being done. I find the 70% number highly encouraging as consumer sentiment that the produce industry was cooperative and looking to do the right thing will be crucial in rebuilding consumer confidence and getting sales moving again.
The notion that people get their information from the FDA and government is problematic. Obviously, only a tiny portion of the population calls up the FDA and talks to them or even reads the FDA and CDC web sites. So people rarely get unadulterated advice from the government. What they get is governmental advice as filtered through the news media. This means a two-prong industry outreach program is required, both to shape governmental recommendations and to shape the way consumer media present these recommendations.
- Organic vs. conventional and fresh-cut vs. bulk. Two arenas of industry competition, long festering, have risen anew with the spinach/E. coli situation. One is a competition between organic and conventionally grown product; the other is a battle between fresh-cut and bulk product. The Pundit has been actively involved with these debates addressing what the spinach/E. coli controversy implies for fresh-cuts here and how the issue impacts organics here.
Whenever one raises differences, it can be controversial. Association leaders, almost as an occupational requirement, prefer harmony among their members. And, presented unfairly, arguments such as these could reduce consumer confidence in all produce.
But safety in food, as in other products, is rarely an all-or-nothing thing, and many corporations have used safety as a point of differentiation without bringing ruin on their industry. Volvo has for decades promoted the safety of its vehicles and its emphasis on engineering safety into each car. When Pan Am flew, it did so under the slogan “The World’s Most Experienced Airline” — which is a subtle way of saying “we are the safer choice.”
The reason some find this type of promotion unacceptable is because it implies that some produce is less safe than others. One of the reasons the industry is in this fix is we have sometimes wanted to present all produce as “perfectly safe”. This is understandable, but problematic, because it isn’t true. Just as it isn’t true in airlines and isn’t true in cars.
- State government promotion of Salinas Valley. The body blow that has been dealt in this current crisis is really to the Salinas Valley. The spinach crisis, the constant reminders in the media of past problems with lettuce and the publicity over the FDA letter to lettuce farmers are a flame set in the kindling of a pre-existing environment in which large-scale agribusiness was already the subject of attack.
It is all very unfair. The truth is that the Salinas Valley feeds countless millions with fresh product every day. When they have a problem such as this, it is going to be big, really big, because they distribute to every corner of the country and around the globe.
So it is very good news that the government of California, recognizing the stake California has in burnishing the image of the “Salad Bowl of the World”, is looking at running some kind of promotional campaign to promote the valley, the farmers who work it and the high quality produce it produces. Of course, this won’t happen until everyone is shipping again.
There is no place quite like Salinas in the whole world. It is a resource California would be wise to invest in.
- Getting Salinas back in production. With the FDA’s decision to lift the blanket recommendation not to eat spinach, the market can start up again. But until product is flowing from the three counties still under investigation in this crisis, the crisis is not truly resolved.
Now the problem is that the FDA is in a difficult spot. Everyone knows the odds are that whatever caused this outbreak is long since gone. But the FDA has to somehow announce that it has “done something” to insure food safety. So working with the industry, the tentative plan is to announce some kind of “Fresh-Start” program on a short-term basis to get the industry going again.
The proposal, not yet approved, is for a five-part program:
- An “industry restart cleaning”, in which all facilities are sanitized.
- A pre-harvest audit to make sure good agricultural practices are being followed.
- Monitoring of irrigation facilities and procedures.
- A review of all soil amendments
- And, if all this can’t be done or done satisfactorily, pre-harvest spinach testing.
How all this can be verified is still an open question, but there is a possibility that the California Dept. of Food and Agriculture might be willing to take on the task.
How quickly such a system can be up and running is unclear, but it doesn’t seem easy to do. Several weeks seems pretty optimistic.
- Temporary or permanent? Just spinach, or lettuce too? Industry is pushing hard that these requirements be temporary as part of a “Fresh-Start” program. But rent control in New York City was a temporary measure imposed during World War II and is still going strong. When I look at that list, I don’t see a thing on it that those who are concerned about food safety won’t want to make permanent.
I also don’t see anything on the list they won’t want to apply to lettuce as well as spinach.
- FDA teams in Salinas. The FDA currently has 20 investigators in the field functioning in multidisciplinary teams of four. By the end of the day Friday, they visited six growers and 10 fields. The impression they give is that the FDA is throwing all it’s got at this problem, which means the FDA is woefully unprepared for a serious act of terrorism. What if this were a case where thousands of people were dying? The FDA needs the capability to field hundreds of teams on a few hours’ notice.
- Was the recommendation to stop eating spinach too broad? One of the most hotly contested issues that will be debated forever is whether the FDA recommendation to stop eating all spinach was too broad. Tom Stenzel, President/CEO of the United Fresh Produce Association, tried to explain the FDA’s thinking by comparing it to 9/11 when, uncertain of the source or extent of danger, the government grounded all airlines.
I think this has always been the FDA’s position, but in this case, the danger was always known much more exactly. In the first case, the majority of illnesses came from people who bought bagged spinach. Because this product is, well, in a bag, we have a brand so it is a relatively easy thing to suggest a voluntary recall on those brands. It might be one brand, it might be 100 brands — but never on bagged product would there be a need to withdraw brands that were never implicated in the illnesses.
There were some reports that people purchased bulk spinach and others that they fell sick as a result of eating something at a restaurant or at a salad bar.
Once again, the industry has trace-back mechanisms. If you go to a retailer, you should be able to find out who they bought loose spinach from or who they bought foodservice-sized bags from. Once again, recalls could be done with those specific brands and suppliers.
What is the point of these expensive trace-back systems if the FDA isn’t going to use them to limit the extent of these recalls?
- Message. The problem with releasing some spinach and not other spinach is that it gives a mixed message to consumers regarding the safety of spinach and adds to the complexity of developing a consumer-based spinach message.
What should the industry message be? The temptation is to try to reassure consumers that they can eat with confidence. But you can’t overdo this because we can’t guarantee that this will be the last food safety outbreak we will ever have.
You can show care and concern; you can emphasize that farmers eat this product as well; you can show lots of women and children on the farm. But it is a bad idea to guarantee what can’t be guaranteed.
Though they have not published the information, FDA officials have been privately telling industry leaders they have determined that both organic and conventional product are implicated in the E. coli spinach situation.
If this information is true, then this already odd food safety crisis gets odder still. Organic and conventional product would be grown in separate fields and processed on separate machines in different parts of the plant. For the E. coli to be on both at the same time, there would have to be a coincidence of mind-boggling proportions.
Unless… what if all the product is actually organic? Sometimes organically grown product is sold as conventional because that was where the demand was that week, or perhaps because the product yields well when grown organically.
In any case, when the FDA says that product is conventionally grown, they probably mean that it was marketed as conventionally grown, not that they tested it for synthetic chemicals. What else could explain this oddity?
Retailers are absolutely key to both the short-term and long-term ability of the industry to recover from the spinach/E. coli crisis.
In the short term, the question is to what degree retailers will feel comfortable stocking and displaying spinach? Extensive studies after the Alar event of 1989 showed that a large portion of the sales decline for apples occurred not simply because retailers refused to buy the apples but because retailers elected not to promote apples.
This is a cautionary note to trade leaders. You need buy-in by key retailers or all the messaging and promotion to consumers will have a tough row to hoe.
Of course, it is a bit of a chicken-and-the-egg situation. Retailers will feel more comfortable promoting spinach to the extent they feel that their customers are comfortable with spinach.
So we, as an industry, have a two-way task ahead: raise consumer comfort levels with spinach so that retailers feel comfortable promoting and displaying, while simultaneously getting retailers to display and promote so consumers will become acclimated to the idea that retailers they trust, trust spinach to be safe.
Long-term, it is a responsibility that produce retailers would prefer to pass on to the FDA, but in the end the strength of our food safety systems is at least as dependent on what retailers demand as they are on what the government does for the simple reason that what retailers pay for is what they are going to get.
The other day in a piece we wrote here, I urged PMA to bring in David Theno, Ph.D, to speak at its convention. David is the Sr. Vice President, Quality and Logistics at Jack in the Box. He is conveniently local in Southern California and considered a rock star in the Quality Assurance world, credited with saving Jack in the Box from near certain bankruptcy. Though I linked to it the other day, what he has to say is so relevant, I’ll display his complete article right here:
Industry Must Raise the Bar to Ensure Safer Burgers
Recipe for Safe Meat: Stricter Microbial Standards, Vigilance, Quality Control
by David Theno, Ph.D.
August 1997 — The grill and frying pan were never intended to be worn as protective armor. Yet Americans are being warned that these standard household items are their best, most reliable defenses against the dangerous bacteria that prompted the largest meat recall in U.S. history — E. coli 0157:H7.
Certainly, cooking is one of the final checkpoints on the road to food safety and wholesomeness. But the fact is, much more can be done at the meat procurement and processing stages to ensure the finished hamburger patties we buy are safer when they arrive on the retail market.
Companies that sell meat products — including restaurants, grocery stores and other vendors — have a key role to play in this regard. That’s because these retail outlets have the ability to put pressure on the companies that slaughter and process meat products. And as the places where 70 percent of all hamburgers consumed in the United States each year are sold, quick-service restaurant chains — so-called "fast food" outlets — are in a particularly unique position to use their purchasing power to compel meat suppliers to adhere to more stringent microbiological specifications.
Simply put, if buyers only accept products that meet the highest standards, then only the best meat will get to the consumer. The companies that don’t measure up won’t stay in business. But before the retail food industries can form a united front to help realize our collective goal of a better quality national meat supply, they must confront a few basic misconceptions:
Myth #1: Meat quality doesn’t vary appreciably from one supplier to the next.
The simple fact is, all meat suppliers are not created equal. As is the case in nearly every industry, some manufacturers produce a better quality product than others. Some slaughterhouses have superior systems in place to ensure that animal hides and digestive tracts, where most contamination lurks, are carefully removed so as to avoid all contact with the cuts of meat that will ultimately end up on a consumer’s plate. And some processors test for E. coli 0157:H7 much more frequently than others.
In my position as vice president of quality assurance and product safety for Jack in the Box restaurants, my chief responsibilities include establishing the product specifications our suppliers must meet and jointly monitoring their performance. It’s not enough to take a supplier’s word that his products are in compliance with your standards; you have to do your own product testing as well. This is the only way to develop, as we have, a supplier base that is doing everything technically possible to control bacterial contamination.
Myth #2: Testing for E. coli 0157:H7 is ineffective.
The argument goes something like this: since you can’t test every ounce of product for E. coli, there’s no point in testing at all. This is nonsense. While taking one sample per 100,000 pounds of product does not sufficiently reduce the consumer’s risk of getting a contaminated hamburger patty, serial sampling, which involves taking a sample of hamburger every 15 minutes, enables you to know the microbial status of your meat supply all through the production day. That practice has enabled us to reduce microbial levels 100-fold. Our suppliers are required to conduct a sample on the order of every 2,000-3,000 pounds, which some companies would deem excessive. But once again, companies should want the security and confidence that comes with knowing they are going the extra mile for their customers.
Myth #3: Testing for E. coli 0157:H7 is expensive.
In fact, it costs less than a penny per pound of hamburger for Jack in the Box to maintain its system of testing for E. coli. Even when you sell 65 million pounds of hamburger per year, as we do, the cost is still quite reasonable for such an effective insurance policy, particularly when compared with the devastating human and economic costs of an outbreak of foodborne illness. Working with our suppliers, it took less than one month to set up the programs.
Myth #4: Government will take care of the food-supply problem.
The legislative and regulatory processes, by their very nature, require extensive consultation and research. Comprehensive public policy doesn’t take shape overnight. But outbreaks of foodborne illness do. We in the food-service and retail food industries have an opportunity and an obligation to be the gatekeepers who filter inferior meat products out of the American marketplace. By rising to this challenge, we will ultimately provide Americans with the key ingredients they need to enjoy their beloved hamburgers once again: confidence and peace of mind.
Just change the word hamburger to fruits and vegetables and change the word meat to produce and you see the challenge ahead.
Much of our food safety system is built on “reps and warranties” — promises made by shippers to retailers, by packers to shippers, by growers to packers.
At each stage, the question is: Are we sincerely interested in these representations because we want the safest food supply possible, or are we interested in these reps and warranties as a liability-shifting mechanism so if there is a crisis we can deflect blame and lawsuits to someone else?
What Dr. Theno is telling us is that, as a big buyer, Jack in the Box took the bull by the horns and both made its product safer and rebuilt consumer confidence.
If this crisis had been on Wal-Mart brand spinach, Wal-Mart would be doing exactly what Dr. Theno urges with meat, on spinach. It would be there demanding E. coli checks on every 5,000th bag, either sending its own staff out in the field or demanding third-party audits on food safety protocols. In other words, Wal-Mart would be doing what is necessary to both have safe product and rebuild consumer confidence.
It would be a terrible mistake to wait for political consensus to achieve the same level of food safety and the same consumer comfort level.
Regardless of what the FDA does, there cannot be a successful outcome to this disaster if consumers don’t feel reassured as to the safety of spinach and all produce products.
Certainly if Good Agricultural Practices need to be revised, they should be revised. But that is very subtle and not likely to move consumer perceptions.
There are two things that can and should be done:
- Manure, composted or not, should be banned in commercial agriculture. It is not necessary and is barbaric. Every consumer is repulsed by the idea that their fruits and vegetables could be raised in soil laced with manure. And they don’t feel better because you tell them it is heated up for five days.
- Every processing plant should do “nth” bag inspections for E. coli on all lettuce and spinach products. Even if it is every 10,000th bag, the very concept of continuous testing will be enormously reassuring to consumers.
These are real changes to the system which would, without a doubt, reassure consumers and might even make outbreaks less likely.
What has it been like on the front lines during this spinach/E. coli crisis? The Pundit asked Mira Slott, ace special projects editor at the Pundit to reach out and capture the pulse of the industry at retail. We thus present the first in a new series in which we collect opinions and insights from different industry sectors on different subjects.
A special thanks to our Pundit Panel of the day:
Robert DiPiazza, Senior Vice President and General Merchandising Manager for Fresh, and Jerry Hull, Senior Produce Buyer, Sam’s Club, Bentonville, Arkansas
Bob Harding, Produce Buyer, Westborn Markets, Berkley, Michigan
Don Harris, Vice President Produce/Floral, Wild Oats, Boulder, Colorado
Jeff Lyons, Senior Vice President of Fresh Foods, Costco, Issaquah, Washington
Mike O’Brien, Vice President of Produce, Schnuck Markets, St. Louis, Missouri
The Pundit Panel has generously been willing to share their time and expertise to help the whole industry understand the way this has played out at retail: We are proud to present today’s panel of Retail Pundits:
Robert DiPiazza, Senior Vice President and General Merchandising Manager for Fresh, and Jerry Hull, Senior Produce Buyer, Sam’s Club, Bentonville, Arkansas
Q. Could you describe the dynamic on the retail floor?
DiPiazza: We’re patiently… or I should say… un-patiently waiting for the FDA to bring this investigation to a close. Sam’s Club has two items affected, bagged baby leaf spinach, and typically our spring mix has spinach as part of the mix.
Hull: We pulled all spring mix and baby leaf spinach off the shelves — all the spinach we carry — so we’ve lost those sales and have only gotten modest sales back in other SKU’s, not close to what we would have experienced with the spinach products. We picked up a few sales on romaine hearts, but have seen no noticeable decline or increase in tossed salads. Chopped romaine has picked up, so we’ve had two items increase. Everything else is not impacted at present time.
DiPiazza: I don’t think in instances like this that those sales shift over to other products. We are anxious to get back to normal and get spinach back on the shelf. We understand this ban has been devastating to the industry and that we need to make corrections and move forward.
Q. Are you making product adjustments for your customers?
DiPiazza: We’ve re-formulated our spring mix, taking spinach out and are in the process of getting it in all our clubs. It’s back in some clubs right now. We made sure to take spinach off the ingredient label on the package.
Hull: We started reformulating the products without the spinach the second day of the news event. The new spring mix was ready to go out in clubs earlier, but we were just waiting for clearance to be sure everything had been done properly to insure public safety.
Q. What feedback have you received from your customers?
Hull: We’ve had probably the normal consumer questions and calls, but very consistent reaction in line with an incident like this. We haven’t put signs up, but we make clear to the public on the product packaging there is no spinach in it. I hope this whole thing blows over soon, but the way things have been unfolding, it’s hard to know if that will be the case.
DiPiazza: When a food safety concern like this is so broadly covered in the media, retailers get a lot of calls. We field consumer questions like any other issue, in this case telling consumers they should return any fresh spinach they’ve purchased. Do I think this outbreak will have long term affects? Unfortunately, we’ve had food safety outbreaks before in meat and other products. If you look at history, long-term the product will rebound. I expect we’ll have spinach sales back in some time. It’s just difficult to forecast when that will be.
Q. What can be done to jumpstart the recovery process?
DiPiazza: Once the investigation is complete and the market is ready, we’re going to try and work with our grower partners, who have been significantly impacted to reenergize sales of spinach and try to help them revitalize their businesses.
Bob Harding, Produce Buyer, Westborn Markets, Berkley, Michigan
Q. In many ways, produce is at the core of your identity, so as a relatively smaller chain, how does a food safety incident such as this affect your operations?
A: Essentially what we did when we first found out, we went through every product and brand with fresh spinach in it, both conventional and organic, including cooking spinach, and pulled it all. We kept counts and gave product back to the suppliers, and they gave us 100 percent credit. Earthbound went to supplying us herb salad and spring mix without baby spinach and printing no spinach on the label. We do have signs on our counters letting consumers know our spring mix does not contain spinach. Our salad bar spinach was immediately pulled as well.
Q. How did your customers take to the news?
A: Surprisingly, we didn’t hear any concerns from consumers. The funny thing about this is that we just had consumers ask, “When will we get spinach again?” It’s ironic when every time you turn on the news or pick up a newspaper, there are reports of the outbreak giving details of what happens when the E. coli spreads. I really received no negative feedback. A few people brought back their uneaten baby spinach bags, but there was never an overwhelming reaction of people pounding at our door. Since we removed the spinach, we’ve received a small spike in green leaf, romaine, romaine hearts, and head lettuce, but no significantly meaningful numbers.
Q. It sounds like your customers have a serious liking for spinach. Had the category been increasing in sales prior to the outbreak?
A: This incident really hurts a category that has been growing in interest. The category of baby spinach over the past few years has skyrocketed, and sales of spinach have been a huge deal for us. Of course, this will affect spinach sales dramatically. A lot of time local media sensationalizes things and scares the consumer before they have the facts and figures. I think there will be a cooling-off period and people will forget about this incident, but it will be a gradual process and probably a long time before that happens.
Don Harris, Vice President Produce/Floral, Wild Oats, Boulder, Colorado
Q. What are the key strategies you engineered when you learned of the fresh spinach e-coli outbreak?
A: We pulled everything with fresh spinach from the shelves and our produce managers, who are always very involved with our customers, encouraged them to make transitions to other bulk greens and organic salads. Even with Earthbound Farms labels, items like organic leaf lettuces and romaine mixes have done well filling in the holes, despite the fact the company name has been so prominently linked in the media to the spinach E. coli outbreak. We did the same with Fresh Express, and other organic leaf lettuce brands. Bulk leaf lettuces probably doubled in volumes and salads tripled. I had expected an overall sales drop with the spinach ban and all the press, but overall sales were actually up last weekend on salads.
A: Our customers in general are flexible. If they can’t get spinach, they have arugula or bulk greens; it’s organic, it just won’t be spinach. They talked with managers and associates on the floor to learn about other choices. In some cases, it encouraged consumers to try new items.
Q. With the ordering adjustments to fill displays, have you encountered any problems?
A: We’ve had a hard time keeping shelves filled with the alternative products because in some cases we’ve had a tripling in demand. We always have big displays. Keeping some products in stock has been challenging. We’ve had trouble filling kale orders, some other mustard greens, even dandelion greens, bulk greens as a replacement for baby spinach and the bulk spring mixes.
Q. Has there been any confusion with reformulated spring mixes?
A: I had great grief over last weekend because of an ad that was running on spring mix. We couldn’t take the ad out because it was too late. We had pulled spring mix because it could have had spinach in it. Earthbound reformulated the spring mix for us. It would have been hard to explain that ad after the initial outbreak if those bags included spinach, but we will have spring mix in stores without spinach. All people in the stores are a little paranoid. We did get consumers calling, examining the bags with a fine-tooth comb, calling us, asking, “Is this spinach?” for some of the greens that look similar. Young chard, for example, is often mistaken for spinach.
Q. With your many years in the industry, how does this recall compare to others?
A: I’ve dealt with a lot of recalls over the years. My history has been with conventional, but I’ve found there’s a general consensus of consumers thanking us for taking the product in question off the shelf. They believe we wouldn’t sell them something that wasn’t safe for them to eat. At this stage, organic hasn’t been implicated. On that Saturday when Natural Selection was implicated, this indicated it was a California outbreak. Normally the recall would be confined to California growing areas. So, I initially told the stores to play up local spinach; we bring in spinach from Long Island, for example. But then the FDA banned all spinach, so we pulled it all. We’ve been pushing local spinach, and those guys really get clipped. If you are a medium or small grower, this ban can be tragic. All the different labels created complexity. But it is very unusual to ban all spinach across the board because, normally, there’s a measured run for your orders.
Q. Your experience on the retail floor in terms of sales sounds more encouraging than at other chains I’ve spoken to. Why is that?
A: We’ve been very fortunate. My stores made this thing work by not only getting all spinach products off the shelves, but putting signs up without panic, beautiful displays with additional greens, and moving quickly to execute strategies. Having well-trained, knowledgeable managers and employees made it work. They were calling us asking what they should be doing, and coming up with their own ideas. In my former life, I was dealing with 1,700 stores. Here at Wild Oats, we could follow up with phone calls and by noon double check progress. Merchandisers in each area were calling on product substitution strategy because they didn’t want to see holes in the department.
Q. What additional steps can you and the industry as a whole take moving forward?
A: Our number one priority is to look out for the consumer. I’m on the board of PMA, and we, as an industry, should use them to try and get the FDA to start moving on lifting the ban. When the whole industry is affected, forces everyone to get involved and think about how to make changes.
We’re going to have to spend money to get the word out to consumers that spinach is safe. When FDA comes out saying fresh spinach is safe, the news won’t get front page.
In the organic industry, which is only one or two percent of the industry, while in produce closer to 5 percent, we need to ask ourselves, can we do something better?
Jeff Lyons, Senior Vice President of Fresh Foods, Costco, Issaquah, Washington
Q. What’s your take on the FDA’s handling of the situation?
A: It’s a pretty tough deal when the FDA comes out with a blanket statement, “Don’t eat spinach”. It’s the first time in my experience FDA enacted such a broad rule; it didn’t matter the vendor or where it came from. I’m used to dealing with food safety issues, whether bean sprouts or meat, focused on this plant or that label.
Q. How did you respond to FDA’s broad ruling?
A: We were able to get all spinach off the floor immediately, broadcast the message to all buildings, and track sales to see there was no product on the floor or mishaps with customers purchasing a bag. If that occurred, we have the capability to call directly to the warehouse, and since we operate through membership cards, to contact the customers directly and inform them to please dispose of the product. We’ve done this in the past on recalls. We know who has purchased the product. This is confidential information, but in this instance of safety we are able to alert the customers to please return the item, and let them know there’s been a recall. It gives us confidence that we have this mechanism in place, even though it didn’t happen in this case.
Q. Could you describe interaction with suppliers on product solutions?
A: This is a devastating thing for them. Our original spring mix had some spinach in it, and the vendors asked us if they could reformulate it and get it back on our shelves. We said sure, and we put a label on the front of the bag letting consumers know it contains no spinach. The vendors didn’t have time to change their label yet, so we contacted our attorney, and our food safety person contacted the FDA to be sure. They said it was fine to go ahead with our own labeling in the interim. On the back of our spring mix package, it says it may contain spinach or product ingredients may vary. Costco uses up to 17 lettuce varieties to give us flexibility in offering consumers the highest quality offering. When something starts to break down, we don’t want it in the mix. Our membership is our primary concern; at the same time we want to work with vendors. Otherwise these other crops would be thrown away. If you’re a spinach farmer and it’s your whole crop, and you choose to plow it under, you’re finished.
Q. How have customers reacted with the media blitz?
A: We had some concern with some members after a TV news company in Los Angeles falsely accused Costco of carrying spring mix with spinach and saying this is bad and they have it on the floor. It wasn’t spinach, it was arugula or another rounded shaped leaf variety that is less familiar. The TV company did three retractions over the next day, but the damage had been done. We had members worried, and people on the floor trying to explain. That was the biggest hiccup in the whole thing because there are a lot of leafy varieties out there. By next week, package labels will all be changed around the country, which should eliminate any further confusion. Hopefully customers are trusting of their club store or supermarket.
Q. So, where does that leave Costco in relation to getting back into the spinach market?
A: If the FDA investigation proves water contamination that could lead to a lot of concern, that’s tough. At this point we won’t carry spinach and won’t carry it for some time, even if FDA says New Jersey crop or spinach from other states is OK. We will wait awhile to get back into the category because consumers will still be concerned. We’ll take a cautious approach. Once there are enough reports and media coverage that consumers feel comfortable about eating spinach again, we’ll bring it back.
Q. Costco generates huge dollar volumes from limited product SKUs, so how will this affect the category?
A: At Costco we’re an item business, so that was a tough one to lose. Spinach is a very good item for us, within the top five items in our salad area and big dollars. Spinach has really been growing at double-digit pace for us. We have mixed greens that don’t have spinach, and mixed greens still are our number one selling item in the category.
We saw a pick up in alternative items, but not as much as we saw in loss. I think the scare had an impact on consumers thinking of just avoiding lettuce and other leafy greens in general. We saw a little switching over to romaine hearts but not a major difference in buying patterns.
Q. Where do you go from here?
A: We realize that consumers are wary. We have to manage those inventories, and we think sales of spinach will come back gradually. When you look at the myriads of produce eaten in this country, you can’t say the E. coli outbreak is a pervasive problem, rather isolated instances, but this is a signal to the industry to make improvements in food safety. Ever since the Jack In The Box incident, the meat industry has made improvement after improvement, and our meat supply is safer. The industry needs to work on intervention strategies; we need to get proactive in this business so consumers feel confident. We can’t sell double messages — saying that organic is better will confuse consumers.
Mike O’Brien, Vice President of Produce, Schnuck Markets, St. Louis, Missouri
Q. Since the outbreak, how have your actions affected your customers?
A: We voluntarily pulled all spinach, including bulk when FDA extended the recommendations, even though our bulk product is grown in Colorado, which is not even under investigation. FDA said to pull it, so we did. Feedback from consumers is they’re happy we voluntarily pulled the spinach. I don’t think they’ve lost confidence in eating spinach, at least the customers we’ve talked to. The news hasn’t had a major impact on department sales. We’ve seen a little bit of substitution and consumers are buying more bulk. Our supplier, Fresh Express, pulled its spinach bags and spring mix that had spinach and reformulated product without the spinach. Fresh Express is not associated with Natural Selection, but everyone’s guilty until proven innocence. The industry is working on trying to get the ban lifted in those areas not affected.
Q. What is your assessment of the long-term effect?
A: It’s hard to say the impact until I’m able to analyze sales data over time. It has kind of calmed down at retail. The customer only knows that if they are looking to buy fresh spinach, they have to wait and they seem OK with that.
With so much having been written in so short a time, thought it would be helpful to publish a sort of round-up of available material to help people understand the whole situation regarding spinach and this E. coli breakout:
The Perishable Pundit itself has dealt extensively with the subject in several major pieces. On September 15, 2006, we published Spinach Recall Reveals Serious Industry Problems, which addressed the implications of this crisis for the fresh-cut industry. You can read the piece here.
On September 18, 2006, we published Organic Dodges a Bullet, which deals with the implications of the outbreak for the future of organic farming. You can find this piece here. Also on September 18, 2006, we ran a piece called Ramifications and Reflections on the Spinach Recall, which provided our first 10-point analysis of the situation. You can read it here.
September 19, 2006, we asked Is FDA’s Concern Now an Obsession? — a piece in which we assessed whether a national recommendation to not eat spinach made any sense. You can review this here.
On September 20, 2006, we noted 10 Peculiarities about the E. coli Outbreak and reviewed why certain aspects of the situation are unlike past food-safety challenges and other unanswered questions regarding the outbreak. Read this one right here. Also on September 20, 2006, we did our third 10-point list, calling this one “Spinach Recall Begs for Solutions”, where we reviewed how the trade can deal with this issue for the future, including looking at the meat industry, the prospect of universal testing and the use of RFID and GTIN. You can read all this here.
On September 21, 2006, we asked Is FDA Causing Long-term Damage? Here we posed the question of whether punishing the innocent and the guilty alike doesn’t reduce incentives to invest in food safety. You can read this piece right here.
In addition, the Pundit did several smaller pieces that touched on various aspects of this crisis. On September 18, 2006, we raised the issue of whether food safety outbreaks such as this raise long-term issues about the viability of cartoon character tie-ins in Who Has Marketing Fortitude? You can read about it here. Also on September 18, 2006, we dealt with the way some companies have little sense of decency when it comes to marketing their products in the midst of a crisis. You can read this one right here.
Additionally on September 18, 2006, our Pundit’s Mailbag focused on letters received by United President/CEO Tom Stenzel and incoming Chairman Emanuel Lazopoulos of Del Monte Fresh, which dealt with the confluence of United’s Board Meeting and the spinach crisis as well as issues of industry leadership. You can find this one here.
On September 19, 2006, we noted that there might be a Greenhouse Opportunity in all this. Read this here. Also on September 19, 2006, we noted that, though fruits and vegetables are healthy, fresh produce is not necessarily the best choice for those with a compromised immune system. The piece is called Marketing Nightmare and you can find it right here.
On September 21, 2006, we did a piece called Wal-Mart Deli/Bakery Has Crisis Of Its Own that draws a link between the difficulty of preventing a Salmonella outbreak at one store with the difficulty of preventing an E. coli outbreak on an industry-wide basis. You can read this piece here.
Several additional pieces appear in the September 25, 2006, Pundit and they will be incorporated into future iterations of this Spinach Crisis Summary.
In addition to our own work, there are many excellent sources of information out there that do not require payment, membership or registration. Three of the Pundit’s favorites:
The U.S. Food and Drug Administration has offered daily information on the crisis right here.
The Centers for Disease Control and Prevention deal with the outbreak here.
The Produce Marketing Association has maintained an excellent industry resource on the subject right here.
Please feel free to write or call if you are looking for specific information not included here. Note that many of the articles and websites have links to other resources.
The Pundit would like to thank the many industry members who’ve called or written over the past week. Most have given information in confidence, and regular readers of the Pundit have been enjoying the benefit of this input since the crisis broke. But wanted to deal here with two specific letters:
John Pandol, a partner at Pandol Bros. in Delano, California, asks an interesting question:
Jeff Lyons, Senior Vice President of Fresh Foods, Costco, Issaquah, WA, touches on this issue in today’s Retail Pulse series as he mentions that Costco uses membership club data to let people know about recalls when health or safety are involved.
And Tom Marrolli, Outside Sales Executive/Mid-Atlantic at State Garden in Boston, Massachusetts, answers the Pundit when I asked:
How is it possible for so many brands to be implicated? Even if they come from the same packing plant, it doesn’t make sense. These items are batch processed. If Natural Selection Foods is packing for Dole, it packs for Dole for many hours. It doesn’t pack in bits and pieces for each brand.
Since so many brands are implicated, it would have had to have been packed over many different packing days. But an E. coli problem is typically in a small batch. It doesn’t make sense.
You can read the whole article here.
But as Tom explains:
It’s not only possible, it’s probable. There is not just one packaging machine in a major processors operation. Each machine may be loaded with a different film. The machines can work simultaneously off the same load. In other words, one line may be packing one brand; the line next to it may be packing another. Same spinach, different brands.
And he is, of course, correct. Although there aren’t enough lines for all these labels to run at once, industry sources tell me that some of these labels would have been packed on different days. Of course, the FDA has never issued a list of implicated labels, so it is possible that Natural Selection Foods was being conservative and recalled all its labels packed in that plant just to be safe.