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Perishable Pundit
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Boca Raton FL 33481

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Fax: 561-994-1610



Produce Business

Deli Business

American Food & Ag Exporter

Cheese Connoisseur

More Thoughts About
Wal-Mart’s Marketside

After visiting Phoenix to see the launch of Wal-Mart’s Marketside concept, we wrote a Special Report which we entitled, A Triumph inPhoenix — Wal-Mart’s Marketside Hits The Trifecta… One Open Question:Do Suburban Consumers Want Small Grocery Stores?

Now that we had a chance to sleep on it, a few additional thoughts come to mind:

  1. The enormous power of brands. It is not just a matter of the appeal to consumers of the brand. It is a matter of getting all manner of muscle vested in the retailer’s success. Sara Lee/Bill Mar was at Marketside grilling hot dogs and giving them away, Stemilt had people distributing apple and pear samples and Dietz & Watson practically ran the service delis for Marketside. And Marketside was lucky to have them as they did so excellently with highly experienced manpower. It actually is kind of ironic because Dietz & Watson always refused to sell the Wal-Mart supercenters but obviously was persuaded that the Marketside concept was appropriate for the brand.
  2. We’ve been in many, many Fresh & Easy stores but do think that visiting the Marketside concept crystallized why Fresh & Easy has struggled so. The Fresh & Easy concept is simply so foreign, so insistent on doing things its own way that it is asking a great deal of a consumer. We had written early on about Fresh & Easy’s unwillingness to accept American Express cards when other supermarkets do accept them. Eventually they changed policy and started accepting them.

    Basic Marketside policies — accepting checks, accepting manufacturer’s coupons, etc. — are interesting to contrast with Fresh & Easy simply because Marketside policies are so normal for America. Almost all supermarkets accept checks, and almost all supermarkets accept manufacturer’s coupons. We know that these things cost money, but Fresh & Easy knew it was going to lose money initially anyway. One would have thought it would have made sense for Tesco to introduce Fresh & Easy with as much of these details being comfortable to American shoppers as possible. Then, in three years it could always change policy after it had a dedicated customer base.
  3. Bakery is the weakest department in Marketside. We understand it had some staff changes midway through the launch and just recently brought on a bakery person with experience at Whole Foods. This is the one category we felt needed to be fixed pronto.
  4. One of the nice things about Safeway’s “the market by Von’s,” which we profiled here, was it had some outdoor seating. In Phoenix, Marketside’s seating might be better in-store and air-conditioned. There seemed to be sufficient space to have a little counter or even experiment with a wine bar. It also fits with Hispanic shopping patterns where in-store eating is common. We think it is worth a try.

  5. There seemed to be a bit of disruption caused by the fact that the offices for the whole Marketside operation were, mid-launch, moved to Phoenix from the Bay Area. Seems that someone at Bentonville decided… A) It would be cheaper, B) As the launch city, it was important to get the Phoenix stores right so the executives should be on-site, and C) With its high percentage of elderly and high percentage of Hispanic consumers, Phoenix is, in fact, a lot what America will look like in the future.
  6. After the Phoenix launch, the next city up is San Diego. Interesting contrast: Wal-Mart is very strong in Phoenix — the number two grocer — but Wal-Mart has almost no presence in San Diego. Seems like the thought process must be to try both extremes and see if it plays in Peoria.
  7. Nobody — Marketside, Fresh & Easy, etc. — does a good job of displaying and promoting fresh prepared foods, especially items such as curry dishes that are loose. The prepared food items look good enough when laying flat in their trays, but when tilted up to let consumers see when walking by with a shopping cart, the lose items fall to the bottom while streaking against the front of the package. In the end, it is just not very appetizing. They probably should do as the Japanese do and make wax representations of each item and use that for the tilted display.
  8. The decision to do a promotion on prepared foods — 6 cents for a $6 entree — was courageous but probably a mistake. It was too difficult to stay stocked on the full assortment. Although the stores never ran out of $6 entrees, the store lost a chance to show off its full array of product.
  9. The big challenge with this format is to get consumers to shop it as something other than a convenience store. Fresh & Easy offers $5-off-$20-purchase coupons exactly because it wants to push the basket size up. Our guess is none of these stores will make it if they can’t get a ring of $20, and really it is a $30 ring that would make them stellar performers. If we were designing promotions, we think we would give away a prepared food entrée with each $20 purchase.
  10. More than a few consumers came into the Marketside store carrying those famous Fresh & Easy $5 off $20 coupons and asking if the store would accept them. The decision seemed to be NO, but they would give the consumer a $6 prepared food entrée instead. We asked one retail expert what he would advise:

“…it all depends on what you say you are. And if the philosophy is that it is completely non-promotional EDLP, then my answer would be no. But if you have an “ad match” program, then my answer is yes. If you position yourself as a complement to Wal-Mart, then my answer is yes. If you don’t have any overt connection to Wal-Mart, then my answer is no. If it says “Low Prices Always” on the building, then my answer is yes. And so on and so on…”

But if your marketing position is one thing, then you do something else, I say “ who cares?”!!

Marketside has committed to always have the lowest prices in the market on five basic items — milk, bread, etc. Branded groceries are priced exactly the same as in a Wal-Mart supercenter — so the price gap with local convenience stores is enormous. Produce, which is different from the produce in the supercenter, and the fresh prepared foods seem to have their own price list.

Our thought is if you are Wal-Mart and you go to war, you make sure you win. We would accept all coupons and probably double manufacturers’ coupons to contrast with Fresh & Easy’s private label offer.

It is very expensive to do this but the losses on these four stores are inconsequential. Even losses on 40 little stores are inconsequential. Teaching competitors that they should realize that if they come into Wal-Mart country and try to steal Wal-Mart’s customers, they will never make a dime. That is a lesson that could save Wal-Mart many billions in the years to come.

Marketside is a little store but the stakes may be huge.

Disputed Link To Aunt Mid’s
Cut Lettuce Reveals Need
For Industry Firms To Have
Easy Access To Top Epidemiologists

The papers have been filled with news reports indicating that Aunt Mid’s Produce Co. has been the source of an E. coli 0157:H7 outbreak — this one linked to distribution of foodservice or institutional size packages:

The Michigan Department of Community Health recently issued a public health alert in response to an outbreak of illnesses caused by E. coli and thought to be spread through industrial-size packages of iceberg lettuce. The alert names Detroit-based Aunt Mid’s Produce Co., which distributes lettuce directly to restaurants and institutions, as the common thread among some of the… people who have been sickened since September 8.

Of those affected, 10 people have been hospitalized. Aunt Mid’s has voluntarily suspended production of the lettuce until the investigation into the outbreak is complete. Some students at Michigan State University and the University of Michigan have gotten sick during the statewide outbreak.

We mentioned Aunt Mid’s during the spinach outbreak of 2006, as the company worked to reassure consumers of its food safety efforts. Now, the company is objecting to the claim that its product is associated with an outbreak:

In connection with the numerous industry and general media articles regarding the recent E. coli outbreak and its source, it is important that all persons concerned are made aware of the current status of the ongoing investigation to identify the source of the contamination.

On September 26, 2008, the Michigan Department of Agriculture notified Aunt Mid’s that its foodservice pack-size iceberg lettuce was an “item of interest” in an E. coli outbreak investigation. Aunt Mid’s immediately and voluntarily halted production and sales of any chopped or shredded iceberg lettuce products.

Since that notification Aunt Mid’s has worked around the clock with the Michigan Department of Agriculture, Michigan Department of Community Health and Michigan State University to determine whether any Aunt Mid’s product was contaminated. To that end, Aunt Mid’s has initiated with outside, certified independent laboratories an ongoing testing program of both its products and its processing facility.

Aunt Mid’s is pleased to report that these tests prove there is NO CONTAMINATION in Aunt Mid’s products. Those laboratory test results have been shared with the State of Michigan.

Aunt Mid’s has also freely and graciously extended to the various departments of the State of Michigan access to its processing facility and has provided additional product samples, for testing by those departments. The Michigan Department of Agriculture has just released to Aunt Mid’s the results of its tests of Aunt Mid’s iceberg lettuce samples and Aunt Mid’s processing facility.

Aunt Mid’s is pleased to report that the State tests confirm the results of Aunt Mid’s independent laboratory tests — NO CONTAMINATION OF EITHER AUNT MID’S PRODUCT OR PROCESSING FACILITY WAS FOUND BY THE STATE TESTS.

Food Safety is, and always has been, top priority for Aunt Mid’s. Its state-of-the-art, HACCP (Hazard Analysis of Critical Control Points) certified processing facility houses its own laboratory managed by a quality assurance and control team. Aunt Mid’s voluntarily undergoes stringent third-party food safety audits by AIB International (www.aibonline.org) on a regular basis. Aunt Mid’s consistently earns the highest rating achievable — “Superior”. Aunt Mid’s also has passed all Michigan Department of Agriculture inspections. Inspection results can be obtained by calling the M.D.A. hotline at 800-292-3939.

We wish to reiterate that, to date, after the numerous tests conducted by certified independent laboratories, NO AUNT MID’S PRODUCTS HAVE BEEN FOUND TO BE CONTAMINATED. When more information becomes available in this ongoing and complicated investigation, Aunt Mid’s will make such information available on its website. Aunt Mid’s will continue to fully cooperate with the State of Michigan investigation until a conclusion is reached.

In the meantime ace plaintiff’s attorney Bill Marler and others have been calling on Aunt Mid’s to reveal the source of its iceberg lettuce. Pointing out that if it is true that Aunt Mid’s is the source of an outbreak and, if, as is often the case, the problem starts with the raw product, others may have bought raw product from the same farm and thus other consumers may be at risk:

At least 40 confirmed cases of the infection with the highly toxic pathogen E. coli O157:H7 have been linked to commercial bagged lettuce distributed by Aunt Mid’s Produce, but the Detroit-based company refuses to name the supplier of the contaminated product. Thirty of the illnesses are in Michigan; the others have been documented in Illinois, Ohio, New York, and Oregon.

“Food borne illnesses are often difficult to trace, as we saw this summer with the tomato-pepper Salmonella outbreak,” said food safety advocate and attorney William Marler. “You want to get to the source as quickly as possible in order to stop the flow of contaminated produce and alert those who might have it in hand to discard or return it. In this case, we have a trail leading directly to the door of the distributor — Aunt Mid’s Produce — and they’re blocking the trail there. Not revealing the source of the contaminated lettuce means that there could be other contamination — in fields or in the supply chain — which is not being stopped. It’s completely irresponsible and should be illegal.”

We wanted to get to the bottom of this situation and so asked Pundit Investigator and Special Projects Editor, Mira Slott, to find out more:

A proud father Mr. Philip Riggio (third on the right)
and his sons (left to right)
Vincent, Philip, Jr., and Dominic…all in the business

Dominic Riggio
Aunt Mid’s
Detroit, Michigan

Q: How did this outbreak investigation unfold?

A: We were informed by the Michigan state agencies that there was an E. coli outbreak; several E. coli cases reported. They contacted us on September 26, telling us that iceberg lettuce was one item of interest. Ever since, we’ve been working with the agencies handling the investigation. Upon contact, we stopped selling and processing iceberg products.

Q: How have you participated in the investigation?

A: We sent numerous product samples to independent labs, as well as the same samples to the Michigan Department of Agriculture, all of which have come back negative. We also conducted environmental tests simultaneously with the Michigan Department of Agriculture at our processing facility. Those were pretty extensive. All of our environmental tests have also come back negative.

The Michigan Department of Agriculture has also contacted us that they removed samples from the Lenawee County Jail linked to some of the cases, and all the test results from there came back negative. That was their testing, not ours. As a matter of fact, all of our tests have come back negative and there are no outstanding tests out.

Q: Is there any concern that contaminated product could be out in the market?

A: We stopped selling and processing iceberg lettuce in cooperation with the investigation, not because there is anything wrong with it. Our action was voluntary. We are waiting for some case study information from the state, and have already begun our trace-forward investigation. The information the state gathered prior to notifying us on the 26th should be readily available, but we haven’t gotten that back yet.

Q: The Illinois Department of Public Health warned consumers of a connection between E. coli cases in the state with those in the Michigan outbreak. It identified Aunt Mid’s as the distributor of iceberg lettuce consumed by six Illinois residents during late August to mid-September who have been diagnosed with E. coli 0157.

A: We have not been contacted by the Illinois Department of Health or any of the Illinois agencies, so we are not a part of their investigation as of yet. We believe they are taking the news from Michigan and extrapolating it.

After numerous tests, there is no contamination in Aunt Mid’s products.

Q: Could you elaborate on your food safety measures?

A: Food safety is a top priority at Aunt Mid’s. We go to great measures to provide safe working and processing conditions. We go to growers who are certified in the same way. Good manufacturing practices through HACCP plans third-party audited. We undergo stringent food safety audits by AIB International, consistently earning the highest superior rating, as well as regular inspections by the Department of Agriculture. All records can be obtained through a hotline.

The truth is coming back to us through our customers. Our customers have supported us so greatly this last week, sympathizing with how our name is being dragged through the mud. Our customers know the steps we’re taking to insure food safety. We have proved this over time, and that’s why they are standing behind us.

Q: Are you speculating that the epidemiological study and analysis was flawed or incomplete and perhaps led to an immature link to your company?

A: The Michigan agencies have not provided us with the case study, and that should tell us more about why. We’ve requested it and are still waiting. The only one saying it is Aunt Mid’s is the Michigan Department of Community Health on September 26. We don’t have a recall. We voluntarily stopped selling and processing iceberg product, but nothing was found.

Q: If you are voluntarily halting production and sale of iceberg lettuce, why not do a recall of the product already out in the market as well?

A: If they said we identified this problem on this day with these lot codes — boom, we would recall immediately through our distribution system. No contamination has been found since the beginning of this investigation. We voluntary stopped processing and selling iceberg lettuce as a show of good faith and cooperation with Michigan authorities, not because we thought there was anything wrong. We continue to sell other products.

Q: Just to clarify, although you didn’t recall product, wouldn’t customers or establishments that had Aunt Mid’s product in stock pull it anyway in reaction to the press releases?

A: Some customers have suspended orders till the problems are resolved. Anything that was shipped prior to September 26 was not recalled by us. Some distributors that received our product but had not sold it, returned it to us, but we didn’t recall anything. There was no official recall. The turnover time period in produce is different than beef.

This is the world and we’re in a business where outbreaks and food safety issues are a part of things. We are not running from it; we’re addressing it head on.

Q: I’m sorry your company name has been tarnished through this ordeal, and hope that in the end you’ll be vindicated.

A: On the 26th, when the Michigan Department of Community Health issued their press release with iceberg lettuce as an item of interest, they named Aunt Mid’s, but they named us without proof. Anytime your name is mentioned in the same sentence with any pathogen, you might as well sit in the electric chair. We have a panicked public. We know how the public is going to react.

We believe at this point, our name is associated with the Illinois Department of Public Health press release only because they saw the Michigan report. We’re not working with Illinois state agencies. They’ve pretty much taken the news from Michigan. That’s an assumption on my part. We’d be happy to supply the State of Illinois with all our independent test results and other information that could help in the investigation.

The Michigan Department of Agriculture has been in our facility day and night testing alongside with us. They’re being very careful of what they’re saying. They are truly doing their investigation and we’ve been fully cooperating. The Michigan Department of Community Health contacted us originally in tandem with the Department of Agriculture. It was a conference call. We’ve had little to do with that department beyond September 26.

This relatively small outbreak actually illustrates some very important issues and poses some very important questions for how we can deal with problems such as this in the future.

During the Salmonella Saintpaul situation, we ran a piece from Jim Gorny of UC Davis that focused on the difficulties of epidemiology — you can find that article here. However, the fact that epidemiology is difficult, time-consuming and can be incorrect, does not mean that the very science of epidemiology is invalid.

In fact, if the produce industry adopts the position that only DNA evidence found as a “smoking gun” on product is sufficient to tie a producer to an outbreak, the produce industry will wind up discredited and irrelevant.

As such, although it is reassuring that Aunt Mid’s has done lots of testing and others have done lots of testing, and it has come out negative, as they teach in law school “the absence of proof is not proof of absence.” In other words, these tests are being done on different product at different times and simply don’t prove anything about what was or was not happening weeks ago when this product would have been packed.

One thing that all processors should do is hold back under refrigeration samples from each lot so when there is suspicion, at least we can test product from the relevant lots. Because this product is stored under continuous refrigeration, it generally lasts longer than any product on the market, so by the time the samples are rotten, the product is no longer in the market.

One big caveat, and we very much hope that the public health community will join us in this, is that while we will fight hard to make sure the produce industry recognizes the value of epidemiology, the public health community needs to acknowledge just as much that mistakes can be made and that there must be a standard of evidence met before consumers are told to panic and businesses are destroyed.

We were horrified to read this line from Mira’s interview with Dominic Riggio:

“We are waiting for some case study information from the state, and have already begun our trace-forward investigation. The information the state gathered prior to notifying us on the 26th should be readily available, but we haven’t gotten that back yet.”

Epidemiology is a science and, as such, those who practice it need to be able to make their case. The very first time public health authorities called Aunt Mid’s, the authorities needed to be willing and able to present the epidemiological evidence that led them to indict Aunt Mid’s Produce Co.

There have been cases in which Federal authorities have walked into produce companies demanding recalls and they were shown that their epidemiological evidence was being misinterpreted.

We have begged and pleaded, with the produce associations to help their members by retaining on contract a world-class epidemiologist who would be in a position to be available to a firm such as Aunt Mid’s in the event of a situation such as this.

During the Salmonella Saintpaul situation, we ran an important interview with Michael T. Osterholm, a renowned epidemiologist now based at the University of Minnesota. It was exceedingly influential because his critique of the epidemiological study done in the Salmonella Saintpaul situation was telling.

The Pundit cut his eye teeth in the business on the Hunts Point market, so we understand exactly how the Riggio family must feel and we appreciate that they are doing all these tests to fight back and vindicate their name in the only way they know how. Unfortunately, no amount of testing today will ever persuade public health authorities about whether there was a food safety outbreak several weeks ago.

To do that, what Aunt Mid’s and all produce companies in such situations require is a good epidemiologist who will look at the evidence at the start and quietly point out errors and alternative interpretations and thus prevent these issues from erroneously breaking to the public.

It is also possible that the epidemiologist would be the one pointing out that public health authorities are withholding information and thus preventing anyone from vetting the accuracy of the epidemiological report.

Finally, the epidemiologist may confirm that the public health authorities are correct and that a company is implicated.

But what is required is not for the industry to do endless testing — but for the associations to facilitate the availability of world-class epidemiological expertise so that the industry can speak the language of public health.

As for our friend Bill Marler, we would certainly join his effort to get the product sources revealed in the case of outbreaks. His logic is 100% correct — we need to trace back and then trace forward to minimize illness. The issue, however, is whether or not Aunt Mid’s has been properly implicated. The mere assertion that they are implicated, without any supporting evidence, is not sufficient.

As an officer of the court and a representative of a system in which our courts are not only courts of law but of equity, we hope Bill Marler will join our effort to insist on transparency by public health authorities, including a timely revealing of case studies and epidemiological evidence so that these can be reviewed by third parties for accuracy.

We think Bill Marler is too good a lawyer to defend a system in which public authorities in effect declare themselves prosecutors, judge and jury and then conduct a “secret trial” and never feel obligated to reveal the basis of their judgments. We don’t see how anyone can believe in the rule of law and believe in a system such as that.

Many thanks to Dominic Riggio for taking the time to explain the position of Aunt Mid’s to the industry.

Perishable Thoughts

We have run several pieces on the financial crisis, including the following:

1. Government Bailout Requires Deeper Analysis

2. Pundit’s Six-Point Proposal To Fix Financial Failures

3. McCain And Obama Make A Proposal — The Intellectual Bankruptcy Of Our Politics May Be A Bigger Problem Than The Financial Insolvency Of Wall Street

There also is much evidence that the financial crisis and the general tightening of the credit markets has seeped into the general economy. For example, The Wall Street Journal ran a piece entitled Big Discounts Fail to Lure Shoppers:

As the financial crisis spread last month, some U.S. retailers hit the panic button, offering more generous discounts than they did at this time last year.

But the promotions did little to convince cautious shoppers to open their wallets. When they report September sales this week, many retail chains are expected to show big drops in sales at stores open at least year, a key measure of retail performance, according to analysts polled by Thomson Reuters.

Things are not looking good. But at times like this is when we can really appreciate being in the food business. The same article quotes a Costco executive:

Prices may have to go even lower to get consumers interested again. At Costco, where sales of non-discretionary items such as food and gasoline have increased and consumers have cut back on discretionary purchases of furniture, apparel and electronics, Chief Financial Officer Richard A. Galanti said last week, “If [a purchase] can be put off, it will be put off.”

This all came to mind because we have been travelling extensively, speaking about retailing and observing new and old retail concepts, which we mentioned here. After our trip to London for the Citicorp Retail Conference and zooming to Phoenix to discuss Wal-Mart’s new small store concept, we made a quick trip to Washington, DC.

We stayed at the Mayflower and turned to the Guest Services Directory to check out what restaurants the hotel had and what hours they were open. We were greeted with a quote that seemed apropos for a moment when the need of people to eat was quite literally, our industry’s “bread & butter” in this uncertain economy:

He may live without love — what is passion but pining?
But where is the man that can live without dining?”

Part i, Canto ii, Section xix
By Owen Meredith (Pen name), Edward Robert Bulwer Lytton

View quote section here.

We asked Pundit aide-de-camp James Elmer to research a bit more on this quote:

The quote can be viewed/purchased here:

Lucile — (download entire book from Google Books)
By Owen Meredith, (Pen name), Edward Robert Bulwer Lytton
BookSurge Publishing, July 21, 2000
324 pagess

The entire section this quote is selected from:

We may live without poetry, music and art;
We may live without conscience, and live without heart;
We may live without friends; we may live without books;
But civilized man cannot live without cooks.
He may live without books, — what is knowledge but grieving?
He may live without hope, — what is hope but deceiving?
He may live without love, — what is passion but pining?
But where is the man that can live without dining?

Edward Robert Lytton Bulwer-Lytton, 1st Earl of Lytton (November 8, 1831 — November 24, 1891) was an English statesman and poet. He was secretary at different courts in Europe and Minister to Portugal and France. From 1876-1880, he served as Viceroy and Governor General of India and held this office during the Great Famine of 1876–78. Ironically, in the context of the quote we wish to use, some British and American historians argue that his uncompromising implementation of Britain’s trading policy is blamed for the severity of the famine, which killed up to 10 million people.

He was a son of novelists Edward Bulwer-Lytton, 1st Baron Lytton and Rosina Doyle Wheeler. He was educated at Harrow School and at the University of Bonn. At twenty-five years old, he published in London a volume of poems under the name of Owen Meredith. He went on to publish several other volumes under the same name. The most popular one is “Lucile”, a story in verse published in 1860.

Lucile was a verse novel. The poem is a narrative told in an anapaest meter. It was Meredith’s (Lytton’s) most popular work, achieving wide popularity in the 19th century, despite accusations of plagiarism involving elements of an 1831 George Sand novella, Lavinia. In the century following its initial publication, over 2000 editions were produced by nearly 100 publishers.

Many thanks to James for that input. If we come upon truly difficult times, it will be of no small solace to those of us in this trade to realize that it is, indeed, true, “People have to eat” and things will have to get very bad indeed before total food consumption goes down.

Already, however, those in foodservice have seen consumers trading down both to less expensive restaurants and to eating at home. Some of the few big chains showing good results: Wal-Mart and McDonald’s.

And that is pretty much an accident. Not long ago, Wal-Mart tried to “upscale” its image with ads in Vogue and McDonald’s has tried to roll out upscale coffee bars in every store. Fortunately for these companies, none of these plans have worked so they didn’t lose their reputation for economy.

Thus they are well-positioned to thrive in a world where consumers can live without most things but still need to eat.


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