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Perishable Pundit
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Produce Business

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American Food & Ag Exporter

Cheese Connoisseur



Question For Fresh & Easy
And Marketside: Are Americans
Really Ready For “Ready Meals”?

We have covered the launch of Tesco’s Fresh & Easy extensively, and since Wal-Mart launched its small store concept, Marketside, we have written pieces, both here and here, comparing and contrasting the concepts.

Although the formats have much to differentiate themselves from one another, they share one important element besides being a significantly smaller footprint than conventional US grocery stores: They share an emphasis on “ready meals” or fresh prepared food. We are referring here specifically to food that is prepared by a vendor or in a commissary and then packaged for the consumer to reheat.

These items are very popular in the UK and to a minor extent are sold in many supermarkets in the US. It is also true that in high-income areas, particularly urban areas, it is common to have specialized grocery stores that sell some variant of these products.

Yet we wonder if both Tesco and Wal-Mart aren’t misinterpreting the consumer research as to the extent of the market for these foods in the United States.

The UK consumer came to the habit of buying these ready meals during a time when two circumstances existed:

First — which is still true — it was during a time when few UK consumers had large American-style refrigerator/freezers. So they had little choice but to shop frequently.

Second, the UK lacked the vibrant restaurant culture of the US — which also is still true today, though to a lesser extent. Particularly the UK lacked a large selection of moderately priced restaurants.

Neither of these circumstances are evident in the United States and, yet, these seem almost prerequisite to wanting these “ready meals” in large numbers.

To some extent these “ready meals” strike us as an “in between” product squeezed on both ends by more compelling propositions.

If the focus is economy, then one has to think that frozen foods will win out and, in fact, with the economy tightening, frozen foods are showing good numbers. Not only are frozen foods much less expensive to begin with, but they are economical in two other ways: First, because they can be stored easily, one does not have to make extra shopping trips, which costs both time and money, and, second, the shelf life is for all intents and purposes, forever.

These traits make frozen foods fit in more with American lifestyles. At the Pundit household, we’ve thrown out plenty of fresh prepared foods but never a LeanCuisine. Life just often isn’t predictable. You buy something like these “ready meals” and then one kid gets invited to dinner at a friend’s house, the other has a practice the timing of which means everyone is going to eat fast food. Whoever was shopping forgot there was a PTA meeting that night and one spouse has to work late and so the office is ordering pizza. Next thing you know, those “ready meals” look a little grungy — especially if in a moment of optimism one bought a whole bunch of them — and they wind up in the garbage.

Of course for many, price isn’t enough… what about quality? Well most Americans do associate fresh with quality. Yet if fresh equates with quality then, inevitably, consumers will interpret restaurant take-out food — prepared, literally, to order — as higher quality than “ready meals.” We praised Marketside for being smart to have a service deli, cook pizzas in front of people, in-store rotisseries, etc., not just because consumers will value these fresh products but because we thought such cooking would create a “halo effect” for the “ready meals” and consumers might think they were made fresh right in the store.

The “ready meals” strike us as inherently a weaker offer than take-out on three counts:

First, they are not as fresh. They are made in commissaries a day or more in advance.

Second, they are not as good. We were talking to some consumers about the Pad Thai dish at Fresh & Easy. It is pretty tasty, they said, but it just doesn’t taste like Pad Thai from a Thai restaurant. If any of these shoppers want to pick up some dinner, they can easily zoom by a local Italian place, Thai place, Mexican place, Chinese place, Indian place, Barbeque place, Sushi place and more.

These restaurants are all specialists. It is very difficult for any supermarket to produce “ready meals” in each of these categories that will be equal in flavor and taste to what these specialists produce.

Third, the restaurant take-out can be customized. If one prefers broccoli today instead of spinach with the chicken, no problem. Mrs. Pundit would like her broccoli steamed, Mr. Pundit will take it sautéed in garlic and olive oil — once again no problem at our local Italian place — but it’s a big problem if we are buying “ready meals” where the option is only what is there.

In addition, the take out is arguably more convenient. We can call from the office, shopping mall, car or soccer practice and it is ready when we get there. Many places now will bring it out to the car. The “ready meals” require us to get out of the car and there is no guarantee the store will even be in stock with the item we are hankering for. If our favorite Italian restaurant runs out of chicken breasts or broccoli, they send a kid to Publix to buy some until the next delivery. If Fresh & Easy and Marketside run out, they are out.

So if frozen foods are more desirable from an economy angle and take-out is better from a quality angle, the market for “ready meals” gets constrained fast.

If we take away the “ready meals,” however, these small format stores are just what the Grandma Pundit would have called a “Superette.” And though they still exist in urban areas where big supermarkets can’t get real estate, superettes have died out everywhere else, giving way to larger supermarkets and smaller convenience stores.

We wonder if the answer is not “ready meals” but a full cooking kitchen as in Sheetz, where you can come in and order hamburgers, salads, sandwiches, etc., and they cook them for you — fresh. The executives at Sheetz are pretty smart. They make a point on their menu of not just offering a “Grilled Chicken Wrap” but a “Made to Order Grilled Chicken Wrap.” They don’t just offer a “Grilled Chicken Salad,” they offer a “Made to Order Grilled Chicken Salad” and throughout the menu they emphasize this “made to order” as a competitive advantage. They also don’t try to be good at 20 different cuisines.

Wal-Mart has made clear that Marketside is an experiment. Well we would encourage them to try one store as a hybrid between a Sheetz on the foodservice end and a Marketside on the grocery store side. That would be a mix that just might work with how Americans actually eat.

These “ready meals” are mostly a foreign concept outside the American vernacular.




Laws Encourage Imprudent
Behavior On Wall Street

The New York Times ran a piece entitled, The Road to Lehman’s Failure Was Littered With Lost Chances. As we read it, we realized that our current laws may be combining with compensation practices to put the interests of executives and board members out of alignment with the public interest. Why do we say this? The focus in both law and compensation practice has been to ally the interests of executives with those of shareholders. What we have learned in this financial crisis is that, in many cases, the public interest is more concerned with the interests of creditors and keeping the company solvent, then it is with the interests of shareholders.

We have been analyzing the financial crisis in a series of pieces including these eight:

Lessons For Everyone From Bear Stearns

More To Bear Stearns/JP Morgan Deal Than Meets The Eye

AIG Bailout Gives Short-term Relief Many Dangers Long-Term

Government Bailout Requires Deeper Analysis

Perishable Thoughts — Youth, Experience And The Subprime Crisis

Pundit’s Six-Point Proposal To Fix Financial Failures

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

Yet we confess that we hadn’t thought of one angle until we read this line from the story in The Times:

“Days before second-quarter earnings, Mr. Fuld called on the billionaire investor Warren E. Buffett, who would eventually purchase a stake in Goldman Sachs, but Mr. Buffett was demanding terms that Lehman considered too onerous.”

Now Warren Buffett is widely acclaimed as the world’s greatest living investor and, certainly, is not foolish or trivial. So he wouldn’t have been demanding cash that Lehman Brothers couldn’t afford to pay. What this line probably indicates is that his demands were deemed onerous in terms of the dilution to existing stock holders.

Now the law gives the board of directors a fiduciary responsibility to the SHAREHOLDERS, not bondholders or other debt holders, generally right up to the time a company becomes insolvent. It is only at that point that this fiduciary responsibility shifts to creditors of a company. In addition, by awarding stock options, restricted stock, etc., many compensation plans are all designed to tie the executives’ interests to the interests of shareholders.

Famously, Richard S. Fuld, Jr., Lehman’s CEO, saw his own stock in Lehman Brothers drop from $800 million to virtually nothing. In this sense one can say that Mr. Fuld simply miscalculated. He should have accepted Mr. Buffett’s money, dilution and all, to salvage some value.

That is true and a fair enough explanation of what transpired. Yet it leaves tantalizing questions. Suppose Mr. Fuld had not held $800 million in stock but, instead, held $800 million in Lehman Brothers bonds. Surely it is likely that he would have been more inclined to accept the dilution Mr. Buffett proposed as that equity would have made the bonds more secure. In fact if the law had given Mr. Fuld a fiduciary responsibility to secure the interests of creditors instead of shareholders, one could argue Mr. Fuld would have been legally obligated to accept the investment.

This area is a minefield of conflicting interests. First, it may not be in the interest of society to encourage such a risk-averse approach in business, as risk-taking is the source of much growth and progress. Second, it is unclear if stockholders would give their money to executives who don’t have their interests as the primary matter although it should be noted that bondholders do it every day.

Still, it strikes us that it is just recently that bankruptcy came to be seen as a legitimate business strategy and that in the not-very-distant past the moral injunction against not paying one’s debts functioned as a restraint on the use of leverage and other high-flying tactics.

We are, of course, aware of many busts from tulips to railroads and so don’t want to overstate the case, but we are also mindful that when J.P. Morgan was called before the Senate’s Pujo Committee in 1912 to testify about concentration of financial power, he spoke memorably:

Untermeyer: Is not commercial credit based primarily upon money or property?

Morgan: No, sir, the first thing is character.

Untermeyer: Before money or property?

Morgan: Before money or anything else. Money cannot buy it…. Because a man I do not trust could not get money from me on all the bonds in Christendom.

This notion — that a man’s character was the crucial thing, even in financial matters — sounds almost quaint now. The reference to " Christendom" sounds positively archaic. The world was smaller and moral sanction easier to impose.

The public interest is not so concerned with avoiding the losses that individual shareholders might suffer if their shares are diluted, but it seems heavily focused on avoiding the panic that accompanies corporate collapse, especially of financial institutions. One wonders if a part of the answer to preventing such collapses in the future is using the law and compensation programs to compensate for the loss of moral opprobrium that one found in years past.

Perhaps a requirement that stock compensation be matched by bond compensation or that, in financial enterprises, board members have a primary fiduciary obligation to seek to maintain solvency would help align the private interest of executives and board members with the public interest.




Employee Free Choice Act,
If Approved, Will Affect Us All

If you were watching the last Presidential debate, you might have noticed this video we feature below from former Senator and Democratic Presidential Candidate George McGovern:

This speech echoed a column that Senator McGovern wrote in The Wall Street Journal two months ago:

As a congressman, senator and one-time Democratic nominee for the presidency, I’ve participated in my share of vigorous public debates over issues of great consequence. And the public has been free to accept or reject the decisions I made when they walked into a ballot booth, drew the curtain and cast their vote. I didn’t always win, but I always respected the process.

Voting is an immense privilege.

That is why I am concerned about a new development that could deny this freedom to many Americans. As a longtime friend of labor unions, I must raise my voice against pending legislation I see as a disturbing and undemocratic overreach not in the interest of either management or labor.

The legislation is called the Employee Free Choice Act, and I am sad to say it runs counter to ideals that were once at the core of the labor movement. Instead of providing a voice for the unheard, EFCA risks silencing those who would speak.

The key provision of EFCA is a change in the mechanism by which unions are formed and recognized. Instead of a private election with a secret ballot overseen by an impartial federal board, union organizers would simply need to gather signatures from more than 50% of the employees in a workplace or bargaining unit, a system known as “card-check.” There are many documented cases where workers have been pressured, harassed, tricked and intimidated into signing cards that have led to mandatory payment of dues.

Under EFCA, workers could lose the freedom to express their will in private, the right to make a decision without anyone peering over their shoulder, free from fear of reprisal.

There’s no question that unions have done much good for this country. Their tenacious efforts have benefited millions of workers and helped build a strong middle class. They gave workers a new voice and pushed for laws that protect individuals from unfair treatment. They have been a friend to the Democratic Party, and so I oppose this legislation respectfully and with care.

To my friends supporting EFCA I say this: We cannot be a party that strips working Americans of the right to a secret-ballot election. We are the party that has always defended the rights of the working class. To fail to ensure the right to vote free of intimidation and coercion from all sides would be a betrayal of what we have always championed.

Some of the most respected Democratic members of Congress — including Reps. Marcy Kaptur of Ohio, George Miller and Pete Stark of California, and Barney Frank of Massachusetts — have advised that workers in developing countries such as Mexico insist on the secret ballot when voting as to whether or not their workplaces should have a union. We should have no less for employees in our country.

I worry that there has been too little discussion about EFCA’s true ramifications, and I think much of the congressional support is based on a desire to give our friends among union leaders what they want. But part of being a good steward of democracy means telling our friends “no” when they press for a course that in the long run may weaken labor and disrupt a tried and trusted method for conducting honest elections.

While it is never pleasant to stand against one’s party or one’s friends, there are times when such actions are necessary — as with my early and lonely opposition to the Vietnam War. I hope some of my friends in Congress will re-evaluate their support for this legislation. Because as Americans, we should strive to ensure that all of us enjoy the freedom of expression and freedom from fear that is our ideal and our right.

The bill Senator McGovern is criticizing is the national version of a bill that Governor Arnold Schwarzenegger just vetoed in California. The Western Growers Association had been pushing for this veto and had this to say when the news came out:

Western Growers has just learned that California Governor Arnold Schwarzenegger has vetoed AB 2386 (Nunez, D-Los Angeles) — “card-check” legislation.

“We are very pleased Governor Schwarzenegger vetoed this bill, as it would have curtailed farmworkers’ rights to cast union ballots in a secure, private manner,” Western Growers President and CEO Tom Nassif said. “Everyone has the right to cast a ballot, be it for the President of the United States or to certify union representation, free of coercion and intimidation. We applaud the governor for recognizing this very basic right and vetoing this bill.”

In 2007, Schwarzenegger vetoed SB 180 and SB 650 (Migden, D-S.F.), which was also aimed at allowing “card check elections.” Since its passage more than a month ago, Western Growers, along with other agricultural interests, inundated the governor’s office with calls, letters and e-mails urging the veto of AB 2386.

We think Western Growers Association and its President and CEO Tom Nassif as well as Board Chairman Bob Gra deserve some hearty applause for taking on this issue. There is a temptation among produce industry associations to keep their powder dry for “ag specific” issues. Very often, though, the issues that will have the most impact on business are of a more general nature.

This bill, with an Orwellian name of Employee Free Choice Act, will deny prospective union members the right to a secret ballot. Instead, a union would be authorized based on a majority filling out a card in full public view. This is both anti-democratic and highly likely to lead to intimidation.

Senator Obama is co-sponsor of the bill in the Senate. Senator McCain is opposed. It is a very important issue.

Here at the Pundit we don’t endorse Presidential candidates and, in any case, few people vote just on one issue. Perhaps even if Senator Obama wins he can be persuaded to change his mind on thia bill. Or the Senate might be persuaded to block the law. But whoever wins the election, we hope that the industry will join an effort to defeat this bill on a national level just as Western Growers Association did so effectively in California.




Perishable Thoughts —
Something For Nothing

With all the focus on bailouts by the federal government and, in fact, governments around the world, one question worth asking is when the government gives money to “bail out” an institution, where does that money come from?

A wry thought on this subject is provided by Rick Eastes, Director of Special Projects for Ballantine Produce Company, Reedley, California. Though this is Rick’s first contribution to our Perishable Thoughts section, Rick has contributed to the Pundit with many letters including these pieces:

Pundit Mailbag: Sunkist Responds To Article

Pundit’s Mailbag — Rick Eastes: Do The Right Thing With Food Safety

Pundit’s Mailbag — Immigration As An Economic Issue

Pundit’s Mailbag — Too Much Hype Over ‘Organic’?

Today, however, Rick gets a hat tip for passing along this reminder about the cost of “free” things:

“When someone gets something for nothing, someone else gets nothing for something.”
— Anonymous

There is no particular citation here. This is one of those ancient phrases playing off “something” and “nothing” and appearing in the English language for centuries. There are literally thousands of variants.

We asked Pundit Aide-de-camp James Elmer to find us a few examples. Here is his report:

Most instances of this quote are in the context of money, gambling, capitalism, investing, stock trading, confidence schemes, a lucky number in a lottery, etc. The wisdom of seeking equity in transactions, for all parties involved, is the lesson here, and is comprehendible across any industry or business relationship.

Below are 14 results I selected between 1922 and 1871 (oldest available). They are all available for download in their entirety through Google Books. Listed below each volume are the pieces of copy containing the variations as they appear in the texts:

Is Christianity a Failure?: What is Christianity? … (download entire volume)
By Fred J. Eddy
Published by Phillips Printing Co., 1922
Original from the University of California
256 pages, Pg. 2

“When we get something for nothing, some one else gets nothing for something, which is not fair, for the same reason that stealing is not fair.”

Bulletin of Photography: The Weekly Magazine for the Professional Photographer (download entire volume)
Published by F.V. Chambers, 1921
Item notes: (28, 700-724) 1921
Original from Harvard University
Pg 806

“The world has a bundle of money for the man who can produce the goods and nothing but disappointments for the man who expects to get something for nothing, or give nothing for something.”

The Scientific Monthly (download entire volume)
By James McKeen Cattell, American Association for the Advancement of Science, JSTOR (Organization)
Published by American Association for the Advancement of Science, 1917
Item notes: v.4 (1917)
Original from Harvard University
Pg. 146

The Luck Element, by A.G. Keller: “The passion for getting something for nothing and the fear of getting nothing for something have always fascinated the human mind.”

The Cyclopedia of Temperance, Prohibition and Public Morals (download entire volume)
By Deets Pickett, Elbert Deets Pickett, Clarence True Wilson, Ernest Dailey Smith
Published by The Methodist Book Concern, 1917
Original from Harvard University
Digitized Apr 28, 2008
406 pages Pg. 165

“…when one gets into a gambling establishment he will do one of two things — get something for nothing, or nothing for something. If he gets something for nothing he is a thief; if nothing for something, he is a fool.”

Commercial and Industrial Geography (download entire volume)
By Albert Galloway Keller, Avard Longley Bishop
Published by Ginn and company, 1912
Original from the University of California
357 pages, Pg. 32

From Chapter 11, The Industrial Regions of the World: “In the Arctic’s you get nothing for something, in the tropics something for nothing, while in the temperate regions you get something for something.”

The Union Postal Clerk (download entire volume)
By National Federation of Postal Clerks, National Federation of Postal Clerks
Published by National Federation of Post Office Clerks, 1908
Item notes: 4-6 (1908-1910)
Original from Harvard University
Pg. 19

“Something for nothing is the dram of the fool. Nothing for something is often the unpleasant awakening of the unwise investor.”

Parliamentary Debates: Senate and House of Representatives (download entire volume)
By Australia Parliament
Published by Commonwealth Govt. Printer., 1908
Item notes: v.40 1907 Oct
Original from the University of Michigan
Pg. 5,068

Mr. Dugald Thomson states in a debate of a proposed tariff on British goods: “(the honorable member for Corio) has declared that he does not believe in giving something for nothing, and, as the Government propose to give nothing for something, their action will harmonize with his views, so that he may vote with them without any qualms of conscience.”

The Pacific Monthly: A Magazine of Education and Progress (download entire volume)
By William Bittle Wells
Published by Pacific Monthly Pub. Co., 1904
Item notes: v.12 (1904)
Original from Harvard University

“The man who tries to get something for nothing generally succeeds in getting nothing for something.”

The Public (download entire volume)
By Louis Freeland Post, Alice Thatcher Post, Stoughton Cooley
Published by Louis F. Post, 1901
Pg. 45

From a speech by Rev. Herbert S. Bigelow, Vine St. Church in Cincinnati OH, given at the Single Tax club’s dinner in honor of Thomas Jefferson: “Whenever one man is permitted to get something for nothing, another man is compelled to take nothing for something”

Ethics of Success: A Reader for the Higher Grades of Schools; Illustrated by Inspiring Anecdotes from the Lives of Successful Men and Women
(download entire volume)
By William Makepeace Thayer, Albert Gardner Boyden
Published by Silver, Burdett & Co, 1893
444 pages Pg. 346-347

In section LXXXIV, titled “GETTING SOMETHING FOR NOTHING,” it is written that “something for nothing” schemes are so common that they scarcely awaken surprise and that men have to look sharp in the business world to get “something for something”. There is a manifest meanness in the desire to get something for nothing. He who does not give an equivalent for what he gets is a relative of the sneak thief. He violates the law of integrity by trying to palm off “nothing for something”.

Annual Report of the Dairy and Food Commissioner of the State of Michigan (download entire volume)
By Michigan Office of Dairy and Food Commissioner, Michigan, Michigan Food and Drug Commissioner, Office of Dairy and Food Commissioner
Published by Office of the Dairy and Food Commissioner, 1899
Item notes: 6th (1899)
Original from Harvard University
Pg. 15

(Begins with an anecdote about a slippery cream of tartar salesman): “It is the old principle of seeking to get something for nothing, though reversed, to that extent in this case, that they got nothing for something, since the goods received contained absolutely no cream of tartar whatever.”

The Chronicle: A Weekly Journal, Devoted to the Interests of Insurance, Manufacturers and Real Estate
(download entire volume)
Published by John J. W. O’Donoghue, 1887
Item notes: v.39 (1887)
Original from Harvard University
Pg. 92

“I have no faith in mutuals of any kind, and I think they are all trying to get something for nothing and give nothing for something”

The Popular Science Monthly (download entire volume)
Published by D. Appleton, 1886
Item notes: v.28 (1885-1886)
Original from Harvard University
Pg. 71

The Art of Investing, by John F. Hume: “in addition to their money’s worth, they have endeavored to get something from nothing, with the result, most generally, of getting nothing for something.”

Questions of the Day: Economic and Social (download entire volume)
By William Elder
1871
Original from the University of Michigan
Pg. 304

“Here there could be none of that haggling over price, which, if not stealing quite, has the tone and purpose of getting something for nothing, and in turn, generates that kindred necessity of selling nothing for something, which is called “selling dear,” in the creed of the worshippers of competition.”

Many thanks to James for his research. We think that the issue of bailouts tends to be thought of in two steps. First, the focus is on the immediate problem and the “solution” the bailout will provide. That the bailout must be paid for either by individuals — perhaps in the form of higher taxes or, collectively, perhaps through an inflation of the currency, is thought of only later.

We thank Rick Eastes for reminding us to think of it today.

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