Western Growers Association is currently meeting in Hawaii. People go there for the climate, but WGA has made sure it would be hot… by publishing a letter to Publix Super Markets that can only be described as incendiary.
One of the buttons on the top of our page records the pieces we summarized under the title NRA Food Safety Round-up. It records a series of events that transpired in which the National Restaurant Association intended to promulgate its own food safety standards that, it was anticipated, were going to be developed by a group known as the Food Safety Leadership Council — which consists of Avendra LLC, Darden Restaurants, McDonald’s Corporation, Publix Super Markets, Wal-Mart Stores, Inc., and Walt Disney World Company.
Publix is the newest member of the group that has traditionally been composed of companies that perceived themselves as being at the greatest reputational risk on food safety.
NRA was eventually persuaded, in practically the only way associations can be persuaded — by its own members — to postpone the announcement of any new standards to give the California Marketing Agreement some time to work. This decision was somewhat easier to make as the timing of the controversy was such that it was too late for any product to be planted in Salinas to meet new requirements anyway.
Now the Food Safety Leadership Council has promulgated its new on-farm produce standards and you can read them here.
In and of itself, these standards mean nothing. But Publix sent a letter to at least some of its vendors:
Dear Produce Supplier:
As part of our ongoing effort to enhance food safety standards purchased by Publix, we have joined with the food safety professional staff of a diverse group of food retailers, known as the Food Safety Leadership Council (“FSLC”), to develop and adopt a set of enhanced On-Farm Produce Standards. Current members of the FSLC include: Avendra, LLC, Darden Restaurants, McDonald’s Corporation, Publix Super Markets, Inc., Wal-Mart Stores, Inc., and Walt Disney World Co.
On the following pages you will find the new “FSLC On-Farm Produce Standards” for your review. Please review these standards, together with the food safety procedures used by your firm, to ensure that you meet the standards required by Publix. It is our intention to utilize these FSLC On-Farm Produce Standards to evaluate vendor farms that provide produce to Publix. As a vendor, you agree by signing below to adhere to the standards.
To assist us in maintaining the FSLC On-Farm Produce Standards, we request our supplier’s farms be inspected and audited for conformance to these standards by representatives of member companies of the FSLC, or designated inspection agencies that have been certified by the FSLC to conduct food safety audits. As a supplier to Publix, this standard will be verified through Primus and their good agricultural practice auditing program. This is not a new audit, but rather a standard to be verified by the auditing company. By signing below, you acknowledge and agree to conduct and pay for an audit by an FSLC certified auditor at least once per growing season. The results of any such inspection or audit will be shared among all members of the FSLC as a means to enhance consistent safety standards. You further acknowledge that, regardless of the results of any audit, each FSLC member company will make its own independent purchasing decisions based on multiple factors which may be important to each such company in its sole discretion. Participation in the auditing process does not commit any FSLC member company to purchase products from your firm, and no such purchases may in fact occur.
Please sign and return this form to Garry Bergstrom to indicate acceptance by your firm of the terms described in this letter. Any questions regarding this program can be directed to Bob Carey of Publix Corporate Quality Assurance (CQA) at [Phone number deleted by the Editor]. We appreciate your participation as we work together to provide our common customers with safe, wholesome, high-quality food.
Business Development Director, Produce/Floral RBU
Director, Corporate Quality Assurance
The gist of the letter is that Publix wants its vendors to follow these FSLC standards, to agree to be audited and pay for an audit by an FSLC authorized auditor. Since Publix already required audits, this is not a new audit but a new standard.
Whereupon the Western Growers Association sent out a somewhat astounding letter considering it is writing to its members’ customer:
Dear Mr. Bergstrom:
Several Members of Western Growers received your letter dated October 29, 2007, addressed to “Dear Produce Supplier” with an attachment captioned “Food Safety Leadership Council On-Farm Produce Standards.”
We are bewildered as to how and why your “Council” concluded that the California Leafy Green GAPs and metrics were insufficient to address the food safety concerns of the public and our members’ customers, apparently without the benefit of input from the grower/handler community.
After our review of your On-Farm Produce Standards, we believe that the new standards are unreasonable, excessive and scientifically indefensible and will require produce suppliers to submit to redundant, expensive and unnecessary food safety inspections and audits. Further, they will result in significant loss of available farmland and may cause serious environmental harm.
The FSLC’s standards clearly imply without any scientific basis that the GAPs, scientifically developed and peer reviewed by some of the nation’s leading food safety scientists and experts, are inadequate. We know that is not the case as federal and state government food safety agencies all agree that the GAP metrics include the latest, cutting edge food safety science.
Your effort marks the beginning of a destructive food safety “arms race”, where different groups of produce buyers, in an effort to claim that they have safer produce than the next, will impose on fresh produce suppliers ever more stringent, expensive and scientifically indefensible food safety requirements without even the implication that the additional costs will be reimbursed.
The On-Farm Produce Standards appear to apply to all fresh produce grown in the United States, not just California and Arizona grown lettuce or leafy greens. Do they?
Do the standards apply to imported produce? Where explicitly in the standards does that requirement appear? What inspection and audit verification process will you use to ensure that produce grown in other countries meets the same standards and requirements as US grown fresh produce?
The new standards require a one mile buffer zone between fresh produce fields and concentrated animal feeding lots. What is the scientific basis and justification for such an extensive buffer that will take substantial farm land out of production? What environmental studies have you conducted that evaluate the effect on wildlife habitat, flood control and water quality?
The new standards require a ¼ mile buffer zone between fresh produce fields and animal grazing. What is the scientific basis and justification for such an extensive buffer that will take substantial farm land out of production?
The new standards appear to require that only potable water that meets US EPA drinking water standards may be used on fresh produce crops eliminating the use of commonly used irrigation water sources. What is the scientific basis and justification for applying such a rigid standard to irrigation water? What environmental studies have you conducted throughout the country that evaluate the effect of irrigation water treatments such as the addition of chlorine or other sanitizers on land, crops, and wildlife?
What is the rationale for the required compost micro testing regime?
California law requires testing for fecal coliforms, yet this is not required by FSLC. What is the rationale for deleting this test?
the added requirement for generic E. Coli testing is lower than that required as a composite part of the fecal coliform test. What is the rationale for lowering this standard?
the transfer vector for Shigella is human-to-human, so why would testing be required in compost?
Strategies for field testing are being widely discussed by industry. How does the required field testing program assure the FSLC that contamination in the field will be identified? Have confidence levels that would dictate sampling programs been established by the FSLC?
How do you propose to reimburse growers/handlers for the increased costs of these food safety measures? Will you agree to a “food safety line item” on invoices that would be auditable?
Do you now reimburse growers/handlers for the increased costs already incurred by complying with the existing standards for lettuce and leafy greens?
How do you propose to impose these standards internationally without violating WTO and other international trade agreements?
Will you be advertising claims that you have the best/superior safety standards, giving rise to the notion that perhaps this nation’s produce is presently unsafe?’
Our industry in California, Arizona and elsewhere has spent millions of dollars and years of research developing methods of farming in order to ensure the safest, most nutritious food supply in the world. While some new regulations do not yet cover all produce commodities, we recognize that all fresh produce commodities are not equally susceptible to pathogenic contamination. So you can imagine our resentment that without any apparent scientific basis or consultation, your “Council” has promulgated a new set of standards for growing of all fresh produce.
Our questions are not rhetorical. We hope and expect that they will be answered. We would be interested in a constructive dialogue on these issues if you are willing to so engage.
Western Growers is ready, willing and able at any time to meet with the FGSLC to review your answers and the scientific rationale for the imposition of the “enhanced” standards.
Thomas A. Nassif
President and CEO
In addition, WGA released an announcement with much the same content:
Western Growers Challenges New Food Safety Buyer Group
On Unreasonable, Scientifically Indefensible Food Safety Demands
Western Growers today condemned the demands of a consortium of retailers and food service vendors who insist that fresh produce suppliers must implement new unreasonable, excessive and scientifically indefensible food safety standards and to submit to additional expensive and unnecessary food safety audits.
The consortium, organized under the umbrella name of the “Food Safety Leadership Council,” (“FSLC”) currently consists of Publix Supermarkets, Inc., Wal-Mart Stores, Inc., Darden Restaurants, McDonald’s Corporation, Avendra, LLC, and Walt Disney World Co.
In a letter addressed to “Dear Produce Supplier”, Publix attached a 20-page document titled “Food Safety Leadership Council On-Farm Produce Standards.” The consortium is demanding that the entire fresh produce industry agree to develop and adopt “enhanced” food safety standards that add unnecessary burdens to the recently implemented California Good Agricultural Practices metrics that the California Leafy Green Marketing Agreement Board has accepted and upon which state and federal inspections are currently being conducted.
Western Growers sees this effort as the start of a food safety “arms race,” where different groups of produce buyers, in an effort to claim that they have safer produce than the next, will impose on fresh produce suppliers ever increasingly more expensive and scientifically indefensible food safety requirements.
“We have very serious concerns about these new food safety standards and demands,” said Tom Nassif, Western Growers President and CEO. “We are extremely disappointed that they are taking this approach. The new standards clearly imply without any scientific basis whatsoever that the already developed and adopted GAP metrics, scientifically developed and peer reviewed by some of the nation’s leading food safety scientists and experts, are inadequate. We know that is not the case as federal and state government food safety agencies all agree that the GAP metrics include the latest, cutting edge food safety science.”
Western Growers is sending the consortium a letter outlining Western Growers’ specific scientific and policy concerns and asking them to cease and desist imposing these unreasonable standards on fresh produce suppliers until they meet with and provide the fresh produce industry with scientific bases for their new requirements.
For example, the new standards far exceed the existing Leafy Greens GAP metrics in significant ways:
The On-Farm Produce Standards appear to apply to all fresh produce grown in the United States, not just California and Arizona grown lettuce or leafy greens.
The new standards require a one mile buffer zone between fresh produce fields and concentrated animal feed lots.
The new standards require a ¼ mile buffer zone between fresh produce fields and animal grazing.
The new standards appear to require that only potable water that meets US EPA drinking water standards may be used on fresh produce crops eliminating the use of commonly used irrigation water sources.
The new standards use “bright-line” generic E. coli counts to determine acceptable or unacceptable irrigation water.
The new standards clearly imply that the inspections required by the California Leafy Green Marketing Agreement currently performed by state and federal government inspectors are inadequate and the standards appear to require mandatory additional independent, expensive and unnecessary audits.
Ironically, nowhere in the standards is an explicit reference to or requirement that fresh produce suppliers from other countries adhere to the same standards being imposed on US fresh produce suppliers. Moreover, the consortium has not provided the fresh produce industry with its own set of good handling practices that demonstrate that consortium members are properly handling fresh produce after receipt of produce from fresh produce suppliers.
The consortium has asked its suppliers to sign on to the new standards immediately if suppliers wish to do business with consortium members; in fact, some fresh produce suppliers may already have signed such agreements.
Western Growers strongly encourages its members to become better educated about the new standards and to wait until the fresh produce industry receives from the consortium more scientific evidence and validation to support their new standards.
Of course, each company must make sales and marketing decisions based on their own circumstances. Western Growers members are also strongly encouraged to contact and confer with their own attorneys, internal or external food safety experts and/or Western Growers before agreeing to be bound by the new standards.
Western Growers is simultaneously contacting and coordinating with fresh produce organizations around the country to explore developing a unified response to these unreasonable demands.
That there are substantive questions regarding the standards goes without doubt. And, surely, letters like this will play well on the homefront back with the WGA membership. Yet, such a strident letter is likely to achieve the opposite of its purpose as it stiffens the backs of the very buyers that WGA hopes to influence.
This is where associations have to work with their membership and other associations. Perhaps the members are afraid to talk to the retailers directly. Fine so WGA goes to PMA and asks Bryan Silbermann for help. Bryan can speak to some of his board members: Steve Bleeker from Disney is on PMA’s Foodservice Board, Stephen Tursi from Wal-Mart is on the main PMA board, plus Mike Agostini at Wal-Mart is on PMA’s Technology & Standards Council.
WGA could have called Tom Stenzel from United, who has Mitchell Smith from McDonald’s on United’s board, plus Michael Roberson at Publix, John Gurrisi at Darden and Gary Campisi at Wal-Mart are part of United’s Food Safety & Technology Council.
Nobody from Avendra comes to mind on the boards this year, but Avendra is the lineal descendant of various hotel procurement arms, including the Marriott procurement operation, and PMA has had Marriott contacts back to the days of Joe Brennan.
The point is that associations should facilitate this kind of contact, use connections to get everyone together to work it all out. Notice that there is no mention in the WGA letter that it tried to work things out quietly and that Publix refused to meet with them.
One suspects that WGA, which, as a grower association, does not have the contacts of a vertically integrated association such as PMA or United, didn’t want to be seen asking its association brethren for help. That is bad and, in the end, if this issue is to be resolved, it can only be resolved through the vertically integrated associations. They now will have to step in after a major mess has been created.
Here is a pretty good rule: Associations should try to avoid issuing public attacks on private companies — especially if the private companies are customers.
And the truth is Publix has done nothing wrong. Private companies are permitted to establish their own procurement policies and they don’t need anyone’s permission or approval. Nobody is forced to sell to Publix or to meet their standards.
WGA seems to be missing the important point that Publix is a company free to make its own procurement policies. Even its letter to Publix, in point ten (10), seems to imply that WGA is missing this key point:
10) How do you propose to impose these standards internationally without violating WTO and other international trade agreements?
This literally makes no sense. As a corporation, Publix is not bound by any WTO rules. Publix is free to announce that it chooses not to buy produce, for example, from China — case closed. It is the government that is bound by WTO rules. The government cannot enforce rules against foreign countries that are not enforced against US producers and are not justified by the science. But private companies can and do discriminate every day.
In fact if any organization is coming close to breaking the law, it would be WGA when it says this:
The consortium has asked its suppliers to sign on to the new standards immediately if suppliers wish to do business with consortium members; in fact, some fresh produce suppliers may already have signed such agreements.
Western Growers strongly encourages its members to become better educated about the new standards and to wait until the fresh produce industry receives from the consortium more scientific evidence and validation to support their new standards.
Strongly encouraging one’s members to wait and not to sign a contract is very close to an illegal restraint of trade. WGA itself ought to be very careful before it gets a call from an attorney at the Federal Trade Commission.
Although the standards that the FSLC has proposed can be justifiably questioned, that is also true of almost all food safety standards. If Publix had, instead of announcing these requirements, announced that it would only purchase from operations that are GlobalGAP-certified, ISO9000-certified and, where appropriate, British Retail Consortium Certified, those standards could be criticized on a scientific basis as well. We have no real data proving that any of these standards make for safer produce.
In fact, for all the support WGA gives the California Leafy Greens Marketing Agreement, there is no data proving that product grown under the agreement is safer than product grown under another system.
It is also interesting that WGA has only chosen to attack these particular companies and this particular standard. Earlier this year, due to a crop failure in Europe, Marks & Spencer wanted to buy US broccoli — it waived its Field to Fork standards — but insisted on EurepGAP-certified product. There were exactly three US producers to choose from. Yet WGA didn’t condemn Marks & Spencer.
And Costco is demanding finished product testing. WGA didn’t condemn Costco, although, arguably, the consensus of food safety experts is that the finished product testing is less likely to achieve safety than the preventive measures detailed in the FSLC guidelines.
To some extent, WGA is reaping what it sowed. Way back in February, we published WGA’s Secret Science Panel:
It is fair to say that the very purpose of the California Marketing Agreement that will cover spinach, lettuce and other leafy greens is to build regulatory and consumer confidence.
In order to do that, we need not only a defensible procedure — be it regulation by government, private entities or some other alternative — but we need substantive standards that can be defended. But the way Western Growers Association has handled the drafting of the GAP documents has put the industry in a highly suspect position.
Supposedly, there is a secret panel of scientists meeting to draft out the proposed GAP standards, which will be science-based. In essence, the WGA has chosen to keep secret the kind of information that is essential to build confidence in this process.
Let us ask five simple questions:
Who is on this committee and how were they selected?
Do they have any conflicts of interest?
Have they each endorsed the draft GAP document?
Have they been asked to draw up dissenting reports on areas where they would like to see different standards?
What was the charge given the scientists?
And we’ll add two really big questions:
Why is all this a secret?
How will refusing to answer these questions build regulatory and consumer confidence?
The assumption by the consumer media, politicians and regulatory bodies will be that this is all being kept a secret because the panel wouldn’t reflect very well on the industry.
So let us head this off at the pass: WGA should release the composition of the panel right now.
Although the very purpose of this panel drafting the metrics was to build confidence, WGA insisted on a secret process that built no confidence.
If there really was a public panel of 20 top scientists who had signed their names to the metrics, this probably wouldn’t be happening.
Right now the Leafy Greens Board should be working toward a public process. We are already too late for next season, but we should be working toward the following season.
Now, with all this being said and recognizing that WGA tried to keep things too secret and thus diminished confidence in its efforts, and further recognizing that WGA should have worked quietly behind the scenes through PMA and United to resolve this problem, we still have to ask what about the FSLC standards?
WGA would like a scientific justification for everything, but WGA has never provided a scientific justification for its own standards. How could it? We don’t know the cause of these outbreaks; we don’t know the migration rate of E. coli 0157:H7.
We have no basis for saying that any particular distance from a feed lot guarantees safety. In fact, some of the standards that WGA is taking such umbrage at are the exact same standards that Fresh Express promoted in an interview with Jim Lugg published in USA Today distributed at the PMA convention in 2006!
Right now, WGA is challenging the FSLC standards by asking things such as this:
3) The new standards require a one mile buffer zone between fresh produce fields and concentrated animal feeding lots. What is the scientific basis and justification for such an extensive buffer that will take substantial farm land out of production? What environmental studies have you conducted that evaluate the effect on wildlife habitat, flood control and water quality?
But Fresh Express explained its standards this way:
Fresh Express won’t accept produce from fields if:
* They’re within one mile of a cattle feed lot or dairy operation. Cattle operations may cause E. coli to get into runoff water and onto a field, especially during floods.
Yet WGA has not issued a condemnation of Fresh Express. And the “Secret Panel” that created the metrics never published a paper explaining why Fresh Express was wrong.
Why is the burden of proof on the FSLC and not on the creators of the Marketing Agreement metrics?
So, what should WGA do? How can it help its members?
Aside from working with the national associations to resolve these issues, the real problem with the Publix “agreement” and what WGA should point out is that it creates an obligation on the part of vendors without any compensatory obligation on the part of Publix.
The way the document is drafted, not only are producers not promised business but they are not even promised that Publix will only buy from producers who meet the standard.
In fact, as it is written, if it comes into effect, the most likely outcome is this: A few brave souls will sign the agreements, produce to the FSLC code and then, because the supply is so constrained, prices of FSLC-certified and audited product will zoom with a separate market for FSLC-certified product. FSLC members will say that they are not willing to pay $5 a box premium, the buyers will abandon FSLC standards, buy the cheapest legal product and leave those producers who met the standards with the choice of selling at the same price as those who didn’t or not selling at all.
This is the key line in the agreement:
You further acknowledge that, regardless of the results of any audit, each FSLC member company will make its own independent purchasing decisions based on multiple factors which may be important to each such company in its sole discretion. Participation in the auditing process does not commit any FSLC member company to purchase products from your firm, and no such purchases may in fact occur.
In other words, you, the vendor, agree to spend money meeting these standards. We, the buyer, do not commit to paying even 1 cent a box more to make these standards real.
It is a sucker’s contract, and Publix and any other FSLC members should — as part of their Corporate Social Responsibility programs, which all involve “fair dealing” with vendors — revise the contract to create reciprocal responsibilities. At very least, there should be a commitment to only purchase product that meets the FSLC standards — even if it is more expensive.
Of course, any standard could be abused. If a company starts running TV commercials claiming its produce is safer than another company, that would be a big problem — but that is true of any standard — not just the FSLC standard.
It is fine to discuss with buyers the science behind decisions, and it is advisable for groups such as the California Marketing Agreement to operate in as transparent a manner as possible when establishing food safety metrics. In the end, though, any buyer is free to set whatever standards it chooses for its own procurement. Isn’t that what we repeated a hundred times during the battle to get approval of the California Marketing Agreement — these are just minimum standards.
The focus of a grower’s group should be to see that contracts are worded so that growers can get a fair deal, and the focus of vertically integrated groups should be on helping facilitate commerce by getting everyone talking and finding the common standards that 90% of the trade can agree on.
One thing is sure: Buyers and sellers have to live together, so some civility in our discussions is essential for the long term success and prosperity of the trade. We better all take a deep breath and let vertically integrated associations step in and try to find some common ground.
Anyone who has ever attended the Canadian Produce Marketing Association convention knows that the joy of the Canadian produce trade is its intimacy. The scale of the event is such that you meet everyone and become friends so very quickly. Such intimacy is a double-edged sword when there is a loss of someone too special and too young:
THE CPMA sent out an Obituary and sent along a few special words:
Our Canadian produce industry is like one big family, and we have just lost one of our most kind and cheerful ambassadors. Cory had such a passion for her family, her company, the produce industry and the people in it that make it all happen. She was very dedicated and was constantly getting people to work together, while making sure they also enjoyed the experience. She leaves us with great and fond memories, and we will continue to remember Cory, her incredible smile and her zest for life.
— Dan Dempster
Canadian Produce Marketing Association
Ottawa, Ontario, Canada
The Ontario Produce Marketing Association, where Cory was a past-President, also sent out a notice and some additional thoughts:
Her personal motto was ‘Live, love and laugh’ and she brought that enthusiasm for life to everything she did, both professionally and personally. She always brought that positive, uplifting tone whenever you met, which allowed you to cherish and remember the moments she shared with you.
Her enthusiasm and love for the industry was manifested in the dedication and commitment she had for her work. She did so much for the industry, some of which was hidden from public view and done, unselfishly, on a volunteer basis.
— Ian MacKenzie
Executive Vice President
Ontario Produce Marketing Association
Her family business, Faye Clack Communication, sent out the details:
Remembering Cory Clack-Streef
On November 8th, 2007, Cory Clack-Streef, President of Faye Clack Communications Inc., passed away peacefully following a valiant two-year battle with breast cancer. She was 46. Cory’s first priority was her commitment to her husband, children and family. She loved being a Mom and was the first one to take charge when arrangements needed to be made for birthdays, holiday celebrations and family reunions.
She was married to Albert Streef and was a partner in Streef Produce Limited, was the past president of the OPMA [Ontario Produce Marketing Association], was an honorary director of the OPMA and was honored with Produce Person of the Year in 2005.
“Cory knew and was intimately connected to every facet of the food industry,” said her sister and business partner, Virginia Clack-Zimm. “Whether it was communicating with the trade or dealing with the complex network of U.S. and Canadian government agencies or the media, her skill and experience benefited each of our clients and their individual objectives. She cultivated the agency’s unique ability to effectively execute meaningful campaigns that garnered results in a communications saturated marketplace, while still inspiring our team.”
“Cory had a really big heart. She took the initiative whenever she saw the need, often before others recognized there was even a problem,” continued Clack-Zimm. “Her fundraising efforts for the victims of the flooding post-Katrina were only one example of many such selfless undertakings. We will all miss her immensely.”
Cory will be dearly missed by her husband Albert Streef and daughters Sadie, Fallon and Jillian, the entire Streef family, her mother Faye Clack and Ewing Rae, her father Bill Clack and Pat Damm, brother Dr. Scott Clack and his wife Kim, and her sister and business partner Virginia Clack-Zimm, Jim Jenkinson and her children Lena and Erich Zimm and the entire Clack Clan.
Visitation will be held at J. Scott Early Funeral Home, 21 James Street, Milton, Ontario, Wednesday November 14th, 2007, from 2:00 p.m. to 5:00 p.m. and 7:00 p.m. to 9:00 p.m.
A celebration of Cory’s life will be held at the Gambrel Barn, Country Heritage Park in Milton, 1:00 p.m. on Thursday November 15th, 2007.
For more information please contact:
905-206-0577 x 240
The Pundit remembers being introduced to Cory by her mother, Faye Clack, the marketing Grande Dame of the Canadian produce industry. What a difficult moment this must be for her. How in vain seem our condolences.
What can we offer the husband of a 46-year-old woman and her three young daughters?
To Faye, to Cory’s sister and business partner, Virginia, to her husband, her daughters and the rest of the family, we can only say our prayers are with you.
Ian MacKenzie was kind enough to send along the beautiful photo of Cory we run with this article.
Cory had many formal achievements and made many specific contributions to advancing the interests of the trade.
Yet, to her friends, it is that smile and the happiness, the caring, the love it represents that will linger.
In lieu of flowers, the family is establishing a trust fund in memory of Cory. We will publish the details as soon as they are available.
Our piece, Tesco Finally Opens Doors…British Press and Protesters Unimpressed, brought several pieces that thought well of the new Tesco Fresh & Easy concept:
I would have to disagree with you on Tesco. I lived in London for 6 years when Marks & Spencer and Tesco were just getting started in the “Ready Meals”; they were terrific.
And Americans talk a good story about calories and diet, but LOVE a good serving of Lasagna!
— George Urda
Cal-Mark Beverage Inc.
Cal-Mark does private label beverages and so would have special interest in a concept such as Fresh & Easy, which is heavy to private label. In fact, one suspects that if Tesco is successful in building equity in the Fresh & Easy brand, it will try to go as close to 100% private label as possible.
Brands give producers control over retailers. If they can do it, retailers prefer to have control over producers.
The Pundit loves a good serving of lasagna as well and suspects that the particular comment about the lentil and tofu lasagna referenced in the Los Angeles correspondent’s report for The Times of London speaks to a particular demographic. In any case, as long as they eat, that is as easy problem to solve as Fresh & Easy would sell tofu lasagnas if that is where the demand is.
The US, however, has a different way of eating. On the one hand, our larger homes and freezers allow for easy “stock ups” on frozen foods. On the other hand, our vibrant restaurant culture encourages take-out.
So in many a household, you might find a “Lean Cuisine” lasagna in the freezer as a contingency. On a good week, you might find pieces of lasagna that were made using Grandma’s secret recipe and cut into pieces and frozen for future use or the family might pick up Italian food, including lasagna, from their local Italian place.
Perhaps if they are in a Whole Foods or Publix’s new GreenWise, a Central Market or a Fresh Market — they all have beautiful displays of fresh food — the family might be enticed to buy some.
This doesn’t mean that Fresh & Easy won’t sell plenty of prepared foods. The issue is that most of the items in the store do not require daily delivery. So if they properly charge the transportation costs of more frequent delivery to the products necessitating that delivery, it will be hard to sell enough to cover the cost.
How big a market there is for this type of fresh prepared food is unclear. The Los Angeles correspondent for The Times of London put it this way:
The bigger problem here is that ready meals just don’t appeal to Californians — as much as Britons cannot understand it. You can see why by visiting a Gelson’s, a Whole Foods or a Bristol Farms. These LA superluxurymarkets hire their own chefs to prepare gourmet food daily and sell it piled high at deli counters so it looks like a king’s feast. Even boxed sushi is prepared in-house, by a resident sushi chef. Of course, Tesco hopes there’s a middle ground — a refrigerated, prepackaged niche somewhere above Wal-Mart and below Whole Foods. But I’m not at all convinced….
Put another way, the affluent in America don’t want their food pre-packaged in trays, and the paycheck-to-paycheck demographic doesn’t buy many fresh prepared foods — and, of course, every other article one reads is about the “shrinking middle class” — so who will be the customer?
It is also worth noting that this has been tried before. When Marks & Spencer took over Kings in New Jersey, the company tried a range of ready meals that flopped. Now it is true that the technology is better today, the store concept is different, and we are on the West Coast, not the East Coast. So it might work out better — but it clearly is an unknown.
Yes, they are very popular in the U.K., but that information does not give us a definitive answer as to how Americans will like the products. Time will tell.
We also received a letter from an executive on the packaging and logistics side of the business:
The US grocery industry is no doubt the best in the world, but I observed the new Fresh & Easy stores first hand this past week and, in my opinion, Tesco delivered what they promised to the American consumer.
Excellent looking meat
Great valued wine
Bright innovative stores
Completely Green, reusable packaging on all perishable items not just produce.
Easy to sho
I have read your articles. They appear not to be fact-based. Hopefully you will visit a Fresh & Easy and see if you agree.
— James A Vangelos
Polymer Logistics US Inc
Arroyo Grande, California
Since the Pundit goes back a long way with our writer’s father, Al Vangelos, who we worked with closely when he was Chairman of United and the CEO of Calavo, we’ll cut him some slack on that “not to be fact based” comment — since, of course, agree or disagree, the “fact” of the matter is we were quoting an important reference.
It matters a lot to Tesco, much more than to US-based Pundit readers, that the Los Angeles correspondent for The Times of London writes a piece and it is entitled Tesco in the US? It’ll Never Work.
As far as the substance of our letter-writer’s remarks, we wouldn’t disagree that Tesco has delivered on the promises he identifies.
We wouldn’t have expected anything less. Tesco isn’t some upstart; it is the third largest retailer in the world and successfully owns and operates many concepts and stores in many countries.
We would think Tesco could handle opening six little stores that, all together, would fit inside one Wal-Mart supercenter with plenty of room to spare.
Execution may become an issue if they open thousands of stores or try to go beyond the reach of the distribution center. At this point, it is more a question of the viability of the concept.
We’ve called it a “brilliant or bankrupt” strategy because most retailers would open one or two prototypes to test the concept. Our basic business critique of Tesco’s Fresh & Easy approach is that all this secrecy has indicated a weak concept. A strong concept doesn’t need it.
Warren Buffet, whose investment in Tesco has been trumpeted as an endorsement, is famous for looking for businesses with a sustainable business advantage or deep “moat” around them. We suspect that Tesco’s large real estate holdings in the U.K. may serve as such a moat. Yet we are uncertain what Tesco’s competitive advantage will be in America.
Look at the eight-point list in the letter and ask yourself if any of this is beyond the capability of Kroger, Safeway, Supervalu, HEB, Publix, Ahold, Delhaize and many others.
The reports are of long lines at the initial Fresh & Easy stores. That means little. Tesco gets a lot of news. There are very few stores and they are very small — so very few people account for big crowds. Many in the crowd are journalists, competitors or suppliers checking them out. We know of at least two retailers who have ordered staff to purchase one each of every prepared food and private label item. There are many others.
To us, the business challenge presented encapsulates three basic possibilities:
Consumers will not like the concept. They won’t go for the prepared foods, they won’t find the brands they want, they will find too many items not available or not available in the size or package they prefer. As Kroger’s CEO explained, they may find the concept “not convenient” because it adds an extra store to visit but doesn’t replace any current shopping visit. If this is the case, Tesco will be left with a chain of outdated grocery stores, such as A&P operated 50 years ago, plus an enormous distribution center with nothing to distribute.
The return on capital will not be sufficient. Consumers might like the concept just fine. But if these stores require this enormous infrastructure and ultra-frequent deliveries, great success may not generate the profit necessary to support this structure. Wal-Mart continues a very slow rollout of Wal-Mart’s Neighborhood Market concept not because it is a failure but because Wal-Mart is better off investing its capital in supercenters.
The concept will be loved by consumers and will produce an excellent return on capital. In this case, every competitor will roll out these small format stores, and it is unclear why Tesco will be any more successful at this than anyone else. At very least, the competition for real estate will raise rents and thus reduce profits. Most likely Tesco will never open in most of the country because Kroger will have done Cincinnati, Stop & Shop will do Boston, Acme will do Philadelphia, Publix will do Miami, etc., etc. — all before Tesco gets there. In effect, Tesco will have duplicated the problem Marks & Spencer had with Kings — a little operation in a confined geographic area with little way to expand.
We will add to this that many of things Tesco has promised go beyond the list in our correspondent’s letter and are not so much going to be directly noted by consumers but by “advocates,” and there, we suspect, that Tesco has set itself up for a fall. When Tesco promises to offer “good jobs,” we have no doubt it will do that. We only mean, however, that everyone who takes a job at a Fresh & Easy store will think that the job is a better option than anything else the world provides.
The professional advocates — and the unions that will finance them — will have a completely different standard. To meet their definition of a “good job,” the pay and benefits must exceed that of Tesco’s unionized competitors and even then, won’t cut the mustard unless one person can support a family in middle-class fashion.
As a giant multinational corporation, Tesco will be held to Wal-Mart-like standards. This means every error will be magnified. The company is likely to be better known for its mistakes than its successes. In the UK, it has plenty of problems and critics — but it gets a pass on some things because it is also a British business icon and a great symbol of British overseas expansion to a country whose recent history has been more about the receding of Empire. In America, though, we doubt anyone will feel a need to cut them a break.
Our letter-writer has good reason to be particularly interested in the Fresh & Easy concept. If you check out the Polymer Logistics website here, you see they talk about “Retail Ready” packaging and Fresh & Easy uses a great deal of that. In fact, Polymer Logistics and Tesco have a very close relationship:
Polymer Logistics’ most significant relationship is with Tesco, for the supply of potato merchandising units, beverages and ambient foods. Direct and indirect revenues related to supplies of the Company’s 15 products and services to Tesco represented approximately 52 per cent and 39 per cent of Group revenues for the year ended 31 December 2005 and for the six months ended 30 June 2006, respectively.
In fact, Tesco is among the pioneers of the whole Retail-Ready concept:
Background to Retail Ready Packaging (“RRP”)
The transportation of products from the supplier to the retail outlet has traditionally involved the packaging of the product in cardboard boxes which are loaded onto wooden pallets and transported to the retail outlet by lorry. Typically, the product is then moved to a storage facility at the rear of the retail outlet where it is unpacked by hand and either housed in the storage facility or moved directly onto the shelves ready for sale to the consumer.
This labour-intensive process has proved to be costly and inefficient compared to more modern methods, with retailers having to subsidise the attendant labour costs as well as the damage caused to certain products due to the delivery process involving extra handling. In addition, this process has often led to lost sales due to the non-availability of stock at the point of sale, where a significant proportion of goods are often on-site in the storage facility but have not been put on the shelves.
In order to address these problems, the retail industry has sought a more efficient delivery process and leading UK supermarket retailers, such as Tesco, Sainsbury and ASDA, are now promoting the use of RRP as a solution to the issues referred to above. The Group’s RRP is designed to be ‘display ready’ from factory to the point of sale. Consumers purchase directly from RRP units in-store, with no requirement for retailers to unpack goods from the RRP units onto the shelves. The Directors believe that the Group’s RRP provides a significant number of benefits to retailers and suppliers, as described in more detail below.
It is a very brilliant idea. Whether it is best used in produce is a question mark. We don’t question the efficiency, but we question whether it doesn’t make the product look too institutional and sterile. Maybe it is suitable for an Aldi but not something focused on the image of “fresh.” Of course, perception can change, so we don’t want to rule it out.
In fact, even if Fresh & Easy fails and Tesco beats a retreat as did Marks and Spencer and Sainsbury’s before it, it will probably leave permanent changes on the industry. Many vendors have upped their food safety standards to get the Tesco business. Many have started to focus more on the consumer, and a whole store of retail-ready packaging has introduced many to the concept. Those are all wins for the industry whatever the future holds for Fresh & Easy.
A scion of one of the most prominent names in produce sent this report:
I drove to the Fresh & Easy store in Hemet on Sunday. There are a lot of things I like about it, and I’m looking for a spot near my home where they could put one. It is a smaller grocery store, with a good assortment of products, many in private label.
Cross between Smart and Final and Trader Joe’s? That guy’s on drugs.
Think of it as a well-stocked limited assortment grocery store with some good ready to eat foods, sort of a high end Sav-a-Lot. There’s sandwiches, salads, juices, desserts and warm up meals, but a little more than you might find in a really good truck stop.
It absolutely reminds me of the little old neighborhood grocery store on the way to work where I buy coffee and lottery tickets, but Fresh & Easy doesn’t have coffee or lottery tickets. It’s exactly what it says on the receipt; it’s a “Fresh and Easy Neighborhood Market!”
A word to the Tesco protesters: On Saturday night after the USC game, I left the stadium en route to my favorite 24-hour chili burger stand, and not far from the Armenian-Russian-Latino chain, I passed a competing Latino supermarket with a neon sign “Live Chickens”. So the demonstrators can go protest the live chicken sellers, if they can get past the MS-13 gang security detail.
Meanwhile both Pundit sister publication DELI BUSINESS and I want to know how they pull off this live chicken trick.
Sorry Mr. Pundit, but I was not going to stop with my family at night in that neighborhood for a store check.
I needed a burger, extra chili, way too bad.
But I digress. The point is there are some real interesting business models in play in Southern California.
School’s out on whether the overall Tesco supplier set up is optimal or not, but Fresh & Easy has found a great commercial test site in the alternative lifestyle capital of the world.
There is much to recommend about Fresh & Easy’s merchandising approach and I, for one, am glad to see them mixing it up in the retail arena.
— John Pandol
Vice President, Special Projects
Pandol Bros., Inc.
So is the Pundit. We need innovative ideas and we need to try new things. A new neighborhood small store concept holds out the possibility of thousands of stores all across the nation making the lives of consumers easier and creating opportunities for vendors.
We appreciate John’s letter and relate to the “little old neighborhood grocery store” but do note that though people find charm in the neighborhood hardware store, they mostly buy at Home Depot and Lowe’s… the neighborhood bookstore resonates with many, but the sales are at Border’s, Barnes & Noble and Amazon.com.
It is said that Tesco did an enormous amount of consumer research before launching its Fresh & Easy Neighborhood Market concept. We hope it didn’t misread consumer nostalgia for a bygone way as reflecting likely consumer behavior.
We wish Tesco luck and thank George, James and John for their letters.