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Perishable Pundit
P.O. Box 810425
Boca Raton FL 33481

Ph: 561-994-1118
Fax: 561-994-1610


email:
info@PerishablePundit.com

a

Produce Business

Deli Business

American Food & Ag Exporter

Cheese Connoisseur

December 29, 2006 —
Perishable Pundit Overview:

Between Christmas and New Year’s, we are presenting “Pundit Classics,” pieces that ran previously that deserve a second look.

Today we are offering a random selection of interesting pieces from the past few months.

Whole Foods And
The Lobster Tale

What Andrew Young Should Have Said

Is This New Product Destined To Be
The Potato Chip Of The Produce Department?

Viral Marketing: Advertising With A Twist

Room For Improvement At New Wal-Marts




Whole Foods And
The Lobster Tale

The decision by Whole Foods to stop selling live lobsters but continue selling lobster meat in other forms has been greeted with some skepticism. David Merrefield at Supermarket News put it this way:

The lesson to be learned from this is that in retailing, when it’s necessary to make a change, tout that change as a high-value development, and do so in a style that will resonate with the core shopper base.

Live lobsters are an increasingly slow-moving category, so many supermarkets have removed lobster tanks without a thought about using the occasion to generate publicity. According to a news article in the Chicago Tribune, Jewel abandoned live lobsters eight years ago. Several weeks ago, Safeway quit selling live lobsters too, probably becoming the largest chain to eschew the product. Safeway didn’t gain much of a halo effect because the decision was styled in straightforward business terms: They didn’t sell well, so out they went.

But my favorite assessment was from the House Democrats of Maine. Funny simply because one knows they would go to the ramparts to defend any creature obstructing development in Timbuktu. But they do have a point:

And, not to state the obvious, but the lobsters Whole Foods was selling are ALIVE. If you could ask the lobsters in the store’s tank who has the better quality of life, them or the butchered meat and salmon filets in the Whole Foods display case, we’ll bet a lobster dinner that we know the answer.

And maybe more telling:

How is this compatible with the company’s stated interest in selling the most natural food available and bringing consumers closer to food producers? Can you find anything more “natural” in a natural food store than a live Maine lobster?

What this episode actually tells us is that a big chunk of the organic/natural/whole food movement is about politics, not food. With a bunch of new organic/natural/whole food concepts around the bend, the issue is whether there is a substantial market for these products that don’t share the political affinity of the Whole Foods customer base. Publix sells live lobsters in some stores and, so far, there is no word on whether the new Publix GreenWise concept will do so. The Pundit lives in Boca Raton where one of the first GreenWise stores is due to open so he’ll be watching carefully to see if Publix goes after the crunchy granola folks. My guess: there is a big market for organic that couldn’t care less about politics. Boca Raton with a big affluent population is a decent test.




What Andrew Young Should Have Said

Andrew Young, the civil rights leader, close associate of Dr. Martin Luther King Jr., former member of Congress, mayor of Atlanta and Ambassador to the United Nations, resigned suddenly from his paid position as Chairman of the national steering committee of Working Families for Wal-Mart, a group largely funded by Wal-Mart that consists of clergymen, businesspeople and the singer Pat Boone who speak in favor of the impact Wal-Mart has on the economy and the lives of working people and their families.

Young resigned because he was asked in an interview with a newspaper if he was concerned that Wal-Mart might drive small mom-and-pop stores out of business and force them to close. He replied as follows:

"Well, I think they should; they ran the ’mom and pop’ stores out of my neighborhood," the paper quoted Young as saying. "But you see, those are the people who have been overcharging us, selling us stale bread and bad meat and wilted vegetables. And they sold out and moved to Florida. I think they’ve ripped off our communities enough. First it was Jews, then it was Koreans and now it’s Arabs; very few black people own these stores."

Much attention has been paid to the obvious racism of these remarks. In uttering them, he reveals himself not to have been this great champion of human rights but more to have been a simple partisan for his own group. Knowing that he harbors this kind of animosity against other groups of people will, and should, permanently reduce his stature in the eyes of the world.

To me, however, the more interesting part of this story is the ignorance of both business and economics that the quote reveals.

And, of course, it is ignorance of both that is at the root of Wal-Mart’s many PR problems.

If Andrew Young wanted to tell the truth about Wal-Mart, this is what he would have said:

“Every time a way is developed to do things better, more efficiently, less expensively, offering better service or variety… anytime there is ever an improvement in commerce, those individuals that were doing things in another way get hurt.

So, when supermarkets rolled out across America, lots of little grocery stores, butchers, bakers and produce stands couldn’t compete. And when mighty department stores rolled across America, lots of little clothing stores couldn’t compete. And when people learned that they liked to shop in safe, air-conditioned, enclosed shopping malls, lots of main streets didn’t make it.

More recently, many a hardware store couldn’t compete when a Home Depot or Lowes rolled into town, and many a toy store closed when Toys R’ Us came to town

Independent bookstores closed in the wake of Barnes and Noble, Borders and Books a Million, and who knows what businesses yet will close in the wake of Amazon.com and E-Bay?

But there is no political way to determine if it is better for consumers to buy books in little bookstores, in chain superstores or on-line. This is a decision best made by millions of people acting in their own self-interest.

Just because a Home Depot, a Barnes & Noble or Amazon.com… or for that matter a Whole Foods store… opens for business, this doesn’t force anyone to change their shopping habits. If they change, and they have, it is because they perceive a better value in the new alternative than in the old. It might be price, it might be selection, it might be convenience, service or some other attribute, known or unknown.

There are many things Wal-Mart offers to minority groups: One-stop shopping, which is a special value to a community that doesn’t have as many cars per household as more affluent ethnic groups. Facilities that are generally kept safe and well lit with security guards when shops in our own neighborhoods may be dangerous, and better prices, a crucial attribute to a community where money is not as plentiful as in other ethnic communities.

Of course it is sad if hard-working people lose their jobs or their businesses but, if Wal-Mart is offering a better deal, then people in our community will save money on their purchases. That extra money in every pocket is available to buy other things. That means that, in time, those small businesses will be replaced with other businesses.

And, politically, that is the problem. If a new concept comes into a community and cuts prices 20% and a bunch of competitors can’t compete, the 10 O’Clock News interviews them and everyone has the name and address of people hurt by a new innovation. But nobody has the name of the computer store that will open in two years because that real estate is available, nobody has the phone number of the people who get jobs at a factory because people can afford to buy more of something, nobody ever interviews the little child who goes to Disney World because the family reduced its expenditures enough to save up the money.”

Andrew Young’s words especially demean the efforts of those in the perishable food business. By the time I started working in the produce business in New York, the age of the Jewish and Italian greengrocer was fast coming to an end. Those families that stayed in the business, including my own, went on to dominate the wholesale trade.

But the Korean families I knew, and I knew many, were scarcely “overcharging” or selling “stale bread and bad meat and wilted vegetables”. In fact, most of the families I knew struggled to make a living, often with everyone in the family working long shifts as they kept the stores open 24 hours a day.

And the product was usually very fresh. One reason perishable food is typically a portal of opportunity for America’s immigrants is that they could set up a store with minimal inventory cost.

Most opened up and came down to the market every day, buying only what they absolutely needed. They sold all day for cash and came back the next day ready to buy again.

Besides, the one thing we know is that those immigrant groups provided their neighborhoods with a better value than what the people who elected to shop there could get elsewhere. Maybe it was price, maybe it was a selection geared to what that particular neighborhood wanted, maybe it was convenient location thus saving on transportation costs. Maybe it was convenience in hours of operation.

But our economy is so competitive that, in the absence of specific laws to allow it, it is virtually impossible to abuse a consumer group for an extended period of time. In fact, prejudice and ignorance always create a window of opportunity for someone else.

Amadeo Peter Giannini was the stepson of a small produce wholesaler whose business was located on the wharf in San Francisco. He built the business into the largest produce wholesaler in the West. He sold his stake at 31 years of age and opened The Bank of Italy in North Beach, which was one of the very largest communities of Italian immigrants in the Western US. He launched the bank and gave it that name because America’s bankers wouldn’t lend to Italian immigrants. In their racism, they failed to see a viable market.

After the San Francisco earthquake in 1906, Giannini salvaged the depositors’ money out of the bank and walked through the streets of San Francisco by dressing as a humble fruit peddler and burying cash, gold and silver worth $80,000 under a load of oranges. With the money intact, when other banks were closed he set up a desk on two barrels with a board and started lending money to common people, mostly Italian immigrants to rebuild their lives and their businesses.

Those Italians turned out to be far better credit risks than the establishment bankers in their ignorance perceived. So today, Amadeo Peter Giannini’s bank is called Bank of America.




Is This New Product Destined To Be
The Potato Chip Of The Produce Department?

We’ve explored the issue of cartoon marketing for kids here, here, here, here and here. The Washington Post picked up on it here and The Associated Press continued with the issue here.

Labeling of this sort can help but, in the end, satisfaction with a product is going to be determined by convenience, flavor and other product attributes.

This is especially true if our interest, as an industry, is not solely in selling product to children but, also, in having them eat it.

The Junior Pundits are now 3 and 5 years old, and they love sliced apples and Grapple apples. But now, Stemilt Growers has found a new way to flavor apples without chemicals and combines this flavoring with fresh-cut pre-sliced apples. Something tells us these are going to be pretty popular at the Pundit’s house.

Pundit Investigator and Special Projects Editor, Mira Slott, interviewed Roger Pepperl, Marketing Director of Stemilt Growers, to find out more:

Q: Your new flavored AppleSweets sliced apples have been described as akin to whole Grapple apples. Why are they different?

A: The patented process for flavoring the apples is uniquely all natural and not done with any chemicals.

Q: Does the flavoring process add calories or impact the product’s nutritional content?

A: It doesn’t change the nutritional value in any way. The flavor is added after the slicing process and is so minimal that it does not increase the caloric value over plain slices. The process produces an unbelievably precise, consistent slice for a great clean visual image.

Q: What flavors are available and what’s in the pipeline?

A: We have sweet and tart options as well as flavors. We are starting out with caramel and wild berry, but will also have other flavors that will be coming out over time. You’ll see flavors like Mom’s apple pie, tropical mango, pina colada, and blueberry, which we’ll be launching in December.

Q: Seems as if the opportunities are endless…

A: We have about 40 flavors we’ve tested at different levels, with a wealth of flavors to explore as we broaden the concept. We will have seasonal flavors, warm weather and winter flavors. We’ve talked about orange ‘creamsicle’ in the summer. The fact we are vertically integrated with orchards, processing and packing allows us continuous raw product management that we control.

Q: Could this process be adapted to other commodities besides apples?

A: Yes, in our long-term vision, but I don’t want to elaborate on that except to say the process is pending.

Q: Will your product vision continue to build on the theme of healthy convenience?

A: In today’s society of convenience, people eat on the run, while walking, unfortunately while driving. Snacking out of the bag at one’s desk or at school, people are able to enjoy the flavors like caramel, but they avoid the mess of dipping as well as the extra calories, sugar and fat. Many studies have proven if a child is presented with sliced apples versus a whole one, consumption jumps off the page. Also, women find sliced apples more socially friendly to eat in public places. The optional flavor profiles broadens the market appeal.

Q: What’s your marketing strategy?

A: In our testing, the concept appeals to all age groups. We are marketing the product line as a healthy snack option, and obviously kids and mothers are our target audience. We are one of the early adapters to put the Produce for Better Health Foundation’s More Matters logo on the packages. We’ve soft-stepped the introduction, but this concept could make real noise down the road as the new potato chip of the produce department.

What a great idea. So often the Pundit hears people complaining that they can’t make money shipping a commodity — well here are people with some savvy saying let us not just ship a commodity.

It is great that Stemilt is utilizing the new More Matters logo, but the whole product teaches a lesson about increasing consumption. It is not just a matter of marketing; it is also a matter of our industry developing substantively better products.


We are running a few graphics to show you some sample bags, you can also learn more at the AppleSweets web site right here.




Viral Marketing: Advertising With A Twist

One of the things we are always doing here is looking for ways to advance the industry. Obviously we try to have the kind of content that will help move the industry forward, but this attitude also includes pushing industry marketing to the next level.

When we started PRODUCE BUSINESS magazine, a sister publication of the Pundit, we worked very hard to raise the marketing sophistication of the trade. It was common at the time for an ad to consist of little more than a contact name, a phone number and a line saying “shipping sweet corn from May to July.”

We spent a lot of time and money helping people do better, more sophisticated ads that would help their businesses grow.

Now with the Pundit, we’re helping people find new ways to market using the power of the Internet.

One type of marketing we are working with companies on is called Viral Marketing. The basic idea is to use the power of the Internet and people’s own relationships to get a message spread. This both decreases costs, because you need only get the message to certain key people, and increases effectiveness because people are likely to be more receptive to messages sent by friends, family, co-workers, bosses, etc., than they are going to be receptive to messages from perfect strangers.

A lot of this is focused on consumer marketing but it has application in the trade as well. If, for example, you want to get a message to all the buyers of perishable food at Wal-Mart, well, one of the most effective ways would be to focus on creating something that Bruce Peterson, Senior Vice President and General Merchandise Manager of Perishables at Wal-Mart, thinks is valuable enough that he wants to forward it to everyone. Or, a marketer might piggyback on valuable content produced by something like PerishablePundit.com. This is a kind of viral marketing that fades out once your target audience — in this case, Wal-Mart buyers — is reached.

Do the right job and you will probably get 100% readership by your target audience and a degree of attention that would be difficult to duplicate.

We love working on these kinds of efforts because the core in these efforts in the trade is great content. Our goal is to create something sufficiently insightful that people want to forward it to people they have influence with.

PUNDIT’S FUNPICKS

With consumers, a lot of the effort is funny jokes or videos, especially if you are targeting younger consumers.

Here are some examples:

Burger King lets you tell this subservient chicken exactly what you want it to do.

Heinz has had great success with this Ketchup Against Tomato Cruelty campaign

Folgers Coffee has a Tolerate Mornings campaign. Lower the shade and click on the TV for a video getting wide play.

And Carlton Draught has this very big ad about beer.

But marketers are just beginning to experiment with the potential. User-generated content is all the rage. The original Extreme Diet Coke & Mentos video has now been seen over six million times. You can see it right here. Just click on the button on the left next to the megaphone.

The transition is to a different type of marketing. Not only technologically but also in terms of goals.

Starbucks, for example, has developed its Cheer Pass Central, which is getting a lot of attention. The goal is to have people do good things for others during the holiday and then “Pay it Forward” to another person.

Starbucks will start it off, giving out free passes to movies, metrocards for the New York Subway and other freebees. They also give a numbered card and ask you to “Pay Forward” this kindness to another person and give them the card.

Everyone can go online and log in with the number and explain the act of kindness they gave or received. The idea is to see how long a “chain of cheer” can be sustained.

In theory you can be given a card in New York and watch it on the internet as it travels the whole world.

It is another kind of viral marketing and another way to use the Internet.

Which means this is probably as good a time for a commercial message as any. As we are in budgeting season, we hope you will consider the Pundit worthy of support in 2007. Please don’t hesitate to contact my associate, Ken Whitacre, right here to learn more about how we can help bring the influence of our content together with the reach of the Internet to make your marketing more effectuive.




Room For Improvement At New Wal-Marts

This past weekend, I checked out the opening weekend of not one but two Wal-Mart Supercenters in Miami Gardens, Florida, about an hour from my home.

Wal-Mart promoted these stores as being heavily focused on international products, and I thought it was interesting that Wal-Mart opened two supercenters in one city, less than five miles from each other, on one day. So I took the family and convinced them this was a great way to spend a Sunday (fortunately, they were supercenters, so I could bribe the kids into thinking this was a treat with toys and McDonalds).

As far as opening weekends of supermarkets and supercenters go, I generally don’t like to be too judgmental, as what you see is not the way the store will really operate after a while. But if I were a Wal-Mart exec, on one hand I would be thrilled so many people wanted to try our stores. On the other hand, I would also be very disappointed in the execution on the ground.

Every perishable department was out of stock of massive amounts of product. You had gaping holes of two and three feet at a spot in produce and meat. You could not buy a quart of milk because the rack was empty. Big massive cases to hold rotisserie chicken and secondary displays of bananas became junk bins as people abandoned all kinds of junk in these empty cases.

I’ve worked plenty of grand openings and know how difficult and unpredictable they can be. But Wal-Mart is very experienced at this, and it is really unacceptable to let a store look like these brand new stores did.

In some cases, you need to bring in staff from other stores for a grand opening and have replenishments ready. Wal-Mart’s vaunted logistics abilities should make this quite possible.

In other cases, you need to have a plan for the unavoidable. For example, it is highly predictable that you won’t be able to produce enough rotisserie chickens to satisfy this above-average crowd. Fine. So you put up a sign explaining that, and if this likely event transpires, you figure out what are you going to put in that giant hot case by the cashiers that normally will hold rotisserie chicken.

You don’t let it just become a junkyard. If you won’t have staff during the grand opening weekend to keep restocking the secondary banana display — a full 32 cashier lanes away from the produce section — then figure out what you want in that rack during that weekend. You don’t leave it with six hands of bananas and every item someone discards before they check out.

Beyond what I hope and expect are short-term operational issues, the food offering at these stores was formidable. (From time to time, I’ll probably run item checklists of interesting items and brands I see in different departments, both at these Wal-Marts and at other stores I am always visiting, to illustrate the scope of the perishable offerings.)

Many consultants are barking up the wrong tree when they tell retail clients all they have to do to compete with Wal-Mart and its supercenters is increase variety. The variety offered at these stores was extensive in every perishable department. Sure the mix was different than a good supermarket, with fewer specialty cheeses, for example, but more grab-and-go items than any supermarket in competition with these stores.

Still, not all was good.

First, as far as this international food thing went, it looked like no one sent the memo to the various perishables departments. This area is heavily Caribbean, and I saw no evidence that the mix had been changed more than infinitesimally to accommodate this customer. Beyond this, several departments seemed to raise real issues in my mind.

PRODUCE: PROCUREMENT- OR CONSUMER-DRIVEN?

Produce was very troubling to me, as it appeared that Wal-Mart’s produce selection was now more procurement-driven than consumer-driven.

Quality was good and, out-of-stocks aside, variety was good. But Wal-Mart is supposed to function as the buying agent for consumers, and it appeared that, all too often, other factors were influencing product choice.

In the early days of produce being sold in Wal-Mart Supercenters, the Wal-Mart name had little brand equity with produce consumers. Bruce Peterson, now Senior Vice President/ General Merchandising Manager for Perishables, made a conscious decision to carry top brands and use their equity to convince consumers that Wal-Mart was a good place to buy produce. This happened to fit in with the Wal-Mart tradition of selling branded products for less and, since Wal-Mart is now the biggest seller of produce in America, I think it is reasonable to say it was a brilliant decision.

But now, decisions are obviously being made for other reasons. Far too often, I saw signs that big vendors were given more lines just because it was convenient to procure that way. Perhaps because the price was best. But there is no way that the brand mix I saw in that department was determined by asking what would consumers most value on each item.

It is easy to let this habit slide. But it is dangerous territory. Wal-Mart, especially, has to be careful. The general merchandise offerings bring so many people to the store that even mediocre product mixes will sell a lot. But the day the consumer is not the Number One driver of each and every procurement decision, Wal-Mart will lose something priceless. And, one day, it will start impacting the results.

DELI HAS PRODUCT BUT NEEDS STRATEGY

Wal-Mart’s deli in both Miami stores had an astounding array of products — far more than the typical deli at Publix or Winn-Dixie. And it offered innovative products, especially in the grab-and-go area, including nifty things such as desserts that fit in the cupholder of your car.

Three things in the deli really came across: First, the store branding was inconsistent and confusing. Some things were branded Wal-Mart Deli and others Prima Della, but it was not clear why. I guess Prima Della is supposed to be upscale — Wal-Mart executives tell me it cuts on par with Boar’s Head — but that was not explained to the consumer. There was no signage or any other way for consumers to know that, and, besides, what is wrong with the pizzas and other items being marketed under Wal-Mart Deli? Are they low quality? It is not like there were two lines at different price points. The branding is confused.

When it comes to service deli meats, Publix, the big competitor here, is a Boar’s Head deli. Publix sells its store name brand cheaper and has a few specialty lines, such as Hebrew National, but it is much clearer positioning than the Wal-Mart case, which has a big assortment of brands.

There is actually a great opportunity for Wal-Mart to explain the advantages of each brand it offers and what values each one of these lines offer consumers. Not being committed to one brand should let Wal-Mart select the best Genoa salami, the best pastrami, the best ham, etc., at each price point. But if Wal-Mart did this, there was no indication of it. There was no signage at all, no way for a consumer to position anything.

There was a nice line of salads, such as Asian Chicken Salad, marketed under the FRESH brand, which just added a third mystery label to the mix. The salads are cryptically made by TFF in Salinas, which I assume has something to do with Taylor Fresh Foods, but these items would sell better labeled as part of an integrated department branding strategy than just having this random label thrown into the department.

Second observation: The department has a bizarre, almost schizophrenic feeling to it.There are really nice products, like an imported Parmigiano Reggiano, a hickory-smoked sun dried tomato turkey breast, a section of upscale gourmet sausages in beautiful black packaging and slices of Eli’s Original Cheesecake, positioned between pre-made sandwiches such as one would get in a vending machine or at the least expensive convenience store. Then there was a variety of microwaveable burritos and handheld foods.

The deli department was a hodge-podge. It was as if the department had not really been merchandised at all. The sections for different usages should be clearly defined, with products organized in a way that appeals to the wildly different clienteles. A little merchandising and that product mix could sell a lot more.

Third, Wal-Mart should really abandon some of the half-hearted service efforts. Case in point: They had a nice selection of pre-packaged wet salads, but the non-descript label, Wal-Mart Deli, did not do the product justice.

A half dozen wet salads were also displayed in the bowls in the service deli, and it was a sorry looking display; each salad was just dumped in a mournful bowl obviously showing it had to come from some bucket. The quality also was suffering as the product sat out there to languish, and the staff was too busy to service anyone anyway.

This treatment of wet salads hurts image and sales. Wal-Mart should just go with prepackaged salads. My Publix in a ritzy beachside neighborhood of Boca Raton manages just fine with all prepackaged.

BEEF BRANDING SHOULD EQUAL CHICKEN/PORK

Meat seemed an area where a little branding would make a big difference. The chicken and pork were heavily merchandised in branded packages from Tyson and Perdue, but Wal-Mart left the beef in unbranded packages positioned between the chicken and pork. The beef had a generic appearance, despite the black plastic containers for the case-ready product.

BAKERY DOES WEDDINGS: IS THAT THE MESSAGE?

Bakery was the most consistent in presentation and branding, with the exception of one pile of snack cakes that were just packaged goods and not fresh-baked and thus didn’t really belong in bakery to begin with. Virtually the only signage in all the perishable departments was prominent signage in the bakery, saying Wal-Mart makes wedding cakes.

I haven’t seen the statistics on sales for such products at Wal-Mart, but to me it seemed like a distraction. Is that the most important message for bakery to promote? If they can sell that kind of product, it made me question why the commitment to floral wasn’t stronger as it consisted solely of bouquets in buckets in both stores.

SEAFOOD NEEDS TO BE COMMUNITY-FOCUSED

The seafood department would have been a nice little department if this wasn’t supposed to be a “store of the community” geared toward the local Caribbean population. Carribbean cuisine is heavily geared toward seafood, but if I took a picture of this department and told you it was taken in a new supercenter in Minneapolis, you wouldn’t doubt me for a minute.

Some of the packaged smoked fish, such as Prima Della brand baked salmon, as well as jarred herring, and packages of smoked nova salmon didn’t seem to contribute to a fresh fish department. They would probably do better back in the deli.

Overall I had two additional observations:

First, there didn’t seem to be a reasonable merchandising strategy between departmental offerings. So, for example, the deli department up front offers a nice selection of fresh hummus and related products in prepackaged containers. The dairy offers the exact same product under a different brand in a coffin case in the back.

You can make a lot of arguments for secondary displays, even a second brand, but to maximize sales, you want sound reasons for your decision. So that secondary display might be positioned next to the chip aisle instead of the dairy. I saw a fair amount of evidence of simple lack of coordination and departmental competition.

Second, a great opportunity was being missed at the opening of these two supercenters. So many people, so many products and nothing, nothing was really being merchandised to sell. If you didn’t know that you liked and wanted peeled Thai coconuts or hot fried okra or baked salmon or red velvet cake or soy milk or a pre-cooked roast, there was nothing in either of these stores that would even attempt to educate you or convince you.

What a lost opportunity.

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