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Key Performance Indicators and Food Safety…
Shall The Twain Ever Meet?

Our piece, The Truth That Dare Not Speak Its Name: The Priority Can Be Safe or The Priority Can Be Local, But It Cannot Be Both, attracted many comments.

This one came from one of the most prominent food safety experts in the industry:

It is hard for me to measure the depth of our agreement with your commentary, but I can assure you it is deep.

I would like to offer a few comments or questions:

1. For years there has been a battle going on within the corporate structure of many buying entities with one side advocating action and other side advocating avoidance of responsibility.

2.There have been many a letter sent from buyers with no internal changes regarding performance reviews or interaction between buyers and the corporate guardians of the brand and customer.

3. While we agree whole heartily with your analysis — do other buyers not mentioned avoid negative reviews by simply doing less, doing nothing or being less public about their intent?

4. For all of the buyer faults mentioned in your piece where do the two retailers mentioned stand with regards to their assuming responsibility in contrast to their peers?

Thank you so much for what you do for this industry.

Another thoughtful piece came from a leader in the mushroom industry:

An excellent analysis, as usual. I sincerely appreciate your articles and well-researched opinions, even when I don’t totally agree with everything as stated.  You are very careful to point out the clear problem in this article, although one implication can be slightly awry.  The issue here is a waiver of food safety standards, not locally grown produce.

Every producer is locally grown in their own specific area.  So, the most carefully controlled, highest standard, safest producer of any fresh produce can also be locally grown.  As you noted, ‘…the more general cause is the local food movement. More specifically, the willingness of large buyers to waive food safety standards so they can buy regionally.’

The local food movement itself is not the issue, but the federal government’s willingness to exempt small growers from food safety standards (Food Safety Modernization Act) as well as the willingness of buyers to waive these safety standards.  At the recent PMA Foodservice Conference in July, Karen Caplan of Frieda’s asked a most important question of a panel that just discussed how important food safety was to their companies.  

Basically, she asked, ‘How have you changed your KPI’s throughout your organizations to reflect the food safety priorities you just outlined?’  To their credit, they honestly replied, ‘We haven’t.’  In a nutshell, they said that while publicly their top priority was food safety, their buyers’ top priorities was still cost alone.

We all deal with multiple priorities every day.  That’s part of every business.  However, there can be only one #1.  You closed your assessment with this point, ‘…any commercial buyer, can make a priority of safe or he can make a priority of local. It is a deception to think he can make both his top priority’ (emphasis added).

Both can be priorities, but only one can be the top priority.  That is the key. When buyers’ KPI’s have that as their top priority, then we’ll see real change.

Thanks for your efforts to face these important sensitive issues.

—Joe Caldwell
Vice President
Monterey Mushrooms, Inc.
Watsonville, California

We also managed to agitate a very intelligent Yalie from one of the most prominent Eastern apple shippers:

I read your column faithfully and I enjoy your insights into the produce industry, but I have to take strong issue with the argument posed by your article on “The Cantaloupe Crisis.” This story contained the rather amazing assertion that “whatever the specific cause of this outbreak, the more general cause is the local food movement.”

Moreover the story repeatedly maintains that a retailer can prioritize food safety or prioritize buying local, but it cannot prioritize both.

I take strong exception to the implication that local produce is inherently less safe somehow than the industry standard.  I would maintain that plenty of “local” producers are operating at the same safety standards as the companies that are marketing themselves as complying with multiple food safety audits and therefore “safer” than other companies.

Multiple audits prove little.  A company is only as good as its most thorough audit.  To rank a company’s food safety program by the number of audits it passes is to invite huge costs into the industry that will eventually be passed on to the consumer. Will it make our food safer?  I doubt it.  Either a company uses best practices when approaching the issue of food safety in its production practices or it doesn’t.  One well-designed audit should be able to establish this. 

What an audit cannot do is guarantee that no pathogen will ever slip into the food supply.  No audit is that thorough.  I predict that a major outbreak of food-borne illness in the next ten years will be traced to a company that has undergone multiple food safety audits.  I guarantee it.

Plenty of local producers are using best practices to grow and handle their product, and they are passing their food safety audits with flying colors. My company is one of them.  To suggest that a major retailer like Wal-Mart applies lax standards when purchasing produce from regional suppliers is simply untrue.

Wal-Mart is now requiring that all of its produce suppliers pass a GFSI-level audit at both their production facilities and their farms. These are among the most stringent standards in the industry and hardly constitute what you characterize as “certain minimum standards.”  

I do not accept that this retailer is looking the other way when it sources regional product. I think Wal-Mart is making every effort to ensure that the produce they buy is as safe as they can make it. I think you are playing a dangerous game when you suggest that there is “perfectly safe” food somewhere, and that is what every retailer should try to buy.  We grow food in the real world, and the world is not perfectly safe.

—John Rice
Vice President
Rice Fruit Company
Gardners, Pennsylvania    

We are, of course, deeply appreciative for the kind words regarding our work and for the time that such leaders in the field have put into such thoughtful letters. There is a common thread in these critiques, and we will accept three strikes with a wet noodle for not being more clear on two points:

1)  It is obviously not the case that local food is always less safe. Every farm or packing house and every fresh-cut facility or greenhouse is local somewhere so, clearly, sometimes local food is coming from the top farm or facility in the world.

2)  Although we happened to mention Wal-Mart and Costco in the piece, this does not, of course, mean that these are particularly bad organizations when it comes to food safety. They are actually among the best organizations. Many organizations promise nothing and deliver nothing and thus don’t often get spoken of. If an organization sets the bar for itself high — say by publicly proclaiming that its vendors will all be GFSI-certified — and then doesn’t follow through, it will get criticized for failing to be true to its self-proclaimed goals.

This is as it should be because these pronouncements are promises to consumers. So if a retailer makes such a promise, it is entirely appropriate that it be held accountable. Still, failing to meet a goal does not mean one is inferior to competitors on food safety, and we certainly wouldn’t wish to give that impression.

John Rice’s defense of Wal-Mart is heartening, but we are not sure what to make of it. John writes that “Wal-Mart is now requiring that all of its produce suppliers pass a GFSI-level audit at both their production facilities and their farms.” This is certainly the position. We quoted the press release in the last article. But is there any evidence that Jensen Farms had this certification?

It seems exceedingly odd that in all the thousands of news reports done on the Jensen Farms cantaloupe outbreak that both the farm and the buyers would all forget to mention that Jensen Farms has such a certification. Indeed John is implying that Jensen Farms has two such certifications, one for the farm and one for the packinghouse. Yet there is no mention of either on the Jensen Farms website.

Apples are an unusual commodity in that large shippers in places such as New York and Pennsylvania run world-class packing operations. Indeed, when Cornell did a study regarding locally grown that focused on apples, we actually questioned whether it made any sense to key the study to apples. Although geographically, apples are a local crop in many places, we wonder if these large, well-established operations, would meet the small scale and biodiverse criteria used by many local advocates.

We also would say that it is very clear that many retailers use differential criteria when buying local produce. It is not at all uncommon, for example, for retailers to require that California producers meet the criteria of the California Leafy Greens Marketing Agreement and that local producers simply meet the laxer criteria of a USDA GAP Autdit.

We have been told by many vendors of horror stories in which they have sat down to do an annual review that starts out with retailers explaining new food safety standards and enhanced testing or trapping or buffer zones that will now be required. In the course of the review, the retailer explains its volume requirements on a week-by-week basis. The retailer cut out the big, typically California-based producer, for a number of weeks for the “local program.” If the shipper points out to the retailer how amazing it is that the retailer actually was able to get local growers to meet the standards just placed on that shipper, he is warned never to raise the issue again.

Rice Fruit Company finds itself in the fortuitous position of A) Dealing in a product that is not considered particularly prone to foodborne illness, and B) Having a top-notch facility and food safety program.

It is just not clear that there exists a similar option if one wants to buy cantaloupes in Colorado.

Beyond these clarifications, we would say the letters also bring forward this key point:

Despite all the talk of food safety being a priority, retailers have been unable to find a mechanism beyond establishing minimum standards to enforce food safety as a corporate priority. By using the phrase “minimum standards,” we are not implying that the standards are low. We are simply pointing out that the buying staff is not incentivized to pay more for product in order to get product that is safer. Instead the buying staff is precluded from buying product below a set standard and then is given every incentive to buy on the basis of price above that standard.

The reference to KPIs that Joe Caldwell mentions in his letter is a reference to Key Performance Indicators — this is consultant-speak for how one actually pays and promotes one’s people. Karen Caplan is a shrewd lady and she knows perfectly well that it is all fine and dandy to pronounce lofty goals or proclaim priorities, but if an organization claims its priority is food safety, but pays its people based on profitability, then the great likelihood is that decisions will be made to enhance profitability even at the expense of food safety.

We have been harping on this disconnect between corporate goals and the way people are evaluated and compensated for a long time. One of the most circulated Pundit pieces ever was first published in the aftermath of the spinach crisis back on November 17, 2006, and was titled Tale of Two Buyers. It told the story of a business review in which a retail VP proclaimed food safety the top priority then left the details to a buyer, whose own day to day priorities were different. Here is an excerpt:

If the VPs are sincere about wanting the buyers to place food safety first, the VPs have the responsibility for changing the culture and the economic incentive systems.

Because, let us talk straight and imagine two buyers:

1. The buyer in the little story above buys into the contracting idea and, as a result, gets the food safety standards the chain wants but, even though the grower worked closely, the contracted price turned out to be higher this season than the market price so, all season long, the chain had to either price higher than its competitors, which reduced sales or had to accept substandard margins or a loss.

2. The buyer in the little story above resists contracting because he wants market-priced produce and as a result his product, though meeting all legal requirements, is produced with no extra food safety protocols. The chain is not always aware of exactly where it is grown and packed, but they deal with a good supplier and they did a field inspection once a year, although the actual crop used may not come from that field. The vendor signs lots of representations and warranties as to the way the product is grown and packed. Fortunately there were no outbreaks and buying at market price, the chain was consistently priced competitively to consumers and made decent margins.

Ok, now here is the test: Which buyer gets a bonus this year? Buyer #1 — who put food safety first, or Buyer #2 — who put profitability first?

If your answer is the same as the Pundit’s, you realize why solving this problem depends on a lot more than the intentions of retail VPs. Until the culture and compensation systems change, this is a problem that will stay with us.

Unless and until the way employees are evaluated and compensated by retailers charges to actually put food safety first, it will be a long uphill battle to make food safety the top priority.

And indeed, as Joe Caldwell’s letter indicates, one may have many priorities and all may be legitimate. But one can only have one top priority.

When the government exempted certain smaller growers from the Food Safety Modernization Act, it established that it was more important to foster these small scale operations than it was to have safe food. In other words, that food safety is not the top priority.

Although we agree with John Rice that some local growers produce to top standards, we don’t think that applies to this situation. In this case, we think that when a buyer decided to buy these regionally produced cantaloupes, that buyer was prioritizing something other than food safety.

At last count 21 people are dead as a result.

The obvious question is how will the industry change to make sure this does not happen again? In the The New York Times article that we quoted in our original piece, Craig Wilson, head of food safety at Costco, was quoted as criticizing the cantaloupe industry.

The problem with criticizing the cantaloupe industry is that First, there really does not exist a “cantaloupe industry” — the relationship between a seasonal grower in Colorado and the large California growers is almost nill. The relationship with the large growers in the tropics, still less. Second, there is no reason to think that this is only a cantaloupe problem. It just manifested in that way this time.

In our piece in The New Atlantis, titled How to Improve Food Safety, we argued that the way to deal with this issue is to move toward a more British-like system in which a retailer would not be able to hide behind the liability insurance of its vendors but would, on pain of liability, have an affirmative obligation to do due diligence on its suppliers. 

If every retailer knew that its stock could tank every time there was a food safety outbreak because it would be called up on the stand to justify its procurement decision on a food safety basis — food safety would zoom in priority status.

But if there is not a change in liability standard and buyers do not change their Key Performance Indicators to prioritize food safety and give up differential safety standards for local product, this will happen again.

And knowing what we do, it will be our fault.

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