Ron McCormick, Vice President of Produce at Wal-Mart, gave a talk at the Fresh Produce Association of the Americas that focused on the company’s procurement priorities.
Praising by name Michael Cochran, Perishable Procurement Director and a PRODUCE BUSINESS 40-under-Forty honoree, Ron emphasized the importance of Wal-Mart’s global sourcing initiative and also placed great emphasis on Wal-Mart’s locally grown initiatives.
He emphasized that “food miles” is an important concept to Wal-Mart and will become more so. Lee Scott, Wal-Mart’s CEO, has charged Wal-Mart executives to emphasize both social responsibility and sustainability.
For the produce operation, this translates into something Ron calls “Heritage Agriculture,” which seems to involve a revival of often long-defunct agricultural production. Ron specifically mentioned as an example that Arkansas once had a vibrant peach industry and that cucumbers, especially pickling cucumbers, were also grown locally.
Ron indicated that Wal-Mart would strongly encourage the revival of these local crops and similar crops around the nation. He went so far as to point out that Wal-Mart paid some producers a little extra to make the move into RPCs and that Wal-Mart would consider similar incentives to encourage “Heritage Agriculture”.
Perhaps the most interesting thing about Ron’s talk is that there was not one mention of consumer demand for these initiatives. Ron mentioned benefits to Wal-Mart as it moved away from vendor-managed replenishment toward direct procurement as Wal-Mart buyers were now becoming much more knowledgeable about the produce.
Ron mentioned that Lee Scott wanted all these initiatives. Yet one would think the key for a retailer might be that customers are knocking down the door begging for Arkansas cucumbers. To us, that sounds like a retailer that has its focus on the wrong end of the business — what does the CEO want as opposed to what the consumer values.
We shudder at the thought that a man in a position such as Lee Scott might still be using terms such as “food miles” — at this point this has been thoroughly discredited as a simplistic notion in which one and only one aspect of production is plucked out for comparison. Even people who believe in this whole mode of thought now recognize that you need to do a Lifecycle Analysis, as we discussed here and here, in order to even approximate an assessment of the environmental cost of producing any item.
Besides how does Wal-Mart balance its goal of being environmentally friendly with being socially responsible? It is a major issue for Wal-Mart subsidiary ASDA, as we pointed out in an interview with government officials from Kenya.
The “Heritage Agriculture” initiative sounds great, and if Wal-Mart is really committed to it, the company probably just has to give out a few years of purchase orders and it will happen.
There is, though, the issue that things grown locally were stopped for a reason. For example, Arkansas peaches, which are still grown, lost their large-scale commercial viability for a reason:
By 1901, Johnson County shipped up to ten boxcar loads of peaches a year. The season lasted only two weeks, typically mid-July to the first of August. From 1912 to 1915, growers produced big crops, but the price per bushel remained low. The peak year for the Nashville area was 1950, when 425 orchards collected more than 400,000 bushels. The year 1925 was also a productive year — 250,000 bushels were shipped, and the price hit two dollars a bushel. The peak production year for the state was 1940, when nearly 2.3 million bushels were produced, but the best year for profit may have been 1944, when the federal government set a price ceiling of $4.50 a bushel.
In 1952 and again in 1953, disaster struck Arkansas growers as late freezes followed early warm spells. Two-thirds of the crops were destroyed, and production sank to 150,000 bushels, hurting both producers and brokers. Brokers contracted with growers in California, Florida, and southern Texas — places without late frost. The Arkansas growers lost the market, and the impact was devastating. For Howard County growers, the only option was to pull up the trees and convert the land for other purposes, often pasture for cattle, or to raise chickens. Johnson County fared little better; growers learned to expect a full crop in only three out of five years, while others reported that profits had ceased as far back as 1950.
A two-week season, constant frosts, competition from more temperate climates — Ron spoke of Lee Scott pushing “Food Miles” because he believed you could use it to drive costs, specifically transportation costs, out of the system.
Yet while it never hurts to explore options, and things do change so there may be opportunities out there in “Heritage Agriculture,” it is also true that we have a pretty aggressive capitalist system, and the reason tree fruit growers plant peach trees in California and not in Arkansas is likely that it will be more expensive, not less expensive, to grow in Arkansas. So the initiative probably won’t take costs out of the system, but will actually add costs to the system.
Ron, who spoke without a prepared text, was, by all accounts, an engaging and enlightening speaker. He is also a good soldier and he is carrying out the vision of his CEO. For that he deserves only praise.
But is Wal-Mart’s CEO focused on some geo-political goal or does he want to serve Wal-Mart’s customers? One suspects that much more than Lee Scott’s job will ultimately hang on that question.
