In our piece, Vendors Beware As Wal-Mart Alters Course On Procurement, we included a little story on how the Pundit learned about contracting in the produce industry:
When the Pundit was cutting his eye teeth in the business, he was sent by the Pundit Poppa down to Puerto Rico to study under the tutelage of one of the Pundit uncles, Sydney Prevor, who had long run the firm’s Puerto Rican affairs.
We imported many items, potatoes prominent among them, and we would sell them to small wholesalers who had slots at the Mercado.
One customer was a little bigger than the rest and he could order, in advance, a full trailer. In exchange for doing so, he wanted a discount. So each week we gave him an offer, he accepted it and we had a contract for the week.
Yet, a youthful Pundit learned about contracting from this customer. For it turned out that when the ship would arrive, if the market price was below the contract price, our customer would speedily come to get his trailer of potatoes and, in fact, would always have a story as to why he needed a few pallets extra at the same price this week.
Yet when the contract price was above the market, he never came for his potatoes. We would call him and there was always a reason why he needed it cheaper this week.
In time Uncle Sydney advised our customer that a contract with him was no contract at all and told him we would no longer give him a price in advance and he was welcome to buy at market from us every week.
Little did we understand that the mighty Wal-Mart in its behavior would come to mirror our Puerto Rican potato customer.
This anecdote brought a letter:
I am in the natural and organic food business and I get your Perishable Pundit and wanted to send a note to say I think your columns are great.
Continue to spill ink and burn electrons on Tesco and Wal-Mart — your insight and analysis are “right on.”
I have been in the natural food business since 1978, but I tell anyone who will listen — and those that don’t listen — that I really learned the grocery business while working at an independent supermarket in the, ahem, late 1960s/early 1970s… so I really like the parenthetical comments you throw in about where your family sent you to learn the business (this week: Puerto Rico)…and loved your story about the potato guy…
Ok, enough praise in one email.
Keep up the good work
— Gary Cohen
President
Natural Value
Sacramento, California
We appreciate the kind words. It is true that we were very fortunate to grow up in a family not only involved in the industry but in so many facets of the industry: Import, export, wholesale, retail, growing, restaurants. It gave us an unusually broad perspective.
Yet, we would have to say that we really learned the most at retail. Being right there at the point where consumers intersect with the product taught us a great deal. We remember the old 3-lb. baskets of mushrooms, and it was our job to pull them from the cooler and open them so customers could buy.
It was really a fascinating study in consumer behavior. Every time we brought out a new basket, the customers, excited to see the fresh product and noting the beautiful while mushrooms, would immediately buy. Depending on how many customers were in the store we sometimes had to open two or three or more 3-lb. baskets.
Each time, though, there was a last basket and the customers would buy a pound-and-a-half and we would put the rest of the basket on the shelf.
Sales would slow significantly and there was always a question mark: Should we leave that basket out there, hoping to sell that last pound and thus reduce our shrink, or do we bring out new baskets and maximize sales.
In the end, our math found that selling more was more important than reducing shrink. We were often tempted, however, to take the mushrooms in the back room, combine a few baskets and come out with “new” mushrooms that were really repacked. In many cases, we thought it was the theater of bringing out the fresh mushrooms, more than any actual product quality advantage, that enticed consumers.
Today, we would think it would be good to constantly bring out new mushrooms and sell the open baskets to the deli for use as a cooked product in prepared foods. But, of course, we now have pre-packed mushrooms. They probably take better care of the product and are easier to handle but they offer less romance.
Consumers liked our theater in bringing out those old baskets and opening them before their eyes to reveal fresh mushrooms. They liked having a produce guy to talk to, but labor is expensive and pre-packaged mushrooms more efficient to display. There is a gain there, but some loss as well.
To our minds, the growth in packaging and decline in seasonality are mixed blessings for the produce department.
Many thanks Gary Cohen and Natural Value for this nice letter.
