Chiquita has had a tough year and has decided to reorganize.
We’ve been talking to Tanios Viviani, who was President of Chiquita’s subsidiary company, Fresh Express, since the spinach crisis. He was the key man to decide that Fresh Express would not join the California Leafy Greens Marketing Agreement and then the key man to decide that it would join the agreement.
Tanios was also one of our Single Step Award winners. [You can read his interview in the Pundit here]. We asked Mira Slott, Pundit Investigator and Special Projects Editor, to check back in with Tanios — both to learn more about changes in his specific role as a result of the restructuring and to help the broader industry wrestle with the business issue of how a company can optimally organize to obtain its goals:
Global Innovation and Emerging Markets
and Chief Marketing Officer
Chiquita Brands International
Q: Congratulations on your new position at Chiquita. It sounds quite far-reaching. What does it entail? How do your responsibilities fit within the overall company restructuring plan?
A: This is a journey we’re going through to transform Chiquita. This restructuring is meant to accelerate the company’s transformation to become more consumer-focused with higher value-added programs, improve customer profitability and turn around our own business performance. We’ve been on this path since I and my CEO were brought into the company. What expedited change was the not-so-exciting business results this year.
External factors impacted progress; European regime change on banana imports, the EU more than doubled the import taxes on banana, coupled with E. coli costs and slower growth of the salad category due to the spinach E. coli situation last year, and additional imports suffering.
This confluence of blows made us take more aggressive action in changing the organizational structure to hasten product growth, alleviate the impact of the E. coli crisis, and try to neutralize costs from the European side.
Q: Is there a fundamental shift in the company structure?
A: Yes. We are moving from a product-structured company and going to a geographic structure with the national and European organizations. Before, the fresh salad group reported to me. Now my role as leader of Fresh Express is consolidated with the North America group. And I take on a different role across all geographies, overseeing innovation and emerging businesses and providing leadership in marketing.
Q: With your broader responsibilities, you’ll have a lot on your plate. What will you focus on?
A: My goal going forward is doubling the fresh salad category. I’ve said all along I believe the category should be two to three times bigger. I will continue to develop consumer products and customer merchandising solutions to allow us to double the size. That work doesn’t go away. I also take on responsibility to help other geographical regions in Europe and Asia; to develop new programs as well. It may be in fruit. It may be in salad; any areas in the fresh food business.
The beauty of this, and what gets me excited about the restructuring, is the ability to continue to work with retail and food service customers in the U.S. and be more active in the international area to bring ideas that work effectively here elsewhere.
Q: Could you provide some more specific ideas of what you have in mind? Do you have any projects already underway that you could discuss?
A: For example, let’s talk about salads for a second. We have built a program with seeds developed in the Netherlands that led to sweet butter lettuce, which was a success in the U.S. We would be able to apply that to other geographies where we choose to sell our products. Conversely, fruit in a bottle is just being done in Europe. I am excited by the opportunity to test this program in other geographies including the U.S. This is based on the concept of cross-fertilizing ideas and helping other regions develop innovation programs more efficiently.
Instead of having an innovation group working in Europe and another here, we can integrate ideas and solutions. I don’t have specific projects to tell you about yet. This is a new work model for the company. Research and development can be streamlined and shared faster. A lot of the innovation will come.
Q: Products don’t always translate well across different cultures and environments. What challenges will you face in adapting innovative products to various customer and consumer likes and nuances?
A: It requires that we understand local needs and local desires to develop programs that make sense. In my past professional history, I had to roll out ideas throughout the world. What gives me an advantage in my new role is that multicultural background working in various countries in Asia and Latin America and learning how to adapt product solutions.
Q: What kinds of products were you involved in prior to Chiquita? Are there lessons you can apply to the fresh produce business?
A: When we were launching a fabric laundry softener globally, we adapted formulations. In southern Europe, consumers were interested in higher softener feels. When we launched softeners and shampoos in China, because of the income levels of target customers, we needed to provide specially designed small packets. There were different needs in Egypt. We diluted the formulations of dishwasher detergents to be less concentrated in Argentina because that’s what consumers wanted.
Being able to reinvent packaging, brand names and advertising is critical to success. This is not just applicable country to country. If you translate this to the U.S., the taste profiles consumers are looking for on the East Coast are often completely different than in the South. Curly spinach is popular in the northeast and mid-Atlantic, but is not a staple in California.
The acquisition of Verdelli gives us the ability to tap into the company’s curly spinach expertise, to encourage regional tastes and make product fresher and more available. We’ve launched an arugula product with targeted geographic SKUs. We’ll continue to look for locally relevant tastes.
Q: Your new job title emphasizes global innovation. Variations in packaging and taste profiles don’t necessarily define groundbreaking product advances. Innovation in the produce industry is often more challenging than in fast-moving high tech industries such as electronics. What do you mean when you say innovation?
A: We define innovation in four areas: product innovations, which we continue to develop. An example here is our sweet butter lettuce, rolling out nationally now in single-serve portions which include recipes and proprietary packaging with “fork chops”, a tool to eat salad that combines a fork and chopsticks.
We observed how consumers eat salad. They eat from the top well but have a hard time picking up a tomato or smaller pieces at the bottom of the container. The ability to use a fork to poke into the ingredient and chop sticks to grab it like a tongue make eating salad both easier and fun.
Then there is the second prong of merchandising, which is critical. We are still in an impulse category and have to help consumers navigate through the store, to reduce shrink, improve efficiency, and provide a pleasurable shopping experience so they come back.
You need well-thought-out plannograms and clever utilization of merchandising tools to close the sale in the store. Within the past two years, we have put new energy into secondary displays. Produce is one of the few categories with hardly any secondary displays. We worked with Albertson’s to develop hot/cold secondary displays close to checkout. The cross-merchandising strategy improved sales of both salads and rotisserie chickens.
Q: Do you find challenges in executing merchandising ideas based on different corporate structures and departmental segmentation and rivalries?
A: Merchandising solutions are sometimes harder to develop but also will pay off more so than a product innovation. We’ve invested significant time and money in merchandising solutions. Like product initiatives, sometime they fail and sometimes they succeed. We’ve had some great collaboration with retailers, including HEB, Wal-Mart and A&P, that have produced phenomenal results. All around, we’re trying to create a better shopping experience for the consumer and a more efficient experience for the retailer.
We have to manage labor and understand how the department accounts for its growth. We have many innovative customers working with us to overcome conflicting retail issues and figure out how we are going to win with the consumers. When you have strong relations with customers, you understand their strategies and they share yours to find points that intersect to grow and develop. The approach has to be a joint relationship as opposed to ‘we versus them.’ That has been a trait at Fresh Express and Chiquita that we want to make stronger. My goal is finding consumer solutions that meet retailers’ goals and objectives as well.
Q: That kind of talk is easy to come by, in almost a cliché kind of way. Can you share with our readers grounded examples of action steps you’ve taken to build effective working relationships with retailers to achieve these results?
A: In rolling out our new single-serve products, it was paramount we worked with retailers on size of packaging to accommodate shelving and stocking efficiencies in the backroom. This is not something that can be learned through phone calls or boardroom meetings.
What I require of my direct reports is that every six months they need to spend at least one day working out in the harvesting fields, in the manufacturing facilities where we process products, and in the grocery store stocking shelves and in the backroom. I require this from everybody that works for me, even the senior level managers.
The General Manager for our salad and snacking division, Ed Romero, takes that to heart. Not only does he spend time in the three areas, he goes further. For instance, he took his entire team to work for two full days, spending an entire day stocking shelves at HEB in Texas. To me, it is very important being in touch with both the customer and consumer. When we launch a product, we want to be sure we do our homework, and understand the day-to-day reality on the ground.
Q: What are some of the biggest surprises or revelations that have resulted from this field work?
A: Every time they do this, every six months, they are truly working, not just visiting and talking to the manager, but getting into the backroom and unpacking boxes. Ed comes back with pages and pages of insight… nfrom consumer complaints to suggestions on recipe of products to packaging to pallet design.
On salads, something really silly was discovered that led to four-sided coding on our boxes and inevitably a change that improved the whole stocking program. Typically labels are placed on one or two sides. As you go in the backroom and try to pick up a box, if it’s shelved in the wrong position, an employee won’t see the label and opens an SKU not needed. This creates waste and additional work. Ed came back a year ago and said we must have four-sided coded boxes. The action improves accuracy, reduces shrink and saves money on labor.
To me all these things are innovation. It sounds basic and simple, but it is all part of creating a profitable shopping experience for everybody. We win selling the right products, it allows our customers to reduce shrink, and the consumer wins by always having the right product fresher.
Q: So there’s product innovation and merchandising innovation. What is next in the four areas you’ve categorized?
A: Third is technology. We have spent a few years improving salad bags through modified atmosphere technology. There are almost six layers of film in our bags, each layer intended to do one thing. For each product variance, different respiration rates are involved.
Another example, we have developed an automated harvester we’ve been testing for our spring mix and other mechanical processes for our raw product program.
In the banana world, our Chiquita-To-Go product is a single banana packed in a proprietary box. The technology allows the banana to ripen at the right time. It allows us to sell in places where consumers only want single units, such as coffee shops, airports and convenience stores.
That technology increased penetration of produce items in channels too difficult to get the right ripening or yellow color with conventional methods. It was a huge break-through in the past year for selling in different channels. We are still rolling out the product Chiquita-To-Go. Now consumers can get a perfectly ripened banana in a single serve package. And it is possible for those channels that have difficulty handling fresh produce to store smaller boxes and open them only when it’s time to sell.
Q: What is the final piece in your innovation square?
A: The fourth is very dear to me. I believe much innovation comes through the supply chain. How do you transport from seed to shelf? Talk about innovation around trucking and logistics. We are now rolling out through our logistics partners more fuel-efficient truck designs. They’re using different designs with the wheels in front to save on fuel.
We’ve redesigned pallet configuration to improve capacity and significantly reduce the carbon footprint.
On the international side, innovation is much broader than a product. Putting the product out in the grand scheme of things is not that difficult. Putting out profitable, relevant and sustainable product is very hard and requires you to work through these four dimensions.
Repacking a product and putting on a new label is like throwing spaghetti against the wall and seeing what sticks.
Our principle is to test many things, and fail cheap and learn from our mistakes. Much of this innovation is a combination of luck and inspiration because I came from a family business where I learned basic principles from my dad, and then worked with large companies as an ‘intrapreneur,’ not an entrepreneur — I was given the ability to act like an entrepreneur in a large public company.
The changes at Chiquita were done to expedite our transformation. I hope to facilitate the process through these four prongs of innovation. We need to simplify the decision-making process and make the company more entrepreneurial in its behavior, faster in making decisions. We need to be a company that sees innovation beyond product innovation through seed to shelf so we can be profitable and sustainable.
Q: How involved will you be in Fresh Express operations going forward?
A: Brian Kocher, President/North America, will focus on the day-to-day business, superior service and more efficient operations, while I’m helping to grow the engine and work with our partners to develop trailblazing ideas and solutions.
I’ll be heading to Europe and Asia for business and working on global strategies, but I continue to live with my family in Salinas. I love to host visitors at our innovation center, where we test new varieties and methods to more efficiently grow our lettuces at our trial farm. We have a pilot plant facility to experiment with processing procedures and advanced drying equipment. We research and test food safety programs here. We also have a test kitchen where we bring in consumers to help us develop recipes and new salads. These elements make up the foundation for innovation; not only for the Valley to continue to prosper but to drive the whole industry.
When some of our customers heard about my new position, they asked if I was moving away. I joked that I’d stick around if they’d invite us to participate in their innovations. They kindly responded, ‘with pleasure.’ I am happy to say that I will continue to make Salinas my home.
Chiquita is attempting a geographic, rather than product-line, approach to management. Tanios thinks the salad category can be doubled or tripled in size. He wants to focus on cross-fertilizing ideas across geographies and focus on four types of innovation:
- Product Innovations
- Merchandising Innovation
- Technology Innovation
- Supply Chain Innovation
There is certainly much to be done on those four areas around the world. We like the simple innovations, like putting a label on four sides of a box so employees in a store won’t open the wrong SKU.
Chiquita is one of those names that means produce, and Fresh Express is the most successful and consumer habit-changing launch of our lifetimes, so we wish Chiquita well in its restructuring.
As for Tanios, wherever the winds may take him, at a moment when he needed to be in Salinas, he was there, and that has in many ways transformed the food safety efforts of the industry.
That is something a man can carry with him through a lifetime and into the history books. We wish him good fortune as well.