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Spinach And The Consequences
Of Buyers’ Actions

In exploring reasons why some buyers have declined to join the Buyer-led Food Safety Initiative, we’ve uncovered several concerns. First we heard from those expressing a concern about the promotion of the initiative to the consumer press. Then we analyzed the thought that had been expressed that the buyer effort was not what was needed because we needed a law or mandatory regulation. Most recently we heard from those thinking that all these buyer-led efforts are sullied by the pursuit of self-interest.

Today we are going to hear from a buyer who thinks that the effort focuses excessively on spinach:

I find it interesting that the focus centers around spinach. And I ask myself, who stands the most to lose if consumers shy away from fresh spinach? While it is a fairly recognizable item at retail, it really isn’t that big an item in the big picture. So who gets “hammered”? As I look into this, it’s food service distributors!

Fresh spinach is a significant piece of their business. It also hammered the clubs as “spring mix” was a big item with restaurants. So I wonder if the motivation is much less about the sanctity of fresh produce as it is about restoring lost revenue to a part of the supply chain?

An executive on the buy-side thinks that the buyer-led initiative hasn’t addressed the consequences of their actions:

A big problem that I have with the buyer’s letter is that it doesn’t address the industry as a whole, but carves out a fairly small item for focus. But let’s assume that some standard is set that these buyers find acceptable. So now the buyers will all be scrambling to get this product from a much narrower supply source. So what happens then? Prices go up, availability goes down.

The Pundit thinks the focus on spinach and leafy greens is understandable. Sure some of the people fighting for tougher food safety standards on spinach will benefit if it stays a vibrant product in the industry, but that is neither bad nor surprising. Who else would care enough to do something except those with interests in the field?

It is also true that if we have another food safety scare on spinach, the black eye on the industry reputation will be far worse than if we have one on some other item. This crisis, with its de facto ban on fresh-spinach consumption got unparalleled publicity. Perhaps the industry will ultimately be forgiven and spinach sales will get back to pre-crisis level and resume their upward swing.

However, my grandfather used to say to me that in business and life, he found this adage useful: “Fool me once, shame on you. Fool me twice, shame on me.” Put another way, the public and regulators are going to legitimately feel that having been put on such public notice, the industry better be able to fix the spinach problem.

Also, in fairness, the buyer’s letter just says start with spinach:

Finally, while we recognize that lettuce and leafy greens are the most immediate priority due to the most recent E. coli outbreak, we expect that the associations share our urgency to have standardized food safety requirements and commensurate auditing criteria for additional crops in accordance with their actual and/or perceived risk, including: melons, tomatoes, and green onions. We expect that the process described above will be initiated for one or more additional crops by February 15, 2007.

The reference to the consequences of the buyer’s effort is telling and sort of another issue on all this. We talk about higher standards as if all growers are capable of meeting them. It is not true.

Some don’t have the capital, the food safety expertise, the staff to deal with these issues, etc. Others will meet them, but it will take time. HACCP experts have to be hired, plans made, staff trained, etc.

There is an iron tradeoff: to the extent the new standards are meaningful, supply will be constrained and prices will rise.

This may moderate over time as more growers become proficient. But higher price levels may be permanently necessary to pay for the enhanced focus on food safety.

To the degree higher prices get passed on to consumers, demand will be suppressed.

It is unknown if those who don’t buy spinach because of high prices will buy healthy alternatives. They may buy candy bars and die of complications of obesity. It is a completely open question as to whether safer spinach won’t cost lives in the end.

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