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Wholesalers, Independents May Get Windfall From Buyer-led Food Safety Initiative

The list of signatories to the buyer-led food safety initiative is an impressive one:

Ron Anderson, Vice President Corporate Produce, Safeway, Inc.
Craig Carlson, Vice President Produce, Pathmark Stores
Jim Corby, Vice President, Produce Merchandising, Food Lion
Greg Corrigan, Director Produce & Floral, Raley’s
David Corsi, Vice President, Produce, Wegman’s Food Markets
Bryan Gannon, Director Produce & Floral, Big Y Supermarkets
Gary Gionnette, Vice President Produce, Supervalu Inc.
Reggie Griffin, Vice President, Produce Merchandising, Kroger Company
Mike Hansen, General Manager, Sysco Corporation
Don Harris, Vice President Produce & Floral, Wild Oats Markets
Gene Harris, Senior Purchasing Manager, Denny’s Corporation
Mark Hilton, Vice President of Produce and Floral, Harris-Teeter
Craig Ignatz, Vice President Produce Merchandising, Giant Eagle
Mike O’Brien, Vice President Produce & Floral, Schnuck Markets,
Frank Padilla, Head Buyer, Grocery Division, Costco Wholesale
Greg Reinauer, Vice President, Sales & Marketing, Amerifresh, Inc.
Roger Schroeder, Vice President Produce, Stater Bros.
James Spilka, Vice President Produce, Meijer, Inc.
Mark Vanderlinden, Vice President Produce Merchandising, Price Chopper
Tim York, President, Markon Cooperative

One category of buyer completely missing from the initiative is the regional produce wholesaler or distributor. Which is somewhat odd as it is these players that have the strongest interest in the “industry-wide” approach to raising food safety standards.

In other words, Kroger or Safeway or Costco, Sysco or Supervalu — these companies are of sufficient scale to implement their own food safety protocols. They can demand that product be grown and packed to their own specs and can have inspectors and auditors and what not.

This would be much more difficult for regional wholesalers to do.

So the tack the Buyer-led Food Safety Initiative has taken, which is to ask the associations to set standards, is great for smaller wholesalers because they can “piggyback” on the initiative, announcing that they won’t sell anything without an audit report saying it meets the new standards.

This is similar to what we learned is going on among foodservice operators when Janet Erickson of Del Taco told us that an important criteria that they, as a smaller chain, look for in suppliers is that they are selling large companies with reputations for excellent food safety programs. They know a chain that sells to Darden, McDonald’s and Jack in the Box has been vetted thoroughly.

The problem, of course, is that many wholesalers are in a different business. Their role is to help growers who, perhaps, don’t have the volume to sell to large chains. Some specialize in consignment or price-after-sale deals, in which their function is to sell product that growers need to sell. This is much different than what retailers and foodservice operators do, which is to buy the size and grades and variety they want.

When The Pundit was a wholesaler, he knew about cold chain management and was concerned to maintain the cold chain, but that was more a matter of product quality than safety. The first wholesaler who came to talk to the Pundit about safety was Al Siger of Consumers Produce of Pittsburgh (you can read Al’s letters to us here, here and here) when he built a brand new, state-of-the-art facility, which we wrote about, in the Pundit’s sister publication, PRODUCE BUSUINESS, right here.

Al was concerned, even then, that large customers he worked with would not tolerate the food safety implications of the traditional terminal market facility with countless people coming in contact with the product and the cold chain often being compromised.

But we never gave a thought to our suppliers. Most of them were well known and well established in the trade. But some were total strangers… One day an Amish guy from Pennsylvania came to the office to give us a sample of his musk melon. It was delicious. He wanted us to sell it, and he brought the first truckload in the next evening. He was a total stranger, but it didn’t phase us.

We did a tremendous business selling railroad claims and rejected loads. Joan Rushton once called and explained that the raspberries she was shipping to France missed the connection in New York and she needed someone to sell them for her. That type of thing happened every day.

Which leads to the obvious question: How can the independent wholesaler or distributor fit into a world in which buyers are the primary arbiters of food safety?

It is not a question with an easy answer: One could imagine a kind of cooperative buying group among wholesalers, much as ProAct or Markon are among foodservice distributors.

With certain wholesalers that are driven by local chain business, this could work. But most wholesalers are better thought of as extensions of the shippers’ marketing team than as true buyers.

The guy who handles Dole’s packaged salads in a terminal market doesn’t need or want a co-op or buying group to negotiate better deals. His function is to sell Dole’s packaged salads.

Yet the customers he will sell to — small retailers and restaurants, big chains doing fill ins, etc. — are either too small or too occasional a buyer to be vetting the growers and processors.

The situation is problematic. If the Buyer-led Food Safety Initiative actually has teeth in it and demands significantly more expensive and difficult efforts by growers and processors, one would anticipate a boom at wholesalers as growers and processors unable or unwilling to meet these elevated standards look for alternative distribution.

This high volume of product going through alternative distribution channels will depress prices and will give a competitive advantage to retailers and restaurants who buy from local wholesalers. This is especially true if food safety initiatives expand, as they logically will, to cover more products.

Because we don’t market food safety to consumers, consumers will have no reason to prefer the more expensive product sold by large organizations, and market share will thus shift to those selling less safe products.

So, in a bizarre twist illustrating the unintended consequences of human action, a buyer-led effort that is confined to large chain buyers may lead to a boom in local wholesaling, independent retailing and a shift in market share to those less able to police food safety.

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