BOOSTING CONSUMPTION TOPS PMA'S 'TO-DO' LIST

NEW YORK -- SN recently picked the brains of two veterans of the fresh produce industry. Bryan Silbermann, president of the Produce Marketing Association, and Steve Junqueiro, chairman of PMA's board, discussed the challenges facing the industry in a wide-ranging interview with SN in the Big Apple this year. l side of the business. He joined Save Mart Supermarkets as a produce clerk 30 years ago,

NEW YORK -- SN recently picked the brains of two veterans of the fresh produce industry. Bryan Silbermann, president of the Produce Marketing Association, and Steve Junqueiro, chairman of PMA's board, discussed the challenges facing the industry in a wide-ranging interview with SN in the Big Apple this year.

l side of the business. He joined Save Mart Supermarkets as a produce clerk 30 years ago, and served as director of produce and floral for the Modesto, Calif.-based chain for a number of years before becoming its vice president of operations in 2004. He has worn many hats at PMA, including Fresh Summit chairman, retail board chairman, PMA board director and executive committee member.

What follows is an edited version covering the highlights of the interview.

SN: What are the top three issues affecting the industry?

Junqueiro: Well, I believe that the top issue is consumption, driving consumption. I think that is on top of everyone's minds, whether you're a grower-shipper or retailer. It helps everyone involved if consumption continues to grow, and I believe it will. Some of the issues that we see that are going to drive that [are] global sourcing and convenience of the product. There are a lot of things that tie into growing consumption of fresh fruits and vegetables.

Silbermann: I would agree. I think that certainly consumption is [a top issue]. Would you say technology is one of the top three [issues]?

Junqueiro: That's one of those issues that's going to support the growth of the industry, and we see technology becoming so much more important in the fresh produce industry than it ever has in the past. How we deal with that, how we grow the technology in all areas of the industry is extremely important.

SN: Are you talking about communication between buyers and growers and shippers, or could it be technology involved in growing better varieties?

Junqueiro: It's about all of that.

Silbermann: We agree on consumption and technology. The third one, it's tough to say what I would give that position to -- maybe the whole safety area. Into that I would roll government relations issues. I would also roll what the industry is doing to combat microbiological contamination.

One of the things Steve may want to add to this on the consumption side is the better understanding that I think our industry is getting of who we really are producing and marketing our products for. I think we've marketed products based on what the retail and food-service buyers said people wanted. We really haven't, as an industry, spent time focusing on what consumers want. It's really not even a supply chain anymore. I think it's much more of a supply circle. The information has to flow in both directions. You've got to have better knowledge of what consumers want, which in many cases retailers have because they are close to the consumers but that hasn't necessarily been part of the process of development of products on the supply side of the business.

SN: There's been very little feedback?

Junqueiro: The feedback loop hasn't existed.

Silbermann: I think that retailers are certainly focusing far more on that and that's obviously driving innovations in product development, innovations in packaging, innovations in varieties of products being grown to focus on what consumers want, which they tell us is taste, taste, taste.

Junqueiro: I agree. It's probably what I've seen in the industry over the past 20 years, that evolution. You know, 20 years ago and prior, I'd say that the relationship between a buyer and a seller was sometimes very adversarial. That was the nature of the produce business -- beat down the guy on the price and make sure you get the very, very best price and then go have breakfast. It was a love-hate relationship. What has changed, I think, as part of this evolution is the business relationship between buyer and seller and finally understanding that you don't determine success on how many packages you sell to me as a buyer. You determine success on how many packages we together sell to the consumer.

SN: You're finally both now selling to the same person.

Junqueiro: Exactly. It's the understanding that we're trying to serve the needs of the consumer and how do we best do that. Because of that relationship growing to that point, you see things. First of all, category management is possible now because you're sharing the information with your partner and growing the business. Because of that growth we saw 10 years ago, you're seeing what Bryan just spoke of -- the innovation of new products, products that taste good, products that can be signaturized for you as a retailer.

SN: What can retailers learn from food service?

Silbermann: Look at the huge expansion in the quick-serve restaurant offerings over the past two years. There was all the fanfare about home meal replacement some years ago. The fact of the matter is that very few retailers have really been able to capitalize on, to me, what is clearly a huge need out there. To see the McDonald's of the world buying suddenly 54 million pounds of apples a year as they're going to do this year, making them the single largest buyer of apples in the United States, to go from zero to 54 million -- that's a lot of apples. [Food service] is clearly eating away at the retail side of the business. From a competitive standpoint, retailers need to pay more attention to that.

SN: What is food service doing differently that's putting it ahead of retailers?

Silbermann: If you look at the way a McDonald's or Wendy's develops their products, they go to the grower and they get the distributor involved and they get the packaging people involved and they get the seed companies involved. McDonald's won't introduce something unless it's absolutely going to taste good. They do taste tests, they do market research, they are very, very cautious and it takes them 2 1/2 to 3 years to introduce a new product. By the time it's introduced nationally, like the apple walnut salad, for example, or the apple dippers in their Happy Meals, they have done so much work with their supply chain partners that everybody pretty much knows what is expected of them. That's helping the industry on the retail side because it's pushing the taste profile. People are getting the message on the supply side that, hey, this is the product that consumers want.

Junqueiro: As a retailer, you can no longer be successful by just deciding what you're going to offer the consumer. That's what's changed in the industry. Successful retailers are going to supply whatever the consumer demands and supply the very best. The consumer changes throughout our marketing areas, but when it comes to fresh fruit and vegetables, it's about taste. It's about convenience and hopefully for retailers like us, it's the ability to offer signature items that taste better than anyone else's and are more convenient than anyone else's.

SN: We haven't really talked about organic produce and how that fits into driving consumption.

Junqueiro: Organics for our [Save Mart] stores has grown rapidly over the last couple of years. I've always said that category would probably be the last to take off in our market. All our stores are up and down Central Valley of California, in very agricultural areas. Our customers are very comfortable with agriculture. As that demographic has changed, and more people are moving into the Valley and attain more knowledge about organics, that category's beginning to grow. It's nowhere near the national average. I think the average is 5% or 6% of produce sales and ours is less than half of that. But it is, on a small base, growing very substantially. It's another offering we can provide for our customers.

Silbermann: The interesting thing I'm seeing is that more and more, I'm hearing from people that organic products can in some instances also be better tasting. There are conventional produce producers here who say, 'You line up my product that I grow conventionally and my product that I grow organically. I guarantee you'll be able to taste the difference between the two because certain pesticides may have an effect on the taste profile of what I grow.' Please don't get me wrong. I'm not saying that's across the board with every product. But there are some products where people say, 'There really is a difference that you can taste.'

SN: We haven't talked much about food safety. What programs is PMA working on?

Silbermann: One of the things where PMA and FMI [Food Marketing Institute] have really focused a lot of attention over the past year was on the partnership of food safety education. Last year, we came out of Fresh Summit with that campaign specifically focused on consumers handling produce better and that's been very successful. We have a responsibility as an industry to not only put our own house in order, but also help the consumer keep her house in order. It's our responsibility to point out where the hazards are. Talk about how stuff can kill you if you handle it wrong. You must tell people how to avoid doing that. Otherwise where's your social responsibility?

SN: Is there anything else we should cover?

Silbermann: We did one consumer research project that was specifically on packaging. We asked people what their preferences were for loose, bulk produce vs. packaged. Almost three-fourths of consumers said we think that loose produce has better quality and taste. Of the same shoppers that said that, half of them said that packaged produce is more sanitary. About 40% said that packaged produce is safer. Consumers have a lot of issues they are thinking about when they are making a purchasing decision. The other thing I would point to is packaging innovation, where the whole industry has learned from one particular player. It's Costco. It has really had a major impact on driving the larger-size packages on the clamshells and bags. Would you agree with that, Steve?

Junqueiro: Consumers are much more mature and readily disposed to pick up larger packages. They see that as a value and you're right. I think [club stores] have really helped develop the customer in that area.