It's been a challenging year for fresh food departments. Prices for several major categories — including eggs, dairy products and baked goods — endured significant spikes, just as a deepening recession and rising fuel prices were forcing many shoppers to budget more carefully.
Last week, in SN's annual Strategic Planner, Fresh Market took a look at how perishables departments are responding to some of the challenges that are emerging in this environment. This week, we take a look back at a few key events that shaped the world of fresh foods in 2008, and examine the impact that these events have had on food retailing.
Notably, two major food recalls shook consumer confidence in the food supply and led to calls for reform. This summer, an outbreak of Salmonella Saintpaul linked first to tomatoes, and then ultimately blamed on peppers from a single Mexican farm, sickened almost 1,500 people. Problems with the investigation exposed flaws in the U.S. Food and Drug Administration's response system, and have led the produce industry to redouble its efforts toward developing a standardized electronic traceability system.
Earlier in the year, an undercover video filmed by animal rights group the Humane Society of the United States stunned the public with footage of crippled cows being shocked with cattle prods at a processing plant, and led to the largest beef recall in U.S. history. HSUS further demonstrated the growing influence of animal rights groups by helping to pass a ballot initiative in California that will ultimately force the state's egg industry to go cage-free by 2015.
And the 2007 Farm Bill finally passed, including new country-of-origin labeling requirements for produce, meat and poultry. Thanks to the efforts of industry groups, the new COOL laws are less onerous than initially predicted, and most retailers were compliant shortly after the Sept. 30 deadline.
Salmonella Investigation Takes a Wrong Turn
MISTAKES WERE MADE this summer at the U.S. Centers for Disease Control and Prevention and the U.S. Food and Drug Administration, and the ensuing confusion cost the U.S. tomato industry hundreds of millions of dollars.
In late May, the New Mexico Department of Health notified the CDC that a relatively rare strain of salmonella known as Salmonella Saintpaul had sickened about 20 people in the state. By June 3, the CDC had linked a total of 57 illnesses in New Mexico and Texas to this strain and had determined — based on epidemiological evidence available at the time — that tomatoes were the most likely culprit behind the outbreak. By June 7, the outbreak had spread, with 145 people sickened in 16 states throughout the country. The FDA warned consumers nationwide not to eat raw roma or round red tomatoes, and the process of pulling product from shelves began.
This could have been an example of how foodborne illness outbreaks are best controlled, with government agencies working together with the produce industry and food retailers to eliminate a problem quickly and then search for the source.
Except people kept getting sick.
The FDA and CDC insisted throughout June that tomatoes were the most likely cause of the outbreak, but were unable to pinpoint a source. By July 1, the list of reported cases of illness had grown to almost 900 in 36 states, and the agencies began expanding their search to include other produce items, such as peppers and cilantro, that are commonly eaten raw with tomatoes.
After more than two months of public warnings, press conferences and product recalls, the FDA announced on July 30 that it had found its smoking gun: contaminated irrigation water at a pepper farm in Mexico. The final toll from the outbreak was almost 1,500 reported illnesses, including almost 300 hospitalizations.
The tomato industry took a hit as well. In August, tomato producers estimated that their losses could reach as much as $250 million due to lost sales, recalls and plowed-under crops. And, adding insult to injury, some FDA officials pointed to the produce industry's supply chain complexity and traceability challenges as the key sources of confusion that delayed the government's response.
Produce industry groups described this assessment as unfair.
“Say someone got sick in New York, and someone got sick in Washington, D.C.,” said United Fresh Produce Association president Tom Stenzel in an earlier interview, using a hypothetical example. “They both ate tomatoes. FDA thinks tomatoes may be the cause. But when you start tracing those [tomatoes] back, it turns out that the New York tomatoes came from Mexico, and the tomatoes eaten in Washington, D.C., came from Florida. The FDA says the traceback didn't work. That's false. The traceback did work, but what it was indicating was that those tomatoes were not contaminated by a common source, and probably weren't contaminated at all.”
Ultimately, this outbreak exposed weaknesses in the government's response system, and established the need for “preventive safety standards for fresh produce; reforms needed to address organizational and capacity shortcomings in the public health system's response to foodborne illness outbreaks at the local, state and federal levels; and procedures and systems needed to ensure accurate risk communication to the public and affected industries,” according to a report issued last month by the Produce Safety Project at Georgetown University, Washington.
And while almost all produce companies were able to supply government officials with the required traceback information they needed to conduct their investigation, the outbreak has caused the produce industry to redouble its efforts toward a standardized electronic traceability system that will speed up and simplify future investigations.
-- Matthew Enis
Animal Rights Activists Demonstrate Growing Power
THE HUMANE SOCIETY of the United States had a significant impact on U.S. animal agriculture this year, forcing a Congressional investigation into U.S. Department of Agriculture inspection rules and passing a ballot initiative in California that will force the state's egg producers to go completely cage-free by 2015.
In February, an undercover video filmed by the organization forced Chino, Calif.-based Hallmark/Westland Meat Packing Co. to recall 143 million pounds of beef — the largest beef recall in U.S. history.
Video from the investigation showed footage of cows that were unable to walk being shocked with cattle prods, dragged with chains and pushed with forklifts — all clear violations of the USDA's rules against processing “downer” cattle. Officials at HSUS said they had targeted the plant at random.
“There are 6,200 facilities across the country that the USDA inspects, and we chose this one and found egregious abuses that USDA, the Humane Society of the U.S., the cattlemen and really every other entity that has commented on the footage [describes] as deplorable,” said Wayne Pacelle, president and chief executive officer of HSUS, in February. “The fact that we selected this [facility] at random I think is troubling.”
The investigation renewed calls for an overhaul of the USDA's meat inspection system, in addition to unsettling many consumers, whom retailers then had to reassure.
Rep. Rosa DeLauro, D-Conn., chair of the House Agriculture Appropriations Subcommittee, held hearings in March with the USDA's Food Safety and Inspection Service to determine why the agency had failed to notice or address violations at the plant earlier. A separate investigation was also held regarding the supplier's work with the USDA's school lunch program, she said, “to ensure that the school lunch program does not become the industry's dumping ground for bad meat.” Hallmark/Westland had been the second-largest meat supplier to the U.S. public school system, providing between 37 million and 55 million pounds of beef to schools between February 2006 and February 2008, the period affected by the recall. The recall also led to an effort to reform the FDA's Hazard Analysis and Critical Control Point program.
“The recent recalls, including the largest one ever, in California [even though that recall it did not involve E. coli or salmonella], have been caused by lack of enforcement in the meat industry. That's why we've asked Congress to intervene in this situation,” R-CALF USA's chief executive officer, Bill Bullard, told SN in March. The Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America, based in Billings, Mont., represents the U.S. cattle industry.
More recently, HSUS, along with several other organizations, collected sufficient petition signatures to place Proposition 2, the “Prevention of Farm Animal Cruelty Act,” on California's 2008 presidential election ballot.
The act prohibits the confinement of certain farm animals in a manner that does not allow them to turn around freely, lie down, stand up and fully extend their limbs. Conventional egg producers argued against the bill, citing food safety concerns and a lack of specificity, and noting that increased production costs, led by the need to retrofit their production facilities, would make their product more expensive, and could simply lead retailers to purchase more eggs from out of state.
The proposition passed in November, giving California's egg, poultry, pork and veal processors until Jan. 1, 2015, to come into compliance.
-- Amy Sung
Commodity Prices Experience Highs and Lows
COMMODITY PRICES WENT on a roller-coaster ride this year, with wheat, corn and soybean futures all reaching record highs, surpassing $13.50, $8 and $16.40 per bushel, respectively, then plummeting this fall to lows not seen since 2006.
Soaring wheat prices forced many bakeries and baked goods suppliers to raise their prices, while higher prices for corn and soybeans translated into a 42% spike in the price of animal feed during the 12 months ending in July, hurting meat, poultry, egg and dairy producers.
A variety of factors have been blamed for this spike, including non-commercial speculation in the commodities markets, growing meat and dairy consumption overseas, plus droughts and poor harvests in several countries, which tightened global supplies. But, as food producers have continued to point out, U.S. mandates for ethanol production have made a significant, ongoing contribution to rising prices as well, by generating more demand for corn.
“The government's decision to convert a third of our corn crop into ethanol continues to drive up production costs for meat and poultry products and is foisting a greater burden on the pocketbooks of consumers,” J. Patrick Boyle, president and chief executive officer of the American Meat Institute, said in August. “Ethanol policies have already contributed to prepared animal feed prices climbing a whopping [41.8%] over the past year.
“Consumers should be forewarned that this is just the beginning of higher prices for meat and poultry, unless Congress changes the law.”
Ironically, record corn prices also stunted the U.S. ethanol industry's growth this year. According to a report in the Chicago Tribune, plans for 19 new ethanol refineries were recently canceled. Ethanol refiners VeraSun Energy and Pine Lake Corn Processors have both recently filed for bankruptcy, and Aventine Renewable Energy's stock price plummeted 99% from its peak, to trade at less than 50 cents.
Deflation of the commodities bubble, along with a slowdown in the proliferation of refineries, will give food producers a temporary break from rising input costs. However, the Obama administration appears unlikely to lift or ease existing renewable fuel mandates, and many poultry and meat suppliers trimmed flocks and cut production this year, which will likely contribute to rising wholesale and retail prices in 2009.
-- Matthew Enis
Farm Bill and COOL Implemented
AFTER NUMEROUS extensions, repeated revisions and the threat of a presidential veto, the 2007 Farm Bill finally passed on June 18, 2008.
In late April 2008, congressional negotiators reached a deal to reconcile the House and Senate bills, producing a version that included provisions to increase spending on food stamps and other food programs while mostly maintaining current farm subsidies, which had proved to be points of contention for the bill's critics. Critics argued that the bill was overly generous with subsidies for commodity growers.
However, produce industry groups, including the Produce Marketing Association, Newark, Del., and the United Fresh Produce Association, Washington, praised new funding for food safety efforts, an increased focus on fruits and vegetables in school lunch programs and support for specialty crop research. The industry also fought for and won significant revisions to the bill's country-of-origin labeling requirements, which went into effect Sept. 30.
The revised rules require no new record-keeping processes for retailers and suppliers, and allow state and regional labeling programs, such as “California Grown,” to automatically qualify as COOL-compliant. In addition, retailers will not be held liable for any COOL misinformation or mistakes caused by their suppliers, and in general, liability for retailers is significantly reduced unless it can be proven that they are willfully violating the provisions of the program.
“This bill provides more funding for fruit and vegetable industry programs and priorities than any other farm bill in history — attention that is well deserved and has been long awaited — and signals that the times are changing,” PMA President Bryan Silbermann said in May. “It also provides some much-needed relief from what would have been overly burdensome COOL regulations.”
The bill also gave organic agriculture $105 million in new funding.
Within weeks of the late June enactment of the Farm Bill, USDA began delivering program benefits for 2008 and will deliver additional program benefits in 2009.
-- Amy Sung
Traceback Efforts Draw Spotlight in Face of New Recalls
TRACEBACK HIT headlines this year as retailers and their customers faced a salmonella outbreak last summer that was eventually traced to jalapeno peppers grown in Mexico.
Because the U.S. Food and Drug Administration first alleged that tomatoes carried the contamination, and tracebacks failed to confirm that, the search dragged on for weeks and created fodder for the consumer press.
“What ordinarily would have been a mundane business subject [traceback procedures], as far as consumers are concerned, made headlines,” said Julia Stewart, director of public relations, Produce Marketing Association, Newark, Del.
Soon, the Produce Traceability Initiative, driven by PMA, the Canadian PMA and the United Fresh Produce Association, will enable electronic traceback of individual cases of produce chainwide, as opposed to the current paper-based system that has been in place for years, Stewart said. The initiative calls for the enhanced system to be operating across the supply chain by no later than 2012.
The steering committee, made up of 50 industry members, completed its plan in August; it uses a standardizing code and tracks individual cases of produce electronically, creating efficiencies and speeding up traceback.
“But now we have a two-pronged job: educating the industry about what each company's role will be in making this happen, and educating the government about what we're doing,” Stewart said.
PMA, CPMA and United Fresh are all currently trying to make sure everyone in the supply chain has the tools to make the plan work, Stewart said, adding that a website dedicated to ‘how-to’ will be launched early in 2009.
Meanwhile, the meat industry is putting a new focus on traceback.
Record meat recalls over the past two years have consumer groups and some sources within the industry calling for better traceability back to the source of E. coli contamination, which they say is logically the slaughterhouse.
The U.S. Department of Agriculture's Food Safety Inspection Service called a public hearing on the subject of determining the source of E. coli contamination this fall, and sought additional public comment up until Dec. 17.
“The October 2008 meeting, which focused on sampling issues associated with raw beef, particularly for E. coli 0157:H7, provided a good exchange of information and suggestions from both industry and consumer groups that will be considered as we continue to work with stakeholders,” Amanda Eamich, senior press officer, USDA/FSIS, said earlier this month.
-- Roseanne Harper