Supermarket retailers joined growers, packers and other produce industry executives this weekend at the Produce Marketing Association's annual Fresh Summit International Convention & Exposition in Anaheim, Calif. As always, the show addresses a range of topics that are top of mind for the produce industry. Prior to the show, three of PMA's top executives discussed with SN some points of concern for produce departments, including updates on how the economy is affecting produce purchasing habits, how PMA is progressing with current food safety initiatives, and how new food safety legislation may affect small farms and local food programs. Below are excerpts from a conversation with PMA President Bryan Silbermann, Vice President of Government Relations and Public Affairs Kathy Means and Chief Science Officer Dr. Bob Whitaker.
SN: Could you give our readers a sense of some of the challenges that businesses in the produce industry have been facing in the current economic climate?
BRYAN SILBERMANN: With unemployment the way it is, that's going to have an impact on [consumer] spending.
I think what you're seeing is a deflationary pressure throughout this year on produce prices. We're hearing that unit volumes are up slightly, but that [dollar] sales are flat at best and often down. I've heard numbers anywhere from single digits up to 20% in terms of different items facing deflationary pressures on pricing.
You've seen consumers buying more value items, so staples have been more in demand. Higher-priced products have suffered. You've seen this in the bagged salad category and specialty produce.
BOB WHITAKER: I can tell you, just from living in a production region [California's Salinas Valley], I've never seen more things like berries and grapes planted, where there used to be ground covered by leafy greens or tomatoes. Perhaps growers are making decisions to go with things that, while they're more expensive to grow, have a little better markup associated with them, as opposed to greens and other [crops] that are marginally profitable to begin with. To have more pressures put on by transportation costs and things of that nature … you see a changing of the landscape.
KATHY MEANS: We haven't heard as much about labor shortages recently, because there are more unemployed people in the United States taking [agricultural] jobs that they did not take before. It has changed the atmosphere and the pressure for immigration reform, which is a shame, because we still need that. The recession is not going to last forever; in fact [economists] say that we are starting to rebound, even though employment usually lags six to nine months behind.
SN: Many people have coped with the recession by dining out less and cooking at home more. But, when shopping at supermarkets, consumers are more focused on finding deals, using coupons or trading down. What can retail produce departments do to maintain or build business?
KM: As Bryan pointed out, consumers are focusing more on staples, and less on exotics and out-of-season items. We're seeing a return to the basics. … Consumers are also looking for coupons — a little extra piece of help, however a chain might want to address that, whether it's buy-one, get-one deals, coupons or whatever it might be. … Also, in some of the research we've done, we've asked [consumers] what they would do if produce prices did go up. And, they said the first thing they would do would be trade down within the fresh produce category. They also said if prices got too high, they would consider shifting to frozen or canned. So, they want to stay in the fresh produce category, and there is an opportunity … for retailers who tailor their promotional activities, the way they set up their departments, and the products they highlight. And, if they do want to sell more expensive items, [they should] make sure that their customers see the value in that.
BS: If you look at best-of-class retailers, such as Wegmans and Whole Foods for example, they really go out of their way to highlight where product comes from — to tell the story about the product. I think that's the kind of thing that more and more consumers are looking for from their retailer. Produce is still a destination stop for the vast majority of people coming into a supermarket. And everything produce retailers can do to tell a story behind the product helps make a connection with the consumer. That's the big benefit that fresh has.
The other piece is opportunistic buys. We've become so focused on the programmatic marketing of produce. Everything is planned so far in advance that I think we've lost some of the ability to turn on a dime and focus on [a bumper crop of] something that's available because of weather conditions. The retailers that can do that — can handle much larger volumes all of the sudden — are the ones that have done a lot better this summer, for example. Cherries were a good example this summer. Volumes were much higher than anyone had anticipated. That's the kind of thing that people who are flexible with their supply chain management can do really well with.
SN: The Produce for Better Health Foundation is working to create a produce-industry-funded national fruit and vegetable promotion board, and will be hosting another town hall meeting on the issue at Fresh Summit. What benefits will retailers see if this promotion board is established?
BS: A national fruit and vegetable promotion board could be very successful, if it gets the support of the [produce] industry behind it. And, I think it's too early to tell right now. We are engaged in some very active discussions about how best to get to that point, and one of the ways in which we're doing that is by holding this town hall meeting, much like we did at our [recent] foodservice conference.
What types of benefits would retailers see? It would certainly help to have a coordinated message. To have the kind of marketing clout that produce, as a whole department, has lacked. The question is, we have to decide how much money will a board need to really be effective? That's one of the items under discussion right now.
SN: Food safety continues to be a top priority for the produce industry. Could you give our readers a progress report to describe where the industry is right now with food safety?
KM: This is a huge topic in Washington right now. The House, of course, recently passed the Food Safety Enhancement Act, which has some important components for produce in terms of commodity-specific rules and traceability. The Senate will consider [companion legislation] this fall. … We find that [the U.S. Food and Drug Administration and legislators] are very open to hearing what is going on with the industry, and how the rules affect them. There are often many paths to a goal, and when we can work together, whether it's on a particular bill or by providing comments to FDA on their proposed rules, we bring that information to them. We are all working toward the same goal — food safety and protecting public health.
BW: The industry is engaged on a lot of different fronts. A lot of the commodity groups are beginning to look at their practices and what can be done to better manage risks. … We also hear a lot in our industry about standards and audits and harmonization of different types of approaches. In the past year, we've tried to move food safety away from tactical issues like audits, standards and product testing — which are all important, to be sure — but we've tried to move the discussion to a higher level. Basically to take responsibility for the safety of our products, as the FDA's Food Protection Plan says we must. Understanding the implications of food safety and corporate liability, and what it can mean to a company when you have a food safety outbreak — what that can do to your employees, your brand, your investors and your customer base. We've launched a series of symposia on food safety where we're targeting decision makers within the produce industry — groups of 20 or 30. And, we talk to them about current issues in food safety, and what it takes to make a cultural change to prioritize food safety, so that it's not just something you do so that you can show an audit to a [retailer]. It should be something you do to protect your company.
Also, the [PMA- and produce-industry-funded] Center for Produce Safety has helped give us answers to some of the questions we have about food safety. When you sit down and try to write food safety guidance documents, you won't get very far without realizing that you're missing some of the key scientific information that you need to have. We don't know what the best water quality is. We don't know how far animals need to be away from our crops. We don't know the specifics of how bacteria move from animal areas into crops, we don't know how long they persist on vegetable material. So, the Center for Produce Safety was formed in 2007 to fund research that would address those issues and provide that information to those who need it the most — growers and processors who handle crops every day.
SN: This summer, there was a lot of concern among small farmers about audit requirements, inspections and other new rules for all growers under the Food Safety Enhancement Act. I wrote an editorial arguing that these rules should be scalable, and that small farms should not be held to the same standards as corporate growers, because they don't have the same potential to cause a national outbreak. Why do large growers and packers disagree here? And, how will small farms that sell produce direct to retail or direct to consumer be impacted by these rules?
KM: These rules do need to be scalable, but they need to be the same rules. Everyone has to pay attention to the inputs [water, fertilizers, etc.] that they put into their crops. Everyone has to know what their land was used for before it was a farm, and what is going on around their land. Everyone needs a worker hygiene program.
Also, one of the points that Bob was making during a recent trip to Washington was that, when you think of Dole or Fresh Express, for example, you think of those as corporate farms. But, they are, in fact, dealing with lots of small growers. So, we need to have the same programs for everyone.
BW: Food safety does not have to be prohibitively expensive. I think what we see is a real opportunity for education among smaller growers about what is really needed. It's encouraging to see states using small-farm research grants to provide training to growers, so that they understand the components of food safety, and can perform their own risk assessments. Many tend to think the worst — that they'll need expensive new systems in place — but there are many ways to manage risks. Also, it's kind of unfortunate is that [this debate] has segmented off some of the larger production areas as “corporate farms” when, in fact, they're collections of family farms.