President and CEO, Food Marketing Institute
KEY DEVELOPMENTS: Bought the industry time on the Country of Origin Labeling issue; made significant progress with Congress on credit card interchange fees.
WHAT'S NEXT: Building a database to help fight shoplifting rings; developing recommendations to improve the speed of food recalls.
The number of consumers who describe themselves as “completely” or “somewhat confident” in the safety of supermarket food has fallen from 82% a year ago to 66%, while consumer confidence in restaurant food, at 43%, has never been lower, according to the Food Marketing Institute's U.S. Grocery Shopper Trends, 2007.
The likely causes of those dismal numbers are simple enough to point out: the fresh-spinach E. coli outbreak last September, the Taco Bell E. coli outbreak last December and the ongoing stream of news about contaminated products and ingredients from China that began this spring.
The public wants answers, and legislators are feeling the heat. It's up to leaders like Tim Hammonds, FMI's president and chief executive officer, to act as a mouthpiece for the industry on Capitol Hill, finding the best solutions to these problems.
Which brings us to his pointed response when asked if all that bad news from China is making strict Country of Origin Labeling requirements seem more and more like an inevitability.
“We really need to have a true food safety system in place, rather than say to consumers, ‘We're going to tell you where it's from, and it's up to you to decide whether it's safe or not,” Hammonds told SN. “Ultimately, what happens is that the [U.S. Food and Drug Administration] is going to get reorganized in some way. They're going to have to increase their supervision of products produced in other countries, and perhaps they're going to need to be budgeted with some additional funds to do this.”
In the meantime, Hammonds said, FMI plans to make official recommendations to the industry on improving the speed of product recall processes at its annual Midwinter conference in January 2008.
“Part of the reason we think consumer confidence has fallen is because they're watching many of these recalls take weeks or even months to resolve,” Hammonds noted.
FMI has also been talking to the FDA about the industry's own safety initiatives, such as its own Safe Quality Food program, even as the organization works to study and consolidate the opinions of its members on emerging issues ranging from irradiation and cloning to the use of antibiotics in animal feed.
But while concerns about the safety and quality of the food supply may now loom largest for the media, consumers and retailers, FMI has also continued to fight for the industry on other fronts as well.
Notably, Hammonds said that “tremendous progress” has been made recently in FMI's long-running battle against credit card interchange fees.
“On July 19, the Antitrust Task Force of the House Judiciary Committee has announced that they plan to hold hearings, and Congress has asked the General Accountability Office to assess the impact of interchange fees paid by the government itself, because government employees use credit cards, too.
“We've actually had a more sympathetic ear on this issue under this Democratic-controlled Congress than we had with the Republican-controlled Congress. Congress is sending a message to Visa and MasterCard that they need to move quickly toward transparent, cost-based interchange fees.”
Other priorities for FMI in the upcoming year include the fight against organized retail crime. Hammonds said FMI has just formed a coalition with the National Retail Federation, the Retail Industry Leaders Association and the Federal Bureau of Investigation in an effort to make a federal database, where members can log information on organized gangs of shoplifters to help the FBI better focus its resources. The group is hoping to make organized shoplifting a federal crime.
“What we're always looking for are the issues that unite our smallest family-run members with the largest chains,” Hammonds said. “If you can unite the industry from the smallest to the largest companies, people listen, especially here in Washington.”
— MATTHEW ENIS
President and CEO, GMA/FPA
KEY DEVELOPMENTS: Aligned the interests of the merged GMA/FPA to respond to challenges and opportunities.
WHAT'S NEXT: Work collaboratively with the supply chain on food safety and sustainability issues.
The sheer numbers alone — $2.1 trillion in estimated consumer packaged goods revenues — place Cal Dooley at the helm of a very large industry, one that has a significant impact on the U.S. economy, as well as on the health and diets of Americans.
As of the beginning of this year, Dooley went from being the president and chief executive officer of the Food Products Association to president and CEO of the combined Grocery Manufacturers Association and FPA, adding scientific and technical clout to an already powerful manufacturer organization. The association now comprises about 340 members.
At the time of the merger, C. Manly Molpus, on SN's Power 50 list since its inception, retired as head of GMA after 17 years.
Richard H. Lenny, chairman, president and CEO of The Hershey Co., Hershey, Pa., who is serving a third term as chairman of the GMA, said he sees Dooley building upon what Molpus accomplished during his tenure, especially in collaborative efforts with retailers.
As Molpus stood at the forefront of the Efficient Consumer Response movement, Dooley is at the forefront of food safety and environmental sustainability.
“We are seeing consumers losing confidence in the regulatory agencies' ability to provide an adequate level of protection. We also are seeing them lose some level of confidence in manufacturers of food, beverages and consumer products,” Dooley told SN.
With reports of tainted food imports from China, the food safety issue has crept into global commerce, a growth platform for most manufacturers.
“The industry has to respond to that [tainted food imports from China]. We are working with our member companies to see if we can help devise a private-sector approach to insuring an enhanced level of safety of the products we are importing from China and from other developing countries,” Dooley said.
A safe food supply is tied to a sustainable environment. The association is concerned that conversion of corn for food to corn for ethanol could be very disruptive to the supply chain. The public also is casting a critical eye on those companies that are heavy users of natural resources and don't do enough to protect the environment. The association, which has commissioned several studies that examine the food industry's stance on sustainability, will host a summit for all stakeholders on the topic in January.
“This is an initiative that we are going to work on in close collaboration with our retail partners, so we are approaching sustainability from an industrywide perspective. We need the entire supply chain collaborating on sustainability,” Dooley noted.
Dooley brings with him a nearly ideal set of credentials to lead the GMA. He served 13 years as a Democratic member of the U.S. House of Representatives from the 20th District of California. He is also a fourth-generation farmer. As a founder of the New Democrat Coalition, a centrist organization that encourages debate and seeks bipartisan solutions, Dooley is poised to move the association ahead on many critical fronts.
Former Director of the Office of Management and Budget Rob Portman, a colleague of Dooley's in Congress, said, “I worked with Cal to open global markets for American farmers and U.S. agricultural products. He was also a good partner for fiscal responsibility as we fought to restrain spending and use taxpayer funds more wisely. Our collaboration continued when I joined the Bush administration as U.S.Trade representative and the director of the Office of Management and Budget. During the last couple of years, I have counted on him as a trusted and effective private sector ally that consistently builds support for challenging issues.”
“He believes in strong collaboration, a healthy debate around issues, and once debate occurs — let's get on with it. He brings action orientation to our association, and his personal integrity and work ethics are without parallel,” commented Lenny.
Dooley said he has concentrated on putting an entrepreneurial team together that is proactive in identifying vulnerabilities and opportunities for the industry. “My past successes have been as a result of my ability to bring people together and to identify an objective and engage in a team effort to effectively respond to challenges.”
Dooley's work with the GMA will bring him back into the public-policy spotlight.
— CHRISTINA VEIDERS
President and CEO, National Grocers Association
KEY DEVELOPMENTS: Wal-Mart's withdrawal of its applications for the EDLP trademark and ILC charter.
WHAT'S NEXT: Play a more significant role in industry collaboration.
Despite his 25 years of service to the National Grocers Association, Tom Zaucha's fervor for the independent sector hasn't waned.
“I feel humbled and proud to serve an industry that I have such a great passion for,” he said. “One of the things that I've learned in the past 25 years is the importance of being pure to our mission.”
Zaucha has served as president and chief executive officer of NGA, which shares the same anniversary this year, for a quarter of a century. NGA's membership comprises more than 1,500 privately owned or controlled food retail companies operating a variety of formats and representing more than 18,000 stores.
In the coming year, Zaucha hopes to help the supermarket industry get back to its collaborative roots.
“Years ago, public and privately held companies would act together as an industry, but today I'm concerned that some companies may be attempting to use public policy as a means of furthering competitive edge,” he said. “That's been both our biggest challenge and best success.”
Specifically, Zaucha points to Wal-Mart's attempt to trademark the EDLP (everyday low prices) acronym. Last November, NGA filed a notice of opposition with the U.S. Patent and Trademark Office, challenging the attempt. The mega-retailer rescinded its application for exclusive rights to the commonly used marketing tool in March.
NGA may have also influenced the industry Goliath's decision to withdraw its application for an industrial loan company (ILC) charter the same month. In its attempt to start a banking entity, Wal-Mart faced opposition from NGA and other trade associations.
The U.S. Senate's rejection of the “Employee Free Choice Act,” which would have eliminated the need for secret ballots in voting on unionization of employees at a business, was another victory for NGA, said Zaucha.
Meanwhile, credit card interchange fees, and cost structures that offer lower rates to companies doing a greater number of transactions, is a continued bone of contention for NGA.
“The credit card associations continue to monopolize prices and drive costs to merchants and consumers,” said Zaucha.
Another hurdle is mandatory Country of Origin Labeling, he noted.
“It was introduced after 9/11, when we had an emotional feeling about safety and security, but it's not a safety issue, it's a marketing issue,” Zaucha said.
NGA also opposed the repeal of the Robinson-Patman Act this year. In April the Antitrust Modernization Commission recommended that Congress repeal the act, which has historically leveled the retailer playing field by enabling suppliers to say no to illegal demands on the part of power buyers for competitive advantage.
Moving forward, food safety, social accountability/environmental sustainability, and health and wellness education alliances will be top-of-mind for the industry veteran.
“When it comes to those three issues, it's very important that all the key associations come together,” he said. “That's one of the things I'd like to accomplish before I retire.”
When asked about when that retirement day might be, Zaucha, who's not yet set a date, coyly replied “20 more years.”
— JULIE GALLAGHER
Secretary, U.S. Department of Agriculture
KEY DEVELOPMENTS: Proposed substantial changes for the 2007 Farm Bill.
WHAT'S NEXT: Strengthen trade relations by protecting the food supply.
The latest Farm Bill looms large these days, as Mike Johanns knows all too well.
As head of the USDA, Johanns represents the most influential voice in the crafting of this year's bill — a wide-ranging, enormously important piece of legislation that ripples through everything from crop payouts to school lunches. Indeed, the USDA's proposals for the updated bill, outlined in January, carry considerable weight with the tangle of subcommittees that make final approvals.
Johanns certainly hasn't taken his role lightly. After embarking on a “listening tour” that put him face-to-face with farmers in 48 states, he and the USDA crafted a rigorous set of proposals that seek substantial change.
“Like everything, ladies and gentlemen, the times do change, and the times have changed,” said Johanns when he unveiled the USDA's Farm Bill proposals earlier this year in Washington.
For decades, farm bills have allowed large subsidies for commodity crop production. In the past couple of years, however, the interests of organics, public health and the environment, among others, have asserted themselves in the industry.
Consumers have shown their interest, and now so has the USDA. For this year's bill, it's seeking to increase support for small farmers and wellness markets. This includes a $7.8 billion increase in conservation funding, a $5 billion increase in support for fruit and vegetable producers, and a $1.6 billion allotment for renewable energy programs.
On the commodity crops side, Johanns hopes to better align federal funding with the market climate. For example, the current Farm Bill, farmers told him, often pays out high subsidies during a plentiful year and meager subsidies during a weak year.
“We took that to heart. We came back here and started studying that, and we found out first of all that they were absolutely right,” said Johanns. “During some of the best years we paid out the highest payments.”
This alternative mind-set might seem surprising coming from a former governor of Nebraska with knowledge primarily in the meat industry. Sources who know Johanns' good judgment and listening skills are far from shocked, however.
“The secretary is open, a great listener, a hard worker and generous with his time,” said Bryan Silbermann, president of the Produce Marketing Association, Newark, Del.
Johanns hasn't strayed too far from his roots. In the past year he's worked to repair relations with the Asian countries that, since 2003's mad cow disease outbreak, have suspended or limited their imports of American meat.
He's made considerable progress. Last month the USDA announced that South Korea and Malaysia had eased their restrictions on U.S. beef. The department also made significant progress with Japan, a once-prized customer that shut out U.S. beef imports after the outbreak.
“Japanese officials have said they will consider revising their inspection system to meet standards that are more reasonable and science-based,” said Jay Truitt, vice president of government affairs for the Centennial, Colo.-based National Cattlemen's Beef Association, in a statement on the issue. “This represents another long-awaited but positive step toward normalizing trade of U.S. beef with Japan.”
No doubt, the agriculture industry spotlight remains firmly on Johanns. And that's exactly how he wants it.
— JEFF WELLS
ANDREW C. VON ESCHENBACH
Commissioner, U.S. Food and Drug Administration
KEY DEVELOPMENTS: Established a position to coordinate the food safety efforts of FDA.
WHAT'S NEXT: Weathering the food and drug regulatory storms that come with the job.
Leading the U.S. Food and Drug Administration is a tough job in terms of the issues and politics, and many observers thought Dr. Andrew C. von Eschenbach would be up to the medical challenges when he was confirmed as commissioner by the Senate in December of last year.
A urologic surgeon and previously the director of the National Cancer Institute, von Eschenbach has surprised some with the focus he has brought to the food side of the agency, especially to food safety.
“There's no question he has stepped up to the plate big time on food and is very committed to it,” said Dr. David Acheson, assistant commissioner for food protection, a new position created in May by von Eschenbach to coordinate FDA's food safety efforts.
“During his time here, he has come to recognize that ensuring the safety of the food supply is not only very important, but is a huge challenge,” Acheson told SN. Some of today's food safety issues weren't important 10 years ago, such as the global food supply, changes in consumer demand and rapid distribution, he said.
Von Eschenbach “has really grasped this. He has recognized that the system is more vulnerable than it was,” Acheson said. “He has said it is a personal goal to try to move some things forward with regard to protecting the food supply, from both deliberate attack, and through unintentional contamination.”
A friend of the Bush family, von Eschenbach was named acting commissioner in September 2005, after his predecessor, Lester Crawford, left under a cloud of financial scandal two months after confirmation. Crawford pleaded guilty to lying and violating conflict-of-interest laws in regard to stocks of companies that FDA regulates.
Von Eschenbach was not confirmed until more than one year later. In the interim, he was named to Time magazine's Time 100 list of “People Who Shape Our World” in April 2006. Time wrote: “Although his career has been focused on curing disease, von Eschenbach has a unique opportunity to prevent disease by bolstering the long-neglected food side of the agency.”
In August 2006, FDA approved nonprescription behind-the-counter access to Plan B, an embattled emergency contraceptive that was the subject of heated debate during the confirmation process of von Eschenbach as well as his predecessor.
This month, FDA signed the first U.S.-European agreement on assessing food safety risk with the European Food Safety Authority. “As a science-based and science-led agency, FDA recognizes that scientific cooperation is vital for the success of its mission, which is to provide the best possible health protection for the public,” von Eschenbach said in a statement.
The commissioner's initial responses to domestic and foreign food safety challenges have been “positive,” said Tom Wenning, senior vice president and general counsel, National Grocers Association, Arlington, Va. “They have focused on using sound science to address those problems, whether they are the issues that came up with spinach, or the ones that are taking place with imports.”
“With the ongoing focus on food safety issues, most recently regarding the imports of food products from China, von Eschenbach will be the center of much attention as FDA commissioner,” said Brian Todd, president and chief executive officer, the Food Institute, Elmwood Park, N.J.
Other issues facing FDA include avian influenza, nanotechnology, and possibly combining food safety and inspection functions with the U.S. Department of Agriculture, Todd said.
“FDA is going to be at the forefront of much discussion, so he will definitely be one of the more powerful people in the next few years, or as long as his tenure at FDA continues,” he said. The FDA commissioner can be at the “center of the storm,” or the “go-to guy” on many issues, Todd added.
Von Eschenbach appears up to the job, he said. “If anything, he is an extremely qualified individual with a background in dealing with all of the factions involved, from food companies to drug companies,” Todd said.
“He has a job that not too many people would envy,” said Don Stuart, managing director, Cannondale Associates, Wilton, Conn. “It's trying to protect the nation's health and the consumer; it's almost an impossible challenge, but he comes with all the credentials and certainly is well regarded. He seems to be a reasonable choice, and he was well recognized — Time recognized him.
“The big challenges are how do we deal with a global environment in the year ahead, and that will be interesting,” Stuart added.
Von Eschenbach has said that some of FDA's biggest challenges are internal. In a “State of the FDA” address given to the Food and Drug Law Institute Annual Conference in April, he said budget constraints and an aging workforce at FDA are major concerns.
— DAN ALAIMO