April, 2007

Fruits of Thought

Industry At A Crossroads

The produce industry is fighting desperately to be the kind of industry it was before the spinach outbreak. Yet, we can never really be that way again.

At PMA’s recent Produce Solutions Conference, Tim York of Markon Cooperative used the phrase “painless produce” to describe what buyers were seeking, and it strikes us that both the Buyer-led Food Safety Initiative and the regulatory approach initiated by United Fresh Produce Association are designed to produce that “painless produce” industry. In terms of food safety, “painless produce” means buyers should be able to buy from any legal producer or vendor and not worry about safety.

Although big buyers have begun doing some auditing, this basic assumption of safety is what has underpinned business practices in produce forever. If you are short a product, you can pick up a fill-in at a terminal market. If you need some Mexican product, you can call a broker in Nogales who either has or will get the product. If you need an item, you can put it out for bid and buy from the lowest bidder.

There have been exceptions: Wal-Mart led the way with dedicated distribution center assignments, though even there, the restriction was on who could sell to Wal-Mart, not where the product came from.

This highly flexible industry of interchangeable product has been the produce industry. It is the way virtually everyone now in the business grew up and there are thousands of jobs — whole companies — that revolve around this model.

Yet it is increasingly clear that just as the model of buying most things at auction has long since faded, this freewheeling environment of buying from anyone, anywhere shall fade in turn.

Perhaps the saddest part of Tim’s presentation was the acknowledgement that only six of the select group of buyers that had urged the set-up of the California Marketing Agreement were willing to commit to constrain their supply chains to only those who signed the California Marketing Agreement.

In effect, the other buyers are saying that as much as they want food safety, they don’t want it so badly they are willing to risk paying more for it.

This leaves the industry at a crossroads. The regulatory approach may be desirable, notably because it may make regulators more sympathetic to the trade, but it is unlikely to bring about food safety.

The problem is part politics in setting the standards — typically when you regulate hotels you don’t turn everyone into a Four Seasons, you try and get rid of some roach motels. Equally, you usually don’t have the political constituency to regulate in such a tough manner that the problem gets solved.

Last year, if we had mandatory federal regulations in place, the odds that the standards would have been higher than those followed by Natural Selection Foods and Ready Pac are near zero. It is only post-outbreak that the political constituency for tougher standards began to congeal.

Even if the standards are strong, enforcement is often another matter. Just look at what happened with the 7th Street wholesale produce market in Los Angeles or watch the video of rats scampering at the Taco Bell/KFC in New York. Both were heavily regulated, but the regulations weren’t enforced — even though the facilities were being inspected. So mandatory regulation doesn’t absolve buyers of the need to confirm things on their own.

Even if standards are strong and enforcement rigorous, both can always be improved. There is no level of standard or frequency of enforcement that provides a 100 percent guarantee of food safety — so regulation can’t guarantee safety, and it can’t excuse people from the obligation to look at their supply chain.

As much as we can endorse the California Leafy Greens Marketing Agreement and other initiatives as a way to raise the floor on food safety, buyers have to take responsibility for what they sell.

Foodservice has been aware of this for some time, which is why foodservice, especially leaders such as Darden, Disney and Jack in the Box, have dedicated supply chains, going this route because they have enormous reputational risk if they make someone sick and because the law views a restaurant as a manufacturer and holds it strictly liable if someone gets sick or dies. Retailers get a free pass and the liability is typically passed on to the supplier.

The California Leafy Greens Marketing Agreement has won almost universal acceptance by the trade in California. Product will be safer than it would have been and the industry is better positioned to plan for the future.

Yet it would be a horrible mistake if buyers took the success of this initiative and read it as producing “painless produce.” Those days are gone and every buying organization now has a responsibility it did not have before. Take a look at the video of the people urinating in the middle of the 7th Street Market, of the rats gnawing and the generally unsanitary conditions. And remember that absolutely nothing in the California Leafy Greens Marketing Agreement stops this now very well-grown product from being exposed to conditions like that.

Food safety is not just a grower’s responsibility. How many buyers really know their product isn’t passing through a facility like the 7th Street Market on the way to their own receiving dock? If you don’t know, how can you really feel proud of your food safety system?  pb