August, 2005

Fruits of Thought

Foodservice Barriers

There is a lot of hullabaloo lately about the success of new salads and fruit offerings at fast food. Most of these items are more successful than their predecessors and can serve a useful purpose to prevent the “veto factor” of a family not selecting the restaurant because one member won’t eat burgers and has no options.

These restaurants have reasons in these times of public health concerns about obesity for trumpeting their produce offerings. However, the sales of most of these so-called “successful” produce offerings are so low that if a new hamburger option sold at this level, it would be discontinued almost instantly.

It is disconcerting, and the future of the relationship with this important customer sector is a great unanswered question for the future of the produce trade.

The industry has always struggled with its relationship to foodservice. For decades, the Produce Marketing Association has solicited foodservice operators as active members. PMA's chairman-elect, Janet Erickson, executive vice president of purchasing and quality assurance of Del Taco, is from the ranks of foodservice operators.

There is good reason for foodservice operators to be fully integrated in the produce trade. I once asked Jim Ratliff, a former chairman of PMA who at the time was corporate director of procurement for Hilton Hotels, why he got involved with PMA. He explained that produce accounted for only about 10 percent of his food purchases, but it counted for 99 percent of his headaches.

Fair enough, and a good reason to get involved. But it seems to be an idiosyncratic position among foodservice personnel. It is not that there aren’t a number of executives from foodservice operators who are active in produce associations; it is that there seems to be not one single company committed to continuing involvement with the produce trade beyond procurement.

In other words, when Jim Ratliff moved on, nobody from Hilton was interested in continuing. Janet Erickson is super active now, but when she leaves, who from Del Taco will sustain any involvement? I don’t mean to pick on these companies. They are typical, and understanding why they are typical is important if the produce industry is to get a handle on this customer segment.

The main reason why executives at foodservice operations would only sporadically choose to identify with the produce trade is this: Foodservice operators do not have dedicated produce personnel.

This is an attitude the produce industry is not really accustomed to. Unlike the retail level, where there are individuals whose lives are tied to the produce business, at the foodservice operator level, not only don’t the chains care whether their customers buy more produce or meat, but there are also no individuals whose career interests dictate a continuing commitment to produce.

Of course, there are exceptions from time to time. Del Taco specifically positions itself vis-à-vis Taco Bell as a fresher alternative. Right now, hamburger chains are very interested in selling more produce to keep the “food police” away. The chains can point to all the healthful options on the menu and then point fingers at the consumers if they elect to buy fattening foods.

Intrinsically, though, these chains profit equally whether they sell hamburgers or salads, and the executives have no deeper self-interest in promoting fresh produce than they do in promoting frozen french fries.

So really, the produce trade has only a few unusual individuals who have chosen to affiliate on “its side” at the operator level. There is literally nobody to talk to at most foodservice operators — at least nobody with continuing interest in seeing the proportion of produce sold increase.

As if this cultural disconnect weren’t broad enough, there is an institutional disconnect between the way the produce trade sells and the foodservice industry buys. Most produce vendors are looking for sales now. They have peaches that need to be shipped, and they want to know where they can ship them. Even if they sign contracts, it is for business that already exists.

But foodservice is different. If you want to sell peaches or broccoli or rutabagas to Burger King, you first have to get them on the menu, a process that could take years or decades or forever. Who is going to pay for all those years of effort? The industry's efforts to get its hands around foodservice have been mostly futile, and this probably won't change because the questions the industry often tries to get answered, such as what percentage of the consumer produce dollar is spent in foodservice, are non-sensical. The very questions are attempts to put foodservice in a retail box. Restaurants don't really sell produce; they sell meals, and they sell experiences. These concepts don't translate into categories retailers operate under.

It’s a real dilemma for the produce trade. The buying sector that promises the most growth is also the hardest to access in terms of organization, product nature and culture.

Both PMA and United are highly unusual among trade associations as they are “vertically integrated.” This means that companies from all the facets of the industry are equal members and work together to resolve issues and build a better future.

Most trade associations are horizontal, representing sellers or buyers but not both. These horizontal associations often become adversarial in their relations with supplier groups. This may be the future for produce and foodservice if operators don’t infuse executive ranks with individuals who feel they have a future in produce.  pb