December, 2009

Fruits of Thought

Lessons From The Year's Great Issues

Like the three wise men carrying gifts of gold, myrrh and frankincense, the year 2009 brought the produce industry in contact with three great issues, each one carrying lessons for the future.

The first issue was that of the financial crisis and recession. It has taught us the value of conservatism and preparedness.

All during 2009, conversations with this writer were not based on the usual complaints about buyers or competitors; instead it was the many small businesses that make up this industry looking for help. It was voices filled with consternation as they found credit lines cut and credit cards eliminated.

To what degree a business has room to survive these difficult times and anticipate future financial needs is crucial to a company’s long-term success. After all, one can’t be successful in the long run unless one stays in business!

Financial strength is key. A business must have enough financial strength to not only survive, but also pay its bills even if it loses a line of credit or if it suddenly has to pay for supplies.

We have also observed that a shortage of funds can lead even giant businesses to do counterproductive things. We’ve seen this with some of the upscale retailers. Instead of simply acknowledging that their market — rich people — shrunk a bit and, accepting that profits will be down or even non-existent for a while, some of these upscale vendors have taken actions to boost sales today by muddying their position in the minds of consumers. If a recession hurts sales of Rolls Royce automobiles, the correct strategy is not for Rolls to produce a $10,000 econo-car. It is to maintain its strategic positioning serene in the confidence that it will be successful over time.

The second issue was the defeat of the generic promotion program. We learned the limits of collective action and the importance of individual initiative.

Many well-meaning people wanted to see this happen. But they ran fast into the enormous difficulty of getting producers of wildly disparate commodities, with wildly different cost structures and wildly different profit margins, to find a way to work collectively.

The truth is that the produce industry is an awkward construct. What ties together a Maine potato grower and a coconut grower in the Dominican Republic is really the decision of retailers to market them in the same department.

In thinking through the generic promotion proposal, we have learned that this is not your father’s produce industry. Once upon a time, almost everything was bulk produce, typically unbranded and of limited varieties. Collective action was almost the only way to boost consumption because we were selling a series of commodities.

Now, two things have changed: First, the product has changed. It can be specially packaged, branded, grown for niche markets, such as upscale or organic; it can be a proprietary bulk item such as Jazz apples; it can be fresh-cut. Secondly, marketing has changed. In the trade, there are national shows, local shows, trade newspapers and magazines and there are many digital and web-based communication tools. There is also a new way of reaching out to consumers utilizing websites, social media and niche consumer publications.

The combination of the ability to variegate the product with new marketing tools makes collective action less crucial and the opportunity for individual initiative to pay off more substantial.

The third issue was the inching through the Congress of food safety legislation. In coming to the decision to embrace, rather than oppose, such legislation, the industry came to recognize the benefit of having an authority to buttress industry product safety claims.

There are many things in the food safety legislation not to like. Giving FDA recall authority could lead to abuse and there are a lot of expenses for inspections and what not; plus there is no evidence any of this will help make food safer.

The overwhelming win for the industry, is simply in building consumer confidence in the FDA. If the FDA has the confidence of consumers when it declares food safe, consumers will listen. In an age when many are quick to make junk-science allegations, a credible U.S. safety authority is a priceless asset.

In the various food safety struggles since the spinach crisis, the industry has not always been treated fairly or well by government agencies, and the industry would have legitimate cause to oppose any increase in the authority or funding. Transcending this inclination is evidence of a wisdom acquired only with time and reflection.

In Matthew 2:1-12, the visit of the Magi is described. King Herod asked the three wise men to find the child in Bethlehem and then return to tell him where the child was. He pretended he wanted to worship the child. In reality, Herod was threatened by the child as the child was “the one who has been born King of the Jews” and thus, was a rival for Herod’s throne.

The Magi were warned in a dream that King Herod intended to kill the child so they went home directly “returning another way” so as to avoid King Herod. The intellectual and moral implication of that decision, though, is that once one has been exposed to the truth, one is enjoined from going back to falsehood.

As we move into 2010, may the light we have seen in 2009 stay with us and grow brighter still.  pb