January, 2007

Fruits of Thought

Beyond Our Borders

In February, Produce Business magazine and its sister website, PerishablePundit.com, will be exhibiting at Fruit Logistica, a produce trade show in Berlin. We decided to go because a significant number of our business associates started asking if we were going to be there. In addition, significant trends and events are drawing our attention beyond our borders:

  • In September 2006, we reported on this page of a trip I took to give speeches and visit with the produce trade in South Africa. I closed the column by urging Costco, Supervalu, Wal-Mart or some other giant to step up to the plate and hire Danie Kievet, who hosted me during my time in the country. Well, others obviously confirmed my assessment as Wal-Mart’s Global Sourcing division hired Danie to head up its South African Procurement Operations.
  • The No. 1 question we get asked about U.S. retail right now? What are Tesco’s plans for the United States? Tesco, of course, is the United Kingdom-based giant that has more than held its own against Wal-Mart’s British subsidiary, ASDA. It is making a major move to open stores in California, Arizona and Nevada.
  • Can the food-safety rules eventually established for U.S. growers be applied outside the United States? We have treaties that preclude countries from banning product just because they don’t want it. Generally, import restrictions must be science-based. This is why Europe is in trouble at the World Trade Organization over its resistance to genetically modified products. The objection is politically not scientifically based.
  • The AgJobs bill battle is not over whether we will starve if we don’t allow in farm workers; it is not even over what wage should be paid to field workers. It is mostly over whether it is better to import more produce or import more produce workers.
  • The biggest threat to U.S. food production right now is that substantial federal subsidies to encourage ethanol production are diverting acreage from food production to fuel production. These subsidies are driven by a combination of environmental concerns over global warming and geopolitical concerns that buying oil often funds our enemies in the war on terror.
  • In his April 2006 column in Produce Business, Looking Beyond The Wall, Bryan Silbermann recounted a trip to China where PMA’s International Council met. PMA now has three offices outside the United States — in Australia, Mexico and Chile — and in 2006, PMA announced it would reserve two additional seats on its Board of Directors for international members. Rob Robson, CEO of OneHarvest, Carole Park, Queensland, Australia, was named the first international member of the executive committee of PMA’s Board.
  • United Fresh, in November 2006, held its first event outside the United States, Fresh-cut Europe, a conference and trade show focused on fresh-cuts, done in the United Kingdom.

These seven facts point to the enormous international influence on our industry. The interconnected web of world affairs is demanding even closer connections between countries.

If you look at a behemoth such as Wal-Mart, you see it is virtually compelled to build up its global sourcing arm. It is not a question of saving a few pennies by cutting out the middleman; it is question of interests that are assisted by being a big buyer.

If someone wants to fight Wal-Mart’s expansion in Mexico, Wal-Mart wants to prove it purchased and exported billions from Mexico. It makes it harder for a competitor to paint Wal-Mart the enemy of the Mexican people, and it creates, in the supplier base, a ready-made lobbying force of hundreds of domestic operators that can be asked for help in a political pinch.

Everything has to be executed well, of course. Wal-Mart may do itself more harm than good if its Global Sourcing arm accepts product that would be rejected if it were supplied by a third party or accepts out-of-stocks or rejections in quantities that would cause a third party to be dismissed as a vendor.

Some international connections pose significant challenges. An organization such as PMA benefits from the perspective of international players on its board, and non-U.S. members can benefit from the chance to leverage the resources of a large organization. But where does it lead? In most countries, such as Chile, the only people interested in PMA membership already have substantial U.S. ties.

In some cases, exporters who do little or no U.S. business reach out to an organization such as PMA for the same reason they subscribe to Produce Business: to stay educated about the cutting edge in the world of produce. On PerishablePundit.com, we’ve argued there are so many of these people in Australia and New Zealand, for instance, PMA should start a chapter.

However, a membership-based organization changes as its membership changes. A few seats on the Board for foreigners helps everyone, but as more produce is imported and the supply base moves outside the United States, a vertically integrated trade association may one day have to confront a situation where much of its membership comes from outside the United States. How does such an association formulate positions on things such as the AgJobs bill?

We don’t need a crystal ball to see the answers will involve greater attention to international realities than most in the industry have been used to. On the willingness of the trade to acknowledge this new reality and ability to adapt to it hangs our future.  pb