Fresh & Easy’s 98-cent Sale
Causes More Consumer Confusion
What kind of store is Tesco’s Fresh & Easy? With
all we have written on the subject, one of the obvious problems of the concept is that we can’t really
answer.
At the present moment, Fresh & Easy seems to be aiming for the ambiance of a dollar store. The chain issued an announcement:
NEW YEAR’S RESOLUTION 101:
STRETCH YOUR BUDGET AND STAY LEAN IN 2009
Grocer offers range of 98-cent Produce Packs to start the
year off right
Budgets have tightened over the last year due to tough
economic times and people are changing the way they shop. People are cooking more at home and are purchasing
products with longer shelf life. Fresh & Easy Neighborhood Market has noticed a sharp spike in its sales of
canned foods over the past few months, particularly canned fruits and vegetables. In response to the needs of
its customers on a budget for fresh quality products, the company is launching a line of 98-cent Produce
Packs. Customers don’t have to make compromises to provide fresh fruits and vegetables for their families,
particularly in the New Year as people recover from a food-filled holiday season.
“It’s clear customers are trying to stretch budgets but
they also tell us they don’t want to compromise on quality or freshness,” says Simon Uwins, Chief Marketing
Officer at Fresh & Easy. “We are introducing the 98-cent Produce Packs to help our customers start the year
off right without breaking the bank. We’re making changes so customers have more choices in the way they are
feeding their families.”
The 98-cent Produce Packs are delivered fresh daily to
stores and currently include apples, oranges, peaches and tomatoes. With the new line, customers can always
choose from six different fruits and vegetables which will rotate depending on season and availability. “
Now that the holidays are over, people are starting to
reevaluate their eating habits to get back on track to better health,” says Fresh & Easy Spokesperson and
Registered Dietitian Janice Baker. “When shopping, families need to choose foods that are high in fiber,
vitamins and minerals, yet lower in fat and calories. These foods usually keep the stomach full longer as
well. Consuming lots of fruits and vegetables is a great foundation to a healthy, well balanced diet.”
According to the Centers for Disease Control (CDC), in
2005, only one in seven Americans exercised enough and ate at lease five servings of fruits and vegetables
daily1. Poor diet and a sedentary lifestyle, the CDC reports, can lead to increased health risks such as
obesity and diabetes.
From January 2 to January 13, the 98-cent produce packs promoted include Apples – 3
count; Yellow Onions – 2 lbs, and Baja Classic Tomatoes – 1lb. The promotion is difficult to understand as it
says, “Excludes all Fresh & Easy apples & tomatoes.” We assume this means the company did a special buy of
less expensive apples and tomatoes and the company doesn’t want to sell the normal product at this price.
Still very confusing.
And, besides, Fresh & Easy says the whole point of the promotion is “...no one wants to
compromise on quality. And we don’t think anyone should have to.” Yet if all the apples and the tomatoes are
of equal quality, why should some be excluded from the promotion?
Just as we were trying to figure this all out, we received a letter from one of the
nation’s premiere retail produce experts:
Fresh & Easy currently has a big outdoor sign saying that it
will feature six 98-cent items each week.
This week it is: 2# cello carrot, 1# roma tomatoes, 2# bag
yellow onions, 4 pack of very small peaches, 3 each gala apples, and 1.5# of minneola tangerines.
They have all of the 98-cent items as the first in line in
produce with 6 RPCs and signing.
My thoughts:
It is hard to make a price impact with just 6 produce items
especially with Fresh & Easy as they sell so much by the package, not by net weight so consumers can’t figure
out if it is a good deal or not.
Fresh produce is the opportunity to make a quality statement
for the store. Promoting it solely on price means the store misses out on that opportunity. It degrades the
produce and the store.
Fresh & Easy now features a grocery end with “Everything
under $1”. They have canned tuna mustard, pasta, canned green beans, rice, and pasta all in private label on
the end.
As we said, it is turning into a dollar store.
We know value is the hot thing today and, certainly, consumers like a deal. However, one
day the store is promoting its green credentials; the next day it’s the place you get stuff for under a buck.
This is no way to build a consistent image.
We also wonder if it is actually addressing the problem consumers experience in shopping
for fresh produce at Fresh & Easy.
If it is true as the press release implies — that consumers have been switching from
fresh to canned to avoid spoilage in tough economic times — we suspect that what consumers really want is the
ability to buy the quantity they need.
Maybe they want one apple, two Minneolas, an onion, two peaches. Whatever the price,
people feel cheated and wasteful if they have to throw out half the product because the only option was a
prepack of produce.
Let consumers buy what quantity they want, as most stores in America do, and consumers
won’t have the same problem with waste. This 98 cent plan may be a solution to the wrong problem. Tree Fruit Industry In Turmoil
During a recent quick trip to California to visit the Pundit’s sister and celebrate the
Pundit parents’ 51st wedding anniversary, the Pundit, Mrs. Pundit and the Jr. Pundits, Primo and
Segundo — aka William, age 7 and Matthew, age 5 — all had a delightful visit with Al and Mary Vangelos.
Al is
sagacious and Mary is a woman of
omnifarious kindness. She extended the Pundit an invitation to visit the Vangelos home back in 1990 when
Al and the Pundit — except we weren’t the Pundit yet! — were working day and night to help the old United
Fresh Fruit and Vegetable Association prevail over troubled times.
It took 19 years to make the visit happen but, as they say,
the longer the waiting, the sweeter the kiss. And, of course, Mary had extended the invitation to a single
guy and got a whole family. Still and all, it was an unseasonably cold day in California but we were warmed
that day by the ember of friendship and mutual respect that has glowed more brightly with the passing years.
Al has had and still maintains many roles in the industry, but the most prominent is the
President and CEO of Sun World, so our conversation inevitably strayed to a discussion of some of the
challenges facing growers and, particularly, the California tree fruit industry. We knew the problem was
serious and Al provided additional insight.
On the flight home we reflected on how we ought to write a piece discussing the matter
when what should be waiting in the mail but a letter from another prominent tree fruit executive explaining
what is going on the industry:
Indeed California tree fruit is in tough straights.
Estimates are that perhaps 7,000 acres were scheduled to be pulled out of production
at the end of 2008 (some wish it was 10,000 acres), especially among some white-flesh varieties, which are
currently dramatically over-produced. Even when acreage is pulled out, it is usually replaced with more
productive varieties, so it seems there is always pressure from more volume even if from fewer acres planted.
For a number of years the popularity (and high price returns) of white-flesh peaches
and nectarines primarily in the Taiwan market produced heavy plantings, but as volumes of whites have hit
dramatic levels, there has not been significant market expansion domestically or in other export markets.
The variety of all summer fruit choices and availability has grown dramatically over
the last 5-7 years, and a real battle has emerged over ‘shelf space’. As we all know, the average shelf space
dedicated to produce has not changed significantly over the years, but the list of items offered in that same
shelf space has probably more than doubled in the last decade.
Retailers have steadily moved away from standard ‘margin markups’ to a philosophy of
‘space utilization’ and ‘yield per square foot’. With more items to manage in a fixed amount of ‘real estate’,
the value of real estate becomes more valuable and costly to manage; therefore it demands a higher yield per
square foot of utilization. Big promotions are increasingly harder to implement. We have discovered that tree
fruit demand is increasingly inelastic, and retail prices rarely have any correlation to FOB prices or
producer costs.
From June to September, there is increasing commercial production and home grown
supply of peaches, for example, in all of the contingent 48 states. With transportation costs being a
significant cost component (not to mention the plethora of ‘promote local’ programs), consistent access to
many markets is at times dramatically restricted for long periods of time throughout the season.
Unfortunately, eating quality is highly variable and difficult to manage in most tree
fruit cultivars. The factors of variety, bloom timing, where fruit sets on the tree, pruning and thinning
techniques, harvest timing, Brix-acid variability and post-harvest treatment all conspire to make the
optimization of flavor a constantly moving target. At times it seems as if every single fruit is an
individual, and achieving consistency in the eating experience is ever more challenging. Not meeting a
consumer’s expectation, consistently, is but one reason total per capita consumption of most tree fruit
cultivars has remained flat for years.
The last 2 seasons, California tree fruit producers have been crushed with a market
oversupply that has not been mitigated through increased consumption, market expansion, or significant acreage
adjustment, and the financial consequences for growers has been extremely harsh.
The consequences of the confluence of all of these factors has resulted in acreage
being pulled out, some growers large and small pressured out of business, thus forcing the consolidation (or
closure) of many packing operations.
With very low, and in many cases, negative returns, capital reserves have disappeared
to meet all of the production inputs for many growers. Traditional crop financing with banks or serviced by
packing houses have dried up. Even if you have some remaining capital reserves, or the ability to borrow them,
finding the ‘will’ to risk scarce cash resources to prune, thin, and culturally manage a crop to harvest with
little encouragement for a profitable season is wearing on everyone. Then, there is the economy;
unemployment, and a worldwide recession (for some, depression has arrived).
There will be survivors. Certainly, there are opportunities. I suspect Warren Buffet
is buying at Berkshire Hathaway, not selling.
In the California tree fruit business, those growers who have held together the right
mix of varieties, market timing, who are teamed with a knowledgeable packinghouse company will continue to
find ways to enhance the eating experience of their peaches, plums, nectarines, pluots, and apricots and will
achieve adequate market penetration to be profitable (even if marginally).
The 2009 season will be a severe test, but it will sharpen everyone’s focus on
improved ways to capture and retain their hold on the very competitive ‘battle for shelf space’, and an
opportunity to present their best fruit this coming summer. We can only hope.
It is quite a letter. It correctly details so many of the trade’s problems:
1. We seem like hamsters on those wheels sometimes. The dominant variety is in
overproduction compared to demand. So everyone looks to produce newer varieties that are getting better
returns, that puts these new varieties in over production so the returns shrink, then the cycle begins again.
2. Retailers have become more sophisticated. The relationship between the FOB,
the retail price and retail profitability is complicated. Even if lowering a retail price does increase
movement, it doesn’t necessarily increase retail profitability and even if expanded space for a product
increases movement for that product, this doesn’t establish that the retailer wouldn’t be better off devoting
the space to something else.
The letter didn’t mention it, but there is something else: Many retailers just care less
about the supplier community than they once did. The relationships aren’t as personal, the accountability to
higher-ups more intense and the connection of buyers to the produce industry more casual. Lee Scott just
finished his time as CEO of Wal-Mart. Once upon a time, he was prone to say things such as, “We need our
suppliers more than they need us.” By the time he left, he had stopped saying such things.
3. Inelastic demand. Most produce items are very inexpensive and have limited
traditional meal opportunities. So cutting the price of tree fruit may help for a short promotion but it just
doesn’t boost demand very significantly – especially because if you cut prices on, say, peaches, the place the
increased sale often comes from is from plums or nectarines! The industry tries but doesn’t really have the
resources to boost consumer demand.
4. The locally grown programs are causing many problems not fully realized. This
disruption of markets is one of them. It is very difficult for traditional growers and packers of a single
line of product to plan volumes and manage sales.
5. The inability of the tree fruit industry to offer a consistent-quality eating
experience is increasingly problematic. It makes consumer promotion difficult and makes retailers hesitant
to push the product. Not to mention that it makes consumers hesitant to buy.
Interestingly enough, when we speak to growers, they barely mention these things as
their problem; they tell us that the problem is that the banks won’t finance them. Several growers have
mentioned that at this time of the year they would have been getting money for pruning but that the banks
won’t lend.
Though we know we are being told the truth and, certainly have written enough about the
financial crisis to know the seriousness of the situation, it strikes us that this is not the complete
story and that the problem points to why solving this financial crisis is so difficult.
The situation is not that growers, who every year for 30 years have borrowed money for
pruning and what not, finished the season, paid it all back every year and owed the bank nothing for months
till the next cycle started, are now suddenly unable to borrow.
If that was the problem, then a burst of liquidity would solve the problem.
Unfortunately, due to the profitability reasons referenced in the letter, the banks seem to have often been rolling over these loans or portions of them. Often they seem intertwined with land value, and
as long as land values kept rising, the banks were collateralized and thus prepared to roll things over.
Now we hear that the banks are demanding real business plans showing a real likelihood
of repayment.
In other words, the problem is not bank liquidity; it is that a lot of lending has not
been done in a method that would traditionally have been considered prudent.
The Pundit’s family once had a substantial produce business, advanced millions to
growers, provided millions more in credit for export customers and used a bank to help finance the operation.
The bank was typically willing to lend but they had one rule: One day a year, they wanted us to owe them zero.
We don’t sense that a lot of growers, tree fruit and others, could really meet that test.
The bright side is a little tough because it means hardworking growers will go broke. If
the problem is oversupply, banks not lending to those unable to establish a prudent likelihood of repayment
will cause weak players to exit the business. This will leave strong ones in a better position to charge what
they need to if they are to make a profit.
It is a tough outcome, but what, really, is the alternative? Audit Of California Avocado Commission
Raises Questions Of Use Of Funds And
Governance Policies
The last few days have not been filled with
great publicity for the avocado industry. The New York Times
ran a piece entitled,
Report Outlines a High Life for Advocates of Avocadoes, which gave
this report:
Luxury suites.
Shopping sprees. Four-star hotels. Such was life in the high-flying
world of the
California Avocado Commission.
That, at least,
is the image presented by a blistering report released last week by
the California Department of Food and Agriculture, which painted the
commission, a state-established trade group financed by growers, as a
kind of free-spending, avocado-gone-wild farm party….
… an internal
audit had uncovered about $300,000 in dubious expenses, and the state
report outlines scores of charges including some $39,000 spent by
commission employees at upscale clothiers like Ann Taylor and
Nordstrom.
The audit also
found $17,000 improperly spent on home improvements, including a
garage renovation, for an unidentified commission employee who also
charged the commission for the purchase of an iPod, a satellite radio,
a plasma television and a vacuum cleaner. Those charges were later
reimbursed.
The Los Angeles Times headlined its
piece,
Audit of California Avocado Commission Uncovers At Least $1.5 million
in Questionable Spending, and also focused on the “high-life’
angle:
Something has
been rotten at the state agency behind a splashy $7-million annual
marketing blitz on television, billboards and in food magazines to
promote California-grown avocados, a new state audit indicates.
Employees and
board members at the obscure, Irvine-based California Avocado
Commission enjoyed lavish perks and benefited from as much as $2
million in questionable spending in the last three years, the audit
concluded.
Among the
benefits to staff members cited by the auditors were home remodeling
projects, tickets to sporting events, gym memberships and vitamins,
regularly delivered restaurant meals, clothing from high-end retailers
described as uniforms, generous auto allowances and $850 hotel rooms
at four-star resorts.
During the
three-year audit period, the commission’s 18 employees used commission
credit cards to run up more than $1.5 million in charges for “a
significant amount of discretionary expenses that appeared
questionable at best and even personal at times,” the report said.
About $17,000 was
spent on gifts, meals and flowers to celebrate employees’ birthdays,
employment anniversaries and other special occasions, the report said.
An additional $39,000 purchased clothes at Nordstrom, Talbots, Ann
Taylor and other stores that the commission dubbed “uniforms” after
spending $8,700 to embroider the commission’s name and logo onto them.
Commission board
members, their spouses, guests and employees spent thousands of
dollars on “massages, nail service, facials and body treatments”
during meetings at the Ritz-Carlton Laguna Niguel and at luxury spas
in La Jolla and Del Mar in San Diego County….
[Rick] Shade, the
commission board’s chairman, said no employees had been fired for the
spending cited in the audit. He noted that the commission’s former
president, however, resigned from his $300,000-plus-a year job last
May after 20 years so he could “devote more time to his church.”
Shade also said
that it was the home of Mark Affleck, the former president of the
commission, that was mentioned in the audit where $17,000 was spent on
permanent improvements and listed on the commission books as “home
office expenses.”
The board
currently is negotiating with Affleck to repay the commission money,
he said.
Affleck, reached
at his home in Mission Viejo, said he could not comment because he was
unfamiliar with the audit findings.
The San Francisco Chronicle focused its
piece,
Audit: Calif. Avocado Commission Misspent Money, more directly on
Mark Affleck:
The former head
of the California Avocado Commission misspent tens of thousands of
dollars in farmers’ contributions to remodel his home office and
purchase an iPod, plasma TV and other personal items, according to a
state audit released Friday.
The California
Department of Food and Agriculture audit claims that 18 employees,
including Mark Affleck, who resigned abruptly last year after 20 years
as the trade group’s chief, misused funds. They bought groceries,
designer clothing, restaurant meals and other items.
Affleck, who now
directs a global humanitarian ministry for the Rev. Rick Warren’s
Saddleback Church, declined to comment Friday.
The commission
chairman said Affleck has already repaid some of the expenses but the
board is trying to secure more.
A spokesman for
Warren, author of the best-selling “The Purpose Driven Life,” who will
give the invocation at President-elect Barack Obama’s inauguration,
said Affleck is a longtime parishioner “in good standing,” whose
contract work with the church “has nothing to do with avocados or
accounting.”
… The 89-page
audit paints a picture of a freespending organization whose employees
dipped regularly at the trough, charging up birthday gifts and flowers
for colleagues, running personal mail through FedEx accounts and
regularly charging lunches for the entire staff.
It says employees
racked up more than $1.5 million on commission-issued credit cards
from 2005-2008, the three fiscal years covered in the audit. Some of
those charges were called “questionable at best and even personal at
times.”
Seven executives
received $9,500 a month car allowances, plus $750 a month to pay for
gas and oil changes, the report said, adding the steep payments do not
“seem to be in the best interest of the state.”
Rick Shade, a
Santa Barbara avocado farmer and the organization’s current board
chairman, said he believes a final tally will show staff misspent more
than $300,000.
“I don’t expect
the growers who are barely getting by to be happy with this at all,”
Shade said. “Some things were outright wrong, and some an abuse of
discretion.”
The board is
negotiating with Affleck to pay back more than $17,000 he spent to
build, paint and install air conditioning in a new home office in his
garage, Shade said. The audit says Affleck — who Shade confirmed was
“Employee A” named in the audit — also spent more than $24,000 on
about 50 pieces of equipment including a plasma TV, an iPod and Bose
headphones for use at home. Some items have been returned to the
commission.
Affleck also
approved cash bonuses for select employees, gave certain staffers
$10,000 to buy cars and authorized senior staff to be paid as much as
$3,000 to join gyms and spend on workout clothing, the audit said.
Between 2005 and
2008, commission staff also spent about $123,000 on season tickets for
the Los Angeles Angels and Anaheim Mighty Ducks, and Affleck set aside
“large amounts of tickets for his own use,” the audit said.
Affleck already
has repaid “several tens of thousands of dollars” in questionable
expenses, and the commission’s lawyer plans to report the cash bonuses
to the Internal Revenue Service, Shade said.
… The trade
group’s $17 million annual budget is funded by avocado growers, who
are obligated to contribute 3 percent of their sales. When Affleck
resigned in May, he was getting an annual $400,000 salary.
After Shade
became commission chair in November 2007, he said new board members
noticed a few accounting anomalies and decided to take a closer look
at spending. Another commissioner then asked agriculture officials to
move the Avocado Commission audit to the head of the line, and
auditors arrived in May, just as the board revised expense policies
and started yanking back staffers’ credit cards.
“You feel a sense
of betrayal,” said Carol Steed, a San Diego grower spared by the
wildfires that ravaged other farmers in the region.
Affleck took the
reins of the commission when avocado prices were 23 cents a pound and
the fruit had a reputation for being fatty and unhealthy. Today the
price tops $1 a pound, bolstered by commission studies and marketing
plans that tout that fat in avocados as contributing to healthy
cholesterol levels.
“He was, in a lot
of ways, an incredible leader,” Steed said. “It’s sad he could be
potentially remembered for something like this.”
The report has been forwarded to the California
State Department of Justice, and they will be looking for cause to
bring charges.
Right now all the information isn’t out there
and, so far, nobody has actually been charged with any crime. In fact,
nobody has even been fired.
It is all very titillating but our take in
reading the reports is that if 18 people in an organization the size
of the California Avocado Commission were charging all these things on
company credit cards, then it was almost surely authorized behavior.
One person end-runs the rules, 18 people execute a policy.
So it seems highly likely that Mark Affleck
decided to run an organization that offered what most private
companies would consider rather lavish benefits.
If at the Pundit we tell our employees they are allowed to watch a movie in the hotel room and bill the Pundit, movies get watched. If we said that we would pay for a daily massage to deal with stress, there would be many more massages taken.
Of course, this still leaves three open
questions:
1. Was the proper IRS policy followed? In other words, a company is allowed to give people a non-accountable car allowance and let them charge clothes at Nordstrom. It is just required to file a 1099. It seems not to have done so.
2. Were the policies either authorized by the
board or within the scope of authority delegated to the CEO by the
board? Our impression in reading the material is that these extra payments were attempts to end-run grower frustration over what the growers perceive to be high salaries. As well as to deal with a salary freeze imposed after a bad crop.
3. How much did Mark Affleck take personally
in these benefits, and was he simply piggybacking on the
organizational policies that applied to all executives? Or did he do
extra things for himself without getting approval of the board or
compensation committee? In a case such as this, careful attention
has to be paid to what is the correct question, or people’s
reputations will be unfairly sullied. If the CEO of the organization
tells the executives it is OK to buy a new suit at Nordstrom for PMA,
that employer may be generous and the organization may have an
obligation to report it to the IRS. But the employee who gets the memo
and buys the outfit is not
prima facie doing anything wrong.
The real sadness of all this is that growers all
over the country will be more skeptical that their commodity promotion
boards are acting with their best interest at heart. They will assume
there is fat to be cut and what is already an often substantial
cultural breech between growers and association executives will loom
larger.
So even if Mark Affleck acted with the best of
motives, he violated a cardinal rule of business by doing things that
would cause embarrassment if they were on the front page of The New
York Times.
There is a little irony to Mark Affleck getting
caught in this web. At one stage of his life Mark Affleck wanted to be
a public speaker and consultant, so he did what is recommended all
such people do… he wrote a book. The name of the book is Radarscan
Issues Management, and the publisher describes it this way:
 Early
action is the theme of this book by Mark Affleck, who writes, “If an
organization waits until all the issues and forces reveal themselves
and then acts, it’s always too late. RadarScan Issues Management helps
you develop a culture that not only accepts, but looks for harbingers
that may signal a new trend or threat even when it seems implausible.”
Affleck shows how to anticipate issues, paint scenarios, generate
intelligence on strategic issues, and plot issue trajectories….
Yet, is it really possible that he never saw
this one coming?
You can find the book
here.
Pundit’s Mailbag — New Thinking On Small
Formats And Produce Distribution
We received a most interesting letter
from France, filled with interesting ideas for increasing produce consumption and a twist on the
au courant small format store concept. Beyond its specifics the letter also pointed to a very different
role that trade associations in Europe seem to have seized as opposed to that played by the North American
associations:
Your article,
Small Format Stores And The Ever Changing Retail Environment, was
intriguing.
Besides a reduction in the footprint of
the store format, wouldn’t it be a good idea for specialty fruit and
vegetable retailers to offer a drastically more selective assortment,
giving preference to legibility over visibility of the offering? In
other words, focus on the right mix between quality and price, rather
than just shopping on prices and on appearances.
So perhaps a store should have small apples, and not have 10 varieties. Let the retailer be saying to the consumer, this apple is in the store now because it’s the best choice for you. Make it much more simple. There
are so many apples on display at the big supermarkets… how can one
even remember the names and varieties? For consumers, too many choices
can become overwhelming.
This new strategy would differentiate
specialty stores from (non-specialized) supermarkets, supercenters and
hypermarkets. Consumers would delegate choosing to the retailer,
letting [the retailer] make the selections in a universe characterized
by gustatory uncertainty and cruelly lacking reliable means of
reference. And thus the retailer would commit himself.
A meaningful assortment could be built up
as follows:
- Offer different varieties of the same
fruit to enable consumers to compare the taste and to improve
knowledge of different varieties (e.g., Only yellow apples for a
two-week period: Belchard, Golden Delicious, Tentation, and then a
limited assortment of bicolored apples for two weeks, a selected
choice instead of simultaneously offering 12 varieties, which few
consumers have ever heard of and even fewer are able to recognize).
- Offer off-season fruits and vegetables
as a helping hand to developing countries; this would be our “fair
trade” reference and could feature, for example, green beans from
Kenya.
- Not offer products for which production
volumes are below average in a given year, because they will
inevitably be expensive (this year, stone fruit in France suffered
from Spring frost, so no apricots would be offered by our “new”
retailers).
- On the other hand, fruit and vegetables
in overproduction (such as lettuce and melon this year in France)
would be highlighted with special offers of the day, or of the week,
explaining why this is profitable for both the consumer and domestic
growers (provided of course that product quality is good).
- Focus on a few vegetables and explain
how to eat them, and with what other dishes they go well — instead of
proposing 10 different vegetables that are all equally mysterious to
young adults.
- Promote category II products, but of
excellent gustatory quality.
- Have one “521” offer, i.e., 5 fruits
and vegetables, for a price of 2 Euros. In a volume of 1 kilo.
- Offer packages based on season,
proximity, Vitamin C content, “detox”, carotene content (to enhance
tanning), etc.
Such a selected offer would make sense
for consumers.
The specialty retailer could use the
gained space to invest in a fresh-cut processing area, in order to
recycle truly ripe-to-eat fruits, create nice smells of fresh soup,
fruit sauce or compotes, recruit customers who are looking for
service, and increase buying frequency: for lunch plus an extra
ingredient for dinner. In France, the decline of fresh fruit and
vegetable purchases is a generational problem, and the whole industry
is trying to find solutions.
This project is currently under study at
UNFD, the French Specialty Retailers’ Association.
We’re still in the preparation phase. Our
Second Life stand in 3D is not ready yet. As soon as we have some
results available, I’ll let you know. We will
relate our experience at
a conference in Dubai soon. With luck we hope to go to Monaco for the
Imagina awards.
I hope I will be able to send you our
project in 3D soon.
Last April, you were kind enough to
analyze our vending machine venture for fresh fruits and vegetables in
a piece you entitled,
French Vending Machine Pilot Project. We see all efforts to have
produce more conveniently available, via vending machines or new
retail store formats, as part of an attempt by the industry to wrestle with this real generational problem.
When we look at the data that indicates that each successive generation is consuming, on a per capita basis, less produce, we have a real dilemma to face: Is there really a future for fresh fruits and vegetables?
In France, fresh produce, as opposed to canned, dried or frozen, still presents the majority of weekly fruit and vegetable purchases. Unfortunately, over the last decade, the frequency of shopping trips has declined.
How often do you
purchase fresh fruits and vegetables
L1- Tous les combien achetez-vous des fr uits et
légumes ? Diriez-vous
|
|
1989 |
1993 |
1996 |
1999 |
2002 |
2007 |
|
ts les jours |
11 |
10 |
8 |
5 |
5 |
6 |
every day |
|
3 fois/ sem. |
18 |
18 |
15 |
13 |
12 |
14 |
3 times a week |
|
2 fois/ sem. |
27 |
28 |
27 |
30 |
28 |
24 |
twice a week |
|
1 fois/ sem. |
33 |
35 |
39 |
43 |
42 |
43 |
once a week |
|
2/3 fois par mois |
5 |
3 |
4 |
6 |
8 |
7 |
two or three times a month |
|
moins souvent |
6 |
6 |
7 |
3 |
4 |
5 |
less often |
In a 2007 study of shopping behaviors,
42.5 percent of buyers are trending away from regular trips to the
supermarket a few times a week to only shopping once a week. They
drive to a big store in the suburbs and load up their cars with a
week’s worth of food all at once.
This trend is ominous for consumption of
fresh fruits and vegetables.
To really enjoy fresh produce, it needs
to be purchased more than once a week. The general problem is that
fresh produce, especially if purchased ripe at the peak of flavor, is
not easily storable, so consumers buying it only once a week eat it in
a day or two or three and wait until the next week to buy more; in the
meantime preferring to use canned or frozen products, products with
preservatives or prepared salads with longer shelf-lives.
So how would it be possible to address
this problem and turn the fresh factor into a real product benefit?
Our goal, as an association and as an
industry, is to make it easier for these consumers to find fresh
fruits and vegetables near the places where they live or work,
providing more access to convenient, easy-to-eat and take away
products. This is a good way to increase consumption, especially for
young people who consume less produce.
In France we still eat for pleasure, but
there are generational differences with fresh produce consumption. In
France now, the elderly, such as my mother at 82, eat more fruits and
vegetables. But I buy fewer fruits and vegetables than my mother did
when she was my age. And my niece buys still fewer fruits and
vegetables than I did when I was her age. The young don’t want to
bother with shopping, but they would like to eat healthy.
A lot of people work in the Paris area
and in other large cities in France and are using public
transportation. They live outside Paris but work in Paris, so if
people pass by small shops and just buy what they need for the
evening, that might be incentive to buy more fresh fruits and
vegetables more frequently. They could buy some for lunch and then
some for dinner, and it wouldn’t be that heavy to carry. This concept
would work well for young people and couples, perhaps not as easily
for big families.
People in the suburbs have less choice
than they had before. The traditional small shops of France are
disappearing outside the cities. In France, people only work 35 hours
a week. We have more time, so people could shop more frequently.
Unfortunately, people do not enjoy this
type of shopping at big supermarkets; there is no pleasure, no
romance, in buying food. They do it once a week, as a chore, and are
done.
One could assert that with the big
increase in fuel costs, people will go back to proximity, so the
future is not that clear. I think it is clear, however, that people
don’t want to waste time in food purchases.
Our project idea early on was to have
these small shops on the streets where you walk, like newsstands,
where you buy your newspaper and also buy your fruit or your salad,
all ready-to-eat. The aim is to make it very easy and very quick.
I thought about delicate fresh fruits
like strawberries. If you buy strawberries on Saturday, you eat them
on Sunday or at latest by Monday. People might buy strawberries more
often if they could find small shops on their commute to take with
them conveniently on the train to go home.
The idea would be to offer real ripe
fruit so they could eat it on the same day. We could get them to come
to our shop at lunch time, and then we could have a second offer for
dinner, like fresh soup, or ready-to-eat salads, or fruits. We could
make fresh fruits and vegetables have real meaning. If we have these
sort of shops, we have to make money on the services and not on the
quantity, because the shopper can’t carry a lot of things to bring
home. The key is to offer fresh foods that create value.
The French fruit retailers’ association
is trying to find a solution based on one of their strengths, namely
proximity. At their request,
Ctifl is currently studying the feasibility of copying the dense
network of newsstands in urban zones and the use of these stands as
outlets for fresh fruit and vegetables. What would be the ideal
assortment for the small booths, how would they be fitted out, how
would they be restocked, etc.?
We are planning to: 1) carry out a
semiological study of the different outlets selling fruits and
vegetables (not only fresh), in order to get a better understanding of
the values conveyed by the different points of sale, and 2) “install”
on Second Life (using 3D) such a stand, as well as a “corner” in a
conventional outlet. Depending on the results, a real-life prototype
will be tested. You can see a prototype video
here:
As for specialty retailers in France,
they represent 10 percent of fresh fruit and vegetable sales. They
would be the obvious type of retail stores to implement the concept,
but small format supermarket outlets such as “Carrefour Market” or
Monoprix might also show some interest.
Small stores, vending machines and
newsstand clones are all attempts at dealing with the same problem:
Only by developing a viable supply chain for small, omnipresent
outlets can we encourage the frequency of consumption that is crucial
to offering fruits and vegetables, both whole and fresh-cut, at the
peak of their flavor. And only by offering fruits and vegetables at
the peak of their flavor can we hope to build consumption.
I am once again indebted to my colleague
Nelly Ottens for help in translating this letter.
—Catherine Roty
Chargée d’études
Ctifl
Paris, France
We are indebted to both Catherine Roty and Nelly
Ottens for sharing so generously of their insight with the industry at
large.
We think Ctifl deserves much praise for being
willing to look to issues of product quality and structural
impediments to purchase.
Going back to the old 5-a-Day program, we have
long felt that simply looking to promotion was insufficient. As long
ago as this
column and even before, we said that the
industry promotion would be more successful if we resolved structural
issues that kept gas station mini-marts stocked with cookies and chips
but no fresh produce or, half-rotten fresh produce.
Ms. Roty implies the best explanation we have
heard for why per capita European consumption of fresh produce is
higher than US consumption: because patterns of frequent shopping —
cultural patterns growing out of physical realities such as small
refrigerators and urban living without cars — allow for higher fresh
produce consumption, because one need not worry about the produce
going rotten before the next trip, and literally allows for better
produce as it can be sold closer to the peak of ripeness.
Now they have had hypermarts for some time in
France and there have been quite a number of cars and a move to more
suburban living for decades — but habits change slowly; perhaps, as
Ms. Roty implies, they change generationally.
In addition, Ms. Roty is really proposing that
retail should be more like foodservice. Retailers, in general, will
carry a multitude of items and see what sells. Foodservice, by its
very nature, involves a Chef or menu-planner making a selection for
the consumer. This is the vegetable of the day; these are the fish we
choose to sell.
So in proposing that, as she wrote: “Consumers
would delegate choosing to the retailer, letting [the retailer] make
the selections in a universe characterized by gustatory uncertainty
and cruelly lacking reliable means of reference. And thus the retailer
would commit himself.” Ms. Roty is suggesting little short of a
revolution in retail thinking.
And there are real reasons to think that she may
be on to something. Many years ago, when Internet shopping was in its
infancy, the common perception was that it wouldn’t work for fresh
produce as consumers would want to make sure they picked out a melon
of the proper ripeness or that the consumer would want to see the
quality.
Yet a young Cornell University professor by the name of Ed McLaughlin did some research that turned this point on its head. It
turned out that consumers were thrilled to order fresh produce on the
Internet precisely because it was so difficult to select a ripe melon
or to know that a particular pineapple was of quality; they were happy
to delegate these chores to an expert. Of course, not too many
Internet shopping services actually had experts on these matters, but
that is a story for another day. For now, the point is that the
research seems to indicate an opening for a retailer who offers to
exert expertise on behalf of the consumer.
In critiquing small store formats, including
Tesco’s Fresh and Easy, Safeway’s ‘the market by Vons’ concept —
as we did
here and
here — or Wal-Mart’s Marketside concept — which we discussed
here,
here,
here and
here — we have questioned whether American consumers would accept
an abridged assortment. Yet, Ms. Roty raises an intriguing question:
Might people be more inclined to accept such an abridged assortment if
small format stores stated that the selection was not just smaller but
better? In other words, right now one looks at these small format
stores and one thinks they didn’t have room for all the options.
Suppose instead there were signs posted indicating that the buyers had
made choices and selected particular items for display based on that
day’s quality and value — might it turn a negative to a positive?
We are enthused by the idea of these
newsstand-like kiosks. When they open the first one, we hope Ms. Roty
will let us know as we shall go to Paris to see such a thing.
Yet, as hopeful as we are, we must acknowledge a
degree of skepticism.
On the logistics side, nobody has been able to
develop a system that allows for frequent distribution of fresh fruits
and vegetables to low-volume locations at a price that is not
prohibitive. And it strikes us that many high-volume locations already
have an array of available fresh produce. In most of Manhattan, for
example, you have many small fruit shops and quite a number of fresh
fruit carts on the street.
We have some doubts about the willingness of
people to carry things. We remember when Eatzi’s opened in the Cellar
at Macy’s on Herald Square. They had the theory that many commuters at
nearby Penn Station would stop and pick up dinner before boarding
commuter trains out to Long Island. It didn’t work, and we fear that
it will be too much of a bother to carry such things. Although,
perhaps, technology could be used. At the new
Jetblue Terminal 5 at JFK airport, you can order a sandwich with a
machine by the gate and they deliver it to you. Maybe we could have
people order fresh produce upon departure or via mobile devices and
have it waiting upon arrival?
We have long been troubled by the amount of good eating product that is difficult to sell because it is the wrong size or variety. However Ms. Roty speaks to the heart of the value proposition that retailers such as Aldi, Liddle and Netto offer in fresh produce. These retailers vehemently object to the notion that what they sell is of lower quality than the product a supermarket might sell, they explain that they might, though, buy a size or variety that is unpopular and thus get a better deal. We have doubts though, that, cosmetically unappealing produce has a bright future as looking is apart of enjoying as much as eating.
Mostly though, we are a bit skeptical because
the barriers to opening small stores are not high. However, as they
say, the devil is in the details. If there was money to be made
executing the concept, surely somewhere, someone would be doing it.
Perhaps beyond the upscale neighborhoods where such retail concepts
exist, the consumer needs low prices more than service or expertise.
Skepticism over new business concepts is always
warranted, because most fail. But some succeed; we most ardently hope
that this is one of the exceptional few.
Many thanks to Catherine Roty and Ctifl. Your
work is an inspiration to the industry.
Perishable Thoughts – Higgins Boat
Story Tells A Tale Of Perseverance
Our piece,
Perishable Thoughts — Keeping Things ‘In Perspective’ For 2009, referenced a contemporary quote pointing
out that for all the problems of a financial crisis, it was nothing compared to the dangers of getting out of
a Higgins boat on Omaha beach. In other words, nobody is getting shot here.
The reference to a Higgins boat led to the following note:
Your mention of Higgins boats reminded me of the late Victor Krulak -- recent New
York Times obituary below. Note that he made one observation, which was thrown away by the bureaucracy but
followed up by him when he returned to the States.
He also worked on the two defense reorganizations in the late ‘40’s and early
‘50’s, in which he helped keep the Marine Corps from being abolished. Part of the war that is fought in
bureaucratic trenches. My memory of the quote is:
“Sometimes it’s more difficult establishing your right to fight than actually
fighting.”
— Dan Cohen
Maccabee Seed Company
Davis, California
Dan has contributed to the Pundit before including pieces such as these:
Pundit’s Mailbag — National Marketing Orders And Agreements
Pundit’s Mailbag — Two Windows And Two Issues
You May Never Look At Spin The Bottle The Same Way Again
Now we send him a hat tip for this quote as well as for the sharp eye in making a
connection to the January 5, 2009, obituary of Lt. Gen. Victor H. Krulak, who died December 29, 2008, at the
age of 95. The New York Times obituary is entitled
Victor H. Krulak, Marine Behind U.S. Landing Craft, Dies at 95:
In 1937, while a lieutenant in an intelligence outfit in
Shanghai, when the Japanese were trying to conquer China, he used a telephoto lens to take pictures of
Japanese landing craft with a square bow that became a retractable ramp, enabling troops and equipment to be
dispatched quickly onto an enemy beach.
Envisioning those ramps as answering the Marines’ needs in a
looming world war, Lieutenant Krulak showed the photographs to his superiors, who passed on his report to
Washington. But two years later, he found that the Navy had simply filed it away with a notation saying it was
the work of “some nut out in China.”
He persevered, building a balsa wood model of the Japanese
boat design and discussing the retractable ramp concept with the New Orleans boat builder Andrew Higgins. That
bow design became the basis for the thousands of Higgins landing craft of World War II.
“There would not have been a Normandy or an Okinawa or an
Iwo Jima without that boat,” his son Charles said in an interview on Sunday.
Son Charles, by the way, did his father proud; he is General Charles C. Krulak, the
Marine commandant from 1995 to 1999.
The quote actually comes from Victor H. Krulak’s book, which is a history of the Marine
Corps:
“Fighting for the right to fight often presented
greater challenges than fighting their country’s enemies”
First to Fight: An Inside View of the U.S. Marine Corps
By Victor H. Krulak
Published by Naval Institute Press, 1984, 1999
252 pages, pg 15
It derives from this section:
“Standing beside Marine Lieutenant General Holland
Smith on the bridge of the command ship Mt. Olympus, off of Iwo Jima on the morning of 23 February 1945,
Secretary of the Navy James Forrestal said that the raising of our flag atop Mt. Suribachi “means that there
will be a Marine Corp for the next five hundred years.” Moments later, out of Forrestal’s hearing, Smith
commented, “When the war is over and money is short they will be after the Marines again, and a dozen Iwo
Jimas would make no difference.”
The resolute general was voicing the frustrations of
the many generations of Marines before him who had learned through hard experience that fighting for the right
to fight often presented greater challenges than fighting their country’s enemies.”
The quote can be viewed here:
First to Fight: An Inside View of the U.S. Marine Corps (Google Books)
By Victor H. Krulak
Published by Naval Institute Press, 1984, 1999
252 pages, pg 15
Here is the original version of the story of the development of the Higgins boat. The
best telling of the story would be from the man himself, and includes a picture of the original boat that
prompted the design from 1937!
First to Fight: An Inside View of the U.S. Marine Corps
By Victor H. Krulak
Published by Naval Institute Press, 1984, 1999
252 pages, pg 90
Here are several other renditions of the story by admirers of Krulak:
From Whaleboats to Amphibious Warfare
By Anne Cipriano Venzon, J. Michael Miller
(Above link begins Krulak’s involvement, several paragraphs
earlier begins
Andrew Jackson Higgins story of his development, prior to meeting Krulak, of a shallow draft boat)
Leadership Embodied – The Secrets to Success of the Most Effective Navy and Marine Corps Leaders
By Joseph J. Thomas
Article on Victor Krulak contributed by Shawn P. Callahan
In troubled times, we thought this quote has a special resonance. The book goes on to
explain in the sentence after the quote that:
“Viewed more philosophically, it may be said that the
unending struggle for survival has done much to strengthen the Marines’ character. As in the greyhound races,
every time the Corps started to coast, it seemed that the rabbit, in the form of a threat to their survival,
sped up and challenged them to higher levels of performance.”
And so the struggles we endure are not solely negatives; they are the stuff that causes
us, in our quest to overcome the problems, to rise to meet the challenges. If we were never challenged, we
would never begin to know the depth of our own potential.
As we struggle with tough times, that is a rather uplifting message.
Of course, there is a side story to Victor H. Krulak’s life. As The New York Times
obituary explains:
In the fall of 1943, General Krulak, a lieutenant colonel at
the time, commanded a battalion in a diversionary raid on Choiseul Island in the Solomons that enabled a
larger Marine contingent to capture the more important island of Bougainville. Although wounded, he continued
to lead his marines in battle, bringing him the Navy Cross. Some of his wounded men were evacuated by a Navy
torpedo boat skippered by Lt. John F. Kennedy.
In the late 1940s, General Krulak helped pioneer the use of
helicopters to carry marines and supplies into battle, a maneuver employed in the Korean War, when he was
chief of staff of the First Marine Division.
When Kennedy became president, General Krulak reminded him
of their meeting on Choiseul. He presented Kennedy with a bottle of whiskey, something he had promised him for
his rescue work back in 1943 but never had a chance to deliver. In 1962, Kennedy named General Krulak the
counterinsurgency adviser to the
Joint Chiefs of Staff.
General Krulak was, of course, quite well qualified for the
position. Still, if he hadn’t have met JFK as a young Lieutenant, if he hadn’t remembered his promise and
brought whiskey to the White House, maybe he never would have received the appointment.
So we see the paradox. The message of the quote today is to endure and persevere in the
face of ridicule, for if you fight hard enough and long enough you just might show all those geniuses they
were wrong. The paragraph after the quote reminds us that suffering can be redemptive and that our true mettle
may only come out in response to enormous challenges. Then we have the next paragraph, which reminds us that
life is serendipitous and the key is really to take advantage of the opportunities life presents.
That is an awful lot of wisdom to fit in a few paragraphs in a book.
Many thanks to Dan Cohen of Maccabee Seed Company for suggesting we read it.
****
Perishable Thoughts is a regular section of
the Perishable Pundit. If you have a favorite quote that you would
like to share with the industry, please send it on. You can do so
right
here.
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