We go back a long ways with the Pandols. When the Pundit was testing his eye teeth in the business, our family company used to split a Chilean shipper with the Pandols and Jack Pandol was the man my father called on to lecture this incipient Pundit when he was still in grade school about the UFW.
Truce Confessions Of A Conference Junkie
Communications Technology – The Flintstone’s Task With The Jetson’s Tools
Farmers Are The New Rock Stars: You Have Permission To Trash Your Hotel Room
Trade Shows: Public, Private or Both?
Limited supply of club grape varieties ‘angering retailers’, says Pandol Bros
John Pandol Raises A Question:
Are Proprietary Varieties Truly The Future? Is Retail Frustration Something To Be Avoided?
Pundit’s Mailbag — Univeg, Ready Pac, Sunkist And The Lord Mayor Of Dublin
PMA’s EAT BRIGHTER Campaign Trumpets Success But The Data Tells Us Nothing About Any Consumption Boost
Pundit’s Mailbag — Tesco Gets Reviews From Industry Members
Now, as The London Produce Show and Conference kicks off a reunion for the produce industry as the pandemic fades, John joins us to shine a spotlight on the real dilemmas facing producers and the supply side as they try and wrestle with the needs of both trade buyers and consumers. We asked Pundit Investigator and Special Projects Editor, Mira Slott to find out more:
Director of Special Projects
Q: For London Produce Show attendees in the know, or who experienced the quick-fire Q&A round between you and Jim Prevor that you did in New York, your presentation in London, hitting the hot topics facing the industry, should not be missed. You have never been shy about speaking your mind and instigating important debate to better the industry.
A: This is the teaser; you’re doing the action movie trailer…
Q: What’s sticking in your craw right now?
A: The challenge of selling it all. Volume is vanity, profit is sanity. You can always explain a low price to a grower. You can never explain why you couldn’t sell it. Focusing on average price versus the percent of crop sold is a legacy of a time when products were scarce and market windows were common. The assumption is all produce could be sold within the market range.
Q: Isn’t there a home for different products, grades, etc., what about terminal markets,Hunts Point Produce Market in NYC, London’s New Covent Garden…
A: Increasingly, retailers and foodservice operators have no interest in moving more volume. Wholesalers refuse open price consignments and even charities pass on the ability to receive more product. Growers ask, ‘how much will the market pay’ instead of ‘how many will the market take’.
Q: Even within the competitive environment, hasn’t the industry fostered many long-term relationships between suppliers and retailers, who stick together when there are issues, or Mother Nature doesn’t cooperate?
Is company diversification a must or is it more about the agility to adjust to market fluctuations? Are you suggesting value-added products, honing specific markets, customers/consumer bases?
A: The question is, should a grower first secure high-priced programs and boutique sales…and then deal with the rest of the crop, or should one first secure homes for all the volume then substitute better sales for lower; like the strategies a commodity grower does when selling futures.
Q: What about securing long-term contracts? Didn’t Walmart do that in the days of Bruce Peterson, a Produce Business Vanguard Award winner? I remember Jim writing some strong critical columns about Walmart’s changing buying strategies, and its switch to a global sourcing initiative in 2009, auctioning for lowest prices…that squeezing already low margins and pitting suppliers against each other conflicted with increased investments in food safety, sustainability index requirements, and higher quality…
A: Long term loyalty contracts. I don’t know of a lot of multi-year contracts. Just because a guy may continue on — we kind of have a rolling renewal. I have a good relationship with a store and, all of a sudden they get bought out, or they have a new management system, they decide they’re looking for different grades, even if comps sales change, people change their hairdos and they change their grape suppliers.
After Bruce Peterson, Walmart had all these suppliers…Then they figured, all our suppliers are about the same, you can bid, and six of you will get business and six of you will get zero… Then there’s the question of differentiation, and even reliability wasn’t a differentiator. The thought process, why would I have 12 guys here, I just want six, let’s bid, and then you start chasing guys away, and you only have a few remain.
In the long term that’s bad. If you had 12 guys, you’d have the thinking and innovation of 12 guys. Then you find out you didn’t get the innovative products. That actually did happen to Walmart. In one regard, Walmart is not the target of innovation because of their size (and volume requirements). You need to fill a lot of stores… ‘We’re hearing about this item in Jim Prevor’s share group, or customers are asking for it, can we get it?’ The answer could be, no it’s not good for my business, or we’re not interested in selling you Cotton Candy grapes.
Q: I remember the Cotton Candy grape making its American deput at the New York Produce Show in 2011, through your partnership with the Grapery. And how the Grapery partnered with Mack Multiples to bring Cotton Candy grapes to the UK exclusively through Sainsbury’s… where it’s known as Candy Floss.
A: The other thing, when introducing a new variety or packaging, first you have to go to smaller retailers who are open to testing before putting it in 1,000 stores. And larger retailers ask, can you show me some kind of track record. So, the big guys tend to be last ones to get it.
Sometimes, you get to a certain point, we’ve seen growers that say those guys aren’t helping us develop the business, they come to the table when the soup’s already done; by virtue of size, they’re just not set up to test in a few stores.
There was a variety one of the breeders offered to a major U.S. retailer. It was going to be their specific variety and they picked their main supplier. The variety didn’t go at retail like they thought. It would have been better to test in a few stores before they went out and committed major resources. I don’t know if they were contractually obligated or the retailer felt obligated to buy the fruit, it didn’t sell well, they weren’t selling other things they could have had on the shelves, and they had a lot of shrink. Essentially, the breeder going straight to the retailer and then nominating growers to grow it was not very good.
Q: It sounds like a complicated process, especially with the proliferation of SKUs…
A: We look at the whole store, the entire food selection. Retailers may introduce over 1,000 products every year and most of them don’t sell. I go to the supermarket and there are 25 different SKUs of Oreo cookies. Do we really need that many Oreo cookies?
Q: Are you saying 25 SKUs of the Oreo brand, or similar products that replicate that brand?
A: The brand of Oreo cookies, there was regular, double stuffed, double stuff dipped in chocolate, a pistachio cream one…there was a diet one with a thinner Oreo cookie, there were different size packages. I love Oreo cookies, but I don’t need 25 choices.
Q: It’s interesting you bring that up. The produce department typically has less branded product than other parts of the store. In the case of bananas, doesn’t a retailer otypically just carry one brand…In addition, what’s happening with the private label side of the business?
A: With bananas, a retailer will have a contract with a supplier, and it’s unusual to see different banana brands there, you don’t even see the brand with a private label. Increasingly now we’re starting to see… with grapes they will have a private label, a store label, then a fairly plain bag, I know HEB does that.
We’re really trying to figure out why stores are pushing private label as robustly as they are.
Publix has GreenWise for organics. Walmart has Marketside…
Every time we go to a grocery store, we see their own brand private label, and now it’s in produce.
I think it was a Hartman Group study I saw, 75 percent of consumers trust the store brand, and only 65 percent trust a supplier brand…
There’s been far less branded product in produce traditionally. What’s our most branded thing? I’d say packaged salads, which were introduced in the 90’s, you had the packaging technology with films that could make it work. Before then it was probably not possible. Look at all those mixed brands, whether it’s Ready Pac or Dole…and then you will see the store level, Publix GreenWise, SE for Winn Dixie, you’ll see the Albertson’s Group has their organic line and their Signature line. The packaged salad category is filled with multiple supplier brands, and we see private label increasing within it.
Q: Isn’t Driscoll’s an ideal example of a company that built an iconic brand to distinguish itself in the marketplace? Driscoll’s CEO Miles Reiter shared perspective about the company’s multi-faceted strategy during our interview for his Produce Business Vanguard Award profile…
A: Driscoll’s brand is well known, Driscoll’s does not do private label to my understanding. It has a Driscoll’s label, an in season label they use that is special, they have a high flavor label, they have a non-Driscoll label they use. They have a label that doesn’t prominently say Driscoll’s…
We also see within very branded product or traditional branded companies they don’t use their brands all the time. Yet the themes we hear, people want to know where their food came from, the story of the guy who farmed it…
Q: Is private label a way to lower costs, a strategy for retailers to differentiate and create their own identity to drive customer loyalty…?
A: On one hand we’re being told by all these brand building companies you need your story told upfront but there are these big pieces of business where I’m a silent partner. My question is, from a marketing point of view, and from a business point of view where’s this all going. If consumers really want to know the story, why would they buy private label? Is there going to be a big rejection of private label because people are going to say I don’t trust that retailer, then I should be building my own brand and turning down business with private label. If it’s really true that consumers are indifferent or trust the retailer more, I should be pursuing private label.
Q: Not all retailers are created equal in terms of customer loyalty…
A: Focus on retailers that have good private label programs, and they give you lead time, and it works operationally. Is it all about supplier branding and knowing the grower? I’m not ready to make a categoric statement. Look at store branding at Wegmans, Publix, Aldi, HEB…Costco is another one, they seem to be pretty good at what they do.
I sit on panels with Lisa Cork, who is all about branding produce.
Q: Lisa Cork is a branding guru. She has driven produce company sales through the roof by reinventing brands…At a previous London Produce Show, she presented a case for using packaging as a marketing tool in the UK retail market, where almost all the produce is packaged…
A: I think the average person in the UK knows Marks & Spencer doesn’t own vineyards and celery fields, that those are indeed third parties. Can I pick up a Marks & Spencer product and find out where it came from, probably not, and do people really want to know that, oh, that’s interesting, my mango came from Central Africa, it went on a ship…to a warehouse in Paddington and then a distribution center in Leeds and then on a truck to my store in London? Maybe there’s a niche consumer that cares, but the great majority of consumers just want that mango.
Q: So, most consumers shopping at Marks & Spencer would have confidence if they’re buying produce from Marks & Spencer it would be high quality, that the mango is good… I remember years ago there was some controversy when stores put airplane symbols on packages of produce airfreighted into the UK related to carbon footprints, impacting countries like Kenya and creating a backlash of sorts.
A: We get into this thing where we need to develop a new market, we need value added product, or new customers, or new countries. How do I keep getting into this mess, why do I always have too much product for my business, and I have to find new guys? Can’t I figure out, we only need to produce this amount.
In the U.S., people are going to eat eight pounds of grapes, so much a week, we need to supply no more than x amount in a given week. Why can’t we do that? Our answer is we need new markets, get people to eat more, or we have to get rid of a competitor.
Our thing in the U.S. is saying we are in trouble because of these darn foreign competitors. We saw a lot of activity of countries trying to penetrate our markets. Mexican blueberries, tomatoes…there were about five different trade cases within the last 6 to 15 months. ‘We can’t make a living because there’s all this cheap foreign produce.’ They have costs too. American growers look at foreign and think things are less expensive in foreign countries, it’s not always cheaper.
Q: We’ve covered those contentious trade disputes. In the case of blueberries, you had U.S. based blueberry producers on both sides of the debate; The American Blueberry Growers Alliance (ABGA) testifying on the harmful effects of increased imports to its members businesses, and the Blueberry Coalition opposing limitations on imports.
A: My problem is if I’m going into planting, and processing and cold storage and all those long-term things, if I’m planting for a market that doesn’t exist, why am I doing that. My grape business is good, but if I make it 10 percent bigger, what really influences demand and consumption. We all get in a situation where we need more demand, so I’m going to promote and merchandise, you see the typical things. If you look at a Produce Business article, make a bigger display, build more variety… look at the big nuts display, I’ll buy nuts this week. How do we determine how many nuts or grapes we should produce?
The lettuce industry is probably a lot closer to getting those estimates right, and many of the vegetables too are based on demand and contract, they don’t say we’re going to plant a lot more, they look out, there’s demand for this much of this crop, we’re going to plant for the business it doesn’t get crazy.
Q: Why isn’t the grape industry doing the same? Why is there such proliferation?
A: In a permanent crop like avocados or grapes, when I plant a vineyard, I need to know demand five to 20 years from now. I’m going completely blind, which is why we get out of whack. I want to be bigger so I’m more efficient, now I’ve moved my costs down, but how do I sell all this?
I could abandon the field, give to a food bank but I don’t make money if I don’t have a place for it.
The question is, why am I doing that afterwards? We have all these tools, all these predictive forecasting, artificial intelligence and trend tracking. How come they can’t tell me how much to plant five years from now, or at least give me some insight into it.
There is proliferation of crops. Look at blueberries. People are buying more blueberries because of antioxidants, ok, but what is the demand, we can’t sell all the blueberries… They have to go to the freezer, and there’s not even capacity in the freezer. We produce too many.
It’s always been the case to have global supply off-season, but why are we producing so many. We’re becoming more efficient…if I plant varieties that produce 20 percent more yield, should I plant less, or reduce land.
Q: Proponents of limiting imports say the windows for off season crops are expanding and encroaching on domestic growing seasons. And they say it effects pricing, and the margins they can achieve…
A: Well, retail price and wholesale price are not necessarily tightly related. In other words, there’s this assumption when fruit is in season fruit is cheap in the store. We have a major grape promotion on the West coast, they’re 99 cents, their normal price is $2.99, and the price was like that for 25 years.
It has nothing to do with what actual costs are. We have prices that are lower than that.
What does the land cost, what are labor costs…? Mira, you live in Manhattan. A McDonald’s hamburger should cost double what it costs in Bakersfield, yet it’s the same price because they have a chain, although it’s more expensive at the airport…
Q: Let’s bring this back to the produce department and impacts of promotions to increase sales and consumption… Is this a matter of interchanging bumps in sales category by category, perhaps trend related, or an overall department boost?
A: Grapefruit consumption is about 15 percent of what it was 30 years ago. It was the breakfast of old people. Some medications and health issues counteract with grapefruit.
Sales of Navel orange are less. We had a blip during Covid, people bought bags, they realize they are cheap, 75 cents a pound. We see the trees have gone down now.
Pomegranates went down. Pomegranates got planted like crazy and we’ve seen a lot of fields bulldozed here in the Valley. Even the juiced pomegranates, they’re not here anymore. The biggest reason is mechanization. If you have 160 acres and you have a mechanical way to take out the arils and make juice, all of a sudden you have 7000 acres. People were into pomegranate juice, the antioxidants and all that…you could separate the arils and buy them in a little cup. They had their bump and are there, but you don’t see the plantings in the countryside as you did before.
We see vineyards that don’t get picked, there are certain varieties. One of the things in our data base, those guys just abandoned that field. What is it about that variety that can’t sell for even half the price? We’ve seen organic fields packing as conventional. They take up all the organic business, and then they don’t have anymore, so they pack and sell it as conventional.
Q: That would hurt them because they’d get more money if it was organic, right?
A: Yes. It’s like me going to the juice plant, normally we pick 85-90 percent of our grapes for fresh and 10-15 percent for juice. For the last three generations it’s been like that. Suddenly we could have really good quality, why should we sell it as byproduct. 140 dollars a ton is not like selling it for 20 dollars a box. Not even close.
In the case of organic, we know a lot of growers don’t’ sell their whole product as organic; a lot of their product is converted to conventional.
Q: Every year, there are news reports, and industry talk about how demand for organic keeps increasing… Also, that there are more organic varieties, which can be priced to compete more closely to the conventional alternative.
A: What is organic production, and the idea is why don’t you plant organic if there is so much demand for it, and you can actually sell it. Every store takes a little bit. And there are certain guys who say organic is the way it should be and I’ll only stock organic. And there are the rest of them that absolutely choose not to. Often, it’s more like, you know, we’ll handle it, and keep it as a niche product for 10 or 20 percent of our customers, who think they’re buying something better, and we’ll use it as an upsell strategy. We see a lot of that.
Q: In the U.S., Costco is a force in organics, making news back in 2015 when it surpassed Whole Foods as the largest organic retailer… In speaking with Costco’s Frank Padilla for his Produce Business Vanguard Award profile, Costco is making strides to replace conventional produce with organic produce when possible…
A: Yes. Costco doesn’t want a lot of SKUs, if they can substitute out a conventional product for organic, they don’t want to carry both. They have a customer base that wants that. They’re kind of in a bubble.
I went to Costco a few days ago. They had organic raspberries and conventional raspberries. The conventional was $4.49 and the organic was $6.49. That’s a 50 percent difference. They were similar in quality. We think 50 percent of the people will buy organic at a 10 to 20 percent price differential. I know with most products you need a 35 percent cost differential for organic, the guys that examine agriculture say that.
So, if you have a real high margin on conventional and a lower margin on organic, you sell more organic at a higher price, but you make less margin. OK, great, it depends on what metrics you’re thinking about. If the manager gets paid on gross sales dollars that’s fine, if the manager gets paid on gross margin that’s not good.
Q: Does that pay structure vary a lot depending on the retailer?
A: There are different metrics, in some cases its gross profit, in some cases its gross margin, in some cases it’s shrink… We talk about organic, OK, organic starts getting old quicker, it depends if they put in the fresh cut section of the store, sometimes they put in the conventional area at lower prices…
Q: This connects back to oversupply and food waste. I know you have some pointed words on that topic.
A: Yes, let’s talk about food waste fallacies. The single largest source of food waste is too much food, excess production. We throw away food because we produce too much of it. Remember in the 60’s, the population boom, there is no way we can produce enough food and people are going to starve to death. Then the rationale, so, if we produce too much, take that food, and give it to people. I could give it away or store it longer. We have wonderful technologies to increase shelf life. Back in the day, I increased my cucumbers shelf life, it’s called pickles. When we couldn’t consume fresh fruit, we preserved it…
Q: Logistically, it’s not always possible to get that excess food to those in need. Also, there are costs involved with picking, harvesting, and transporting, etc. The efforts to sell misshapen fruit, Ugly Fruit campaigns, while good intentioned have had mixed results at retail… Does it make sense to have a goal of zero waste?
A: I would argue, no. If you’re going to have excess, you will have waste. We go and push it into the grape juice, we do the dessert syrup that goes to Starbucks, that’s a big customer. In some cases, people figure, I can just abandon it in the field, or I can pack it and ship it to Chicago, and he can dump it there.
We say, oh we have all these mechanisms, but I can’t sell the fruit I have right now, and I’m going to have lower grades? I look at the Ugly Fruit programs that have been around for several years. If Wonky Fruit is a good idea, show me your sales data.
A lot of this goes to the difference between data and insight. Artificial Intelligence (AI) and data insight is everywhere. The two biggest new services in produce tend to be either brand building guides or AI to either help operations or data tracking.
Q: How reliable is historical data in assessing future trends? Developing varieties can take a long time…
A: This reminds me of a presentation on the difference between tracking a trend and forecasting (from NEPC Boston) Have you ever heard of the Gartner Hype Cycle from the tech world …look at the curve.
Data is knowing you are driving 70 kms per hour. Insight is knowing that is too fast in front of a school and too slow on the motorway.
It’s like driving down the road looking in rear view mirror. As long as things are not radically different, you’re ok. With trends and innovations, how come some fruits or some vegetables go up and some go down in consumption and why. Trend tracking doesn’t really tell you the why. We can go to a lot of these presentations, and they tell us people are eating more salads and less roasted vegetables, but they can’t say why. I need to plan production next year or for certain crops for the next 20 years. Is this just a flash in the pan or sustained? That’s why we want more data not just simplistic data.
There’s the popular diet du jour, for a while it was low carbs, down with potatoes then back up with potatoes, all fats were bad, then olive oil and avocados are good fats…Now sugar is the number one avoidance attribute in the U.S. Many lifestyle diets discourage fruit consumption. Sugar is what makes fruits good. If people stop eating sugar will the fruit business start going down, I don’t believe that is true. People will come to the realization that not all sugars are created equal, OK, there’s the calories, but to eliminate total classes of food because of one attribute is illogical. Is it time for ‘the good sugar’ the same way we talk about ‘the good fat’?
Q: Promoting fruit as good sugar, interesting…of course there’s no shortage of selling points from a health standpoint, antioxidants, anti-inflammation properties, science linked to reduced risk of diseases. Is marketing to health reaching a niche audience?
A: Recommendations will influence consumption for say 18 months, we might see these fads, and on to the next miracle diet. There seems to be fluid hierarchy of attributes with consumers. OK say antioxidants are in the news, or some popular celebrity is promoting something and then suddenly there’s a lot of interest in that…Two months later I’m all about fiber content, then I want celery… For the population that seems to follow such things, there seems to be a short attention span for top-of-mind attributes. I need to monitor calories, so calories are top of mind forever, but it doesn’t seem to work like that, but that’s true for weight maintenance, and health too.
But when you say health, well health to a young person may be fitness and appearance, and health to an older person keeping out of wheelchair mobility and vision and things like that.
Q: Maria Weiloch, ICA Sweden, who also will be presenting in London, points to research that shows a certain percentage of consumers is turned off by campaigns that tell them what is good and bad for them to eat. And that there is often an association that what is good for you doesn’t taste as good…
A: In reality, what you like and does it have healthy attributes are not related, it’s all over the board, but in general people think healthy things don’t taste as good, and all the stuff that’s bad for you is delicious.
We use moral words, oh, this is decadent, why is eating something sinful? We use moral ideology to describe food in a negative fashion. The quarterback Tom Brady says, I don’t eat strawberries because of XYZ…People will look down a set of facts that agrees with their opinion.
It gets back to the demand planning. The best way to reduce food waste, surplus food, is to determine I didn’t need to produce it. I have the water usage, I need to irrigate it, the labor costs, all these costs into food I’m abandoning. We could have used that fertilizer, all those inputs and all that labor for something else. Hey, government, pay me not to produce surplus food. I’m not running a tractor, I’m not doing xyz.. how many metric tons of carbon footprints am I not extending? You’ve been planting 1,000 acres, just plant 800 acres.
Now they want me to set aside land for bees. There’s a program to set aside three percent of your land for native pollinators. There are problems with bees, we have invasive species, African bees, certain diseases that get into them. Some argue against agrichemicals… We’re going to give three percent of our land for native habitats, grow flowers for bees, now I have to water that, I have to farm that land just for the bees. Why couldn’t we make a bee reserve here instead.
Q: Isn’t this program part of Walmart’s initiative focused on restoring pollinator habitats through integrated pest management?
A: Yes. I don’t know if Walmart is requiring it or it’s on a volunteer basis to be a part of that program. We have this shortage of water, so the Army of Engineers has decided to redo the dams. We have lands we can’t farm because of water shortages, but we’re going to set aside land for bees…
Q: According to Walmart, “Walmart U.S. will encourage fresh produce suppliers to protect, restore or establish pollinator habitats by 2025 on at least 3% of land they own, operate and/or invest in and report annual progress….and “Walmart U.S. is committing to source 100 percent of the fresh produce and floral we sell in our in-store produce department from suppliers that adopt IPM practices, as verified by a third party by 2025.”
A: There is a fluid hierarchy of items in corporate sustainability. After the summer of George Floyd, there was a renewed focus on sourcing from black-owned businesses and becoming more diversified…
I think our trade is going very carefully with the sustainable packaging thing and the idea of replacing all these plastics. How do you keep some of these products fresh and protected? We are looking at different options and experimenting with alternatives, but we’re going to have a lot of problems with non-transparent packaging… Every retailer came out and made their announcements, what products can we try this with, apples or potatoes, but don’t touch the berries. I commend retailers for taking that approach. Hey, United Nations if you have a better alternative to plastic, bring it on.
Q: Philippe Binard of Freshfel discussed the problems brought on by the French plastic packaging ban that went into effect in January 2022.
A: Yes. It reminds me of the fumigant methopromide, which we still use now. There was a Montreal Protocol in 1988 to get rid of it, to phase it out in 30 years. And in five years you could start to test alternatives. So, 30 years was four years ago, and we still don’t have a replacement. We have some substitutes that are adequate for some applications but don’t work in others. We’re still using the methopromide we used 30 years ago. Ronald Reagan was President and Margaret Thatcher was Prime Minister. There were all these U.N. meetings, it was ozone depleting, and we were going to phase it out.
At the New York Produce Show, Brad Rickard of Cornell presented interesting research, would consumers pay more if you could breed grapes with less chemicals, and it was not that important, as long as it tastes good and looks good, I’ll buy it…The unspoken assumption, I’m down with doing things for the environment as long as it doesn’t affect my personal priorities.
I think we could say the same about packaging. Packaging is to protect and maintain the quality of the product inside. That is packaging’s mission statement you could say. If you can do that and have a more sustainable package, I’m on board. I’ll do things for the environment, as long as it doesn’t cause problems for me personally, or cost too much…
Q: Could these high inflation rates create additional issues there?
A: How are companies managing this? Supermarkets talk about comp sales. How were dollar sales compared to last year? My stock portfolio went up 10 percent, but the market went up 20 percent…
We haven’t had this type of inflation in more than 40 years. Stores with 10 percent increase in sales are actually doing horrible, and those with 4 percent increase are doing really well…Comparing numbers on a page, am I measuring the right things in the right way?
The other thing is pricing, initially consumers have a hypersensitivity to price, researchers call it a value perception shift. Whether it’s a burger and fries, a bunch of grapes, a car, or a gallon of gas, what’s this supposed to cost now? Initially we have sticker shock. The deal is, that the initial shock wears off over time.
We find a new equilibrium of what things should cost, the reaction is, oh no, we can’t raise prices…we’re in this price time capsule where prices can’t go up. At some point cars cost more, fast food is a lot more, restaurants are a lot more, we’re still driving cars and eating fast food…
The other thing, prices have been suppressed for a long time. Ocean freight wasn’t making money for 20 years and now they’re making it back. We had artificially low inflation for a long time. And when prices go up there’s a sticker shock. People are also making more money.
Q: Not everyone though…Do you think the pandemic might be playing into this?
A: To an extent, but I still think the reaction to price increases has historic precedents, when prices go up, people think there should be a law against it, these guys are steeling from me…
Q: The produce industry already contends with very low margins…
A: We need to be very competitive. Few people have pricing power. At the end of the day, if apples are 10 dollars, I won’t eat apples, I’ll substitute for another fruit. A store can only raise prices so much within a competitive area.
Q: What’s your advice?
A: In short, on the supplier side, we need to be more thoughtful predicting demand before we expand.
To retailers, my advice, don’t panic with inflation, consumers will get over it. The industry is gathering in London to help build that synergy.
Q: Yes, and you’ve sparked plenty of conversation to brainstorm the best paths forward through that synergy.
John doesn’t specifically mention it but the root of many of the issues he is concerned with is that per-capita produce consumption is not increasing and may well be declining. Decades of industry programs to increase consumption have mostly failed. At the London Show we have presentations from Maria Weiloch of ICA, Rich Dachman of Brighter Bites and Dan Parker of Veg Power each representing cutting edge efforts to increase consumption.
The great success of the industry is actually producing better products, charging more for them, so we can see sales in financial terms increase on a per capita basis even if actual consumption is flat or declining.
There is a clear bifurcation in consumption with more affluent, more educated consumers upping produce consumption while poorer, less educated people, are eating less fresh produce.
Even with great programs that are boosting consumption among the poor or young children, we just don’t the data to know if giving produce for free to young children, actually means those children ill aet more produce when they are 35 and have to pay for it themselves.
John, being a deep insider blessed with a willingness to speak out, is a vitally important source of information. Issues such as organic produce being sold as conventional because there is limited demand and the reality of price differentiation and production cost differentiation on organic are vital issues to discuss.
The role of retailers trying to dictate land seta sides for bees and what not and what that means for the economic viability of agriculture. These are all things so many are afraid to discuss.
You can’t be fully informed if you are not engaged with these issues as these issues will determine the future of many businesses and the industry as a whole.
So please join us at The London Produce Show and Conference to engage with John and the issues that matter for our businesses and our industry.
You can register for free attendance at The London Produce Show and Conference right here.
There are still some last minute opportunities for sponsoring and exhibiting and you can seize those right here.
Come and be part of the great industry reawakening! We look forward to seeing everyone at The London Produce Show and Conference.