United Fresh Produce Executive Development...

United Fresh Produce Executive Development Program

Cornell UniversityIthaca, NYMarch 5 – 10, 2017

Produce Consumption

Aristotle and the Consumer Average Consumer not Aristotelian

What Motivates Consumers Dangerous to be Self-Referential

Does Health Motivate? Everyone? More than Other things?

Volvo – Safety Is Our Business Pan Am – The World’s Most Experienced Airline

Produce Consumption

Menus of Change Harvard School of Public Health Culinary Institute of America Google

Produce Consumption

Is It A Promotional Dollar issue? High Cost

Commodity Trap

Message Indulgence Taste Luxury Red Convertible

Produce Consumption

No Research Launched as National Programs

Anecdotal A school

Off Topic or Poor Research Sales of a Brand Menu Mentions Confusion of Promotion with Promoted

Product Problems

Inconsistency in Produce Branding

Objective or Relative

Inverse Price/Quality Relationship Flaw in the Japanese Example

PBH/Trade Associations –Unable/Unwilling to Differentiate

Why Public Health Efforts Struggle With Produce

Cigarette Use 24.2%of those Less than 12 Years 34.1% of those with GED 19.8% of those Graduated HS 18.5% Some College/No Degree 16.6% Associate’s Degree 07.4% College Degree 03.6% Graduate Degree

Why Public Health Efforts Struggle With Produce

High Correlation Income/Education and Produce

Consumption

Ability To Absorb Wisdom Drop Out of School Children Before You Are Married Drugs Alcohol/Tobacco

Why Public Health Efforts Struggle With Produce

Second-Hand Smoke Provided a Detour Around Freedom and

Autonomy Issues Inconvenience Cost Will Soda Taxes and Other Initiatives Be

the Beginning?

Produce Consumption

Breed Better Varieties Where Planted Horticultural Practices

Take A Long Time Pears

Nine Years Twenty Years Twenty-Five Years

Produce Consumption

Culinary Technique Cultures Without Much Protein

Don’t Sell Produce As Medicine Tied Down By Government Funds

Produce First Partners

Berries in Cognac, Peaches in Cream Two Cheers for Bacon! Chocolate!

Critical Industry Issues

2007 Food Safety

2008 Sustainability

2009 Expediency

2010 Wal-Mart Transition

Critical Industry Issues

2011 Wal-Mart/Local: “Dumbing Down”

2012 Beyond Product and Process to People

Critical Industry Issues

2013 Tesco and Fresh & Easy

2014 Prioritizing Profits

2015 Hard Discount Retailing

2016 The Revenge of the Producer

BEGINNINGSWallabout Market in Brooklyn

BEGINNINGSWashington Street Market in Manhattan

BEGINNINGSHunts Point Market

BEGINNINGS

…AND MORE Exporters Importers Supermarkets Convenience Stores Mail order Restaurants Farms

Executive Share Groups

Retail Wholesale Distributor Fresh-Cut Processor Production Agriculture

The Tsunami of 2017

Radical Transformation in the Produce Industry Means We Can’t Take Things One at a Time

2017 Critical Industry Issues

Internal Proprietary Produce and Power Cheese, Halo and the Data Revolution: Low

Volume Specialty and High Margin Baskets: Rob Kaufelt/Murray’s Cheese/Kroger

Lidl Amazon Fresh/ Wal-Mart Digital Real Estate Tipping Point

2017 Critical Industry Issues

External Autonomous Trucks 10/25/2016 Otto Immigration/Minimum Wages –Robotics in

Harvest and Foodservice & the Secret Behind Paid Leave

Brexit/Trump – International Trade_ “ A country’s more than an economy”

Trump: Regulatory Approach Trump Campaign: Post Media Consumer

Outreach

How a Revolution in Genetics, Branding and Business

Practices is Altering Power Relationships in Produce

The Revenge of the Producer

Retail Sector

History Wal-Mart was the Great Transformer

Produce Industry 1988 - 2008

The Paradigm Consolidation

Washington, MO 1988 Retail Driven Supply Chain Responsibilities

Food Safety Traceability Sustainability

Rise of the Aligned Supply Chain Search for Scale

Post 2008

Wal-Mart Abandons Aligned Supply Chain in Search of Price Reduction No 52 Week a Year Supply No Supply Chain Management No Consumer Reference

The Local Response Further Compromise of Standards

“Dumbing Down” of the Produce Industry Search for Margin

Not Easy/Out of Stock, etc.

What Bruce Peterson Created

Aligned Supply Chain for each DC Intense Demands on Vendors

Capability not Price

Meet the Metrics Business is Yours Forever

What Bruce Peterson Wrought

Made Produce Shippers More Sophisticated Companies 52 Week Global Supply Chain Managers Metric Managers – Out of Stocks, etc.

Heroism

Consumer Issues/Grow the Business Reward Improvements

Melons

Bruce Peterson: The Multi-Billion Dollar Man

Certainty of Business Created Value Old Paradigm

Business Depends on Personal Relationships

Peterson Paradigm Business Depends on Meeting Metrics

Industry Valuations Zoom Jay Pack/Standard Fruit & Vegetable

Wal-Mart Moved On

Growth Slowed Less Concerned About Getting Produce More Focused on Paying Less

Others Reacted Price Benchmarks – Bananas Weak Players Replaced –Winco, Kroger

New Concerns Aldi and Hard Discounters, Technology

Production Base Hammered

Private Label Save R&D and Marketing

Tough Demands Food Safety/Traceability/Sustainability

Minimal Profits

A UK Future?

Consolidated Buyers Demanding Total Transparency Not Allowing For Adequate Returns

UK Pushback

Del Monte Abandons ASDA Tender Poupart Abandons Physical Property South Africa, South America, Turkey

Seek Customers in Russia, China, India

Reality Shone Through

Consolidated Buyers Multiple Sellers Parity Products Weak Brands Growing Private Label

Reality Shone Through

Leaves Producers Struggling Accepting Unprofitable Business Accepting Marginal Business Accepting Being Abused Agreeing to Non-Strategic Deals

A Few Points Of Light

Del Monte and ASDA Driscoll’s and Fresh & Easy/Tesco

Tripartite Transformation

No Speculative Planting The Rise of Genetics New Era of Branding and Marketing

Limited Speculative Planting

High Cost of Inputs Limits on Land Limits on Water Limits on Labor

1985 – 10% committed, 30% expected, 60% was speculative

2015 – 100% committed or expected

Salinas Giant

Consequence

More Predictable Profitability for Producers

More Dramatic Price Spikes Producers More in the Driver’s Seat

Mike Antle Rich Dachman Costco Organics Even More Limited

Power Shift From Retailers to Producers

The Rise of Genetics

Proprietary Produce

Compelling Consumer Attributes Flavor, Novelty

Limit Acreage Limit Vendors

Washington vs East Coast

Optimal Geography Optimal Horticultural Practices

Proprietary Produce

Recognizable Brand Marketing Fund

Fast Food Franchises Fancy Food Show Margins

Brand Required Quality Standards Auditing Alternative Labels Distressed

Proprietary Produce

Not There Yet Licensing Optimal Approach?

Sun World vs Driscoll’s

Business Pressures Syngenta

Driscoll’s Retail Share Groups

UK Responding

Sable Seedless Viva Strawberry

Consequences

Turns Retail Consolidation on its Head 100,000 Farmers but Only One Vendor Getting the Best Stuff Getting Differentiated Stuff

New Era of Branding and Marketing

Why Produce Brands Have Been Weak Parity Products

Not Like Mustard

Retail Gatekeeper One Only

No Universal Distribution Marketing Less Effective

No Packaging Consumers Can Evaluate Quality

New Era of Branding and Marketing

Stuart and Lynda Resnick Research

Pink Lady/Cripps Pink Club Varieties Packaging Opportunity to Interface with

Consumers – Social Media/Websites

Consequences

Retailers Want Specific Brands Halos and Cuties

Long Term: Clementine/Murcott

Shifts In Power Relationship

Other Power Lifts For Producers

Amazon Fresh/Internet Coconut King

Deep Discounters Experiential Retailers Foodservice Wholesale Processing Export

New Age

Producers Will Enter Negotiations From a Position of Strength

The Bifurcation of Production

Where Will I Get My Proprietary Genetic Material? Can’t count on it being there from

Universities of Seed Companies.

What Brand or Brands Will I Market Under? Value is Created by Consumer Preference

and Demand.

Aldi Fastest Growing Food Retailer in US Lidl Coming in Next Hitch Wagon to their Star?

Lidl

Global

LIDL LAST MOVE

OCTOBER 2012: FIRST INTERNAL LIDL CONFERENCE EVER

DRIVING BASKET SIZE AND LOYALTY

FIRST TV AD from LIDL : April 2014

Since then, 17 different copies

Share of voice January 2015: 14%

Share of market: 5% (+0,3)

FROM HARD DISCOUNT TO SMART DISCOUNT

AUSTERITY

IS GOOD

FRUGALITY

IS GOOD

EXPANSION

IS GOOD

NATIONAL BRANDS

IS GOOD

ADVERTISING

IS GOOD

GENTRIFICATION

IS GOOD

Global

The wheel of commerce

is waiting fora new incomer

How Did Deep Discounters Get To 10% In The UK?

Price Dallas – 26.14% below Wal-Mart

Recession Evolution Cultural Shift

Tipping Point

Initial Reaction

Small Base Recession Cooperation Avoid Cutting Margin

Create an Umbrella

Lufthansa and Ryan Air

German passengers will simply not be attracted by discount fares. Jürgen Weber, CEO, Lufthansa

The Germans will crawl bollock naked over broken glass to get to them. Michael O’Leary, CEO, Ryan Air

How Does It Work?Courtesy Oliver Wyman Labs:

Panic Among Mainstream Retailers in UK

“Price Investment” Meetings Supplier Discounts

Tesco Scandal Price Competitive and Margin Satisfactory?

The Problem?

Lower Prices Are Not A Business Model

American Airlines Approach

Robert Crandall Olive

People’s Express Lower Cost Structure Crandall’s Genius: Free Sell The Empty Seats

Saturday Night Stay Two Week Advance Purchase

Retail Version: Private Label

Unattractive Packaging Keep Full Margin Customers Attract Discount Lovers

Pull of the Discounters Same Customers

No Company Paying for the Food!

Psychology Everyone’s Equal at Aldi

Difficult Time

Nothing Is Forever A&P Sears, Roebuck & Co. Wal-Mart Aldi/Lidl

Aldi/Lidl Challenges

Prosperity Siren Song

Serve More People

Changes Credit Cards Assortment Restocking

To Endure and Prevail

http://www.PerishablePundit.com JPrevor@PhoenixMediaNet.com