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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
