FRESH SUMMIT 2000 2000-10-23

ROBERT VOSBURGH

ANAHEIM, Calif. -- If the produce industry is calling the just-concluded period of retailer consolidation an earthquake, then everyone is still feeling aftershocks -- that is, the intensity may have diminished, but the landscape continues to change.

So, it seems especially appropriate that the Produce Marketing Association has selected Anaheim in Southern California as the site for its Fresh Summit 2000 convention and exposition. Bryan Silbermann, president of the Newark, Del.-based trade organization, believes this year's show will reflect how the various components in the produce supply chain are repositioning themselves in the aftermath of retailer consolidation.

"I think some of [the shock] has made its way through the system, and people are adjusting to it." he said. "So, while consolidation is certainly still a big issue, I don't think it has as high a profile as it did a year or two ago."

To be certain, the scope of change on the retailer end continues to play out. But there is noticeably less overt activity. Most of it is now confined to internal adjustments, as the new, larger companies work to implement the efficiencies that consolidation promised.

Grower/shippers and ancillary businesses, on the other hand, are finding themselves caught up in a tsunami of sorts, as these new companies crest above the entire distribution channel and force all players to seek safety in new -- but more significant -- roles. Pressure is now building on the supply side to keep up with the changes at the other end of the distribution pipeline.

The umbrella of consolidation covers a lot of territory once thought stable. But today, tremors are running through everything from produce containers to the way buyers and sellers communicate, Silbermann said.

Packaging is a primary link in the chain that connects grower/shippers to wholesalers to retailers, and forms one of the foundations of this year's educational program, according to Silbermann. A "double-header" discussion -- spanning both sessions on Monday, Oct. 30 -- will first bring attendees up to date on the formation and inaugural meeting of an industrywide packaging task force convened earlier this year by PMA and the United Fresh Fruit and Vegetable Association, Alexandria, Va.

"People are really going to see how much closer the two sides of the packaging industry have come to one another," said Silbermann, referring to the main players, corrugated cardboard and returnable plastic containers.

Here, he said there is a growing consensus that the discussion is not about materials, but capacity.

"Maybe this whole discussion is less about what the box is made of, and more about what size it is," he said. "It's becoming as much the dynamic as what the box is made of, and who makes it."

Indeed, a large part of the debate thus far has lamented the lack of an industrywide standard. While RPCs have adopted the nominal 16-by-24 inch footprint, the paperboard industry is only now moving into the final stages of adopting one that's identical.

"I think the committee has succeeded in bringing a real focus to the discussion and providing a platform and a forum for various groups to discuss all this at a very high level," he added, noting the task force includes representatives from the retail, wholesale and supplier sides of the industry, as well as manufacturers of both corrugated cardboard and RPCs.

Part two of the seminar will serve as a forum for questions and answers as the industry moves toward adoption of a box standard. This phase includes three panelists serving as a catalyst for discussion. The panel will include Cynthia Forsch, corporate director of environmental affairs for Albertsons, Boise, Idaho, and be moderated by Silbermann and Tom Stenzl, president of United.

Technology is another issue that continues to top the "current events" list in the produce industry. In part, that is because the spate of retailer mergers and acquisitions is forcing a greater reliance on computers in the larger effort to generate greater efficiencies in the marketplace. Silbermann said that the industry continues to react slowly to technology's potential, though the interest level remains high.

"[Produce] is not an easy business to get your arms around," he said. "It's amazingly flexible, but it's also incredibly diverse. Businesses on the supply side tend to be, with few exceptions, smaller family businesses that aren't highly capitalized. So, even though they're risk takers when it comes to crops, they're still fairly cautious when it comes to new business systems and the change they represent."

To that end, Silbermann added that another roadblock to fast-tracking technology remains the sheer number of technology suppliers currently to choose from. He believes the sluggish pace of incorporation will remain until a clear number of leaders emerges.

One seminar at Fresh Summit 2000 will examine the current state of affairs in business-to-business communications, while another looks at the role retail sales of produce and floral can play in consumer-direct online shopping.

Of course, a consistent focus of every PMA convention has been another ever-changing aspect of the produce business: the consumer. Silbermann said he is encouraged by the renewed interest in fresh fruits and vegetables by the shopping public, and the ways in which the industry has responded with new varieties and value-added items like bagged salad mixes and snack packs, such as those pairing peeled baby carrots with dip.

"The vegetable side of the industry seems to be having a excellent year, the fruit side, less so," he said. "I think that's due in part because vegetable processors have been more successful in adding convenience."

While the industry is performing strongly, he noted the continued lack of commitment by the federal government.

"I think the work that's being done to try and get the government to put its money where its mouth is -- in terms of funding for better habits and education -- is a critical piece of what needs to happen," he said. "If we can spend all this money to alert people about the dangers of smoking, why can't we use a fraction of that to promote healthy eating with produce?"

These retail success stories are under challenge by inter-industry rivals, particularly food service. Silbermann cited figures from the just-released Foodservice 2010 study by McKinsey & Co. and the International Foodservice Distributors Association, Falls Church, Va., predicting food service will comprise 51% of total food dollars spent within 10 years, and 62% of new food spending during that period will go to food service -- all at the expense of traditional supermarket retailers [see "Study: Food Service to Eclipse Retail in New Food Sales," SN, Sept. 25, 2000].

"Food service is taking away a lot of business from retail," said Silbermann, whose organization also sponsors a food service conference every summer. "Produce is doing very well in a number of segments. Even quick service is adding produce. McDonald's just added McSalad Shakers to its menu."

Fighting the competition off will require retailers to retain a true focus on taste and convenience, he added. Silbermann also said that they should adhere to flexible buying programs that maximize the day-to-day changes in the marketplace.

"There seems to be more of a 'long-term contract' mentality creeping in, more program advertising and promotion, so we're not making use of the opportunities inherent in the industry," he said. "We have to be careful that we don't lose sight of how we attract consumers in our overarching rush to become more efficient, because you can become highly efficient, but not very effective."

The educational program throughout Fresh Summit 2000 looks at the retailer-consumer relationship through a number of different lenses. A two-part series on Monday, Oct. 30, reviews "Consumer Options," with one session examining where produce is being purchased today, while the follow-up session traces new avenues retailers can use to maintain, and build, their produce department volume.

Similarly, there are sessions on the newest produce promotion programs (Oct. 30), reaching ethnic consumers (Oct. 30) and even a live focus group featuring a panel of shoppers from southern California (Oct. 31).