FRESH AFFAIRS

MINA WILLIAMS

NEWARK, Del. (FNS) -- As this year's Produce Marketing Association's annual convention and exposition, in New Orleans, Oct. 16 to 20, approaches, the PMA's president, Bryan Silbermann, took the time to discuss with SN the issues facing produce retailers as the new millennium approaches. The PMA, founded in 1949, currently operates under a $9.8 million budget.

SN: What awaits retailers in New Orleans this year, and how has the gathering changed over the years?

SILBERMANN: We have seen a major shift in how retailers approach the PMA convention. Major retailers and service wholesalers are using the convention as a place to bring their own geographically separate people together for meetings about their strategies and plans. This time has become a focal point for them to bring buyers and merchandisers together and spend a couple of days talking about their own company's strategies.

Secondly, retailers are using their convention time to conduct business reviews with their supply partners. Everybody who is anybody is at the convention. It is efficient to have all these meeting there.

SN: How does the convention help retailers learn more efficient business practices as they apply to produce?

SILBERMANN: Aside from business reviews and new product introductions, the educational sessions will help retailers find new ways to improve their methods. Five general sessions and 17 workshops will present a series of topics critical for retailers. This year especially there are some real hot-button issues ranging from produce safety, to irradiation, to organics. There will be presentations on merchandising innovations, new technologies, efficiencies and a pretty strong focus on consumers and what they are telling us through research.

The other element being added to the convention is the growing number of foreign retailers attending. The PMA has been working closely with the U.S. Department of Agriculture, through programs such as the Cochran Program [promoting U.S. exports], to bring foreign buyers to the United States. We expect to see a number of developing countries represented at this year's convention.

SN: What other services, besides the convention, does the PMA offer that would be helpful to retailers?

SILBERMANN: Training, information and research are the three legs of our services, aside from the conventions and meetings. Issue updates are perhaps one of the PMA's best services. Over the past several years we have put in place, through technology, several means of rapidly communicating to our members information on critical issues.

Some of the topics, such as food safety and regulatory issues relating to produce, are ever-changing. We have the ability to send out faxes to all our members. They can also call in to our fax-on-demand system to obtain even more details on a particular issue, or they can log on to our members-only section of the Web site. Value-added information is a critical element that we provide retailers year-round.

SN: What major contributions to the industry has the PMA made in the past year?

SILBERMANN: Food safety is the key issue and one which we have focused significantly on in the past year. Last year at the convention we brought together, for the first time, the PMA Food Safety Advisory Council co-chaired by Bruce Knobeloch, of Schnuck's, and Roger Askey, Bob Evans Restaurants. That group met to determine what the PMA's food-safety priorities should be. What has resulted is the publishing of our food-safety guidelines, which serve as a major contribution to the retail community.

The PMA has also made contributions to the consumer-focused Partnership for Food Safety Education's Fight Bac program, as a financial sponsor. Another part of our food-safety initiative is in sponsoring the Food Safety Council, which is part of the National Restaurant Association. This council focuses on training materials for food-handlers. While that initiative began in the restaurant industry, it is much more applicable today for retailers as well, especially with more retail-based home-meal replacement initiatives going on today.

SN: As a $100,000 supporter to the 5 a Day campaign, how are these industry efforts being put to work? Is this national campaign driving increased consumption and retail sales?

SILBERMANN: On a recent market tour of St. Louis during National 5 a Day week, I certainly saw presence of the 5 a Day campaign. The evidence was everywhere and the visuals, before the consumers, were ever-present. Nationally, consumer research shows that people's awareness of the need to eat five servings of fruits and vegetables is up. Other research indicates that consumption is rising. While there are a lot of factors involved, clearly 5 a Day has to be one of them. The PMA remains just as committed today as we were in 1991 when we launched this concept as a separate foundation. We continue to contribute $100,000 each year, and we think it is a wonderful investment for

everybody.

SN: In addition to the marketing of fresh fruits and vegetables, the PMA has a Floral Marketing Association division. What is this group doing to promote floral? What trends are there on the horizon that retailers should be aware of?

SILBERMANN: A lot of attention for the PMA has been focused on a joint event we hold, Floral World. This year it will be held in Atlanta, Jan. 7 to 10. There is a lot of synergy at this event, many groups come together to hold concurrent events. It is truly the buying and merchandising event for the wholesale floral industry. WF&FSA, the Wholesale Florists and Florists Suppliers of America, joins us in this event, which attracted 4,500 attendees last year.

In the floral category, it is education and training for the retail industry, how to handle floral products, which is very important. Because of this, the PMA has rolled out a care-and-handling video, which we are seeing a strong demand for. Something our board has identified as a future project is to look at category consumption of floral products. We feel the surface has just been scratched in building consumer demand for floral products in supermarkets.

SN: With the PMA's 50th anniversary next year, what special plans, celebrations and programs are in the works?

SILBERMANN: We are going to kick off the publicity for our 50th anniversary at the end of the convention in New Orleans. The real anniversary celebration will come next October in Atlanta following a gradual building into a grand crescendo in 1999. The critical element of our anniversary, however, is that the PMA is not just celebrating 50 years of history. The PMA has always been an organization focused on the future, so we celebrate where we have come from, but even more important, we are focusing on where we are going.

SN: How is retail consolidation affecting the produce industry from the grower, shipper and packer standpoint?

SILBERMANN: Retail consolidation is cyclical. Obviously, consolidation is driven by the stock market plus competitive forces. Consolidation is introducing a whole new range of pressures that are not necessarily making it easier for retailers on the purchasing side. As some retailers get bigger and bigger, they find, on the buying side, that there are few suppliers who can handle the kind of volume they are looking for. If you are a large retailer, you can go to your manufacturers and contract year-round. This is much more problematic in the produce area. First there aren't that many suppliers in produce who can supply the huge consolidated chain with all they need, expect for some items like bananas. Then you have to throw weather into whole thing.

An interesting dynamic of consolidation is seeing strong regional chains becoming more and more important in the supply side of the industry because bigger does not mean more flexible. The produce industry thrives on flexibility, so when a supplier needs to move an oversupply of product, for example, they are seeking regional chains. Growth of the mega-retailers is increasing the value of regional store chains who have the kind of flexibility to turn on a dime and move product when it is abundant.

The other issue of consolidation is the tremendous diversity of opinion as to whether central buying for massive chains is the best way to go. Some of that relates to consumer demographics at store level, but more relates to the accountability and responsibility factors at the buyer levels. I've talked to a lot of people who acknowledge that central buying is the most effective way to go, but with produce this does give a tremendous competitive advantage to regionals, and makes for a fascinating struggle in the marketplace. Produce will become even more important in positioning a regional chain against a consolidated national. Regionals can offer something that has become available at short notice and items that may not be in large enough supply to satisfy a major chain.

SN: Will consolidations strengthen or weaken partnerships with growers, shippers and packers?

SILBERMANN: That really depends upon the spirit in which the retailers approach it. There are a lot of personal relations that have been built over the years between buyers and sellers in the produce industry. I think, as long as personal relations remain strong, we will be all right. Those companies that do not continue to use the personal relationships in the produce industry will struggle. Using new technologies for communication is going to help the produce industry in the long term, but it will never replace personal relations that have always driven this business. Companies that try to rely on tech-side and sheer strength of buying power will struggle with produce in the future. It is a different animal.

SN: What impact does globalization have on the produce and floral industries from the perspective of today's retailer?

SILBERMANN: I see a much more global approach to the retail environment. Many more companies are owned by groups that operate across country lines. This impacts how the produce business is approached. For example, consider European companies who buy United States retailers. The European companies are used to returnable containers for produce. As a result, you see the United States subsidiaries following suit. On the flip side, European companies are learning from their subsidiaries things like standard price look-up codes and merchandising trends.

We are seeing not just this great exchange between Europe and North America but also between us and the Pacific Rim and South Africa. We are seeing programs, like 5 a Day, becoming a global program. I don't think of globalization as simply multiple new sources of supply or multiple new markets for our products, but rather as global assimilation of trends and practices.

SN: Technology is progressing faster than most companies can absorb it. What are some of the cutting-edge technologies affecting the marketing of produce? How are retailers adapting? What is upcoming?

SILBERMANN: I think the biggest technological hurdle is electronic data interchange. We have talked about it a lot in the industry. The critical issue is its adoption by retailers as they work on year-2000 upgrades. What I am hearing is that, as they make changes for Y2K, they are building-in EDI compatibility. EDI in itself did not justify making major changes to software, because the cost benefits just were not there. Now that they have to change for Y2K anyway, putting in EDI compatibility has become more cost-effective.

So, come the year 2000, I believe EDI will take off, not as a replacement for personal relationships but to enhance accuracy of communication. There is far more communication in the produce industry between buyers and sellers than in any other department in the store. Any system that gives you a transfer of information accurately without having to re-key will strengthen these relationships.

The PMA is working on a white paper, through the Produce Electronic Identification board which we administer. A release date is expected by the first of the year.

SN: Food safety has received a good deal of media attention over the past few months. What is the industry doing as a whole to promote the subject?

SILBERMANN: Trace-back programs, initiated by growers, shippers, packers and commodity groups, are one means developed to help retailers deal with food-safety issues. A lot of the trace-back issue is based on more bar coding of boxes and pallets. Unless product can be followed through the store, there really can't be a good trace-back. I think trace-back capabilities have improved, since retailers recognize they have to build in compartments to minimize exposure. In the event there is a problem, they have to lock up that compartment, call the product back, and destroy it to minimize the impact on the entire line.

SN: Convenience is one consumer trend that has reshaped the grocery industry. How does this trend play out in the produce department?

SILBERMANN: Produce is one product that particularly lends itself to home-meal replacement. It is ready to eat and has always been a perfect snack food. The issue is how to integrate produce into HMR.

The fresh-cut salad category continues to grow, though retailers are becoming more selective and are implementing category management to weed out particular items. Shelf space is still at a premium for them. With precut fruit, the increased attention on food safety will push more fruit prep out of the store. If retailers can't do it really right, it will have to be done in central commissaries or local processing plants.

I do see an increased focus on kids' snacks. Kids drive a lot of HMR decisions, especially in the snack and school-lunch segments. Moms want to offer nutritious and fun-to-eat items. I expect that area to be a major push for produce in years ahead.

SN: How will new items impact the produce category?

SILBERMANN: New items will help the category by offering variety and flavors that excite consumers. I'm not just talking about exotics and limited-availability items, but those that are more a part of the mainstream. It is much more significant for the industry when we offer a new apple, like the Pink Lady, or seedless watermelon, which has become a preferred product for many consumers. These items not only have to have volume and availability but flavor. American consumers have been raised to want something new every year. We have to use that to not just pique interest but to expand the category.

In past years we became efficient, developing new varieties that shipped well. From those experiences we learned a lesson: tremendous shelf life was not what the consumer wanted and these items were not bought more than once. We were efficient vs. effective. We have to be effective with new varieties that consumers will buy a second, third and fourth time. These new items have to taste good and be convenient.

SN: Could you comment on the continued push for national organic standards?

SILBERMANN: The adopting of national organic standards has been dragging on too long. We simply can't have a patchwork quilt of state-by-state standards. It is critical to get standards out and implemented as soon as possible. Organic production will not take over or even become a majority of produce production, but it is an important niche and it is growing within certain demographic groups. As soon as we get national standards in place there will be more comfort on the side of retailers and customers. I know the wheels of government grind slowly, but this is ridiculous.

SN: Irradiation and genetic engineering are other issues emerging more and more. How will these methods impact produce?

SILBERMANN: You have to start at the opposite end of the process, with the consumer, and ask, "What will it take for consumers to accept irradiation?" Consumers have to be shown clear and unequivocal benefits of irradiation over nonirradiated products. If they see such a benefit, some people will buy it. The meat industry has made a push for irradiated ground beef, and consumers can see the benefit clearly, because it addresses many of the contamination issues. I am not sure the argument is as compelling for produce, where you could clearly point to that type of benefit.

As for genetically engineered items, consumers are already getting more and more products that are genetically engineered. Within the next two to three years I expect to see more produce items genetically engineered. Already certain cash crops are being genetically engineered for production, not consumer, benefits. So again, when consumers choose these produce items, it will be because they believe in it.

SN: With all these changes afoot, what new shipping or warehousing techniques can prove beneficial to retailers?

SILBERMANN: As food safety continues to command attention, certain ozone treatments will be used, where ozone is put into wash water as an antibacterial. Another area that is gaining momentum in shipping and warehousing is environmental improvements, specifically those that offer time and temperature controls, both over the atmosphere generally and humidity levels. One thing food-safety guidelines stress is to ensure that truck temperatures are monitored more carefully by buyers. Technology is now being used to monitor temperatures during distribution using digital equipment downloaded from the tractor trailer. This gives buyers an expanded view of temperature variations and its impact on the quality of produce.

SN: Moving forward, what do you see as the most critical issue facing the produce industry?

SILBERMANN: With consolidation in the retail industry, people within the produce and floral segments must realize that it is the human connection with perishable products that remains just as important as ever. Retailers may have bigger buying firms with larger resources, but it is people at the other end of the buy on whom you have to rely.