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Grower-shippers given guidance

by Brian Gaylord | May 03, 2009
LAS VEGAS -- Conceding that it's a "humiliating era to be teaching economics," Ed McLaughlin, director of the undergraduate business program at Cornell University's food industry management program, did his part to enlighten and educate grower-shippers who attended the Grower-Shipper Super Session April 23 during the United Fresh 2009 convention, here.

Pointing to the interconnectedness of various sectors across worldwide economies, Mr. McLaughlin singled out China and India as driving forces in today's global economy. Purchasing power in those two countries - which combined account for 45 percent of the world's population - affects the worldwide economy and competition for natural resources. But it also creates opportunities for grower-shippers in the United States.

The world's perception of China and India may not match today's reality. For instance, of India's population of 1 billion, anywhere from 10 to 20 percent have middle-class purchasing power, Mr. McLaughlin said. Automobiles targeted for the Indian market "use fuel and add demand on oil," he said. "There are demands on oil and food use [in India] that didn't exist five years ago," Mr. McLaughlin said.

Global retailers such as Walmart Inc., with nearly 200 stores in China, and British retailer Tesco, the No. 2 foreign retail grocer competing in the Chinese marketplace, are responding to a population with increasing disposable income.

The Lotus Supercentre chain -- the largest Chinese-owned market -- has elaborate, impressive displays of fresh produce in its stores, said Mr. McLaughlin, who shared with the audience a slideshow of fresh produce displays in markets in both China and India.

Lotus offers "extremely high-quality" fresh produce, both bulk and packaged, Mr. McLaughlin said. Organic produce also is coming on in popularity in China - especially eastern China - he said.

"China is no longer a low-wage country," Mr. McLaughlin said. "The east coast of China is no longer a low-wage harbor."

France-based Carrefour - the second-largest worldwide food retailer after Walmart - is linking its produce departments to local growers as a marketing strategy. So while some marketing overseas has similarities to marketing in the United States, Mr. McLaughlin pointed out distinctions.

For example, he showed a sign in a Carrefour store in China stating that fruit sugar content "is guaranteed to be at least 12 percent," not the kind of marketing angle consumers are likely to encounter in the United States. Mr. McLaughlin also offered data and perspective on U.S. markets. One tidbit was that potatoes, tomatoes, lettuce and onions combined make up two- thirds of produce sales to foodservice. The top 10 retail chains control 50 percent of all grocery food sales, he said.

Of Walmart's stateside activities, Mr. McLaughlin said that for its first 25 years, Wal-Mart was known for low prices but that "same-store sales are going down, so they've added organics."

The current recession more or less matches past recessions in the United States in consumer buying habits, Mr. McLaughlin said.

"In every recession, people buy retail and don't eat out," Mr. McLaughlin said. Consumers are shifting to value stores, shifting from brands to private labels and shifting from eating exotic food to eating basic food, he said. Mr. McLaughlin urged the audience to think globally on both ends of the supply chain and to invest in "human capital."

Tom Stenzel, president of the United Fresh Produce Association, urged the audience to improve its efforts in food safety. Foodborne illness outbreaks have damaged consumers' perception that the food supply is safe, and the industry needs to continually strive to regain or maintain the public's trust, he said.

"It's not where produce is grown, it's how you grow it," he said. Mr. Stenzel drew an analogy to the airline industry, which doesn't shut down or slow down when a plane crashes.

"They don't ground the airline industry," Mr. Stenzel said. "We (produce) need to get to that point."

The fresh produce industry's efforts to revise its good agricultural practices are ongoing.

"We are ready to move on food safety," Mr. Stenzel said, adding that broad food-safety legislation most likely will involve areas such as import certifications, mandatory traceability, user fees, emphasis on preventative controls and authority to issue commodity-specific good agricultural practices. Laws on food safety may change as early as October or November, he said.