As the fresh produce industry attempts to recoup its losses from the 2008 Salmonella saintpaul outbreak that sickened 1,401 people, companies are turning their attention to winning back profits, as well as customers. Lessons learned from the 2006 spinach E. coli recall are steering the industry down the path to recovery, as it looks to overhaul federal food safety regulations and reconnect with consumers.
Tomato industry losses are estimated at $100 million, and in July growers launched an appeal to Congress to recover damages from the outbreak. The Food and Drug Administration (F.D.A.) mistakenly targeted tomatoes for the Salmonella illnesses at the start of its investigation, though jalapeño and serrano peppers from Mexico eventually were named as the culprit.
F.D.A. warnings, as well as media reports, prompted consumers to avoid purchasing fresh tomatoes for several months. A Produce Marketing Association (P.M.A.) study conducted June 13-19, just days after the F.D.A. issued its first nationwide warning against eating certain types of tomatoes, found that 88% of the people surveyed were regular consumers of fresh tomatoes, but two-thirds had stopped purchasing tomatoes. And a Harvard School of Public Health study, released just before the first tomato warning, found that 9 in 10 Americans remembered hearing about food recalls in the past two years, while 8 in 10 people who remembered the recalls avoided eating the foods involved in them.
Though if past recalls are an accurate model, consumer confidence may be a bit easier to win back.
"Looking back to what has happened with other commodities recalls, the impact should be short term," said Sean Fox, professor of agricultural economics at Kansas State University. "My best guess is that long term, the industry should not see a significant loss."
Mr. Fox noted that with the 2006 spinach outbreak, the industry saw the short-term impact of decreased sales for several months. But by 2007-08, even though sales were down, production also was down, but prices were up. So from an economic standpoint, he said the overall demand for spinach rebounded within a year.
Request for regulatory action
After the 2006 spinach outbreaks, regional produce associations developed a set of good agricultural practices (GAPs) and safety standards that helped the leafy greens industry recover from the E. coli outbreak. At a July 30 hearing before the U.S. House of Representatives Committee on Agriculture, industry representatives highlighted the best practices as a possible starting point for new produce legislation.
"With regard to leafy greens in particular, California and Arizona have established uniform GAPs and a corresponding verification program that requires implementation of food safety measures developed with the F.D.A., C.D.C., state health authorities and private sector experts. Compliance with the requirements is verified by government inspectors," testified Henry Giclas, vice-president for strategic planning, science and technology for the Western Growers Association, at the hearing. "These guidelines have become the foundation for formalized verification programs in which government inspectors audit production and handling practices for compliance. They are a food safety lynchpin, for helping F.D.A. and industry advance efforts to prevent contamination."
An important way for the fresh produce industry to regain consumer trust after the 2008 Salmonella outbreak is through similar measures, said Julia Stewart, public relations director at the P.M.A.
"We realize it takes more than rhetoric, it takes action to restore consumer confidence; and we’re working on that," she said. "In just two weeks, we’re announcing a plan and timetable to do chain-wide traceability within minutes."
The P.M.A. has worked in conjunction with The United Fresh Produce Association (United Fresh) and the Canadian Produce Marketing Association on a Produce Traceability Initiative.
"The Produce Traceability Initiative will help connect the internal traceability systems of each member of the supply chain," said Tom Stenzel, president and chief executive officer of United Fresh, in testimony before the House committee. "This whole-chain connectivity is based on three pieces of information that will be labeled on every case of produce: (1) a Global Trade Item Number (GTIN), which will identify who the originator of the case is and the type of product that is inside, (2) a lot number specifically identifying the produce, and (3) the pack or harvest date. This information will be labeled on each case so that the numbers may be read and understood universally throughout the supply chain. Labels will also carry a barcode, which each member of the supply chain will be able to scan so that the information can be stored."
Though Mr. Stenzel told the committee existing traceability programs did work during the recent Salmonella recall.
"Produce traceability worked in this outbreak," he said. "It provided tremendous evidence that tomatoes were not the cause of the outbreak, as there was no single point where contamination may have occurred. And, once investigators began looking for the right commodity, trace backs from Minnesota and from the F.D.A. led to the warehouse of a small produce distributor where an identical sample of the outbreak strain was found."
Enhanced produce traceability may greatly assist with restoring consumer confidence, Mr. Fox said.
"For about any food product when you have a recall of this magnitude, it points to the benefits of having a traceability program in place," he said. "Any company that can do that can probably limit both long-term and short-term damage to the sector."
Mr. Fox said consumer ennui with recalls and decreased media attention also may be factors in the equation.
"We’ve had a lot of different food scares with different commodities, and I suppose at some point, consumers become immune to it and realize the risk for individual consumers is so low," he noted. "The more recalls we get, the less media attention and coverage we get."
Out of touch?
In addition to media trends, the local food movement is another trend the industry should be cognizant of, Ms. Stewart said.
"Part of what we learned from the spinach recall a few years ago is that we’ve lost touch with consumers," she said. "For instance, more people are interested in local produce because they want to restore a personal connection with the people who grow their food."
In a Packaged Facts report, "Food Flavors and Ingredients Outlook 2008," the "local and ethical" trend ranked highest in this year’s food trends.
"Increasing environmental awareness, as well as growing individual consumer responsibility for taking care of the earth has led consumers to seek local ingredient sourcing," the report found.
In July 2008, Wal-Mart Stores, Inc. said it plans to buy 70% of its produce from local, U.S.-based suppliers. The company said it has increased partnerships with local farmers by 50% during the past two years, citing savings in shipping and fuel cost at the heart of the decision. The regional supermarket chains Wegmans and Hannaford both saw a 20% increase in local produce sales over the past year, per an Aug. 6 New York Times article on local food.
So in addition to better regulatory practices, the produce industry may be ripe for a marketing makeover. Organic Valley Farms, for example, profiles its family farmer suppliers on its web site (www.organicvalley.coop) to introduce customers to the individuals who grow Organic Valley foods.
"Individual stories are going to be important to tell," Ms. Stewart said. "Dole Foods is a big company for example, but at heart, it’s made up of family farms. We’re charged with how to restore communication with consumers."
This article can also be found in the digital edition of Food Business News, August 19, 2008, starting on Page 31. Click