To paraphrase Winston Churchill in a different context: to the produce industry, foodservice is a riddle wrapped in a mystery, inside an enigma.
Foodservice is clearly the future. It is not merely an opportunity; it is THE opportunity. The trend to cooking less and buying pre-made dishes to eat out or take home is well established. Yet, as opposed to the retail industry, with its dedicated produce staffs interested in boosting produce sales, to a typical produce shipper there is literally no one to talk to at the operator level who is vested in the idea that produce is what matters. Our mighty branded vendors sell loads to foodservice but have trouble getting a premium for those brands.
As the produce industry gathers in Monterey to celebrate the 25th anniversary of the Newark, DE-based Produce Marketing Association (PMA) Foodservice Conference, the industry finds itself in a quandary: Undoubtedly dependent on foodservice for big volumes and destined to become more so, the produce trade looks ahead and sees great challenges as foodservice approaches a tipping point at which its retail base will be a secondary customer. Our world will be turned upside down.
While we celebrate 25 years of vibrant growth for produce and foodservice, let us also look at five challenges that lie ahead.
1. The end of produce exceptionalism: Will “From Field to Fork” become just a slogan?
An unusual attribute of the produce industry is that both buyers and sellers identify themselves as working in produce. As such, both buyers and sellers have personal interests in advancing the produce industry and in maintaining a personal reputation with both the buying and selling community. A retail produce director, buyer or merchandiser may well find his or her next job on the other end of the business.
This personal unity of interest leads to a willingness to serve on committees and boards and to work cooperatively for the advancement of the trade. It is why both major national trade associations have a vertical cast, drawing membership from the whole supply chain.
But it is also very unusual. A supermarket buyer assigned to purchase the ramen noodle inventory does not think of himself as in the ramen noodle industry. If his next job is buying mustard, the buyer doesn’t think he joined the mustard industry. These buyers are in the supermarket industry, and the personal interests of the buyers have little to do with maintaining the overall prosperity of ramen noodle producers or mustard manufacturers. It is highly unlikely any of these buyers will become the chairman of a noodle or mustard association.
This is why at the Washington, D.C.-based Food Marketing Institute (FMI), the supermarket industry association, you can’t be a full voting member and represent a packaged goods company. And this is typical of trade associations, almost all of which are “horizontal” — representing either buyers or sellers — rather than “vertical” — representing both.
The organization of foodservice operators strikes at the heart of produce industry exceptionalism. Foodservice operators seldom have dedicated produce buyers; they typically have a food and beverage person or team to manage that end of the business and procure produce, meat, seafood, and coffee. But most people given the responsibility of buying produce at a foodservice operator don’t think of themselves as in the produce industry; they are in the hotel or restaurant business or they are business-and-industry feeders — but not produce people.
There are always exceptions to prove the rule. Right now Janet Erickson of Del Taco, Lake Forest, CA, is chairman of PMA, Joe Brennon from Marriott, Washington, D.C., was once chairman of PMA, and Jim Ratliff of Hilton, Beverly Hills, CA, was also chairman of PMA. Here is a quick quiz: Name one other person who works for any of these companies.
If you don’t have experience with the companies, you probably can’t. Though they made and, in some cases, continue to make important contributions to the produce industry, it was an idiosyncratic use of their time. Not bad, just unusual, like an American deciding to excel at cricket.
Put another way, their involvement with produce lacks the institutional backing and self-interested motivations that sustain a long-term commitment to an industry and its institutions.
As foodservice continues to grow and, indeed, comes to dominate, it may well be that the produce trade will be unable to sustain these vertical institutions and integrated way of thinking. Instead, a fracture could take place, and the buyers will remain in organizations such as the National Restaurant Association while produce organizations come to represent the interests of sellers.
It won’t be the end of the produce industry, but it would turn the trade into just another supplier. An exceptional business, in which buyers and sellers identify themselves as part of the same team, would be no more.
2. Oh, woe is me: The dilemma of being a side dish!
At retail, in dealing with produce directors and their staffs, produce is the big enchilada. At foodservice, it is mostly a sideshow.
The key selling factor among consumers is the protein, the so-called “center of the plate.” That is what gets the order. Satisfaction with the protein leads to high consumer perceptions of the restaurant and thus repeat business.
It is virtually unheard of for restaurants to receive comment cards saying, “You guys have the best steak in the world, but my side dish of carrots was not good so I won’t be returning.”
But they get plenty of cards saying that the protein wasn’t good or is too small, etc., so the focus is on the protein. Even among dishes such as entrée salads that seem to be built on produce, the produce is usually a backdrop for the salmon or the steak or the chicken.
With the growth of vegetarianism, some restaurants carry vegetarian entrées, but even here, these often involve meat substitutes made of soy or grain or things such as pizza and pasta where the produce becomes an ingredient.
This year, the Produce for Better Health Foundation (PBH), Wilmington, DE, and The Culinary Institute of America, based in Hyde Park, NY, launched Produce First! American Menus Initiative, designed to address this specific problem. It is a great program designed to get chefs to put produce first — not relegate it to an afterthought. They did research and educational outreach to chefs and developed sample recipes. It probably will help expand produce offerings on menus.
The problem is that consumers still focus on the protein, and foodservice is quite responsive to consumer demand. Unless and until the consumer focus on the protein changes, produce will, for the most part, be just a side dish and an afterthought.
3. The economics stink.
Ever wonder why you can go to a fancy restaurant, order a steak and get a piece of meat big enough for four people, a mountain of mashed potatoes falling off the plate and two thin pieces of asparagus with a cherry tomato?
Paraphrasing James Carville, President Clinton’s noted campaign advisor, “It’s the economics, stupid.” The restaurant industry is simply being responsive to consumer values.
The consumers focus on the protein so foodservice operators will spend a pretty penny to get that nice piece of meat, pork, poultry or fish because consumers are willing to pay for it.
The starch is cheap — rice, potatoes, pasta — and thus perfect to fill up the plate and the consumer’s stomach if that obscenely large piece of protein didn’t do it.
The produce is comparatively expensive but doesn’t serve the same role as the protein in consumer satisfaction. It is a recipe to minimize produce usage.
Here is a shocker for you: Most restaurant executives do not view their mission as making America healthier, and increasing produce consumption is not on their “to-do” list.
They want to respond to consumer demands or, put another way, they want to offer foods people want to buy, at the lowest cost possible. So convincing a restaurant to scale back that mountain of mashed potatoes to add more asparagus is a very tough sell.
There may be an opportunity to get operators to scale back protein — but that messes with their prime directive. The industry needs research it doesn’t have showing consumers actually value being served more produce.
4. They don’t like to pay for our branding.
Most branded food products, both in and out of produce, are problematic to foodservice executives. Why? Simple — the whole focus of these companies is to develop a product and a brand for which they can get the consumer to pay a premium. But brands typically get lost in the kitchen, so no consumer knows what brand he or she is being served. [Editor’s note: See Branding in Foodservice on page 26.]
Besides, a restaurant is a sort of gatekeeper for quality that intrinsically devalues brands. Even if you normally use brands as a key to buying a good product, at a restaurant you feel you have an expert buying the product. Be it McDonald’s or a white tablecloth restaurant, be it tomatoes or fish, the assumption is the restaurant elected good quality for its scale.
So, not infrequently, big branded players aren’t all that interested in foodservice.
There have been many attempts to promote brands at restaurants. Every once in a while, you see a little logo on a menu saying this item is made with or served with some branded item. But usually branded vendors pay for it rather than restaurants doing it because of consumer loyalty to brands.
Beyond this, the whole concept is difficult for fresh produce with the vagaries of the supply chain. What if that particular brand of produce can’t be acquired this week? Should the restaurant place stick tags on every menu to cover the logo? It is a difficult thing to pull off.
5. We don’t know how to sell them anyway.
Most produce vendors are experts at selling products that buyers are already planning on buying. Sometimes vendors have new products to sell, especially in the value-added arena. But selling to retail is a different dynamic. Retailers may do a good job or a bad job with new products but, philosophically, most retailers work under the notion that new products should be given a test. They may do it in 10 stores or across the chain, they may want a fee, but they basically put products out and see if they sell.
Foodservice operates under a different paradigm. Foodservice operators buy only produce that is on the menu. No number of e-mails or faxes, no price reduction, no persistent salesperson will ever sell Kentucky Fried Chicken pomegranates because they are not on its menu.
So the dilemma is that, beyond their current purchases, if vendors want to sell to foodservice, the effort has to start with trying to get a vendor’s particular product on the menu. Yet most produce vendors are inept at this. They don’t have the consumer research to justify their product as an important menu addition. They don’t have the culinary expertise to assist in developing new menu items. They don’t pay their sales staffs or budget their efforts in a way that justifies working two or three years on an account, getting an item on the menu and only then realizing any sales.
And it is not an easy problem to resolve because it comes to the commodity nature of the industry. A company that built in the expensive infrastructure necessary to do a great job selling foodservice would succeed in getting an item on the menu only to see its price undercut by vendors of the same product who are attempting a free ride on the first vendor’s expensive sales effort. Indeed, the restaurant might use a frozen or canned alternative.
No wonder produce companies don’t spend the money needed to really sell foodservice — they may never get it back.