Surviving Trump

At the turn of the century, delivering milk to customer doorsteps was the norm. Then, as grocery stores and modern appliances took off, milk was mostly purchased at retailers. But today, as consumers demand to know more than they ever did before about what's in their food, how it was made, and where it's been, the milk man is not only back, he's thriving.

"The number one driver for our business is the quality of our products," said Bruce Bedford, Vice President of Marketing Analytics and Consumer Insights for Oberweis Dairy. Oberweis is a family-run dairy based on the far western edge of Chicago that operates 40 dairy stores, with two more planned to open later this year and more planned to open in 2018. Oberweis also delivers milk in glass bottles to homes across the Midwest. "Our customers love that our milk is 48 hours farm to table," Bedford said.

Food industry leaders from more than 60 countries gathered at the Global Food Safety Institute's conference in Houston in February. The next GFSI food safety conference will be held in Tokyo in March.

48 hours? Yes. And today's increasingly selective customers, on the hunt for local products, are drinking it up.

Every day, Oberweis trucks pick up milk from family farms and deliver it to the company's bottling plant near its home office. There, the milk is tested and pasteurized. It is then bottled immediately in glass bottles and loaded on trucks for home delivery, so families often receive their milk 48 hours or less after it comes from the cow.

“Our competitive strengths are taste, sourcing and our use of marketing analytics. Our business model is resonating with today’s consumer,” Bedford said. “We also take food safety as seriously as we take taste. It takes just one bad story, one bad situation to negatively affect the brand. Our customers are very vocal, if they don’t like something, they let us know.”

Bedford said the company’s promise of taste and transparency has been so successful that Oberweis is expanding home delivery to Raleigh, North Carolina and Richmond, Virginia this summer.

“Our home delivery segment is thriving due to our obsession with producing and delivering the best tasting dairy products, as well as our use of SAS analytics to support our strategic marketing efforts. We take a very analytical approach to identifying consumer needs and targeting our offerings to consumers most likely to purchase our products. SAS has been an enormously valuable partner in helping us achieve build an analytical marketing engine that mirrors the quality of the products we produce,” Bedford said.

The Oberweis Dairy story is just one example of the escalating supply chain pressures on manufacturers and retailers when it comes to food quality and safety. Today's food industry is more local than ever before but also more global. The industry is dealing with an unprecedented number of food safety outbreaks and recalls, which erode consumer trust and threaten brand reputations. While it's virtually impossible for companies to eliminate all food safety issues — especially considering the variable of in-home preparation — there are three pressing challenges that must be managed: stricter consumer demands regarding quality and sourcing (transparency), changing rules on food handling (traceability) and an increasingly digital supply chain (technology).

Today's consumers want to know what's in their food and how it will impact their health. It's a new day in which transparency is no longer optional — it's expected — and it will be retailers and manufacturers who will be held responsible when there's a problem in the supply chain.

In 2016 Oracle Retail surveyed 13,267 respondents across 12 countries and found that consumers ranked quality assurance as their highest priority when shopping, in front of value and product availability (The Power and the Money, 2016). In fact, more than 42% of the global respondents routinely demand to know where products are sourced from. These consumers believe the information should be pervasive through digital means, in-store and on products. They even expect store associates to have the information on hand. At least 29% of the respondents indicated more information would drive their loyalty to the retailer.

"In the last year, 48 percent of food recalls were caused by mislabeling," said Paul Woodward, Senior Director of Strategy, Retail Supply Chain Business, Oracle. "So for many companies, somewhere in the process information is being missed, is not being collected, the wrong packaging is being used with the wrong product, etc. So that's why it's important for these companies to put in a rigid process, or solution, to stop these products from being mislabeled. That would be a significant, significant cost savings for the industry."

Many companies are investing in training and education efforts to help their employees get up to speed on new food safety rules to improve visibility. And new technology is hitting the market at a rapid pace to help suppliers and retailers deal with all of these issues.

"We are listening to the consumer all the time, we are in constant contact with our customers. When it comes to these food safety issues, we are always doing our utmost to ensure the highest standards," said Gillian Kelleher, VP of Food Safety & QA at Wegmans Food Markets. "One area where we're constantly focusing our effort is on store food safety. There's high risk due to the amount of food preparation we do in our stores. We have a strong emphasis on employee coaching and education, making sure people handling food understand the ‘whys' behind our in-store food safety practices and the importance of what we do when it comes to safe food handling."

In the short term, Wegmans and others will have to comply with new food safety rules, which are poised to change substantially how the retail and food industries do business. The Food Safety Modernization Act, or FSMA, is the most sweeping reform of U.S. food safety laws in more than 70 years. It was signed into law by former President Obama in January 2011, but it took many years and considerable industry involvement to promulgate a wide range of rules, the first of which went into effect late last year. The majority of the new rules under FSMA will go into effect this year, and big deadlines in May and September.

One FSMA rule impacting suppliers and retailers is the Foreign Supplier Verification rule, which goes into effect on May 30. This regulation for the first time puts a giant magnifying glass on all imported foods brought into the United States, whether it's a high- or low-end product.

"The FDA and other regulatory agencies have always had control over domestic foods. But under FSMA and the foreign supplier rule, now food brought from other countries will have to be shown to be safe. It was never part of the food rules before," said Karil Kochenderfer, GFSI North America Representative for the Consumer Goods Forum. "The reality is that there's limited resources, whether it's companies, the government or consumers, everyone is stretched. And we have an increasingly global, dynamic food supply. The only way to prevent problems is through public-private collaboration."

And collaboration was the big theme at this year's Global Food Safety Conference in Houston, which attracted more than 1,200 attendees. The fact that those attendees came from 54 countries underscores just how global food supply chains have become and the large number of attendees highlights the degree of attention the issue receives. Trust and transparency were recurring topics, as well as listeria control, traceability and food safety innovation. A recurring theme among those in attendance is that the biggest problem upfront for retailers and manufacturers will be the initial investments required — including money, time, labor and legal resources — to implement a fully FSMA-compliant food safety plan.

"The more you move food, the more likely a food safety problem will arise," Kochenderfer added. "In an exceedingly mobile society, manufacturers and retailers must realize that A, we have a mobile, global public. B, we can detect substances that we cannot even begin to understand, and it takes time to learn the science. And C, scientists need to be respected. They are the gatekeepers and they need to guide our discussions on food safety."

With worldwide sourcing and complex supply chains that stretch to places with diverse cultural practices, rules and attitudes toward food safety, it is difficult for many companies to get a handle on their own suppliers and their suppliers' suppliers. Such traceability issues are being address by advances in technology comes in, to help retailers, food manufacturers and distributors understand and manage their own suppliers and trading partners for greater compliance visibility.

"The food industry is really being transformed by the Big Data revolution. You can now access, manage and interpret huge quantities of data, so you can prevent and maybe even predict potential food safety problems," said Brian Roufa, Chief Marketing Officer and SVP Sales Operations for ICIX, a provider of compliance solutions.

"For example, Walmart told us they collect about 2.5 petabytes of data every hour of every day — and they need sane ways to manage it, use it to spot changes and problems, and to make sure that most of their food safety and compliance is automated with standard operating procedure, so they only have to handle a small number of exceptions and problems. Complex supply chains also require more transparency and more collaboration among trading partners than ever before, to reduce the odds that something bad slips through."

Roufa says many companies are starting to take the compliance data they have and use it for other things outside of food safety and compliance. For example, if procurement can access compliance data, they can tell who has a good compliance track record, and who responds quickly in the event of a question or problem, so they can establish a preferred list of trusted trading partners. Or, companies might be able to use compliance information in marketing and sales, to help consumers develop brand preferences.

"Automation and smart data analysis are improving safety, but what we're seeing is that food safety regulation is now considered a low bar in the industry, and what everyone really wants to do is move beyond a safety focus to a quality focus," Roufa said. "We were at the Global Food Safety Conference in Houston recently, and most of the audience applauded wildly for one of the food manufacturers on a panel who said, ‘We don't compete on safety, because consumers expect their food to be safe. We compete on quality instead.'"

Smart retailers and manufacturers should be in regular communication and collaboration with trading partners, so they can know quickly if there's a problem and can respond quickly, Roufa said. So when a trading partner logs into the compliance system, it's easy to see which suppliers are in compliance, which ones owe documentation or test results, and which ones regularly respond, according to Roufa. Not only does this help in day-to-day management, but it helps develop a trusted set of trading partners that can be counted on to do the right things, on time. This cuts down on the probability that there will be a problem, or that one will get out of hand.

While the food and retail industries were deeply involved in creating the current regulatory environment for food safety, another recurring theme from the Global Food Safety Conference is that retailers and suppliers are expending tremendous energy to comply with the new rules. Further complicating things, or at least creating potential uncertainty, is President Trump's views on regulations. He has alluded to the possibility of tighter restrictions on foreign foods as a way to gain an advantage during trade negotiations and also expressed a dim view of regulations overall which could have an impact on FSMA regulations not yet implemented. Trump's choice to lead the lead the Food and Drug Administration, Dr. Scott Gottlieb, is also seen as a fan of deregulation and previously held senior positions at FDA during the George W. Bush administration.

Regardless of party affiliation, food safety is the ultimate bipartisan issue. Retailers and their suppliers need a proactive food safety strategy and supply chain transparency — whether mandated by the government or not — to maintain trust with consumers.