What Does Calling Peanut Butter “High Risk” Mean?
The FDA is considering putting peanut butter in the "high risk" category. Sounds great, but what does that mean? The definition, from the FDA's Compliance Program Guidance Manual is "foods that may present hazards, which FDA believes, may present a high potential to cause harm from their consumption." That is pretty general, and I've never seen a list of formal criteria.
What foods are considered "high risk?" I've been unable to find a complete list.
For some foods considered high risk -- soft cheese, seafood, and juice -- the FDA has created detailed and specific compliance guidance. The rest of the high risk foods -- whatever they are -- are subject to heightened scrutiny but not to special regulatory rules tailored to those foods.
So, speaking as a manufacturer, I can't really say what being listed as "high risk" will mean. But I assume I'll be finding out.
The FDA Comes Calling
I've been away from blogging for a few days while responding to the PCA recall. The FDA inspector came in last Thursday to follow up and make sure that we didn't have any PCA product (we don't). The State of Michigan called Friday to do some additional follow up on the phone. The FDA inspector also looked over our little peanut butter plant. All three of our lines -- peanut butter, nut roasting, and confectionary -- are shut down for our annual maintenance and cleaning period, so he'll have to come back to watch the peanut butter run.
Behavioral Economics to the Rescue
Several years ago I read about a study involving what people say they will pay for pens. I haven't been able to find the reference, but the basic setup was that people were presented with a typical cheap pen and, say, a $50 pen. They were asked which they would buy. Almost nobody would pay $50. But when presented with a cheap pen, a $50 pen, and a $100 pen, lots more people people picked the $50 pen.
I figured I'd test this out in my catalog, and asked my staff to create a $250 gift basket, which at the time was more than twice as expensive as any in our book. This was immediately placed on the "Jeff's Idiotic Ideas" list by my employees.
I couldn't see any effect on the less expensive baskets, but it sold well. So then I said, well, let's try a $500 basket. Again, no obvious effect on lower-priced baskets, but it sold well too.
I've been told that there is no way we could pack and ship a $1000 basket.
So we haven't added to the growing store of knowledge about behavioral economics, but I have learned to test assumptions about price points and what the market will bear.
UPS Annual Ground Volume off 4.4%
UPS reports:
Total U.S. volume decreased 4.4% with ground volume down 3.7% and Next Day Air® declining 10.1%. Pricing remained stable. Revenue per piece growth was constrained by a lower average weight per package and a continuing shift away from premium products. These trends, along with lower volumes, more than offset the benefits from reduced fuel cost and competitive wins.
We'll know the economy is picking up when this turns around.
2009 Catalog Kick-Off
Today I'll lead Koeze Direct's annual catalog kick-off meeting at which we start making plans for the 2009 holiday catalog.
Trying to plan 10 months ahead in uncertain times is no fun. I always told people that I would never feel like a real business person until I had run a company through tough times as my father and grandfather had. Now that I have the chance to do that, it is a part of my education that I would willingly skip.
We'll probably plan for a further 5% drop in sales, be prepared for 10%, and hope for a flat year. These are what my old controller called Wild A** Guesses.
When Spartan Tossed Us Out
We made private label peanut butter for Spartan Stores for around 40 years. In fact, when my Grandfather died in 1968, Spartan played a key role in keeping our business afloat by agreeing to pre-pay for peanut butter for a time to ease a cash flow crunch.
Fast forward to the late 80's or early 90's. The Spartan peanut butter buyer was visiting my father at our plant. After a tour and some conversation, my Dad and the buyer went out in the parking lot to get into my Dad's car to go to lunch. At the time, my Dad had a Mercedes Benz 190 -- their version of an economy sedan.
The buyer pointed at the car and said, "Is this your car?" My Dad said, "Yeah." The buyer said, "You shouldn't be driving a car this nice; that's my money in that car."
It is at that moment that my father knew that nothing mattered to Spartan except price. Shortly thereafter, Spartan went to another supplier.
I'm for competition and free markets as much the next person (well, almost as much), but Spartan tossed a long-time, high-quality, and local supplier (on whom they could easily check) for a penny or two a jar. Perhaps that was the correct decision for them and I trust their new suppliers have performed well over the years. But that decision, repeated by buyers across the grocery supply chain for a couple of decades now, put price far above every other consideration in buying decisions across the food industry. And steadily increased the temptation among manufacturers to get ahead by cutting corners.
The logical response by government would have been to step up surveillance of the food business. But we know what happened instead.
Lower Grade Peanuts = More Salmonella Danger?
Today's New York Times has a long front-page piece on the PCA recall. Little if anything new in the article, but I did find this little tidbit interesting:
“They had a little niche market, importing some peanuts from Mexico and South America, and buying a lower grade,” said Mr. Hall, who visited the plant when it clogged city sewers with oil overflows.
This goes back to a point I made earlier concerning the role that ruthless cost-cutting in the supply chain plays our growing food safety issues. The article also points out that Georgia's budgets for food inspections were under pressure. None of this excuses PCA, but we won't have consistently safe food unless the underlying money questions are solved.
Valentine’s Chocolate Sales = $345 Million
Nielsen projects Valentine's chocolate sales of 58 million pounds totaling $345 million. This is about 5% of annual chocolate sales.
Everybody assumes that Valentine's Day is big for chocolate, but Halloween is close to twice as big at 90 million pounds.
Wrap up on Initial FDA Observations
In a series of posts I picked apart the FDA's observations of the PCA plant. Assuming that the FDA's report is accurate (which PCA disputes), what does this show?
The report indicates that PCA had repeated positive tests for salmonella in multiple products over a fairly long period of time. The FDA also had positive salmonella swab tests in the plant. While the FDA's observations contain serious violations of good manufacturing practices they don't, to my way of thinking, account for the repeated positive tests. In the ConAgra recall, investigation eventually turned up a persisting source of ongoing contamination. Thus far no such source has been reported in the PCA plant.
Could just generally filthy conditions account for this level of contamination? I suppose it could, but conditions that bad should have gotten them shut down.
So, what went wrong with the inspection system? The plant had some previous issues on inspections, but they also received some decent ratings by inspectors from private agencies, and never seemed close to being shut down. My guess is that the plant actually didn't look that bad. The FDA's recent inspection paints a fairly shocking picture, but take out the salmonella testing findings and I guarantee you there are plenty of food plants (and restaurants!) operating as I write that have worse conditions than those cited. (Let alone conditions in foreign plants that export to the US.)
I think that the source of the ongoing contamination was more subtle than just general nastiness. (One possibility would be mis-handling of product re-work and scrap. Once salmonella is present in the lines, consistent improper handling of re-work and scrap could continually re-introduce salmonella into the system downstream from the roasters.)
I haven't seen anything in press reports or in the FDA's report to suggest that there was a continuing source of contamination, let alone what that source could be . But I also don't think that the FDA's initial findings come close to identifying a root cause for this outbreak.
2009 Peanut Recall List of Links
- The FDA's main page on the recall, including list of affected products.
- The Center for Disease Control's report in Morbidity and Mortality Weekly Report.
- Peanut Corporation of America's home page. (Not a place you normally want to have to list your agent for service of process.)
- American Peanut Council, including list of unaffected products.
- The Atlanta Journal Constitution's reporting, which looks to be the most comprehensive.
- Follow the politicians' reactions in the Senate.