Subterfuge in the Supermarket

When we go to the supermarket and shop the produce department, we, as consumers, have certain expectations. At the top of the list is that we expect fresh fruits and vegetables in the department to be just that – Fresh!

On April 6th of this year an article appeared in The Packer, which is the leading trade publication for the produce industry.  The headline of the article read as follows:

DelMonteFruitNaturalsDel Monte vs. Del Monte: What makes fruit fresh?

Before delving into the issue, it should be noted that there are two Del Montes. Prior to 1989 there was only one Del Monte and it was a subsidiary of RJR Nabisco Inc.  As a result of a leveraged buyout by the legendary KKR, the company was split into two.  Ownership of the brand remained with Del Monte Foods along with exclusive rights to produce and sell processed food products with the exception of “fresh fruits and vegetables”.

The other company created in this breakup was Del Monte Fresh Produce.  Del Monte Fresh received a royalty free perpetual license for exclusive use of the Del Monte brand on fresh produce. At the time of the breakup, the bulk of Del Monte Fresh’s business was bananas and fresh pineapple.  They were a distant number 3 in the banana business behind Chiquita and Dole, and second in the fresh pineapple business behind Dole, then called Castle & Cooke Foods.

After several iterations of shaky ownership that included the infamous Carlos Cabal (that story here) and his gang of thieves in Mexico that nearly broke the company, Del Monte Fresh survived and was rescued by a relatively small and unknown fruit exporter called United Trading Company, headquartered in Chile. Ultimately, UTC management launched a successful IPO in 1997 and became Fresh Del Monte, Inc. trading on the New York stock exchange under the symbol FDP.

So much for the background and now to the story.  In the mid 90’s, Del Monte Foods began packaging their processed fruit products in colorful high graphics mason jars, and pushed for placement in the produce department. Initially the products were marketed under the Orchard Select brand but eventually added the heritage-rich Del Monte brand.  Around the same time, Fresh Del Monte began development of their fresh-cut fruit line from “pineapple only” to include a variety of fresh fruit blends with limited shelf life requiring disciplined refrigeration.

As Fresh Del Monte began to ramp up their fresh-cut fruit business, Del Monte Foods viewed this as a threat to their “fresh cut canned fruit” business [sic]. A lawsuit ensued, and in 1999 a judge ruled in favor of Fresh Del Monte granting the company exclusive rights to sell fresh-cut fruit under the Del Monte brand. There was nothing in the ruling limiting or restricting Del Monte Foods from continuing their existing practices of using the Del Monte brand for processed fruit.

Beginning in the year 2000, both companies headed down their separate paths to build their respective cut fruit businesses.  Del Monte Foods began producing their processed fruit products in single serving deli style cups and achieved a high level of success getting placement in the refrigerated section of retail produce departments.  Even though the products were shelf stable and virtually identical to those  merchandised in the unrefrigerated dry foods section, they added the phrase “must be refrigerated” to their packaging.  An obvious contradiction to the “need to  refrigerate” was indicated by shelf lives exceeding one year, as evidence by the “best if used by” dates printed on the packaging.

Common sense, then,  would seem to conclude that fruit products with shelf lives exceeding one year are not truly fresh.  Further review of the fine print labeling on the packaging revealed the use of preservatives which included potassium sorbate and sodium benzoate on many of the products. The items without preservatives were those packaged in a heat treating pasteurization process in various offshore locations.

Meanwhile, Fresh Del Monte, through a series of acquisitions of regional fresh-cut processors and startups began building a national network of fresh-cut fruit processing operations.  The operative word here is “fresh”, as their products contained absolutely no preservatives. The typical shelf life for fresh-cut fruits was a reasonable 5 to 7 days. Compare that with the one-year plus lives indicated on  the Del Monte Foods’ products and draw your own conclusions as to what is truly fresh.

Now, this is not intended to be an indictment of Del Monte Foods, in fact, quite the contrary. They have not violated any labeling laws and  have done a great job in product development. From a marketing perspective, I think their strategy was brilliant. After all, when Mrs. Consumer is shopping the produce department looking for good tasting healthy alternatives to processed foods and spots Del Monte branded fruit in the produce department, the reaction is quite predictable. With its colorful packaging allowing full view of the product inside along with the statement to “keep it refrigerated”, what else is she supposed to think other than this is truly a fresh fruit product. If she chooses to read the label in detail, she would learn otherwise.  But then again, would she even care?

No, it’s not Del Monte Foods, but rather the multitudes of mainstream retailers, knowing full well the nature of the Del Monte Foods products. But, they choose to stock it anyway in the refrigerated fresh-cut fruit section of the produce department, which in my opinion, makes them guilty of  subterfuge. By the way, Webster’s dictionary defines subterfuge as “deception in order to conceal, escape, or evade.”  While there is nothing illegal about this practice on the part of supermarkets or Del Monte Foods, their actions are clearly an act to conceal, escape, and evade by promoting a product purported to be fresh when it isn’t.

And that is what the jurors in a federal district court concluded in their recent ruling that “Del Monte Foods’ fresh fruit claims are fraudulent.”

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