Blog: Spinach, Ahold and Tesco

Catherine Sleep | 25 September 2006

Recent years have seen great efforts to promote fruit and vegetable consumption, for example the five-a-day campaign here in the UK (make that six in Denmark, or a staggering nine in the US, which always did have to be brightest and best). Results are mixed, with the average Brit barely managing three portions a day, but it takes time for such initiatives to succeed.

Fruit and vegetables have probably benefited from their comparative evasion of major safety scares – until now, that is. A crisis has beset spinach, the vegetable that perhaps enjoys the most wholesome image of all, thanks in part to the cartoon character Popeye, unpaid spokesman for spinach for 75 years. (You may think I jest, but in 1937 spinach farmers in Crystal City, Texas were so grateful for his endorsement that they erected a statue of Popeye in the town and credited him for saving the then-dying spinach industry.)

Bagged spinach in the US has been identified as the cause of an E. coli outbreak that has so far spread across 23 states, with many people falling ill and one death. Suddenly the green leaf isn’t so innocuous. And just to crank it all up a gear, food safety attorney William Marler is already seeing litigation dollar signs, inciting victims to sue the spinach industry for medical bills.

Will spinach bounce back?

Meanwhile there’s trouble of a different sort in the boardroom of Dutch retailer Royal Ahold. Hedge fund shareholders appear to have taken courage from the successes of Heinz activist investor Nelson Peltz and decided they should have a greater say in the company’s strategy.

Centaurus and Paulson are pushing for Ahold to withdraw from the US, where it makes 70% of its sales, and concentrate on its traditional European operations. A strong set of Q2 results has done little to shake the hedge funds’ convictions, and speculation that the company could merge with Delhaize has been interpreted as a sign that Ahold is being forced to think outside the box.

Can Ahold resist shareholder pressure and steer its own course?

A third contentious issue that’s been in the news this week is regional sourcing, prompted by Tesco’s announcement it would set up regional offices to help it source local produce. This is sold as a win-win strategy: producers access larger markets, consumers get the products they want.

But it can have a more sinister side, as smaller producers struggle to keep up with a sudden surge in demand, or forfeit long-established outlets for their wares to fulfil less lucrative contracts from demanding multiples.

Regional sourcing may be a mixed blessing


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