Chat with Karst: Scott Danner on PTI, PACA and more

01/06/2011 05:15:28 PM
Tom Karst

I had the chance to chat on Dec. 29 with Scott Danner, chief operating officer of Kansas City, Kan.-based Liberty Fruit Co.

10:00 a.m. Karst: You have mentioned that your first job was picking sweet corn near Springfield, Mass., as a teenager. What was that experience like?

10:02 a.m. Danner: I think I started in seventh grade. My first day, it was like 5 a.m., and my first mentor stood up bigger than life and said, “Just so everybody knows, there are no days off in this job.” All of a sudden one ballsy kid raises his hand and said “What do you mean we get no days off?” He goes, “Sonny, if you can teach me how the crops can stop growing, I’ll give you a day off.”

(That job) taught me a really good work ethic.

10:03 a.m. Karst: Fast forward a little bit. How do you first connect professionally to the industry?

10:04 a.m. Danner: I had that job all through high school and all through college. Two years out of college, I went back to the man and he hired me as his general manager. I then to work for a farmers’ cooperative, which I am proud to say is still in existence. I get a kick out of this big (buzz) about locally grown and buy local. You know, it has been around for decades. I look back and I’m telling people, I can remember in the 1970s and 1980s, Walbaum’s, Food Mart, Big Y, Stop and Shop, all of these people, they promoted Massachusetts grown or Harvest New England or Connecticut grown. They had the pictures of farmers in their ads. It is almost like we are reinventing the wheel. It has been going on for decades, if not centuries.

I was there (at the farmers’ cooperative) for six or seven years, I took another opportunity with C & S Wholesale back in 1990. They had never done produce and we started from scratch.

10:07 a.m. Karst: When did you come to Kansas City? What excites you now about Liberty Fruit?

10:08 a.m. Danner: I came to Kansas City in 1993. We have a great owner (Arnold Caviar) at Liberty Fruit, a visionary owner who just turned 70. He is not resting on what he has; he wants more for his people. When he talks, it is never about me, me, me or I, I, I, it is always about him wanting to make sure his people are taken care of. It is definitely a family type environment. When a person leaves or moves on, it is like one of his kids leaving the nest. It is a welcome change coming from the corporate world.

10:09 a.m. Karst: What are some opportunities and challenges right now for your company?

10:10 a.m. Danner: For us, our challenge is that we are not on the East Coast where heavy populated areas are only ten miles down the road. Our challenge for growth is spreading our wings further and further. We are into nine states now. I joke about it with people in the industry, but our next town is 200 miles away. Our challenge is that fuel costs continue to rise over the past few months – I think we are about 30% higher than last year at this time – so it’s a big challenge for us. We don’t have that huge market where we can keep just trying to get more market share. In the Kansas City area, we have done a great job but again, with the economy, you don’t see a lot of restaurants expanding or supermarkets putting up new stores. For us, we’re spreading our wings.

10:012 a.m. Karst: I know you were recently named to the new Produce Traceability Initiative leadership council. What have been your initial impressions about that group and how do you think the industry is dealing with PTI implementation?

10:12 a.m. Danner: The big struggle we have right now is getting to the perception that it is not an association mandated deal, but it is our — the industry’s — initiative. I think a lot of work needs to be done to change that perception. When I talk to people now, they say, “Oh yeah, it is something PMA or United is trying to push down our throats.”

But it is not. The struggle we have is that anytime a company looks at an investment, the first words out of their mouth are “What is the return on investment?” For PTI, you cannot say that you going to invest X and get it back in Y.

What is the ROI? Hopefully safer food, you won’t have the massive recalls, hopefully you won’t have the kneejerk reaction where say (a certain lot of) cilantro is bad and suddenly you don’t want cilantro from anybody. The long term goal of this is that if there is a problem, you hit those lots, you get them out of the system, you destroy them and we move on. Let’s not hurt other suppliers and let’s keep the confidence level of the consumer.

That’s my struggle is try to educate why we are going forward with this and why we need to do it. I don’t think that is the norm right now in the wholesale/distributor sector. You talk to a lot of people on the terminal markets and not a lot of them are going full force on this.

10:14 a.m. Karst: As time goes by, what is your sense of what is going to happen with PTI?

10:15 a.m. Danner: I think it is going to happen, I really do. It is very costly to institute. We need to somehow address those costs because everyone is asking for more, more, more, more and no one wants to pay for it. It is the same thing as a person who walks in and wants a Lexus for a VW price tag. We understand everybody wants it, but is everybody willing to pay the 10 to 20 cents per carton it will probably take? There are a lot of big people there on that PTI council and trust me there have been discussions down that road. I was very, very pleased with our first leadership meeting at PMA. No one held back. There were no bad questions, no bad answers, there was no bad anything. There was a lot nice free speaking and openness and I think we have a helluva leader (Cathy Green of Food Lion) in helping us with that. We need to know what the issues are, and if we don’t’ know what they are we can’t address them.

10:18 a.m. Karst: When you were on the USDA fruit and vegetable industry advisory committee, there was talk of a PACA fix to the court decisions regarding post default agreements invalidating PACA trust rights. Will the USDA be able to come out with a proposed rule that address that?

10:18 a.m. Danner: I believe they will. What they are really trying to do is make sure they don’t open the statute up to legislation. That’s the worst thing that could ever happen. If we open this PACA up to legislation, we’re dead. The grocery people hate it, the dairy people hate it, the meat people hate it and they would love to get it to go away. The USDA understands there is a loophole there that was never designed to (disallow) post default agreements. It has just been interpreted that way by the courts. If someone is willing to make good on a debt and the other party who is supposed to receive the money is willing to do it over a longer period of time, what’s the problem with that?

10:20 a.m. Karst: Food safety legislation passed in the lame duck session after being in doubt. Is that a good thing?

10:21 a.m. Danner: It is better than nothing. It didn’t go as far as our industry wanted it to go, but it is better than nothing. Truthfully, I know everybody was hoping they would tie PTI or some sort of traceability to (food safety legislation). It would give us the federal backing we were really hoping for. PTI is still a voluntary initiative, though if you are dealing with the big boy retailers you will have to do it no matter what.

10:22 a.m. Karst: What would be one thing you would like to see for 2011?

10:23 a.m. Danner: I would love people — especially in the foodservice arena — understand what a true and real markup should be. We still have people out there thinking markups from the 1970s. It is crazy. Everybody’s costs have gone up and anybody who thinks that you can make a delivery for $30 or $40 a drop, they’re insane. You can’t do it anymore. Become realistic and understand when you drive 200 or 300 miles, it is more expensive than a customer just down the street. It is a tough thing to swallow, a tough thing to grasp, but it is reality.



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