From the pages of Jim Prevor's Perishable Pundit Some decisions in life are very difficult and some are really easy. Selecting a keynote speaker for The Amsterdam Produce Show and Conference was a really easy call. In a year when Lidl began its American invasion and Amazon bought Whole Foods, retail is the nexus of concern in the industry – and Cornell’s Ed McLaughlin is recognized as the world’s single most prominent expert on the evolution of retail as it connects to the food industry. Though his roots are American, his involvement in Europe is substantial. He has been a visiting professor of retailing at IESEG in France since 2009 and an Adjunct Professor of retailing at Nijenrode University, the Netherlands School of Business, since 1989. He has worked deeply with Albert Heijn since 1989 and founded the Ahold Retail Academy, which he has directed since 1998. Indeed, his chair at Cornell is named after Robert G. Tobin, who was the Chief Executive Officer and President of Ahold USA. There is simply no one on earth who so seamlessly combines an understanding of global retailing, the produce industry and who thinks so profoundly about the future. We asked Pundit Investigator and Special Projects Editor Mira Slott, to get a sneak preview of Professor McLaughlin’s presentation: Ed McLaughlin Robert G. Tobin Professor of Marketing Director, Food Industry Management Program Former Dean, Charles H. Dyson School of Applied Economics and Management Cornell SC Johnson College of Business Cornell College of Ag. and Life Sciences FreshFruitPortal.com Cornell University, Ithaca, New York Q: A powerful aspect of the Amsterdam Produce Show intertwines global academic excellence and cutting-edge industry research through unique collaborations with renowned universities around the world. Cornell University and its Food Industry Management Program have been at the forefront in that regard, with you taking a leading role. You’ve proven yourself to possess an innate mastery of lifting vast academic expertise into actionable real world solutions [Preview Of Foundational Excellence Program: Cornell’s Ed McLaughlin Leads Blockbuster Academic Cast To Elevate Knowledge Base Of New Produce Industry Professionals] These talents should serve you well during your keynote presentation in Amsterdam, since the topic you’re tackling is no small feat: Disruptions in the Food Retail Landscape: Implications for Fresh Produce FreshFruitPortal.com A: Today, the food retail sector is now arguably experiencing more radical change and disruption to its structure and conduct than at any time in its history. I see three main recent disruptions: First, the rise of discounters around the world but particularly in the U.S.; Second, the Amazon-Whole Foods deal impact; and Third, Wal-Mart’s dominance and strategic reaction to One and Two. I predict all three will reverberate through the food industry for years to come with game changing implications for both produce suppliers and retailers. Q: That’s a bold prediction. Could you walk us through your analysis, and also, contextualize the phenomenon for Amsterdam Produce Show attendees.? Do the impacts translate differently in Europe versus the U.S., etc.? FreshFruitPortal.com A: I can certainly sketch out what I have in mind for my presentation. I would like to hold back on the details for two reasons: First, I don’t want to give away everything, but more candidly, I’ll still be finishing my thinking and research right up to the Show, since this is a moving topic. Q: Fair enough, disruptive news is unfolding at a fast pace. We’ll create some anticipation, and leave room for attendees to pepper you with up-to-the-minute follow-up questions. A: That’s great. I’m up for the challenge! Q: How did you key in on these three disruptors specifically? Aren’t there other disruptors in play? A: I may bring in a fourth one to the discussion. Another important disruption is technology, and particularly in the produce industry, grower-oriented product and genetically-modified changes that will affect the produce system, and the branding. It could be challenging to give this topic its due within the timeframe of this one presentation. Q: We may need to extend the conference another day for you to cover all that ground. Why don’t you start by elaborating on what you consider the retail-oriented game changers: the infiltration of discounters, the Amazon-Whole Foods merger, and what Wal-Mart intends to do about it. A: I’ll summarize the highlights in each of those disruptions, and the implications I see for the produce industry. Number 1, let’s talk about discounters. In the U.S., Aldi and Save-A- Lot, and a few other equivalent-type stores have existed for a long time. We used to call them hard discounters. Aldi started in the U.S. 40 years ago. A foreign company thought they could survive by selling 600 SKUs, no brands, no bagging, no bathrooms, no phones, and no Coca Cola. It was a preposterous concept, and 1,500 stores later it’s booming. Q: But isn’t that growth also predicated on its evolution into fresh food categories, including produce? A: For the past 15 to 20 years, Aldi has carried fresh foods, and fresh produce particularly, although it didn’t start out that way at all. There’s a major acceleration going on now in the growth of discounters, with people keenly aware of Lidl’s entry into the U.S. this summer. Lidl, also a German-based company with 10,000 stores, is a very proven concept. In Europe, Lidl has more extensive produce offerings than Aldi, so it represents a substantial threat to Aldi in the U.S. It’s opened about 40 to 45 stores already in the U.S. FreshFruitPortal.com and announced that number will be as high as 100 by the end of this year. This is not a surprise to anyone. Lidl made its intentions very clear about three years ago that it was coming to the U.S., so all these incumbent retailers, including Aldi, have had time to prepare. Q: And have they done so? A: Aldi in preparation has announced it will now increase from 1,500 stores in the U.S. to about 2,500 stores by the year 2022. Aldi has already begun an aggressive capital expenditure program, taking fairly radical steps for a U.S. store. Instead of remodeling while the stores remains open, Aldi is undertaking the dramatic step rarely taken by a retailer — to allow the stores to go totally dark, closing the stores completely until the modeling renovations are completed. Q: Is that advisable? A: This is a very risky step for Aldi, because during the time of its closing, consumers must go to a competitor to get their food. Aldi risks they’ll prefer the competitor and not return to Aldi. Apparently, Aldi agreed to take the risk because they can renovate quicker rather than having to work around shoppers. If Aldi completes the 900 more stores than they have now, it will be the third largest food retailer in the U.S. in terms of store numbers, so this is a very significant development. There are two prongs, or somewhat three prongs, in this disruption development: Number one is Aldi; Number two is Lidl; and the third, which is often overlooked, is the rapid growth of dollar stores. If you think of just the two largest publicly held dollar stores, it’s Dollar General and Dollar Tree. Between just those two companies, they have about 28,000 stores, Dollar General by itself has announced for 2017, 1,000 new stores. One third of those stores will have substantial fresh produce departments. You remember when dollar stores used to be cans and cheap paper goods. Q: Are dollar stores really much of a threat for produce department-rich food chains? For years, dollar stores have carried relatively few produce items, just the basics, due to supply chain procurement and in-store logistics issues with fresh fruits and vegetables. A: They didn’t used to have refrigeration, and now they do, with money back guarantees if shoppers are not satisfied, and produce ads on the front page with as aggressive pricing as FreshFruitPortal.com you can get. One of the most rapidly expanding sectors is dollar stores, Aldi and Lidl. This poses an enormous challenge to traditional supermarkets because of the very low prices and increasingly improved quality, Yet this also represents an opportunity for produce suppliers in a channel that’s just beginning to develop, where they can sell products that might not have the highest quality or cosmetic appearance for conventional supermarkets but still good quality attractive for an aggressive price discount format. Q: Are the discounters realigning or customizing product selection to adapt to different market demands? A: Two things that are fairly obvious. They are all expanding their fresh presentations. You look at Aldi 20 years ago, and it only had things like potatoes and onions in polybags, but now it offers an increasingly greater number of items, including more upscale items, such as Driscoll’s strawberries, fresh herbs, and branded bananas at aggressive prices. Not only more SKUs, but higher quality products that are competitive with conventional supermarkets. Q: Did Wal-Mart miscalculate the full-on discounter incursion? For years, Wal-Mart plunged forward with its every-day-low-price, low cost formula, while other retailers strategized around it to survive, often upscaling produce assortments and services to differentiate as the anti-Wal-Mart… A: Wal Mart is the largest retailer in the world, the largest company in the world, which doesn’t surprise anyone.