Friday, November 03, 2006

Fixing the Produce Supply Chain is Big Business for Supermarkets

Most of us remember last month's ban on spinach due to E coli, one of those nasty intestinal bugs that can easily cost you significant cash by putting you out of work, into the hospital, and for some who are really unfortunate, even kill you.

The situation is not much better for those who drank contaminated carrot juice made by bolthouse farms, the producers of one of my favorite drinks - a strawberry/banana blend of juices which are quite tasty.

In the end, there is not much to say about the ideas of prevention because in these circumstances, there is not much that can be done at the consumer level with regard to prevention. So, as was done by many, these products are simply avoided or banned by federal agencies to ensure that people don't get sick.

<b>What does this mean to your Investments?</b>

It does not take much imagination, however, to recognize that this is going to have a significant impact on your investment portfolio if you hold stocks of these companies or if you hold mutual funds that specialize in these businesses. The bottom line is that the trust that these companies had can be destroyed by a scandal of this nature and it can even effect the bottom lines of the retailers.

In my case, stop and shop and walmart are the places where I usually purchase bolthouse products. But, sure enough, after the news, the products were pulled from shelves, presumably costing these stores significant amounts in terms of wasted inventory and even more when you consider the lost profits. It is not easily seen exactly how much, but as time moves forward, it would be nice to think that these types of losses are both preventable and unnecessary.

<b>Nature Fights Back</b>

As time goes on, these "bugs" mutate. They change and become more and more resistant. And they are more potent than thought originally. So what does this mean? In simple terms, it may not be as easy as we would like to believe. Previously, using fertalizers that were non-manure seemed to significantly reduce risks, but with more resilient strains and more transmission methods, this basic safeguard doesn't seem to get the job done anymore.

Voting With Your Wallet

With no clear solution in sight, despite the O.K. signal from the government, my instinct still tells me to avoid some of these products. After all, what has really changed in terms of the screening process for these produce products? And are those changes enough to combat the resilient strains? Personally, I am not sure that the risk is worth it. I'd like to see retailers and produce farmers create a better screening and a more concrete plan to cope with this problem. That would make me comfortable as a consumer.


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