From the pages of Jim Prevor’s Perishable Pundit
We’ve been fortunate to have the engagement of the largest food retailer in the Netherlands, Albert Heijn, ever since the launch of our Amsterdam Produce Summit event. In the inaugural year, Said Belhassan, who was then the VP Merchandising & Sourcing Fresh at Albert Heijn, joined our Thought-Leader Panel, and last year, Michiel van Zanten, who was then the Senior Sourcing Manager, Strategic Sourcing Fresh for Albert Heijn, filled the chair. This year, we are excited to have the chair filled by Maarten van Hamburg, the General Manager of Albert Heijn’s service provider, Bakker Barendrecht (Ridderkick, The Netherlands), the strategic partner for getting fresh produce through the supply chain and onto the shelves.
We asked Mira Slott, Pundit Investigator and Special Projects Editor, to find out what kind of insights Maarten might share at the event:
Q: We’re honored you’ll be participating in our distinguished Thought-Leader Panel. It’s great to connect with you before the Summit begins to garner some of your insights for a sneak preview. I know you’ve been quite busy. We appreciate your committing your time to help the event and the industry.
To start, can you tell us about Bakker and your role? There are industry executives who might not be completely familiar with your operation. Bakker is a kind of company that rarely exists in the US, for instance. How does your relationship work with Ahold? It seems as if Bakker is a kind of strategic partner with Ahold in managing Albert Heijn’s produce procurement?
A: I understand we may be atypical. Essentially, Bakker Barendrecht was founded around 90 years ago in the industry of fruits and vegetables in the Netherlands. We started off as a wholesaler, and basically about 60 years ago, we started our cooperation with Albert Heijn. This cooperation evolved to delivering the fruits and vegetables to Albert Heijn.
In the 70s, produce was sold via the auctions. Actually, the system is still in place in Europe, and in many places in the world, in order to sell fruits and vegetables to the market. We were at the auctions with Albert Heijn in the 70s, and Albert Heijn was gaining share in the Netherlands, and the size of the business was becoming quite big.
So, we took the brave decision together to build a buying/sourcing connection. We went off the auction system, and we built our own direct sourcing with our own growers. This was about 30 years ago. It evolved in those 30 years to encompass a network of growers.
Q: What is the scope of your direct sourcing network? Are these both locally and globally based growers? Do you have exclusive contracts with growers? Does this strategy give you more control on quality and efficiencies?
A: Our network includes 110 Dutch growers completely dedicated to Albert Heijn, and then 160 companies all over the world in around 50 countries, in which we have decades-long relationships now-a-days.
Basically, the thought of it was to steer quality based on the requirements of the retailer. We wanted to create the right availability, not depending on the auction, but created by contract growing. So, we contract for what we need. It’s a demand-driven model instead of push-driven model, which is the case for 95 percent of the world.
By doing this, not only can we focus on the quality and the availability needed for the retailer, but as well, we can build a very efficient system with cost transparency, and it’s very cost-effective because it’s so dedicated, there are no additional costs anywhere in the chain.
So basically, the three core prerequisites of great quality, the right availability and a low-price level are the reasons for this way of working.
So, we’ve been a service-provider for Albert Heijn for 60 years for fruits and vegetables, for the fresh part of the business, not the convenience part, but we supply the convenience partner for Albert Heijn with our products. So, again, there is no additional cost in the chain.
Q: When you say convenience, what products does that encompass?
“We consolidate all products from all over the world and the Dutch produce and we send it to the Albert Heijn warehouses. We ensure the freshness through the responsiveness of that chain, and we distribute the fruit and veg every 45 minutes to each of the five warehouses.”
A: It’s the cut fresh fruits and vegetables. We deliver the fresh produce to another company that prepares the convenience products.
We want to be able to manage the quality specifications required for the retailer and push the level up and up through the decades. We want to insure we are creating a low-cost chain by creating a demand-driven model with contract growing and dedicated supply.
Q: How do you distribute the produce to Albert Heijn?
A: We do this in the Netherlands. We consolidate all products from all over the world and the Dutch produce and we send it to the Albert Heijn warehouses. We ensure the freshness through the responsiveness of that chain, and we distribute the fruit and veg every 45 minutes to each of the five warehouses.
Q: To clarify, these warehouses/distribution centers are owned by Albert Heijn?
A: Albert Heijn has five distribution centers, so Bakker is collecting all the fruit and veg and, based on the needs of the stores, the orders of the stores, we replenish all products to the five warehouses of Albert Heijn. So, every day, we send 150 trucks of fresh produce to Albert Heijn and we do that 24/7; it’s a continual operation. We do that through the principle of VMI (Vendor-Managed-Inventory).
We are responsible for the stock levels at the Albert Heijn warehouses.
Q: How does that work exactly?
A: We basically have a direct connection — we call it seamless integration with the Albert Heijn orders. So, we have an online connection to real-time sales. We log in the system and see the real-time sales of strawberries or citrus evolving per second.
Q: That’s a true partnership… you’re intricately in sync with Albert Heijn’s produce needs and consumer buying patterns.
A: In our 60 years’ experience, we have people who follow the orders and promotions for decades now, which means we can forecast the needs of the retailer Albert Heijn in a very specific way. On the weekend from Saturday to Sunday 4:00 at night, we are looking at the assortment and the checkout data, which is intimately connected to our systems, and we adjust the orders. By doing this in this direct connected way, we are able to create an ultra-short supply chain, because we’re not depending on information from Albert Heijn; we’re not depending on information from a category manager at Albert Heijn, we can do all these things by ourselves. This creates a short chain and great quality because of the freshness.
Q: I wanted to ask you about accelerated innovations in the age of Omni-Channel, and aggressive retail initiatives into robotic automated warehouses for consumer order fulfillment. Ahold Delhaize has been making headlines in the U.S. for partnering to create automated order collection “mini robot supermarkets” adjacent to its U.S. chains, including Stop & Shop. Could you update us on what is happening on this front in The Netherlands? I understand Ahold Delhaize is working with Takeoff (which is also partnering with Albertson’s) to build small robotic warehouses that stack groceries and use robot arms to assemble shopper’s orders to speed up click and collect orders…
Is this something you’re involved in?
A: I’ve been discussing this beforehand with Said [Belhassan, who recently was promoted from VP Merchandising & Sourcing Fresh to VP Store Operations at Albert Heijn. Said participated in the Inaugural Thought Leaders Panel at the Amsterdam Produce Show]. I can talk about our operations and certainly be a part of the program in Amsterdam and share my views about that, but it will be difficult for me to speak on behalf of Ahold Delhaize and how they manage this. But I can share with you my perspective, and how we align ourselves, looking at the online developments of grocery retailing.
Q: That’s understandable. We can learn much in a broader sense based on your experience and field of expertise.
A: There are interesting prerequisites for the produce industry in order to keep up with the system, because there’s a lot of developments of grocery retailers with Omni-Channel, for instance with Peapod, with bol.com… Ahold started some 20 years ago in online retailing for fresh food as well, and we are coordinating with them to identify the whole chain of produce to be sure to fulfill their needs. Here I can share a few insights on the prerequisites of what is necessary that I can openly share.
Talking about the automatization of Albert Heijn on the warehousing for their Omni-Channel strategy, that’s a bit difficult for me.
What we see happening in Omni-Channel is retailers are evolving their efforts in robotizing and automating their warehouse structure, like Ocado in the UK, Ahold Delhaize… essentially every retailer at the moment, which is quite exciting for parties in the chain.
How can we make sure we adapt to these kinds of systems? And here, I can share a few insights with you as we have experience the last 20 years in the online business with Ahold as well.
For our part of the supply chain, as a logistics provider, we need to build a far more responsive chain than we’ve ever done. Why is that? Because demand from online retailing is more volatile than, let’s say, traditional grocery retailing, because it’s “now for now.” The consumer demands the possibility of delivery in two hours. It’s putting a stretch on our chain of products.
In the Netherlands, we’re testing a two-hour delivery rate all the time. All these kinds of initiatives create very volatile demand, and this is a challenge for the grocery industry because we like to know what we need to grow and what we need to produce far in advance.
“When out-of-stocks for traditionals supermarkets are higher, the consumer is not happy and punishes the retailer. But if the product is not delivered, the consumer is angrier because in store you can pick up alternatives. If you order bananas online and they are not delivered, you won’t order again. It’s simple logic to keep your eye on order completeness.”
Q: How are those two-hour deliveries working out?
A: Order completeness is a significant consumer issue. Consumers are very unsatisfied when their online order is not complete. It’s one of the biggest dissatisfiers in the consumer experience with online retailers.
I order 10 products and one of them is bananas and bananas are not delivered. Lack of order completeness is a major dissatisfier, and that is reflected in consumer loyalty. It is critical as a retailer you are delivering what you promised.
When out-of-stocks for traditional supermarkets are higher, the consumer is not happy and punishes the retailer. But if the product is not delivered, the consumer is angrier because in store you can pick up alternatives. If you order bananas online and they are not delivered, you won’t order again. It’s simple logic to keep your eye on order completeness.
Q: It’s enlightening you bring attention to completeness of order as a major problem. I’ve been speaking to our presenters about different issues with online ordering, and out-of-stocks is an issue. Also, the way different systems handle substitutions. In packaged goods, if consumers order one size, is it acceptable to deliver another? Branding poses similar issues. If a system advertises one brand, is it OK to deliver a different brand?
We’ve noted it as an important issue. the Perishable Pundit pointed it out in an introduction to another speaker’s “sneak preview” article, where they were listing Halos, a brand of California Clementines, but delivering Seald Sweet’s Mandarina’s brand from your sister company, Greenyard, in the US. People have also pointed to challenges in maintaining quality control and sometimes the need for different types of packaging to protect product during deliveries, so it doesn’t get damaged.
A: For sure. I focus on three prerequisites on fulfilling the needs of retailers for online retailing.
The first point is to have a responsive chain, and that comes with the lead times to fulfill order completeness and fulfill product availability. You need to have one-on-one seamless integration with the retailer in order to do that the right way.
The second thing — and I agree with the other speakers — is the quality issue. The strength and the quality of the products should be very high for a few reasons. One reason is the handling of online… it is quite tricky because the product degrades, and delivery to home is difficult to put these kinds of products in the online chain without destroying them. So, packaging is very important, but it’s really the strength of the product and the quality that comes into play. If you order groceries weekly and the quality of product isn’t good for your recipes, you have a big issue because you then have to go to the store.
Another reason product quality is of vital importance is you need a good shelf life. If you order weekly, for groceries on a Sunday for delivery on Monday, and a product such as strawberries has gone bad by Thursday or Friday, you have a big issue. So, this is a pressure for online retailing.
The third important thing for how Omni-Channel is evolving is you need to have an appropriate model. You need to know the current distribution models and future distribution models for online retailers to build a chain behind them to fulfill their needs and avoid additional costs.
You could be dependent in the design of those models on the needs of today, when those needs could be completely different a few years from now. You need a very good relationship with the retailer to understand its demands, and to create the chain of fruit and veg.
For fresh produce to be successful in Omni-Channel retail, you need a fully aligned strategy on all parts of the chain, and you cannot do that independently by yourself.
This is what I was reflecting on for Omni-channel retailing and the prerequisites we need to put in place to be successful from a service point of view and appropriation of the food chain.
Q: Your insights are most intriguing. I was interested to get your thoughts on another issue: Do you think there is a risk that automation and robotics could take away the personal touch and expertise that’s associated with handling and picking the produce and fulfilling orders?
A: That’s a great question. I see it as a phased-in approach. I’m convinced of a robotized approach to picking, which is sensitive enough to handle fresh produce. Let me share with you why I believe this. I was looking two months ago at a pilot robotics program, where robots were picking peppers and even picking strawberries in a greenhouse in the Netherlands. And these robots were sensitive enough not to destroy product. So, if you can pick strawberries with robots in a greenhouse, you can do the same in a warehouse at retail. It’s a matter of time until we are there.
It’s a few years ahead of us. We have to be sure we don’t make that transition too fast, because with the current methodologies of picking, it’s still too sensitive. So, if you ask me whether I think it’s a risk because of the quality and picking and handling of products, in the short run yes. In the long run, no.
“It would be a pity if we cannot fulfill this promise as a produce industry. If we fail, the willingness of consumers to buy fresh produce in the omni-channel will go very slowly.”
Q: What are the biggest challenges for the produce industry going forward as this landscape changes?
A: For me, the biggest challenge is how do we promise to the consumer the right quality of produce in the Omni-Channel. Remember the majority of retail chains that are now trying Omni-Channel do not have fully integrated supply chains, so they are not adapted for the needs of that particular chain. That creates risks for quality management.
It would be a pity if we cannot fulfill this promise as a produce industry. If we fail, the willingness of consumers to buy fresh produce in the omnichannel will go very slowly.
It’s actually quite interesting that we’ve seen a great step forward in the Netherlands. Three years ago, consumer willingness to buy fresh fruits and vegetables online was around 37 percent. Three years later, the willingness of consumers to buy fresh fruits and vegetables online is 50 percent. That’s a major step forward. Still, there is 50 percent to go. And quality fulfillment is one of the biggest challenges.
Q: On a personal note, are there things you’re looking to glean from the Amsterdam Summit? Your participation at the conference will be of great value to attendees.
A: I was there last year at the Amsterdam event. Looking back, what I found interesting, for example, was a study on Amazon and Whole Foods presented by one of the Cornell University professors. For me, the conference is enriching to gain different views and aligning our views on what the most important things are to focus on.
We need the strength of each other with all these kinds of issues, because if consumers are having difficulties with the right produce, it effects the entire supply chain so we need to team up as industry.
I’m looking forward personally to engage with retailers and producers, and to share views on this because I’m convinced nobody has found the right answer yet. That is what’s exciting to me. I’m dedicated to finding the right answers together. And that’s what I hope to find at the conference, to engage with different people with different views and different experiences — but all with the responsibility to fulfill consumer needs.
There is a battle at the very soul of the industry as to what kind of supply chain will best serve the industry in the future. Greenyard’s Bakker Barendrecht, with its intimate relationship with Albert Heijn, stands as the exemplar of one path. It is the highly aligned supply chain, with deep contracting to ensure not only availability but strict compliance with chain demands for quality, food safety, traceability, sustainably, etc.
It is a powerful model, and in many ways, it is more advanced than the traditional produce models. Thirty years ago, we were writing in Pundit sister publication, PRODUCE BUSINESS, in a piece called At the Auction, about the once great American produce auctions in response to a letter from Jan van Meervald, then the managing director of Dole Europe attacking the auctions for causing low prices that year in Europe.
Whether it is auctions, terminal markets, buying from shippers at market prices daily or any other traditional system, the challenge for the aligned supply chain model is that other retailers can prioritize on price. Although, long term, an aligned supply chain may drive costs out of the business, in produce, items often sell below the cost of production. So, the challenge is: How can the retailer, with a supply chain aligned around all the proper responsibilities, such as food safety, sustainability, traceability, etc., compete with a retailer that just buys what is cheapest?
Although the future is still uncertain, this may be even more of a challenge in a digital world. Maybe consumers will align with a retailer they trust and so the aligned supply chain that can produce such trust may be crucial. But what if the future is some automated program that searches the Internet to buy the cheapest banana that day?
When Bruce Peterson set up Walmart’s buying system, he tried to square the circle. He would aim to buy via contract about 80% of the chain’s needs. Then if the market price zoomed, he would use merchandising techniques to constrain demand, so Walmart didn’t have to buy more product. If, on the other hand, the market price dropped to way below its contracted price, the merchandising team would make massive displays, move them up front, etc. – thus allowing Walmart to buy a lot of produce and thus average down on its price.
There are many ways to handle these issues, and we are fortunate that Maarten van Hamburg,
Bakker Barendrecht and the larger Greenyard organization — as well as its customer Albert Heijn and the broader Ahold Delhaize organization — are all willing to share their expertise to help us build a better industry.
This is a uniquely important conference. There has been nothing quite like it on the produce calendar in 2018. Our future as an industry depends on understanding the Omni-Channel future and the role of the produce supply chain in making that future work.
Please join us:
- You can register right here
- If you have questions, need help, etc. please don’t hesitate to email us at this email address.
We look forward to seeing you in Amsterdam!