Walmart and Food Safety

A recent missive to a friend–

 I want to draw your attention to a small segment of a recent podcast on EconTalk, dealing with WalMart.  You have been critical of Walmart in the past, for not paying workers well enough and for selling goods not made in the US.  

 While this extract is in a greater context of the state of food in modern times, it’s instructive to me of how successful Walmart has been in bringing high quality food to the poor, and how the importance of its reputation causes them to implement standards that far exceed those of the US Govt.

Now I wouldn’t be silly enough to think I would change your mind about Walmart; I’m simply introducing some positive things that Walmart does in order to balance your thinking.

Econtalk does weekly podcasts on economics, covering everyday issues, not just theoretical ones, and the guests are varied in their viewpoints.

 This excerpt below comes from the podcast you can find here: http://www.econtalk.org/archives/2016/03/jayson_lusk_on.html

The bold type emphasizes key points–

 Russ: I want to turn for a minute, and I want to leave a little time at the end for policy issues that we haven’t talked about yet. But I want to do something briefly about Wal-Mart. Because Wal-Mart’s entry into the grocery business and the food business is such an enormous–it has such an enormous impact. And I just want you to tell the story about–two things, really. I’m thinking of the interview we did with Roger Berkowitz and Legal Sea Foods and the care he has to take–purely self-interested or altruistic doesn’t matter–to make sure that the food is relatively safe. Because his brand name is very at risk, every day. And that’s true of Wal-Mart as well. And what they are doing with their rotisserie chickens, which we’ve talked about in passing in a different context recently, I think with Robert Frank–I think the chicken world came up. But talk about what they are doing with rotisserie chickens to make sure they are safe. Guest: Yeah, well first just on the scale of Walmart, I think their data suggest that one third of all Americans enter a Walmart every week. Absolutely crazy. Russ: Mind boggling. Guest: Something like that. One quarter of all the food dollars spent in grocery outlets are spent at a Walmart. So, whatever they do is big stuff. And, you’re right. As you say, we may get a little bit to policy issues: we want stricter food standards and what have you. But companies like Walmart, and a good example recently is Chipotle. The biggest deal for them is their brand name. They’ve spent millions, probably even billions of dollars in the case of somebody like Walmart, developing a brand name and a brand reputation and that’s what lets them earn a little bit of a premium over generics, or gets those 1/3rd of Americans going in there every week: it’s because they have a little bit of brand equity. So they want to protect that. And it’s worth it to them. And as the VP (Vice President) for Food Safety for Walmart told me, he said, ‘You know, the government regulations, that’s like the baseline. We go way above that.’ Because they’ve got something much larger at stake. So, one of the things he talked about was the technologies they are using to make sure the rotisserie chickens are safe. So, the old system was that the government would send around inspectors to test the temperatures on their chickens, make sure they were cooking them at a high enough temperature to kill all the bacteria. And at least over one reporting period they found out that across 4000 stores in the United States, they had 10 government inspectors stop by to see if they were doing what they were supposed to do. Walmart, because they are concerned about their reputation, also paid some third-party auditors to go by; in that same time period, the people they paid to check up on them stopped by about 100 times. They’re selling millions of chickens, so there’s still a good chance that the chicken you or I might have bought in the checkout line was not, somebody wasn’t following up to make sure it was cooked to the temperature it was supposed to. So, what they did is they implemented some wireless thermometers they give their employees. And now every single chicken, temperature is checked before it is put out on the line. And moreover, that data is immediately sent to Wal-Mart’s offices where they can monitor and record every one. So they went essentially from testing 10 chickens every month to millions.Russ: They didn’t check only 10 chickens, but the amount that 10 people could check. Whatever that is. Guest:Yeah. Exactly. Russ: Hundreds, probably. Guest: To millions. Exactly. So, as the head of food safety for Walmart told me, their sample size is all. So, n equals all.Russ: Hard to believe. It’s amazing. Guest: So they can check on certain stores–do they have a manager at a store who is not being as careful as he should be, or maybe there are certain times of year, even certain suppliers, maybe, who, you know, I guess suppliers wouldn’t have anything to do with the temperature, but certainly in terms of testing for bacteria. That’s the other thing Walmart did–one thing about their size, interesting, is when they make a change, it has a big impact not just on the people shopping at Walmart but across the whole industry. So, a few years ago they implemented new standards for testing for e-coli and salmonella. And there’s some good evidence to suggest that when Walmart enforced these higher standards, it improved the safety of all the meat throughout the whole supply chain. Russ: Because? Guest: Because Walmart is such a big buyer that a lot of these food processing plants, say a beef processing plant, they are not just selling to Walmart. They are selling to everybody else, too. So, if they are going to adopt new safety standards to meet Walmart, as long as they’ve got the standards in place, it’s still going to impact the meat they are selling elsewhere.

 

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