Costco talks category management

Even its competitors marvel at Costco Wholesale's ability to manage large stacks of produce every day. Costco's Oleen Smethurst shares how it's done

CG: What are the keys to Costco’s produce management?

OS: We focus on innovation, taste and quality. One of the ways we achieve this is by using specification sheets for every item we purchase. This lets vendors know our expectations and also helps our depots know whether to accept or refuse product. We have tight grading and size requirements. Consistency matters, so we try to offer the same size and grade of product in every pack we sell. If we take strawberries as an example, they have to fall within a specific size range and can only have a limited amount of white shoulder (the white, uneven ripening at the top of the berry). We are very demanding about our quality expectations. If an item arrives at a depot and doesn’t meet our specifications, it’s refused. We’d rather be out of stock on an item than disappoint our members.

CG: How else does Costco control quality and taste?

OS: It’s simple: we eat everything we buy. I know this sounds funny, but we try samples of a product before we commit to it or when the country

of origin changes, and constantly, throughout the season, to make sure we are satisfied with the product. I spend the majority of my time travelling the world, walking the fields and packhouses with our growers. We like to get to know and understand our growers so we can develop items and packaging initiatives together. We’re constantly looking for better taste and quality.

CG: Can you elaborate on Costco’s relationships with its growers?

OS: We honour the commitments we make to our growers. The industry tends to operate on more of a verbal basis, but Costco commits to buying a certain amount of product from our growers, and we’ll do everything to honour those commitments. At the end of the day, everyone needs to make a living and counts on these commitments.

CG: How do you keep produce fresh?

OS: The key is to maintain the cold chain so the product’s quality isn’t compromised. We require produce

to be unloaded and placed in the cooler within 30 minutes of receipt. Depending on the item, we have up to six deliveries per week, so it’s not always easy. But we’ve educated our warehouses so they understand produce needs constant attention throughout the day to ensure we’re selling

quality goods. The warehouses have been extremely supportive in dedicating staff and floor space to the produce department, which helps drive sales.

CG: How does Costco control the safety of the produce it sells?

OS: With the exception of melons, we only sell prepackaged produce. We also require an annual food safety audit for all farms, pack-houses and processing facilities we deal with worldwide.

It must be conducted by an approved third-party firm, and suppliers must achieve an 85% score to pass. We look at cleanliness, record keeping and temperature control, for example. If a vendor fails an audit, our food-safety team works with them to get them up to par.

CG: How do you balance produce quality with price?

OS: Our growers have done a very good job educating us to understand yield and how it ultimately affects cost. In general, when an item has more flavour, this usually translates into less yield and a higher cost. So, the challenge is to balance between yield, taste and cost. We push our vendors to be as efficient as possible, from growing to packing to delivery, in order to drive down costs and provide items with more flavour. Our members are looking for produce that tastes great, so we try to achieve this while being competitively priced.

Canadian Grocer spoke with Canada’s produce power players to learn how they stay ahead of the game. Read more Q&As with the country’s top produce experts below:

Category Management with Costco’s Oleen Smethurst here

Supplying with John Russell, President of J.E. Russell Produce Ltd here

Buying practices with Longo’s Mimmo Franzone here