Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: Hello and welcome to another episode of the All Thoughts Podcast.
Speaker 2: I'm Tracy Alloway.
Speaker 1: And I'm Jill Wasn't thal Joe.
Speaker 2: I know you love tomatoes.
Speaker 1: I love tomatoes. Oh my god, I love tomatoes. I
Speaker 1: love tomatoes so much.
Speaker 2: This is the episode just Joe talking about how he
Speaker 2: loves tomatoes.
Speaker 1: Well, there's a funny one because like this is a
Speaker 1: new episode. You know, you like book. You're like, oh,
Speaker 1: let's do a tomato episode, which I'm glad you did
Speaker 1: because I love tomato.
Speaker 3: You're gonna make it more.
Speaker 1: I'm gonna make it my But it's not like but
Speaker 1: I don't know anything about tomatoes. I just love eating them.
Speaker 1: Like when I was a kid, like growing up in
Speaker 1: like exurban Illinois. You know, I had terrible tomatoes growing up,
Speaker 1: so I hated tomatoes from the super I thought tomatoes
Speaker 1: are like the worst vegetable on the planet. But they're well,
Speaker 1: are you.
Speaker 2: Going to correct yourself and say they're not a vegetable fruit?
Speaker 4: You know?
Speaker 1: So I'm just going to go on because I'm gonna
Speaker 1: take this episode over. But like, you know, I've once
Speaker 1: heard someone say that like knowledge is knowing that tomato
Speaker 1: is a vegetable, and wisdom is knowing not to put
Speaker 1: tomato in a fruit salad. But I've like come to
Speaker 1: like like tomatoes are so delicious. There are some varietales
Speaker 1: that I absolutely would put in a fruit salad.
Speaker 4: No, no, I know this is wrong.
Speaker 1: And so these tomatoes that we no, no, no, like when
Speaker 1: you if you tried one of the.
Speaker 2: Tomatoes I have, I still would not put it in
Speaker 2: a fruit.
Speaker 1: I absolutely would. I love tomatoes anyway, Sorry.
Speaker 2: So we got to talk about tomatoes, perhaps not in
Speaker 2: the way you have been so far, but we'll.
Speaker 1: Spend one minute talking about how tomato prices are really high, yes,
Speaker 1: and then the other forty five minutes we're going to
Speaker 1: talk about how delicious tomatoes.
Speaker 2: That's right, Okay, So the genesis of this entire episode
Speaker 2: is that, as you will have heard, tomato prices are
Speaker 2: really high right now. So I think we're looking at
Speaker 2: something like a forty percent increase year over year. Yeah,
Speaker 2: and I just saw some new data that's out this morning.
Speaker 2: So there are a lot, a lot of tomato headlines
Speaker 2: floating around saying that tomato prices are at a record
Speaker 2: two dollars sixty nine cents a pound. So tomatoes are
Speaker 2: getting kind of expensive, which is bad news for you.
Speaker 1: It's really bad news for me because I'm addicted to them.
Speaker 1: I am priced and sensitive, so it doesn't matter how
Speaker 1: high the price of tomatoes get, will not affect my
Speaker 1: volume at Also, that's just straight like, that's just straight
Speaker 1: money out of my pocket.
Speaker 2: It is not bad news for me because I just
Speaker 2: installed five raised beds, big raised beds dedicated all to tomatoes,
Speaker 2: and I just planted them out yesterday, and I'm very excited.
Speaker 2: You should be excited too, because you know you'll get some.
Speaker 1: Tracy always brings me tomatoes at some point in this summer,
Speaker 1: and they're always delicious.
Speaker 2: I've got a really big selection this year, Cherokee, nice
Speaker 2: brandy wine, all the classics, and some new things fourth
Speaker 2: of July I've never tried before. I don't mean to
Speaker 2: get all like Bubba Gump and just start listing tomato
Speaker 2: varieties here, but tomatoes are on my mind, and I
Speaker 2: think they're on a lot of other people's minds just
Speaker 2: by nature of the price increase. So we should figure
Speaker 2: out what's actually going on here.
Speaker 1: I cannot wait to just talk tomatoes for the next hour.
Speaker 2: You're not just going to say how good they are
Speaker 2: over and over, right, I'm right, Okay, Well, I am
Speaker 2: very happy to say that we do, in fact have
Speaker 2: the perfect guest. We're going to be speaking with Jacob Kremple.
Speaker 2: He is the SVP of Procurement and Merchandising over at
Speaker 2: Baldoor Specialty. So, thank you so much for coming on
Speaker 2: all thoughts.
Speaker 3: Yeah, absolutely, very excited to be here. I have quite
Speaker 3: a few friends that are flabbergasted that I get to
Speaker 3: be on odd lots of all things. So I know
Speaker 3: I'm excited to talk tomato.
Speaker 2: This is the perfect guest for the perfect moment. Can
Speaker 2: you tell us what Baldoor actually does?
Speaker 3: Yeah? So. Bowdor is a thirty year old food service
Speaker 3: distribution company based up in the Hunts Point Market area
Speaker 3: of Bronx here in New York City. We distribute food
Speaker 3: from Maine to Northern Virginia, send out about five hundred
Speaker 3: trucks a day with food, mostly to food service restaurants,
Speaker 3: right so, about seventy percent restaurants, thirty percent independent retail
Speaker 3: or other wholesalers. We got our start actually, you know
Speaker 3: Balducci's in Greenwich, Villa yeah, sure, so Andy Balducci and
Speaker 3: Joe Doria. Joe Doria was their produce sourcing guy, and
Speaker 3: he was always out there looking for the best and
Speaker 3: most unique varieties that he could possibly find. And so
Speaker 3: suddenly they saw a lot of chefs that they knew
Speaker 3: in the area shopping at their store. Had a great
Speaker 3: idea of starting a wholesale distribution company. So they took
Speaker 3: Balducci and Doria combining together. That's actually how you get
Speaker 3: bald Or, which is a fun story. So that was
Speaker 3: in the seventies eighties that business crew expanded, it started
Speaker 3: to blow up. They spun it off as a separate
Speaker 3: company in ninety one when Andy Balducci's son in law,
Speaker 3: Kevin Murphy, took over the business. He ran it until
Speaker 3: about twenty thirteen when he passed away from cancer, and
Speaker 3: his son tj as our owner now and CEO, and
Speaker 3: he's been running the company since then.
Speaker 1: Within the realm of food distribution, if someone asked me
Speaker 1: to name all the food distributors, I would be able
Speaker 1: to name Cisco. We've done at least one episode on them.
Speaker 1: I might be able to name United Natural Foods, and
Speaker 1: then I would be able to name Bell Door and
Speaker 1: Bell Door would be the only one that I would
Speaker 1: associate in my mind, maybe because you've done a good
Speaker 1: job with branding, etc. As like, Okay, these are high
Speaker 1: quality ingredients rather than just food distribution. Who are your clients?
Speaker 1: Who do you sell into at beldor.
Speaker 3: Yeah, we sell just about anybody, right, but I think
Speaker 3: we've made our bread and butter as this. I listened
Speaker 3: to your Cisco episode right in Broadliners that you were
Speaker 3: talking about on that podcast. We view ourselves as a highliner,
Speaker 3: so we're going to carry a wide assortment. We carry
Speaker 3: everything from meat and dairy to produce, which is what
Speaker 3: we had our start in and that's our wheelhouse for sure.
Speaker 3: But we have experts in all of those areas and
Speaker 3: our job is to build a curated assortment of maybe
Speaker 3: seventy five hundred skews versus the Cisco carrying twenty thousand plus.
Speaker 3: So the merchants on my team, they just have this
Speaker 3: insatiable appetite to go out and find the best produce,
Speaker 3: the best meat that they possibly can to fit whatever
Speaker 3: that customer's need is, whether it is something that's more
Speaker 3: commodity based, like a basic romaine, too high specialty variety tomatoes,
Speaker 3: like some of the ones that brought.
Speaker 1: And what's the mix in terms of restaurants versus grocery
Speaker 1: stores or restaurants versus whatever else.
Speaker 3: Yeah, so we're about seventy percent, maybe a little bit
Speaker 3: more in restaurants, okay, and there we service everything from
Speaker 3: the Michelin Star partners that we have that we have
Speaker 3: a lot of long existing relationships with some of the
Speaker 3: top chefs in the areas that we serve to your
Speaker 3: local bodegas or bagel shops as well.
Speaker 2: So how does the relationship with supermarkets or restaurants typically work.
Speaker 2: Would it be I'm a restaurant and I don't know,
Speaker 2: I want to do a cprazy salad, and so I
Speaker 2: need some really good tomatoes. Do I call you up
Speaker 2: and I ask you specifically to source tomatoes for the salad,
Speaker 2: or do you have like a catalog that I start
Speaker 2: flipping through or Yeah.
Speaker 3: So you go to bout orfood dot com right, and
Speaker 3: you go on to our website and from there you
Speaker 3: can see our full assortment and then once you sign
Speaker 3: up as a customer, then you're able to see pricing
Speaker 3: and availability and some of those things to make the
Speaker 3: decisions of what you possibly want to buy. We also
Speaker 3: have our sales reps that are partnering with a specific
Speaker 3: set amount of accounts that bring that white glove service.
Speaker 5: Right.
Speaker 3: We want to make sure that you have somebody that
Speaker 3: you can call and pick up the phone and say, hey,
Speaker 3: I want to do a c prazy salad. What do
Speaker 3: you yeah? Yes, yes, exactly. We get mostly those calls,
Speaker 3: but also some of the innovation calls as well of
Speaker 3: like I'm looking to do a apraisey, what would you suggest?
Speaker 5: Right?
Speaker 3: And so between that high touch white glove service that
Speaker 3: our sales teams provides, as well as our merchandising expertise
Speaker 3: and storytelling on the website that we love to do,
Speaker 3: we're really able to maybe bring that picture full circle
Speaker 3: a little bit better than maybe some others out there,
Speaker 3: to really allow you to tell that story on your menu.
Speaker 2: So.
Speaker 1: I don't really know that much about the restaurant industry,
Speaker 1: but Red Kitchen Confidential, and they're in that book. Anthony
Speaker 1: Bourdain talks a lot about like, you know, who'll play
Speaker 1: off the suppliers. He's like, oh, this guy could get
Speaker 1: me this fish at this price. What can you do?
Speaker 1: But this strikes me as very relevant in the time
Speaker 1: of high price volatility, which we've particularly seen over the
Speaker 1: last several years. Talk about the duration of contracts and
Speaker 1: how long they can last. I never seem to be
Speaker 1: able to get clear answers on this. Can a restaurant
Speaker 1: say lock in a price for six months? Is it
Speaker 1: week by week? What are these relationships and how stable
Speaker 1: are they?
Speaker 3: Yeah, that's a trade secret shoe Okay, not caring. No,
Speaker 3: I think we want to meet the chef where they
Speaker 3: are right, and so we offer a wide variety of
Speaker 3: opportunities of how they might want a price with us right,
Speaker 3: anything from daily pricing to weekly pricing to depending on
Speaker 3: the size of the restaurant chain, we will offer longer
Speaker 3: term contracts as well. But I do think there is
Speaker 3: some push and play left in this industry of you know,
Speaker 3: a chef wants to be able to price shop a
Speaker 3: little bit right, and so a lot of our customers.
Speaker 3: You know, our view is that we provide that value,
Speaker 3: not just to making sure that you have a good
Speaker 3: value on the price, but that our service is way
Speaker 3: above par. Right, We're going to deliver on time. Our
Speaker 3: cutoffs are the latest that you can get from any distributor.
Speaker 3: So if you're a chef in New York City at
Speaker 3: eleven o'clock at night, you can go on our website
Speaker 3: and still order product where most other competitors.
Speaker 1: And one time when you get there the next morning
Speaker 1: of there.
Speaker 3: Depending on their account, and their delivery time is early
Speaker 3: six am.
Speaker 2: Yeah, So are you seeing a lot of customers at
Speaker 2: the moment trying to lock in tomato prices given where
Speaker 2: they seem to have gone to recently.
Speaker 3: This tomato pricing thing is unique as far as like
Speaker 3: how expensive it got. But I'd say in general and produce,
Speaker 3: this is like a very much a normal working environment
Speaker 3: for my team of just prices spiking and going crazy
Speaker 3: here and there. And I think a lot of that
Speaker 3: is produce demand, especially in the US, is rather inelastic
Speaker 3: in the short term, and it's so reliant on weather
Speaker 3: and acreage grown and the production out of that acreage
Speaker 3: that you see very wild swings and markets all the time. Right,
Speaker 3: Like tomatoes was the last thing to pop. Yeah, I
Speaker 3: guarantee this summer you're going to be hearing about romaine
Speaker 3: again because that's already almost one hundred dollars a case
Speaker 3: right now, which is insane for Romain because of bad
Speaker 3: weather in California and avocados as well. Avocados went from
Speaker 3: thirty dollars a case to eighty dollars a case in
Speaker 3: literally the span of a week. In the last week, Joe,
Speaker 3: did I.
Speaker 2: Ever tell you? For some reason, I'm on the has
Speaker 2: Avocado Board email distribution list and they sent out really
Speaker 2: good updates about what's going on in the avocado market.
Speaker 2: I think it's because I was writing about bitcoin price
Speaker 2: avocado correlations. Yeah, and like somehow I got automatically signed
Speaker 2: up to this thing.
Speaker 1: Prices of tomatoes. There was actually a Bloomberg piece just yesterday.
Speaker 1: Price is a forty percent from a year ago. Let's
Speaker 1: decompose the price of a tomato. So I'm buy a
Speaker 1: tomato and it's forty percent more, Like, you know, how
Speaker 1: much of that is transport, how much of that is
Speaker 1: for Ledger, how much of that is land, et cetera.
Speaker 1: Like what goes into the price of a tomato? And
Speaker 1: what is the main driver of swings year over year.
Speaker 3: Yeah, so let's let's maybe break this down a couple
Speaker 3: different ways. You have your retail price point at a
Speaker 3: customer sees. Let's say that for a second. Let's talk
Speaker 3: about the wholesale price of like what a going price
Speaker 3: of a tomato should be. If you're going to go
Speaker 3: directly to a farmer and buy half a truck at tomatoes, yea,
Speaker 3: right for that piece. There's all the the costs they
Speaker 3: have to grow, right, So you're talking fertilizer, seed, labor, water,
Speaker 3: the production costs, run their facility, the energy, and the trucking.
Speaker 3: Those are the base things that go into growing a tomato,
Speaker 3: So they have a base cost that they have to
Speaker 3: hit every year to just break even. Right. The way
Speaker 3: that market works is then usually typically they're going to
Speaker 3: contract a certain portion of it to try to make
Speaker 3: sure they get a guaranteed return to make some profit,
Speaker 3: and then they're going to call that sixty seventy percent.
Speaker 3: The rest are going to try to play on the
Speaker 3: open market, which means whatever the USDA price is going
Speaker 3: right for what a wholesale tomato should be, that's what
Speaker 3: we're going to sell the rest of the thirty percent
Speaker 3: at to try to catch some of these upswings and
Speaker 3: actually make some profit.
Speaker 5: Right.
Speaker 3: Like a lot of these growers that we deal with,
Speaker 3: this is a razor thin margin business, just like ours
Speaker 3: is as well. In groceries, as well. Right, Like your
Speaker 3: food cost is such a huge part of the cost
Speaker 3: for whether it's a grower, a retailer, a food service
Speaker 3: distribution company, you're playing in margins of single digits.
Speaker 5: Right.
Speaker 3: What happened specifically this time was if you look at
Speaker 3: winter growing of tomatoes, you can't grow a tomato in
Speaker 3: New Jersey in the winter. You can't grow it in
Speaker 3: Illinois in the winter. Right, You're going to be growing
Speaker 3: tomatoes in Florida.
Speaker 1: Into the greenhouse conversation a little bit, yeah, okay.
Speaker 3: But your traditional field tomatoes are going to be grown
Speaker 3: in Florida and in Mexico. And you think of okay
Speaker 3: for December until the spring starts, right, so called around
Speaker 3: this time when some of the more local programs start
Speaker 3: going further south. If you needed one hundred tomatoes for
Speaker 3: the US market, thirty of them are going to come
Speaker 3: from Florida, seventy of them are going to come from Mexico.
Speaker 3: It's about seventy percent of our tomato production in the
Speaker 3: winter is done in Mexico, now thirty percent in the US.
Speaker 3: If you go back pre and after, right around when
Speaker 3: NAFTA started, that was completely reversed. It was about eighty
Speaker 3: percent domestic, twenty percent Mexico, which we can also dive into,
Speaker 3: which is a fascinating story, the globalization of produce, and
Speaker 3: we talk about flavor and quality. It's a very interesting
Speaker 3: story as well. When this freeze, So there are two
Speaker 3: freezes that happened in flor this winter that took eighty
Speaker 3: percent of the crop in Florida out completely. Blooms fell off,
Speaker 3: fines died. Was not a great situation, right over one
Speaker 3: hundred and fifty million dollars worth of tomatoes lost. Again,
Speaker 3: produce demand is rather inelastic, So you took a market
Speaker 3: that needed one hundred tomatoes and you took twenty six
Speaker 3: out of the equation, and you're left with you the
Speaker 3: seventy four tomatoes that are left for one hundred, right,
Speaker 3: And anytime that happens, that's where you see these spikes.
Speaker 3: So it is less about the input costs themselves got it.
Speaker 3: At this point, I would say majority of it was
Speaker 3: weather related. Now, the other thing is they're always going
Speaker 3: to grow a little bit more than what we need
Speaker 3: for the market or their best guess. But it's a
Speaker 3: very segment in industry, so nobody knows exactly how much
Speaker 3: acreage everybody's putting in. The USDA does some projections, but
Speaker 3: in general, we did see Mexico decline their production a
Speaker 3: little bit this year, probably three to four percent. Doesn't
Speaker 3: sound like a lot, but when they're supplying seventy percent
Speaker 3: of the US market in the winter, that was actually
Speaker 3: quite a bit. While that was because the anti dumping
Speaker 3: tariff that was put in place of seventeen percent and
Speaker 3: change that was implemented back in July of last year.
Speaker 3: So a long history between Florida growers and Mexico growers
Speaker 3: about the price of tomatoes and what a fair cost
Speaker 3: to grow actually is, and a lot of accusations of
Speaker 3: dumping by Mexican growers into the US. So again you think,
Speaker 3: you know NAFTA in the mid nineties and the start
Speaker 3: of more free trade, that's when Mexico you think of Siniloa, Sonora, Jalisco.
Speaker 3: Those are amazing growing regions with a ton of land
Speaker 3: that they had available that had a lot less chance
Speaker 3: of a freeze like Florida does, right, And so once
Speaker 3: that they were already growing tomatoes for the US market
Speaker 3: or about twenty percent then, but they started to really
Speaker 3: invest in growing much more down there. For the US
Speaker 3: market once trade became a lot more predictable. When that happened,
Speaker 3: they also started getting into shade house or greenhouse right sore.
Speaker 3: Shade house is basically like netting that you would put
Speaker 3: over a massive tomato field. Do you think of these
Speaker 3: like vines of tomatoes, acres of fields that are covered
Speaker 3: by netting, and that sort of helps protect from the
Speaker 3: sun but also from bugs as well. And you see
Speaker 3: that with a shade house in Mexico you get almost
Speaker 3: three to four x the return per acre on the
Speaker 3: amount of tomatoes that you can produce versus if you
Speaker 3: just left it out in the sun. So they evolved
Speaker 3: into shadehouse, and then you got into greenhouse, which was
Speaker 3: like perfect growing conditions. They took the technology they were
Speaker 3: using in Canada in the Leamington area to do all
Speaker 3: the snacking tomatoes and things that were starting to grow
Speaker 3: and be a bigger thing, took that down south into Mexico,
Speaker 3: started building these big greenhouses so they could get year
Speaker 3: round production down there as well. And between those two
Speaker 3: they're producing a significant amount more per acre than maybe
Speaker 3: a traditional field grown tomato would be. So in the
Speaker 3: nineties and into the two thousands, there were accusations by
Speaker 3: Florida growers of dumping by Mexico growers. There was the
Speaker 3: Mexico defense was our cost of produces lower, we have
Speaker 3: lower labor costs, We're getting better yields, so this isn't
Speaker 3: actually something that we're economically selling lower in our home
Speaker 3: country versus you or not. I think there's truth on
Speaker 3: both sides to that, for sure. But we had these
Speaker 3: suspension agreements in place that had floors on tomato pricing
Speaker 3: that was allowed to be charged in the US from
Speaker 3: Mexico growers. That changed last year in July when they
Speaker 3: the US government reopened the case and put the anti
Speaker 3: dumping tariff on Mexico, and that change created more uncertainty
Speaker 3: than maybe the floor would have under the old suspension
Speaker 3: agreements that were in place. So between those two things,
Speaker 3: I think it was a little bit of a perfect
Speaker 3: storm of you decimated the floor to crop, Mexico didn't
Speaker 3: have a ton of extra production left available, and you
Speaker 3: see this crazy spike where a case of tomatoes on
Speaker 3: average went from in April much closer to the five
Speaker 3: year average to May was sixty five bucks a case
Speaker 3: on average for the whole month.
Speaker 5: In very high.
Speaker 2: Would you expect prices to actually go up even more
Speaker 2: from here?
Speaker 3: So in June we're back to the five year average.
Speaker 3: Already good, it's yeah, towards the end of MA into
Speaker 3: June it started to drop again. But this is where
Speaker 3: you get into the retail component. Everybody says retailers they
Speaker 3: go they take their prices up like a rocket and
Speaker 3: down like a feather, And so retailers will use this
Speaker 3: as an opportunity. Is there a new price floor that
Speaker 3: they're happy with, where maybe I'm going to charge the
Speaker 3: consumer a little bit more than I traditionally used to
Speaker 3: when these markets are this cheap, because the customer is
Speaker 3: still going to pay. It might not be too sixty
Speaker 3: nine a tomato, but maybe a dollar ninety nine a
Speaker 3: tomato when I used to be able to have to
Speaker 3: go to one forty nine. Right, if you think of grocery,
Speaker 3: retail economics has changed significantly over the last fifteen years.
Speaker 3: So if you think of like how much home delivery
Speaker 3: or click and collect like pick up at the store,
Speaker 3: they're much more advertising and marketing companies now where they're
Speaker 3: selling customer data to their suppliers about what are customers
Speaker 3: actually purchasing or not. All these things cost money for
Speaker 3: them to stand up and run, right, And so I
Speaker 3: think what you're seeing is while grocery ebadah is about
Speaker 3: the same, they're also that you know, traditionally was four
Speaker 3: to six. Now you might see the larger retailers and
Speaker 3: that's still maybe four to six five to seven rates
Speaker 3: margin as margin yep. At the end of the day,
Speaker 3: when you take all their costs into account, right, they
Speaker 3: have a lot more expense on the books and in
Speaker 3: ways that they didn't have before because they're having to
Speaker 3: pay for the additional labor and techivefrastructure and warehouses to
Speaker 3: be able to do the direct delivery the more like
Speaker 3: Amazon style approach that everybody is used to of, like
Speaker 3: I want something today and I want it now.
Speaker 1: Just to be clear, the margins are stable because on
Speaker 1: the one side of the ledger, their costs have gone
Speaker 1: up build out all this tech. But on the other
Speaker 1: side they have data that they can sell and that
Speaker 1: is monetizable and they roughly even out, and that's how
Speaker 1: you get the stable margin yep.
Speaker 3: And they're also charging you a higher price as well, right, Like,
Speaker 3: I think some of the consumer is definitely paying for
Speaker 3: some of their want being able to get stuff more
Speaker 3: on demand, right, as well as the variety that they're
Speaker 3: expected to carry. In a grocery store. In the seventies,
Speaker 3: a produce department was probably seventy five to one hundred SKUs.
Speaker 3: A grocery store today is three hundred to five hundred
Speaker 3: SKUs in their produce department. So they're expected to carry
Speaker 3: this high variety, all these unique things that comes with
Speaker 3: more shrink as well, right, So they had to balance
Speaker 3: all of that so with those economics changes for them.
Speaker 3: I do think what we're seeing is that retailers attending
Speaker 3: to hold on to prices longer than they traditionally would
Speaker 3: to try to help pay for some of this. And
Speaker 3: that's where you think a beef is also one of
Speaker 3: the things. Everybody's talking about how crazy beef presses are,
Speaker 3: and they are insane. I was at a restaurant the
Speaker 3: other weekend in the city and they had a strip
Speaker 3: steak on the menu for like one hundred and twenty dollars.
Speaker 2: Oh my god, fort trip stake, I stripta.
Speaker 3: That's crazy, it's yeah, but people are still paying that,
Speaker 3: which is crazy. Like the demand for beef is not
Speaker 3: slowing down even though these prices are getting so high.
Speaker 3: But if you look at retail versus wholesale, the cutout
Speaker 3: the difference between the retail price of beef and the
Speaker 3: wholesale of beef is it's the highest that it's ever been,
Speaker 3: both in a dollar perspective and a percent perspective. So
Speaker 3: go back twenty years, the difference between the price per
Speaker 3: pound of beef at wholesale and retail is probably thirty percent.
Speaker 3: Now it's probably closer to forty forty five percent. Really, yeah,
Speaker 3: So again, retailers are sort of like building on this momentum,
Speaker 3: this idea of like this you know, lack of consumer
Speaker 3: knowledge of what the market really is, and that's something
Speaker 3: we can't play. In the food service side of the business.
Speaker 3: We're up like a rocket, down like a rock, because
Speaker 3: our chefs in some of the buying teams that they
Speaker 3: have are much more knowledgeable about markets than the average consumer.
Speaker 2: Interesting, so if they see high tomato prices in the headlines,
Speaker 2: they're not going to be fooled thinking that like, oh,
Speaker 2: it's going to go up even further from here. They're like,
Speaker 2: all right, the spike's done, why are you still charging
Speaker 2: me this amount?
Speaker 3: They're going to log onto the USDA website and with
Speaker 3: the prices, they're going to be talking with some of
Speaker 3: our farmers and growers about field projections as well with
Speaker 3: some of them. And so yeah, it's a much more
Speaker 3: savvy buyer than maybe the traditional, you know, can retail consumer.
Speaker 1: It's interesting to think that, you know, one of the
Speaker 1: promises of the Internet was like, oh, the customer is
Speaker 1: going to be able to be so well informed, right,
Speaker 1: and they're going to know, like they're going to be
Speaker 1: able to find the best price. And there probably is
Speaker 1: that to some extent, right, that there probably are customers
Speaker 1: who are like extremely well informed and can find the
Speaker 1: best price. But the part that they didn't talk about
Speaker 1: was that the retailer would be very well informed about
Speaker 1: the customer and that they would be just as savvy
Speaker 1: and have all kinds of counter tactics to counter the
Speaker 1: customer's ability to learn about the price.
Speaker 2: Right, and not to get all antitrust. But if the
Speaker 2: customer has limited options for buying tomatoes, it's not like
Speaker 2: you can go into a supermarket armed with your knowledge
Speaker 2: of the USTA website and start negotiating. Although that would
Speaker 2: be fun.
Speaker 3: I can't say I haven't tried that before. It doesn't work. Interesting.
Speaker 3: I do complain to the head produce clerk at our
Speaker 3: store every once in a while about the price. I like,
Speaker 3: come on, guys, what's.
Speaker 2: The deal with disease in tomatoes? Because I see that
Speaker 2: mentioned a little bit in relation to Mexico. And my
Speaker 2: assumption nowadays is that basically every major crop in the
Speaker 2: world is dealing with like some sort of very troublesome
Speaker 2: disease or pest or something like that. Is it the
Speaker 2: same for tomatoes.
Speaker 3: Yeah, for sure. And I think that created some i'd
Speaker 3: say pre freeze impact in general on the tomato industry,
Speaker 3: where anchorage and production was probably slightly down overall, mostly
Speaker 3: in greenhouses. They were dealing with a couple of different
Speaker 3: viruses that were sweeping through the more traditional greenhouse varieties
Speaker 3: of mostly your snacking tomatoes right that they were not
Speaker 3: used to and didn't really expect to have to deal with.
Speaker 3: And those viruses were decimating those greenhouses where they'd have
Speaker 3: to tear everything out so well included and just replant
Speaker 3: and start everything from the beginning in these greenhouses. So
Speaker 3: tomato pricing, especially on more of the snacking or high
Speaker 3: flavor variety of things that you would see in a
Speaker 3: grocery store have been pretty volatile for a while now
Speaker 3: because of this, they've introduced some new varieties that are
Speaker 3: very promising and have slowed the impact of this already.
Speaker 3: But it's mother nature at the end of the day. Yeah, right,
Speaker 3: and like it's a continually evolving mother nature that you're
Speaker 3: always gonna be dealing with something new as a grower.
Speaker 1: So let's talk about the quote tomato price, because there
Speaker 1: isn't actually a tomato price, because there isn't actually a tomato,
Speaker 1: And like, we have one kind and here's a box,
Speaker 1: and I think there's a few different types of tomatoes
Speaker 1: just within this one box alone. So I sort of
Speaker 1: a two part question. The first part is how correlated
Speaker 1: are tomato prices, Like whether we're talking about like a
Speaker 1: New Jersey beefsteak tomato or one of these, Like generally speaking,
Speaker 1: is there a sort of stable relationship between tomato prices
Speaker 1: or do you see, like you know, the big fat
Speaker 1: red ones might be pricing in a very different trajectory
Speaker 1: than say these multicolor snacking tomatoes.
Speaker 3: Yeah, they all interplay with each other a little bit.
Speaker 3: I would say, you you do have more complimentary as
Speaker 3: substituteable tomatoes. Right, So if you think of like a
Speaker 3: round tomato like your New Jersey beef steak and aroma tomato, Yeah,
Speaker 3: the roads are pretty interchangeable. So in Florida, what happened
Speaker 3: was it was a huge wipeout of rounds and so
Speaker 3: it created a lot of pressure on the roma market
Speaker 3: as well. And so you saw that explode, and then
Speaker 3: this one was so bad that anybody was trying to
Speaker 3: get any tomato they could get. So you did see
Speaker 3: it start to affect some of the more cherry tomatoes
Speaker 3: or wine ripe tomatoes that you would see out there.
Speaker 3: I'd say in general, there's some interplay. It all depends
Speaker 3: on again, supply and demand. If there's not a ton
Speaker 3: of rounds to go around, then romas are going to
Speaker 3: get pushed up. If there's not a ton of romas
Speaker 3: to go around, then everybody's going to switch into the
Speaker 3: high flavor stuff.
Speaker 1: So then speak of the high flavor stuff. So it's like,
Speaker 1: you know, I'm addicted to them, my children really like them.
Speaker 1: Do you see at the firm level, essentially a redistribution
Speaker 1: of acreage towards the high value, high margin stuff such
Speaker 1: that they're just not as a percent or just whole
Speaker 1: like not growing as much of like the frankly like
Speaker 1: boring tomatoes period. That like there is just less because
Speaker 1: I have to imagine the more margins, higher price for
Speaker 1: some of these. That is like, well, why are we
Speaker 1: planting the cheap normaly tomatoes? Yeah, I think cheap normal
Speaker 1: tomatoes A kid, we didn't know about that. Yeah, we
Speaker 1: didn't know about these tomatoes.
Speaker 3: Yeah, exactly. And that's that's the evolution of the tomato
Speaker 3: market as well, is Yeah, there's still a consumer for
Speaker 3: a basic round tomato or wine ry tomato aroma, right like,
Speaker 3: and there's a use for that. You're gonna put that
Speaker 3: on a sandwich or you're gonna make a salce out
Speaker 3: of it or something like that. Right Again, there's consumers
Speaker 3: that want that basic tomato, maybe the more mild flavor. Yeah,
Speaker 3: it's going to be a guaranteed quality and look a
Speaker 3: certain way and always be the perfect round shape that
Speaker 3: when they're in their restaurant or their production facility, they're
Speaker 3: always going to get the same meald out of it.
Speaker 5: Right.
Speaker 3: What's interesting to me on the consumer side is definitely, yeah,
Speaker 3: the explosion of these flavored tomatoes, and I think what
Speaker 3: you're seeing here is that growers that might have grown
Speaker 3: traditionally cherry tomatoes or other type of tomato varieties are
Speaker 3: replacing them with these more sweeter varieties because they know
Speaker 3: that customers like these the snacking tomatoes in vogue right.
Speaker 3: People will just eat these as a snack versus only
Speaker 3: on a salad or something like that. So what you're
Speaker 3: seeing is probably more a replacement of maybe some of
Speaker 3: the older varieties of these that don't drive as much
Speaker 3: flavor with the newer ones.
Speaker 2: Earlier, I went to look up tomato prices on the
Speaker 2: terminal and I just realized there's a Japanese bank. I
Speaker 2: just learned that it has an amazing logo. I would
Speaker 2: you would Tomato just just off the brand identity? What's
Speaker 2: the correlation between fresh tomato prices and canned tomato prices?
Speaker 2: If fresh ones are going up, would it be reasonable
Speaker 2: to assume that the canned ones are going to go
Speaker 2: up as well?
Speaker 3: No, they're completely different markets. Interesting, Okay, Yeah, So a
Speaker 3: lot of your can production type tomatoes are grown mostly
Speaker 3: in California. Different varieties, different subsets, different completely different growing regions.
Speaker 3: For the most part, they do grow some processed stuff
Speaker 3: in Florida as well, but you would see maybe some
Speaker 3: pressure on that. But again they're very different supply chains
Speaker 3: in production. So those are also longer term contracts that
Speaker 3: producers put in place. So I think you see them
Speaker 3: able to cost control maybe a little bit tighter than
Speaker 3: the fresh industry can.
Speaker 1: So one of the Okay, so you talked about the
Speaker 1: weather as being a major disruptor, but we know and
Speaker 1: this is something that else comes up. We know that
Speaker 1: another well, there's actually two things that we talked about
Speaker 1: a lot on the podcast. One is the cardboard box
Speaker 1: that this set of tomatoes are in. But then also
Speaker 1: freight costs and that actual truck and diesel and other things.
Speaker 1: We know that just trucking is on a big upsurge,
Speaker 1: particularly in like the last six months. What do you
Speaker 1: see at Belldor on the sort of pure logistics element
Speaker 1: and how much would you say, when I buy a
Speaker 1: case of tomatoes, am I paying for the shipping component
Speaker 1: or the trucking component?
Speaker 3: For sure, this wouldn't be an odd Blots podcast talking
Speaker 3: about logistics, right. It's been rather extreme lately obviously, with
Speaker 3: oil prices going up and tightening availability within the trucking
Speaker 3: industry as well. If you think of some of the
Speaker 3: crackdown on immigration, sort of like truckers that are crossing
Speaker 3: the border from Mexico, we are seeing the supply of
Speaker 3: trucks shrink a little bit as well. Those two things
Speaker 3: together have caused prices to explode. Where a team drive,
Speaker 3: so two drivers on a truck so that you can
Speaker 3: alternate so you can get it from the west coast
Speaker 3: to the east coast, and the shortest amount of time,
Speaker 3: So a team drive truck that we had run from Salinas, California,
Speaker 3: the veg capital the salable of America right eight months
Speaker 3: ago might have been ten eleven thousand dollars for that.
Speaker 3: We saw prices a couple of weeks ago as high
Speaker 3: as sixteen seventeen thousand dollars, which I have never seen
Speaker 3: in my whole I grew up in this industry. My
Speaker 3: dad was a produce bier. I grew up with him
Speaker 3: take me out to fields and meeting with growers and
Speaker 3: seeing him be able to build those relationships and partnerships.
Speaker 3: And that's what caught me in in this industry, was
Speaker 3: doing that with him. I've never in my whole career
Speaker 3: scene prices at high before.
Speaker 2: Wait, now, I'm curious, did you ever think about going
Speaker 2: into farming directly? No.
Speaker 3: I did work for a grower shipper for a couple
Speaker 3: of years out of college L and M in North
Speaker 3: Carolina to get that experience on the grower side and
Speaker 3: understand that. But no, my love was that sort of
Speaker 3: anytime my dad would go and meet with a grower,
Speaker 3: he was always talking about Kroger's customer and what he
Speaker 3: needed for the customer wasn't what he needed for him
Speaker 3: is you know, running this buying office they had in
Speaker 3: Bureau Beach, Florida that bought all the produce for East
Speaker 3: Coast and a lot of their imports.
Speaker 1: He was a buyer for Kroger.
Speaker 3: Yeah, okay, yep. So he ran their produce buying office
Speaker 3: that they had in Florida that managed all the produce
Speaker 3: spuying for the East Coast. So yeah, he'd take me
Speaker 3: out of school when I was in kindergarten on a
Speaker 3: Friday and we go to you know, really sexy amazing
Speaker 3: places like a Mockley, Florida or Multrie, Georgia to go
Speaker 3: look at produce. We'd stop and play around a golf
Speaker 3: or go to a baseball game or some type of
Speaker 3: event on the way to make it interesting, really nice. Yeah,
Speaker 3: But I'd sit there and listen to and everything was
Speaker 3: about the customer to him, right, and so like for him,
Speaker 3: he won if his customer won and if his grower
Speaker 3: one right. And part of what attracted me to come
Speaker 3: to baut Or last year was this mindset about our
Speaker 3: hat was the same thing. Like for me, it's all
Speaker 3: about making sure we can meet the need of our customer,
Speaker 3: wherever that is, whether that's a commodity Romaine Hart you
Speaker 3: can get anywhere to a girl in duck tomato like
Speaker 3: I've brought here that's unique to us and incredible flavor
Speaker 3: and just an amazing story of Aaron and his family
Speaker 3: and what they've done. So, you know, to answer your question,
Speaker 3: I always wanted to be able to, I don't know,
Speaker 3: build something to bring value to the customer, right, And
Speaker 3: for me that was sort of following in his footsteps.
Speaker 3: I guess a little bit in doing this.
Speaker 2: I want to ask about tomato strains, but before I do,
Speaker 2: I need to ask about something else we've been discussing
Speaker 2: on the podcast, which is fertilizer prices. So if there's
Speaker 2: one thing I know about tomatoes from growing them myself.
Speaker 2: They're heavy feeders, right, like, they need a lot of
Speaker 2: biodegradable material off of which to actually grow and feed.
Speaker 2: Would you expect higher fertilizer costs in the future to
Speaker 2: start feeding into the retail price of tomatoes.
Speaker 3: Yeah.
Speaker 5: Absolutely.
Speaker 3: As you think about contracting cycles within tomatoes, you know
Speaker 3: retailers will be renegotiating costs throughout year depending on different
Speaker 3: growing regions, et cetera. Right now, growers have been able
Speaker 3: to most of pre bought right and especially the bigger ones,
Speaker 3: so that fertilizer costs is pretty locked in at this point.
Speaker 3: But we're going to see over the next six months
Speaker 3: is that's going to start to evaporate. So about or
Speaker 3: our big contracting season is coming up towards the end
Speaker 3: of the summer where we try to lock with a
Speaker 3: lot of our growers to make sure we can get
Speaker 3: consistency and supply for our customers. Our growers are already
Speaker 3: talking about the cost of fertilizer with us and saying
Speaker 3: we've got you covered. Now become contracting for next year.
Speaker 3: This is something we definitely have to talk about. So
Speaker 3: I do expect it to affect that price. But then
Speaker 3: it comes down to how much is are we willing
Speaker 3: to take versus how much does retail have to pass
Speaker 3: on to a consumer.
Speaker 1: So you mentioned that this box of tomatoes we have
Speaker 1: in front of us is a company called Girl and Doug,
Speaker 1: which I hadn't heard of, and you said they have
Speaker 1: an incredible story. I'm on their website right now and
Speaker 1: I'm already learning about a bunch of tomato? Are they varietals? Fridays?
Speaker 1: There's a baby Yoda tomato?
Speaker 2: Do you know that fun of buying your seeds every year?
Speaker 1: A cider popped tomato, a firebird tomato. I knew about
Speaker 1: the sun gold and atomic tomato. When you say, okay,
Speaker 1: they have this amazing story, like how does a company
Speaker 1: become like they break through in the tomato market and
Speaker 1: like such that they're like, you know, someone might go
Speaker 1: to their website like what is that story? And like
Speaker 1: how do they have all these like new exciting varietals.
Speaker 1: When did this become a thing?
Speaker 3: Yeah, I'd say probably over the last like fifteen years
Speaker 3: or so, you've seen a big explosion in the stacking
Speaker 3: tomato category, and a lot of that was driven by
Speaker 3: greenhouse production. Right, So the ability to grow perfectly indoors
Speaker 3: with the exact right temperature, humidity, water control. I'm sure Tracy,
Speaker 3: with your home beds, you would love.
Speaker 5: To have that right.
Speaker 2: Oh my god, if I could get an irrigation system going,
Speaker 2: that would be a game changer.
Speaker 3: It allows these growers to grow seed varieties there might
Speaker 3: be a little bit more challenging outdoors a right. And
Speaker 3: if you think of especially Aaron and Girl and Doug,
Speaker 3: these varieties that they have in here, these are highly
Speaker 3: susceptible to disease. Now he grows still outdoor shade house
Speaker 3: and a little bit of greenhouse, but they're unique. They
Speaker 3: take a little extra TLC, I would say, than a
Speaker 3: traditional round tomato. And so with the explosion of greenhouse production,
Speaker 3: which really started in Holland. Over there, they're probably fifteen
Speaker 3: twenty years ahead of us. They were growing some of
Speaker 3: these really cool, unique varieties over there. The seed companies
Speaker 3: over there are very innovative. And what you saw was
Speaker 3: you US companies understanding this snacking tomato or Canadian companies
Speaker 3: really understanding this snacking tomato category was a big opportunity.
Speaker 3: Started partnering with a lot of these seed companies over
Speaker 3: there to trial new things.
Speaker 2: But how do these new varieties because there are so
Speaker 2: many different tomato varieties, right, and they a lot of
Speaker 2: them have very amusing names like cream Sausage or striped
Speaker 2: Tiger or baby Yoda or baby Yoda, how do they
Speaker 2: actually enter I guess like the customer's consciousness such that
Speaker 2: restaurants or supermarkets are asking for these particular varieties or
Speaker 2: such that you're convincing them that this is what they need.
Speaker 3: Yeah, I'd say it's almost the other way around, Okay.
Speaker 3: I would say that it's really the restaurants and then
Speaker 3: the retailers that are pushing the demand towards the consumer
Speaker 3: of what they want to buy. I really do think
Speaker 3: a lot of it starts with restaurants. And if you
Speaker 3: see something specific on a menu in a restaurant and
Speaker 3: you try it, you're like, oh my gosh, I want
Speaker 3: to try this at home, right, And so like we
Speaker 3: view that very much as our wheelhouse at boud Or
Speaker 3: is our ability to go and find things like this
Speaker 3: that you'll want to call this girl and Doug Tomato
Speaker 3: Medley on the menu because you know something unique that
Speaker 3: not a lot of your competitors are going to have
Speaker 3: and it's this cool story that if a customer asks that,
Speaker 3: hopefully you've talked to your white staff and they can
Speaker 3: educate the consumer a little bit about the story of
Speaker 3: a girl and Doug right. And so I think it's
Speaker 3: less about what the consumer thinks they want or that
Speaker 3: they've heard about this type of thing. I think it's
Speaker 3: more they've seen it somewhere and tried it. And then
Speaker 3: a lot of these bigger tomato companies, Sunset Masternariti Produce
Speaker 3: is a big partner of ours. You know, they're one
Speaker 3: of the most innovative when it comes to see varieties.
Speaker 3: They have acres of testing greenhouses where they're consistently testing
Speaker 3: new varieties to see what will be a good mix
Speaker 3: of flavor and yield and something that's unique or colored
Speaker 3: differently that they think would be a hit with consumers.
Speaker 3: And then they're launching it. And just like anything, it
Speaker 3: comes down to marketing and advertising and getting it in
Speaker 3: the customer's hand to be able to drive that demand.
Speaker 1: So I've been to one of these multi acre indoor
Speaker 1: tomato greenhouses in Leamington, Ontario, and I was there on
Speaker 1: a very sort of like chilly, drizzly sober day, and
Speaker 1: inside the greenhouse it felt like the most beautiful spring day,
Speaker 1: like the dream spring day, and so like it was amazing.
Speaker 1: But all I could think about was like, this must
Speaker 1: just cost a fortune in electricity cost to maintain this
Speaker 1: incredible climate. And the light was so beautiful obviously, and
Speaker 1: it's because I believe they have a natural gas pipeline
Speaker 1: that like feeds a lot of this from the US,
Speaker 1: goes under the Great Lakes or whatever through and then
Speaker 1: powers this. What about like, if we're talking about greenhouse
Speaker 1: grown tomatoes and the recreation of a beautiful spring day,
Speaker 1: how much is it like variability electricity costs or energy
Speaker 1: costs are going to go into that tomato?
Speaker 3: Yeah, I mean it all plays a factor, right, Joe.
Speaker 3: And I think with these greenhouses, energy is a huge component.
Speaker 3: But I would say still just as much it's the
Speaker 3: fertilizer and it's a laborer and the production costs as well.
Speaker 3: So in general, if you think of like tomato markets now, right,
Speaker 3: they were so high, the growers were not the ones
Speaker 3: making a killing, right if you think about they lost
Speaker 3: eighty percent of their crop. Yeah, they're selling a tomato
Speaker 3: for one hundred bucks a case, like this is a
Speaker 3: razor thin margin business for our farmers where you know,
Speaker 3: you're gonna have great years and you're gonna have bad years,
Speaker 3: and a lot of it comes down to your input costs.
Speaker 3: And then what's the you know, USDA going right for
Speaker 3: tomato based on supply and demand. And so right now
Speaker 3: is a tough time for these guys because these input
Speaker 3: cost pressures are so high and there's a lot of
Speaker 3: pressure from our side to try to keep costs down
Speaker 3: as much as possible. Right it's that yin and yang
Speaker 3: between a customer and a supplier of you know, I
Speaker 3: want to try to keep my costs as competitive as possible.
Speaker 3: They still need to make a good return. We've got
Speaker 3: to figure out how to how to do that equally
Speaker 3: with each other.
Speaker 2: So, given razor thin margins for you know, places like restaurants,
Speaker 2: I assume that if they're serving a salad that is
Speaker 2: mostly tomatoes, I'm gonna go back to the cauprasy salad example,
Speaker 2: although I guess there's mozzarella or which cheese do you
Speaker 2: use for cuprasi buffalo? Yeah, so I guess that's probably
Speaker 2: going up as well. Anyway, if the prime component of
Speaker 2: a particular dish is spiking basically, and we seem to
Speaker 2: be experiencing more spikes overall in recent years. Right, we
Speaker 2: have beef, we have eggs, you mentioned romaine, lettuce, avocados. Potentially,
Speaker 2: how are restaurants actually managing their menu prices, because I
Speaker 2: assume they need to know, like, if they come up
Speaker 2: with a dish, they're going to be able to sell
Speaker 2: it for a reasonable margin in the future. But then
Speaker 2: if you have such volatility and ingredient prices, that seems
Speaker 2: really really difficult to predict.
Speaker 3: Oh, absolutely it is. But I think if you take
Speaker 3: a step back a bit on the restaurant side, the
Speaker 3: cost of food is about thirty percent of their overall cost. Right,
Speaker 3: if you go back to our retail example, a retailer
Speaker 3: seventy five percent of their cost. Seventy to seventy five
Speaker 3: percent of their cost is the cost of the actual food.
Speaker 5: Right.
Speaker 3: So let's take a burger in New York twenty nineteen,
Speaker 3: it was probably fourteen to fifteen bucks on the menu. Today,
Speaker 3: a good burger on the menu is twenty two or
Speaker 3: twenty three dollars. If you look at the actual food
Speaker 3: cost that burger, it's probably gone from maybe three fifty
Speaker 3: to five point fifty. That's a two dollars increase. That's huge,
Speaker 3: that's substantial, right, Like, food costs are definitely up significantly,
Speaker 3: but that's not the full fourteen to twenty two to
Speaker 3: twenty three. We don't talk about it enough, but the
Speaker 3: other input costs of running a restaurant are up significantly
Speaker 3: as well, whether it's labor, rent, utilities, that type of
Speaker 3: stuff as well. Like those pressures you're seeing just as
Speaker 3: much on the cost of the food in a restaurant
Speaker 3: are pushing their pricing up as much as food is, right,
Speaker 3: and so yeah, for a chef, like, their goal is
Speaker 3: to be as consistent in their food costs as possible.
Speaker 3: I think that's why a lot of them tend to
Speaker 3: have that like I want you to price me daily
Speaker 3: or weekly, and I want to shop you around and
Speaker 3: I don't want to commit to volume with you type
Speaker 3: of aspect that we have from some partners. Others go
Speaker 3: the other way where they want to be able to partner.
Speaker 3: But you have this sort of like dichotomy in the
Speaker 3: industry of you know, different ways of viewing how they
Speaker 3: keep their food costs honest, right with their distributor This.
Speaker 1: Makes a lot of sense to me. So the restaurant
Speaker 1: is fine with very highly very pricing or doesn't simply
Speaker 1: because or they'll take that risk of not locking in
Speaker 1: simply because so much of their costs are x are
Speaker 1: not the food component, And so they're the whereas for
Speaker 1: the grocery store or some other retailer, they're the ones
Speaker 1: because their end price is so correlated to the underlying price,
Speaker 1: they would be the ones that would care more about
Speaker 1: longer duration and locking that in for sure.
Speaker 3: And in a restaurant, they want to keep their food
Speaker 3: cost as low as possible. Sure, I like their goal
Speaker 3: is to keep it as absolutely low as possible, So
Speaker 3: the most most chefs want to continue to shop around
Speaker 3: and not make some of those commitments. And in case
Speaker 3: the market drops out, what you know, the tomatoes, You know,
Speaker 3: we're super high in April May and they're coming down
Speaker 3: in June, but you go back to November December, they
Speaker 3: were twenty thirty percent below the five year average, right,
Speaker 3: And so like, do I want to lock to get
Speaker 3: some guarantee of price? And my old days when I
Speaker 3: was at Hello Fresh before coming to bout or a
Speaker 3: meal kit delivery company, we had a cost per meal
Speaker 3: that we had to hit. I want to consistency in pricing.
Speaker 3: I was trying to as long as possible for a
Speaker 3: lot of chefs. I think some of them want to
Speaker 3: be able to play that variability in up and down
Speaker 3: so that they can take advantage of some of the
Speaker 3: cheaper opportunities to keep their food cost lower so they
Speaker 3: can eke out a couple more dollars here and there,
Speaker 3: and they probably think they net out at the end
Speaker 3: in anet win. But in general, yeah, like food cost
Speaker 3: is a good component of a restaurant, but there's a
Speaker 3: lot more that goes into that versus like a retailer
Speaker 3: of food service distributor. Most of our costs is the
Speaker 3: cost of the food, So when that cost changes, it's
Speaker 3: near term much more impactful on us for sure. But
Speaker 3: that's our job as bout or is to help direct
Speaker 3: our customer, right Like, we want to make sure they
Speaker 3: know where markets are heading and what we're able to
Speaker 3: do to help support them the best that we possibly
Speaker 3: can with you know, we carry eighty different tomato skews
Speaker 3: at a given time, right so we want to help
Speaker 3: push you towards the things that are If you're looking
Speaker 3: for price, that this is the best optimal price. But
Speaker 3: it's also my job to source multiple regions and find
Speaker 3: the right partners and ones that you know, when tomato
Speaker 3: markets get costly, that they're not just going to pull
Speaker 3: act of God on us raise the price significantly that
Speaker 3: I can still get my contract at a good value.
Speaker 3: But then I'm also there for them when the markets
Speaker 3: are super cheap, that I'm pumping the volume through them
Speaker 3: and supporting them. Right, It's this give and take relationship.
Speaker 3: We both have to win, you know, negotiations in JOYT
Speaker 3: partnerships really our win win, and that's really what my
Speaker 3: team's job is is to find a way to make
Speaker 3: sure things are a win win and we're providing as
Speaker 3: much value for our end customer as possible by making
Speaker 3: sure that our suppliers are well taken care of as well.
Speaker 2: Okay, well, speaking of direction, what's your favorite tomato variety?
Speaker 2: What should we be checking out this summer? Let's say
Speaker 2: price is irrelevant.
Speaker 3: Price is irrelevant, Yeah, I think when tomato prices are high,
Speaker 3: any of these prices are high. What I would tell
Speaker 3: any average redail consumer is like, go outside your comfort zone.
Speaker 3: There's so much good varietal produce out there, whether it's
Speaker 3: in your local farmers market or even in your grocery store. Now,
Speaker 3: i'd say mass availability if you're looking for something in
Speaker 3: the store. Sunset Masternardi flavor bombs incredible. They've got a
Speaker 3: line of bombs. There are four or five different varieties.
Speaker 2: That come in like little packete.
Speaker 3: Yeah, the flat little clamshells almost like these berries are
Speaker 3: right and usually still on the vine. Those are incredible
Speaker 3: and some of those top restaurants in New York are
Speaker 3: using them for like pasta, sauce and different things like that.
Speaker 3: It is a main ingredient because of flavor profile on
Speaker 3: those is just so perfect. I'd say for our restaurant
Speaker 3: consumer or somebody that's not in retail. It's thees Girl
Speaker 3: and Doug tomatoes that I brought for you guys. These
Speaker 3: these varieties that they have in this medley are one
Speaker 3: hundred percent grown for flavor.
Speaker 2: They're really good. Yeah, we've been We were eating some
Speaker 2: of them before we started recording, and we can attest
Speaker 2: their delicious.
Speaker 3: So Aaron his parents had a floral shop they retired
Speaker 3: Botty Produce Farm of all things, and he sort of
Speaker 3: took it over after a while. And started growing some
Speaker 3: of the craziest cool varieties of anything, whether it was
Speaker 3: micro greens to tomatoes to whatever, to sell to chefs.
Speaker 3: So he's a very like chef focused grower, right, and
Speaker 3: so he started with like building some relates with chefs
Speaker 3: directly in the city and literally FedExing from San Diego here.
Speaker 3: Some of those chefs helped connect them without or so
Speaker 3: that we could get him through our distribution where this
Speaker 3: might last a little bit better than through FedEx.
Speaker 5: Right.
Speaker 3: But these tomatoes that he has in the box here,
Speaker 3: these varieties, again they're specifically bread floor flavor. They're a
Speaker 3: little bit more susceptible to disease, et cetera because of that.
Speaker 3: But to make sure he gets the flavor in them,
Speaker 3: he'll go through and coll out at least a third
Speaker 3: of the flowers wow, when they start to produce, to
Speaker 3: make sure that the right nutrients get into each individual tomato,
Speaker 3: to make sure that the flavor is there when it
Speaker 3: gets to the end consumer.
Speaker 1: Yeah, what is the actual process of like, you know what,
Speaker 1: we want it even sweeter tomato. So it's like okay,
Speaker 1: or some new dimension flavor. Is that happening by the
Speaker 1: shift to nutrient delivery. Is it happening through some genetic engineering?
Speaker 1: It did happen through some sort of like grafting, like
Speaker 1: where in the sort of like the R and D
Speaker 1: of tomato. Is it happening where these new flavors are
Speaker 1: coming from?
Speaker 3: Yeah, So it's almost all cross breeding, right, and it's
Speaker 3: done at the mostly at the seed company level. So
Speaker 3: a lot of these growers will partner with specific seed
Speaker 3: companies where they find good relationships or that they grow
Speaker 3: you know, they're developing seeds in a way that makes
Speaker 3: sense to them and their business model and the type
Speaker 3: of flavor that they're looking for, right, And so a
Speaker 3: lot of these guys will work specifically with them and
Speaker 3: test different seed varieties and give them feedback to the
Speaker 3: seed company to be able to you know, well, this
Speaker 3: didn't have as much yield as we hoped it would,
Speaker 3: or the flavor on this was not sweet enough, or
Speaker 3: there's too much acid in this, right, And so then
Speaker 3: the seed company will go back and do some more
Speaker 3: cross breeding and try a new variety that they'll put
Speaker 3: out there, right, And then when they find the ones
Speaker 3: that they love, they're going to go in and get
Speaker 3: a contract and get the seed in and start growing,
Speaker 3: so it's a multi year process. It's actually pretty fascinating
Speaker 3: if you go to Sunset Paul in that team there,
Speaker 3: If you go to there there R and D facility
Speaker 3: where they're growing hundreds of different varieties at a time,
Speaker 3: it's really fascinating to go through and see some of
Speaker 3: the cool stuff that they're doing. Tomatoes are completely black
Speaker 3: to you know, all the different striping like on the
Speaker 3: firebird that Aaron has here right like there, tomatoes.
Speaker 2: Are beautiful like bumblebees or.
Speaker 1: Social media and Instagram specifically must have played a significant
Speaker 1: role in the last ten fifteen years of the tomato market, right, like.
Speaker 3: I think in food in general, right, like food trends
Speaker 3: pop from social media now, whether it was that pink
Speaker 3: sauce stuff years ago to yeah, snacking tomatoes right like
Speaker 3: influencers do.
Speaker 1: What was the prink sauce?
Speaker 2: It was like a recipe that went viral. It was
Speaker 2: basically a tomato sauce with like lots of cream in
Speaker 2: it or something. I can't remember what made it pink.
Speaker 2: I did try it. It was during like COVID times.
Speaker 1: I think, yeah, number that one.
Speaker 3: But yeah, we're constantly looking at what food trends are
Speaker 3: on social media as well, like for us to be relevant,
Speaker 3: for our chefs to make sure that we can meet
Speaker 3: them with what a consumer might be looking for when
Speaker 3: they come into their restaurant for either special or something
Speaker 3: always on the menu.
Speaker 2: So you brought us some strawberries as well, which is
Speaker 2: actually something that I am also planning on planting my
Speaker 2: new raised beds. I used to have some in my
Speaker 2: old ones. And there is nothing like a fresh, like
Speaker 2: farm grown strawberry versus what you buy at a mediocre supermarket.
Speaker 2: Why do they taste so much better than like what
Speaker 2: I would get at no shade to Walmart, but at Walmart.
Speaker 3: Pretty much any other retailers. Yeah, yeah, yeah, I think
Speaker 3: it comes down to seed genetics, right. So strawberries are
Speaker 3: extremely challenging to grow, and they're extremely perishable, right. The
Speaker 3: skin is super soft, you have to hand place them
Speaker 3: in every till that.
Speaker 2: You produce, and also they taste so good that literally
Speaker 2: every other creature on earth wants to eat them, whether
Speaker 2: it's like birds or slugs or deer or rabbits or whatever,
Speaker 2: or maybe.
Speaker 3: Your dog as well or my dog. Yeah, but I
Speaker 3: think in the sixties and seventies and continue through to today.
Speaker 3: The domestic supply chain of strawberries. A lot of the
Speaker 3: sea varieties were coming from partnerships with universities, so like
Speaker 3: you see Davis University of Florida for Florida grown berries,
Speaker 3: where customer love berries, so everybody wants berries all the time,
Speaker 3: year round. They didn't want it to be a seasonal
Speaker 3: thing anymore. To do that, you had to grow varieties
Speaker 3: that were a little bit more from er. It could
Speaker 3: take the ride on a truck from California to New
Speaker 3: York four or five days and survive, right, And so yeah,
Speaker 3: a lot of the varieties that you see in your
Speaker 3: you know, traditional shipper label products are these these varieties
Speaker 3: that are in partnership with with the universities, where a
Speaker 3: lot of it was functional, not flavorful.
Speaker 1: We've gone this whole conversation without bringing up the phrase
Speaker 1: cold chain, and you mentioned Hunt's point, and I'm just
Speaker 1: curious this. We did an episode on this a few
Speaker 1: years ago. Is the New York City market distinctly operationally
Speaker 1: difficult to get from, you know, farm to store in
Speaker 1: a way that's different from other markets due to the
Speaker 1: sort of the geographic reality of New York City.
Speaker 3: I'd say it's definitely a lot more expensive. Nobody wants
Speaker 3: to take a truck across the door Washington Bridge to
Speaker 3: the Bronx, Right. So I've worked at, you know, major
Speaker 3: retailers that are national. I've worked at a meal delivery
Speaker 3: company where we had to ship product through the mail
Speaker 3: and FedEx or ups for one or two days. And
Speaker 3: now I've worked in one of the most competitive food
Speaker 3: service markets in the world with New York City, in Boston, DC,
Speaker 3: Philly where we service as well. It's challenging everywhere, Joe.
Speaker 3: It's a game of perfection, right, and a lot of
Speaker 3: it is having to keep you know, this berry ideally
Speaker 3: would be it a perfect thirty three to thirty four
Speaker 3: degrees from the minute it's put on a truck to
Speaker 3: the minute that it's served on a customer's plate. Like,
Speaker 3: that's really the ideal temperature to keep this berry absolutely perfect,
Speaker 3: especially something like a sweet dispatch that I have here
Speaker 3: that is a more flavorful variety that's going to go
Speaker 3: bad faster than maybe something more traditional. Right, this tomato,
Speaker 3: Ideally you're sitting between forty eight to fifty two degrees
Speaker 3: for like perfection, I've got to ride both of these
Speaker 3: on the same truck to a customer. How do I
Speaker 3: get that done right? So, like, this is a constant
Speaker 3: challenge that we have as an industry is making sure
Speaker 3: you maintain that cold supply chain that I need, you know,
Speaker 3: thirty two to thirty four for this. Yeah, I need,
Speaker 3: you know, thirty two to thirty four for my protein
Speaker 3: and my dairy, but I need forty eight to fifty
Speaker 3: for tomato or an onion.
Speaker 2: Right, all right, Jacob, that was amazing. Yeah, we have
Speaker 2: a lot of fun talking about tomatoes and also the
Speaker 2: food distribution business.
Speaker 3: Thank you so much for coming on a looks Yeah,
Speaker 3: thank you guys, and thank you for the tomato.
Speaker 4: Absolutely enjoy Yeah, So that was fascinating.
Speaker 2: It was great, and we have all this fresh produce
Speaker 2: that we now get to eat. A couple of things
Speaker 2: stood out for me. So one the idea of I
Speaker 2: guess the informationally advantaged you know, chef, yeah, or a
Speaker 2: restaurant buyer versus the informationally disadvantaged retail customer. And the
Speaker 2: idea that like supermarkets can push through additional price increases.
Speaker 2: If this goes back to the conversation we had with
Speaker 2: that baker in Chicago and all Ago, if all the
Speaker 2: retail consumers sing and the headlines is like, tomato prices
Speaker 2: are high, Tomato prices are high, customers are going to
Speaker 2: accept higher tomato prices.
Speaker 1: Yeah, this idea that the end retailer can actually push
Speaker 1: price and then not take it down. It's not just
Speaker 1: some myth, right, it's not just sort of like that
Speaker 1: is like a real phenomenon observed in the industry, and
Speaker 1: of course in theory. Some tomato customers could do the
Speaker 1: homework and like find out.
Speaker 4: But like, no, no to try that.
Speaker 1: Nobody try no, one's gonna have time to do that,
Speaker 1: and actually like price comparison shop Like, yes, of course
Speaker 1: the information is all theoretically out there, but the restaurant
Speaker 1: does that professionally. I don't have time to do that,
Speaker 1: So of course they're going to have like an edge
Speaker 1: over me in terms of like, yeah, like I have
Speaker 1: other things.
Speaker 2: Just outsource it by going to eat at the restaurant exclusively.
Speaker 2: Just don't go to the grocery store. That's right, you'll
Speaker 2: save on costs, on labor costs there.
Speaker 1: No, that that was a great conversation. I'm just fascinated by,
Speaker 1: like also the sheer explosion of varieties and just the
Speaker 1: fact that again, like the idea of like a mass
Speaker 1: consumer base of snacking tomato eaters, that's like a fairly
Speaker 1: novel thing. Like a lot of like my kids like
Speaker 1: really like snacking on tomatoes. I don't think like when
Speaker 1: I was a kid. I'm sure that market of like children,
Speaker 1: let alone adults who like thought about like these are
Speaker 1: the good tomatoes. It's like I never heard it was
Speaker 1: just when I was a kid that was add tomato
Speaker 1: and it was just a red thing that was like
Speaker 1: the size of your fist. And that is obviously like
Speaker 1: a change in the fundamental tomato market that is relatively novel.
Speaker 2: I never thought about it. But I don't remember eating
Speaker 2: tiny tomatoes when I was a kid either, so yeah,
Speaker 2: it must be new. But you know, also, like your
Speaker 2: question about Instagram and that impact on food, like I
Speaker 2: think that is currently a part of it at.
Speaker 1: The color Yeah, yeah, the idea of a black tomato
Speaker 1: that would be cool to take a picture of.
Speaker 2: One of my favorite tomato varieties is called Ethiopian black.
Speaker 2: But they're not even actually black, so I don't know
Speaker 2: very I think they're actually from Ukraine.
Speaker 1: The Ethiopian black tomatoes.
Speaker 2: Yeah, frame they're kind of like stripe. They're darker and striped,
Speaker 2: but you can get like indigo tomatoes that are actually Okay,
Speaker 2: we should stop here because we're just going to start
Speaker 2: talking about tomato varieties.
Speaker 1: Those are nice looking tomatoes.
Speaker 2: Yeah, they're really you'll get some, hopefully if my tomatoes
Speaker 2: survive the next week of colder weather. Anyway, shall we
Speaker 2: leave it there?
Speaker 1: Let's leave it there.
Speaker 2: This has been another episode of the Odd Thoughts podcast.
Speaker 2: I'm Tracy Alloway. You can follow me at Tracy Alloway.
Speaker 1: And I'm Joe Wisenthal. You can follow me at the Stalwart.
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Speaker 1: Bennett at Dashbod, Cale Brooks at Calebrooks and Kevin Lozano
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