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Hello and welcome to another episode of the All Thoughts Podcast. I'm Tracy Alloway.
And I'm Joe. Wasn't thal Joe.
I have a question, go on, what is your favorite chain restaurant. It has to be a sit down chain restaurant.
Sit down chain restaurant. That's a really good question.
You know.
I actually really like Chilia's. I think they have Their fijidas are absolutely legit. And I say this as someone who is eating quite a lot of text mex Fijidas from my time in Texas, and so I think I have credibility and as a kid, and I haven't been there in years, but I still think my memory of the food is really good. I love Cracker Barrel.
Oh, breakfast at Cracker Barrel is really really good. Well, I bring it up because today we're going to be answering the question of where all of these restaurants actually get their food from.
That's a great question. I don't I don't know anything about it. I don't know anything about sit down chain restaurants.
I mean, I don't know.
I think about most chain restaurants period, let alone fast food ones. But the world of sit down ones that are real restaurants where there's waiters, waitresses, et cetera. I don't know a thing about it.
You're not interested in my favorite restaurants. Oh, this is how it works. I asked you a question, and you were ciprocate.
I was going to and I was planning to, and then you like turned a ninety degree angle to talk about to talk about we were going to start answering the question of where these comfort was like, oh, okay, I guess we're going on to some new direction here. We could just keep talking about favorite restaurant, Tracy, what is your favorite restaurant to sit down in?
I actually have many? Okay, Red Robin, Oh, I still love that place. They had a salad that was basically just a plate of chicken tenders.
It was so good.
But build does a salad Fridays. You still love that place?
I know.
And there was one in London and it was like my anchor to America in the early two thousands. And Chili's Chili is with my Chili.
Yeah, yeah, it's legit. Keep going. We're going to make up for the fact that I didn't ask you. But now I'm just keep going well.
One thing.
One thing I did realize recently. I've never been to an olive garden. I don't know why that is.
I've been a few times. It's not that terrible. I don't think like I've been. I've even been to the one in Times Square.
Yeah, but I feel like it's very hard to make carbs badly. Right, it's just pasta and bread.
Yeah, uh, it's good.
Okay, all right, I am going to move the conversation on now Apple Bee's.
Have been to the one in Times Square? There, solid I do not like it. Why do we have to move the conversation on. I don't get it. Why can't we just keep talking about it? Sit down restaurant?
All right, Well, we'll get back to them. We'll get to our recommendations. But on a serious note, one of the reasons we are interested in this subject is because we did a series last year called Beat Capitalism, where we talked a lot about agriculture and the chicken industry specifically,
and anti trust and monopolies and things like that. And one of the things that stood out to me from that series was a comment from Doha Mechi, who is the former Assistant Attorney General, where she talked about the tyranny of the middleman in the economy, and I think this is something that people are, you know, perhaps just waking up to. There are all these companies out there that you have probably never heard of, but have massively dominant positions in the economy and charge a lot for
their services. And one of those happens to be a very large company that provides food for all these sit down chain restaurants.
You know, I'm going to play Devil's advocate on this episode because, as.
You know, because you love chili so much, because I love.
Chili's, and I love food production at massive scales, and I love.
All of this.
But it is true that there are all these companies that are really important that sort of sit between whether the retailer, the customer, or more in the case of food, more frequently the farmer and the end retailer of the farmer and the restaurant do we literally know nothing about. And they're huge and they're massive, and they don't get any attention, and so I am very interested in this topic.
All right, Well, we do have the perfect guest. It is someone who has been on the show before I think maybe a year or two ago. Now, yeah, wow, time flies. But we're going to be speaking with Austin Frerik. He is an anti trust and agricultural expert and also the author of Baron's Money Power and the Corruption of America's Food Industry. It's a great book even if you're not interested in agriculture or anti trust specifically, it says a lot about the US economy, so I would highly
recommend it. And Austin actually has just written a new chapter for his book that is all about this particular company, and I guess I should just say what it is. It's called Cisco.
It's not the networking gear company.
Not the networking gear company, although it does have the most generic origin story ever. So Cisco's stands for systems and services company.
Yum delicious.
All right, Austin, welcome back to the show.
Thanks for having me on again. And I just want to say, you guys have me on last year really changed the course of my book, so I appreciate that.
Oh, thank you.
Well.
It was genuinely excellent. I am not just saying that. I really enjoyed it. Okay, speaking of which, how does it work when you decide to add a new chapter to a book and why did you decide to do this?
Yeah. So the funniest thing about this book was when I would do book talks, people kept telling me about barons I missed, Like I was in Idaho. They're like, let me tell you about a potato baron when I was in Indiana. There.
We're going to get the name of the potato baron after the episode.
So oh yeah, I have a whole purgatory folder that I just put this information into. But Cisco kept coming up and it was the weirdest placed origin story where so I talked fast and I know it. So I purposely been doing book talks and nursing.
Homes, so you have to slow down and practice.
Okay, I blame it on. I listened to podcasts like one point five point five, especially Midwestern and older people. You gotta take it down. And what kept happening when I was doing.
You realize, if you're speaking fast because you're used to it, then people who listened to you on those podcasts are now listen you two and a half to three x speed. Anyway.
It's bad because my husband listens to them on two x twos. We talked that way, and it's so a lot of times you do nursing home gigs, they'll value for dinner before and after. And it was people kept complaining about the food. And I mean, anyone that's been to a hospital or there's home in America, it's pretty bad. I mean, we're serving our most vulnerable people the worst food. And they kept coming up. But it's Cisco's one of those things everyone kind of complains about, but no one knows.
And my mom used to have a bakery and I write about that in my Coffee chapter. And she had a Broadliner and her Broadliner disappeared. They got bought up by a bigger entity, and so I was just curious.
And then that's broadline distribution.
Yes, right, thanks for that's an industry term. I think of them as grocery store for restaurants. They were Amazon Before Amazon, they were the everything store.
This is really important because when we're talking about Foo distribution, so there are broadliners. You get everything there from well, you know, your huge jar of olives to cheese or whatever. But then also a restaurant might also have specialty distributors too that like just really focus.
On one thing, right if they have the option. Okay, in certain markets, usually most rural communities, there's very few options. But like for example, New York has one most competitive broadliner market, so restaurants here have a lot of different source and options.
Yeah, I should just say this is going to be a very odd, lotsy episode because it brings together baking, warehouses, logistics, trucking, anti trust, all that good stuff. So I'm very excited. Okay, Well, on that note, how did Cisco get to be a dominant player in this particular space.
I love this origin story John Bot. He's a different type of character compared to other barons my book. I really like him, like he's like a model businessman where he's one of those people comes out of Waco, Texas. His brother and dad died young, dropped out of college, leap Baylor to support his mom, worked at AMP, got transferred to the AMP in Houston, and he's one of those people you see in business history that just saw things before other people. He saw two important things. Number one,
the rise of frozen food. We're talking like right after World War two and how that was going to and then also frozen food mixed with women entering the work at workforce knowing that they want to make quicker meals. So he thought, oh, people are gonna eat out more. And the thing to keep in mind here is our norm of eating out is a very new thing in America. Historically used to like bring a dish to something, it was like a church function. Now we eat up about
once a day. So he saw that thing ahead of people, and he didn't think amp was moving fast enough. So he founded a frozen essentially a frozen berry company. But going back to this point, you made Joe about all these different things. That's how the idea from Cisco came from where literally some Irish oil man was opening a fancy hotel in Houston, and he was working the loading dock that night and he saw in the day a
frozen strawberries. A frozen strawberry. I don't have a competitive advantage, but what I can do is this food buyer has like thirty different vendors for all these different things. What I can do is offer him as much as possible. So the origin of Cisco was he brought nine companies together to create it, and you realized some's gonna fill this at some point. So even though they only did business in a few state, he registered in all fifty states so that's how Cisco is created.
I am fascinated by this idea because it's just one of those things that hadn't really occurred to me until like a read ear chapter, just like yeah, like it's really weird how much we eat out or it's just really novel in terms of the prevalence of restaurants. I mean I eat out way more than I did, like when I was a kid growing up.
I think about that all the time. Used like Bonanza was like a buffet was like a special occasion once a week.
And now I sit down Pizza Hut. That's another one that was such a big deal. Yeah and yeah, no, I just you just do it.
Now, Well, let me pose a question to you. What do you think? And there's a new king The number one sit down chain restaurant in America is where you order off the menu.
Oh, this is tough.
Before I tell you it's my favorite train, your favorite chain, maybe my husband.
I'm worried that, like I'm not going to know it, and then I'm going to be really embarrassed at how out of touch because you're going to say it is going to be really obvious. What is it?
Cheesecake factory?
No are we are we talking about by dollar volume?
Dollar volume?
Okay?
All right, yeah, you're gonna have to tell us.
I think I'm having stage fright.
What's the Texas Roadhouse?
I love Texas Roadhouse? Oh my god. They have the best red rolls.
My mom brings to block bags and like I should.
Have said, that was my favorite. They had one of those. When I was living in Abu Dabi, they had one and it was absolutely fantastic.
You want to understand America, go to a text roadhouse on Friday night. Yeah, I wasn't one to buke Iowa. I was on book tour last weekend. I got a steak, vegetable and mashed potatoes homemade fourteen dollars.
Un ironically, their sticks are really good, Like they're good. I always have to pull.
Where do they get there? Where do they get their food?
Oh? I mean who knows how they I mean you need to get it from Cisco and they you don't. I don't know.
They only charged fourteen because of the incredible miracle of capitalism. Have been scared, Joe.
My hotic is two things they do scratch cooking. Most chain restaurants now do frozen food. They're actually kind of brocoling in the back and number two volume. Okay, yeah, their surfers only have three tables and they move you so quick.
I love that you're doing in person research on the subject of chain restaurants. But you know, you mentioned that we're not entirely sure where Texas Roadhouse gets its food from. How does it work the contracts between a restaurant and someone like a Cisco. What do we know about those specific agreements?
So a few things. One we can kind of figure out what chain Cisco does based on its website. So it has a subdivision called Sigma. So if you go to Sigma's website, it will rage about its corporate clients. Some of them are all Garden Red Robin's one, you know, different chains like that. The agreements, there's a lot. I mean, what I do know from these agreements is what we see with public universities, and even that are not transparent. There's a famous one at the University of Iowa. Someone
wanted to know what's the contract for food here? And it went up to Supreme Court in Iowa and it was rejected, which is kind of a weird thing, Like you think that our cultural state would have a really good source in the food. You would know the contracts. There's not a lot of disclosure here.
They filed to see the actual contracts.
Keep it closed.
Yeah, Okay, So let's say a red Robin is it or an olive Garden is a client of Cisco. Would that be a national contract that would cover every Red Robin or Olive Garden or would there be any variation and read in regional distribution or anything like that, Like I.
Would think so I would contextualize Cisco as think of it as like fed extra food. Okay, A lot of these companies that pattern products, and Cisco's just moving their patent pattern fries, you know what I mean? Like they all have their kind of That's what Cisco's there to do is outsource that part or handle that.
Is there some giant like Cisco food production center in like I don't know, the wilderness of Wyoming or something, or are they sort of like scattered around the United States.
Scattered around? I mean, this is this is harder to understand. There was a good Wall Street Journal article like twenty years ago, how a lot of your Jollopeno poppers in a restaurant I'll be all being made at one factory in Mexico. You know, it's cheaper to pay someone offshore. Essentially, you know, stuff it, but then you are sacrificing taste at some point. But Cisco doesn't own production facilities. It owned a slaughterhouse in Iowa at one point, but then
it sold it off. So I can't quite figure out what they got into that. My guess is is for most restaurants, people pick their vendor based on They called center of the plate the protein, so they were trying to do quality control.
Yeah, I'm sure you're the center of the plate. Yeah, a restaurant to refer to whichever protein. I already but this is so they don't have production what basically it is and you already said it's like fed eggs at its core, it sounds like it's logistics companies.
Yes, most of theirm place are truck drivers. Huh.
Your dad was a truck driver, right, you talk about this in the book.
Yes, he works from a corn start company.
So what did that experience of growing up with a truck driver dad teach you about a company like Cisco.
So my dad used to be first he's being in the beer business, so he's a beer truck driver, and then he worked in beer sales. So that's actually where a lot of my I love looking at displays and grocery stores because my dad used to merchandise, so I love good merchandising. So like, my favorite grocery store is HAP in Texas LOVEHV No One merchant, No One merchandise is like that, Yeah, this is a fact, and so
you look at that. And so like my dad always taught me like he could, he knew the type of demographics of a grocery based on the number one beer, like oh, this is a blue Moon hivy or this is a you know, red red Dog hivy. So there's different price points. And so my dad now does corn products. But just understanding because there's independent truck drivers, there's in house truck drivers, and there's kind of hierarchy to these different worlds all that kind of stuff.
So let's talk about the competitive landscape because that's an addition to the fact that you know, you are a big fan of the stakes at Texas Roadhouse. That's why we're here. What does the competitive landscape for sort of this sort of broadline or food distribution to restaurant really look like.
So that I mean, that's that's the big question anti trusty market definition. I mean that is is like my little pet peeve is, how do you define a market's everything? So like Cisco try to buy us foods, you know, back in twenty fifteen, and they argue their competition include Sam's Club. I think people like I just remember personally anadoltically my mom, we only went to Sam's Club when she ran out cups and needed to get cups between
her next truckload. Most people would not include Costco and Samski as a broadliner and Texas Roadhouse.
Is it going to Costco to buy steakes?
But in theory or restaurant, I mean, I take your point, it's not really a comp but in theory, there probably are restaurants that source from some of these whole Yeah.
I mean you can tell when you go in certain local restaurants, you'll see Costco branded products in the back. My bigger thing here is right now, a lot of what is a market is defined by highly paid economists, and these things aren't publicly disclosed usually. I kind of keep in mind, I come out of the Treasury Tax
Analysis Office. The beauty of that world is you have Treasury doing tax revenue estimates UFCCBO, and then you have independent academic institutions like you PEN doing revenue estimates, so you have three different estimates coming at you for the same thing. I will love if we did something like this with market definition because here's the thing, these markets are pretty stable. Having like there should be a government agency doing market definition reports.
So based on how you so the merger attempt was blocked. It so based on however the regulators at the time defined, Okay, this is the market, this is the circle we're drawing. What are we talking about in terms of market share and so forth?
So keep so at the time too, there's basically three national broadliners and they were number one Cisco is trying to buy number two US Foods. That was read. But what's really interesting here is basically, even though Cisco got stopped two things number one, number two is trying to buy number three. Right now, US Foods is trying to buy I have to write it down performance foed. But
then Cisco basically is engaged. When people call roll ups to my calculations, it's buying over two hundred and sixteen companies. So even though it got stopped once for this big merger. It's market dominance really comes from rolling up you know, a local Miami seafood place, local produce place, and that Anaheim that kind of stuff.
So I know, roll up strategies started to get more attention under the Biden administration, but historically it does seem like regulators kind of go after the big M and A deals and they kind of ignore all the small ones, even though once you add up all the small ones, it can get a company into a very very dominant position, like with Cisco.
I think this is the biggest one of the biggest dowop poles and modern competition policy in America. I mean, go back to my coffee bearing JB. Move they did was clinics because this sounds awful. They realize people are economically irrational with their pets when it comes to healthcare, so they bought over like fifteen hundred vet clinics they rolled up. Commissioner con helped put a stop to that.
I generally think with big companies like this, once you reach a certain size, you basically don't allow them to acquire because you just know they're not buying a company for pro competitive reasons. But a lot of this flies into the right art because the Federal Trade Comission, you know, it's very understaffed. They can't keep they cannot keep tracking a seafood provider in Miami who's buying it.
Talk to us more about what they rolled up or what they've been trying to roll up. So I take it these aren't other broadliners. Are these specialty? Are these niche? Are these regional?
Like?
What are they? What are the fragmented assets that they're consolidating onto the Cisco umbrella?
All above?
Okay?
I mean they generally don't compete. They buy. Okay, like in Iowa, they came dial because they bought a broadliner, a local broadliner. That essentially what they did for earlier their history. Now they tend to buy more specialties. So they'll buy like hotel things, like little soaps. They'll buy a company that does like Asian food. They'll all these little things, and then they're starting to buy four in like an Irish broadliner, a Canadian broadliner, Coasta Rica broadliner.
It's just kind of a blop that keeps growing.
Am I a tomato broadliner? I brought Joe tomatoes tomato, really nice tomatoes.
Niche, I think you're a specialty distributed.
Yeah, okay, fair enough. I certainly don't do it in volume, especially this year. Okay, Well, on that note, in your chapter, it says that Cisco has something like twenty seven percent market share.
It's unclear what the market share is.
Okay, So originally this was going to be my question, like when we say that, what do we actually mean?
We don't know. I originally in that chapter have A quoted as a fifty percent market share, but you sometimes you'll see forty, sometimes you'll see thirty. It really comes back to the market definition. That's why I want to go back to having some public entity debate this so it's transparent. But also partly what stopped that purchase of US foods is when you have to see looked into it. They are looking at metropolitans and they realize, like in Las Vegas and San Diego, it would have like an
eighty percent market share. So even with food, we tend to talk national food is so local food markets particular, we really need to drill down regionally.
What do they use this power for? Sitting aside the fact that they want to make a lot of money like all companies do, like when I think about the risk of anti competitive abuse or why I wouldn't want one company to have such a dominant, you know, share of a given market, I think, Okay, what is the potential for abuse? So maybe they say no, you're not you can't get access to all of this stuff unless you buy our all of Maybe could be one sort of thing, or they tell a restaurant you can't buy
X unless you buy our soaps. Like what is the fear or what is the reality of what Cisco currently does with the amount of power that they have.
Yeah, so two things number one, So it's it's not like you get a big sales book with the prices of Cisco. Those days are gone. Most of it's on an app and this is a black box. My understanding from people I've talked to is they always want to make their margin. So they might sell you your center of a plate, the protein at a loss or costs. They get you in the door, but then they'll make
the margins up by tweaking the napkin prices. Here's the thing one could argue that's in violation the Robits and Batman Act because in theory, you should charge everyone the same price for x amount of units, but we don't know because.
Of Oh so we think it might be personalized up pricing, but we're not sure.
We're not sure. Okay, that is what some people have accused. The other thing to keep in mind here and the biggest, honestly part of the reason why I wrote this chapter is just the quality decline. I feel like most eating out in America, especially local places, it's all kind of eh because CISC companies like Cisco, they don't want to
buy from like a local provider. They want one entity to do a bunch, and so it's just stifling out that kind of innovation, the quality, and especially in rural America, Cisco doesn't want to deal with local things, and so especially in I think an undercurrent two of my book I realized after the fact was the communities producing our food are actually being hit hardest by the food system. We saw in the Coger Albertson merger case failed merger
that they're gouging the most in real communities. Most the broadliner dominance tends to be highest in real communities, and real communities tend to have the most fast food, So it's kind of getting the worst of all these worlds, So like New York has the best food, Like it's kinda the more yuppie you are in America, that probably the better food selection you have.
That seems fair actually, and again like that's pretty ironic given that most of the food is grown outside of cities. Obviously, I'm going to ask the question that is very close to Joe's heart. But with market dominance tends to come pricing power. But on the other hand, with market dominance and scale comes savings from volume. Do we have any idea of like the net effect of a cisco on food prices in restaurants?
We don't. I mean kind of what I realized writing this chapter and just in general with this book is I just kind of do everything as Goldilocks, and there is beauty to scale, but things have just gotten too far and things are out of whack. And I think with price and I brought this up last time, and it's the first slide I show people anytime I talk anymore, is Americans been more on average on food than most
Western democracies. And I think it's like cliche to say I went to Europe and had cheaper food and it was better. I think that's how you've seen the system play out because you basically big big, gets big. You have all these big boys kind of like going at each other, and it's just kind of this race to the bottom.
Talk to us more about the food creator side of the business. If I'm I don't know if I'm growing tomatoes or if I'm or if me and Tracy are growing tomatoes, to what degree the Cisco play us off of each other or squeeze our margins in order to get within the Cisco distribution system.
I think the best example of that's in seafood. Okay, the seafood. Seafood in general America is just a dumpster fire. To to be blunt with you, there's a really and I'm gonna make a comparison here. CNBC came up with a really good story the other day where Walmart and Amazon are this big fight right now. Yeah, and Walmart basically has very low standards for its third party platform. There's a lot of fraud, a lot of abuse going on that platform because it's trying to get market share
from Amazon. I would compare Cisco to that, where they don't here's the thing, they don't really care how their seafood source I mean, there's been so many allegations of the calamari coming from Chinese slave labor fish that's saying it's Gulf shrimp from the you know, from America. It's not just all these like these constant abuses in this seafood system, but Cisco not caring because all it cares about is price. Think of Cisco like the Walmart food distribution.
That makes sense. So when you were reporting out this particular chapter, did you hear any specific stories from either restaurant owners or food producers about dealings with Cisco and what it's like to actually negotiate with them.
The biggest critique I've heard is just the lack of selection. Cisco is such a dominance in a lot of these markets, local restaurant owners really don't have a lot of choices. That's probably the biggest critique I heard. And just my favorite phrase, and it's a subtitle of the chapter of this chapter is Tonight's dinner fell off the Cisco truck. We've all had those meals, you know what I mean. You go to wedding and you can just tell it's like the low Staer Cisco where it's just so blah
and tasteless, but a lot of restaurants. I mean, that's kind of this whole undercurrent of this book. This chapter is I kind of think of this as my Frankenstein chapter. What started off as an aid to local restaurants make their life easier is now undermining them because they're losing their specialness.
Oh yeah, On that note, didn't the founder at one point try to I guess he retired but was still connected to the company, and then he tried to correct some of what you're describing.
Yes, I mean, I can't say this enough. He is a model business man. I mean, this guy he retired in the late eighties. He stepped aside, donated the charities, kept coming into the office each day, didn't want to sign parking, and he always trusted his people especially. He let basically each warehouse do its own thing, and I would compare it to like Whole Foods, famously Whole Foods let the managers do its own thing pre Amazon, so if they saw a good thing at the farmer's market,
they could bring that producer in. He retires, few CEOs come along. One comes along, and the old man hated consultants number one. He's like they don't know my business. Number two, they'll probably chait even though they're not supposed to. They'll share my secret sauce with my competitors. New guy comes in, hires consultants, and what the first thing he says is centralized procurement. You instead of having all these local different things, get all your berries from one person.
And what John saw is he saw change the numbers. So he wanted to go to the board to talk about this CEO. Time was kept being like, no, no, no, this is a nine year old man who built this company. This is his everything. He went around and got it to the board. According to one ext if he was in estquartered out the building, this broke the old man.
Did he like literally go into the building and like find the.
Board and no, he had a it could be a certain staffer, get it to all the board members and he was shown the door. This broke the old man. And you see the quality decline, you know, centralized procurement. Like you, I don't want to romanticize the Hall of Peanut pepper or like this kind of stuff, but you are cutting corners at some point when you're doing these like not everything can be frozen and taste just as good as a fresh thing. It's like a good example,
it's actually a tomato, like a good summer tomato. Like there's no reason iohy can't get a good summer tomato. It's so easy to grow a tomato there. But they're all the same blah tomato grown who knows where. And that's kind of that kind of story. And part of it the argument I'm making there is part of regulation. Guard rails, whatever you want to call them, is almost prevent companies from themselves to stop a race to the bottom.
It's interesting this idea that the restaurants can't distinguish themselves to the same degree because of the sort of decline
in quality. And it strikes me. We did in upsisode with some guys who actually opened up a pizza restaurant right around the corner from Bloomberg, and in that case we were talking about the delivery apps, and the idea is, like, you know, one point in theory service delivery, et cetera, might have been a restaurant's calling card, right, we have really good we really know you, et cetera, And we have.
We'll get to your house and fifteen minutes or the pizza is free.
But then everyone in theory. It's like this game theory thing where everyone feels compelled to Okay, we're going to distribute through the well known delivery apps that everyone has heard about. And that's great, and on some level it makes markets more efficient perhaps although they've gotten so expensive. I think it's for me, it's more efficient often to just go pick it up. But that's besides the point. But the long term effect is essentially this sort of
elimination of the specialness of the place. And so maybe there is more efficient, maybe the food is cheaper, maybe it does get too faster, maybe even gets too faster and hotter, et cetera. But this idea that we have this sort of textured economy with this sort of flora and fauna of businesses that are distinct, that of texture sort of disappears once they plug into these giant platforms.
You just made a great neo brandeis argument.
Oh great.
I mean this might not shock anyone. I'm a neo brandised person. But that is my critique of the crant I trust framework is not everything can be put into Excel. How many hogs when persons shown, it's a question society is has to wrestle with and I make that kind of point in this chapter was at my wedding, I'm part check and we start col watches, which colatches and I are very different than the ones in Houston. Houston, they put meat in them, but like you can't buy
col watches from Cisco. It's like the local little things make a place of place, and you're losing this the homogenization of the American food system. Everything's kind of the same. It's kind of blah. And that's what's it's hard to art. You can't. That's what's the thing that's missing. That's why it is a little it does seem, frankly a little hard to quantify this effect that everybody feel. I think of two little examples is my mom had her own
coffee store and then she went worked at Starbucks. And what drove her the nuts the most, or something called planograms. She was told where to put every single thing on the shelf. And my mom worked next to a General Mills plan She knew that audience and she knew how to merchandise, but they didn't trust her. It's like the lack of trust and employee.
We learned about planograms. Oh yeah, that's right with the Celsia CEO.
Yeah, that was a good episode. Yeah.
I have since walked into CVS's looking at the shelf space very very differently, and I'll just too.
Oh, I'll just add on. The thing keep in mind is no one gets rid. No one opens a restaurant to get rich. Everyone. It's a really really hard industry. You're willing to sacrifice incomes because you do because what you love, and you just you feel that pride in local places and they're just running, they're running up hill more and more based on because of these structures.
You know, you mentioned frozen berries earlier, and I know Barry Barons are in your book. Do the dominant companies like a Cisco or a Berry Baron, do they kind of like feed on each other? You think, like does Cisco naturally lean towards producers who are making stuff in huge volumes?
I mean, I think it goes back to Walmart. I mean part of it was people in negotiating power when they negotiate deals with these companies. So you've got to get big, so you have some volume so you can negotiate, Like I think of I go back to Walmart just because I think of Walmart as the closest thing America's ever had to Soviet unions out Paula Buro. That's the weirdest chapter people have reached out to me about. Is all the suppliers, like you don't negotiate with Walmart. Walmart
dictates to you. I think with Cisco, is they're just so big.
These are centrally planned internal economies.
Yeah, absolutely, and it's I think the best example of the bad qualities. Actually, the produce system in America partly is because of the farm bell we subsidize corn, we don't subsidize carrots, So our protoce system went offshore, you know, because you can exploit labor and exploit environmental stuff, so that green pepper's coming from who knows where, traveling long things and so. And it's also designed for durability, not
for taste. And you're seeing the play out in your local restaurants where just the foods kind of.
It's interesting you used the phrase earlier saving companies from themselves. I think even the companies seem to be aware of this. And you mentioned Starbucks is a great example because I forget what's the name of the Starbucks founder.
He could everyone it's not Howard Schultz. That's who we think it is.
Oh well, Howard Schultz. Every every few years his name is back in the headlines, and he himself seems to rue the fact that this company, which early on sort of had a local coffee shop vibe which I think he really liked, has not been able to sustain that in part because of, yeah, the required programs, and he complains about that. Everyone's like, we got to get back to feeling like a real Italian coffee shop. It never seems to happen.
Well, one of the Ben and Jerry's founders just quit as well because Ben and Jerry's was bought by Unilever.
So the funding each chapter, I realized, there's they all had these like niche Every commodity is different in America, and the like Therey's actually to be the most complex commodity. The whole Harry regulation America's written in the nineteen before we had refrigeration, So it makes no sense. The joke and dairy is only five people understand the dairy program and four are dead. And I was kid it seen with
this dairy guy in Wisconsin last week. And there's a glut right now in the butterfat market be engineered, soybeans increased the butterfat. And the rumor right now in the street too is are feeding palm oyld the cows.
Oh wow, speaking of dry you know when we did that episode with Mike Frohman recently and you mentioned that you asked him what was the bigg surprise? He learned as US trade repert He's like, oh, there's five hundred different things you could do with a dairy molecule, and
because of trade rules. Anyway, by the way, just following up, I am currently in a touch with someone from the Big New Zealand Dairy cooperative Fonterra from Big Dairy, I am working on finding the dairy molecule specialist for that episode.
Oh well, that's very exciting. Maybe we'll end up doing a three part milk series. Yeah, I'm sure we better hurry it up since it's almost October. Okay, is there anything that can be done about this? Like now that a Cisco has rolled up all these different companies and substantial market share, although as we were discussing, we can debate what that actually means. Is there like what swings that dominance the other way?
Yeah? I mean to Joe's and just I just want to add on to Joe's point earlier about the companies not wanting to have to do this, but if they don't engage this beat, like the system design right now is they have to do this behavior. And I actually think about that with farmers now in America. The farm building right now is designed to maximize corns. You have to overplant corn even though it's bad for the environment, else you go broke. So everyone's behaving this way because
we're in a Las Fair era. What to do about it? And that's kind of why I profiled this woman named Ellen in that chapter. She I think people crave heroes right now. No one's really articulating hope on whatever your local party is, what is a positive food system? And
Ellen Ellen's fascinating where she's a farmer's two kids. She opened her own restaurant and then she opened her own like Cisco, because the problem she has with Cisco didn't want to take her product and sell to restaurants on Almahon to mooin, So she created a nonprofit Got it Up. They would basically pull different farmers in Western Iowa to sell into these It was using and they're also doing school, so that was a big one, but then they got hard hit by the Doge cuts. That to me is
like maybe one possible thing is maybe extension. You have extension all across the world America. Maybe they can kind of get into that help this kind of procurement.
Yeah, maybe you don't try to compete against Cisco on volume, but you go like hyper localized hyperlocal.
But also something we got a rein in Cisco. I mean, looking at the black box of the pricing strategy would be huge. But also I think we should put merger acquisition freezes on these large entities. At some point it's like you can't buy anymore, like you've hit your cap.
It's interesting, tracy. Like the other great homogenizing effect, of course on society is big digital platforms, right Instagram, et cetera. And everyone feels that they have to constrain whatever they do, whether it's a restaurant or media company, et cetera, in order to serve the elgo guy that is sort of
capricious and unpredictable in some way. And it feels like the story, whether we're talking about the physical world or the digital world, is that scale has this homogenizing effect, which nobody really likes these conditions.
Yeah, I think that's right. But also there are these like hidden tears of scale, viz. These middleman companies. All right, well, Austin, thank you so much for coming back on Odd Blots. Congrats on the new chapter, and I'm sure a lot of people will be looking forward to picking up the revised book.
Thank you so much for having me on again. Joe.
That was really enjoyable.
Yeah.
I always love talking about food. Although I haven't had lunch today, so I knew that. I'm a little bit Can we go to Olive Garden in Times Square?
Let's do it right soon, I'll go. I'm happy to go there soon.
Okay, I actually would like to go.
Yeah, it's got great views. It's actually really fun and it's got great views.
Oh you've been to that specifically one? Oh, I didn't realize. Okay, so there's a lot to pick out from that. I know you're on the side of cheap and plentiful food, but perhaps perhaps I guess the homogeneity of the offering, maybe that concerns you.
It definitely concerns me. And this idea that no, and this idea that restaurants if they you know, so much of the preparation is done off site, et cetera for curious things that you eat, and so what is the
restaurant anymore? And so this is a thing where scale is great and cheapness is great, and I'm all for this, And I think food should be a lot cheaper than it is, because we've had a lot of food inflation in this country and I think it's very worrisome, and so food should be a lot cheaper and more efficient, et cetera than it is. But when we think about
the things that sort of make us a society. Nice, If if a restaurant is really just a sort of Cisco microwave, yeah, or Cisco man, right, a giant microwave that can connects a Cisco manufactur distribution system to a Grubhub delivery system, what world are we living in?
Yeah? And I think it gets back to the flora and fauna point that you were making. So maybe you could have you know, uh, food that's cheap and maybe not of the highest quality, but it is plentiful and inexpensive. But then you should have you know, more local options.
We brought me those really nice tomatoes yes, so thank you for those.
You're welcome. So I'm doing my part.
But I do not think that is a scalable solution for most people. No, And I grew up hating tomatoes because I thought that they were all really bland because I only got them.
In the supermarkets. Yeah, it is phenomenal. How different a supermarket tomato taste from a homegrown one? Anyway, shall we leave it there?
Let's leave it there.
This has been another episode of the All Thoughts podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.
And I'm joll Wisenthal. You can follow me at the Stalwart. Follow our guest Austin Ferk, He's at Austin Ferk, and check out the new edition of his book Bearings, which has a whole chapter about Cisco. Follow our producers Carmen Rodriguez at Carman armand Dash E Bennett at dashbod at Calebrooks at Kilbrooks. For more odd Loots content, go to Bloomberg dot com. Slash od Lots have a daily newsletter and all of our episodes, and you can chat about
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