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