Why Tomatoes Are the Most Expensive They've Been in Four Decades

In April, the price of tomatoes was around $2.69 per pound — the highest seen in some four decades. And tomatoes aren't the only food getting more expensive. From cauliflower to lettuce, fresh produce is spiking all over the place. So what's driving the price spike? And what can tomatoes teach us teach about America's political economy including changes in trade and tariffs? Our guest today is Jacob Krempel, senior vice president of procurement and merchandising at the wholesale food distributor Baldor, and an expert in securing fresh produce. We talk to him about where America's tomato supply actually comes from, why consumers are paying more and more, how restaurants navigate price fluctuations, and the influx of novel new tomato varieties. Read more:The Recipe for a Power Restaurant Has ChangedThe Latest Snack Innovations Are Basically Just Creamsicles and Chex Mix Only Bloomberg - Business News, Stock Markets, Finance, Breaking & World News subscribers can get the Odd Lots newsletter in their inbox each week, plus unlimited access to the site and app. Subscribe at bloomberg.com/subscriptions/oddlots Subscribe to the Odd Lots NewsletterJoin the conversation: discord.gg/oddlotsSee omnystudio.com/listener for privacy information.

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• 0:00Joe Weisenthal?

  There are some market stories where you want every detail. Tracy and I have made quite a few podcasts on that basis, but sometimes you've only got 10 minutes and need to know what's moving markets and why. That's the Barclays Brief Podcast. Every week, experts from Barclays Markets and research get you up to speed on what matters and what to watch next. About the time it takes to grab a coffee, so search Barclays Brief wherever you get your podcasts.

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• 0:57Speaker 02

  Bloomberg Audio Studios. Podcasts, radio, news.

• 1:12Tracy Alloway?

  Hello and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

• 1:16Joe Weisenthal?

  And I'm Joe Weisenthal.

• 1:18Tracy Alloway?

  Joe, I know you love tomatoes.

• 1:20Joe Weisenthal?

  I love tomatoes. Oh, my God. I love tomatoes. I love tomatoes so much.

• 1:25Tracy Alloway?

  This is the episode, this is Joe talking about how he loves tomatoes.

• 1:28Joe Weisenthal?

  Well, this is a funny one because like this is a you episode, you know, you like booked, you're like, oh, let's do a tomato episode, which I'm glad you did because I love tomatoes.

• 1:36Tracy Alloway?

  But you're gonna make it your episode, aren't you?

• 1:38Joe Weisenthal?

  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.

• 1:49Tracy Alloway?

  What, from the supermarket?

• 1:50Joe Weisenthal?

  From the grocery store. And so I thought tomatoes were like the worst vegetable on the planet. Well, they're not. Well.

• 1:55Tracy Alloway?

  Are you gonna correct yourself and say they're not a vegetable?

• 1:57Joe Weisenthal?

  They're fruit. You know, so I'm just gonna 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 varietals that I absolutely would put in a fruit salad.

• 2:18Tracy Alloway?

  No.

• 2:18Joe Weisenthal?

  No, I would.

• 2:19Tracy Alloway?

  No, this is wrong.

• 2:20Joe Weisenthal?

  And so these tomatoes that we, no, no, no, like when you, if you tried one of the tomatoes.

• 2:23Tracy Alloway?

  I have. They're so sweet.

• 2:25Joe Weisenthal?

  I absolutely would. I love tomatoes. Anyway, sorry.

• 2:29Tracy Alloway?

  So we got to talk about tomatoes. Perhaps not in the way you have been so far, but.

• 2:33Joe Weisenthal?

  Let's spend one minute talking about how tomato prices are really high.

• 2:36Tracy Alloway?

  Yes.

• 2:37Joe Weisenthal?

  And then the other 45 minutes, we're going to talk about how delicious tomatoes are.

• 2:40Tracy Alloway?

  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 40% increase year over year.

• 2:50Joe Weisenthal?

  Yeah.

• 2:51Tracy Alloway?

  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 $2.69 a pound.

• 3:01Joe Weisenthal?

  Yeah.

• 3:01Tracy Alloway?

  So tomatoes are getting kind of expensive, which is bad news for you.

• 3:05Joe Weisenthal?

  It's really bad news for me because I'm addicted to them. I am price sensitive. So it doesn't matter how high the price of tomatoes get, it will not affect my volume at all. So that's just straight, like that's just straight money out of my pocket.

• 3:18Tracy Alloway?

  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.

• 3:30Joe Weisenthal?

  Tracy always brings me tomatoes at some point in the summer and they're always delicious.

• 3:34Tracy Alloway?

  But I've got a really big selection this year, Cherokee.

• 3:37Joe Weisenthal?

  Nice.

• 3:37Tracy Alloway?

  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.

• 3:55Joe Weisenthal?

  I cannot wait to just talk tomatoes for the next hour.

• 3:59Tracy Alloway?

  You're not just going to say how good they are over and over, right?

• 4:01Joe Weisenthal?

  I might.

• 4:02Tracy Alloway?

  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 Krempel. He is the SVP of Procurement and Merchandising over at Baldor Specialties. So thank you so much for coming on Odd Lots.

• 4:14Speaker 04

  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.

• 4:20Tracy Alloway?

  No, this is

• 4:20Speaker 04

  Excited to talk tomatoes.

• 4:21Tracy Alloway?

  This is the perfect guest for the perfect moment. Can you tell us what Baldor actually does?

• 4:26Speaker 04

  Yeah, so Baldor is a 30-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 500 trucks a day with food, mostly to food service restaurants, right? So about 70% restaurants, 30% independent retailer or other wholesalers. We got our start, actually, you know Balducci's in Greenwich Village?

• 4:52Tracy Alloway?

  Yeah, sure.

• 4:53Speaker 04

  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, combined them together.

• 5:12Tracy Alloway?

  That makes sense.

• 5:13Speaker 04

  And that's actually how you get Baldor, which is a fun story. So that was in the 70s, 80s. That business grew, expanded, started to blow up. They spun it off as a separate company in 91, when Andy Balducci's son-in-law, Kevin Murphy, took over the business. He ran it until about 2013, when he passed away from cancer. And his son TJ is our owner now and CEO. And he's been running the company since then.

• 5:36Joe Weisenthal?

  Within the realm of food distribution, if someone asked me to like 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, if I, United Natural Foods. And then I would be able to name Beldor. And Beldor would be the only one that I would associate in my mind, maybe because you've done a good job with branding, etc. It's like, okay, these are high-quality ingredients rather than just food distribution. Who are your clients? Who do you sell into at Beldor?

• 6:06Speaker 04

  Yeah, we sell just about anybody, right? But I think we've made our bread and butter as this, and I listened to your Cisco episode, right? And 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 7,500 SKUs versus a Cisco carrying 20,000 plus. Right? So, 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,

• 6:50Speaker 04

  like a basic romaine to high specialty variety tomatoes, like some of the ones that I brought.

• 6:54Joe Weisenthal?

  And what's the mix in terms of restaurants versus grocery stores or restaurants versus whatever else?

• 6:59Speaker 04

  Yeah. So we're about 70%, maybe a little bit more in restaurants.

• 7:02Joe Weisenthal?

  Okay.

• 7:03Speaker 04

  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.

• 7:15Tracy Alloway?

  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 caprese 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?

• 7:35Speaker 04

  Yeah. So you go to baldoorfood.com, right? And you go onto 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 caprese salad. What do you think?

• 7:59Tracy Alloway?

  Where are my tomatoes?

• 8:01Speaker 04

  Yeah. Or 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 caprese. What would you suggest? Right? And so between that high touch, white glove service that our, 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.

• 8:27Joe Weisenthal?

  So I don't really know that much about the restaurant industry, but I read Kitchen Confidential. And there in that book, Anthony Bourdain talks a lot about like, you know, he'll play off the suppliers. He's like, oh, this guy could get me this. At this price, what can you do? But this strikes me as very relevant in a 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've never seemed 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?

• 9:03Speaker 04

  Yeah, that's a trade secret joke. No, I'm kidding. 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 to 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.

• 9:28Joe Weisenthal?

  Okay.

• 9:29Speaker 04

  And so a lot of our customers, you know, our, our view is that we provide that value, not just in 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 11 o'clock at night, you can go on our website and still order product where most other competitors.

• 9:50Joe Weisenthal?

  And what time would he get there the next morning?

• 9:52Speaker 04

  Depending on their account and their delivery time is early at 6 a.m.

• 9:55Joe Weisenthal?

  Wow.

• 9:55Speaker 04

  Yeah.

• 9:55Tracy Alloway?

  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?

• 10:03Speaker 04

  This tomato pricing thing is unique as far as like how expensive it got. But I'd say in general in produce, this is like a very much a, a, 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 U.S. 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 in 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. Cause that's already almost a hundred dollars a case right now, which is insane for romaine because of bad weather in California and avocados as well.

• 10:47Speaker 04

  Avocados went from $30 a case to. Eighty dollars a case in literally the span of a week in the last week.

• 10:54Tracy Alloway?

  Joe, did I ever tell you, for some reason, I'm on the has avocado board email distribution list.

• 11:00Joe Weisenthal?

  Really?

• 11:00Tracy Alloway?

  Send out really good updates about what's going on in the avocado market. I think it's because I was writing about Bitcoin prices and avocado correlation.

• 11:08Joe Weisenthal?

  Yeah.

• 11:09Tracy Alloway?

  And like somehow I got automatically signed up to this thing.

• 11:13Joe Weisenthal?

  Prices of tomatoes, there was actually a Bloomberg piece just yesterday, prices up forty percent from a year ago. But decompose the price of a tomato. So I pay, I buy a tomato and it's forty percent more. Like, you know, how much of that is transport? How much of that is fertilizer? 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?

• 11:38Speaker 04

  Yeah, so let's, let's maybe break this down a couple of different ways.

• 11:40Joe Weisenthal?

  Great.

• 11:41Speaker 04

  You have your, your retail price point that a customer sees. Let's save 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 of tomatoes, 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 around their facility, the energy and the trucking.

• 12:04Joe Weisenthal?

  Okay.

• 12:04Speaker 04

  Those are the, the base things that go into growing a tomato, right? So they have a base cost that they have to hit every year to just break even.

• 12:12Joe Weisenthal?

  Yeah.

• 12:12Speaker 04

  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 rate for what a wholesale tomato should be, that's what we're going to sell the rest of the thirty percent at, right?

• 12:33Joe Weisenthal?

  Okay.

• 12:34Speaker 04

  To try to catch some of these upswings and, and actually make some profit, right? Like a lot of these growers that, that we deal with, this is a razor thin margin business, just like ours is as well. And, and groceries as well, right? Like your, 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, 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. Can't grow it in Illinois in, in the winter, right? You're going to be growing tomatoes in Florida.

• 13:09Joe Weisenthal?

  We'll get to the greenhouse conversation a little bit, but yeah, okay.

• 13:12Speaker 04

  Right. But your traditional field tomatoes are going to be grown in Florida and in Mexico. When you think of, okay, for December until the spring starts, right? So call around this time when some of the more local programs are going further south. If you needed 100 tomatoes for the US market, 30 of them are going to come from Florida. 70 of them are going to come from Mexico. So about 70% of our tomato production in the winter is done in Mexico now. 30% in the US. If you go back pre NAFTA or right around when NAFTA started, that was completely reversed. It was about 80% domestic, 20% Mexico, which we can also dive into, which is a fascinating story. The globalization of produce and we talk about flavor and, and, and quality. It's, it's, it's a very interesting story as well. When this freeze, so there are two freezes that happened in Florida this winter.

• 13:55Speaker 04

  That took 80% of the crop in Florida out completely. Blooms fell off, vines died, was not a great situation, right? Over $150 million worth of tomatoes, lost. Again, produce demand is rather inelastic. So you took a market that needed 100 tomatoes and you took 26 out of the equation. And you're left with, you know, the, the 74 tomatoes that are left for 100, right? And anytime that happens, that's where you see these spikes. So it's less about the input costs themselves.

• 14:27Joe Weisenthal?

  Got it.

• 14:27Speaker 04

  At this point, I would say a 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 segmented 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 3% to 4%. Doesn't sound like a lot, but when they're supplying 70% of the US market in the winter, that is actually quite a bit. While that was because of the anti dumping tariff that was put in place of 17% and change. It was implemented. Back in July of last year. So it's a long history between Florida growers and Mexico growers about the price of tomatoes and what a fair cost to grow actually is.

• 15:11Speaker 04

  And a lot of accusations of dumping by Mexican growers into the US. So again, you think, you know, NAFTA in the mid 90s and the start of more free trade. That's when Mexico, you think of Sinaloa, 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. Right. And so once that, they were already growing tomatoes for the US market. We're about 20% then, but they, 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? So there's shade house is basically like netting that you would put over a massive tomato field.

• 15:56Speaker 04

  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, they evolved into shade house and then you got into greenhouse, which was like perfect growing conditions. They, 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. Right?

• 16:41Speaker 04

  So in the 90s and into the 2000s, there were accusations by Florida growers of dumping by Mexico growers. There was, the Mexico defense was our cost of produce is lower. We have lower labor costs. We're getting better yields. So this isn't actually something that like we're economically selling lower in our home country versus you are not. I think there's, 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.

• 17:26Speaker 04

  So between those two things, I think it was a little bit of a perfect storm of you decimated the Florida 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 65 bucks a case on average for the whole month and very high.

• 18:03Joe Weisenthal?

  There are some market stories where you want every detail. Tracy and I have made quite a few podcasts on that basis, but sometimes you've only got 10 minutes and need to know what's moving markets and why. That's the Barclays Brief Podcast. Every week, experts from Barclays Markets and research get you up to speed on what matters and what to watch next. About the time it takes to grab a coffee. So search Barclays Brief wherever you get your podcasts.

• 18:29Speaker 02

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• 19:11Speaker 02

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• 19:52Tracy Alloway?

  Would you expect prices to actually go up even more from here?

• 19:55Speaker 04

  So in June, we're back to the five-year average.

• 19:58Joe Weisenthal?

  Oh, good.

• 19:58Speaker 04

  It's, uh, yeah. Towards the end of May, end of 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 to see, 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 $2.69 a tomato, but maybe $1.99 a tomato when I used to be able to have to go to $1.49, right? If you think of grocery retail economics, it's changed significantly over the last 15 years. So if you think of like how much home delivery or click and collect, like pickup at the store, they're much more advertising and marketing companies now,

• 20:41Speaker 04

  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 EBITDA is about the same, they're also that, you know, traditionally was four to six. Now you might see the larger retailers in that still maybe four to six, five to seven range.

• 21:02Joe Weisenthal?

  As margin.

• 21:03Speaker 04

  As margin.

• 21:03Joe Weisenthal?

  Okay.

• 21:04Speaker 04

  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 in ways that they didn't have before, because they're having to pay for the additional labor and tech infrastructure 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.

• 21:22Joe Weisenthal?

  So 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.

• 21:35Speaker 04

  Yep, and they're also charging you a higher price as well, right? Like I think some, the consumer is definitely paying for some of their want of being able to get stuff more on demand.

• 21:45Joe Weisenthal?

  Right.

• 21:45Speaker 04

  Right? As well as the variety that they're expected to carry. A grocery store in the seventies, a produce department was probably seventy-five to a 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 are tending to hold on to prices longer than they traditionally would to try to help pay for, for some of this. And that's where you think of beef is also one of the things everybody's talking about, how crazy beef prices are, and they are insane. I was at a restaurant the other weekend in, in the city and they had a strip steak on the menu for like a hundred and twenty dollars.

• 22:27Tracy Alloway?

  Oh my god, for a strip steak?

• 22:28Joe Weisenthal?

  I love a strip steak, but that's crazy.

• 22:30Speaker 04

  It's, yeah. But people are still paying that, which is crazy. Like the, the demand for beef is not slowing down, even though these prices are getting so high.

• 22:36Tracy Alloway?

  Yeah.

• 22:37Speaker 04

  But if you look at retail versus wholesale, the cutout, the difference between the retail price of beef and the wholesale price of beef is at 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, the price per pound of beef at wholesale and retail is probably thirty percent.

• 22:55Joe Weisenthal?

  Uh huh.

• 22:56Speaker 04

  Now it's, it's probably closer to forty, forty-five percent.

• 22:58Joe Weisenthal?

  Really?

• 22:58Speaker 04

  Yeah. So again, retailers are sort of like building on this momentum of this idea of like

• 23:04Joe Weisenthal?

  Push, yeah.

• 23:04Speaker 04

  This, you know, lack of consumer knowledge of what the market really is. And, 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, our chefs and, and some of the buying teams that they have are, are much more knowledgeable about markets than, than the average consumer is.

• 23:22Tracy Alloway?

  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?

• 23:32Speaker 04

  They're going to log on to the USDA website and look at 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, American retail consumer.

• 23:43Joe Weisenthal?

  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 like be so well informed. Right. And they're gonna know like they're gonna 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.

• 24:16Tracy Alloway?

  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 USDA website and start negotiating. Although that would be fun.

• 24:28Speaker 04

  I can't say I haven't tried that before. It doesn't work.

• 24:31Tracy Alloway?

  Oh, interesting. All right.

• 24:34Speaker 04

  I do complain to the head produce clerk at our store every once in a while about the prices.

• 24:38Joe Weisenthal?

  I know the real like.

• 24:39Speaker 04

  I know the real price of this. Like, come on, guys.

• 24:42Tracy Alloway?

  What's the deal with disease in tomatoes? Cause 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?

• 24:59Speaker 04

  Yeah, for sure. And I think that that created some, I'd say, pre-freeze impact in general on the tomato industry where acreage and production was 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 those greenhouses where they'd have to tear everything out, soil 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,

• 25:42Speaker 04

  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 the impact of. This already, but it's mother nature at the end of the day.

• 25:53Joe Weisenthal?

  Yeah.

• 25:54Speaker 04

  Right. And like it's, it's a continually evolving mother nature that you're always going to be dealing with something new as a grower.

• 25:59Joe Weisenthal?

  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 have 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 multi-color snacking tomatoes?

• 26:39Speaker 04

  Yeah, they all interplay with each other a little bit. I would say you do have more complementary or substitutable tomatoes. Right? So if you think of like a round tomato, like your New Jersey beefsteak and aroma tomato.

• 26:50Joe Weisenthal?

  Yeah.

• 26:51Speaker 04

  Those 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 vine 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 Roma's are going to get pushed up. If there's not a ton of Roma's to go around, then everybody's going to switch into the, the high flavor stuff.

• 27:22Joe Weisenthal?

  So then speaking of the high flavor stuff, so it's like, you know, I'm addicted to them.

• 27:27Speaker 04

  Yeah.

• 27:27Joe Weisenthal?

  My children really like them. Do you see at the farm level essentially a redistribution of acreage towards the high value, high margin stuff such that they're just not as a percent? Or just the 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 it's like, well, why are we planting the, the cheap normie tomatoes?

• 27:59Speaker 04

  Yeah, I think cheap normie tomatoes are.

• 28:01Joe Weisenthal?

  When I was a kid, we didn't know about that.

• 28:03Speaker 04

  Yeah.

• 28:04Joe Weisenthal?

  We didn't know about these tomatoes.

• 28:05Speaker 04

  Yeah, exactly. And that's, that's sort of like the evolution of the tomato market as well is. There's still a consumer for a basic round tomato or vine ripe 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 salsa out of it, or something like that, right? Again, there's consumers that want that basic tomato, maybe the more mild flavor.

• 28:24Joe Weisenthal?

  Yeah.

• 28:24Speaker 04

  There's gonna 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 gonna get the same yield 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.

• 29:02Tracy Alloway?

  Earlier, I went to look up tomato prices on the terminal, and I just realized there's a Japanese bank called Tomato Bank.

• 29:09Joe Weisenthal?

  I just learned that, too.

• 29:10Tracy Alloway?

  And it has an amazing logo. I would bank it Tomato Bank. 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 gonna go up as well?

• 29:28Speaker 04

  No, they're completely different markets, I would say.

• 29:31Tracy Alloway?

  Interesting, okay.

• 29:31Speaker 04

  Yeah, so a lot of your canned 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.

• 30:02Joe Weisenthal?

  So one of, 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 talk 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 Beldor on the sort of pure logistics element? And how much would you say when I buy a little case of tomatoes? Am I paying for the shipping component or the trucking component?

• 30:40Speaker 04

  For sure. This wouldn't be a odd lots podcast without talking about logistics, right? It's been rather extreme lately, obviously with with oil prices going up and tightening availability within the trucking industry as well. Yeah. 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 the supply of trucks shrink a little bit as well.

• 31:01Joe Weisenthal?

  Yeah.

• 31:01Speaker 04

  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 the west coast to the east coast in the shortest amount of time. So a team drive truck that we had run from Salinas, California, the veg capital, the salad bowl of of America, right? Eight months ago might have been 10, 11,000 dollars for that. I we we saw prices a couple of weeks ago as high as 16, 17,000 dollars, which I have never seen in my whole career. I grew up in this industry. My dad was a produce buyer. I grew up with him taking me out to fields and meeting with growers and and seeing him be able to build those relationships and partnerships. And that's what got me interested in this industry was was doing that with him.

• 31:45Speaker 04

  I've never in my whole career seen prices that high before.

• 31:48Tracy Alloway?

  Wait, now I'm curious. Did you ever think about going into farming directly?

• 31:51Speaker 04

  No, I did work for a a grower shipper for a couple of years out of college, L and M in North Carolina, to get that experience on the grower's side and understand that. But um, 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.

• 32:18Joe Weisenthal?

  He was a buyer for Kroger?

• 32:19Speaker 04

  Yeah.

• 32:19Joe Weisenthal?

  Okay.

• 32:19Speaker 04

  Yep. So he he ran their produce buying office that they had in in in Florida that managed all the the produce buying for the east coast. So, yeah, he'd take me out of school when I was in kindergarten on a Friday and we'd go to You know, really sexy, amazing places like Amokli, Florida, or Moultrie, 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.

• 32:40Tracy Alloway?

  That sounds really nice.

• 32:41Speaker 04

  But I'd sit there and listen to him and everything was about the customer to him, right? And so like for him, he won if his customer won and if his grower won, right? And part of what attracted me to come to Baudor last year was this mindset that Baudor had 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 heart, you can get anywhere to a girl in duck tomato like I 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?

• 33:22Speaker 04

  And for me, that was sort of following in his footsteps, I guess, a little bit in doing this.

• 33:27Tracy Alloway?

  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?

• 33:52Speaker 04

  Yeah, absolutely. As you think about contracting cycles within tomatoes, you know, retailers will be renegotiating costs throughout the year, depending on different growing regions, et cetera. Right now growers have been able to mostly pre-bought, right? Especially the bigger ones. So their fertilizer cost is pretty locked in at this point. But what you're going to see over the next six months is that's going to start to evaporate. So at Baudor, 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 in supply for our customers. Our growers are already talking about the cost of fertilizer with us. And saying, we've got you covered now, but come contracting for next year. This is something we definitely have to talk about.

• 34:35Speaker 04

  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 retailer have to pass on to a consumer?

• 35:00Speaker 02

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• 36:23Joe Weisenthal?

  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. Yeah. 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? Yeah, varieties. Varieties. There's a Baby Yoda tomato, do you know that?

• 36:39Tracy Alloway?

  Well, this is part of the fun of buying your seeds every year.

• 36:42Joe Weisenthal?

  A cider pop tomato, a firebird tomato, I knew about the sun gold, an 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?

• 37:04Speaker 04

  Yeah, I'd say probably over the last like 15 years or so, you've seen a big explosion in the snacking tomato category. And a lot of that was driven by greenhouse production. Oh, good. 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?

• 37:24Tracy Alloway?

  Oh, my God. If I could get an irrigation system going, that would be a game changer.

• 37:27Speaker 04

  But I would. It allows these growers to grow seed varieties that might be a little bit more challenging outdoors. Ah. 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 outdoors, shade house and a little bit of greenhouse, but they're unique. They take a little extra TLC, I would say, than a traditional, you know, round tomato. And so with the explosion of greenhouse production, which really started in Holland, over there, they're probably 15, 20 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 US companies understanding this snacking tomato, or Canadian companies really, understanding the snacking

• 38:11Speaker 04

  tomato category was a big opportunity, started partnering with a lot of these seed companies over there to trial new things.

• 38:17Tracy Alloway?

  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.

• 38:24Speaker 04

  Yeah.

• 38:25Tracy Alloway?

  Like cream sausage, or striped tiger.

• 38:28Speaker 04

  Or baby Yoda.

• 38:29Tracy Alloway?

  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?

• 38:42Speaker 04

  Yeah, I'd say it's almost the other way around.

• 38:44Tracy Alloway?

  Okay.

• 38:44Speaker 04

  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. Hmm. Right? And so like, we view that very much as our wheelhouse at Baudor is our ability to go and find things like this that you'll want to call this a 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 That hopefully you've you've talked to your your waitstaff and they can educate the consumer a little bit about the story of 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.

• 39:28Speaker 04

  And then a lot of these bigger tomato companies, Sunset Master Nardi Produce is a big partner of ours. You know, they're one of the most innovative when it comes to seed 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.

• 39:56Joe Weisenthal?

  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 October 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 costs 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, or through and then powers this. What about like, if we're talking about greenhouse grown

• 40:37Joe Weisenthal?

  tomatoes and the recreation of a beautiful spring day, how much is it like variability in electricity costs or energy costs are going to go into that tomato?

• 40:46Speaker 04

  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 labor and the the production costs as well. So in general, if you think of like tomato markets now, right, that were so high, the growers were not the ones making and killing, right? If you think about they lost 80% of their crop.

• 41:07Joe Weisenthal?

  Yeah.

• 41:07Speaker 04

  They're selling a tomato for 100 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.

• 41:44Tracy Alloway?

  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 going to go back to the caprese salad example, although I guess there's mozzarella or which cheese do you use for caprese?

• 42:01Speaker 04

  Buffalo?

• 42:01Tracy Alloway?

  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 in ingredient prices, that seems really, really difficult to predict.

• 42:37Speaker 04

  Oh, absolutely, it is. But I think if you take a step back a bit, on the restaurant's side, the cost of food is about 30% of their overall cost, right? If you go back to our retail example, a retailer, 75% of their cost, 70 to 75% of their cost is the cost of the actual food. Right? So let's take a burger in New York. 2019, it was probably 14, 15 bucks on the menu. Today, a good burger on the menu is 22 or $23. If you look at the actual food cost of that burger, it's probably gone from maybe 350 to 550. That's a $2 increase. That's huge. That's substantial, right? Like, food costs are definitely up significantly, but that's not the full 14 to

• 43:20Speaker 04

  22 to 23. 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. Restaurant are pushing their pricing up as much as food is, right? And so, yeah, for a chef, like their, 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, they keep their food costs honest, right? With their distributor.

• 44:01Joe Weisenthal?

  This makes a lot of sense to me. So the restaurant is fine with very highly variable 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, 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.

• 44:30Speaker 04

  For sure. And, and a restaurant, they want to keep their food costs as low as possible.

• 44:33Joe Weisenthal?

  Sure.

• 44:33Speaker 04

  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, were super high in, in April, May, and they're coming down in June. But you go back to November, December, they were 20, 30% 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 HelloFresh before coming to Baudor, a meal kit delivery company, we had a cost per meal that we had to hit. I wanted consistency in pricing. I was trying to lock as long as possible. For a lot of chefs, I think some of them want to be able to play that variability and up and down. So that they can take advantage of, of some of the cheaper opportunities to keep their food costs lower. So they can eke out a couple more dollars here and there.

• 45:19Speaker 04

  And they probably think they net out at the end in, in a net win. But in general, yeah, like food cost is, is a good component of a restaurant, but there's a lot more that goes into that versus like a, a retailer, a food service distributor. Most of our cost is the cost of the food. So when that cost changes, it's, it's near term, much more impactful on us for sure. But that's our job as Baudor is to help direct our. 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 80 different tomato SKUs at a given time, right? So, we want to help push you towards the things that are, if you're looking for price, that's the best optimal price, but it's also my job to source multiple regions and find the right partners and ones that, you

• 46:01Speaker 04

  know, when tomato markets get costly, that they're not just going to pull act of God on us and 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 joint partnerships really are 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.

• 46:34Tracy Alloway?

  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.

• 46:43Speaker 04

  Price is irrelevant. Yeah, I think when tomato prices are high, any of these prices are high, what I would tell any average retail consumer is like, go outside your comfort zone. There's so much good varietal produce out there, whether it's in your local farmer's 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 they grow.

• 47:09Tracy Alloway?

  Are those the ones that come in like little packets?

• 47:10Speaker 04

  Yeah, they're flat little clam shells, almost like these berries are, right? Oh, yeah. And usually still on the vine. Those are incredible. And some of the 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 these Girl and Doug tomatoes that I brought for you guys. These varieties that they have in this medley are 100% grown for flavor.

• 47:39Tracy Alloway?

  They're really good.

• 47:40Joe Weisenthal?

  Yeah.

• 47:40Tracy Alloway?

  We've been, we were eating some of them before we started recording and we can attest, they're delicious.

• 47:46Speaker 04

  So Aaron, his, his parents had a floral shop. They retired, bought a produce farm of all things and, 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 relationships with chefs directly in, in the city and literally FedExing from San Diego here. Some of those chefs helped connect him with Baudor 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, they're specifically bred for 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,

• 48:30Speaker 04

  he'll go through and cull out at least a third of the flowers.

• 48:33Tracy Alloway?

  Wow.

• 48:34Speaker 04

  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.

• 48:41Joe Weisenthal?

  Yeah. What is the actual process of like, you know what, we want an even sweeter tomato. So it's like, okay, some, or some, some new dimension flavor. Is that happening by the shift in 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?

• 49:06Speaker 04

  Yeah. So it's almost all cross breeding, right? And it's, it's done at the, 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, they're developing seeds in, 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, 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

• 49:48Speaker 04

  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 and that team there, if you go to their their 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 that are like completely black to, you know, all the different striping like on the firebird that Aaron has here, right? Like they're unique.

• 50:13Tracy Alloway?

  Some tomatoes are beautiful, like bumblebees are.

• 50:16Joe Weisenthal?

  Social media and Instagram specifically must have played a significant role in the last 10, 15 years of the tomato market, right?

• 50:22Speaker 04

  Like, I think in food in general, right? Like food trends pop from social media now.

• 50:27Joe Weisenthal?

  Yeah.

• 50:28Speaker 04

  Whether it was, I don't know, that pink sauce stuff years ago to, yeah, snacking tomatoes, right? Like influencers do.

• 50:35Joe Weisenthal?

  What was the pink sauce?

• 50:36Tracy Alloway?

  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.

• 50:47Joe Weisenthal?

  I remember that one.

• 50:47Speaker 04

  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 a special or something always on the menu.

• 51:02Tracy Alloway?

  So you brought us some strawberries as well, which is actually something that I am also planning on planting in 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?

• 51:25Speaker 04

  Pretty much any other retailer as well. 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.

• 51:40Tracy Alloway?

  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.

• 51:48Speaker 04

  Or maybe your dog as well.

• 51:49Tracy Alloway?

  Or my dog, yeah.

• 51:51Speaker 04

  But I think in the, in the 60s and 70s and continue through to today, the domestic supply chain of strawberries. Berries, a lot of the seed varieties were coming from partnerships with universities. So like UC Davis, University of Florida for Florida grown berries. Where customers 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 firmer. Could take the ride on a truck from California to New York for 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.

• 52:36Joe Weisenthal?

  We've gone this whole conversation without bringing up the phrase cold chain. And you mentioned Hunts Point, and I'm just curious, this, we, 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?

• 53:03Speaker 04

  I'd say it's definitely a lot more expensive. Nobody wants to take a truck across the George 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, with New York City and Boston DC Philly where we service as well. It's challenging everywhere, Joe. Like it's, it's, it's a game of perfection, right? And a lot of it is having to keep, you know, this berry ideally would be at a perfect 33 to 34 degrees from the minute it's put on a truck to the minute that it's served on a customer's plate.

• 53:46Speaker 04

  Like that's really the ideal temperature to, 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 48 to 52 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, is making sure you maintain that, that cold supply chain that I need, you know, 32 to 34 for this. I need, you know, 32 to 34 for my protein and my dairy, but I need. Forty-eight to fifty for a tomato or an onion, right?

• 54:25Tracy Alloway?

  All right, Jacob, that was amazing.

• 54:28Joe Weisenthal?

  Yeah, that was amazing.

• 54:28Tracy Alloway?

  We had a lot of fun talking about tomatoes and also the food distribution business. Thank you so much for coming on Odd Lots.

• 54:34Speaker 04

  Yeah, thank you, guys.

• 54:35Joe Weisenthal?

  And thank you for the tomato.

• 54:36Tracy Alloway?

  And the strawberry.

• 54:37Speaker 04

  Enjoy.

• 54:51Tracy Alloway?

  So that was fascinating, Joe.

• 54:52Joe Weisenthal?

  That was great.

• 54:52Tracy Alloway?

  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 chef

• 55:03Joe Weisenthal?

  Yeah.

• 55:04Tracy Alloway?

  or restaurant buyer versus the informationally disadvantaged retail customer.

• 55:09Joe Weisenthal?

  Yeah.

• 55:10Tracy Alloway?

  And the idea that supermarkets can push through additional price increases. If, this goes back to the conversation we had with that baker in Chicago a while ago. If all the retail consumer is seeing in the headlines is like tomato prices are high, tomato prices are high, customers are going to accept higher tomato prices.

• 55:27Joe Weisenthal?

  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 a real phenomenon observed in the industry. And of course, in theory, some tomato customers could do the homework and find out. But like, no, no one has time for that.

• 55:48Tracy Alloway?

  You try that, Joe, you try.

• 55:48Joe Weisenthal?

  No one's going to have time to do that and actually price comparison shop. Like, yes, of course, the information is all theoretically out there, but the restaurant does that professionally.

• 55:57Tracy Alloway?

  Mm-hmm.

• 55:58Joe Weisenthal?

  I don't have time to do that. So, of course, they're going to have an edge over me in terms of like, yeah, like, I have other things to do.

• 56:06Tracy Alloway?

  Just outsource it by going to eat at the restaurant exclusively. Just don't go to the grocery store.

• 56:11Joe Weisenthal?

  That's right.

• 56:11Tracy Alloway?

  You'll save on input costs, not on labor costs, though.

• 56:14Joe Weisenthal?

  No, but that was a great conversation. I'm just fascinated by also the sheer explosion of varieties. And just the fact that, again, the idea of 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. And it's like, I never heard, it was just, when I was a kid, there 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.

• 56:55Tracy Alloway?

  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 definitely a part of it.

• 57:08Joe Weisenthal?

  The color, yeah, like, the idea of a black tomato. That would be cool to take a picture of.

• 57:12Tracy Alloway?

  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.

• 57:20Joe Weisenthal?

  The Ethiopian black tomato from Ukraine.

• 57:22Tracy Alloway?

  They're kind of like striped, they're darker and striped, but you can get, like, indigo tomatoes that are actually... Okay, we should stop here, because we're just gonna start talking about tomato varieties.

• 57:33Joe Weisenthal?

  Those are nice-looking tomatoes.

• 57:34Tracy Alloway?

  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?

• 57:41Joe Weisenthal?

  Let's leave it there.

• 57:42Tracy Alloway?

  This has been another episode of the Odd Lots Podcast. I'm Tracy Alloway. You can follow me at TracyAlloway.

• 57:47Joe Weisenthal?

  And I'm Joe Weisenthal. You can follow me at TheStalwart. Follow our producers, Carmen Rodriguez at CarmenArmond, Dashel Bennett at Dashbot, Kale Brooks at KaleBrooks, and Kevin Lozano at KevinLloydLozano. And for more Odd Lots content, go to Bloomberg.com/oddlots, where we have a daily newsletter and all of our episodes. And you can chat about all these topics 24/7 in our Discord, discord.gg/oddlots.

• 58:10Tracy Alloway?

  And if you enjoy Odd Lots, if you like it when we go on and on and on about how good tomatoes actually are, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad-free. All you need to do is find the Bloomberg channel on Apple Podcasts and follow the instructions there. Thanks for listening.

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