Driscoll's: The food supply chain is much more fragile than any of us thought

[MUSIC] Hello, I'm Connie Guglielmo, editor in chief of CNET. Thank you very much for joining me today for an episode of Now What. My guest is Soren Bjorn, president of the Americas for Driscoll's. It's the world's largest supplier of fresh berries, strawberries, blueberries, My favorite raspberries and it is a privately held farm that has been around for, I would say a century if I'm correct. That is coping with the big issue that a lot of folks are dealing with during this pandemic and that is the food supply. We're hearing all sorts of stories. About shortages in the fruit supply issues with food delivery. And I'm looking forward to my conversation with [UNKNOWN] to talk about exactly what's going on. Thank you so much for joining us today. Yeah, thanks for having me. So let's talk about what this pandemic and how it's played out for you the beginning For most of us consumers it was about no toilet paper then no hand sanitizer and maybe vice versa on that then no flour and yeast. We've gone through a cycle of goods that are hard to get as people. With all good reason we're a little nervous and kinda overstocked on some supplies From your perspective as a producer of fresh berries, what did the first few weeks look like to you? And then how has that transition to over the last year? Yeah, I think we've gone through, I would say three stages at this point, you know, the first couple of weeks for. What people has all ready referred to as panic buying. Everything disappeared from the shelves. And we actually felt that as well. People were also buying berries. But, unlike toilet paper or spaghetti sauce that you can put away for a little while Berries don't hold up for that long. So, why people did buy more berries? There wasn't that many more. And then by the third week, what we really saw was just sort of backlash that the supply chain started breaking down and that particular retail grocery partners, were really having a difficult time restocking the shelves of all those things that, that consumers- We're stocking up on. And so what happened then was particularly the highly perishable items really got pushed to the back of the priority list. And we actually saw for a while that our sales started going backwards. And now I would say we saw in this third stage where we begin to come into some kinda pattern that you can begin to recognize Is not the power that we recognize pre cooperate but it's pattern at least we can sort of work with and I think that where we gonna be for a little while before we then settle into some In the aftermath of all of this. Exactly what is that pattern, are people buying, or are they not buying? [LAUGH] Yeah, they are beginning to buy again, but they are still prioritizing things that are maybe a little bit more hardy. So in the products department you see things like potatoes and onions, citrus. Maybe selling way better than the sea you know highly perishable items like raspberries. And so but I think as the whole country is getting into spring and it's getting a bit warmer and people just get in that mood sort of naturally, we are begin to see the berry sales begin to pick up and so particularly the last week. We now begin to feel a little bit different and better in that regard So, and this coincides I'm talking to you on April 30th it's the start of raspberry season? He's in strawberries comes right after that. Tell me a little bit about just the growing cycle that you're doing. Yeah. So what was read is that I haven't shown us you know, this whole outbreak really happened, why we're in the middle of a transition from the winter into the summer on the supply side and so a lot of important fruit for Mexico in the wintertime. In the early spring, we then transition in particularly to saw in California, and now we are really into domestic fruit season raspberries on full supply. Strawberry is gonna hit the peak in California in two, three weeks. Okay, of course we're going to have an all time record crop this year. Of course we have to have that this year. And then you start getting into the fruits. First blueberries and then other fruits, stone fruits, nectarines, peaches, those things like that. You have the grapes coming and then later on, the apples. So We're in that you know, beginning of the domestic fruit season, and things are coming into full supply very, very quickly. So let's talk about a few things. Number one Now you mentioned that people were more concerned with Having things that could stay in their pantries for a long time like potatoes etc. But people do like fresh fruit and the mood of the country, at least here in the United States is that people are getting a little stir crazy being at home and are trying to get some semblance of normality back even though there is no normal we can all acknowledge and admit that So perhaps they might be interested in buying more fruit but at the same time, your suppliers, I mean your stores that take your product need to want to buy that product right because they feel they can sell it. You then you have issues of. Do you have enough workers to pick the crop here in California which I know you're sitting in Watsonville talking to me which for people who don't know is about an hour south? San Jose may be less so right, south of Silicon Valley. So let's talk about each of those issues. Number one, are you seeing demand from the actual stores? You said there seems to be a little bit of an uptick. Do you expect that demand to continue? Yeah, absolutely. I mean, our customers, the retail brochures Primarily they want to sell a lot of berries in May, and June, and July. That's what they wanna do, and they feel like they got consumers coming into their stores. They may be coming in Monday, Tuesday, Wednesday instead of Thursday, Friday, Saturday, but they're still coming into the stores. And so everybody wants to sell I think the consumers wanna buy. And as the supply chain is sorta coming back together, most of the problems are beginning to sorta disappear. We still have a few issues, okay? In the supply chain, that tend to be sorta more isolated where you may have an individual reseller that has a specific issue that they're dealing with. But clearly, there's a desire to do it and you're beginning to see Retailers promoting and getting consumers to really buy the categories. So I think that the main site will be there as long as a lot of trends in the country if the outbreak continues on the current path. In terms of the labor supply, I think we are Unfortunately, in some ways, a beneficiary of what's going on in the country overall. But the unemployment rate jumping, you know, very, very dramatically right here next door to where I'm sitting, you know, with us a lot of people normally employed in the hospitality business think about Monterey, Carmel, Pebble Beach, you know, Santa Cruz beach boardwalk, and a lot of those people are laid off The reality is that between act and hospitality, there's a lot of movement back and forth between our employee base. And so right now we have people coming into our business and we are in a hiring mode. We are hiring people because we're heading towards the peak So we've got a lot more people coming in. And right now we're not having difficulties hiring people. The key is really to keep them safe and do all the things we need to do to make sure that happens. And I understand that they're out in the fields picking and one of the issues has been making sure the water stations for washing hands. Etc. So how are you managing people out in the field to keep them safe? Is it every other row is it shifts, tell us a little bit about that. Yeah, it's those kinds of things. So the good news is in the field, unlike, say in a factory, we actually have physical space, right? We have hundreds of acres out there. And so it's more about training people to really do things that they're not used to doing. We spent decades building really cohesive crews that work together. Right. And so a lot of that is around food and family, and getting together. This is a very strong Hispanic culture that we have in the field. And so it's a little bit countercultural to then say, hey, we got to keep everybody apart, right? And so it has been putting up, More wash stations that people don't congregate on wash stations, more quality inspection stations so they don't congregate they're, breaking the crews up into smaller groups, spreading the breaks up so everybody doesn't lunch at the same time. Whereas the enormous, the crew foreman blows the whistle, right and everybody sits down has launched at the same time. And now we asked him to do the opposite of all that. And so it's a, I think the biggest challenge is communication. And there's a little counter cultural, to what we're used to. Yeah, we've been reading a lot of stories about what. Well, you mentioned factory production of food, that's a challenge because there have been cases of the virus. And even though the President of the United States would like those factories to continue to operate, the workers themselves don't yet feel that they are safe or will be working under safe environment. So we're concerned with a shortage And some products there that is particularly in the meat and poultry side. Okay, so on the fruit side, you can manage your environment, communicating get people to change their behavior, and it sounds like you've been successful there. What about you have an abundance, you said a record crop but what about waste? At the beginning of this cycle we were hearing I think, even from you that there could be 10 to 15% of food. Crops at small farms. Immediately, you're not a small farm-, Yeah. You are family owned, but you're one of the largest that food might rot without government funds, for instance. So could you talk a little bit about that either from the Driscoll perspective or what you're seeing in terms of the kind of food wastage that you think is- Yeah. Just happening? Yeah, absolutely. I mean so one is just pure Have you gone through what a supply chain was really sort of bogged down. We were definitely having a difficult time selling everything we had and we have had to not harvest everything, particularly on raspberries and Mike Rose was on full supply, and so leave some of the crop behind. Okay, so we've done that for several weeks now we feel like we are over that now and hopefully don't have to do that again. But the bigger picture is that about 15% of the whole California strawberry crop goes to food service, right? So restaurants Corporate catering, university campuses etc etc. And some of that is gone right you know, especially all the travel related stuff you know is largely gone your regular restaurants. Are not open. And even when they do open we're talking about reopening at 25% capacity. Right? So I think fast foods is you know, is probably doing pretty well but we don't do a lot of fast food with berries. Okay, so maybe that helps the slice tomato guys so they let us people a little bit dose, you know, businesses are back. But you know you're talking about 15% of really the whole crop has to find another home. And retail grocery is struggling to pick up that extra demand. So even though consumers are into stores and even consumers are obviously eating at home, they're just not eating 15% more berries at home than they what they ordinarily would. And that's really the issue and so What we were projecting as an industry is that 10 to 15% of strawberry crop might not have a home. And we've really started advocating for and you can say lobbying for that. That was potentially a much better solution out there than us leaving the berries behind in the ditch. Because that really is the alternative. Is about half the cost you put into a berry crop is to actually harvest the berries. And if those berries don't have a home, you're not going to go and spend, half the cost of the of the crop, right. So, our suggestion to the government was, why don't we work together to find a way to really get this crop to the food banks, but unlike the donations which we have given and will continue to give We can't give 100 billion dollars of berries for free to the food banks. This find a way for the food food banks be able to buy in the case all berries, okay, you know all the crops. And it took, quite a bit of ingenuity on behalf of the government because there's not a program that's regularly set up But tomorrow, the first bit is due for us to bid on actually delivering to a food service distributor who would normally service a restaurant who's not going to put a fruit and vegetable kit together to deliver to the food banks that the food banks can give away for free to those who really need it, right. And so we clearly have a much bigger demand now in the food banks because We have 26 million people that joined the unemployment ranks 30 million. > Yeah, so that's obviously very significant. And we are very connected with the food banks every day when we operate because we're used to donating to the food banks. We have some berries that get a little old, we may have a rejection here and there. And we sent those to the food banks normally, and we heard from them loud and clear that they needed the supply, and they needed help. And so the government has done something, you know, I mean, and it will definitely help, you know, the criticism would be it's not enough. But I will say anything helps. And, you know, I think this case, the government acted very, very quickly and they heard us loudly and clearly. And so I think that's it. Least helpful. Wait, are we talking about the federal government or the state? Yes. It's not about the federal government, not the state of California is gonna do some on their own as well. But the federal government read through the USDA is buying up about 100 million dollars worth of fresh fruit and vegetable a month to then redirect to the food banks as a donation. And, I mean that's their thought out there but that's may be a billion dollar worth of fresh fruits and vegetables and months there is an excess right now. So it may or may not be enough, but it's obviously of help,- Yeah. It's better than nothing. So, and I just wanna point out that Dresco you have donated as you said to food banks, and in addition you have donated Well $4 million throughout this pandemic, including a million Yeah Dollars as I understand it in cash and product donations to food banks here in in California which is where Yeah Again, we're talking to you. That federal subsidy or federal purchase program, basically How long do you think that would have to operate for you to feel a little bit of level of comfort and not have to let go of some of your workers?. Yeah, I mean, in the strawberry business, I really think it's you're talking about the next two months. Okay, if we get through this peak the next two months, I feel like you know, I mean, it may still be challenging by the time we get into July but it'll be an environment where we can operate. Okay, and we can sell all the berries that I feel very confident about and so, I don't want describe this as a bailout. I think it's really a bridge to get us get us to this peak here. And the alternative is to throw the fruit away, which is such a shame when it's really needed. And so it's a bridge to where all farmers can stand on their own. We can stand on our own. We can keep everybody employed. We haven't laid off any people. We as I said, we've been hiring people and And we or our farmers more importantly, won't need a bail out at the end of this. Whereas clearly in other industries we are talking about they're gonna need a full on government bail out to save those businesses and save certain industries. But I don't think in agriculture that's what we are talking about here. And we really talked about just getting the food we eat at the cost of growing the food to the people that really needed for a relatively short period of time. And then we will all be okay.>> Right. And again, just to remind our listeners, what you're talking about is the cost of harvesting that food is what you need some help underwriting because that is That is quite a substantial amount of your costs, right? Let's talk about just the pandemic in general. I mean, obviously, it's a pandemic. These don't come around very often and people have to learn how to think on the fly and cope and manage your part of the food supply chain here in the United States. Very important. What have you learned? That you think, you know we're going to have to have lots of discussions. Hopefully when this all comes to an end. We're all hoping that some of the science that we're hearing about you know with vaccines etc coming as early as January. I hope and pray that that is the case as well, but we don't know, but we do know it will resolve itself at some point. So what have you learned? And what do you think the discussion should be? Once we get through this everybody trying to cope period and get into a more sustainable System. Yeah, I think we're learning something at every level. Right? I mean really learning at the at the global level, okay. And at the national level things that are broken right in our healthcare system, for example, I think as it applies to all business okay, I think we are seeing how broken our immigration system is that relates to farm workers. I mean here the very people that we are calling essential workers today And the reality is that most of them don't have legal status in the country. Right. So that that that is something we I think we as a nation must reflect on and say that doesn't seem right that if we want to secure a food system, which actually is the greatest security you need to have is to be able to feed yourself. You should look at that whole system and make sure that it is indeed secure. And so I would point out that that is one area that. We are not ready to secure is to have an undocumented workforce that is responsible for the harvest of 75% of all the fruits and vegetables that are grown in this country. So I think that's one I think the other thing is that our fruits food supply chain Turned out to be a lot more fragile than I think any of us really thought. And that is comes from years and years, and years of really trying to make it efficient. And so in so many ways, the supply chain is very, very efficient. But then, when it breaks There's just there's no capacity to absorb, really what we need. And again, when you talk about the food system, that's really a system that you can't afford to break down for very long, right? I mean, just like you can't afford for the healthcare system to break down. Now a few systems that are so critical that they must always function, okay? And that's why, you know, the food workers and all of us that in that, in that business, we are deemed essential workers. Because it is essential for the business for the country to go on. Yeah supply chains set ups breaking down too but in many ways they are probably a little bit less essential. We can all wait a few more weeks to get a phone replacement or something like that right so, but we can go very long without having food. So, we need to look at where are the greatest vulnerabilities and all of that. And that's true for us when we started our own business as well and saying, okay, we definitely identified a few vulnerabilities we didn't realise we had we got them fixed very quickly. And then I think that's just I mean things you're learning that you can take forward and improve your business. We are learning that we can do some things that we didn't realise we could do. I'll give you one example is, so I gave you this example of we have some retailers that out their supply chain is breaking down. Two weeks ago we got a phone call from Safeway, grocery chain up here in California. And they had the very unfortunate is that they had an outbreak in their distribution center in Tracy, California. And really had to send everybody home so they can get the facility clean and make sure everybody's safe. And so they call us up and said, hey, we need a solution for how to get berries in our stores. I mean berries is the most important category in all our produce. It's the number one selling category. We have to have berries, but we can't get them there ourselves. What can you do to help us and we in 72 hours, we figured out how to go directly to each one of the 204 stores. We've not, never done this in our history, our company, we are not a direct store or delivery. We are not free to leave. You're not Coca Cola. We don't do this stuff. But we figured out how to do it in 72 hours. I'm not saying we gonna go the next store delivery but [UNKNOWN] forward but we learn that there is something we could do that we just had no idea we could do as a company and for sure we gonna take some of those learning and apply that going forward I think that'd be true as a nation as a whole it is working from home you during the interview from home, okay? No, I mean I should be sitting at home. I'm sitting at the office actually. But we are learning that, that possibly that's painful that we don't want to deal with but as long as possible that really works, okay. And so. What does that mean for the workplace and for commuting and stuff like that? And I would much rather be sitting, working at home than just sitting in traffic for 90 minutes trying to get to work. And that is the reality for a lot of people every day. And so I think we will take some of those things As a company as a nation and bring those forward change how we operate going forward. And by the way, how did you get all of that produce to the Safeway distribution centers, you just get people in their cars to know. No I mean, so we had trucking companies that had lots of extra capacity because their business have disappeared you know And so they said hey, we will do this for you. Okay and so we got together with them and we got together with Safeway and the biggest problem was that sometimes we would show up at a store at four o'clock in the morning with a two pallets of berries and there was wasn't anybody there. Okay, so, I mean, we had to learn when the stores were open. Okay. We used to That way of operating, but I can tell you that our sales jumped with Safeway, 100% in one week. And, and so it's a good example of a great partnership. They came to us with a really big problem. And we want to be their partner and we figured it out together and it is working. I can't say that we want to keep doing this for a long time. But we got creative and we got the job done. Okay, I have about a minute or so left to talk to you and maybe I've been doing this all wrong, but. Here in California, I buy raspberries and blueberries and strawberries when they're in season grown in California all the time and I wash them clean them and freeze them, is that bad? It's not bad okay. So, I mean, I would wash them right before I eat them okay, especially if you're doing it fresh, okay, but I know if you're gonna put them in the freezer, okay. We have a lot of consumers. Take the whole clamshell, pick a raspberries and blackberries and just stick the whole clamshell in the freezer key and then bring them out and put them into smoothies. So whatever they do with them, you know later on so there's nothing wrong with that. Okay, well, I think that that's a good piece of advice for people. Well, as you said, it's not just these berries after that or. Nectarines and peaches, all of those things freeze. Pretty well and I think we have a culture now who discovered the joys of canning and how to preserve food. So hopefully that will help us get through this crisis as well. Is there anything I didn't ask you that you think we should talk about before I let you go? I really appreciate the opportunity and you know, I mean, I think we all need to remember that we're in this together. We got a we got thousands of people that are out there every day trying to make sure that if food keeps flowing into the stores and the best thing we can do to support them is to buy the fresh fruits and vegetables. Okay, and keep them make sure they can keep their jobs. All right. Well thank you so much sir and beyond the president of dress code. [MUSIC]