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Chapter 1: Why are tomato prices at a record high?
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Hello and welcome to another episode of the Odd Lots Podcast. I'm Traci Alloway.
And I'm Joe Wiesenthal.
Joe, I know you love tomatoes.
I love tomatoes. Oh my God. I love tomatoes. I love tomatoes so much.
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Chapter 2: How do trade policies affect tomato prices?
I just love eating them. When I was a kid, growing up in Exurban, Illinois, I had terrible tomatoes growing up, so I hated tomatoes. What, from the supermarket? From the grocery store. So I thought tomatoes were the worst vegetable on the planet. Well, they're not.
Are you going to correct yourself and say they're not a vegetable?
They're a fruit. You know, so I'm just going to go on because I'm going to 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.
No, no, I would. No, this is wrong.
And so these tomatoes that we, no, no, no. Like when you, have you tried one of the tomatoes? I have. I still would not put it in a fruit salad. I absolutely would. I love tomatoes. Anyway, sorry.
So we got to talk about tomatoes. Perhaps not in the way you have been so far, but.
We'll spend one minute talking about how tomato prices are really high. Yes. And then the other 45 minutes, we're going to talk about how delicious tomatoes are. 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.
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Chapter 3: What role does weather play in tomato supply?
Yes.
And I just saw some new data that's out this morning. So there are a lot of tomato headlines floating around saying that tomato prices are at a record $2.69 a pound. So tomatoes are getting kind of expensive, which is bad news for you.
It's really bad news for me because I'm addicted to them. I am price insensitive. 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 money out of my pocket.
It is not bad news for me because I just installed five raised beds, big raised beds, dedicated all to tomatoes. And I just planted them out yesterday. And I'm very excited. You should be excited, too, because you know you'll get some.
Tracy always brings me tomatoes at some point in the summer and they're always delicious.
I've got a really big selection this year. Cherokee, Brandywine, all the classics and some new things. Fourth of July, I've never tried before. I don't mean to get all like Bubba Gump and just start listing tomato varieties here, but tomatoes are on my mind and I think they're on a lot of other people's minds just by nature of the price increase.
So we should figure out what's actually going on here.
I cannot wait to just talk tomatoes for the next hour.
You're not just going to say how good they are over and over, right?
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Chapter 4: How do logistics impact tomato pricing?
This is the perfect guest for the perfect moment. Can you tell us what Baldor actually does?
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 retail or other wholesalers.
We got our start actually, you know, Balducci's in Greenwich Village. Yeah, sure. So Andy Balducci and Joe Doria. Joe Doria was their produce sourcing guy. And he was always out there looking for the best and most unique varieties that he could possibly find. And so suddenly they saw a lot of chefs that they knew in the area shopping at their store.
had a great idea of starting a wholesale distribution company. So they took Balducci and Doria, combined them together. 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.
Within the realm of food distribution, if someone asked me to name all the food distributors, I would be able to name Cisco. We've done at least one episode on them. I might be able to name, if I united natural foods, and then I would be able to name Belldor. And Belldor would be the only one that I would associate in my mind, maybe because you've done a good job with branding, et cetera.
It's like, okay, these are high quality ingredients rather than just food distribution. Who are your clients? Who do you sell into at Belldor?
Yeah, we sell just about anybody, right? But I think we've made our bread and butter as this, I know I listened to your Cisco episode, right? And broadliners that you were talking about on that podcast.
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Chapter 5: What are the economic factors behind rising produce prices?
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.
So the merchants on my team, they just have this insatiable appetite to go out and find the best produce, the best meat that they possibly can to fit whatever that customer's need is, whether it is something that's more commodity based, like a basic romaine to high specialty variety tomatoes, like some of the ones that I brought
And what's the mix in terms of restaurants versus grocery stores or restaurants versus whatever else?
Yeah, so we're about 70 percent, maybe a little bit more in restaurants. And there we service everything from the Michelin star partners that we have, that we have a lot of long existing relationships with some of the top chefs in the areas that we serve to your local bodegas or bagel shops as well.
So how does the relationship with supermarkets or restaurants typically work? Would it be I'm a restaurant and I don't know, I want to do a 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?
Yeah. So you go to boutorfood.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 will work?
Where are my tomatoes?
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?
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Chapter 6: How do restaurants manage fluctuating ingredient costs?
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 competition. contracts and how long they can last. I never seem to be able to get clear answers on this. Can a restaurant say lock in a price for six months? Is it week by week?
What are these relationships and how stable are they?
Yeah, that's a trade secret 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, right? And so a lot of our customers, you know, 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.
And what time would he get there the next morning if they
Depending on their account and their delivery time is early at 6 a.m. Wow. Yeah.
So are you seeing a lot of customers at the moment trying to lock in tomato prices given where they seem to have gone to recently?
This tomato pricing thing is unique as far as like how expensive it got. But I'd say in general in produce, this is like a very much a normal working environment for my team of just prices spiking and going crazy here and there. And I think a lot of that is produce demand, especially in the U.S., is rather inelastic in the short term. And it's so reliant on weather.
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Chapter 7: What are the latest trends in tomato varieties?
I guarantee this summer you're going to be hearing about romaine again because that's already almost $100 a case right now, which is insane for romaine because of bad weather in California and avocados as well. Avocados went from $30 a case to $80 a case in literally the span of a week in the last week.
Joe, did I ever tell you, for some reason I'm on the Has Avocado Board email distribution list. Really? And they sent out really good updates about what's going on in the avocado market. I think it's because I was writing about Bitcoin prices and avocado correlation. And somehow I got automatically signed up to this thing.
Prices of tomatoes. There was actually a Bloomberg piece just yesterday. Prices up 40 percent from a year ago. Let's decompose the price of a tomato. So I buy a tomato and it's 40 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?
Yeah, so let's maybe break this down a couple different ways. You have your retail price point that a customer sees. Let's save that for a second. Let's talk about the wholesale price of 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. For that piece, there's all the costs they have to grow.
So you're talking fertilizer, seed, labor. water, the production costs around their facility, the energy and the trucking, right? Those are 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, right?
The way that market works is then usually typically they're gonna 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 60, 70%. The rest are going to try to play on the open market, which means whatever the USDA price is going right for what a wholesale tomato should be.
That's what we're going to sell the rest of the 30% at, right? Okay.
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Chapter 8: How do consumer preferences shape the tomato market?
To try to catch some of these upswings and actually make some profit, right? Like a lot of these growers that we deal with, this is a razor thin margin business, just like ours is as well. And in groceries as well, right? Like your food cost is such a huge part of
the cost for whether it's a grower, a retailer, a food service distribution company, you're playing in margins of single digits, right? What happened specifically this time was if you look at winter growing of tomatoes, you can't grow a tomato in New Jersey in the winter. You can't grow it in Illinois in the winter, right? You're gonna be growing tomatoes in Florida.
We'll get to the greenhouse conversation a little bit, but yeah, okay.
Right, but your traditional field tomatoes are gonna be grown in Florida and in Mexico. And you think of, OK, 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 U.S. 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 quality. It's a very interesting story as well.
So there were two freezes that happened in Florida this winter. That took 80% of the crop in Florida out completely. Blooms fell off. Vines died. It 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 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. Got it. 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%.
It doesn't sound like a lot, but when they're supplying 70% of the U.S. market in the winter, that was 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.
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