Food safety, sustainability… we’ve discussed many of the most important industry issues with Tim York over the years, in pieces such as these:
New Chapter Begins For Tim York As He Reflects On 34 Years At The Helm Of Markon And Plans To Contribute Again At The New York Produce Show And Conference
Markon’s Tim York To Speak In Amsterdam: How To Profit From Omni-Channel Proficiency… Foodservice, Retail And The Produce Supply Chain
Perishable Thoughts — Building The Future Of Our Industry
Tim York Takes Leadership Role In Food Safety Crisis
Single Step Award Winner — Tim York of Markon
Pundit’s Mailbag – Tim York Speaks Out: PMA Hires Chief Marketing Officer Lauren Scott But Is The Industry Willing To Test And Reject Sub-Par Fruit?
Tim York Will Chair Center For Produce Safety
Tim York Recognized For Food Safety Leadership
Dangers And Broader Implications Of Wal-Mart’s Sustainability Index
Produce Takes Greater Role In Sustainability Standards
Tim York Points Out Buyer Commitment To Food Safety
A Call For An Industrywide Sustainability And Social Responsibility Initiative
Now, suddenly, we find ourselves in some “Brave New World” discussing the very survival of the foodservice industry as we know it.
Mira Slott, Pundit Investigator and Special Projects Editor, spoke to Tim about the world of foodservice in the midst of the coronavirus outbreak in 2020:
Markon Cooperative, Inc.
Q: So much has transpired since we reunited at our New York Produce Show last December at the Jacob Javits Center, which suddenly has been transformed into a 2,000-bed hospital to care for coronavirus patients. We had been celebrating your brilliant, 34-year career at Markon and talking about your plans to leave Markon in June 2020 for new adventures.
A: Yes. it’s hard to believe. Now, we’re just so day-to-day, in survival mode. I haven’t even started looking down the road at plans outside of Markon.
Q: It feels like a different world, since you were facilitating your popular workshop at the New York Show’s Ideation Fresh Foodservice Forum, a concurrent event enjoining top foodservice executives across the supply chain in innovative, solution-driven discussions. At the same time, the main trade show day offered a unique venue that brought people together from the foodservice and retail worlds. In many ways, those interactions seem more relevant now than ever.
Restaurants across the country have been shuttered, and key suppliers are scrambling and shifting gears to endure. It’s such a rapidly changing situation. Are you able to give perspective on what’s been happening on your side?
A: At Markon, as you know, we’re almost exclusively foodservice business, so we’ve gotten the brunt of this first-hand certainly. Gordon Food Service has some Cash & Carry stores that are retail. Other than that, we are a foodservice business.
What we’ve seen is a little bit of a lagging indicator in terms of what’s going on because our orders today are reflective of what’s happened a couple of days ago with their distributors and their replenishment.
I would say overall we were down nearly 80 percent in the third week of March, and closer to 70 percent down for the last week of March. That’s a good sign.
Q: So, the sales trajectory is better. Why is that?
A: I would say the third week of March, in particular, was a hard week, because the week before that, everything started to get shut down. So distributors were left with a lot of product. Then they were really cleaning out inventories and sending it to food banks and other outlets that could take the product.
Now we’re trying to get back to a reasonable semblance of order, whatever that new order is.
What we see — and you see this at retail also — is a narrowing of the number of SKUs, and not being willing to carry nearly as many products as we normally would.
I heard one of our distributors say they would normally have over 500 fresh produce SKUs and they’re reducing that to under 100 SKUs. That’s really around inventory management and risk of shrink and reducing that risk.
Q: So, is this both narrowing the quantity and changing the types of SKUs, perhaps focusing on more shelf-stable products? Potatoes and onions versus more perishable items like berries or fresh-cut watermelon, for instance?
A: No, not really. I don’t see that in our numbers. That’s what we’re hearing consumers are buying at retail. Right, it’s more shelf-stable items. But we don’t see that at foodservice.
I want to say the shift is narrowing, so instead of carrying six packs of apples, maybe we’re carrying two. Or we’re not carrying gold kiwi fruit; we’re only going to carry regular kiwi fruit. We’re going to have items, if you will, that are more mainstream, that we have more outlets for, rather than the typical, ‘you have to have everything for anybody that might want it.’
A creative chef comes up with an item he wants, and you’ve just got to have it. The problem is you don’t know if there’s an outlet for that anymore, so you can’t buy for that and risk that kind of shrink and loss. So, we’re really focused on reducing shrink.
Q: I’ve been hearing about a lot of partnerships of foodservice distributors connecting with supermarket chains, to try and keep their businesses going... What’s happening on that front?
A: Yes. I know several of our members who have done that, who have partnered with retailers or are moving people to other divisions, anything they can do to keep personnel busy and equipment in use. You’ve got all that capital expenditure so it would be great to be using it. Retailers have needed the help.
What we’re hearing with fresh produce… retailers have gotten caught up with inventory on the fresh produce side, but are still needing help with the dry grocery. I see that with grocery shelves around here; there’s a lot of empty spaces.
So, retailers are really in a catch-up game, and we’re in a position where that demand has shifted from foodservice to retail, and we’re able to help them out.
Q: But you’re saying in terms of fresh produce, supermarkets have caught up on supply for the current consumer demand. So, the produce supply chain systems retailers were using before the coronavirus are now sufficient?
A: That’s what we’re finding. Supermarkets don’t need our help as much on the produce side, but more on the grocery side.
Q: Are there new strategies to deliver direct to consumers? For instance, I had a riveting interview with Michael Muzyk, president of Baldor, about ways he’s reinventing his company, including a conversion to home deliveries, in order to cope...
A: I haven’t seen home delivery amongst our distributors, but I read about what Baldor is doing.
Q: Can you talk about the short-term and long-term consequences of something like this?
A: We’re having to look at all our expenses, like everybody else has. What does our outflow look like, and what does our income look like? So, we have had to do a staff reduction already by 35 percent.
We’re trying to be patient and see how the business rebounds, and to see what the new normal is because we don’t want to be understaffed. At the same time, we don’t want to have people twiddling their thumbs.
We started having people working from home the week of March 9, and as of the week of March 23, all our staff is off site.
I can’t really reflect on how our distributors are confronting all the new rules of social distancing. It was kind of odd when we were all still working in the office. We were on a conference call with a speaker phone in the middle of a big room, where we were each separated from each other in four different corners all shouting at the phone. It’s a very surreal experience, I’ll tell you that much. We’re doing the social distancing, and constant washing of hands, wiping down of surfaces, trying to do the things that CDC has advised us we need to be doing.
Q: What are the key challenges going forward, and any advice or insights you can relay to the industry?
A: The key challenge for us right now is just getting the organization the right size. We have a building that we rent, that nicely accommodated 61 employees. We’ve got too much space in the building now. You can’t do a whole lot about that in the short term. But the reductions we can make are around personnel. We do that with a heavy heart. Those are people you’ve worked with, sometimes for a short period of time, sometimes for a long time. Some worked here many years or a couple of decades even, whose lives have been impacted by fissions around the business. And none the less, you have to make the right decisions for the continuity of the business or the remaining people. Otherwise you’re not doing right by them, you’re not doing right by the ownership. So, we’ve had to make hard decisions around personnel, and that’s not easy to do.
What you want to do is make sure your workforce is rightsized for the amount of work that you’re going to have for the foreseeable future. And I’m not sure we’ve found that equilibrium yet.
We’re still trying to find what’s the new normal.
Q: There are still so many unknowns. We don’t even have a sense of when restaurants could be opened again...
A: No. We could be several months, and then there’s the potential of a second wave of the virus, just about when we get back to normal. What is going to be the psychology of people about getting into more confined spaces and in close proximity of each other, whether it’s restaurants, subways, the line at Disneyland, buses, airplanes.... How are people going to feel about that?
When would we get back to normal, and what does normal look like? I don’t know if normal will be back to what we had before the coronavirus. I hope we don’t go around just waving to our friends from a distance, and don’t feel comfortable giving them a hug.
Q: That would be quite contrary to our close-knit produce industry norms and culture...
A: Obviously, as we’ve talked before, the produce industry is a real people business. It’s very isolating to be working from home and not being with the people you’re used to seeing and working with in person. We have to figure out, how do we get around that, how do we overcome that. We’re using Zoom -- I think everyone is using Zoom these days -- we should have bought stock in that. It’s a way to connect. It’s better than nothing, but it’s not the same.
Q: I’ve been inspired by executives in the foodservice industry, who have been working tirelessly to meet the challenges in front of them...
A: I know. We’ve read that three percent of restaurants have closed their doors and won’t be reopening, but that’s just the beginning. I think we could see the entire restaurant business destroyed. Some are more adaptable, more flexible, to figure out takeout or off-premise dining more quickly than others.
There are over one million restaurants in the US. I think we have maybe 20 percent of those at risk, and many will be independents, really the invigorating and exciting kinds of places.
What has happened to foodservice is really a tragedy. The evidence that people are better off crowding through supermarkets than dining in restaurants is actually pretty weak. In Sweden, for example, they kept open most schools and most restaurants. As this piece elaborates, Sweden’s chief epidemiologist Johan Giesecke makes the point that other nations “have taken political, unconsidered actions” — actions that the facts do not justify.
In the past, we have had quarantines that lock down infected people. The article continues:
“This is, in fact, the first time we have quarantined healthy people rather than quarantining the sick and vulnerable. As Fredrik Erixon, the director of the European Centre for International Political Economy in Brussels, wrote in The Spectator (U.K.) last week: “The theory of lockdown, after all, is pretty niche, deeply illiberal — and, until now, untested. It’s not Sweden that’s conducting a mass experiment. It’s everyone else.””
Of course, the foodservice industry has little influence. The trade can beg Washington for financial relief, scramble to stay alive with take-out and delivery and hope that things will normalize soon.
For someone like Tim York, who has been an integral part of foodservice as it became a major industry in America, it must be shocking, astonishing and painful to see the trade collapse and to watch friends have their livelihoods and life’s work destroyed.
We only hope that he will see things turn quickly so at least as he moves on to the next stage of his life, he will be able to leave knowing that things are on an upswing. Many thanks to Tim York for taking time to share this extraordinary moment.
As the coronavirus pandemic continues to wreak havoc on the world’s food system, we are receiving more and more calls and emails from all sides of the supply chain -- trying to process the tremendous amount of information that changes almost hourly. We already have interviews and messages lined up for publication, but first we still have many foodservice suppliers scrambling to make sense of it all.
We began with a piece, Understanding Risk, to help the industry understand the risk that the coronavirus posed for society.
Then we featured a piece titled, Surviving Coronavirus: Baldor’s Trials, Tribulations And Michael Muzyk’s Goal To Keep Everyone Working, which focused on how a very successful foodservice distributor dealt with a world where most restaurants were closed or doing just takeout. Foodservice distribution suddenly was a much smaller business than it used to be.
We then ran a piece we called, Coronavirus/Produce Industry Survival Guide: Specialty Produce Supplier Babé Farms Put To The Test But Meeting The Challenge, which profiled the tribulations of a grower/shipper of mostly upscale foodservice items.
Then we came out with a piece titled Industry Veteran Chuck Weisinger Shares Wisdom On Staying Positive In Response To Coronavirus
Now, Mira Slott, Pundit Investigator and Special Projects Editor, speaks with a grower of specialty produce, almost completely sold through the foodservice channel, to understand how these types of companies can prevail in such unusual circumstances:
San Marcos, California
Q: Thank you for finding time to share the impacts you’ve been facing during the coronavirus crisis, and solutions you’re employing within your operation… as well as your hopes and concerns going forward.
Can you tell our readers what are the key challenges that have been thrown your way?
A: This has been the biggest challenge we have faced in over two decades of being in business. Like most of us, we did not see it coming, and we have been hit very hard.
Q: I understand a major portion of your business is supplying restaurants. The foodservice industry has been hit hard, with restaurants across the country mandated to close their doors or limited to takeout/delivery. How has this impacted movement of your product? How widespread is the problem with the customers you service? Does it vary by location, type of chain, demographics in an area, etc.?
A: Our primary business is in the foodservice sector. We distribute throughout North America with typical concentration in all the large metropolitan areas that have lots of restaurants.
Our products, Microgreens and Edible Flowers, are used mostly in Midscale Dining as well as Fine Dining restaurants, catering, and hospitality. As such, our sales collapsed once the restaurants closed their dining rooms.
Q: Are you still moving your products to the foodservice sector in any way?
We have a very small trickle of business going to foodservice.
Q: Could you provide more details on where that business is, which foodservice establishments, and what products in particular?
A: Our customers are primarily foodservice distributors who provide our Microgreens and Edible Flowers to restaurants, hotels, caterers, institutions, resorts, etc. We work with small local distributors, major regional distributors, and national broadline distributors in every region.
Our products provide chefs and bartenders with inspiration to create beautiful and flavorful experiences. Microgreens deliver tremendous flavor and visual appeal to just about any dish. The popularity of Edible Flowers has been surging both in culinary and in mixology due to their beauty and garden-fresh nuances.
Working with restaurant operators, we have helped develop many successful chainwide offerings that feature our unique products. With the switch to take-out only, the challenge now is to help find ways to enhance take-out menus so that folks at home can still experience something special beyond what they would normally cook themselves.
Our products are an ideal solution in this regard.
Q: Could you give us some insights into what restaurants are doing, how much is being diverted to takeout/delivery?
A: It is my understanding that thousands of restaurants have closed their doors for good. Takeout/delivery is generally only enough to sustain a small portion of a restaurant’s business compared to what it was.
My family has a small Japanese restaurant where we’ve been able to showcase how well microgreens and edible flowers can enhance this type of cuisine. Unfortunately, we have had to lay off almost the entire staff. The restaurant is working hard to build up its takeout business, but this is not easy in this environment with so many people losing their paychecks.
I also believe people are uncertain about how long this will last and are being careful with their spending. Restaurant owners are rolling up their sleeves and doing the basic jobs like cooking and dishwashing, etc., that they once had paid staff to do.
Restaurateurs are resilient, resourceful and dedicated. Everyone is working hard to get through this. The better operators, the ones with good management and strong determination, will come through this.
Q: How much percentage of business is there now compared to what you were doing before restaurants closed?
A: Fresh Origins was continuing in a long tradition of growing and building business in the double-digits. Our company pioneered the Microgreens category, and our national presence is based on a strong foundation of quality, experience, innovation and service.
We were on a very impressive trajectory that has obviously been interrupted. This, of course, is temporary. We will regain our momentum as America wins this battle. We believe that folks will be very glad once restaurant dine-in resumes, and they’ll be anxious to get out of their homes, to get back to work, and to go out to eat. That is what we are planning for at Fresh Origins.
Q: What percentage of your business is in retail… are there opportunities to expand in this area, or divert your product through other channels? Are you selling to wholesalers...etc.
A: Our sales to the retail sector are less than 10% of our normal overall business. BrightFresh® Microgreens is our retail brand. It is available at multiple retailers coast to coast including Safeway, Sprouts Farmers Market, Whole Foods and independents.
We are working to further support our retail brand with an upgraded website for BrightFresh® Microgreens, which is targeted specifically at consumers. Our sales to retail were steadily growing before, and continue to do so during, the recent crisis with little change.
Q: That’s interesting. In what ways?
A: One of the reasons for the success of our BrightFresh® Microgreens is based on the quality of the product. Because we are growing in ideal conditions with bright natural sunshine, rather than inside a warehouse with artificial lighting, our microgreens are more robust and have better flavor and improved shelf-life, which is a key differentiator for microgreens that have typically suffered at retail due to quality and shelf-life issues.
The rapidly changing situation makes it very difficult to navigate. The crisis and the sudden upsurge in business is causing logistics and staffing challenges for retailers. Many retailers are reducing SKU’s in order to keep shelves stocked with the basics, which makes it difficult to pivot more of our unique products to retail.
Q: Could you provide insights on what’s happening particularly with your products at retail… realigning inventories, ways you might be able to help?
A: Much of the retailers’ volume now is in more of the durable, staple items like potatoes and onions. Nevertheless, our current retail product line is doing very well! We see our BrightFresh® Microgreens as a way for retailers to help consumers to kick up their home cooking to create better dishes for their families.
Q: Are you involved in any new industry partnerships being formed, such as with foodservice and retail combining forces?
A: We are offering some of our other products, especially larger greens — such as our Petite®Greens and TenderGreens™ — to our foodservice distributors who have an ability to get these out to retailers or consumers.
A few of our distributors do have direct-to-consumer sales online. We are seeing some of the distributors begin to open their warehouses to consumers and even offer truck deliveries to consumers. Our distributors are scrambling to survive and we are all faced with trying to find opportunities in a crisis environment. It hasn’t been easy.
Q: There’s also been a surge in consumers shopping at farmers markets. In New York City, new social-distancing rules were just put in place to control crowds at outdoor farmers markets. (I enjoyed looking back at your insightful letters we published related to our coverage in the Perishable Pundit on farmers market food safety and fraud issues, local, organic, etc.). Are any of these issues more relevant now?
A: Sanitation and proper food handling are more important than ever, especially for farmers markets where these things have historically been lacking and for the most part ignored.
It appears this crisis may have sounded the alarm to begin the adoption of basic regulations regarding sanitation food handling and overall consumer safety for farmers markets. Anyone in the food business can affect the entire industry. Farmers markets should not be exempt from basic food safety and health rules that provide protection for all of us and our families.
Q: With your products being more perishable than other items like potatoes or onions, are you looking to build or develop other product areas? Are you getting requests for other produce items?
A: We are a very specialized business that is designed to produce high quality microgreens and edible flowers in the most efficient way possible. We are open to growing other products if they fit into our operation, perhaps such as full-sized herbs or salad greens.
We have about 1.4 million square feet of greenhouses in one of the most ideal climates anywhere combined with over 20 years’ experience in growing. We are certainly open to requests for growing other products that would be suitable for greenhouse production, but for now, our first priority at this point is to hunker down and get through the crisis, looking forward to better times ahead.
Q: Could you elaborate on your business, production/harvesting schedules, warmer weather/rain issues, and strategies going forward? What’s going to happen to the items you harvest that are not sold? Will there be an outlet?
A: Our crop has a very short growing cycle, so we have great flexibility to manage our production and inventory. Normally, we plant 6 days a weekly throughout the year. Naturally, at this point, our production is greatly reduced. We are ready to ramp up very quickly to meet demand as the business returns.
Fortunately, we do not rely on a seasonal commodity, so we are not subject to many of the issues inherent to many traditional crops. We are well positioned for when the restaurants reopen and the distributors resume supplying them.
Q: Do you have any key pieces of advice or lessons from your experiences to pass on to the industry?
A: This is a sobering event for all of us. We are, of course, saddened by the harm this is doing to our friends and families across the country and the world. All of us are affected in our every day lives.
It is encouraging, though, to see the massive efforts being made to address the crisis and because of this I am very confident in our future. Like the Great Recession of 2008, and like 9/11, this is a crisis that we will get through, and in the long term we’ll all be much stronger.
For the business, I think we are all learning that having an up-to-date crisis management plan is a very important part of being in business. We should manage for the best but be prepared for the worst. The produce business has never been easy, and I think there are some companies that will not survive this. The ones that have built a strong foundation of good management, that are tied well to their communities or their business constituencies and have strong balance sheets, will survive.
Those that do will see a very strong resurgence. And there will be less competition. Although there will be less restaurants out there, there are still the same number of people who want to eat. I think people are wanting to get back to the social aspect of gathering together to enjoy a good meal outside of the home, and this will also play a big role in our business recovery.
Those restaurants that provide a great dining experience with quality, creativity and service will give people a reason to get back out. At Fresh Origins, we are poised and ready, and we look forward to continuing to be a part of helping chefs and restaurants to serve great tasting experiences.
Our industry will come through this with tough lessons learned in dealing with the unexpected. We are fighting hard, and and we are grateful to be a part of this dynamic industry.
We thank David for his calm demeanor in times of great stress.
Nobody can argue against having up-to-date crisis management plans but, in truth, if anyone came up and asked “What if the government intervenes and requires that all restaurants, hotels, cruise ships, theme parks etc., close down for an indefinite period? How can we be prepared?” The answer is… you can’t.
A firm could build up emergency financial reserves, but its return on invested capital would be so low that someone would buy it out for the sole purpose of stripping out those emergency financial reserves!
One could argue for more diversity — serving retail and foodservice — but few companies are actually great at everything. In any case, it is not clear that being so diverse that you can absorb everything actually produces higher returns than having separate organizations, acknowledging that some might go bust from time to time.
So, maybe having separate companies and thus isolating the more profitable ones is the smarter strategy over time.
For people involved in the produce industry, these stories are tearful. Good people, who have worked hard, are just struck down. It is like an asteroid crashing down from the heavens. It is not clear there is anything they could have done.
And we know so little about the effectiveness of our efforts. How many lives were saved by making people buy at retail as opposed to eat at foodservice? These are not questions with obvious answers.
So what can we say to people like David Sasuga other than we are rooting — and praying — for him and his organization.
We hope that the whole industry will try to help them get through this. And it is true that the strongest and most innovative will endure and prevail. We will be waiting to cheer them back on the other side. Many thanks to David Sasuga for taking time to share the moment with the broader industry.