Key takeaways

• Baldor focuses on quality over quantity, positioning itself as a highliner in food distribution.
• Merchants at Baldor actively seek out the best produce and meat to meet customer needs.
• Restaurants have flexible pricing options, including daily, weekly, or longer-term contracts.
• Produce prices are highly volatile due to inelastic demand and reliance on weather conditions.
• Romaine prices are expected to spike again this summer due to current market conditions.
• Tomato growers face significant production costs and operate on razor-thin margins.
• The winter tomato production in the US is heavily reliant on Florida and Mexico.
• Recent freezes in Florida could lead to significant shortages in tomato supply.
• Shade houses and greenhouses increase tomato production efficiency in Mexico.
• Mexico’s tomato production declined by 3-4% this year due to tariffs.
• Baldor’s curated assortment strategy contrasts with broader offerings from competitors like Cisco.
• Flexible pricing strategies are crucial for restaurants to manage costs in a volatile market.
• Weather and acreage significantly impact produce market volatility.
• Contracts and open market sales are essential for tomato growers to manage profitability.
• The shift in tomato production sources over time is influenced by trade agreements.

Guest intro

Jacob Krempel is Senior Vice President of Procurement and Merchandising at Baldor Specialty Foods, where he oversees sourcing and supply for fresh produce. He has deep experience in wholesale food distribution and produce procurement, helping restaurants and retailers navigate price swings and shifting availability in the US produce market.

Baldor’s strategic positioning in food distribution

• Baldor emphasizes quality over quantity in its food distribution strategy.

• We view ourselves as a highliner so we’re gonna carry a wide assortment… our job is to build a curated assortment of maybe 7,500 skus versus the cisco carrying 20,000 plus.

  — Jacob Krempel

• The company focuses on building a curated assortment of products.
• Baldor aims to differentiate itself from competitors by offering a wide variety of high-quality products.
• The strategic positioning highlights Baldor’s commitment to quality and customer satisfaction.
• Baldor’s approach contrasts with broadliners who focus on a larger volume of SKUs.
• The focus on quality is a key part of Baldor’s brand identity.
• Baldor’s merchants have an “insatiable appetite” for sourcing the best produce and meat.

Flexible pricing strategies for restaurants

• Restaurants can choose from various pricing options based on their needs.

• I think we wanna meet the chef where they are right and so we offer a wide variety of opportunities of how they might wanna price with us right anything from daily pricing to weekly pricing to depending on the size of of the restaurant chain we will offer longer term contracts as well.

  — Jacob Krempel

• Flexible pricing helps restaurants manage costs in a volatile market.
• Pricing options include daily, weekly, and longer-term contracts.
• The flexibility in pricing is crucial for adapting to market changes.
• Baldor’s pricing strategy aims to meet the diverse needs of restaurant clients.
• Different pricing options allow for better cost management and planning.
• The strategy supports restaurants in maintaining profitability despite market fluctuations.

Volatility in produce pricing

• Produce prices are highly volatile due to inelastic demand.

• Produce demand especially in the US is rather inelastic in the short term and it’s so reliant on weather and acreage grown and the production out of that acreage that you see very wild swings in markets all the time…

  — Jacob Krempel

• Weather conditions significantly impact produce pricing.
• The reliance on weather and acreage leads to wild market swings.
• Understanding supply and demand dynamics is crucial for stakeholders.
• The volatility presents challenges for pricing and supply chain management.
• Short-term inelastic demand contributes to price fluctuations.
• Market volatility requires careful planning and strategy from distributors.

Anticipated market movements for romaine

• Romaine prices are expected to spike again this summer.

• …I guarantee this summer you’re gonna be hearing about romaine again because that’s already almost a $100 a case right now…

  — Jacob Krempel

• Current market conditions indicate a potential price increase.
• Anticipated spikes require strategic purchasing and pricing decisions.
• Seasonal trends play a significant role in produce pricing.
• The prediction informs businesses on potential market changes.
• Understanding market conditions helps in planning inventory and pricing.
• The expected spike highlights the importance of monitoring market trends.

Economic challenges for tomato growers

• Tomato growers face significant production costs and razor-thin margins.

• 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 gonna call that 70% the rest are gonna try to play on the open market… a lot of these growers that that we deal with this is a razor thin margin business.

  — Jacob Krempel

• Contracts and open market sales are crucial for managing profitability.
• The economic pressures impact growers’ market strategies.
• Understanding production costs is essential for managing supply chains.
• The reliance on contracts helps secure a guaranteed return.
• Market dynamics require careful planning and strategy from growers.
• The thin margins highlight the challenges in agricultural production.

Winter tomato supply dynamics

• The US winter tomato production is heavily reliant on Florida and Mexico.

• If you needed a 100 tomatoes for the US market 30 of them are gonna come from Florida 70 of them are gonna come from Mexico.

  — Jacob Krempel

• 70% of the supply comes from Mexico during winter.
• The geographical distribution impacts supply chain dynamics.
• Trade agreements have influenced the shift in production sources.
• Understanding the supply dynamics is crucial for market planning.
• The reliance on specific regions highlights potential vulnerabilities.
• The distribution of production sources affects market stability.

Impact of recent freezes on tomato supply

• Recent freezes in Florida could lead to significant shortages in tomato supply.

• There were two freezes that happened in Florida this winter that took 80% of the crop in Florida out completely… you took a market that needed a 100 tomatoes and you took 26 out of the equation.

  — Jacob Krempel

• The environmental factors have a direct impact on supply chains.
• Anticipating market changes is crucial for managing supply and pricing.
• The potential shortages highlight the importance of weather monitoring.
• Understanding the implications of weather events is key for supply chain management.
• The impact of freezes demonstrates the vulnerability of agricultural production.
• The shortages could lead to increased market prices for tomatoes.

Technological advancements in Mexican tomato production

• Shade houses and greenhouses significantly increase production efficiency in Mexico.

• …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… they started building these big greenhouses so they could get year round production down there as well and between those two they’re producing a a significant amount more per acre than maybe a traditional field grown tomato would be…

  — Jacob Krempel

• The advancements improve yield per acre compared to traditional methods.
• Year-round production is facilitated by technological innovations.
• The increased efficiency impacts market supply and pricing.
• Understanding agricultural practices is crucial for market dynamics.
• The technological improvements highlight the potential for increased production.
• The efficiency gains contribute to Mexico’s significant market share.

Effects of tariffs on Mexican tomato production

• Mexico’s tomato production declined by 3-4% this year due to tariffs.

• …we did see Mexico decline their production a little bit this year probably three to 4%… when they’re supplying 70% of the US market in the winter that was actually quite a bit well that was because of the antidumping tariff that was put in place of 17%…

  — Jacob Krempel

• The decline impacts the US market supply.
• Trade policies have direct effects on agricultural production.
• The tariffs influence market dynamics and supply chain strategies.
• Understanding trade policies is crucial for market planning.
• The production decline highlights the impact of economic policies.
• The effects of tariffs underscore the importance of regulatory awareness.