WESTERN GROWER SHIPPER NOVEMBER/DECEMBER 2018
Agricultural R&D is on the Move as Restaurant Menus Get Healthier
WGCIT SPONSOR: TAYLOR FARMS “Bruce Taylor Deserves All the Credit!” Move Over Siri and Alexa, AgVoice Offers Speech-to-Text Technology Tailored to Ag Plant-Forward Concept Drives Meal Kit Firm Ag Economy Faces Uncertainty Need Boosts H-2A Filings
WESTERN GROWER SHIPPER NOVEMBER /DECEMBER 2018 WGA.COM
8 WGCIT SPONSOR: TAYLOR FARMS
WESTERN GROWER & SHIPPER Published Since 1929
“Bruce Taylor Deserves All the Credit!” 10 Move Over Siri and Alexa, AgVoice Offers Speech-to-Text Technology Tailored to Ag 12 Agricultural R&D is on the Move as Restaurant Menus Get Healthier 16 Plant-Forward Concept Drives Meal Kit Firm 20 Ag Economy Faces Uncertainty 24 Need Boosts H-2A Filings
Volume LXXXIX Number 6
To enhance the competitiveness and profitability of Western Growers members
Thomas A. Nassif President Western Growers firstname.lastname@example.org Editor Tim Linden Champ Publishing 925.258.0892 email@example.com Contributors Cory Lunde 949.885.2264 firstname.lastname@example.org
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DEPARTMENTS 4 President’s Notes 6 Member Profile 22 Insurance Corner 26 Government Affairs 28 Agriculture & the Law 30 Science & Technology 33 34 Financial Services 35
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Western Grower & Shipper ISSN 0043-3799, Copyright © 2018 by the Western Grower & Shipper is published bi-monthly by Western Grower & Shipper Publishing Company, a division of Western Growers Service Corp., 15525 Sand Canyon Avenue, Irvine California 92618. Business and Editorial Offices: 15525 Sand Canyon Avenue, Irvine California 92618.Accounting and Circulation Offices:Western Grower & Shipper, 15525 Sand Canyon Avenue, Irvine California 92618. Call (949) 863-1000 to subscribe. Subscription is $18 per year. Foreign subscription is $36 per year. Single copies of recent issues, $1.50. Single copies of issues more than three months old, $2. Single copies ofYearbook issue $4. Periodicals postage is paid in Irvine, California and at additional mailing offices. POSTMASTER: Send address changes to Western Grower & Shipper , PO Box 2130, Newport Beach, California 92658.
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TOM NASSIF | PRESIDENT AND CEO, WESTERN GROWERS PRESIDENT’S NOTES
The Voter’s Conundrum The upcoming midterm elections are significant. While President Trump is not on the November ballot, citizens across the country will be casting their votes for congressional representatives who will either aid or impede the administration’s agenda. In large part, the success of President Trump’s next two years will depend on the political makeup of the House and Senate in the 116 th United States Congress.
Conventional wisdom indicates that the Republican Party will falter come November 6. Historically, the president’s party loses congressional seats in the midterm election. Since 1938, the midpoint of Franklin D. Roosevelt’s unprecedented third term in office, the party of the president in power has lost seats in the Senate 75 percent of the time and the House 90 percent of the time [15 and 18 out of 20 midterm elections, respectively]. Sometimes, midterm elections are a repudiation of performance as congressional turnover tends to mirror the president’s job approval ratings; but, more often, they are simply a political manifestation of Newton’s Third Law of Motion: “For every action, there is an equal and opposite reaction.” Nothing motivates people to go to the polls like an adversary in the White House. Will the trend continue this election cycle? Probably, but I think the magnitude of the “blue wave” will depend on the turnout in many rural districts. It is no secret that rural America helped propel Trump to the presidency in 2016. In counties smaller than 20,000 people, voters went for Trump over Clinton by a margin of more than two to one. In fact, counties all the way up to one million residents favored Trump over Clinton. However, while President Trump’s policies have largely favored the business communities, his position on several key agricultural issues, such as international trade and immigration, may be eroding his support in rural and farming communities, causing many Western Growers members to face what I call the “Voter’s Conundrum.” Regardless of which side of the aisle you find yourself, there may be moments where you find it difficult to support your party; or there may be particular races where you identify more closely with the candidate of the opposite party [or, as may be more often the case, the candidate of your own party is a verifiable fool]. The crux of the Voter’s Conundrum is this: In these situations, do you vote for your party or for the candidate, regardless of party? Many times in my life, I have heard the seemingly sage political advice: “Vote for the person, not the party.”With more than four in 10 voters identifying themselves as independents in the most recent Gallup Poll, it appears that many Americans
have bought into this nonpartisan ballot-casting philosophy. Without turning this column into a partisan voting guide, let’s examine the wisdom of this approach to executing our primary civic duty. For a moment, imagine a political system where there are no parties, only candidates, each with their own political philosophies and positions on the issues. How would your voting decisions be based in this alternate universe? Without the influence of party designations, your choice would more than likely be determined by individual merit; undoubtedly, you would be more like to consider a candidate who may not align with all of your core values, but in your estimation is intelligent, measured and capable. On the surface, this would appear to be the preferable method for choosing our local, state and national representatives. Imagine if these types of elected officials ran our country?! Now travel back to the reality you currently live in, the one with sharply-divided political parties and equally-divergent agendas. Let’s assume this otherwise qualified individual has been elected, with the help of your ballot, but they happen to represent the party opposite of your own. How might they cast their votes on monumental pieces of legislation, bills intended to chart the fiscal and social course of this country for decades to come? Consider this statistic: Party unity voting has increased from around 60 percent in the 1970s to 90 percent today. In other words, Republicans and Democrats in both the House and Senate nearly always vote along party lines. Case in point, zero Democrats in either chamber voted for last year’s landmark tax reform bill, with only a handful of Republicans breaking ranks [mainly due to concerns over the increase in the federal debt]. This fact underscores the significance of party majorities in Congress, and hints at the fate of President Trump’s agenda should the Democrats retake control of the House or Senate in 2019. With nearly six dozen highly competitive seats in the House and nine toss up elections in the Senate [as of the writing of this column], every vote will count, perhaps none more than those in rural America. So, as you cast your ballot, will you vote for the person or the party?
4 Western Grower & Shipper | www.wga.com NOVEMBER | DECEMBER 2018
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CALIFORNIA MEMBER PROFILE
Stenderup Ag Partners Arvin, CA
WG Member since 1978
Danish Roots Run Deep at Arvin Farm
By Tim Linden B ACKGROUND: It was in 1927 when twin brothers Viggo and Soren Stenderup emigrated from Denmark to the United States and found their way to the farming town of Arvin in the southern San Joaquin Valley. They got their chance to literally establish new roots after the Great Depression. “They were able to buy a farm from the Bank of Italy, which became Bank of America, in 1930 following what happened in 1929,” said Kent Stenderup, speaking of his grandfather and uncle and the financial crisis that put many farms in the hands of bankers. LINE OF SUCCESSION: The second generation of Stenderups also featured a pair of twins as Viggo and his wife, Frieda, produced Verner and Gunner Stenderup in 1935. Today the third generation is in place with Verner and Gunner’s sons, Andy and Kent Stenderup, involved in the operation. At 83, Verner is also still in the
CROP ROTATION: The two founding brothers started their U.S. farming career with grapes, cotton and alfalfa…crops that would form the backbone of Stenderup Farms through the first generation and well into the second. It wasn’t until Andy (Cal Poly San Luis Obispo) and Kent (Stanford) graduated from college and rejoined the family operation that the crop mix expanded. “When I came back from Stanford, it was the classic case of the smart college kid trying to re-invent how we farmed,” Kent said. “I talked the family into planting iceberg lettuce. We disked the field. My grandfather said it was the first time ever that he received zero money on a crop.” Today Stenderup Ag Partners, which became the official name of the company 30 years ago, grows a variety of permanent and row crops, split fairly evenly down the middle. On the permanent side of the ledger are juice grapes and almonds. The row crop side features carrots, fresh potatoes, sweet potatoes, processing tomatoes, garlic and onions. CO-OP FRIENDLY: “We’re big believers in the co-op business model,” says Kent. “We belong to Blue Diamond for our almonds and Delano Growers Grape Products for our wine grapes. We also belong to an ag equipment co-op and an almond haulers co-op. Even our bank—Farm Credit—is a co-op.” The business partners are also active in the farm community as the 40-year membership in Western Growers attests. And Kent is the current vice chairman of the Almond Board. “My father and uncle served on various board. We believe in it,” Kent said. THE 4 TH GENERATION: It is too early to know whether the next generation of Stenderups will come back and run the family farm as did Kent and his cousin Andy, but at least Kent’s son John is in the business as a sales representative for C.H. Robinson. And John is certainly akin to following his dad’s footsteps, literally. Over the last two years, John Stenderup has scaled the top two mountains in the world in Mount Everest and K2. Kent accompanied him to base camp on the Mount Everest climb
picture. “He is our special projects manager,” says Kent. On their 2,000 acres, Andy and Kent have a clear division of work with Andy handling all tractor work and equipment and Kent in charge of irrigation and the office.
6 Western Grower & Shipper | www.wga.com NOVEMBER | DECEMBER 2018
THE FUTURE: The Stenderups have been farming in Kern County for almost 90 years and Kent expects farming to take them quite a bit further down the road. At age 59, with a father still active at 83, Kent believes he has many years left helping to guide the operation. “I like our business model now, but it will change. It always does. Our family farming model works really well. We always confer with one another before making any major decisions. I can’t tell you what’s next, but I plan to be here. I’m still having lots of fun!”
and has been an emotional and financial supporter of the ambitious undertakings. After all, it was Kent who got John interested in serious hiking and climbing. “I enjoy the peace and serenity of hiking,” Kent said. “I introduced John to hiking and he took it and ran with it. You could tell early that he had the footing and was very comfortable climbing. One of the first hikes we did was Half Dome (in Yosemite).” Kent still enjoys hiking, including going from rim to rim through the Grand Canyon and hiking Mt. Whitney, California’s tallest peak.
WESTERN GROWERS OFFICERS – 2018
CRAIG A. READE, Chairman RON RATTO, Senior Vice Chair RYAN TALLEY, Vice Chair STEPHEN F. DANNA, Treasurer CAROL CHANDLER, Executive Secretary THOMAS A. NASSIF, President DIRECTORS – 2018 GEORGE J. ADAM Innovative Produce, Santa Maria, California JOSEPH E. AIELLO Uesugi Farms, Inc., Gilroy, California KEVIN S. ANDREW Vanguard International, Bakersfield, California MIKE ANTLE Tanimura and Antle, Salinas, California ROBERT K. BARKLEY Barkley Ag Enterprises LLP,Yuma, Arizona STEPHEN J. BARNARD Mission Produce, Inc., Oxnard, California BRIAN BERTELSEN Cove Ranch Management, Reedley, California GEORGE BOSKOVICH III Boskovich Farms, Oxnard, California DON CAMERON Terranova Ranch, Helm, California EDWIN A. CAMP D. M. Camp & Sons, Bakersfield, California CAROL CHANDLER Chandler Farms LP, Selma, California LAWRENCEW. COX Coastline Family Farms, Salinas, California STEPHEN F. DANNA Danna Farms, Inc.,Yuba City, California JOHN C. D’ARRIGO D’Arrigo Bros. Co. of California, Salinas, California THOMAS DEARDORFF II Deardorff Family Farms, Oxnard, California SAMUEL D. DUDA Duda Farm Fresh Foods, Inc., Salinas, California CATHERINE A. FANUCCHI Tri-Fanucchi Farms Inc., Bakersfield, California DAVID L. GILL Rio Farms, King City, California A. G. KAWAMURA Orange County Produce, LLC, Irvine, California ALBERT KECK Hadley Date Gardens,Thermal, California LORRI KOSTER Mann Packing Company, Inc., Salinas, California FRED P. LOBUE, JR. LoBue Bros., Inc., Lindsay, California FRANK MACONACHY Ramsay Highlander, Inc., Gonzales, California JOHN S. MANFRE Frank Capurro and Son, Moss Landing, California STEPHEN MARTORI III Martori Farms, Scottsdale, Arizona HAROLD MCCLARTY HMC Farms, Kingsburg, California JOHN MCPIKE California Giant, Inc., Santa Maria, California TOMMULHOLLAND Mulholland Citrus, Orange Cove, California KEVIN MURPHY Driscoll’s Inc.,Watsonville, California MARK NICKERSON PrimeTime International, Coachella, California THOMAS M. NUNES The Nunes Company, Inc., Salinas, California KEVIN E. PASCOE Grimmway Enterprises Inc., Bakersfield, California GARY J. PASQUINELLI Pasquinelli Produce Company,Yuma, Arizona STEPHEN F. PATRICIO Westside Produce, Firebaugh, California RON RATTO Ratto Bros. Inc., Modesto, California CRAIG A. READE Bonipak Produce, Inc., Santa Maria, California JOSEPH A. RODRIGUEZ The Growers Company, Inc., Somerton, Arizona WILL ROUSSEAU Rousseau Farming Company,Tolleson, Arizona VICTOR SMITH JV Smith Companies,Yuma, Arizona RYANTALLEY Talley Farms, Arroyo Grande, California BRUCE C.TAYLOR Taylor Farms California, Salinas, California STUARTWOOLF Woolf Farming & Processing, Fresno, California ROBYRACEBURU Wonderful Orchards, Shafter, California
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WGCIT SPONSOR: TAYLOR FARMS “Bruce Taylor Deserves All the Credit!”
By Tim Linden S o says Tom Nassif when speaking of the development of the Western Growers Center for Innovation & Technology. The technology incubator, aimed at bringing farmers and entrepreneurs together to develop solutions for challenges facing production agriculture, is housed on the first floor of the Taylor Farms complex in downtown Salinas. That alone is worthy of recognition but even more importantly it was Bruce Taylor’s vision that led to the idea in the first place. “He deserves all the credit in the world,” said Nassif, who is president and CEO of Western Growers. “At a board meeting when he was chairman (2014), Bruce invited John Hartnett of SVG Partners to make a presentation about what SVG was doing and what Western Growers could do to support the effort.” That began the negotiations and launched the idea of an ag technology incubator in Salinas. The Western Growers board did vote to support the effort but “we wanted to be the sponsor. We wanted it to be the Western Growers incubator,” Nassif said.
In praising Taylor’s vision, Nassif said that Bruce came up with the idea, provided the physical space and also donated money to get it off the ground. He was joined by Vic Smith of JV Smith Companies as an early funder, which Nassif said was as important as anything else in getting the idea off the ground. It is three years later and Nassif said reality has matched the vision. “It has been an unqualified success. We have far exceeded our expectations.” He noted that at the beginning, “we thought that maybe we could get as many as 30 tenants with some using it as a hot desk when they were in the area. Now we have in excess of 53 tenants. They have attracted a lot of venture capital money and they are working on industry issues.” He noted that Western Growers involvement has led to the AgSharks competition, which saw an unprecedented investment of more than $2 million in ag technology at WG’s 2017 Annual Meeting. “It was a resounding success. We are going to do it again this year. I don’t know how much investment it will attract but, at the minimum, the companies will be competing for $250,000 for the best ag innovation.” From Western Growers perspective, Nassif said the WGCIT concept has already reached fruition. “We were never in it to make money,” he said. “What we wanted to do was create an environment to help solve some of the industry’s most vexing problems, especially in the area of water and labor. And that is what’s happening.” He said entrepreneurs are working together and working with members on several different pilot projects addressing the industry’s problems. The effort has led to robust activity with regard to technology in the ag sector, including the excellent relationship Western Growers has forged with Forbes and its AgTech Summit held in Salinas for the past three years. He added that Dennis Donohue as the center’s lead and WG’s Hank Giclas, senior vice president of strategic planning, science & technology, have done yeoman’s work in advancing the effort and bringing parties together to work on the issues. He also said the industry at large has supported the concept and followed the lead of Western Growers in recognizing the value of technology and the important role it has to play in the survival and profitability of the fresh produce industry. He said investment is continuing and Western Growers is looking at many different opportunities in the ag technology space. But Nassif came back to Bruce Taylor and reiterated that he truly made it possible. “The Western Growers Center for Innovation & Technology has become exactly what we had hoped it would be…and Bruce was the visionary.”
The idea for theWestern Growers Center for Innovation & Technology was first hatched when Bruce Taylor was chairman of the board in 2014. Here he is pictured withWGA CEO Tom Nassif at the 2014 Annual Meeting.
8 Western Grower & Shipper | www.wga.com NOVEMBER | DECEMBER 2018
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Move Over Siri and Alexa, AgVoice Offers Speech-to-Text Technology Tailored to Ag
By Stephanie Metzinger T hink Siri, but for agriculture. When Bruce Rasa first conceptualized the idea of a speech-to-text data service powered by artificial intelligence, he knew that he wanted to design it with and for food and ag professionals. Growing up, Bruce always had both hands full while working on his family’s 4,000-acre farm in Missouri. His family grew corn, soybean, wheat, hay and apples, and taking notes while knee deep in the field never got easier. “I know, first hand, how painful the record keeping demands of a farm can be,” said Rasa. “This was my inspiration for creating AgVoice.” AgVoice is the world’s first voice and data management start-up company that allows ag professionals the freedom to work hands- free while on-the-go. Using proprietary analytics and processing of raw voice files, anyone in agriculture can conveniently and safely capture data when both hands are occupied. The startup’s mobile voice-interaction service officially launched earlier this year, and the initial response has been positive. In October 2017, S2G Ventures deemed AgVoice’s technology so promising that the venture capital firm offered the startup $250,000 in equity investment during Western Growers’ AgSharks™ Competition. “AgSharks was a game changer for us,” said Rasa. “We had never seen an event where agtech startups can gain access to significant seed capital so quickly. The vast majority of investors we meet don’t have a deep understanding of agriculture so to be on a stage, being groomed by the best in ag, made a massive difference in our growth and ability to deliver a stronger product.”
HOW THE TECHNOLOGY WORKS For the preliminary rollout, AgVoice is targeting farming experts that support growers, such as agronomists, food safety inspectors, plant breeders and advanced research and development teams. So far, the agronomists and plant breeders who tested the system have reported that the technology allows them to survey up to 30 percent more crops per day. They are now able to complete 300 to 400 plot inspections a day, compared to the 200 to 300 previously. AgVoice can also save on costs. In the case of professional plant breeder teams, it turns a two-man job into a one-man effort. “Some of our clients require two plant breeders to go out into the field. One person has both hands inspecting the produce while verbally citing the findings and results. The other is listening, taking notes and filling out required food safety check lists,” said Rasa. “Our voice-first design enables one person to do it all.” The mobile voice-interaction service was designed to achieve four unique features: 1. Recognize Food and Ag Terms: Apple’s Siri and Amazon’s Alexa were developed to help consumers and do not always properly translate commonly used words on the farm. The AgVoice service is created with a lexicon that is ag-centric and is able to decipher agricultural terms, names and niche words. 2. No Connectivity Required: In many ag operations, internet and cloud connectivity is either non-existent or intermittent. AgVoice sees a future in which the service could run on a smartphone, in an offline mode, without connectivity to match the realities of the ever changing environments of food production and agriculture. 3. Immediate Corrections: No speech recognition software is perfect. However, with important tasks such as recording food safety data, every single word must be correct. AgVoice recognizes this discrepancy and has designed a system (patent pending) that empowers users in the field to correct checklists and notes on the spot. The technology allows workers to easily identify if the information is not accurate and immediately correct the data using their voice or via manual editing on the screen as a backup—so it always works in any environment. 4. Ease of Use: AgVoice’s technology is a voice-first design. Users are able to open the app on their phone and navigate the service using solely their voice. “We made it so both hands are always free. Users can leave the phone in their pocket and not have to interact with the system until their tasks are completed,” said Rasa. “If the user
10 Western Grower & Shipper | www.wga.com NOVEMBER | DECEMBER 2018
protected unless the user chooses to share it. The “sharing” feature allows ag professional to easily share the completed checklists with teammates, company leadership and government regulators, among others. “I’m a row crop kid from the Midwest who worked on my family’s farm day in and day out, so I understand how highly sensitive data can be,” said Rasa. “We guarantee that the speed and ease of capture and sharing is matched with the most secure privacy system.” BREACHING THE SPECIALTY CROP SECTOR A year and a half ago, AgVoice joined Western Growers Center for Innovation & Technology in hopes of working with the specialty crop industry to customize the technology for fresh produce growers. “Joining the Center has been such an educational experience,” said Rasa. “We have learned so much about the challenges facing specialty crop growers and are now even more committed to helping and supporting them. The size and scale of this unique, specialty crop network of Western Growers doesn’t exist at our home base in Georgia, so we are thrilled to be here in Salinas at the epicenter of innovation.” Since joining the Center, AgVoice has had the opportunity to interact with WG members through numerous events such as WG’s Annual Meeting and AgTechx, a recently launched initiative that brings technologists to growers. Moving forward, they hope to advance their technology to the next level and serve all of agriculture by continuing to partner with staunch supporters who share their vision. For more information about AgVoice or its speech-to-text service, contact Bruce Rasa at (770) 265-2499 or email@example.com.
wants to use an optional, wearable device like a noise-cancelling Bluetooth headset, we also offer those. They are on the market for around $100.” PRIVACY AND FOOD SAFETY ARE TOP OF MIND As the technology is being refined, features to help comply with new food safety standards are continually being added. AgVoice understands that to effectively and efficiently comply with the FDA Food Safety Modernization Act, proactive record keeping is a must. Prior to activating the technology, AgVoice works with clients to tailor the service to their needs. They meet with the specialists who will be using the service and build platforms and mandatory checklists based on their job requirements. All information collected in the AgVoice service is completely
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Agricultural R&D is on the Move as Restaurant Menus Get Healthier
By Stephanie Metzinger M cDonald’s iconic burgers are getting more “real.” The fast food giant recently announced that it plans to strip artificial ingredients from two-thirds of its menu. This announcement comes on the heels of a commitment earlier this year to market more balanced kids meals by offering new fruit and vegetables options in its Happy Meals and Mighty Kids Meals. American eating habits are changing and to keep up, legacy brands such as McDonald’s are revamping their menus. Deloitte recently revealed that more than 75 percent of Americans self-reported they had healthy eating habits, and 83 percent said that traditional fast food menus failed to offer enough healthy choices. In an effort to meet consumers’ demand for more low-calorie ingredients
and fresh produce, restaurants are getting more creative with their food. McDonald’s has already introduced apple slices and easy-peel mandarins as kids meal options, and now its Australia team “is currently exploring new vegetable and lean protein options and McDonald’s France is looking at new vegetable offerings,” according to a company statement. McDonald’s is not the only one that is trying to deliver cleaner and healthier food. Wendy’s, which has showcased its “start to fresh” partnership with Church Brothers Farms in the past, is focusing on growing its posh line of fresh salads. Sit-down restaurants are looking to inspire by incorporating new fresh produce varieties resulting from research and development (R&D) efforts. For example, the Cheesecake Factory is building many of its meals around broccolini, and Lazy
Dog Restaurant & Bar launched a Roasted Street Carrots menu item which featured organic, rainbow heirloom carrots with a Mexican street-corn flare. In fact, more and more niche food chains are popping up around the country to bring more of these new, creative fresh produce dishes that go beyond the “garden variety” (pun intended). While these brands are making headlines and being lauded for the healthy changes in their menu items, the man behind the curtain is often overlooked. Farmers and agricultural professionals are the real innovators and concept creators behind new fruit and vegetable varieties. Take Driscoll’s, for example, which has created a legacy of reinventing the “typical” berry. Driscoll’s, the world’s largest berry company, has a team of agronomists, breeders, sensory analysts, plant health scientists and entomologists who are constantly researching and developing new flavor profiles for its berries. Based out of Driscoll’s R&D campus in Watsonville, known as Cassin Ranch, the team of “Joy Makers” are using natural traditional breeding processes such as hand cross-pollination to bring about new and improved varieties. This includes the company’s recently released Sunshine Raspberries—gold raspberries that are honeyed with peach and apricot notes— and Blush Berries—pale pink berries that are sweeter and rounder than the typical strawberry. The Joy Makers are also working hard to improve current varieties of blueberries, blackberries, raspberries and strawberries, making them sweeter, bigger, juicier, hardier and more resistant to pests and diseases. Farmers continue to bring R&D to the forefront to enhance existing fruits and
McDonald’s is moving to make its kids menu healthier by adding more fresh produce options.
12 Western Grower & Shipper | www.wga.com NOVEMBER | DECEMBER 2018
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vegetables that consumers have grown to love. Just this March, Duda Farm Fresh Foods—which invests 2 percent of its annual budget in research and development—added six more patents to its celery varietals. Their impressive
mandarin to the United States. He named them “Delite” and launched the easy peel industry that was to follow. “There are many types of citrus, and as farmers, we are the innovators looking for new varieties to develop to bring
surpasses public sector funding. Between 2008 and 2013, public food and agricultural R&D declined by approximately 20 percent while private R&D funding increased by 64 percent. This includes investments in research, development and outreach of new varieties and technologies to mitigate animal and plant diseases, as well as increase productivity, sustainability and product quality. The agricultural technology boom is also playing a significant role in the surge of R&D funding. AgFunder reported that in 2017, investment in agtech startups reached $10.1 billion—a 29 percent year-over-year increase. To support farmers’ efforts in innovating new fresh produce varieties, agtech start-up companies are developing technology to assist in everything from planning and optimization to automation and irrigation management. In fact, Hazel Technologies, a resident of the Western Growers Center for Innovation & Technology and winner of the 2017 AgSharks™ Competition, has developed sachets that can be placed in boxes of fresh produce to extend shelf life. Hazel’s sachets time-release active ingredients into the storage atmosphere of commercially-packed produce, biochemically fighting spoilage by slowing the aging process and proliferation of disease. As investment in R&D continues to soar, new innovations, such as Hazel’s spoilage-fighting inserts, are game changers for the industry. It can open doors for new fresh produce varieties to flourish and perhaps become the star menu items at local restaurants.
to the marketplace for the consumer to enjoy,” said Heather Mulholland, fourth- generation farmer and chief operating officer at Mulholland Citrus. By the same token, broccolini—a broccoli-Chinese kale
hybrid—graced our plates more than 20 years ago through the successful partnership between Mann Packing (which was recently acquired by Dole) and Sakata Seed. Broccolini, which has smaller florets and a longer, thinner stalk than broccoli, was developed by Sakata Seed’s plant breeders and successfully brought to the American market by Mann Packing. Today, the popularity of broccolini is rising and more restaurants ranging from fast casual to fine dining are using it in haute side dishes. With changing diets, a rising world population and an increase in the global demand for food, the list of companies who are dedicated to prioritizing R&D continues to grow. The U.S. Department of Agriculture reported that private sector funding in food and agricultural R&D has risen rapidly over the last decade and now
Duda Farm Fresh Foods’ Red Celery is grown from an heirloom seed variety that Duda’s researchers developed for nearly 20 years.
celery R&D program has resulted in 33 patents that contribute to enhancing the flavor and quality of celery grown in their fields. The addition of these new patents will allow for the development of new celery varieties and flavor profiles that are sweeter, crisper and have less strings. “Duda has been innovating for 92 years, as we recognize that we have to be innovative to survive and thrive,” said Sammy Duda, senior vice president of national operations for Duda Farm Fresh Foods. “With our continuing investments in R&D around flavor, taste, texture and convenience, we aim to improve the eating experience of our consumers while improving the sustainable production practices that are essential in today’s environment. We are excited about our investments and the new products the investments will allow us to introduce.” In addition to creating new and improved varieties, farmers are also growing their commitment to R&D by expanding the market and offering new commodities to consumers. Mulholland Citrus, which today specializes in easy-peel mandarins, was the first to propagate, grow and market the W. Murcott variety in the early 1990s. While traveling halfway around the world, in Morocco, Tom Muholland of Mulholland Citrus came across a species of citrus not available anywhere in the United States: the seedless W. Murcott mandarin. Mulholland Citrus then became the first American company to bring the
Driscoll’s R&D team of “Joy Makers” use science, sense and imagination to create newer, better berry varieties.
14 Western Grower & Shipper | www.wga.com NOVEMBER | DECEMBER 2018
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Plant-Forward Concept Drives Meal Kit Firm
By Tim Linden T he philosophy that drives menu decisions for Sun Basket, one of the top three meal kit firms in a crowded field, appears to be a perfect fit for produce suppliers. Produce industry veteran Don Barnett, who is the company’s chief operating officer, recently told Western Grower &Shipper that from the very beginning Sun Basket’s point of differentiation has been its focus on creating healthy meals for its customers. He said the competition focuses on convenience while Sun Basket has centered on creating meals that are “healthy and delicious.” At the beginning, what Barnett called Sun Basket 1.0, the company offered a handful of different menus that featured low sodium, no saturated fats and low calorie items. It is now well into Sun Basket 2.0 with 10 different menu classification, including paleo, vegetarian, pescetarian, Mediterranean and gluten free. The company is growing at a very fast pace with customers all over the United States and three distribution centers to serve them. “We cover 98.6 percent of the zip codes in the country,” Barnett said.
He equates the company’s current produce buying size as that of a 150-store chain. They are not yet as big as the huge retailers in this country but Barnett has no doubt that the home-delivery meal kit industry will grow far beyond the tiny percentage it currently holds. Several years ago, the food marketing system, including foodservice and retail, was estimated at $1.5 trillion. Earlier this year, an online story on “Recode” estimated the current size of the American meal kit market at $5 billion. Barnett believes meal kits companies are disrupting food marketing in much the way Amazon disrupted book sales and a plethora of companies altered the apparel and office supply sectors. Twenty years into the book disruption equation, about 50 percent of books are now sold on line. Online office supplies have a similar growth curve. Online apparel sales started to take off a decade ago and already have a 20 percent market share. The Sun Basket executive predicts that the meal kit business will approach 15-20 percent market share in the next 10 years. He noted that 15 percent of $1.5 trillion ($225 billion) is a lot of business. Currently, Hello Chef
and Blue Apron are one and two in the industry (neither responded to requests for an interview), followed by Sun Basket. Barnett says those two companies rely on the convenience factor to attract, acquire and keep customers. He believes Sun Basket’s approach is more sustainable and will win out in the long run. “We are both a food company and a technology company,” he said. “You can’t be one or the other in this business, you have to be both.” As a food company specializing in meal kits, Sun Basket has built the infrastructure, including a
16 Western Grower & Shipper | www.wga.com NOVEMBER | DECEMBER 2018
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produce buying operation in San Jose as well as two local buying offices in the Midwest and East. He said it operates a supply chain process that is far more efficient—and hence less costly—than that utilized by retailers or foodservice operators. He explained that produce typically goes through five to seven hands from field to fork: grower to the shipper to the distributor to the retail or foodservice distribution center to the store or restaurant to the consumer. And there can be a wholesaler or two in the mix as well. “We go from the grower to our D.C. to the consumer. That’s more efficient and less costly,” he said, noting that the mark-up along the way, including the 40-50 percent at retail, is eliminated. “This is a much better profit model. We are still figuring it out but it does allow us to pay more to the grower.” The technology company part of the organization has its own set of challenges to figure out, but Barnett indicates that is where the opportunity lies. “We are not selling to mega-customers; we are selling to individuals with a highly personalized product.” As such, each customers gets a menu page that lines up with their individual
buying habits. A vegetarian is going to see vegetarian meals, while a gluten- free customers is obviously going to be presented with meals that cater to that diet. It is this personalization and dive into the data that creates the value for Sun Basket. He noted that often a person who identifies as vegetarian will swap out vegetarian meals for those featuring fish. Sun Basket’s data captures this and offers that online shopper, fish dishes in the row right after the vegetarian dishes. Barnett explained that each customer has a particular value to Sun Basket. The company has ascertained this value through its collection of data. In the e-commerce world, he said these calculations are golden. Investors—via the stock market or the venture capitalist route—want to know how much it costs to get a customer and what that customer is worth. For example, if it costs $100 to acquire a customer and that customer spends $100 with you, that one-to-one ratio is not going to lead to big profits. But if that customers spends $200 or $300 creating a two to one or three to one ratio, black ink will appear on the bottom line. Currently Sun Basket is operating
between 6 to 1 and 12 to 1, which Barnett said is very good. The company is in a fast growth cycle (including about 100 ads on Facebook at all times), so that ratio has not yet created revenues above expenses but Barnett said the firm has sufficient venture capital money to get it through the growth period. “We could show a profit tomorrow if we adjusted our sights and shot for 30 percent growth rather than 75 percent growth, which is where we currently are.” Using hypothetical numbers, Barnett explained why the data it is collecting and the target marketing it is doing is so valuable. One of the company’s menu is a “Chef ’s Choice.” This is the menu that competes most directly with its competitors’ convenience play. It is not highly personalized but rather appeals to the price shopper who jumps from one meal kit company to the next. These people will stay with one company for a while then move to another. For the sake of example, this shopper might cost $100 to acquire and will be worth $500 in sales before moving on. For Sun Basket’s more personalized menus, a shopper is worth more. He said that person with a paleo diet might be worth $3,000 for that same $100 acquisition cost. “We also know that shoppers who get their meals delivered on Monday are worth more than shoppers who get a Wednesday delivery.” He explained that the prime nights for eating meal kits are Monday through Thursday. A Monday delivery allows for full consumption of the delivery over a few days with the shopper remaining excited about the purchase and more likely to continue using the service. A Wednesday delivery has the meals competing with weekend plans, which could mean lower utilization, less excitement and less chance for a long term customer. A new customer who identifies as wanting paleo dishes and wants delivery on Monday is a very desired customer, he said. Barnett said the average customer gets a delivery with three meals for two every other week. For each individual with an average of four eating occasions a day that means Sun Basket is talking care of six of their 120 eating occasions during the month. At the current time, those six are all dinners. Barnett said the company is exploring other avenues to interact with the shoppers including snacks, deserts and other main-meal eating occasions. For a grower-shipper, Sun Basket is an interesting customer. Barnett, who
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18 Western Grower & Shipper | www.wga.com NOVEMBER | DECEMBER 2018
has worked for several suppliers including Dole, New Star and organicgirl, said about 99 percent of the produce it buys is organic. The organic label is part of its healthy and nutritious play to consumers. It also creates potential customers all over the country who might not have regular access to organic food in their supermarket or regular dining establishments. As a plant-forward meal kit, Sun Basket’s home deliveries are more produce-centric than the competition. “Every day we are buying the staples like leafy greens, carrots and garlic,” he said. But the company is also always looking for that unique item and is willing to pay for it. “We can charge a premium so we can pay a premium,” he said. Sun Basket’s executive chef is Justine Kelly, who practiced her craft for many years as the corporate chef de cuisine at the acclaimed Slanted Door restaurant in San Francisco. Barnett said she is constantly
Don Barnett at Organic Grower Summit
creating innovative dishes using items such as celery root for example. The menus are created about eight weeks in advance with the opportunity to substitute items up to two weeks prior to delivery. And if Mother Nature strikes making a particular item unavailable, the website can always note that a specific dish is “sold out.” As the company’s buying power is continuing to increase, Barnett said it is just now starting to work with growers on a
pre-plant basis looking for specific crops to be grown for specific time periods. Currently, it is buying commodity packs and breaking them down for its own needs at its distribution centers. But Barnett said it is also just starting to work with grower- shippers on customized packs. The company is delivering to consumers five days out of seven so the D.C.’s are all operating on a full-time basis.
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Ag Economy Faces Uncertainty
By Tim Linden U ncertainty in several areas including world trade, tariffs and labor do pose some issues for the agricultural sector that does impact its attractiveness to lenders, according to a couple of financial experts interviewed by Western Grower & Shipper recently. “There is a lot going on that is impactful to agriculture,” said Dean Cardoza, executive vice president of Bank of America, listing both tariffs and the global trade situation as concerns. Mark Littlefield, who wears the same title for Farm Credit West, added the uncertainty about the availability of labor is another negative factor for the ag sector. In fact, he said agriculture in general appears to be in an “off cycle” for the next 18 months. “We’ve got to see a little more certainty moving forward. It might be into 2020 before we have a better understanding of the trade wars.” Uncertainty is not a friend to the financial community as lenders of money favor stability over volatility. Though with that
said, both men noted that ag borrowers with a good financial story to tell will be able to find funds to finance their operations. Even though the Federal Reserve has been consistently raising interest rates for the past two years and three more hikes are expected in 2019, interest rates are still historically low. “Money is still cheap,” said Cardoza. “Historically anything under 10 percent is good. We have been spoiled for a long time with low interest rates.” Even with projected rate hikes going forward, he said the interest rate will still only be in the 4-5 percent range, which is still very good. Littlefield made the same point, noting in mid- September that even after the latest rate hike, 10-year money was still just over 3 percent. Consequently, he said it is currently an excellent time to invest capital in your operation if you have a good business reason to do so. When evaluating loan applications, the modern banker in the ag sector is very knowledgeable about the factors that play a role.
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