Odd Lots - Why Tomatoes Are the Most Expensive They've Been in Four Decades

Episode Date: June 11, 2026

In April, the price of tomatoes was around $2.69 per pound — the highest seen in some four decades. And tomatoes aren't the only food getting more expensive. From cauliflower to lettuce, fresh produce is spiking all over the place. So what's driving the price spike? And what can tomatoes teach us teach about America's political economy including changes in trade and tariffs? Our guest today is Jacob Krempel, senior vice president of procurement and merchandising at the wholesale food distributor Baldor, and an expert in securing fresh produce. We talk to him about where America's tomato supply actually comes from, why consumers are paying more and more, how restaurants navigate price fluctuations, and the influx of novel new tomato varieties. Read more:The Recipe for a Power Restaurant Has ChangedThe Latest Snack Innovations Are Basically Just Creamsicles and Chex Mix Only Bloomberg - Business News, Stock Markets, Finance, Breaking & World News subscribers can get the Odd Lots newsletter in their inbox each week, plus unlimited access to the site and app. Subscribe at  bloomberg.com/subscriptions/oddlots Subscribe to the Odd Lots NewsletterJoin the conversation: discord.gg/oddlotsSee omnystudio.com/listener for privacy information.

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Bloomberg Audio Studios. Podcasts Radio News. Hello and welcome to another episode of the Odd Lots podcast. I'm Tracy Allaway. And I'm Joe Wisenthall. Joe, I know you love tomatoes. I love tomatoes. Oh, my God.

I love tomatoes. I love tomatoes so much. This is the episode, Joe, talking about how he loves tomatoes. Well, there's a funny one because, like, this is a you episode. You know, you're like, oh, let's do a tomato episode, which I'm glad you did. Because I love tomatoes so much. But you're going to make it your episode, aren't you?

But it's not like, but I don't know anything about tomatoes. I just love eating them. Like when I was a kid, like growing up in like Ex-Urben, Illinois, you know, I had terrible tomatoes growing up. So I hated tomatoes. From the supermarket? Right, okay. So I thought tomatoes are like the worst vegetable on the planet.

Well, they're not. Well, are you going to correct yourself and say they're not a vegetable? They're 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, no. 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, 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 have 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. 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. 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, like, 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, brandy wine, 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? I might. Okay, well, I am very happy to say that we do in fact have the perfect guest.

We're going to be speaking with Jacob Kremple. He is the SVP of procurement and merchandising over at Baldor specialty. So thank you so much for coming on all thoughts. Yeah, absolutely. Very excited to be here. I have quite a few friends that are flabbergasted that I get to be on odd lots of all things. I'm excited to talk to Mado. This is the perfect guest for the perfect moment.

Can you tell us what Baldur actually does? Yeah, so Baldur 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 makes sense. That's actually how you get Boudor, 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, 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, like, 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 with Bell door 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 it, Beldor? Yeah, we sell just about anybody, right? But I think we've made our bread and butter as this, and I listen to your Cisco episode, right, and broadliners that you were talking about on that podcast. 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 in our job, is to build a curated assortment of maybe 7,500 skews versus the Cisco carrying 20,000 plus. Right. 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 of tomatoes, like some of the ones that I brought to that. And what's the mix in terms of restaurants versus grocery stores or restaurants versus whatever else? Yeah, so we're about 70%, a little bit more in restaurants.

Okay. 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 Caprazi salad. And so I need some really good tomatoes. Do I call you up and I ask you specifically to source tomatoes for the sex?

or do you have like a catalog that I start flipping through? Yeah. So you go to about or food.com, right? And you go on to 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 caprazy salad. What do you think will work? 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 Caprazi, what would you suggest, right? And so between that high touch white glove service that our sales teams provides, as well as our merchandising expertise and storytelling on the website that we love to do, we're really able to maybe bring that picture full circle a little bit better than maybe some others out there to really allow you to tell that story on your menu. So I don't really know that much about the restaurant industry, but I read Kitchen Confidential. And there in that book, Anthony Burdane talks a lot about, like, you know, who play off the suppliers.

He's like, oh, this guy could get me this fish at this price. What can you do? But this strikes me very relevant in the time of high price volatility, which we've particularly seen over the last several years. Talk about the duration of 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.

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? Okay. 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. 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 you get there the next morning if they are? 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 and acreage grown and the production out of that acreage. that you see very wild swings in markets all the time, right?

Like tomatoes was the last thing to pop. Yeah. 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 Hazz avocado board email distribution list. 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 like somehow I got automatically signed up to this thing. Prices of tomatoes. There was actually a Bloomberg piece just yesterday. Prices up 40% from a year ago. Let's decompose the price of a tomato. So I buy a tomato and it's 40% more. Like, you know, how much of that is transport? How much of that is? How much. 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 swing 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 like 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, right? So you're talking fertilizer, seed, labor, water, the production costs run their facility, the energy, and the trucking. 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. The way that market works is then usually typically they're going to 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 prices,

going rate for what a wholesale tomato should be, that's what we're going to sell the rest of the 30% at, right? Okay. 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 grocery is 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 going to be growing tomatoes in Florida. We'll get to the greenhouse conversation a little bit. Yeah. Okay.

Right. But your traditional field tomatoes are going to be grown in Florida and in Mexico. And you think of, okay, 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 U.S. 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-nafter 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 of the globalization of produce. And we talk about flavor and quality. It's a very interesting story as well. So there are two freezes that happened in Florida this winter. That took 80% of the crop in Florida out completely. Blumes 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, you know, 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 segment in 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 three to four percent. It doesn't sound like a lot. But when they're supplying 70 percent of the U.S.

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% in change, that was implemented back in July of last year. So it's a long history between Florida growers and Mexico growers about the price of tomatoes and what a fair cost to grow actually is. And in a lot of accusations of dumping by Mexican growers into the U.S. So again, you think, you know, NAFTA in the mid-90s and the start of more free trade, that's when Mexico, you think a Sinaloa, Sonora, Halisco, those are amazing growing regions with a ton of land that they had available that had a lot less chance of a freeze like Florida does. Right.

Right. And so once they were already growing tomatoes for the U.S. market, or about 20 percent then, but they started to really invest in growing much more down there for the U.S. market once trade became a lot more predictable. When that happened, they also started getting into Shade House or green. greenhouse, right? So there's, shade house is basically like netting that you would put over a massive tomato field. You think of these like vines of tomatoes, acres of fields that are covered by netting. And that sort of helps protect from the sun, but also from bugs as well. And you see that 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. So they evolved into shade house, and then you got into greenhouse, which was like perfect growing conditions. They took the technology they were using in Canada in the Leamington area to do all the snacking tomatoes and things that were starting to grow and be a bigger thing. Took that down south into Mexico, started building these big greenhouses so they could get year-round production down there as well. And between those two, they're producing a significant amount more per acre than maybe a

traditional field-grown tomato would be, right? So in the 90s and into the 2000s, there were accusations by Florida growers of dumping by Mexico growers. There was, the Mexico defense was our cost of reduces lower. We have lower labor costs. We're getting better yields. So this isn't actually something that like we're economically selling lower in our home country versus you or not. I think there's truth on both sides to that for sure.

But we had these suspension agreements in place that had floors on tomato pricing that was allowed to be charged in the U.S. from Mexico growers. That changed last year in July when the U.S. government reopened the case and put the anti-dumping tariff. on Mexico. And that change created more uncertainty than maybe the floor would have under the old suspension agreements that were in place. So between those two things, I think it was a little bit of a perfect storm of you decimated the Florida crop. Mexico didn't have a ton of extra production left available. And you see this crazy spike where a case of tomatoes on average went from in April, much closer to the five-year average to May was 65 bucks a case on average for the whole month and very high.

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So in June, we're back to the five-year average already. It's, yeah, towards the end of May, end of June, it started to drop again. But this is where you get into the retail component. Everybody says retailers, they go, they take their prices up like a rocket and down like a feather. And so retailers will use this as an opportunity to see, is there a new price floor that they're happy with where maybe I'm going to charge a consumer a little bit more than I traditionally used to when these markets are this cheap because the customer's still going to pay

it might not be $269 a tomato, but maybe $1.99 a tomato when I used to have to go to $1.49, right? If you think a grocery retail economics has changed significantly over the last 15 years. So if you think of like how much home delivery or click and collect like pick up at the store, they're much more advertising and marketing companies now where they're selling customer data to their suppliers about what are customers actually purchasing or not. All these things cost money for them to stand up and run, right? And so I think what you're seeing is while grocery EBITDA is about the same, they're all still that, you know, traditionally was four to six. Now you might see the larger retailers in that still maybe four to six, five to seven range. As margin.

As margin. Okay. Yep. At the end of the day, when you take all their costs into account, right, they have a lot more expense on the books in ways that they didn't have before because they're having to pay for the additional labor and tech infrastructure and warehouses to be able to do the direct delivery, the more like Amazon style approach that everybody is used to of like, I want something today and I want it now. So just to be clear, the margins are stable because on the one side of the ledger, their costs have gone up, build out all this tech, but on the other side, they have data that they can sell and that is monetizable and they're roughly even out.

And that's how you get the stable margin. Yep. And they're also charging you a higher price of that as well, right? Like I think some of the consumer is definitely paying for some of their want of being able to get stuff more on demand. Right. Right. As well as the variety that they're expected to carry. A grocery store in the 70s, a produce department was probably 75 to 100 skews.

A grocery store today is 300 to 500 skews in their produce department. So they're expected to carry this high variety, all these unique things that comes with more shrink as well. Right. So they had to balance all of that. So with those economic changes for them, I do think what we're seeing is that retail are tending to hold on to prices longer than they traditionally would to try to help pay for some of this. And that's where you think a beef is also one of the things everybody's talking about, how crazy beef prices are. And they are insane.

I was at a restaurant the other weekend in the city. And they had a strip steak on the menu for like $120. Oh, my God. For a strip steak? I love a strip steak, but that's crazy. Yeah. But people are still paying that, which is crazy. Like the demand for beef is not slowing down, even though these prices are getting so high.

Yeah. But if you look at retail versus wholesale, the cutout, the difference between the retail price of beef and the wholesale price of beef is it the highest that it's ever been, both in a dollar perspective and a percent perspective. So go back 20 years, the difference between the price per pound of beef at wholesale and retail is probably 30 percent. Uh-huh. Now it's probably closer to 40, 45 percent. Really? Yeah. So, again, retailers are sort of like building on this momentum of this idea of like this, you know, lack of condition.

consumer knowledge of what the market really is. And that's something we can't play in the food service side of the business. We're up like a rocket down like a rock because our chefs and some of the buying teams that they have are much more knowledgeable about markets than the average consumer is. Interesting. So if they see high tomato prices in the headlines, they're not going to be fooled thinking that like, oh, it's going to go up even further from here. They're like, all right, the spike's done.

Why are you still charging me this amount? They're going to log on the USDA website and look at prices. They're going to be talking with some of our farmers. and growers about field projections as well with some of them. And so, yeah, it's a much more savvy buyer than maybe the traditional, you know, American retail consumer. It's interesting to think that, you know, one of the promises of the internet was like, oh, the customer is going to be able to, like, be so well informed, right? And they're going to know, like, they're going to be able to find the best price. And there probably is that to some extent, right, that there probably are

customers who are, like, extremely well informed and can find the best price. But the part that they didn't talk about was that the retailer would be very well informed about the customer and that they would be just as savvy and have all kinds of counter tactics to counter the customer's ability to learn about the price. Right. And not to get all antitrust, but if the customer has limited options for buying tomatoes, it's not like you can go into a supermarket armed with your knowledge of the USDA website and start negotiating. Although that would be fun. I can't say I haven't tried that before. It doesn't work. Oh, interesting. All right. I do complain to the head produce clerk at our store every once in a while about the prices.

I know the real price of this. Like, come on, guys. What's the deal with disease in tomatoes? Because I see that mentioned a little bit in relation to Mexico. And my assumption nowadays is that basically every major crop in the world is dealing with, like, some sort of very troublesome disease or pest or something like that. Is it the same for tomatoes? Yeah, for sure.

And I think that created some, I'd say, pre-freeze. impact in general on the tomato industry where acreage and production was probably slightly down overall, mostly in greenhouses. They were dealing with a couple different viruses that were sweeping through the more traditional greenhouse varieties of mostly your snacking tomatoes, right, that they were not used to and didn't really expect to have to deal with. And those viruses were decimating those those greenhouses where they'd have to tear everything out, soil included, and just replant and start everything from the beginning in these greenhouses. So So tomato pricing, especially on more of the snacking or high flavor variety things that you would see in a grocery store, have been pretty volatile for a while now because of this.

They've introduced some new varieties that are very promising and have slowed the impact of this already. But it's mother nature at the end of the day. Yeah. Right. And like it's a continually evolving mother nature that you're always going to be dealing with something new as a grower. So let's talk about the quote tomato praise because there isn't actually a. tomato price because there isn't actually at tomato. And like, we have one kind and here is a box. And I think there's a few different types of tomatoes just within this one box alone. So I sort of

a two-part question. The first part is how correlated are tomato prices? Like whether we're talking about like a New Jersey beefsteak tomato or one of these, like generally speaking, is there a sort of stable relationship between tomato prices? Or do you see like, you know, the big fat red ones might be pricing in a very different trajectory than say these multicolour snacking tomatoes. Yeah, they all interplay with each other a little bit. I would say you do have more complimentary or substitutable tomatoes, right? So if you think of like a round tomato, like your New New Jersey beefsteak and an aroma tomato. Yeah, the Roma. Those are pretty interchangeable. So in Florida, what happened was it was a huge wipeout of rounds. And so it created a lot of pressure on the Roma market

as well. And so you saw that explode. And then this one was so bad that anybody was trying to get any tomato they could get. So you did see it start to affect some of the more cherry tomatoes or vine-ripe tomatoes that you would see out there. I'd say in general there's some interplay. It all depends on, again, supply and demand. If there's not a ton of rounds to go around, then romas are going to get pushed up. If there's not a ton of romas to go around, then everybody's going to switch into the high flavor stuff. So then speak of the high flavor stuff, so it's like, you know, I'm addicted to them. My children really like them. Do you see at the firm level essentially a redistribution of acreage towards the high value, high margin stuff, such that

they're just not as a percent or just the whole like not growing as much of like the frankly like boring tomatoes period that like there is just less because I have to imagine the more margins, higher price for some of these that is like, well, why are we planting the cheap normie tomatoes? Yeah, I think cheap normy tomatoes. But I was a kid, we didn't know about that. We didn't know about these tomatoes. Yeah, exactly.

And that's sort of like the evolution of the tomato market as well is there's still a consumer for a basic round tomato or vine rife tomato aroma, right? And there's a use for that. You're going to put that on a sandwich or you're going to make a salsa out of it or something like that. Again, there's consumers that want that basic tomato, maybe the more mild flavor. That's going to be a guaranteed quality and look a certain way and always be the perfect round shape that when they're in their restaurant or their production facility, they're always going

to get the same yield out of it, right? What's interesting to me on the consumer side is definitely, yeah, the explosion of these flavored tomatoes. And I think what you're seeing here is that growers that might have grown traditionally cherry tomatoes or other type of tomato varieties are replacing them with these more sweeter varieties because they know that customers like these, the snacking tomatoes in vogue, right? People just eat these as a snack versus only on a salad or something like that. So what you're seeing is probably more a replacement of maybe some of the older varieties of these that don't drive as much flavor with the newer ones. Earlier, I went to look up tomato prices on the terminal, and I just realized there's a Japanese bank called Tomato Bank.

There's a Japanese bank called Tomato. I just learned that too. And it has an amazing logo. I would bank at Tomato Bank, just off the brand identity. What's the correlation between fresh tomato prices and canned tomato prices? If fresh ones are going up, would it be reasonable to assume that the canned ones are going to go up as well? No, they're completely different markets, I would say. Okay. Yeah. So a lot of your canned production type tomatoes are grown mostly in California. Different varieties, different subsets, different, completely different growing regions for the most part. They do grow some process stuff in Florida as well. But you would see maybe some pressure on that.

But again, they're very different supply chains in production. So those are also longer term contracts that producers put in place. So I think you see you see them able to cost control maybe a little bit tighter than the first. Russia industry can. So one of the, okay, so you talked about the weather as being a major disruptor, but we know, and this is something that else comes up, we know that another, well, there's actually two things that we talk about a lot on the podcast. One is the cardboard box that this set of tomatoes are in, but then also freight costs and that actual truck and diesel and other things.

We know that just trucking is on a big upsurge, particularly in like the last six months. Absolutely. What do you see at Bell door on the sort of pure logistics element? And how much would you say when I buy a little case of tomatoes, am I paying for the shipping component or the trucking component? For sure. This wouldn't be an odd lot podcast without talking about logistics, right? It's been rather extreme lately, obviously with oil prices going up and tightening availability within the trucking industry as well. If you think of some of the crackdown on immigration, sort of like truckers that are crossing the border from Mexico.

We are seeing the supply of trucks shrink a little bit as well. Those two things together have caused prices to explode, where a team drive, so two drivers on a truck so that you can alternate so you can get it from the west coast to the east coast and the shortest amount of time. So a team drive truck that we had run from Salinas, California, the veg capital, the salad bowl of America, right? Eight months ago might have been $10,000, $1,000 for that. We saw prices a couple of weeks ago as high as $16,000, which I have never seen in my whole. I grew up in this industry. My dad was a produce buyer. I grew up with him taking me out to fields and meeting with growers and seeing him be able to build those relationships and partnerships.

And that's what caught me interested in this industry was doing that with him. I've never in my whole career seen prices that high before. Wait, now I'm curious. Did you ever think about going into farming directly? No, I did work for a grower shipper for a couple years out of college, L&M in North Carolina, to get that experience on the grower's side and understand that. But no, my love was that sort of anytime my dad would go and meet with a grower, he was always talking about Kroger's customer and what he needed for the customer.

It wasn't what he needed for him as running this buying office. They had in Bureau of Beach, Florida that bought all the produce for East Coast and a lot of their imports. He was a buyer for Kroger. Yeah. Okay. Yep. So he ran their produce buying office. office that they had in in Florida that managed all the produce buying for the East Coast.

So, yeah, he'd take me out of school when I was in kindergarten on a Friday and we go to, you know, really sexy, amazing places like a Mockley, Florida or a multery, Georgia to go look and produce. We'd stop and play around a golf or go to a baseball game or some type of event on the way to make it interesting. That sounds really nice. Yeah. But I'd sit there and listen to him and everything was about the customer to him, right? And so, like, for him, he won if his customer won and if his grower won.

Right? And part of what attracted me to come to Baud War last year was this mindset about our had was the same thing. Like for me, it's all about making sure we can meet the need of our customer wherever that is, whether that's a commodity, Romaine Hart. You can get anywhere to a girl in Doug Tomato like I brought here that's unique to us and incredible flavor and just an amazing story of Aaron and his family and what they've done. So, you know, to answer your question, I always wanted to be able to, I don't know, build something to bring value to the customer, right? And for me, that was sort of following in his footsteps, I guess, a little bit in doing this. I want to ask about tomato strains, but before I do, I need to ask about something else we've been discussing on the podcast, which is fertilizer prices. So if there's one thing I know about tomatoes from growing them myself, they're heavy feeders, right? Like, they need a lot of biodegradable material off of which to actually grow and feed. Would you expect higher fertilizer costs in the future to start feeding into the retail price of tomatoes? Yeah, absolutely. As you think about contracting cycles within tomatoes, you know,

retailers will be renegotiating costs throughout the year depending on different growing regions, etc. Right now growers have been able to most of pre-bought, right, and especially the bigger ones. So their fertilizer costs is pretty locked in at this point. But what you're going to see over the next six months is that's going to start to evaporate. So at Baudor, our big contracting season is coming up towards the end of the summer where we try to lock with a lot of our growers to make sure we can get consistency in supply for our customers. Our growers are already talking about the cost of fertilizer with us. Yeah. And saying we've got you covered now, but come contracting for next year, this is something we definitely have to talk about. So I do expect it to

affect that price, but then it comes down to how much is, are we willing to take versus how much does retail have to pass on to a consumer. Oceaga, with four nights at Residence in downtown Montreal, flights from Porter Airlines, two weekend gold tickets, and $1,000 of cash. Please love for. Lourke, somber, 21 pilots, and more. Download IHeart Radio. Listen to IHeart new music for 10 minutes and enter to win. Osiaga, 26.

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Listen to the big take from Bloomberg News every weekday afternoon on the IHeart radio app, Apple Podcasts, or wherever you get your podcasts. So you mentioned that this box of tomatoes we have in front of us, It's a company called Girl and Doug, which I hadn't heard of. Yeah. And you said they have an incredible story. I'm on their website right now, and I'm already learning about a bunch of tomato. Are they varietals?

Varieties. Varieties. There's a baby Yoda tomato. Do you know that? Well, this is part of the fun of buying your seeds every year. A cider pop tomato, a firebird tomato. I knew about the sun gold, an atomic tomato. When you say, okay, they have this amazing story.

Like, how does a company become like they break through in the tomato market and, like, such that they're like, you know, someone might go to their website. Like, what is that story and, like, how do they have all these, like, new exciting varietals? When did this become a thing? Yeah, I'd say probably over the last, like, 15 years or so, you've seen a big explosion in the snacking tomato category. And a lot of that was driven by greenhouse production. Oh, good. So the ability to grow perfectly indoors with the exact right temperature, humidity, water control. I'm sure Tracy, with your home beds, you would love to have that, right? Oh, my God. If I could get an irrigation system going, that would be a game changer.

It allows these growers to grow seed varieties. It might be a little bit more challenging outdoors. Ah. Right. And if you think of, especially Aaron and Girl and Doug, these varieties that they have in here, these are highly susceptible to disease. Now, he grows still outdoors, shade house and a little bit of greenhouse. But they're unique.

They take a little extra TLC, I would say, than a traditional, you know, round tomato. And so with the explosion of greenhouse production, which really started in Holland, over there, they're probably 15, 20 years ahead of us. They were growing some of these really cool, unique varieties over there. The seed companies over there are very innovative. And what you saw was U.S. companies understanding this snacking tomato or Canadian companies, really understanding the snacking tomato category was a big opportunity, started partnering with a lot of these seed companies over there to trial new things. But how do these new varieties, because there are so many different tomato varieties, right? And they, a lot of them have very amusing names like cream sausage or Stripe Tiger or or Baby Yoda.

How do they actually enter, I guess, like the customers, consciousness such that restaurants or supermarkets are asking for these particular varieties or such that you're convincing them that this is what they need? Yeah, I'd say it's almost the other way around. Okay. I would say that it's really the restaurants and then the retailers that are pushing the demand towards the consumer of what they want to buy. I really do think a lot of it starts with restaurants.

And if you see something specific on a menu in a restaurant and you try it, you're like, oh my gosh, I want to try this at home. Right. And so like we view that very much as our wheelhouse at Baldor is our ability to go and find things like this that you'll want to call this a girl in Doug tomato medley on the menu because, you know, it's something unique that not a lot of your competitors are going to have. And it's this cool story that if a customer asks that hopefully you've talked to your weight staff and they can educate the consumer a little bit about the story of,

of a girl in Doug, right? And so I think it's less about what the consumer thinks they want or that they've heard about this type of thing. I think it's more they've seen it somewhere and tried it. And then a lot of these bigger tomato companies, Sunset, Master Nardi Produce is a big partner of ours. You know, they're one of the most innovative when it comes to seed varieties. They have acres of testing greenhouses where they're consistently testing new varieties to see what will be a good mix of flavor and yield and something that's unique or colored differently that they think would be a hit with consumers, and then they're launching it. And just like anything, it comes down to marketing and advertising and getting it in the customer's hand to be able to drive that demand.

So I've been to one of these multi-acre indoor tomato greenhouses in Lamington, Ontario. And I was there on a very sort of like chilly, drizzly October day. And inside the greenhouse, it felt like the most beautiful spring day, like the dream spring day. And so, like, it was amazing. But all I could think about was like, this must just cost a fortune in electricity cost to maintain this incredible climate. And the light was so beautiful, obviously. And it's because I believe they have a natural gas pipeline that, like, feeds a lot of this from the U.S. goes under the Great Lakes or whatever or through and then powers this.

What about like if we're talking about greenhouse grown tomatoes and the recreation of a beautiful spring day, how much is it like variability in electricity costs or energy costs are going to go and. into that tomato. Yeah, I mean, it all plays a factor, right, Joe. And I think with these greenhouses, energy is a huge component. But I would say still just as much, it's the fertilizer and it's a labor and the production costs as well. So in general, if you think of like tomato markets now, right, that were so high, the growers were not the ones making and killing, right? If you think about, they lost 80% of their crop. Yeah. They're selling a tomato for 100 bucks a case. Like, this is a razor thin margin business for our farmers where, you know, you're, you know, you're, you're

going to have great years and you're going to have bad years. And a lot of it comes down to your input costs and then what's the USDA going rate for a tomato based on supply and demand. And so right now is a tough time for these guys because these input cost pressures are so high. And there's a lot of pressure from our side to try to keep costs down as much as possible. It's that yin and yang between a customer and a supplier of, you know, I want to try to keep my costs as competitive as possible. They still need to make a good return. We've got to figure out how to do that equally with each other. So given razor-thin margins for, you know, places like restaurants, I assume that if they're serving a salad that is mostly tomatoes, I'm going to go back to the Caprazi salad example. Although I guess there's mozzarella or which cheese do you use for Caprazi?

Buffalo. Buffalo, yeah. So I guess that's probably going up as well. Anyway, if the prime component of a particular dish is spiking, basically, and we seem to be experiencing more spikes overall in recent years, right? We have beef, we have eggs. You mentioned romaine lettuce, avocados potentially. How are restaurants actually managing their menu prices? Because I assume they need to know, like, if they come up with a dish, they're going to be able to sell it for a reasonable margin in the future.

But then if you have such volatility in ingredient prices, that seems really, really difficult to predict. Oh, absolutely it is. But I think if you take a step back a bit, on the restaurant side, the cost of food is about 30%. of their overall cost, right? If you go back to our retail example, a retailer, 75% of their cost, 70 to 75% of their cost is the cost of the actual food. Oh. Right? So let's take a burger in New York. 2019, it was probably $14, 15 bucks on the menu. Today, a good burger on the menu is $22 or $23. If you look at the actual food cost of that burger, it's probably gone from maybe $350 to $5.50.

That's a $2 increase. That's huge. That's substantial. right? Like food costs are definitely up significantly, but that's not the full 14 to 22 to 23. We don't talk about it enough, but the other input costs of running a restaurant are up significantly as well, whether it's labor, rent, utilities, that type of stuff as well. Like those pressures, you're seeing just as much on the cost of the food in a restaurant are pushing their pricing up as much as food is, right? And so, yeah, for a chef, like their goal is to be as consistent in their food costs as possible. I think that's why a lot of them tend to have that, like, I want you to price me daily or weekly and I want to shop you around, and I don't want to commit to volume with you

type of aspect that we have from some partners. Others go the other way where they want to be able to partner. But you have this sort of like dichotomy in the industry of, you know, different ways of viewing how they keep their food costs honest, right, with their distributor. This makes a lot of sense to me. So the restaurant is fine with very highly variable pricing or doesn't simply because, or they'll take that risk of not locking in simply because so much of their costs are not the food component. And so whereas for the grocery store or some other retailer, they're the ones because their end prices are so correlated to the underlying price, they would be the ones that would care more about longer duration and locking that in.

For sure. And in a restaurant, they want to keep their food costs as low as possible. Sure. And I like their goal is to keep it as absolutely low as possible. So most chefs want to continue to shop around and not make some of those commitments. And in case the market drops out, you know, the tomatoes, you know, were super high in April, May, and they're coming down in June. But you go back to November, December. They were 20, 30 percent below the five-year average, right?

And so, like, do I want to lock to get some guarantee of price? And my old days when I was at Hello Fresh before coming to Boutor, a meal kit delivery company, we had a cost per meal that we had to hit, I wanted consistency in pricing. I was trying to lock as long as possible. For a lot of chefs, I think some of them want to be able to play that. that variability and up and down so that they can take advantage of some of the cheaper opportunities to keep their food costs lower so they can eke out a couple more dollars here and there. And they probably think they net out at the end and a net win. But in general, yeah, like food cost is a good component of a restaurant, but there's a lot more

that goes into that versus like a retailer, a food service distributor. Most of our cost is the cost of the food. So when that cost changes, it's near term much more impactful on us for sure. But that's our job as Baudors to help direct our customer, right? Like we want to make sure they know where markets are heading and what we're able to do to help support them the best that we possibly can. With, you know, we carry 80 different tomato skews at a given time, right? So we want to help push you towards the things that are, if you're looking for price, that's the best optimal price. But it's also my job to source multiple regions and find the right partners and ones that, you know, when tomato markets get costly, that they're not just going to pull active God on us and raise the price.

significantly that I can still get my contract at a good value. But then I'm also there for them when the markets are super cheap that I'm pumping the volume through them and supporting them, right? It's this give and take relationship. We both have to win. You know, negotiations and joint partnerships really are win-win. And that's really what my team's job is, is to find a way to make sure things are a win-win. And we're providing as much value for our end customer as possible by making sure that our suppliers are well taken care of as well. Okay. Well, speaking of direction, What's your favorite tomato variety? What should we be checking out this summer?

Let's say price is irrelevant. Price is irrelevant. Yeah, I think when tomato prices are high, any of these prices are high, what I would tell any average retail consumer is like, go outside your comfort zone. There's so much good varietal produce out there, whether it's in your local farmer's market or even in your grocery store now. I'd say mass availability, if you're looking for something in the store,

sunset, Master Nardi flavor bombs, incredible. They've got a line of bombs. They're four or five different varieties that they grow. But there's the ones that come in like little packets. Yeah, they're flat little clamshells almost like these berries are, right? Oh, yeah. And usually still on the vine. Those are incredible.

And some of the top restaurants in New York are using them for like pasta sauce and different things like that. It is a main ingredient because of flavor profile on those is just so perfect. I'd say for our restaurant consumer or somebody that's not in retail, it's these girl and dug tomatoes that I brought for you guys. These varieties that they have in this medley are 100% grown for flavor. They're really good. Yeah. They're really good. We were eating some of them before we started recording, and we can attest.

They're delicious. So Aaron, his parents had a floral shop. They retired bought a produce farm of all things, and he sort of took it over after a while and started growing some of the craziest cool varieties of anything, whether it was microgreens to tomatoes to whatever, to sell to chefs. So he's a very like chef-focused grower, right? And so he started with, like, building some relationships with chefs directly in the city and literally FedExing from San Diego here. Some of those chefs helped connect him without or so that we could get him through our distribution where this might last a little bit better than through FedEx, right?

But these tomatoes that he has in the box here, these varieties, again, they're specifically bred for flavor. They're a little bit more susceptible to disease, et cetera, because of that. But to make sure he gets the flavor in them, he'll go through and coal out at least a third of the flowers. Wow. when they start to produce to make sure that the right nutrients get into each individual tomato to make sure that the flavor is there when it gets to the end consumer. Yeah, what is the actual process of like, you know what? We want an even sweeter tomato.

So it's like, okay, some new dimension flavor. Is that happening by the shift in nutrient delivery? Is it happening through some genetic engineering? It did happen through some sort of like grafting. Like, where in the sort of like the R&D of tomato is. So is it happening where these new flavors are coming from? Yeah. So it's almost all crossbreeding, right?

And it's done at the mostly at the seed company level. Okay. So a lot of these grows will partner with specific seed companies where they find good relationships or that they grow, you know, they're developing seeds in a way that makes sense to them and their business model and the type of flavor that they're looking for, right? And so a lot of these guys will work specifically with them and test different seed varieties and give them feedback to the seed company to be able to, you know, well, this didn't have as much yield as we hoped it would, or the flavor on this was not sweet enough, or there's too much acid in this, right?

And so then the seed company will go back and do some more crossbreeding and try a new variety that they'll put out there, right? And then when they find the ones that they love, they're going to go and get a contract and get the seed in and start growing. So it's a multi-year process. It's actually pretty fascinating. If you go to Sunset, Paul and that team there, if you go to there, there are R&D facility where they're growing hundreds of different varieties at a time. It's really fascinating to go through and see some of the cool stuff that they're doing. Tomatoes that are like completely black to, you know, all the different striping, like on the firebird that Aaron has here, right? Like, they're unique.

Some tomatoes are beautiful. Yeah. Like bumblebees or. Social media and Instagram specifically must have played a significant role in the last 10, 15 years of the tomato market, right? Like. I think in food in general, right? Like food trends pop from social media now. Yeah.

Or there was, I don't know, that pink sauce stuff years ago to, yeah, snacking tomatoes, right? Like, influencers do. What was the pink sauce? It was like a recipe that went viral. It was basically a tomato sauce with like lots of cream in it or something. I can't remember what made it pink. I did try it. It was during like COVID times, I think.

Yeah. I remember that one. But yeah, we're constantly looking at what food trends are on social media as well, like for us to be relevant for our chefs to make sure that we can meet them with what a consumer might be looking for when they come and take. their restaurant for either a special or something always on the menu. So you brought us some strawberries as well, which is actually something that I am also planning on planting in my new raised beds.

I used to have some in my old ones. And there is nothing like a fresh, like farm-grown strawberry versus what you buy at a mediocre supermarket. Why do they taste so much better than like what I would get at no shade to Walmart, but at Walmart? Pretty much any other retailer as well. Yeah, I think it comes down to see genetics, right? So strawberries are extremely challenging to grow, and they're extremely perishable, right?

The skin is super soft. You have to hand-place them in every till that you produce. And also, they taste so good that literally every other creature on earth wants to eat them, whether it's like birds or slugs or deer or rabbits or whatever. Or maybe your dog as well. Or my dog, yeah. But I think in the 60s and 70s and continued through to today, the, the demand. domestic supply chain of strawberries. A lot of the seed varieties were coming from

partnerships with universities. So like UC Davis, University of Florida for Florida grown berries, where customers love berries. So everybody wants berries all the time year round. They didn't want it to be a seasonal thing anymore. To do that, you had to grow varieties that were a little bit more firmer. It could take the ride on a truck from California to New York for five days and survive. Right. And so, Yeah, a lot of the varieties that you see in your, you know, traditional shipper label products are these, these varieties that are in partnership with with the universities where a lot of it was functional, not flavorful. We've gone this whole conversation without bringing up the phrase cold chain. And you mentioned Hunt's point. And I'm just curious, this, we did an episode on this a few years ago. Is the New York City market distinctly operationally difficult to get from, you know, farm to store in a way that's different from other markets due to the sort of the geographic reality

of New York City. Yeah, I'd say it's definitely a lot more expensive. Nobody wants to take a truck across the George Washington Bridge to the Bronx, right? So I've worked at, you know, major retailers that are national. I've worked at a meal delivery company where we had to ship product through the mail in FedEx or UPS for one or two days. And now I've worked in one of the most competitive food service markets in the world with New York City and in Boston, D.C. Philly where we service as well. It's challenging everywhere, Joe.

Like, it's a game of perfection, right? And a lot of it is having to keep, you know, this berry ideally would be at a perfect 33 to 34 degrees from the minute it's put on a truck to the minute that it's served on a customer's plate. Like, that's really the ideal temperature to keep this berry absolutely perfect, especially something like a sweetest batch that I have here that is a more flavorful variety that's going to go bad faster than maybe something more traditional, right? This tomato, ideally you're sitting between 48 to 52 degrees for like perfection. I've got to ride both of these on the same truck to a customer. How do I get that done? Right? So like this is a constant challenge that we have as an industry is making sure you maintain that that cold

supply chain that I need, you know, 32 to 34 for this. Yeah. I need, you know, 32 to 34 for my protein and my dairy, but I need 48 to 50 for a tomato or an onion, right? All right, Jacob, that was amazing. Yeah, that was amazing. We had a lot of fun talking about tomatoes and also the food distribution business. Thank you so much for coming on all thoughts. Yeah, thank you guys. And thank you for the tomato.

And strawberry. And strawberry. So that was fascinating, Joe. That was great. And we have all this fresh produce that we now get to eat. A couple of things stood out for me. So one, the idea of, I guess, the infirmative. informationally advantaged, you know, chef or restaurant buyer versus the informationally

disadvantaged retail customer. Yeah. And the idea that like supermarkets can push through additional price increases if this goes back to the conversation we had with that baker in Chicago a while ago, if all the retail consumer is seeing in the headlines is like tomato prices are high, tomato prices are high, customers are going to accept higher tomato prices. Yeah, this idea that the end retailer can actually push price. and then not take it down.

It's not just a myth, right? It's not just sort of like that is like a real phenomenon observed in the industry. And of course, in theory, some tomato customers could do the homework and like find out. But like no, no one is time for that. No, but like no one's going to have time to do that and actually like price comparison shop. Like yes, of course, the information is all theoretically out there. But the restaurant does that professionally. I don't have time to do that.

So of course they're going to have like an edge. over me in terms of like, yeah, like, I just, I have other things to do. Just outsource it by going to eat at the restaurant exclusively. Just don't go to the grocery store. That's right. You'll save on input costs, not on labor costs, though. No, but that was a great conversation. I'm just fascinated by, like, also the sheer explosion of varieties.

And just the fact that, again, like, the idea of, like, a mass consumer base of snacking tomato eaters, that's, like, a fairly novel thing. Like a lot of, like, my kids, like, really, like, snacking on tomatoes. I don't think, like, when I was a kid, I'm sure that market of, like, children, let alone adults who, like, thought about, like, these are the good tomato. And it was like, I never heard. It was just, when I was a kid, it was add tomato. And it was just a red thing that was, like, the size of your fist.

And that is obviously, like, a change in the fundamental tomato market that is relatively novel. I never thought about it. But I don't remember eating tiny tomatoes when I was a kid either. So, yeah. It must be new. But, you know, also, like, your question about Instagram and that impact on food, like, I think that is definitely a part of it. The color, yeah, like the idea of a black tomato. That would be cool to take a picture of. One of my favorite tomato varieties is called Ethiopian black, but they're not even actually black. So I don't know. I think they're actually from Ukraine.

The Ethiopian black tomato from Ukraine. They're kind of like striped. They're darker and striped, but you can get like indigo tomatoes that are actually. Yeah. Okay. We should stop here. because we're just going to start talking about tomato varieties. Those are nice-looking tomatoes. Yeah, they're really good. You'll get some. Yeah. Hopefully, if my tomatoes survive the next week of colder weather.

Anyway, shall we leave it there? Let's leave it there. This has been another episode of the Odd Thoughts podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway. And I'm Joe Wisenthall. You can follow me at the stalwart. Follow our producers, Carmen Rodriguez, at Carmen Armid.

Dashel Bennett at Dashbot. Kale Brooks and Kevin Lazzano at Kevin Lloyd Lazzano. And for more Odd Lod's content, go to blue. Bloomberg.com slash oddlots, we have a daily newsletter and all of our episodes. And you can chat about all of these topics 24-7 in our Discord. Discord.g.g. slash oddlots. And if you enjoy Oddlots, if you like it when we go on and on and on about how good tomatoes actually are, then please leave us a positive review on your favorite podcast platform.

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