Despite a rebounding business environment, Los Angeles’ produce industry faces many of the same challenges as its counterparts across the country.
Originally printed in the October 2022 issue of Produce Business.
Los Angeles’ fascinating charm is due in considerable part to diversity. This trait extends in every way to the sprawling city’s produce industry.
With diversity comes many means of receiving, processing, packing, selling and delivering a long inventory of fresh fruits and vegetables. Customers’ culinary tastes and expectations represent most of the world’s cultures and ethnic groups.
“We sell to everyone,” says Jesse Garcia, LA Produce Distributors’ co-owner and tropicals buyer. These include “a few Asian stores and a lot of Hispanics, and the chains that sell to Anglos. We sell to everybody.”
“In Los Angeles, there is a place for everyone,” he adds. “There’s always a nice business. You have to diversify, bob and weave. It’s completely different from when I got in the business almost 40 years ago.”
But, Garcia specifies, “you’ve got to import or you’re out of the game. You have to compete with the big (tropical fruit suppliers). Even if you buy from them, they will sell to your customers, on a lot of different commodities.”
The ethnic diversity also plays out in supplying foodservice. “In LA, we have all sorts of ethnic groups,” says Francisco Clouthier, owner of Maui Fresh International LLC. His LA-based company focuses on serving foodservice and independent retailers, although they do some national chain business.
Los Angeles’ independent retailers “keep growing and are very good business at the moment,” Clouthier says. “They did well in the pandemic, and they’ve kept their momentum.”
Furthermore, the foodservice business is “really good now. There is still room to grow. They are not 100 percent (back from the pandemic) but overall, they’re doing very well,” Clouthier says. “It has been a hard, challenging year, but we’re back in full swing” after the COVID pandemic.
Carrie LaLonde, chief executive of Valley Fruit and Produce, also feels LA’s foodservice sector has “rebounded significantly despite consumer pricing pressure.”
She points to this summer’s record high of almost 2,000 registered attendees at the International Fresh Produce Association’s foodservice conference in Monterey as a sign of foodservice strength.
“That was very encouraging, as the growth we have experienced among our foodservice and export customer base,” LaLonde continues. “At the conference, attendees reflected strength, energy, and passion in foodservice, and operators look forward to future growth, as consumers reflect increasing demand for fresh produce.”
LaLonde describes Valley Fruit and Produce as the Los Angeles Wholesale Produce Market’s largest wholesaler. This considerable feat comes from diverse sales, with regional and national chain business, as well as independent stores. Valley’s foodservice trade is with local, regional and national foodservice distributors, and institutional sales.
Valley, which is 102 years old, has weekly distribution throughout California with lanes to Nevada, Arizona, Utah and Idaho. Valley also delivers by sea and air to a variety of export customers.
Despite diversity, Los Angeles’ produce industry works from the same base and faces many of the same challenges. Meeting the same hurdles differently is another study in this business.
For Maui, getting drivers and transportation remains an issue. “We had employment issues, with not enough labor, but we got past that a month ago,” Clouthier says.
While business for LA Produce Distributors has been very good, Garcia indicates margins have been tough. LA Produce “cut a few expenses and try to get margins where we can. The retailers can charge more, but they don’t want to pay more.”
Los Angeles’ independent retailers are a strong part of the region’s fresh produce market.
As a direct importer of pineapples and mangos, Garcia had logistical issues with ports during the pandemic.
Valley Produce stopped its direct import program due to pandemic-generated supply chain challenges, but is re-launching this program including its U.S. Customs Trade Partnership Against Terrorism (CTPAT) certification. LaLonde adds. “Our export channel continues to grow, expanding in regional outreach to other regions that are impacted by production upheavals due to weather that impact local production. Consumers still need to eat when their local production is affected.”
Maui Fresh uses trucks to deliver 90% of its sales volume. With this, diesel price increases are a concern.
LaLonde notes the entire produce industry confronts high labor costs. At Valley, “the team has managed to fill its labor needs, but our team is always looking for great people who are passionate about produce, committed to teamwork and accountable for their performance.”
Samit “Sam” Thakker owns Daaks International, Inc., based in Granada Hills, CA. Daaks is a grower of exotic fruits and vegetables, and Thakker sources from southern California, Mexico and Central America. And Thakker doesn’t hide his grave concerns about the produce business, and the future of this country and its agricultural base.
As an example, his date production is in Riverside, CA, but he says the cost of doing business in California is so high that he can’t compete with dates grown in Jordan and Israel, then transported to Los Angeles.
It matters not that regulations, wages and other fruit and vegetable production costs in California far outweigh those of growers in Texas, Florida — or offshore. Thakker’s retail customers are driven in a highly competitive environment that doesn’t allow a sensitivity to growers’ competitive situations.
Thakker can increase output to sustain lower margins or pare back to reduce risks. He has cut his inventory from as many as 120 SKUs to 70.
Furthermore, he notes labor costs are not simply about the hourly rate, which is the highest ever in the produce industry. Prices paid by retailers do not allow growers to build in margins to pay for labor costs. “Our breakeven point is higher than what consumers can pay,” Thakker says.
“There is a storm coming for the produce industry. Farmers will have to quit. There is no parity anymore. There is too much free money out there. There is no more incentive for employees to work,” Thakker says.
By paying taxes and conforming with countless state and federal regulations imposed on Daaks, he is facing hourly labor rates of $18, while competitors down the street manage to pay $10. Many California employees work the system to have a low enough income to receive government supplemental income. Meanwhile, the same workers want to be paid in cash, or some other means of value. Thakker refuses to participate in these, or other, illegal activities.
“How can business owners like me survive? How much more can consumers pay for gas and when they go into stores?”
While the pandemic has passed, that crisis remains an excuse by some to continue to gouge on service prices.
And then come inequitable regulations and regulators. Government food safety inspectors driving to Daaks pass a filthy taco food stand to investigate how recently Thakker’s refrigeration systems were checked. He wonders why it should be his responsibility to remind public servants of their sworn duties.
Thakker, who emigrated from India, worked his way up in American society, earning a master’s degree and doctorate here. Now he sees foreign students coming to America for a strong education, then they return to make their countries great.
“Clearly, I don’t see a future here. The nation can’t last without a vision,” Thakker declares. “I am worried about my future. I am worried about my kids’ future.”
ON THE BRIGHTER SIDE…
Clouthier, of Maui Fresh, says business has been good this year. “We are set up with a terminal market position and a warehouse, where we do consolidation and deliveries, so, we offer different services. Business is coming back into the terminal, market, and people buy daily. Before, they only bought shorts due to employee and transportation challenges.”
“With any shortage in the market, our business has done better. We are set up to provide services. On the market we have nine doors, and we have a 90,000 square foot warehouse off the market.”
Similarly, Valley Fruit has migrated “off the market,” operating, in proximity, three other warehouses. LaLonde says these operations include a central receiving warehouse, an export division, and a fresh cut division, where equipment for cutting, bagging and vacuum packing specializes in a wide variety of product and pack sizes to meet retail and foodservice customers.
Valley has changed its approach to meeting customer demand, expanding its product lines in organic, value-added and specialties. With rising labor costs, there is increasing demand of value-added product and an increase in demand for daily deliveries to reduce customer shrink. “Most of our customers remark that they didn’t know how many products Valley carries, so our approach to customers and our outfacing strategy has changed to targeted product lines and improved customer outreach to ensure customers understand all that is available within Valley’s offerings.”
LaLonde says one thing her sales staff does not want to hear is the customer comment: ‘We didn’t know you sold that!’ “The question is how we more thoroughly communicate the opportunities to our customer base in real time.”
“It’s a great time to be in the produce industry,” LaLonde said. “Consumer health consciousness and increasing demand for access to flavorful fruits and vegetables has never been higher. It is our job to bridge the gap between our grower partners’ programs and the customer channels we service.”