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

Summary

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

Hosts: Tracy Alloway & Joe Weisenthal
Guest: Jacob Kremple, SVP of Procurement and Merchandising, Baldor Specialty Foods
Date: June 11, 2026

---

Episode Overview

This episode dives deep into the recent surge in tomato prices—up to levels not seen in 40 years—and unpacks the complex factors behind the spike. Tracy and Joe, with expert guest Jacob Kremple, discuss not only the economics driving up tomato costs but also the evolving market for specialty tomatoes, logistics challenges, the globalization of produce, the role of weather, changes in the retail landscape, and why today's tomatoes are increasingly unique.

---

Key Discussion Points & Insights

1. Tomato Price Explosion: The Data and What’s Driving It

• Price Surge Context:
  • Tomato prices saw around a 40% increase year-over-year.
  • "There are a lot of tomato headlines... at a record $2.69 a pound." – Tracy Alloway [04:00]
  • Joe is “addicted” and “price insensitive”—showing the inelasticity of demand for some.
• Underlying Causes:
  • Weather-Driven Loss: Two severe freezes in Florida wiped out roughly 80% of the state’s winter crop.
    • “There are two freezes that happened in Florida this winter that took 80% of the crop… Over $150 million worth of tomatoes lost.” – Jacob Kremple [14:18]
  • Reduced Mexican Supply:
    • Mexico provides about 70% of US winter tomatoes (reversed from pre-NAFTA days).
    • Production in Mexico fell 3–4% due to new anti-dumping tariffs (17% imposed July 2025), adding uncertainty and raising costs.
  • Rising Input & Logistics Costs:
    • Fuel, fertilizer, and trucking costs all skyrocketed.
    • "A team drive truck... 8 months ago might have been $10–11,000;... a couple weeks ago as high as $16,000–$17,000." – Jacob Kremple [32:30]

2. Tomato Economics: Supply Chains, Contracts, and Volatility

• Market Structure:
  • US produce market is volatile, with frequent dramatic swings because of inelastic demand and reliance on specific growing regions.
    • “Produce demand, especially in the US, is rather inelastic in the short term and… reliant on weather and acreage.” – Jacob [11:10]
  • Price volatility is common not just in tomatoes but also in lettuce, avocados, and beef.
• Supplier-Restaurant Dynamics:
  • Restaurant clients are highly informed, often price shop, and demand “white glove” service—a contrast to less-savvy grocery buyers.
    • “Our chefs... are much more knowledgeable about markets than the average consumer.” – Jacob [24:03]
• Contracting:
  • Contracts can be daily, weekly, or long-term—depends on the buyer, with many preferring to “play the market” instead of locking in.

3. Retailers, Margins, and Pricing Power

• Sticky Retail Prices:
  • "Retailers take their prices up like a rocket and down like a feather... They’ll hold a new floor even when wholesale drops.” – Jacob [21:00]
• Modern Grocery Economics:
  • Grocery costs: Many have invested heavily in tech, e-commerce, and wider selection (produce SKUs up from ~100 in the 70s to 300–500 today).
  • Margin: Retailer EBITDA margins remain stable (4–7%), but consumers pay more for the convenience and variety.

4. Globalization and Changing Tomato Markets

• NAFTA’s Impact and Mexico’s Role:
  • Since the 1990s, US winter tomatoes shifted predominantly to Mexican production, with greenhouse and shade house tech.
  • “A Mexican anti-dumping tariff now at 17%... It was a perfect storm: decimated Florida crop and not enough extra from Mexico” – Jacob [15:34]
• Specialty & High-Flavor Tomatoes:
  • Greenhouse (Holland-inspired) and seed tech enabled the explosion of “snacking” and high-flavor varietals.
  • Demand led by restaurants, then trickles into retail: “A lot of it starts with restaurants... If you see a specific tomato on a menu, you want it at home.” – Jacob [38:54]
  • Seed companies constantly crossbreed for new flavors and visual appeal—often heavily marketed.

5. Input Costs: Fertilizer, Freight, Energy, and Disease

• Freight/Trucking:
  • Spiking costs due to higher oil prices and labor shortages.
• Fertilizer:
  • Prices are a growing concern and are expected to feed into future retail prices, especially as existing inventories are rolled over.
    • “Growers are already talking about the cost of fertilizer with us.” – Jacob [35:34]
• Disease Pressures:
  • Tomatoes, especially greenhouse and cherry varieties, face persistent virus and pest threats, causing volatility and frequent crop replanting.
    • “Those viruses were decimating those greenhouses where they'd have to tear everything out, soil included, and start from the beginning.” – Jacob [26:04]

6. Pricing: Fresh vs. Canned Tomatoes

• Two Distinct Markets:
  • Fresh and canned tomatoes are largely unconnected in price, due to different varieties, growing regions, and contract structures.
    • “They're completely different markets.” – Jacob [30:32]

7. Trends in Tomato Varieties and Consumer Behavior

• Snacking Tomatoes and Varietal Boom:
  • The market for snacking tomatoes (“flavor bombs”, “girl and Doug medley”) has exploded in the last 15 years, enabled by greenhouse tech and demand for novel, flavorful, and visually attractive produce.
  • Seed innovation is constant, with playful names (“Baby Yoda,” “Firebird,” etc.).
• Consumer Influence:
  • Instagram and social media now play a pivotal role in making odd-shaped, colorful, or “pretty” produce mainstream.
  • “In food in general, food trends pop from social media now.” – Jacob [50:32]

8. Cold Chain/Logistics Challenges

• Distribution in Dense Urban Areas:
  • New York's market is uniquely challenging and expensive—trucking across the George Washington Bridge or maintaining perfect cold chain from field to plate.
    • "It's a game of perfection... 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." – Jacob [53:13]

---

Notable Quotes & Memorable Moments

• On Tomato Variety Evolution:
  “There are some varietals that I absolutely would put in a fruit salad.” – Joe Weisenthal [03:13]

• On Weather’s Outsized Impact:
  “Anytime that happens, that's where you see these spikes. So it's less about the input costs... At this point, I would say the majority of it was weather-related.” – Jacob Kremple [15:34]

• On Supermarket Pricing Games:
  “Retailers take their prices up like a rocket and down like a feather.” – Jacob Kremple [21:00]

• On Margins:
  “The difference between the price per pound of beef at wholesale and retail was probably 30% [20 years ago]. Now it's probably closer to 40, 45%.” – Jacob Kremple [24:03]

• On the Knowledge Gap:
  “Our chefs and some of the buying teams are much more knowledgeable about markets than the average consumer.” – Jacob Kremple [24:03]

• On Social Media’s Influence:
  “Instagram specifically must have played a significant role in the last 10, 15 years of the tomato market.” – Joe Weisenthal [50:26]
  “Food trends pop from social media now.” – Jacob Kremple [50:32]

• On Logistics Costs:
  “A team drive truck... 8 months ago might have been $10–11,000;... as high as $16,000–$17,000.” – Jacob Kremple [32:30]

---

Timestamps for Important Segments

| Time | Segment | |---------------|------------------------------------------------------------------------------------------| | 02:25 | Joe & Tracy’s tomato obsession & intro to the pricing issue | | 05:08 | Guest intro: Jacob Kremple, Baldor | | 06:44 | Baldor’s business model and “highliner” distribution | | 09:34 | How restaurant contracts work in volatile markets | | 11:10 | Produce price volatility & inelastic demand | | 12:20 | How a tomato’s price is built (cost components) | | 14:18 | 2025–2026: Why prices spiked—freeze, Mexican production drop, tariffs | | 21:00 | Retailer pricing “rocket and feather” theory, margin strategy | | 24:03 | Why chefs are savvy and force rapid price corrections | | 26:04 | Tomato crop diseases: Impacts on supply and volatility | | 27:43 | Are all tomato prices correlated? Market differences by type | | 30:32 | Fresh vs canned tomato markets | | 31:44 | Logistics & trucking costs discussion | | 34:56 | Fertilizer cost pressures and further price risks | | 38:54 | Specialty tomatoes & demand driven by restaurants | | 40:06 | Greenhouse production and energy costs | | 46:53 | Jacob's favorite tomato varieties, suggestions for consumers | | 50:26 | Social media's growing importance | | 53:13 | Cold chain distribution and unique urban logistics challenges |

---

Additional Insights

• Why High Prices May Persist:
  Retailers slow to reduce prices (“down like a feather”), possibly banking on new, higher "normal" due to shifting consumer expectations and higher operational costs.

• Restaurant Menu Management:
  Restaurants are less reliant on locking in long-term prices because food is only about 30% of their cost base—labor, rent, and utilities impact menu prices even more.

• Innovation and Consumer Choice:
  Explosion in tomato varieties—driven by both supply (seed breeding) and new demand (restaurant menus, snacking culture, social media).

---

Closing Thoughts (from Hosts)

• “The idea of a mass consumer base of snacking tomato eaters… that's like a fairly novel thing.” – Joe [56:24]
• “One of my favorite tomato varieties is called Ethiopian Black but I think they're actually from Ukraine.” – Tracy [57:18] (showing the whimsical, global diversity in today's tomato market)

---

Summary Verdict

Whether you’re a tomato fanatic, a restaurant sourcing professional, or just wondering why your caprese salad costs $3 more, this episode breaks down the whirlwind of economics, logistics, weather, and even Instagram that explains today’s expensive (and more flavorful) tomato.

Transcript

[Tracy Alloway]

Oddlauts is brought to you by Vaneck. For years, investors basically forgot about real assets, energy, gold and infrastructure. But look at what's driving markets now. Central banks loading up on gold, massive capex cycles, currencies doing weird things. These assets are at the center of it RACS. The VanEck Real Assets ETF is an actively managed one stop shop for real assets spanning gold, commodities, natural resource equities and more. Go to vaneck.com raaxpod to learn more fun disclosures later in this episode so

[IBM Representative (AI Segment)]

there's a lot of noise about AI, but time's too tight for more promises. So let's talk about results. At IBM, we work with our employees to integrate technology right into the systems they need. Now a Global workforce of 300,000 can use AI to fill their HR questions, resolving 94% of common questions. Not noise proof of how we can help companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business IBM when you're

[The Hartford Representative (Risk Management Segment)]

running a business, the best days are the ones where priorities stay on track. For midsize and large companies, that isn't always easy. Risk can touch multiple parts of an organization at the same time, often in ways that aren't immediately obvious. It might involve property liability or cyber. It could stem from regulatory requirements or challenges tied to a specific industry or the scale of an operation. At that level, managing risk becomes an ongoing discipline, not a one time decision. the Hartford, the focus is on helping businesses manage risk before it turns into something more disruptive. That means working with companies to identify where they're exposed, decide what matters most, and put practical standards in place so risk is managed as part of day to day operations. And when losses do happen, the Hartford can pair that risk control work with insurance coverage grounded in underwriting, risk engineering and claims experience developed over time. Learn [e-mail] riskmitigation

[Joe Weisenthal]

Bloomberg Audio Studios Podcasts Radio News.

[Tracy Alloway]

Hello and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

[Joe Weisenthal]

And I'm Joe Weisenthal.

[Tracy Alloway]

Joe, I know you love tomatoes.

[Joe Weisenthal]

I love tomatoes. Oh my God, I love tomatoes. I love tomatoes so much.

[Tracy Alloway]

This is the episode just Joe talking about how he loves tomatoes.

[Joe Weisenthal]

Well this is a funny one because like this is a you episode. You know you like book. You're like oh let's do a tomato episode. Which I'm glad you did cause I love tomatoes.

[Tracy Alloway]

But you're gonna make it your episode.

[Joe Weisenthal]

I'm gonna make it my 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, exurban Illinois, you know, I had terrible tomatoes growing up, so I hated tomatoes from the supermarket, from the grocery store. And so I thought, tomatoes are, like, the worst vegetable on the planet. Well, they're not.

[Tracy Alloway]

Well, are you gonna correct yourself and say, they're not a vegetable, they're fruit?

[Joe Weisenthal]

You know, so I'm just gonna go on. Cause I'm gonna take this episode over. But, like, yeah, you know, I've once heard someone say that, like, 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.

[Tracy Alloway]

No, no.

[Joe Weisenthal]

I would.

[Tracy Alloway]

Oh, this is wrong.

[Joe Weisenthal]

And so these tomatoes that we. No, no, no. Like, when you. Have you tried one of the tomatoes?

[Tracy Alloway]

I have. I still would not put it in a fruit salad.

[Joe Weisenthal]

I absolutely would. I love tomatoes. Anyway, sorry.

[Tracy Alloway]

So we gotta talk about tomatoes. Perhaps not in the way you have been so far, but let's spend one

[Joe Weisenthal]

minute talking about how tomato prices are really high.

[Tracy Alloway]

Yes.

[Joe Weisenthal]

And then the other 45 minutes, we're going to talk about how delicious tomatoes are.

[Tracy Alloway]

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. 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.

[Joe Weisenthal]

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.

[Tracy Alloway]

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.

[Joe Weisenthal]

Tracy always brings me tomatoes at some point in summer, and they're always delicious.

[Tracy Alloway]

But I've got a really big selection this year. Cherokee, Brandywine, 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.

[Joe Weisenthal]

I cannot wait to just talk tomatoes for the next hour.

[Tracy Alloway]

You're not just going to say how good they are over and over, right?

[Jacob Kremple]

I might.

[Tracy Alloway]

Okay. Well, I am very happy to say that we 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 Odd Lots.

[Jacob Kremple]

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. So no, this is. I'm excited to talk to Mata.

[Tracy Alloway]

This is the perfect guest for the perfect moment. Can you tell us what Baldor actually does?

[Jacob Kremple]

Yeah. So Baldor 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.

[Tracy Alloway]

Yeah, sure.

[Jacob Kremple]

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, 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's actually how you get Baldor, which is, which is a fun story. So that was in the 70s, 80s that 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 when he passed away from cancer. And his son TJ is our owner now and CEO and he's been running the company since then.

[Joe Weisenthal]

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 Beldor, and Beldor would be the only one that I would associate in my mind. Maybe because you've done a good job with branding, etc. It's like, okay, these are high quality ingredients rather than just food distribution. Who are your clients? Who do you sell into at Beldor?

[Jacob Kremple]

Yeah, we sell just about anybody. Right. But I think we've made our bread and butter as this. I know. I listened 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 our job is to build a curated assortment of maybe 7,500 SKUs versus the Cisco carrying 20,000 plus. Right. So. 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 tomatoes, like some of the ones that I brought to you.

[Joe Weisenthal]

And what's the mix in terms of restaurants versus grocery stores or restaurants versus whatever else?

[Jacob Kremple]

Yeah, so we're about 70%, maybe 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.

[Tracy Alloway]

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 caprese salad, and so I need some really good tomatoes. Do I call you up and I ask you specifically to source tomatoes for the salad, or do you have, like, a catalog that I start flipping through or.

[Jacob Kremple]

Yeah. So you go to baldorfood.com. right. And you go onto 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 caprese salad.

[Tracy Alloway]

What do you think about where are my tomatoes?

[Jacob Kremple]

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 caprese. 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.

[Joe Weisenthal]

So I don't really know that much about the restaurant industry, but I read Kitchen Confidential, and there in that book, Anthony Bourdain talks a lot about, like, you know, he'll 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 as very relevant in a 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've never seemed 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?

[Jacob Kremple]

Yeah, that's a trade secret joke. No, I'm kidding. No, I think we want to meet the chef where they are. Right. 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.

[Tracy Alloway]

Right.

[Joe Weisenthal]

Okay.

[Jacob Kremple]

And so a lot of our customers, you know, our, 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. Right. 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 sell, order product where most other competitors.

[Joe Weisenthal]

And what time would it get there

[Jacob Kremple]

the next morning, depending on their account and their delivery time, as early as 6:00am yeah.

[Tracy Alloway]

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?

[Jacob Kremple]

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 US is rather inelastic in the short term. And it's so reliant on weather and acreage grown and the production out of that acreage that you see very wild swings in markets all the time. Right. Like, tomatoes was the last thing to pop. 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.

[Tracy Alloway]

Joe, did I ever tell you for some reason I'm on the has avocado board email distribution list and really send 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.

[Joe Weisenthal]

Yeah.

[Tracy Alloway]

And like, somehow I got automatically signed up to this thing.

[Joe Weisenthal]

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 pay a buy a Tomato and it's 40% more like, you know, how much of that is transport, how much of that is fertilizer, how much of that is land, etc. Like, what goes into the price of a tomato and what is the main driver of swings year over year.

[Jacob Kremple]

Yeah. So let's. Let's maybe break this down a couple of different ways. You have your retail price point that a customer sees. Let's say 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. Right. For that piece. There's all the costs they have to grow. Right. So you're talking fertilizer, seed, labor, water, the production costs around their facility, the energy and the trucking. Right. 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. Right. 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 price is going rate for what a wholesale tomato should be, that's what we're going to sell the rest of the 30% at. Right.

[Joe Weisenthal]

Okay.

[Jacob Kremple]

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 groceries 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. In the winter. Right. You're going to be growing tomatoes in Florida.

[Joe Weisenthal]

We'll get to the greenhouse conversation a little bit.

[Jacob Kremple]

But 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 start going further south. If you needed 100 tomatoes for the US 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. if you go back pre NAFTA, 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, 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. Blooms fell off, vines died. Was not a great situation. 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 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.

[Joe Weisenthal]

Got it.

[Jacob Kremple]

At this point, I would say 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 segmented 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 3 to 4%. Doesn't sound like a lot, but when they're supplying 70% of the US market in the winter, that was actually quite a bit. While that was because of the anti dumping tariff that was put in place was 17% and 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 a lot of accusations of dumping by Mexican growers into the US so again, you think of NAFTA in the mid-90s and the start of more free trade. That's when Mexico, you think of Sinaloa, Sonora, Jalisco. 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 that they were already growing tomatoes for the US market, we're about 20% then, but they, they started to really invest in growing much more down there for the US market once trade became a lot more predictable. When that happened, they also started getting into shade house or 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 3 to 4x 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 produce is lower, we have lower labor costs or 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 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 US from Mexico growers. That changed last year in July when they the US 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.

[Joe Weisenthal]

Data centers need electricity, AI needs copper, reshoring needs steel, and gold's run may tell you something about how the world is repricing money and debt. All of those point back to real assets. The RAX ETF is an actively managed one stop real asset shop. From gold to commodities to natural resource equities, adjusting as conditions change. Visit vaneck.com raaxpod to learn more. An investor should consider the investment objective, risks, charges and expenses of the fund before investing. To obtain a prospectus and summary prospectus which contains this and other information, visit vaneck.com Please read the prospectus and summary prospectus carefully before investing. RACS is distributed by Vaneck Securities Corporation Distributor.

[IBM Representative (AI Segment)]

So there's a lot of noise about AI. But time's too tight for more promises, so let's talk about results. At IBM, we work with our employees to integrate technology right into the systems they need. Now a global workforce of 300,000 can use AI to fill their HR questions, resolving 94% of common questions, not noise proof of how we can help companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business IBM get the

[Jacob Kremple]

news you need in just 15 minutes.

[Joe Weisenthal]

Start your day with Bloomberg Daybreak, the podcast with a global view on the stories that matter. I'm Nathan Hager.

[Tracy Alloway]

And I'm Karen Moscow. Join us each morning for curated stories

[Joe Weisenthal]

on current events, politics, business and foreign relations, plus one conversation on the day's biggest developments, all in just 15 minutes. Subscribe to Bloomberg Daybreak for a precise,

[Tracy Alloway]

thoughtful take on the stories that matter.

[Joe Weisenthal]

Listen to Bloomberg Daybreak each morning on Apple, Spotify, or anywhere you listen.

[Tracy Alloway]

Would you expect Prices to actually go up even more from here.

[Jacob Kremple]

So in June we're back to the five year average already. It's yeah, towards the end of May into June, it's, 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. Is there a new price floor that they're happy with where maybe I'm going to charge the consumer a little bit more than I traditionally used to when these markets are this cheap because the customer is still going to pay. It might not be 269 a tomato, but maybe $1.99 a tomato when I used to be able to have to go to 149. Right. If you think of 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 pickup 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 and that's still maybe 4 to 6, 5 to 7 right now. Margin as margin.

[Joe Weisenthal]

Okay.

[Jacob Kremple]

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 and 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.

[Joe Weisenthal]

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 roughly even out and that's how you get the stable margin.

[Jacob Kremple]

Yep. And they're also charging you a higher price a bit 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, produce department was probably 75 to 100 SKUs. Grocery store today is 300 to 500 SKUs in their produce department.

[Joe Weisenthal]

Wow.

[Jacob Kremple]

So they're expected to carry this high variety, all these unique things that comes with more shrink as well. Right. So they have to balance all of that. So with those economic changes for them, I do think what we're seeing is that retailers are tending to hold on to prices longer than they traditionally would to try to help pay for. For some of this. And that's where you think of 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.

[Tracy Alloway]

Oh, my God. For a strip steak.

[Joe Weisenthal]

I love a strip steak.

[Jacob Kremple]

But it's crazy. It's. 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. 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 at 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 was probably 30%. Now it's probably closer to 40, 45%.

[Joe Weisenthal]

Really?

[Jacob Kremple]

Yeah. So, again, retailers are sort of like, building on this momentum, discovered push. Yeah. This lack of 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.

[Tracy Alloway]

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?

[Jacob Kremple]

They're going to log on to 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.

[Joe Weisenthal]

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 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.

[Tracy Alloway]

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.

[Jacob Kremple]

I, I can't say I haven't tried that before. Doesn't work.

[Tracy Alloway]

Interesting. All right.

[Jacob Kremple]

I do complain to the, the head produce clerk at our store every once in a while about the price.

[Joe Weisenthal]

I know the real like, I know

[Jacob Kremple]

the real price of this.

[Tracy Alloway]

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?

[Jacob Kremple]

Yeah, for sure. And I think that that created some, I'd say pre freeze impact in general on the tomato industry where acreage and production was, 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 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. Right. And it's a continually evolving mother nature that you're always going to be dealing with something new as a grower.

[Joe Weisenthal]

So let's talk about the quote tomato price, because there isn't actually a tomato price, because there isn't actually a tomato. And we have one kind. 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 have 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 multicolor snacking tomatoes?

[Jacob Kremple]

Yeah, they all interplay with each other a little bit. I would say you do have more complementary or substitutable tomatoes. Right. So if you think of like a round tomato, like the New Jersey beefsteak and aroma tomato. Yeah, 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.

[Joe Weisenthal]

So then speaking 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 farm level, essentially a redistribution of acreage towards the high value, high margin stuff such that they're just not as a percent or just 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 it's like, well, why are we planting the cheap normie tomatoes?

[Jacob Kremple]

Yeah, I think cheap normie tomatoes are.

[Joe Weisenthal]

When I was a kid, we didn't know about that. Yeah, we didn't know about these tomatoes.

[Jacob Kremple]

Yeah, exactly. And that's. That's the evolution of the tomato market as well is.

[Joe Weisenthal]

Yeah.

[Jacob Kremple]

There's still a consumer for a basic round tomato or vine ripe tomato aroma. Right. Like, 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. Right. Again, there's consumers that want that basic tomato, maybe the more mild flavor. Yeah. That's going to be a guaranteed quality and look a certain way 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 will 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.

[Tracy Alloway]

Earlier I went to look up tomato prices on the terminal and I just realized there's a Japanese bank called Tomato.

[Joe Weisenthal]

There's a Japanese bank called Tomato. I just learned that too.

[Tracy Alloway]

And it has an amazing logo. I would.

[Joe Weisenthal]

You would bank there if you lived in Japan?

[Tracy Alloway]

Just, 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?

[Jacob Kremple]

No, they're completely different markets.

[Tracy Alloway]

Interesting. Okay.

[Jacob Kremple]

Yeah. So a lot of your can 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 processed 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 fresh industry can.

[Joe Weisenthal]

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. What do you see at Beldor 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?

[Jacob Kremple]

For sure. This wouldn't be an odd lot just without talking about logistics, right? Yeah, it's been rather extreme lately, obviously with. With oil prices going up and tightening availability within the trucking industry as well. Yeah. 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. Yeah, 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 in 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, $11,000 for that. We saw prices a couple weeks ago as high as 16, $17,000, which I've 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 got me interested in this industry, was doing that with him. I've never and my whole career seen prices that high before.

[Tracy Alloway]

Wait, now I'm curious. Did you ever think about going into farming directly?

[Jacob Kremple]

No. I did work for a grower shipper for a couple years out of college, L and M in North Carolina to get that experience on the grower 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 wasn't. What he needed for him is, you know, running this buying office they had in Vero Beach, Florida that bought all the produce for east coast and a lot of their imports.

[Joe Weisenthal]

He was a buyer for Kroger?

[Jacob Kremple]

Yeah.

[Joe Weisenthal]

Okay.

[Jacob Kremple]

Yep. So he, he ran their produce buying office that they had in. In, in Florida that managed all the. 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 Immokalee, Florida or Moultrie, Georgia to. To go look at 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.

[Joe Weisenthal]

Sounds really nice.

[Jacob Kremple]

Yeah, but. But I'd sit there and listen to him and, 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 Baldor last year was this mindset that battle had was the same thing. Like for me it's. It's all about Making sure we can meet the need of our customer, wherever that is, whether that's a commodity. Romaine heart, you can get anywhere to a girl and duck tomato like I brought here, that's, that's unique to us and incredible flavor and just an amazing story of Aaron and his family and what they've done. So now 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

[Tracy Alloway]

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 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?

[Jacob Kremple]

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, et cetera. Right now growers have been able to mostly pre bought. Right. Especially the bigger ones. So their fertilizer cost is pretty locked in at this point. But what you're going to see over the next six months is, is that's going to start to evaporate. So Baldor, our big contracting season is coming up towards the end of the summer where we we try to lock with a lot of our growers to make sure we can get consistency and supply for our customers. Our growers are already talking about the cost of fertilizer with us.

[Joe Weisenthal]

Yeah.

[Jacob Kremple]

And saying we've got you covered now become 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 retailer have to pass on to a consumer? The Bloomberg Sustainable Business Summit returns to Singapore on July 22. Our 5th annual Asia Pacific Summit will explore how business and finance leaders are shaping the next phase of globalization by strengthening resilience, advancing climate adaptation and driving a multi speed energy transition across Asia's diverse markets. Join us for solutions driven discussions, interactive workshops and networking opportunities. Learn [e-mail] SBS Singapore.

[Joe Weisenthal]

So you mentioned that this box of tomatoes we have in front of us is a company called Girl and Doug, which I hadn't heard of. 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, Varieties. There's a baby Yoda tomato. Did you know that?

[Tracy Alloway]

Well, this is part of the fun of buying your seeds every year.

[Joe Weisenthal]

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?

[Jacob Kremple]

Yeah, I'd say probably over the last, like, 15 years or so, you've seen a big explosion in the stacking tomato category, and a lot of that was driven by greenhouse production. Right. 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?

[Tracy Alloway]

Oh, my God. If I could get an irrigation system going, that would be a game changer. But I.

[Jacob Kremple]

It. It allows these growers to grow seed varieties that 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 US 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.

[Tracy Alloway]

But how do these new varieties. Because there are so many different tomato varieties.

[Jacob Kremple]

Right.

[Tracy Alloway]

And a lot of them have very amusing name, like cream sausage or striped tiger or baby Yoda. Or Baby Yoda. How. How do they actually enter? I guess, like, the customer's 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.

[Jacob Kremple]

Yeah, I'd say it's almost the other way around.

[Tracy Alloway]

Okay.

[Jacob Kremple]

I would say that it's really the restaurants and then the retailers that are. 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. And so 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 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 wait staff and they can educate the consumer a little bit about the story 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.

[Joe Weisenthal]

So I've been to one of these multi acre indoor tomato greenhouses in Leamington, 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 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 costs 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 US Goes under the Great Lakes or whatever through and then powers this. What about, like, if we're talking about greenhouse growing tomatoes and the recreation of a beautiful spring day, how much is it like, like variability in electricity costs or energy costs are going to go into that tomato?

[Jacob Kremple]

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 the 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 a killing. Right. If you think about they lost 80% of their crop.

[Joe Weisenthal]

Yeah.

[Jacob Kremple]

They're selling a tomato for 100 bucks. A case like this is a razor thin margin business for our farmers, where 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 cost. 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.

[Tracy Alloway]

Right.

[Jacob Kremple]

It's that yin and yang between a customer and a supplier of 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. How to do that equally with each other.

[Tracy Alloway]

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 Caprese salad example. Although I guess there's mozzarella or. Which cheese do you use for Caprese?

[Joe Weisenthal]

Buffalo.

[Tracy Alloway]

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.

[Jacob Kremple]

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. 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 3.50 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, their goal is to be as consistent in their food cost 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 dynamic dichotomy in the industry of, you know, different ways of viewing how they, they keep their food costs honest. Right. With their distributor.

[Joe Weisenthal]

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 ex. Are not the food component. And so they're the. Whereas for the grocery store or some other retailer, they're the ones because their end price is so correlated to the underlying price, they would be the ones that would care more about longer duration and locking that in for sure.

[Jacob Kremple]

And in a restaurant, they want to keep their food costs as low as possible.

[Joe Weisenthal]

Sure.

[Jacob Kremple]

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, the tomatoes were super high in April, May, and they're coming down in June. But you go back to November, December, they were 20, 30% below the five year average. Right. And so like, do I want to lock to get some guarantee of price? My old days when I was at HelloFresh before coming to Baldor 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 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 in 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, a retailer, food service, distributor. Most of our cost is the cost of the food. So when that cost changes, it's, it's near term much more impactful on us for sure. But that's our job as Baldor, is to help direct our, 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 SKUs 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, get costly, that they're not just going to pull act of God on us and raise, 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, 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.

[Tracy Alloway]

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.

[Jacob Kremple]

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 Masternardi flavor bombs. Incredible. They've got a line of bombs. There are four or five different varieties.

[Tracy Alloway]

That's the ones that come in like little packets.

[Jacob Kremple]

Yeah, they're flat, little clamshells. Almost like these berries are right?

[Joe Weisenthal]

Oh, yeah.

[Jacob Kremple]

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 is a main ingredient, because the 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 Doug tomatoes that I brought for you guys. These varieties that they have in this medley are 100% grown for flavor.

[Tracy Alloway]

They're really good.

[Jacob Kremple]

Yeah.

[Tracy Alloway]

We were eating some of them before we started recording, and we can attest to they're delicious.

[Jacob Kremple]

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 chef focused grower. Right. And so he started with building some relationships with chefs directly in the city and literally FedExing from San Diego here. Some of those chefs helped connect them with Baldor so that we could get them 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 cull out at least a third of the flowers 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.

[Joe Weisenthal]

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? Did it happen through some sort of, like, grafting? Like, where in the sort of, like, the R and D of tomatoes, Is it happening where these new flavors are coming from?

[Jacob Kremple]

Yeah. So it's almost all cross breeding, and it's. It's done at the. Mostly at the seed company level. Okay. So a lot of these growers will partner with specific seed companies where they find good relationships or that they grow. You know, they're developing seeds in. 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 cross breeding 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 in 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 their, their 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.

[Tracy Alloway]

Some tomatoes are beautiful.

[Jacob Kremple]

Yeah.

[Tracy Alloway]

Like bumblebees are.

[Joe Weisenthal]

Social media and Instagram specifically must have played a significant role in the last 10, 15 years of the tomato market. Right.

[Jacob Kremple]

Like I think in food in general. Right. Like food trends pop from social media now.

[Joe Weisenthal]

Yeah.

[Jacob Kremple]

Whether it was, I don't know, that pink sauce stuff years ago to. Yeah, snacking tomatoes. Right. Like influencers do.

[Joe Weisenthal]

What was the pink sauce?

[Tracy Alloway]

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.

[Joe Weisenthal]

Yeah, I remember that one.

[Jacob Kremple]

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 into their restaurant for either a special or something always on the menu.

[Tracy Alloway]

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,

[Jacob Kremple]

pretty much any other retailers.

[Tracy Alloway]

Yeah.

[Jacob Kremple]

Yeah. I think it comes down to seed 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.

[Tracy Alloway]

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 Rats, rabbits or whatever.

[Jacob Kremple]

Or maybe your dog as well.

[Tracy Alloway]

Or my dog, yeah.

[Jacob Kremple]

But I think in the, in the 60s and 70s and, and continue through to today, the 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, could take the ride on a truck from California to New York four or five days and survive. Right. And so, yeah, a lot of the varieties that you see in your traditional shipper label products are these varieties that are in partnership with the universities, where a lot of it was functional, not flavorful.

[Joe Weisenthal]

We've gone this whole conversation without bringing up the phrase cold chain. And you mentioned Hunts 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?

[Jacob Kremple]

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, with New York city and Boston, D.C. philly, where we service as well. It's challenging everywhere, Joe. Like, it's, it's, 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 sweet espatch 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.

[Joe Weisenthal]

Yeah.

[Jacob Kremple]

I need, you know, 32 to 34for my protein and my dairy, but I need 48 to 50 for a tomato or an onion. Right.

[Tracy Alloway]

All right, Jacob, that was amazing.

[Joe Weisenthal]

Yeah, that was amazing.

[Tracy Alloway]

A lot of fun talking about tomatoes and also the food distribution business. Thank you so much for coming on.

[Joe Weisenthal]

All thoughts.

[Jacob Kremple]

Yeah, thank you, guys.

[Joe Weisenthal]

And thank you for the tomato.

[Jacob Kremple]

Absolutely. Yeah.

[Tracy Alloway]

So that was fascinating.

[Joe Weisenthal]

That was great.

[Tracy Alloway]

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 informationally advantaged, you know, chef.

[Joe Weisenthal]

Yeah.

[Tracy Alloway]

Or restaurant buyer versus the informationally disadvantaged retail customer.

[Joe Weisenthal]

Yeah.

[Tracy Alloway]

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.

[Joe Weisenthal]

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.

[Tracy Alloway]

No one is try that.

[Joe Weisenthal]

No, but, like, no one's going to have time to do that and actually, like, price comparison shop. Like, 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 gonna have, like, an edge over me in terms of, like. Yeah, like, I just. I have other things to do.

[Tracy Alloway]

Just outsource it by going to eat at the restaurant exclusively. Just don't go to the grocery store.

[Joe Weisenthal]

That's right.

[Tracy Alloway]

You'll. You'll save on input costs. Labor costs, though.

[Joe Weisenthal]

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's like, I never heard. It was just. When I was a kid, there 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.

[Tracy Alloway]

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.

[Joe Weisenthal]

And the color. Yeah. Like the idea of a black tomato that would be cool to take a picture of.

[Tracy Alloway]

One of my favorite tomato varieties is called Ethiopian Black, but they're not even actually black, so I don't know very. I think they're actually from Ukraine.

[Joe Weisenthal]

The Ethiopian black tomatoes from Ukraine, they're

[Tracy Alloway]

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.

[Joe Weisenthal]

Those are nice looking tomatoes.

[Tracy Alloway]

Yeah, they're really. You'll get some. Yeah, hopefully if my tomatoes survive the next week of colder weather. Anyway, shall we leave it there?

[Joe Weisenthal]

Let's leave it there.

[Tracy Alloway]

This has been another episode of the Odd Thoughts podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.

[Joe Weisenthal]

And I'm Joe Weisenthal. You can follow me at the Stalwart. Follow our producers, Carmen Rodriguez at carmenarmon, Dashiel Bennett at dashbot Kalebrooks, Al Brooks and Kevin Lozano at Kevin Lloyd Lozano. And for more Odd Lots content, go to bloomberg.com oddlods we have a daily newsletter and all of our episodes and you can chat about all these topics 24. Seven in our Discord, Discord, GG Oddlots.

[Tracy Alloway]

And if you enjoy Odd Lots, 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. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad free. All you need to do is find the Bloomberg Channel on Apple Podcasts and follow the instructions there.

[Joe Weisenthal]

Thanks for listening, Sam.

[Tracy Alloway]

The Big Take podcast from Bloomberg News keeps you on top of the biggest stories of the day.

[Joe Weisenthal]

My fellow Americans, this is Liberation Day.

[Tracy Alloway]

Stories that move markets.

[The Hartford Representative (Risk Management Segment)]

Chair Powell opened the door to this

[Tracy Alloway]

first interest rate, cut impact politics, change businesses. This is a really stunning development for the AI world and how you think. Think about your bottom line. Listen to the Big Take from Bloomberg News every weekday afternoon on the iHeartRadio app, Apple Podcasts or wherever you get your podcasts.