July 15, 2020

WG Members Cope with COVID…With Innovation

By Tim Linden

Of the $1.4 billion in relief checks already provided to more than 80,000 farmers and ranchers impacted by the COVID-19 pandemic, less than 2%, about $25 million, has been allocated to specialty crop producers. As is typically the case when it comes to federal government support for agriculture, livestock and field crops are at the front of the line, with the fresh produce industry bringing up the rear.

Of course, the industry would love to get some of that $16 billion in direct payments under the USDA’s Coronavirus Food Assistance Program (CFAP), but nobody is waiting around for the windfall. Instead, suppliers have enacted innovative efforts to cope with COVID-19 and keep their businesses relevant and compliant as they deal with a new existential threat to their livelihood.

In these pages, we look at how three Western Growers members have met the newest enemy head on and are emerging on the other end stronger for it.

D’Arrigo Bros. Co. of California, Salinas, CA

John D’Arrigo, president of the 90-plus-year-old company, has not had time yet to pencil out the cost of all the COVID-19 precautions that have been put in place by the organization; he has been too busy putting them in place. “We are going to have to do that soon,” he said in early June, after spending the previous three months on a daily quest to prepare the company in every possible area of concern. “I don’t know if it’s a quarter a box or a dollar a box, but it’s a lot. The cost has been horrendous.”

According to D’Arrigo, the company got ahead of the curve by jumping on the situation very quickly. “Very early on, I realized this was going to be the real deal,” he said. “If you studied it, that became clear. I started looking at our different environments and made a plan for each one.”

The office was closed to visitors with protocols established at the entrance, and tracing efforts enacted to track the movements of the company’s 2,000 employees and 60-plus labor-transporting buses. The goal was to minimize contacts between employees and establish new safer routines that could be monitored and improved upon. “We converted one building to a training facility and hired a trainer so we could teach everyone how to protect themselves and protect their families once they went home.”

For the workers traveling on buses, D’Arrigo adopted assigned seating on each bus. The worker would go to and from the field as the only occupant of a particular seat. “That’s your seat every time and every day,” John said.

Every process received the same scrutiny with a training squad working day and night to make sure protocols were followed. “We slowly developed a binder with all the protocols. That binder is updated almost every day.”

For example, for the cooler facility there are protocols for forklifts, the proximity on the loading dock for workers and for the semi-truck drivers who show up every day to pick up loads of fresh produce. “We don’t allow any non-employees into the cooler box anymore. And, of course we sanitize and re-sanitize everything.”

D’Arrigo said that his company, like most others in the leafy green industry, had a head start on safety protocols because of the 2006 spinach crisis that caused a deep examination of all processes and the development of mandated best practices. “We had a lot of safety precautions already in place, but the coronavirus caused us to take it to the next level.”

The company bought 4,000 bandanas issuing two to every employee. “One to wear and one to wash.”

For the most part, he said wearing face covers has been the easiest hurdle as many farmworkers already did that.

Social distancing in the field is another necessity that caused a reconfiguring of the harvesting mechanism and the installation of screens between packing stations on those winged harvesters. From one end of the business to the other, changes were made. D’Arrigo said no stone was left unturned.

Initially, product was lost as about 30 percent of D’Arrigo’s business goes to the foodsaervice sector, and that business was lost overnight. “We disked under hundreds of acres,” he said.

Previous to this pandemic, D’Arrigo was on a planting schedule that calculated its needs one to two years in advance. “Now we are reassessing sales every 30 days and adjusting acreage accordingly,” John said.

The pandemic has changed consumer buying habits and D’Arrigo is constantly analyzing those numbers to make sure its production matches the needs of its customers. “It took us a while to figure that out, but we were able to adjust quickly. We are lucky that we haven’t had to lay off anybody during this period.”

The change in consumer buying habits has also caused D’Arrigo to reexamine its products and how they are presented to consumers. During the pandemic, bulk sales dropped at retail while packaged produce saw a spike in sales. The company is adding packaging options where applicable. “Can we shrink wrap, sleeve or bag? We are looking at every commodity,” he said.

The planning did not stop within the confines of its property lines. John D’Arrigo and fellow industry leader Bruce Taylor of Taylor Farms California serve on a task force with the CEOs of the four area hospitals to plan for farmworkers who come down with the coronavirus. In the early days of the pandemic, federal authorities were projecting that there could be millions of cases nationwide. The Salinas ag community thought it was prudent to develop locations where workers could be quarantined to prevent their families and their communities from turning into hot spots. D’Arrigo also contracted with a local taxi company to be on call to pick up any sick workers and deliver them to the hospital or these shelter-in-place locations.

From a macro level, John D’Arrigo believes the coronavirus pandemic is a bellwether event that is changing the industry in ways that will be felt for years to come. He wonders how the foodservice industry will alter its operations and what changes in the supply chain will occur to safely deliver fresh produce to their customers. He believes this pandemic will accelerate automation at the production end as there are fewer farmworkers available to do the work and the need to social distance could be with us for a long time. He also agreed that smaller operations might find it difficult to absorb the extra costs associated with creating safe environments during a pandemic and there could well be more industry consolidation.

In fact, D’Arrigo says this pandemic has exposed the produce industry’s fluctuating supply and demand pricing system as outdated. He said these are real costs associated with keeping everyone safe and there has to be a way to pass them on to the consumer. “There are many long-term costs and we have to be able to recover them. How do we recoup them? We can no longer afford to sell our products below cost…ever.”

At the same time, he said the industry must be very adaptive and change with the times. “Our philosophy is to move fast and be first,” he said.

Ocean Mist Farms, Castroville, CA

Joe Pezzini, CEO of Ocean Mist, detailed many of the same precautions that this grower-shipper took to operate under pandemic conditions. “We are no different than the rest of the essential businesses that had to change operations to stay in business,” he said. “It wasn’t easy and there were new challenges at every turn.”

First and foremost, the company endeavored to keep its employees safe at its two operation in Monterey and Riverside counties. “The pandemic greatly impacted every phase of our operation. In the first place, as many as could are working remotely. We established physical distancing and the wearing of masks and mandated that there would be no gatherings of employees in the office or in the fields. We have been diligent in enforcing those policies.”

In the field, Ocean Mist modified its equipment, including the use of dividers on its harvesters and erected physical barriers in its packing and cooling sheds to keep people apart. “And we developed protocols to question every employee every day about their health.”

Along with other produce firms, and through the local grower-shipper association, Ocean Mist secured space at local hotels to house and quarantine ill workers.

From a business standpoint, Pezzini said the early panic buying by consumers altered the supply chain but that righted itself within several weeks. “We are now back to season norms,” he said in early June, but he added that the pandemic has had a material economic impact on Ocean Mist and all producers.

“We’ve had to make constant adjustments. Prior to this, there was a trend toward a more natural display at retail. And now it has swung back to packaging.”

In addition, he said some staple items received a shot in the arm while specialty items, including artichokes, took a hit initially. Pezzini spoke as the country was starting to open back up and he predicted that June would be an important gauge as to how quickly the world gets back to normal, if there is such a thing.

He also agreed that the pandemic has brought about some permanent changes. He believes some of the safety protocols will not go away as it is best to be prepared for the next wave of this coronavirus or the next virus. “We think working at home will also stick with us for a while. In fact, there will be a certain segment of our population—older workers and those at risk—who are going to be working at home permanently or at least until there is a vaccine. That’s what CDC (Centers for Disease Control) and OSHA (Occupational Health and Safety Administration) are saying. I don’t think we will ever go back to exactly how things were.”

Pezzini said business travel will also take time to return but return it will. “Definitely business is going to change, but this is still a people business.”

Progressive Produce Corp., Los Angeles, CA

Like the other companies interviewed, Progressive Produce Corp.’s first reaction to the coronavirus was to protect its employees. It enacted many new protocols from working at home to safely working in the company’s facility. It enacted rules requiring masks and social distancing and worked with its own affiliated transportation company, Pathfinder Logistics, to safely supply its customers with product.

While there were many additional costs associated with these measures, Progressive was one of the more fortunate companies to have a product lineup that matched well with consumer demand.

“We got lucky,” said Scott Leimkuhler, senior vice president of sales. “Three of our main items—potatoes, onions and citrus—saw sales increases as panic buying set it. We worked closely with our customers and with Pathfinder to fill those orders.”

Leimkuhler said that for a 20-day period from mid-March, the company operated 24 hours a day, packing mostly potatoes and onions. “We ran the equipment as efficiently as we could. Everyone did a fantastic job.”

Two months later, the company is still running around the clock but the orders have started to stabilize. “The initial 20 to 30 days were crazy. For a couple of weeks, the IRI data (retail scan data) from Nielsen showed that potatoes were the number one produce item.”

Progressive does have a significant foodservice business with its “Hollywood Fries” bulk pack, but Leimkuhler said the jump in retail sales easily made up for the lack of foodservice business.

But it wasn’t as simple as just running the machinery and filling the orders. The Progressive executive said the first inclination by retailers was to reduce their SKUs and carry fewer potato options, but Progressive was more efficient by having all of its packing equipment running at the same time churning out the various pack sizes. A retailer might have only wanted 10-pound bags but Progressive could deliver more pounds of potatoes if that retailer would take five-pounders, three-pounders and value-added packs as well. The company also shifted to mesh bags as that is a more efficient operation and they could pack more pounds per hour, and consequently increase their sales. “We were constantly making adjustments to make sure we were running at maximum efficiency as much as we could. Units per hour was our most important measurement.”

Progressive also had to work closely with its bag suppliers as they weren’t initially ready for the influx in orders. “In fact, we did do some packing in some old bags because we had them on hand.”

And the company did direct store delivery for some customers as that was more efficient for the retailer than taking loads to the distribution center. “The coolest takeaway is that it brought us closer to our customers as we worked to solve these issues,” Leimkuhler said. “There was a lot of collaboration and teamwork to make it happen.”