The USDA Farmers to Families Food Box program has quickly turned controversial. Many bidders, who put in higher bids and so lost the contract, contacted their supply chain partners and together pressed the United Fresh Produce Association to send a letter raising questions about the program and the way bids were awarded.
Although we have little doubt that there will not be uniform perfection, government contracts, which typically go to low bidders, always run this risk.
However, this program was really designed to help the two ends of the produce supply chain. The farmers and the consumers in need. We know many produce executives who considered bidding and elected not to do so. Baldor actually went public with this. Michael Muzyk, president of Baldor Specialty Foods, whose own travails with this pandemic we profiled here, was quoted in Politico this way:
“It’s puzzling,” said Michael Muzyk, president of Baldor Specialty Foods, a distributor based in New York. Muzyk, who also serves as chairman of the United Fresh Produce Association, did not apply for a contract, saying he felt the program was ill-designed.
Most of the criticism of the companies that won bids is premature, since a company mostly just needs money to execute on this. In other words, a successful bidder can hire experts or have contractors buy the content of the boxes, physically assemble the boxes, deliver the boxes etc.
In fact, we would suspect that some of the companies that did win will acquire new capabilities in contracting, in some cases, in going beyond produce.
His company recently won a $107 million USDA Farmers to Families Food Box contract. We thought we would check in and see how this new contract was going to be executed. Pundit Investigator and Special Projects Editor Mira Slott reached out:
Q: It’s wonderful to reconnect again. Your world has broadened greatly in line with your deeply held aspirations. Much has transpired in the five years since you challenged the industry at a time of fiscal crisis and tumult in Puerto Rico to counter-intuitively invest in the country’s agriculture sector. In great turmoil is hidden opportunity and heightened calling...
Your inspiring Global Trade Symposium talk at the 2015 New York Produce Show is more germane than ever now. The industry looks to reinvent itself during this unprecedented coronavirus pandemic, yet your business in not unfamiliar with handling crises.
Is this the reason Caribbean Produce Exchange received a remarkable $107 million contract award as part of the USDA Farmers to Families Food Box Program? This stands out as one of the largest awards by far. Perhaps, it’s a bittersweet accomplishment.
A: Yes. Thank you. It’s a big responsibility. It’s a very difficult moment, and you get a lot of mixed feelings, because it is proportionate to the size of the country, and on the island how many hundreds of thousands of people actually are going hungry the past few weeks? So, it’s nice that we are able to work the capabilities we have developed here since Hurricane Maria, and to help bring the industry together because this is not just a produce program. We’re coordinating the food boxes from U.S. farmers, which also includes dairy, poultry and pork.
Q: For perspective, could you talk about how your business has evolved, and update people less familiar with the scope of what you do, with an understanding of your business? And then we can walk through the process of how you’ll be coordinating this USDA food box program contract.
A: A lot has happened in these past five years, so I’ll try and summarize! Around that time, we were about a year-and-half into an initiative to professionalize the management of our family business. This year we’re celebrating our 60-year anniversary. We’re third-generation, so my grandfather started the company. Right after we spoke at the New York Produce Show in 2015, we had just begun bringing in the talent we needed to evolve the company to perform different things and to perform differently.
That led us into diversifying beyond produce into other perishable categories, both representing lines of value-added products, but also doing some logistics of meat, poultry and dairy products for some of our customers. Basically, we drove a stronger investment in consumer marketing, bringing talent and the funds to develop our ability to serve customers fresh and refrigerated products beyond produce; and number two, we started offering our services to do logistics for various clients in the food industry.
We still do handle the supply chains for fresh and frozen products. We also invested in a more modern facility and, in general, a modernized company and organizational strategy.
Also, we entered into joint ventures with companies in the food space to sell, distribute and market in the U.S. We have a joint venture with a family company out of Ecuador, Wanabana, to commercialize a line of 100 percent tropical fruit products in a pouch in the U.S. and Canada.
Finally, we also completed a family transaction in which I became a full owner of the company, and my partner, a top manager and current president of the company and CEO is Angel Santiago. He’s a former coffee entrepreneur, who also worked at Kellogg and Mars, and now he’s my partner in the business and he runs it.
We created a holding company, Grupo Navis, to nurture these joint ventures, so the holding company owns Caribbean Produce Exchange, and we also use it to enter into these partnerships and new businesses.
Today, and for the past two-and-a-half years, what I do now is I’m chairman of this group of companies, Wanabana, Caribbean Produce, and Cacique Foods, an affiliate company that manufactures ready-to-eat fresh-cut fruit, vegetables and salads. And now were running a 60-year-old privately owned, closely held company.
This leads us into the story now, because in 2017 as we were in the middle of doing this, we had the effects of Hurricane Irma and then Maria, a Category 4 hurricane, devastating the island.
Q: It was heartbreaking to see the horrific destruction and hear the countless stories of human suffering. What happened to your company? How were you able to provide hunger relief during this humanitarian crisis, affecting millions of residents, many who already lived below the poverty line?
A: Caribbean Produce was blessed. We suffered no damages, and we found ourselves with our entire facility and infrastructure intact. The personnel started arriving ready to work.
Q: That’s incredible.
A: I know. We had inspectors go into the facility to make sure, and we couldn’t believe it. Inside it was like nothing had happened. And outside it was complete devastation.
Q: You were so fortunate.
A: Basically, we needed to figure out what we could do with this blessing, because clearly it was not for us to benefit. We had been spared, and we had been chosen to find a way with our capabilities to serve those impacted. We made a resolution that we could not let any of the fresh products we had in our warehouse go to waste.
Supermarkets were down because of power outages. Supermarkets are our main customers, but we couldn’t get the product we had in our coolers to consumers through that channel. We could go through foodservice, but what we decided to do was to start distributing our product to our people where they were, in shelters, and to the police stations, and churches, and the community centers. We just started dropping food for free so people could eat, and the food wouldn’t go bad. We were concerned that supermarkets weren’t operating, and we could have a serious hunger problem very soon.
Q: Could I ask you about the logistics for that? Were you set up operationally, how complicated was distribution with the power outages and all the damage inflicted on the island from the hurricanes?
A: That’s a great question. In that environment, there were no communications — telecom was down — so literally we had to go visit customers and take orders by hand and manually bring the orders back. It was like The Pony Express. We had to do this for 10 to 15 days, then slowly we could start sending texts and use WhatsApp messaging, but no reliable voice. Also challenging was securing fuel for our fleet, and fuel for our police cars. I could show up for work, but not know if I had enough gas to go back, because there were fuel shortages. There were also security issues we had to deal with.
So, seven days into this, we literally started sending trucks with food, with suggested routes for the drivers, but we said to them, whoever needs food, please give them the food. We weren’t selling food, just distributing it, to municipal government refugee centers, hospitals, community centers, wherever people hurt… we would just give them the food. We weren’t invoicing, we were in a basic survival situation, and we had this amazing, blessed reservoir of fresh food that we could help with.
Q: And you were able to overcome the challenges with perishable products...
A: You make a good point. With our facilities, we were able to secure fuel. We had everything refrigerated, we had beautifully unharmed food, and we just wanted to make sure it wouldn’t go bad because we knew there were so many people out there who couldn’t access food, basically because supermarkets were crushed.
Supermarkets had no energy, no communication, generators were going out, there was no personnel, supermarkets couldn’t order from suppliers. A supermarket would start up for three hours and then the generator would fail, and they would have to ask people to leave the store without the food they needed. It was a big crisis.
Q: Did you form new partnerships through this crisis?
A: Our CEO had just assumed the presidency in the middle of this, but he had already taken the bull by the horns; it was just a formality at this point. He started talking with the Red Cross workers, who arrived on the Island, looking to organize relief operations for the critical areas. They had to establish supply chains for food and water. So, when the Red Cross heard we were doing this, on the spot they hired us. In one hour, they delivered a contract to our email in a hotel where we could sign it.
Q: The collaboration sounds like it happened so organically, and that you were able to switch gears quickly.
We ended up having to hire hundreds of people to run the operations. And we also started assembly lines to put together boxes because this was a different concept. We had to prepare boxes that would be delivered with an assortment of food and water directly to consumers. We would deliver directly to communities that the Red Cross would identify and tell us where to go every day, and the next day we were running deliveries and assigning routes. They had personnel and experts detecting needs, and there were operations in each town to get food and water to communities, and they would make sure it would get into the hands of individuals.
It was an incredible and inspiring experience, where we recognized mainly how to put together this operation and have the ability to be of service in a moment of critical need.
It was so effective and efficient that FEMA then hired us to move first aid products for them. They had products in warehouses that they needed us to get to the people, whether it was tarps for the roofs or ponchos for raincoats for people who were without roofs, or dry, shelf-stable emergency food kits, or batteries, flashlights... So, these contracts we had with FEMA and the Red Cross were the way products could get through the supply chain to the communities.
Then we had to learn how to run these operations with the necessary accounting mechanisms. You’re under a commercial relationship, in an atypical situation, where, whoever you are delivering products to will inspect them. You’re delivering products to a beneficiary, and the person or organization paying for it needs you to account for the transaction of the donated product or what the taxpayer gave them. You must make sure it’s being delivered properly to the right recipient. So, it’s a whole different accounting and accountability. And this suited us very well with our company values, and therefore why it worked out well.
That was a gift of sorts in a crisis that we discovered our ability to put together all our capabilities to serve in these situations. We also had some earthquakes earlier this year in January, and we started working with the farmers in these communities impacted by the earthquake and their employees, and there were certain issues of food supply and hunger. So, we’ve been supporting non-profits and have been doing work in these communities, and also supporting our farmers.
Because of our experiences in dealing with these crises, we now have plans for readiness to serve in these extraordinary circumstances.
Q: This crisis readiness will be an asset for your USDA Families to Farmers contract...
A: It’s very purposeful work. It’s interesting because we had some strategy sessions last year, following what we did after the hurricanes. We decided to change our DNA and change our purpose. As opposed to being a produce company or a food distribution company, after having these experiences, we felt these crises transformed us and gave us new purpose.
Our purpose statement for our company is really about putting together breakaway solutions for life’s dynamic needs. So, we acknowledge that life is always dynamic, and after you go through these experiences as a community, as a person, you realize that stability is really an optical illusion.
And I think people in the produce business totally understand this, because we all live in a lively dynamic supply chain that is all about life and death.
We decided to embrace these things that happened and turn them into an overarching purpose for our companies.
Q: How did you find out about this USDA Farmers to Families Food Box Program? I was going to ask you what inspired you to get involved in the Program, but that’s now an obvious answer. So, how did this all come about?
A: There’s always a spiritual magic to how these things happen. It’s now about 3 weeks ago. The president of a local food bank came out in the local media with a cry for help. Hundreds of thousands of people are going hungry, our switchboard is overwhelmed by calls. I’ve never experienced this, and we have been dealing with earthquake hunger, but what has happened with COVID-19 has completely overwhelmed our system. We need help.
We reached out to her over that weekend. She said we need food ready to be distributed. It just so happened in those same days the USDA had communicated about this Farmers to Families Food Box Program. That Monday morning, our management participated in a USDA webinar offered to learn about the program and do an application. We found out we were awarded this contract on Friday (May 8th). As we speak, the operations have been laid out and the hiring has begun to put together the program.
One of the things that is very interesting about this one is we’re coordinating the resources of our industry peer group. So, because of our experience with the crisis relief, we’re putting together the services, the buying, the logistics, the preparation of boxes, the official standards, and the distribution to non-profits because we’ve done that piece.
In these boxes, we’re coordinating with the availability of inventory with all the distributors within and beyond produce, so with poultry, pork and dairy products — because those inventories were produced for foodservice and the school lunch program, which is huge in Puerto Rico — those channels have been shut down because of the coronavirus pandemic. It’s the coordination of all the sectors from farmers to distributors to food manufacturers to dairy plants to put it together and make an efficient distribution. And that’s what the USDA sponsored.
Q: Are you working with different companies awarded contracts with this program? Is the focus on local Puerto Rican farmers and distributors? Are these companies you already work with, or is it beyond that, with other U.S. companies, etc.?
A: Great questions. So the requirements and purpose of the program is to provide help to the farmers, which basically includes our farmers where we normally buy products. Though it includes local Puerto Rican produce farmers, local Puerto Rican dairy farmers and dairy plants, it also includes all United States producers of eggs, pork and of chicken and also buying U.S.-produced fruits and vegetables, from local and national growers as well as working with distributors in the U.S. – the program, designed to help US producers, requires that all the food be grown or raised in the United States.
We’d go to foodservice, but there is no foodservice because of the coronavirus, so we will now re-purpose it. It also includes buying inventories from some of our customers, who might have more than they needed and want to invest in helping people who don’t have the money to go into their stores.
Q: Could you explain more about what products you’re expecting to get from your supermarket customers?
A: In addition to supermarkets buying produce, they also have their own private label brands, dairy products, etc., made in the U.S. The thing about this program… the urgency is extremely high. We’ve started doing our first deliveries as of Friday (May 15th). I got the award the Friday before. People are having trouble securing food for the past three or four weeks. It’s been extremely hard. That’s why we’re moving so fast because people are going hungry.
In Puerto Rico, I’ll give you the statistics of how many kids depend on the school lunch program to get their main meal of the day. In Puerto Rico, under normal circumstances, it’s 58 percent of children.
Q: That’s a huge percentage.
A: In the U.S., two thirds of public-school students have their primary meal at the school lunch, but that’s public schools. If you include students at private schools, that number is lower. But in Puerto Rico, because of the poverty level, out of 100 percent of school-age children, 58 percent of students depend on that meal.
Q: I can only imagine how with schools closed. This additional financial burden becomes even more magnified, where food-insecure family members are losing their jobs...
A: Schools have been closed here since March 16. What happens is those kids belong to families, many in poverty. The challenge is the kids go to a household where they may be on food stamps, but the allocation is not enough to absorb the breakfast and lunch their kids were having five days a week in school. Now you have more mouths to feed on the same fixed budget.
Then you have the families, because such a large percentage of our children go to public schools here, that have lost their wages, who had private sector wages, having to absorb that loss of income. Then the unemployment benefit doesn’t kick in fast enough. And that’s the crisis that we have here.
A: This crisis has the two elements of health and economic. The health aspect… the Puerto Rican government made what turned out to be a very good choice early on. Puerto Rico was the first U.S. territory to go on lock down. Our governor announced this decision on March 15, with immediate effectiveness that next morning on March 16.
The challenge of this was there was no previous warning. But it was very effective in saving thousands of lives, absolutely. We have an older population. The average population in Puerto Rico is 55 years old, and our health care system couldn’t handle the crisis. We have a weak healthcare system. The determination was that our health care system could not handle large numbers of people needing to use respirators.
Q: But of course, there’s the double-edged sword, with the impoverished impacted most...
A: As you know, in a population of 3.2 million people, we’ve registered 114 deaths from the coronavirus. That’s it. But on the economic side, Puerto Rico is the poorest jurisdiction in the U.S., poorer than the poorest state, which is Mississippi. As a community, we have far fewer savings and far fewer cushions to withstand the economic effects of stopping the economy. That’s what’s driving the hunger. The loss of wages, the loss of school meals, and the limited benefits that people have received to withstand this effect… that is why the need is here for what we are doing, and why the USDA Farmers to Families contract award is proportionally so big.
Q: The USDA Farmers to Families Food Box contracts have become a hot topic, because produce industry executives are pressing the USDA for answers on why certain companies were chosen or given large awards, while others were not. For instance, why did CRE8AD8, an event and travel management company based in San Antonio, TX, receive a contract award of $39 million? Do you have any thoughts on this?
A: It’s important for companies to reflect on their abilities and experience to do these things. For me, it’s about how we’ve responded to the needs in our communities over the years, and about the special agility in our nature on how to handle this. We do these things every day, but it’s about thinking outside of your normal course of business to adapt to the challenges at hand.
Q: Are there opportunities for companies that are interested in collaborating with you to fulfill your contract?
A: Yes. We use our eco system of business partners. So, for example, our deliveries are done through independent truckers. Through our networks, if truckers are in an industry that is in a standstill because of the crisis, they can come and drive other trucks.
You have to address this systemically. When a crisis comes, no single organization has all the resources needed to respond to it. So, you must collaborate. That collaboration is one of our practices in our normal course of business, so it comes very naturally. I need this, you need that, and you start helping one another. Trucking is one. We hire people from our community when we have these peaks in demand. We reach out to employment agencies, since a lot of these people are the ones getting laid off from hotels or restaurants. You need to repurpose the abilities, talents, assets and resources of your community.
After Hurricane Maria, we put together a network of smaller distribution centers around the island that were the packinghouses of farmers that lost all their crops. The infrastructure was there, and it was food-safe. We made them part of the network of FEMA supplies, and food supplies that need to be stored, and we ran logistics using packinghouses around the island, their personnel and their infrastructure.
It’s all about the networks of trust. It doesn’t matter what you were doing before the crisis, how can you help today, and don’t limit yourself to a label. We’re not a produce company… we put together life solutions. It’s about having that openness to be of service.
Q: You talk about the synergies. Since our readers are produce industry executives, this discussion has been focused on the fresh fruit and vegetable segment of the Farmers to Families Food Box. USDA said it would “award contracts for the purchase of the agricultural products, the assembly of commodity boxes and delivery to identified non-profit organizations that can receive, store and distribute food items.”
It separates the procurement into three categories: fresh fruits and vegetables, dairy, and meat. “The distributors and wholesalers will then provide a pre-approved box of fresh produce, dairy and meat products to food banks, community and faith-based organizations, and other non-profits serving Americans in need.” By necessity, based on this description, wouldn’t it require such synergies?
A: The reason for the program is, Number One, to have USDA money to protect and rescue our farmers so they don’t go out of business and then, Number Two, people are going hungry, so who can make these connections? It’s about being the connector for the industry.
Q: So, when you’re receiving that $107 million contract, you’re splitting that between the industries?
A: Yes. I don’t know all the details yet, but the food box is designed with product category parameters set by the USDA – one-third fresh fruits and vegetables, one-third dairy items, and one-third meat, and the content of the box is an array. You can’t just put anything in there.
Q: How does the process work for you exactly? Are you doing separate boxes for each of the categories? I imagine there are different issues with the temperatures/refrigeration, and food safety, in regard to packing and delivering the different commodities...
A: The ramp-up was really a scale-up of existing models from other relief operations. And the company has been making grocery for consumers since late March for Medicare beneficiaries (senior citizens) under hire by the island’s largest Medicare insurance company. Very similar operational processes, just larger.
Here is a video that our team just put together of the first day of operations with the first boxes delivered to communities on May 15.
The dairy products (butter or margarine, white Latin cheese, UHT milk) go inside the same box as the produce. The meat products are picked separately under constant refrigeration. They stay separate all throughout, travel in the same refrigerated shipping containers and then are handed in 1:1 proportion to the boxes to the nonprofit organizations that will get these to each family or individual.
Q: That’s a cool video! It’s great that you were prepared to get the operation up and running so quickly. Could you elaborate on the assortment of produce that will be included in the boxes, and from which suppliers?
A: On the fresh fruit and vegetable side, for example, we’ll be pulling carrots from California, and also pulling local lettuce from the island and also local plantains and bananas from the island. It will be a whole range.
One of the things we learned is the food has to be part of the basic staples here. We have a tropical, Latino culture and that means people prefer plantains; they like potatoes too, but plantains are important. And we have local plantain growers who need that help as well.
Q: That’s an interesting point you bring up about being sensitive to the cultural differences...
A: We learned that with FEMA and the Red Cross. They had U.S. assigned meal choices and in some of it, people didn’t even know what it was. The FEMA emergency kit had things like beef jerky. Even if someone was hungry, they had never seen it before, and were scared to eat it. We went back to FEMA and said, ‘I think you need to assign culturally relevant boxes, so that people know what it is, and they know how to cook it, how to eat it.’
Q: Have you found with the coronavirus crisis, and with farmers having to get rid of surplus product, different types of products are more available or hard to come by?
A: Yes, very good question. Locally, the big surpluses have come from those suppliers to the school lunch program, specifically egg producers, milk producers, plantains, and tubers of different kinds, and lettuces, leafy greens.
Q: What are you foreseeing for the future?
A: That’s a great question. I wish I had a crystal ball on what’s going to happen. As we speak, the governor announced the first plans to open up the economy on May 24. Of course, we’ve been working because we’re essential. But we’ve implemented very high security measures for our employees and our customers.
We’ve been in nine weeks of lockdown. There’s a real need for income for our people and our businesses, and a real deep concern for which businesses will not be able to weather the storm.
I think there’s an effect now, I’m not going to get into the health or economic projections, but it’s the uncertainty of what this new world will look like, whether I’ll have a job, whether I’ll have a business, will our schools re-open in August… the uncertainty is so high. It’s making everyone so conservative and cautious.
Q: In many ways this goes full circle to how we started this interview, looking back to your inspiring presentation at the Global Trade Symposium back in 2015, about taking risks and finding opportunity during times of crisis. This philosophy intersects with how you approach the challenges now.
A: It’s interesting you make that connection. I was listening to a webinar today, Rebecca Henderson, a professor at Harvard. She was asking, ‘How do we remake capitalism?’ In the context of what this crisis is, and not just coronavirus, we experienced this with Hurricane Maria too. A lot of things are wrong with our society.
As a business leader, you need to define and embrace your purpose as a company. You have to make life a good expression of your deepest-held values, and then use the power of business toward those values. That includes your collaborators, your employees, and your suppliers to manifest your values into action when you find yourself in a crisis. Otherwise, if you try to hold onto your old definition of business or stay with the familiar cues and references you had the day before the crisis, you won’t find them because they won’t be useful anymore, and leave you with a loss for direction.
A: An example of a successful collaboration, we teamed up with Baldor, City Harvest and Crowley Logistics to donate tropical fruit to residents of the South Bronx in need during COVID-19.
Q: Your impact is multi-faceted and far-reaching...
A: In my other life, I have another business, a private equity fund, where I invest in food and ag businesses. We invest in passionate entrepreneurs who want to change the food system. I’m working every day with companies — we have six companies in the U.S. we invest in — and all have been catapulted forward because of the COVID 19 pandemic. Whether it’s offering local foods or healthy foods or a Latino element, or direct-to-consumer, this crisis thrust them forward because they are positioned towards the future. There’s a coherence to it all.
Gualberto won entry to the PRODUCE BUSINESS 40-under-Forty back in 2010. The multi-generational journey of his family in the produce industry is inspiring, but it is also true that necessity is the mother of invention… and Gualberto, recognizing that Puerto Rico is a relatively small market, has grown beyond simply selling produce. Some of that is his entry into the investment world but this interview also tells the story of his firm’s growth into products beyond produce.
Some companies have been quick to condemn non produce companies that have won bids for the new program. Maybe we’re crazy, but the Pundit has reached out and tried to help them succeed. After all, the program is supposed to help feed hungry people and the winners offered to do that at a low cost. We don’t know that Gualberto was such an expert in meat or dairy products, but we see this as a bonus that the program helps companies gain new capabilities while also helping people in need get food.
We congratulate Gualberto for seeing the big picture, growing the capabilities of his own organization and helping people in need. That is the point of all this. Sure, some meat or dairy people could complain that Caribbean PRODUCE Exchange is doing this. But they would be mistaken in their direction.
Those who love the produce industry should try to help the bid-winners succeed. All of them. Our industry will be thought of better if we get the food to those in need, and fast. Let that be our goal.