As Driscoll's readies for its peak season, the family-owned company is gearing up for a bumper crop with a record supply of California strawberries and a plentiful amount of blueberries.
But while much of the annual harvest is often routine, the presence of the coronavirus this year has upended much of that dance, forcing Driscoll's to shorten the period during which farmers supply it berries, change how the produce gets shipped to stores and how it's displayed once it arrives. Driscoll's accounts for roughly a third of the North American berry market, but demand for its perishable produce in the U.S. has dropped by about 20%.
"We haven't plowed a crop under yet and hopefully we won’t have to do that at all. But we are also having to cap the amount of production we're taking in because there’s not enough of a market," Soren Bjorn, president of global berry brand Driscoll’s, told Food Dive. "You can't just keep pushing the product to the market that just is not there."
With demand for its berries from restaurants, schools, hotels and corporate catering functions sharply lower, Driscoll’s has turned to retail to pick up the lost demand — a channel that is riddled with its own challenges.
Retailers have struggled to get its berries through the supply chain, leaving some of Driscoll’s product displays — used to spur impulse buys as consumers enter the store — smaller than usual. Other stores were simply too busy to set up the usual large display as they scrambled to keep shelves stocked.
"We haven't plowed a crop under yet and hopefully we won’t have to do that at all. But we are also having to cap the amount of production we're taking in because there’s not enough of a market. You can't just keep pushing the product to the market that just is not there."
Soren Bjorn
President, Driscoll’s
Salad bars that typically contain berries sit empty at supermarkets while prefilled fruit cups popular with on-the-go workers have seen demand drop, pushing sales for precut berries down 80%. In-store demos used to entice consumers or displays set up outside of the establishment also have their own hurdles.
“Right now, the people standing in line at the stores six feet apart, the last thing that they need is a berry display out front. And so those things impact sales because they work in normal circumstances and drive sales," Bjorn said. "Those are the kinds of things that need to come back, especially as we're heading into the peak season.”
Bjorn said March sales for Driscoll's were strong, especially in the last two weeks of the month as the company benefited from a broader consumer push to stock up. But early April saw demand slide before starting to recover again — a trend not uncommon throughout the food space. Bjorn expects revenue to fall about 15% to 20% in April.
"April is going to be very different, financially speaking, than we had hoped for a couple months ago, but we are keeping the business in tack," Bjorn noted.
He remains optimistic sales will pick up this month as the market stabilizes and retailers, who sell a lot of berries in May and June, look to cash in on the lucrative window.
Thinking outside the carton
After hundreds of Driscoll’s independent growers pick the produce, it’s delivered to the berry company's cooling centers before being transported to retail distribution centers. Coronavirus has upended that process in at least one case.
A Safeway distribution center in Tracy, California closed after some of its 1,700 workers got the virus. Instead of delivering its berries to the facility, Driscoll’s pivoted during a 72-hour period to start preparing the displays itself and trucking them to more than 200 stores every other day. The process, Bjorn said, is time consuming, more costly, less efficient and delivers lower margins, but it's essential. Another retailer on the East Coast has reached out to Driscoll’s asking about a similar arrangement.
"We want to make sure their consumers keep coming to their stores, keep buying our berries. And so for both of us, this was an investment to keep the business going," he said. "And I think that's the way it is for a lot of things right now.”
Unlike a can of soup or a box of pasta, berries are highly perishable. So when Driscoll's has a supply of berries, they need to adjust the price accordingly to find a buyer willing to purchase them or else they go bad. With plentiful crops and sluggish demand, there is a glut of supply that has put pressure on how much money Driscoll's and its 800 independent farmers receive. Prices are down 20%, prompting Driscoll's to end its Mexico berry picking season a month early in late April as it heads into its peak California season.
For farmers, those four weeks can mean the difference between a profit or a loss. Bjorn estimates it takes roughly $30,000 for a strawberry farmer to rent land, prepare the field and put the plants in the ground; for a producer with 100 acres they've already spent $3 million before harvest. Then when they pick the berries, they must spend another $30,000. With an acre of strawberries generating about $60,000 to $80,000 in revenue, the gap between making and losing money can be razor thin.
“There’s a very good chance that if we stopped four weeks early, that for that season, as a grower, ... there’s a very good chance that you lost money," Bjorn said. "Hopefully, they have another crop that they make some money on and they are strong enough financially that they can overcome that. And if they can't, then we will certainly have a conversation with them about what we can do to help them make sure that they stay around.”
Farmers, retailers and Driscoll’s all have a unified interest in berry production that goes beyond just the current growing season. If a producer goes under, that limits a potential berry supply the following year that would help generate money for all three groups across the supply chain.
Driscoll’s partnership with farmers, most of whom have worked with the company for several generations, is tied to how much they are able to get for a crate of berries, with the producer getting 85% and Driscoll’s the rest. Fewer farmers means less revenue for Driscoll’s to pay staff and invest in plant genetics or build a new distribution center. And less revenue limits how much producers can invest in their operations.
"If it's bad, then it's bad for all of us," Bjorn said.
