Everyone depends upon the grocery retail supply chain, and yet, few people have any idea how complex and sophisticated they are, at least until something goes wrong. Over the last three years consumers have felt the impact of product shortages and skyrocketing prices. Eggs have received especially intense focus, with prices increasing 60% in 2022.

Errol Schweizer has over 25 years of experience in the food industry. He has worked as the VP of Grocery at a major national retailer and has been a co-founder, board member, and advisor to over two dozen CPG companies.

In this episode, Errol joins host Scott Luton to shed a little light on the supply chain dynamics going on beyond the store shelves:

• The many different factors going into today’s historically high grocery prices

• How different producers in the food supply chain are responding to overall market conditions

• When – and why – shoppers might finally start to see prices come down

Intro/Outro (00:00:03):

Welcome to Supply Chain. Now the voice of global supply chain Supply chain now focuses on the best in the business for our worldwide audience, the people, the technologies, the best practices, and today’s critical issues, the challenges and opportunities. Stay tuned to hear from Those Making Global Business happen right here on supply chain now.

Scott Luton (00:00:32):

Hey, good morning, good afternoon, good evening, everybody. Scott Luton here at Supply Chain. Now welcome to today’s show. So on today’s show, we’re gonna be talking with a food industry expert to get a better handle on how the supply chains behind Eggs work. And why the heck are we seeing these prices for eggs? So sky high. In fact, consumers saw average, uh, average egg prices. Try, say at three times fast in the us, increase some 60% in 2022. So how do we get here and what lies ahead? Join us in a great show here today on supply chain now. So outstanding guests here today. Lemme share a little bit about him. He brings more than 25 years of work experience in the food industry to the table, no pun intended, from grill clerk to stock clerk and purchasing manager, all the way to VP of grocery at a big, uh, food retailer. Since 2016, our guests has been a board member, a co-founder and advisor to over two dozen food retail in C P G enterprises. He’s been featured in all the big publications from Forbes to New York Times, A Guardian amongst other media outlets, and Get This He guest lectures and a little bit of free time, a guest at Yale Rice, Stanford, and other, and other, uh, educational institutions. So join me in welcoming Errol Schweitzer. Errol, how you doing?

Errol Schweizer (00:01:45):

I’m doing great, Scott. Happy to be here.

Scott Luton (00:01:48):

Well, uh, thank you for carving some time out. I really have enjoyed your perspective and expertise on a variety of things, including the egg industry. And I’ll tell you with your background, uh, it’s good to have experts here really informing our audience of what’s going on. So thanks for the time here today.

Errol Schweizer (00:02:03):

Yeah, my pleasure.

Scott Luton (00:02:05):

All right, so before we get into the heavy hidden topics, you know, we’d like to kind of get a better sense of our guests here. So let’s start with, uh, where did you grow up? Errol

Errol Schweizer (00:02:12):

Bronx, New York, 1 0 4 67, right near the zoo and the Botanical Garden, uh, product of the, uh, New York City Public School system and the, uh, state University, city University of New York,

Scott Luton (00:02:25):

Man. Okay. You’ve got all the credentials, <laugh>, uh, growing up in, in that part of the woods. Let me ask you, so let’s talk sports a little pre-show. You are telling me you’re a big time Yankees fan and Nick’s fan, is that right?

Errol Schweizer (00:02:38):

I am. And it’s alternate ecstasy and heartbreak, depending on the team. <laugh>

Scott Luton (00:02:44):

<laugh>. Well, I

Errol Schweizer (00:02:45):

Gotta tell you, particularly being a Knicks fan, but this season’s been a little better.

Scott Luton (00:02:49):

Well, I agree. Uh, you, I think, uh, y’all played our Atlanta Hawks, uh, uh, three or four times, and, and your, uh, Knicks are a tough team handle as always, but even worse, at least from Atlanta’s perspective. Uh, in the nineties, man, the Yankees reigned on our Atlanta Braves parade more than once. I’ll always remember the 96 World Series, which was, uh, uh, Andrew Jones rookie season. And the Braves had a two games of one lead. And, and, um, y’all had a catcher, uh, and, and his name escapes him right minute, but he hit like a three run home run off. Mark Waller’s turned the series around, and y’all went on to win, I think, in six games. So, uh, and breaking our hearts while you did that, but what’s, yeah, all

Errol Schweizer (00:03:34):

That was a Jeter’s rookie season too.

Scott Luton (00:03:36):

I think you may be right. Um, and, uh, I’m gonna, I gotta think of that Catcher’s name. Leritz. Jim Leritz.

Errol Schweizer (00:03:43):

Oh, Jim Leritz. Yeah. Right on

Scott Luton (00:03:44):

<laugh> Man. Broke our hearts old. Well, hey, so of all those, you know, of all those, uh, title teams you, that the Yankees had throughout the nineties, uh, and, and, and really since the two thousands, you name it, what’s one of your favorite players?

Errol Schweizer (00:03:58):

Man, I really just love the squad with Mariano Rivera and Paul O’Neill. Um, just, you know, that, that, that late nineties, early two thousands. But I also have a soft spot for, um, growing up in the eighties in New York and the Don Mattingly, Dave Winfield era, even though we, we never won, but I still have a a 31 Winfield shirt. Uh, always been a Mattingly fan. So, um, I sort of pivot between those two because that was very emotional back then, and we could never really figure it out. And then obviously in the, you know, late nineties, early two thousands when, you know, it was the best team in the world.

Scott Luton (00:04:31):

No kidding, man. And Mariano, uh, Riviera or Rivera was like one of the, if he’s not in the best closure of all time, um, just the, the ultimate professional, Mr. Consistency man. Yeah. Uh, very jealous of all those teams. But anti digress. Let’s, let’s switch gears a minute. Cause I could talk, we could talk Yankees, Braves baseball, I think, for a long time. Um, let’s talk about, and

Errol Schweizer (00:04:54):

You wanna point out that Hank Aaron is the best baseball player of all time, and he was a brave.

Scott Luton (00:04:58):

So, yes. And still in my book, I’m partial the true home run king.

Errol Schweizer (00:05:03):

I, I agree. I think he’s the, the numbers king, the home run king man, much respect to Henry Aaron.

Scott Luton (00:05:09):

Amen. And what, and what he ba battled back then, the death threats and all the hate. And to be able to go out there and compartmentalize and still perform as professional. I’ll tell you, I’m, I’m with you. I’m glad you brought that up. Um, okay. I knew we could, we could make this a baseball, uh, three hour podcast. But putting that aside, I, I love your background again. I, I, I really appreciate you carving some time out, as busy as you are. Um, tell us a little bit about your background. I kind of lo, I kind of put it at a high level in the intro, you know, from, um, how’d you put it? Um, from Grill Clerk, which I can relate. I’ve worked in restaurants from for four and a half years through college, all the way up to the executive level and all points in between. Tell us a little bit about, uh, that journey.

Errol Schweizer (00:05:52):

Yeah. I, I started out actually 30 years ago. Come to think of it, um, just work in food service in college. Um, you know, prior to that I’d been, you know, a lifeguard and, you know, you know, working at day camps or other odd jobs you do as a teenager, but I really took the food service in college to, um, you know, help with tuition and, you know, have some spending money. Um, I, I made sandwiches. I was a grill, cook line server. I mean, I did everything in the dining halls. And then I started working at a little, uh, volunteer run food co-op, um, on, on campus. Um, that was, you know, pretty poorly staffed. And, you know, at the time I adopted some lifestyle changes and tried to start eating a little healthier. You know, I grew up in the Bronx and, um, you know, in the eighties in the Bronx, you know, it’s, you know, pizza and Chinese food and McDonald’s and, uh, <laugh>, you know, plenty of grocery stores.

Errol Schweizer (00:06:39):

It wasn’t a, you know, quote food desert by any means. But, um, you know, there wasn’t a lot of healthy options. So I started, you know, I started educating myself when I was in college about how to eat better. And, um, you know, inspired me to start working in, you know, national organic food stores. And I had a lot of odd jobs in my twenties. Um, me and my wife were just joking about it. I, I had a hard time holding down a job and commitments. But one thing that was consistent for me was working at farmer’s markets. I did CSA work. I kept doing food jobs, retail, food service. I worked in warehouses and supply chain. I was an E M T for a while, including, um, a short stint at Yankee Stadium as an m t. Um, but kept coming back to food, um, and worked at a number of retailers until I found my way to Whole Foods.

Errol Schweizer (00:07:22):

Um, and they hired me, um, at entry level, uh, even though, you know, had a college degree, um, all this experience. But they had an opening on the grocery team, even though I asked for produce. And, um, I just started out as a stock clerk stocking the drink box, um, helping with overnight inventories, fronting and facing the store throughout the day, uh, helping with customer service. And, you know, I kind of took to it, um, you know, I’m pretty good at basic arithmetic, you know, eighth grade math, you know, a little algebra, you know, it’s kind of what you need for, uh, <laugh>, you know, ordering and, you know, restocking groceries. I’m, I’m okay with the spreadsheet. You know, I was able to, you know, track sales and gross margin. I kind of educated myself to that. You know, I’m a, I’m a biology major and I, you know, I, I’ve studied a little bit of history and economics, but I never took a business class.

Errol Schweizer (00:08:06):

And so I just learned by doing mostly. So I didn’t get fired, you know, I wanted to make sure that we were, you know, maximizing our sales and profitability. And at the time, you know, I started at Whole Foods, uh, in Florida, and we were competing with Publix still. They still compete with Publix. And Publix is a great retailer, right? I think Publix, I think Publix is based in Florida, right? Arrow. Yeah. Like when Florida, and they, they’ve always sold organic food. Um, they’re, you know, they’re partially employee owned, so they’ve got a really committed staff. Um, and they monopolize, you know, large segments of Florida, 50 plus percent of market share. So I had to be very careful about pricing and assortment. Um, so I learned, um, you know, to be competitive, but also collaborative and, you know, you know, helping my, uh, coworkers, you know, learn the ropes. You know, obviously it’s always a team effort to stock shelves. You know, we’d get a truck in, uh, you know, 1500, 2000 cases, and we had between, you know, four of us, you know, three or four hours to knock that out, you know, man. So the customers came in. And so I got used to stocking 75 to a hundred cases an hour, got really good with a box cutter, a, you know, pallet jack, a forklift, a a cardboard bailer, you know, all, all the fun stuff,

Scott Luton (00:09:16):

Right? Errol, I gotta, I gotta chime in here because, you know, for, um, about a year and a half, maybe two years, my, well, my first job ever at $4, $4 and 35 cents an hour was my local Winn-Dixie Yeah. Uh, grocery store in Akin, South Carolina. And you just walked me through all my memories. I, I to tell you, <laugh>, you and your team was a lot more efficient than me, than me and the, the team I was on. So, um, anyway, please continue. You’re talking about coming to your background,

Errol Schweizer (00:09:44):

Always look so crunchy. But at first week I got there, one of the guys on my team says, you know, don’t, don’t listen to the hype. These, these folks are ball breakers. You gotta work. You gotta work. And he was right. And we did. Um, and so, yeah, I, I learned the ropes and, um, I just, after six months started applying for promotions, I started applying all over the country. Um, got, got rejected from most of them <laugh>, until I finally got an offer to move to Austin to help open the flagship Lamar store, where they, they hired me in as a, a world food section buyer. Um, and I was actually partially a regional buyer too. I worked outta the regional office, um, and had assistant, uh, manager responsibilities in the store as well. Um, so I did that for a couple years and then, you know, learned the ropes, uh, figured it out, and then started applying for regional buyer positions.

Errol Schweizer (00:10:35):

And I actually ended up getting two offers. And, um, my wife convinced me to take the one back home in New York. Mm-hmm. And so, uh, for a while, I was the regional buyer and regional grocery director in Whole Foods market in New York City, New Jersey, long Island, Westchester, Connecticut area. So if you ever City lot, oh, I went from having the responsibility over, you know, uh, a team that was doing, you know, 300, maybe $400,000 a week to a team that was doing, you know, 15, um, you know, 150 million a year. Hmm. 200 million a year by the time I left. And, you know, with everything else, I was focused on maximizing sales and profitability through selling really good food. Um, and so I learned about category management, a bit about supply chain. I learned quite a bit about pricing strategy and promotional strategy. I worked with dozens, probably hundreds of local suppliers to merchandise their products. I negotiated, um, or helped our national team negotiate deals with national suppliers, and, um, added about 350 basis points of margin, um, including a good growth and top line sales. And I was asked to apply for a role back in Austin to work on the national team.

Scott Luton (00:11:45):

And was that the, and, um, was that ultimately the VP of grocery role?

Errol Schweizer (00:11:49):

No, that, that was sort of the assistant global coordinator role. Um, I would give, give a shout out to my friend and mentor Perry Ante, who, um, was the, uh, global coordinator, quote, you know, VP of grocery at the time, and, uh, recruited me and mentored me. And then, uh, he took a better opportunity. And, um, I was asked to apply for his job, which I did. And then I did that role for seven years. Okay. So I was at, by the time I left, I grew up from about 1.8 to about 5 billion in sales with my team. Um, added about 250 to 300 basis point gross margin. But in the meantime, what we did was we, we launched dozens, probably hundreds of products into household names. Uh, we developed supply chains, you know, really specialized, uh, unique supply chains on non gmo, um, organic and regenerative, as well as working with kosher and halal suppliers, plant-based grass-fed.

Errol Schweizer (00:12:42):

We, we really focused on, um, ethically and impact motivated entrepreneurs and cooperatives. We did a ton of negotiation with big C P G two. I’ve sat across the table from all, you know, the Nestle m and m, Mars, general Mills, Kelloggs, Coke, Pepsi, you name it. Not afraid of that scene. Um, but it wasn’t what inspired me, right? You know, I like working with the folks who had a great idea, um, had a great cause and a great product to make them into national suppliers, which we did for, for many products. And then, um, you know, economy changed, the, uh, industry changed, and I’m a very opinionated New York Jew, and, uh, we decided to part ways. I, I’m still on great terms with Whole Foods and my friends there. Um, and I’ve been a board member, advisor, consultant, you name it, for about two dozen retailers, mostly indie retailers, C P G, uh, package, food companies, startups, emerging brands, some investors. I’ve worked on, uh, everything from, you know, chapter seven, chapter 11 turnarounds to, you know, starting up a company from scratch, uh, man into emerging brands, and still continue to do that to this day. So it’s, it’s my love and my passion.

Scott Luton (00:13:53):

We’re gonna get into against Street in a minute, but, but just give us a couple things. Um, you know, like in tw here in 2023, January, 2023, when we’re recording this, of course it’ll be released in February. But, uh, what’s a couple things that are going on right now in the food industry that, that, um, that you feel like we should set the table with perhaps?

Errol Schweizer (00:14:11):

Well, I mean, I, I love the, uh, topic of the podcast supply chain. I mean, I don’t think anybody outside the food industry really thought about food supply chain before, you know, March of 2020, maybe even April of 2020, right? Um, and even then, the, the, the, the effects of what happened in that timeframe were delayed, uh, by a bit. Um, and what we went through was this cycle of, um, the economy kind of stopped, you know, uh, just about three years ago, uh, particularly food service, and then restarted jumpstarted, uh, in the midst of a pandemic. And so, not only did we see, you know, obviously in the food industry, really, really horrible things like, uh, food workers died and hundreds of thousands got infected and got sick. Uh, but we saw a rapidly changing erratic consumption patterns. You know, I come out of category management and supply chain, and you watched your sales religiously so that you can detect and react to patterns.

Errol Schweizer (00:15:13):

And it’s a lot of what predictive analytics and a lot of the tools we use to, you know, replenish ourselves and determine what else we need to be carrying and what is, what is not, uh, being sold. And that all blew up and it continues to blow up. But it, that was the first time in, in my experience, and I had been working at the time for two different retailers that, um, you didn’t have a basis to compare to figure out what you needed to sell. Um, and how much of, and this is before any pricing crisis. This is just, this is just replenishment. This is just determining what people wanna buy. And, you know, you start seeing trend reports come out three years ago about, oh, comfort Foods and, you know, key national brands and people, you know, are, are snacking at home because they’re working from home, or they’re not commuting as much.

Errol Schweizer (00:16:00):

And so trying to react to that, um, people are wanting to take better care of themselves. You saw a big boost in organic sales and non G M O sales, you saw a huge boost in plant-based sales. Um, and so that’ll start happening. But on the other hand, the supply chains themselves were, were built on a foundation of spreadsheets, you know, and a lot of us have dealt with the, you know, just in time, um, style supply chain management Sure. Where you’re having a manage inventory really tight to watch your cash flow, to keep a focus on profitability, ultimately towards better bottom line performance, which means on a good day, you’re, you’d rather go out of stock on something than actually keep it in, in stock if it means that you’re spending too much to do so. Right? Um, and so when you multiply that by a billion across, you know, you know how many transactions are happening on a daily basis in this country, in the food industry, you end up with what happened, which was, um, out of stocks and log jams where the supply chain was built for productivity and efficiency, but it was inflexible.

Errol Schweizer (00:17:05):

Um, and it was fragile. You know, the, the notion of fragility versus anti fragility, it was very helpful for me in an understanding what was happening here. Um, and a friend of mine who’s been in it longer than me, it was like, yeah, just in time was built for the, the CFOs <laugh>, which is actually not true. When you read about what it was, what it, how it’s been done in Japan. It, it actually wasn’t, it was built for, um, it was actually built for anti fragility. And here, the way it was adapted. So what that meant by, you know, 6, 8, 9 months later, you started seeing stuff really go out of stock, like really big problems with delays. Um, and then compound that with, you know, weather events. Like here in Austin exactly two years ago, we had a really deep freeze. Um, and it took, you know, even well prepared retailers like h e b is probably the best retailer in the country on that sort of stuff. It took them weeks to recover. It took Whole Foods many weeks to recover.

Scott Luton (00:17:57):

Y’all, y’all might have had some waffle houses that went down for a little while, which never happened. That happened two years ago. <laugh>. Yeah.

Errol Schweizer (00:18:03):

Waffle House is the ultimate resilient supply supply chain, <laugh>. So it, it, it affected everybody, but it was these compounding effects, right? And so then supply demand, um, as well as, you know, challenges with, uh, illness and then turnover where people working in the supply chain, people like us who came up through the ranks, but also people in those ranks were like, I don’t know if I’m getting paid enough for this <laugh> part of my fringe. Like, um, it was stressful, it was hard for folks, and you started seeing a lot of turnover. Uh, you started seeing a lot of folks going for other jobs. Um, you got, you started people seeing people ask for, for raises. And, you know, uh, what I feel is a welcome boost in interest in unionization that people were willing to actually stand up and ask for more and better.

Errol Schweizer (00:18:49):

Hmm. Um, but that was yet another factor that impacted the supply chain and then impacted, uh, prices. Right. Um, I also wanna point out that early in the pandemic, you saw the first wave of pandemic, what we call pandemic profiteering by big retail conglomerates and C P G conglomerates, you know, with this boost in supply chain, that’s huge jump in sales with, you know, the, you know, uh, that food service was quiet, wouldn’t shut down. Everybody was eating at home, cooking at, at home. I mean, the retailers had a bonanza, especially the bigger retailers, huge boost, not only in gross margin dollars, but you saw a big boost in the gross margin rate as well. Um, and so, you know, obviously that made the shareholders happy, made the investors and some of the executives happy, but it created the expectation that retailers gonna keep producing this type of profitability. Right? And so when you start a grocery,

Scott Luton (00:19:40):

It gets addictive, right?

Errol Schweizer (00:19:41):

It gets, oh, yeah. I mean, you know, gross margin, it’s crack, right? You know, it just, you, you wanna keep getting more and more and you have to be very careful, uh, with your unit economics, right? When you know, it’s obviously that’s the whole elasticity, um, you know, equation. So what then started happening with the supply chain stuff and, you know, the push into profitability, you know, labor issues, uh, you started seeing prices start increasing, particularly in highly consolidated sectors. It really started out in the meat poultry sector, first to the point where like, it became like a federal issue after six months. Um, you know, meat, poultry, it’s, you know, it’s like four or five firms control like 80% of the market, right? And it’s, it’s an oligopoly, you know, just straight out of the dictionary.

Scott Luton (00:20:21):

Yeah. And it’s, and it’s interesting, I think on the consumer side with some of the scary things that you hadn’t seen, most people haven’t seen in their life, their lifetime here in the states of some empty shelves or empty coolers or what have you. Once it was available, it was like, it was, you can get all you could, and they were, and, and what went with that mindset, at least from what I’ve, I’ve observed and what I perceived is that fear of missing out, you’re gonna pay those higher prices and just keep, keep paying as you’re getting through that stretch of the, of especially the pandemic. Cause there was a lot, there was a lot of fear in general. Um, and that, that, uh, my hunch would be that helped sustain that, um, the, those profit margin maximization efforts that you were speaking to, right? So you, you had it on the, the, the corporate or industrial side in terms of the initiatives. And then the market was embracing it based on kind of the, the psyche of the consumer, I’ll call it. So you’re, um, and all of this may be, is there anything else before we move into the egg industry? Anything else you think really as, as where we are today? Any other background topic you wanna bring to the front before we talk eggs?

Errol Schweizer (00:21:24):

Yeah. Just to put a bow on the pricing discussion, what you’ve seen particularly in the last 18 months, is that behavior, which we would probably refer to as price signaling, where retailers, um, c PPG companies, you know, even investors were all like, Hey, now is the quote inflationary timer. If you’re gonna move on price, move on price. Now put, put out a price change. And I was talking to a colleague, a fr a long-term friend who works at a grocery store locally, and he was just saying where they usually change price tags once a month or changing price tags weekly, cuz they’re getting all these price increases from their wholesaler who’s getting all those price increases from all the brands. And now where I things think things got out of control is that a lot of folks, um, double dip and sort of increase the rate of retail over the rate of cost increase, which is, you know, the, the, the profiteering, the margin grab.

Errol Schweizer (00:22:16):

And that’s how you ended up with, um, where we’re at now with these really high prices. And, you know, there’s some analyses, economic analyses that have pointed out that about 50% of the price increases are just that profit margin Wow. As opposed to the pass through from cost to retail. Mm-hmm. So, you know, not to say that, you know, there obviously are a lot of very real reasons why prices have gone up well over the rate of, uh, of, of wages, by the way. Mm-hmm. I believe it’s, you know, the overall, uh, inflation is at least 200 basis points higher than the rate of wage increase. Wow. So that difference is the profiteering. And, you know, I think it was q3, uh, profits were the highest ever was like, uh, 2 trillion in corporate profits. Wow. And when you look at the companies, and I’ve documented this in my Forbes articles pretty extensively. Um, and so where, where we’re at now is there <laugh>, is we are now continuing to pay those, those prices, the, you know, the shareholder buybacks and dividends, those, those checks have been cut to investors and shareholders, but those prices are not coming down.

Scott Luton (00:23:19):

Man, err so much to ask you about. So little time. I really, I feel, I feel like I’ve gained a certification through, uh, hearing your take on, you know, all, you’re almost 30 years in the food industry and kind of walking us through all that. Um, let’s talk eggs. Um, so now that you’ve kind of given us, um, a macro, uh, perspective of what’s going on across the food industry, especially in the last two or three years, even up, up to right now, um, of course, as I mentioned on the front end, eggs, generally speaking on average for consumers here in the us I think we’re up 60% in 2022. Um, and we’re still, I still see it in my, on my social media <laugh>, all my, my family and my friends are all talking about the price eggs. What factors have been impacting the egg industry here lately?

Errol Schweizer (00:24:08):

Yeah, eggs are real interesting because, um, they, you know, come from an animal, um, and yet are kind of treated in, in grocery stores more like a packaged product, um, as opposed to, you know, a fresh product or, you know, uh, you know, piece of meat or, um, or even milk. I, I consider eggs to be a very different type of category. Um, and so the, the numbers are raised, you know, I, I’ve, I’ve seen, you know, bureau labor statistics say 60%, Iris says 80%. Um, you know, I’ve seen even higher numbers. Eggs are, you know, multi segmented category. So there’s a lot of different prices you’re gonna see. But what all eggs have in common are actually the supply chain factors that, um, create these, you know, no pun intended, layers of cost of, you know, how the price is actually calculated. Um, and you know, the main factor in, you know, influencing supply now was, um, the avian flu, um, which primarily impacts high density operations or what we call factory farms.

Errol Schweizer (00:25:09):

You know, that’s, that’s why you’ve seen these operations with, you know, 10,000, a hundred thousand birds have to be cold. And ultimately they’ve had to coal like over 60 million birds, which is really astronomical and horrifying idea that they’ve, you know, suffocated or buried alive or, or the live, you know, all these birds because they find one instance of avian flu in a flock. That whole flock’s going down because it’s so, uh, virulent. Um, and so it’s really horrifying. And, you know, I would say the one lucky thing is we haven’t seen any kind of avian flu jump to people at this point. We’re, we’re still in the midst of the, um, you know, the covid 19 stuff. The last thing we need is some, uh, H five N one, H one n one, or whatever the, uh, the strain is of avian flu. Hmm. All right.

Errol Schweizer (00:25:55):

So, you know, that’s sort of the context. Um, and so eggs, you know, there’s a farm, and the farm is not always our pastoral fantasy. It’s usually a very large barn with, you know, tens of thousands of hens crowded into, uh, you know, you know, a large space, you know, laying eggs. You know, there’s, there’s workers who go about gathering the eggs. There’s conveyor belts that, you know, that are transporting the eggs so that they could be, uh, washed and sorted, um, and then packed. Um, and then, you know, the eggs get picked up and they get sent somewhere else. Right. And so anytime you, you touch or you move something, there’s costs associated with it. Right? And so, um, let’s start with the chickens themselves. Okay. The main factor in the price of eggs, believe it or not, is actually feed. Um, and depending on the type of egg, how it was produced, where it was produced, um, what was fed feed could be 50 to 75% of the price of that egg period.

Errol Schweizer (00:26:50):

Really. So if you wanna watch the price of eggs, the other thing to watch on a regular basis is the price of feed, primarily corn. Little, to a lesser extent, soy, uh, my team at Whole Foods used to buy feed. So, um, I, like I said, I’m not an economist, but you know, I, I, I, I can, um, you know, survive by pretending to be one day to day <laugh>. Um, we used to watch the cme, you know, we, we used to watch feed pricing. We used to negotiate with feed suppliers. And on the other hand, now I also watch, you know, the profit profitability of feed suppliers too. You know, grain commodity markets, you know, grain, uh, speculating is highly unregulated. Uh, or I would say misregulated in the us. Mm. You’ve seen huge profits from Archer Daniels, Midland, and Cargill and Bunge, uh, and Dreyfus, what we call the A, B, c, and D of grain trading. Um, and that influences, yeah, uh, impacts feed pricing, you know, so feed pricing has been very high, um, you know, in and of itself, even outside of the avian flu. Um, so that’s probably the second largest impact to, um, the egg prices. Now, just go ahead.

Scott Luton (00:27:54):

So Ariel, if I’m following along here, uh, the type of, uh, bird that’s producing the egg is a big factor. And then to feed the type of feed they’re using, um, to produce a particular type of egg is a really big factor. Is that right?

Errol Schweizer (00:28:08):

Yeah. In terms of the type of bird and the type of feed, you know, you have, um, conventional eggs, you know, usually from a concentrated animal feed lot, you know, uh, concentrated barn operation. Then you have quote, cage free eggs, um, where, you know, the animals at least are not in a cage. Um, you know, they’re, they’re also technically in a very large barn, very concentrated. Then you have organic eggs, um, which are produced under the U S D A organic standards, which governs the type of feed they can use. Uh, some of the other conditions, um, used in the raising of the hens. And then you have a small but growing specialty egg, um, you know, category particularly called either regenerative or pasture raised. Um, very small market segment, um, where the, the hens actually get to go outdoors. And a lot of organic and cage-free operations enable outdoor access too.

Errol Schweizer (00:28:58):

Uh, but the pasture raises, you know, regenerative, um, usually already the most expensive really emphasize, and all these types of eggs, all these types of hens, they eat, feed, you know, in the Pasteur, raise the outdoor, um, hens actually eat a little less feed as a percentage, cuz they’re actually grazing on grass and they’re eating bugs and worms, which is why when you, you look at one of those types of eggs, the yoke is like sometimes bright orange as opposed to b, kind of a pasty yellow for, um, you know, most conventional or even a lot of organic eggs where they’re mostly indoors eating, uh, corn and soy feed all day.

Scott Luton (00:29:31):

Well, err as you’re talking about the diff all these different types of eggs and preferences, is that, uh, examples of a segmentation out in the market that you wrote about?

Errol Schweizer (00:29:40):

Yeah, that’s part of the category segment segmentation and, you know, these different attributes, um, you know, these different production methods lead to different price points. I mean, all we’ve talked about so far is what’s going on in the farm gate, right? Um, but those are two of the main influences there as well. You know, and the, one of the things that I also emphasize a lot in my writing are what we call externalities of cost. Um, you know, in this country we don’t really regulate pollution very well. Um, you know, and so when you look at the runoff from farms and you look at, you know, herbicide or pesticide drift, uh, you know, when you look at fertilizers spilling into the Gulf of Mexico, we’ve got a dead zone in the Gulf of Mexico, the size of New Jersey, no disrespect to New Jersey. Um, you know, and that’s all coming from runoff from mostly animal agriculture and large scale corn and soy mono crops.

Errol Schweizer (00:30:30):

That is a cost externality that does not get factored into the price that moves up the value chain. So that’s something else that I’ve written about quite a bit too, um, because a lot of production methods are trying to do more true cost pricing. And for the most part, 99% of eggs probably don’t have a true cost, although I would say a lot of the really expensive organic and regenerative stuff is attempting to. So that’s just something else to consider, uh, is the cost externalities that we don’t take into account. Um, and, you know, I would say one of the internalities that we are taking to account now is profitability. Um, right. And it just got revealed by Farm Action, which is a nonprofit, this is something I didn’t even know. Um, I know, I know how concentrated the conventional egg market is. It’s maybe a, you know, a dozen companies that control about half the market, so it’s not too concentrated.

Errol Schweizer (00:31:19):

But one of the main egg suppliers, KMA apparently had a, not only 110% increase in profits, uh, in sales, but a 600% increase in profits. Right. Wow. And so when we talk about like, sort of the connection between profiteering and price gouging, you know, they’re responsible for maybe 20% of overall egg sales. So I would actually counter that they’re not responsible for what’s going on in the category. They have, however, taken advantage of the category and really host consumers of their own products by raising, once again, retail price above the cost of, of production so that they’ve gleaned additional margin. But for the most part, you’ve got these very real world, uh, impacts to the supply chain that are, you know, governing these price increases, which aren’t gonna last. By the way, I mean, you know, hens take, you know, you gotta grow out hens for maybe 18, 20 weeks for them to be able to lay eggs.

Errol Schweizer (00:32:11):

So as long as the, uh, rate of adding flocks to the supply chain, uh, is higher than the rate of coals, you’ll start seeing more and more eggs come into the marketplace. And the other thing I wanna point out is that the supply chain for eggs is super squirrely. I’ll just say that. It’s just like people trade eggs. They move eggs around, you know, when they say farm fresh, you know, hopefully there’s traceability that they know where the eggs actually came from. One of the things that I worked on at Whole Foods. Um, and I’ve actually consulted for some other retailers and brands as full traceability and tracking the eggs. Sure. We developed a standard when I was there of tracking the eggs from farm to shelf. Like it had to happen. We had to know where the eggs came from, which is not only a food service, food, I’m sorry, a food safety issue, um, you know, but you know, it’s a customer service issue too, to be able to actually say that. So eggs get traded a lot too, and moved around, which is sometimes a problem, uh, when there’s recalls,

Scott Luton (00:33:06):

Man, uh, provenance. If Greg White was here, he would say provenance. Um, all right, so feed hens type of eggs, externalities, I don’t know if I could say it. <laugh>. An internalities. Uh, all good. Um, before we move, so all of this kind of speaks to factors and the layers that go into all the pricing. Um, cuz you just mentioned that. Uh, kind of a forward looking comment there about where we’re going Before we get there, anything else that we need to add to this list about what goes into pricing for eggs?

Errol Schweizer (00:33:43):

Yeah, I got a few more, so bear

Scott Luton (00:33:45):

With me. Please do. Yeah.

Errol Schweizer (00:33:46):

Um, so the eggs have to get packed, uh, into cartons. Sometimes it’s done on farm, you know, for a smaller operation. Um, you know, I’ve, I’ve spent some time at, uh, Jeremiah Cunningham’s World Best Eggs here in Austin, um, when they were out in Elgan, and I’ve watched them pack eggs. I’ve also been to some larger facilities where the eggs get shipped from these farms. They get, they get picked up and these, you know, these, these bigger trays, and then they get packed in an off offsite facility. So there is a cost associated with that too. You know, there’s the transportation, obviously fuel costs have come down, but they’re still relatively high. And then you have labor costs. Um, so the labor costs overall are a pretty low percentage, um, of the, of the cost overall. And once again, another externality would be if you are not, um, paying your workers a living wage or you are hiring as what’s happened in the meat industry recently, or a lot I should say, is trafficking or underpaying employees.

Errol Schweizer (00:34:42):

Like, I think J jbs just got nailed for that. Uh, again, um, hiring underage immigrant kids to, uh, pack meat in the eggs, uh, industry, we haven’t seen as much of that. We haven’t heard as much of that. So, um, all in all though, that labor is a big part of having to pack the eggs. And so there is a markup associated with that, right? And so once the eggs are packed, there’s a higher cost that’s come from, you know, the farm gate price, the transportation, now the packing, right? So once it’s packed into your convenient 12 or six or 18 count cartons, uh, here in the United States, or those of you in Europe or elsewhere, that’s, we, we pack our eggs in odd numbers, <laugh>. Um, and we wash our eggs too for our, you know, European listers. They don’t wash their eggs, which is why they’re shelf stable in Europe, uh, which I discovered when I was working in Europe several years ago.

Errol Schweizer (00:35:28):

And, um, then the eggs are either picked up or shipped to a wholesaler. Now wholesale is a, um, very interesting complex, mostly invisible, uh, part of the supply chain, except when you’re on the highway and you drive by a truck and you see either, uh, cns, uh, or U N F I or, or KeHE, um, or McLane or, uh, Spartan Nash, I think I’ve named all the big ones or smaller, smaller wholesalers. Um, you know, give a, a shout out to, uh, checks foods, uh, in, uh, in the Northeast or um, DPI in the Mid-Atlantic. These are wholesalers. And what they do is they are the go-between from supplier to retailer and they have a markup, uh, particularly, um, for retail, I’m sorry, for wholesalers that have a labor proportion of their, their service where they’re actually stocking product as well. Mm-hmm. <affirmative>, a lot of mm-hmm. <affirmative>,

Errol Schweizer (00:36:23):

Smaller wholesalers, particularly in New York City, um, like Dora’s Natural or um, um, you know, rainforest distribution, they also stock or merchandise product. But the larger ones like a UN NFI or a C N S are just about a truck. It’s just the truck taking it from their facility. So the eggs go to a wholesaler. Um, they’re in that facility and, you know, with, you know, just in time and, you know, other supply chain methods and the fact that eggs are still perishable, they are rotated quickly first and first out, um, hopefully and eventually end up on a truck to a retailer, right? And so there’s a cost associated with wholesale, and it’s between 10 and 30%. It’s between five and 30%. Even if you, if you’re talking about like the most efficient types of wholesale that like, um, you know, Walmart or Kroger or are doing in terms of their own internal wholesale.

Errol Schweizer (00:37:14):

Cause a lot of larger retailers do their own self-distribution, and then a lot of mid-size retailers are still able to do their own perishables distribution, which I don’t wanna get into the math of why, you know, perishable, some perishable products are easier to self-distribute. I’ll just say it happens. Um, so you have the wholesale markup, right? Then, um, the brand gets to the retailer and retail markups, uh, or margins in the ED category can range from, you know, not too many loss leader. There are some, there could be some loss leader to low single digit margins, you know, depending on how competitive the category is to up to 35, 40% margin or markup, depending on how you wanna calculate it. Um, Google margin to markup calculator in your spare time. <laugh>, I used to keep that formula on my desk at Whole Foods, <laugh>. Love it. Anyway, so you have a retail markup, um, that could be between, you know, zero and 40 points and you never know that as a consumer, you don’t know what the wholesale price is and you don’t know what the, um, retail price, uh, sure.

Errol Schweizer (00:38:16):

Price margin equation is. And it could vastly impact the price of eggs to you. If the mar, if you know, a retailer is getting eggs at, you know, at their back door for $3 and decides, oh, I have to compete and just sell this at costs, it’s $3. Or if they’re saying, oh, I could plug a, you know, a 30% markup to it, well, it’s a $4 egg, right? Et cetera. Um, and so the retailer margin markup is a huge piece of why egg prices, I, I I I say mostly arbitrary between the externalities and the retail price. Egg pricing is all over the place. Um, and it’s like that, I would say for most categories. Now, another piece I didn’t talk about is the brand itself and how the brand, uh, does business or, or the marketer like whether like the van, whether Cal Main Yeah, yeah.

Errol Schweizer (00:39:07):

What you see on the label, you know, it’s Horizon Organic or it’s Vital Farms, um, or it’s Handsome Brook or, uh, Pete and Jerry’s, I’m naming all my favorite egg companies, <laugh>, um, et cetera. Or it’s a, it’s a Simple Truth or a Lucerne or 365 or Kirkland, right? Those last four are actually store brands. So this is where, um, the company, the retailer itself, um, contracts directly for the eggs, usually at a, at a annualized price. They usually get annual contracts. Um, it’s what we call dead net, um, or E D L P. Like it’s an everyday low price. Um, and it’s usually the best price in the category. These are your store brand or private label. However, all the other companies that I just mentioned, some of whom actually do private label too, some of whom don’t, and some of whom are just marketers mm-hmm. <affirmative>,

Errol Schweizer (00:40:01):

Um, they’re just a label. Like, uh, horizon is a marketer. Organic Valley is a marketer, you know, they, they get the eggs from their either organic valley, they’re, they’re cooperative member farms or Horizon, you know, contracts out for eggs from, uh, from, from growers, et cetera. So these types of third party brands, consumer packaged goods companies have their own margin associated. And this margin usually gets plugged in after the farm gate price. Hmm. Um, and, you know, depending on the brand, they’re putting in a, you know, their own 40 points, sometimes more, you know, sometimes a little less that they run a little more efficiently, and that, that has to pay for their own overhead, their own labor, their own, you know, general administrative costs. But they also have trade spend in the industry. Um, trade spend is that part of the budget for food brands that is then accrued for and plugged back into the retail price to give you intermittent sale pricing, promotional pricing coupons, or to pay for wholesale or marketing, you know, wholesale flyers or, um, you know, wholesale shrink <laugh> wholesale deductions.

Errol Schweizer (00:41:11):

There’s a whole other, you know, kind of really complex and gives you a headache if you think about it too much of how wholesale billings work to, to brands, but also how the brands manage their, um, promotional pricing with retailers. And, you know, you don’t see eggs on sale too much, but occasionally you do. Right? Well, that is through an accrued trade spend. So the reason why I mentioned trade spend, you know, all these things that I’m talking about are, are massive industries. You know, grocery, retail, 830 billion a year. Hmm. You know, of which Walmart and Kroger control, you know, close to 30%. Hmm. Um, wholesale, very large industry cpg, very large industry trade spend sort of at the intersection of all this, um, is like 200 billion a year industry, private label store brands, 120 billion plus dollar a year industry, right? So the, these are not all insignificant factors in our economy, but also in terms of when you plug in pennies across the value chain, right from farm gate to packing to wholesale, you know, with the brand then to retail, it all adds up to the whackadoo price that you see on shelf.

Scott Luton (00:42:25):

Well, and, uh, so there’s, so as, as you walk just through all that, most of our listeners will pick up, there’s a ton more complexity than we all ever imagined in the egg industry. So let me ask you this. I, I wanna, I wanna try to shoot for the 80 20, not that the math works up like that, but for most of our listeners that are here in the states that may go to one of the big, uh, grocery retailers that you mentioned. And, um, and well, what’s the biggest category? So what’s the one biggest category for egg sales, would you say? Errol?

Errol Schweizer (00:42:58):

I mean, um, still the majority of egg sales are conventional factory farm raised. Okay. You know, concentrated animal feed locks are highly efficient, highly externalized, but also like just the productivity, the sheer caloric value of the amount of eggs. And then the next one down would be cage-free conventional.

Scott Luton (00:43:15):

Okay. So

Errol Schweizer (00:43:16):

That first we just see something cage-free and then organic.

Scott Luton (00:43:19):

So, okay. So on that first one, which is, uh, sounds like that’s what the majority, or maybe at least the plurality of consumers here in the states are, are, are going out to buy and they’re seeing the price stickers. We walked through a variety of factors and, and the layers that go into, it’s amazing. Next time we’re gonna do this in person and we’re gonna grab a whiteboard and we’re all gonna get a certification thanks to Errol Schweizer about the complexities of the egg industry. But speaking to that, at least, that plurality, if not a majority, what’s the single biggest factor out of all of those and what’s gonna bring it down? What’s gonna bring it ba down even if we don’t get back to where we were, say a year, 18 months ago? What’s gonna bring that down to at least a more, I’m not gonna say reasonable, right? Cause pricing’s all relative, but get it closer to what we were paying. What are the, what are the answers to those two questions you think?

Errol Schweizer (00:44:14):

Yeah, it’s just the prevention of avian flu, which, um, I, I would definitely be very, um, circumspect about, if you’ve ever read, um, epidemiologist named Rob Wallace, he has a book called Big Farms Make Big Flu, where he is, um, you know, pretty thoroughly documented how, you know, factory farming gives rise to, uh, these types of, uh, animal, uh, pandemics. Um, so I, I, I hope, um, that we see flocks recover in order to bring food prices down because, you know, ultimately, you know, we need to talk about a transition in our food system, but it needs to be a just transition in terms of sustainability. Um, and what we have with these types of pandemic supply chain. Now, avian flu, these are unjust transitions. It’s unfair particularly to cash strapped consumers. Folks who are on SNAP or wic, which are 40 million consumers, um, are on, on snap.

Errol Schweizer (00:45:11):

You know, it’s, I estimate about 15, 10 to 15% of national annual retail sales is snap. Um, so all this food inflation has really hurt, uh, folks with the least amount of money. But then the re you know, the rest of us who have varying levels of income are also paying a lot more. And so the main thing is the recovery of the flocks, right? Uh, but then maybe we should start thinking of like, can we do things differently, <laugh>, can we do things better so that, you know, these large operations, um, do we need operations this large and dense? Can we decentralize, um, hand and egg production particularly make it more humane? I mean, just the sheer inhumanity, uh, and cruelty of, of coaling 60 million birds, right? I have, I have some eggs cause I got a couple acres. Um, I have hens, I have seven hens.

Errol Schweizer (00:45:58):

Okay. And we’ve, we’ve, you know, we keep our hens for years. Like I, personally, I don’t think they’re very cuddly creatures. They’re essentially dinosaurs. They’re, they’re, they’re reptiles with feathers. Um, but it’s kind of nice to have them not only for, for waste disposal, you know, they eat my compost and they eat my leftovers, but I get eggs, right? <laugh>, but I also go to the store and I buy a lot of eggs. Right. Um, and it’s been painful to watch the egg prices go up from four and $5 to 10, 11, 12, 13. Right. Primarily due to the biological effects of how we create these concentrated animal feed lots, um, as the main factor in creating calories for the, for the country in animal products. Right. And then I also say like a lot of folks have tried plant-based. Um, I, I just don’t think it’s an, you know, apples to apples.

Errol Schweizer (00:46:44):

I think you can and should eat more vegetables and you should eat more healthy food. Um, produce for a while, pricing was steady. And it’s only recently that we’ve seen produce, uh, prices come up. I’m not sure if a lot of the processed plant-based foods are a good analog to eggs, primarily due to the quality and type of protein and the caloric density and the nutrition content. Um, and then, you know, when you, when after that you’re talking about other types of, of food stuff. So we, we need to look at how we can expand more sustainable, um, animal compassionate, safe egg production and decentralize away from these factory farm feedlots, which are the cause of avian flu influenza. When you raise animals in these sort of dense operating environments, like I said, you get one bird and they’re taking out the whole flock. Wow. That is the only way they’re gonna stop it. And then obviously feed prices. And that is a whole separate conversation about, um, grain and commodity markets and why it’s essentially a casino economy and how we can get better control on, on grain and feed prices.

Scott Luton (00:47:46):

Yeah. Um, I’ll tell you. So, alright, so I’m, if I’m tracking you with you, uh, in the short term, we gotta get a handle on the, the massive avian flu outbreak that we’ve seen that’s cost us 60 million birds. Uh, and and that’s just the u is that, that’s just the US poultry

Errol Schweizer (00:48:03):

Industry. I’m talking about us Yeah. US centric conversation right now.

Scott Luton (00:48:06):

So we gotta get a handle on that. And is that, is that, would you say that’s getting better, Errol? I mean, are we, are we

Errol Schweizer (00:48:11):

At, I’ve heard that flocks are recovering and the U S D A is saying that, I’ve been reading other blogs, I’ve been reading some ag economists saying that the flocks are starting to recover.

Scott Luton (00:48:19):

Okay.

Errol Schweizer (00:48:19):

But remember it’s a 18 weeks right cycle. Um, and so you’re thinking you’re, you’re talking about 36 or 54 weeks in terms of, you know, staggered, you know, when those eggs actually hit the market and start influencing, uh, supply quantities. And this is one of those categories where I think what you’re gonna see across much of the grocery store with the price increases is suppliers are gonna be very hesitant to lower prices. Retailers are gonna be very hesitant to lower prices and eggs, though you’re gonna see the prices gonna come down. Okay. And it’s gonna come down. I, I would say if the flocks recover, you know, over the next six to nine months, uh, and it’ll probably be at least a year before we have any sensible egg pricing.

Scott Luton (00:48:58):

Okay. Wonderful. All right, perfect. You read my mind there. So, um, yeah, quick, quick to raise those prices and then drop up ’em slow <laugh> so you can they go up

Errol Schweizer (00:49:09):

Like a bullet? They come down like a feather? Yes. I think that’s actually a saying in, uh, economics.

Scott Luton (00:49:14):

Ah, all

Errol Schweizer (00:49:15):

Right. So, and you know, it’s the same thing with most products because when supplier prices come down, particularly one measure of inflation, the producer price increase, cuz what we’re talking about inflation, we’re mostly talking about the cpi, the consumer price, price inflation. That is what people pay out the store, but what suppliers are actually paying, you know, the PPI could be higher if that starts coming down and you don’t see the C P I coming down, that means you’re, you know, that’s the profit margin. Mm-hmm. But also, um, it also will be plugged into different retail tricks and maneuvers. Like they may start, uh, doing different pack sizes or they may put that difference into, uh, more promotional pricing, more trade spend. Or you’ll see some retailers wanna negotiate E D L P and stop doing promotions so they could show that lower price. Mm-hmm. And this is once again, over the next, you know, couple of years, if we start seeing prices a level out, then b deflationary, it’ll come down like a feather, but it’ll be really scattershot. It won’t be as clear because there’s all these different ways that companies, CPG and retailer are, are gonna manage that deflation to protect their margins. Mm-hmm.

Scott Luton (00:50:21):

All right. So the good news here to our listeners, now that we’re all a lot more educated and all the, again, all the complexities that go into the egg industry, I’ve ne i’ll, I’ll never look at an egg, they’re quite the same way, Errol, and I really appreciate that. Cause with information comes power, um, so six to nine months is the outlook for, for getting things turned around and getting these prices to come back down like a feather, if I heard you right. Especially, especially in the conventional market, right. Which is the, the, uh, the biggest, or at least the plurality

Errol Schweizer (00:50:50):

Of vast majority. Yeah. Okay. Vast majority excellent. Of eggs are conventional factory farm eggs, and then you have cage-free and then organic. Uh, and then a very small segment of, you know, quote pasture rays. Okay. Maybe less than 10%.

Scott Luton (00:51:02):

All right. So as we start to wind down our time here with Errol Sweer, um, you’ve al already given us kind of, you’ve already broken out, uh, your crystal ball and given us kind of what to expect. Is there anything, one other thing and putting the transformation, I think if fee doesn’t, uh, necess, uh, need another, uh, dedicated conversation, probably the transformation that needs to take place in the food industry, which you’re speaking to and advocating for, deserves a separate conversation as well. Putting those things aside, what else, what, is there anything else that comes to mind that you’re expecting to see as we get further into 2023 when it comes to the food industry?

Errol Schweizer (00:51:40):

Yeah, I wrote a forward-looking piece, uh, for Forbes a couple weeks back of things that, um, thinking that, you know, um, the food industry is gonna be very erratic. Um, there’s, you know, a lot of conversation about, you know, ongoing inflation. Um, it’s gonna start hitting the retailers hard. I I’ve actually been saying re food retailers already in a recession because the dollar sales growth has far outpaced the unit turns. Mm-hmm. <affirmative>, this is the, once again, the unit economics. The units have cycled either negative or low single digits for a lot of larger retailers, but also, uh, a lot of smaller ones that I’ve spoken to. So, you know, that’s, that’s really, um, a big deal for the next, you know, you know, six, nine months in terms of how retailers navigate. Um, this, where consumers have hit their limit on what they could actually spend and they’re buying less.

Errol Schweizer (00:52:28):

Sure. Or, you know, they’re going to dollar stores, they’re going to discounters, right? Um, or they’re cutting back or they’re gonna, the food bank, you know, 50 million Americans use food banks, <laugh>, you know, I mean, it, there’s no shame in it. You know, everybody’s feeling this pain, you know, like I said, 40 million Americans on Snap mm-hmm. <affirmative>, um, which, you know, goes that mo money, Mo mo majority goes to grocery stores. So yeah, this is, this is, you know, counterbalanced by, there’s still a high level of consumer savings. People still have some money. Um, while wage rates haven’t kept up with inflation, they have mostly gone up. I think it’s like four and a half points. Um, you know, you still see, um, a lot of job growth. The economy continues to add jobs, so I don’t mean to like reign on the parade here. It is tough and it’s, it’s chaotic, but there is still, I think, a counterbalance here.

Errol Schweizer (00:53:14):

And then, uh, something that I’ve written about pretty extensively is I think the federal reserves moves on interest rates are callous and different and, uh, what I call borderline Malthusian in terms of, you know, the sort of social Darwinism, because essentially what they wanna do, you know, they wanna slow down the economy by putting people out of work, by making it hard to borrow, by making it harder for companies to grow. Um, and I, I think it’s a really, um, foul way to manage something that it’s not even gonna, it’s not even gonna affect food prices. Like there’s actually no, no connection between the interest rate hikes and the cpi. I’ll, I’ll just put, I’ll, I’ll put that on the table and say dumb idea. Stop doing it. And either, either break up the Fed or put them under some sort of oversight, like they need adult supervision because it’s essentially bankers working for bankers.

Errol Schweizer (00:54:05):

Sorry, I’m op that’s a little bit of an op-ed <laugh>. But I think some of the other things that are continued to be, I think just good news, um, you know, I’m seeing a lot more continued interest in regenerative and agro ecological farming methods, like, you know, sustainability, you know, beyond sustainability. Um, I think there’s still a lot of interest in creating fair, um, and ethical supply chains, like consumers continue to buy those foods. Organic has stayed strong. I’m still a big fan of the organic label. And then I think a lot of people are thinking about animal welfare with this, like, oh, wow, did we just put down 60 million hens? Mm-hmm. <affirmative>, like, even not, not even saying that you’re going full vegan, which I don’t endorse. Um, but just thinking about should your food suffer in order to make food for you? And well, I don’t know, maybe not.

Errol Schweizer (00:54:49):

You know, and that’s the other thing is that I think the supply chain issues, the continued pricing issues has woken up a lot more consumers, particularly younger consumers who are, you know, really coming to these, the sort of ethical, uh, you know, food supply chain, um, in much greater percentage than even people our age who I think worked really hard to create this sort of, uh, industry. Um, but they’re seeing like, oh, maybe we should be doing something differently. And I think that’s gonna continue as well. And I think that’s a good thing. But, and then finally, um, you know, I just wanna point this out, like, you know, corporate, private sector, um, folks like myself, we have a, we have a monopoly on pricing. We are the only ones who set pricing, I’m sorry, consu cons, consumer trends, supply, demand, you know, price signals.

Errol Schweizer (00:55:36):

All we’re talking about are still various ways that the market interacts, and the market is highly consolidated. There’s a lot of imbalances in the market. There’s cost externalities, like I’ve talked about, um, and I’ve put that out there that we probably need, you know, at least some sort of traffic cop role for the public sector when it comes to pricing to prevent this type of price gouging, profiteering, and skyrocketing prices. Mm. Because markets are really good at certain things. They’re, they could be very highly efficient, very highly productive. But these last few years have been a real black eye <laugh> on the performance of markets to guarantee a safe, cheap, convenient, abundant food supply, which ultimately I, we still need, but maybe not the way we’re doing it now. And so I’ve started putting out some ideas I, I’m learning and reading a lot, and it’s like, well, how are other ways to manage pricing? You know, are we talking about what, you know, Roosevelt did in World War II of price controls? Is there some other middle ground? Mm. Can we use all like the app-based technologies like data to, you know, create other ways to manage pricing, what happens in these sort of e inflationary or on the other hand deflationary events to protect the margins? But anyway, there’s I think, a lot of conversations we should be having about, Hey, can we not make these mistakes again,

Scott Luton (00:56:50):

<laugh>, right? <laugh>. No, absolutely. Right. And, and, and the lessons we’ve learned in particular in the last two or three years, um, we gotta, we gotta keep those in mind, act on them, uh, and let, allow those and deliberately enable those to drive good, meaningful change, structural change, uh, that you’re kind of speaking to across the industry, beyond the food industry. Uh,

Errol Schweizer (00:57:12):

And everybody should have the right and access to good food. Yeah. And ultimately, that’s what what I’m saying here, and I don’t mean to cut you off, but like, no, no, ultimately that’s what the food industry is trying to do. A lot of us have always worked for and have had a lot more difficulty in executing these last few years. Right. And I, I think we need to think about how do we do that? Cuz ultimately that’s what we’re here

Scott Luton (00:57:31):

For. Yeah, agreed. Uh, you touched on workforce, uh, shifts. Um, you know, there’s lots to have learned from there in the last two or three years that, that, uh, we’ve seen some organizations apply. We need more, uh, we need more, uh, change there for sure. Um, and, and you mentioned there at the end, consumers are demanding more, more transparency, uh, more ethically sourced products, um, sustainable sustainability, d e I really in, in, um, in truckloads when it comes to, uh, the brands that they buy from in are fans of. So I really appreciate you wide ranging. We’re gonna have to kick off a new series, uh, eight Things with Errol and just crank it, tee tee it up, and <laugh> let you bring the unmitigated

Errol Schweizer (00:58:15):

Two folks towards you. Check out podcasts. I, that’s right. Use a couple episodes a month to,

Scott Luton (00:58:19):

To dive

Errol Schweizer (00:58:20):

On this sort of

Scott Luton (00:58:20):

Stuff. And that’s where, that’s the final question I wanna ask for you, cuz y’all know you’re active, you’re doing, um, a lot of wonderful writing and other content creation. So your podcast is named

Errol Schweizer (00:58:31):

The checkout.

Scott Luton (00:58:32):

The

Errol Schweizer (00:58:32):

Checkout, obviously, uh, the retail connotation of the check stand, the, uh, you know, the checkout counter love it. But also, um, for me it signifies the transactional nature of food relationships.

Scott Luton (00:58:44):

So folks, obligatory, uh, statement. You can get that wherever you get your podcast from. Of course, you can find Errol in a wide variety of publications such as the Forbes article, uh, that he mentioned, and that’s just one. Um, and the, the website, the clearinghouse, where, where, where you wanna point people to err to con to connect with you. Maybe they wanna bring you in and have you keynote a conference or, or maybe get consulted, uh, by you, who knows. What’s a good website for

Errol Schweizer (00:59:07):

You? It’s just errol schweitzer llc.com and you can email me through the website. Um, I’m also up on LinkedIn. Um, I’m, I’m relatively easy to find, but Errol Schweitzer LLC is, is something I check every day and it has a good, I think, summary of, of what I do and why

Scott Luton (00:59:23):

Agreed. And the why is important. Y’all heard that Plenty of passion speaking to that why here over the last hour. So y’all check that out. Well, you know, to make it easy for you, we’re gonna include arrows contact information and include that website and social, uh, in the episode note. So y’all look for that and you one click away from connecting with the one only. Errol Schweitzer Errol really appreciate, uh, the knowledge bomb you dropped on us here today. Not just on Eggs, big, big chunk of that. But the food industry in general is, is it is marvelous. And what you opened on, on the front end is most people have no idea how we get and what, what’s, what’s behind the food that we buy and consume here in the States. I completely agree with you.

Errol Schweizer (01:00:06):

We, um, you know, have a responsibility to create a better food system together. Um, and we live in an industrial society with an industrial food system. Uh, but we also have, you know, plenty of other options that we’re, you know, trying to grow that are, you know, maybe a little, little fringe, a little trendy. And I think we should continue to work together to figure out better ways to, uh, grow, uh, produce, distribute retail food, uh, that are more sustainable, ethical, tasty, caloric and nutrient dense that

Scott Luton (01:00:37):

Works for everybody. Yeah. Done with you. Um, Aero Sweer, really appreciate, uh, your time here today. Uh, and to our listeners, uh, hopefully you enjoyed and err, uh, really, uh, thanks for your time, enlightened, informative, intriguing and inspiring in many ways. And we’ll look, have you back. Y

Errol Schweizer (01:00:54):

My pleasure. I love this podcast. Love what you folks are doing. Thanks for having me on.

Scott Luton (01:00:58):

You bet. Okay, folks, uh, again, talking with Errol Schweitzer today. Uh, hopefully y’all enjoyed to our listeners this episode and learned as much. I don’t know, I’ve got about 17 pages of notes over here, uh, from Errol as much as I did. Uh, of course you can find Supply Channel now. Wherever you get your podcast, hey, find us on YouTube. Moral easy to engage and participate in our programming there. But whatever you do, it’s a lot of what you heard err talk about today. Deeds not words. Take action, right Linda, helping Hand, let’s Drive Chain together. But on behalf of our entire team here at Supply Chain now, Scott Luden challenging you to do good, to give forward and to be the change. With that said, we see next time right back here at Supply Chain now. Thanks. Bye.

Intro/Outro (01:01:38):

Thanks for being a part of our supply chain now, community. Check out all of our programming@supplychainnow.com and make sure you subscribe to Supply Chain now, anywhere you listen to podcasts. And follow us on Facebook, LinkedIn, Twitter, and Instagram. See you next time on Supply Chain. Now.