Growers Can’t Resist Lure of the Land : Agriculture: The owners of a small farm in Ventura County specialize in gourmet greens and other unusual produce. They persist despite growing competition from major conglomerates.
He has a master’s in business from Harvard, a bachelor’s in economics from Stanford and some blunt advice for the farmers at Underwood Ranches.
Liquidate.
If the partners auctioned off their tractors and sold their land, they would no doubt reap a hefty sum. Enough, surely, to invest in a solid mutual fund, kick back and watch the dividends roll in.
At least, that’s how consultant Bill Knoke figures it.
Hired to draft a long-term strategy for Underwood Ranches, Knoke discovered that the most sensible course might be the most radical. Only half jokingly, he recommended that the farmers abandon farming.
“People in agriculture do it for the love of agriculture and not to make money, and that’s a problem,” Knoke said. “They’d be better off liquidating everything. They could invest the money and earn 10% (interest) without even working for it.”
Solid economic students themselves, the three partners who dominate Underwood Ranches understand their consultant’s advice.
But follow it?
No way. Not now.
Not now, when the first, optimistic shoots of corn have begun to stretch their ladyfinger leaves on the rich dirt known as Conejo Ranch. Not now, when they see promising new products in the pipeline, crops never before sold in North America.
No, not now. But the idea lingers, tempting.
As spring sags into summer, the trio worries about markets and weather and pests. “There’s always a fear of becoming another statistic,” Craig Underwood says, to knowing nods. “When prices are down, you wonder if they’ll ever turn around.”
That fear has grown especially sharp because of the ferocious competition roaring through the produce industry. Agribusiness conglomerates are eyeing lucrative “niche” crops such as baby carrots and esoteric salad greens that were once the exclusive province of smaller farmers. And on their 60-acre patch outside Camarillo, the Underwood partners feel the threat. Their specialties, such as the gourmet greens that flourished on Conejo Ranch last season, no longer seem quite so special. Their sure things are undeniably unsure.
But the farmers are not yet ready to give up. They sank nearly $575,000 into Conejo Ranch last spring, buying the field with borrowed money and borrowing more to prepare it for farming.
It’s the only piece of property that the trio holds title to. They work other fields in Ventura County--have for years--but those plots are rented from absentee landlords. Conejo Ranch is theirs.
Theirs to farm--and theirs to gamble on.
In buying the field for vegetables, the partners bucked a nationwide trend. Strip malls and golf courses are gobbling up huge swaths of agricultural soil. Nearly 2 million acres of United States farmland vanish each year, paved under to make way for homes and shops and parking lots.
As little guys in the produce industry, the Underwood partners understand the pressures that prompt farmers to divest. Yet, tugged toward the land, they find agriculture all but irresistible. “When it’s good,” partner Jim Roberts says, “it’s really sweet.”
So far this year, it’s been just shy of sweet.
The ranchers have plucked a first crop of salad greens from Conejo Ranch. They sold about three-quarters of the harvest, at moderate prices, and mashed the rest into the soil to decompose--a colorful, all-organic fertilizer.
The greens, turnips and radishes proved “an average crop,” Roberts said. “I was pleased because we didn’t have a lot of weeds.” On the other hand, he added, “We didn’t break any records for making money.”
He’s hoping for better from the field’s second crop: corn.
In Ventura County, corn ranks below even obscure crops such as kale and cilantro, accounting for just 1% of the annual vegetable sales.
But Underwood Ranches partners are banking big on their Somis Creek brand--sold pre-cut, husked, and ready-to-microwave. Pegged as a “value-added” product because it’s semi-prepared, the corn should command higher prices than the standard, husk-it-yourself variety.
From bagged gourmet salads to peeled baby carrots, the farmers at Underwood Ranches have focused on value-added vegetables. The problem is, so have their competitors.
At least 70% of the new produce items introduced in American supermarkets over the past two years have been semi-processed fruits and vegetables, from sliced pineapple to pre-cracked coconuts. That’s apparently not enough to satisfy the demand--one study found 43% of shoppers clamoring for more convenient, easy-to-prepare produce.
Those kind of figures have agribusiness executives everywhere salivating. And when the big guys salivate, the little guys sweat.
With their limited resources--several hundred employees and sales of less than $10 million a year--the Underwood partners cannot begin to compete with the produce giants steadily moving into the prepared-veggie market.
One competitor, Irwindale-based Ready Pac, boasts the world’s largest vegetable processing plant along with a thousand employees and $130 million in annual sales. Their crinkly bags of pre-packed salads dominate many a produce aisle.
“Everything we put on the shelf sells,” said Chris Nelson, Ready Pac’s chief operating officer.
His firm has the technology to keep cruising: “We have $2-million (conveyor-belt) washing lines,” Nelson said, while small farmers “are using Kenmore washing machines.”
In fact, the Underwood partners actually started out drying their lettuce in Speed Queen laundry machines.
They also experimented with a low-cost, low-tech method of peeling baby carrots: churning them in a cement mixer with a few handfuls of railroad gravel.
“It worked real well,” Underwood recalled, “but the carrots were kind of gritty.”
Gritty, and metallic. Traces of iron from the railroad gravel stuck to the carrots. The veggies didn’t taste of iron, but they did set off magnets on the packinghouse assembly line.
“It wasn’t objectionable, it wasn’t like there were metal shavings in the carrots, but we couldn’t keep on doing it,” Underwood said. So he developed a new approach--a massive sorting and scraping machine.
Perfecting the production and packaging of baby carrots took nearly three years. Developing the salad mixture, and the corn now growing on Conejo Ranch, each took three years as well.
After so much research, the partners feel confident that they have a winning corn product. But they’re equally sure that competitors will soon be hot on their trail.
“It’s so easy in this business for people to copy what you’re doing,” Underwood said. “We may spend three years developing a product and once it’s on the market, within six months someone else can copy it.”
To counter the competition, the partners rely on innovation.
They know they will have just two to three years with each product before the competition gets punishingly hot. So they routinely set aside 25% of their profits for research and development.
“The key for us, as with all guerrilla operations, is to fight around the edges and be quick and nimble,” Roberts said.
Sometimes, they wind up with spectacular failures, as in the case of the poisoned potatoes.
Eager to develop a super-sweet variety of new potato, the partners planted a four-acre test crop back in 1992. They expected the potatoes to turn out tender and fresh, tasting of spring itself.
But, as Underwood recalled, “We had a little glitch.”
When the first harvest came in, Sales Director Minos Athanassiadis zapped a plateful of the potatoes in the office microwave and dug into a tasty lunch. Ten minutes later, his chest began to tighten and his breathing grew labored.
Somehow, he managed to stay calm. Within 20 minutes, he recovered completely.
Yet he wasn’t too keen on that particular variety of potato.
The culprit, it turned out, was a type of alkaloid--an organic substance that also shows up, in various mutations, in caffeine, morphine and quinine. The colorless, crystalline substance can poison animals or humans. And it overpowered the other compounds in the tiny test potatoes.
Chucking all four acres of the alkaloid-rich potatoes, they wrote off their $6,000 investment and started anew with a different variety.
The trio harvested a second crop this spring--and sent the baby potatoes to a lab for chemical analysis before anyone tried them.
Pronounced fit to eat, the potatoes are now being test-marketed at several grocery stores. Meanwhile, the partners are perfecting yet another new product: salad-ready bags of Easter Egg radishes in white, red, pink and purple hues. On their experimental fields, they’re sorting through potential moneymakers from peanuts to birdseed.
To help them plot the next moves, Craig Underwood and his partners recently spent several thousand dollars to hire two strategists.
They’re asking the consultants questions such as: How much capital do they need? How can they speed up research and development? How can they encourage customer loyalty?
And, most basically: How can they thrive in a tumultuous industry?
The resulting action plans may help position the company for the future. But they mean little in the day-to-day grind of this hectic spring season.
As planting foreman Natividad Zavala said, “The only things we have are the weather, the earth and the hours we put in. That’s how we make our living.”
* ABOUT THIS SERIES
“60 Acres of Hope,” a series that began in October, follows the first year of a Southern California farm. Three previous articles traced the field’s first crop of gourmet salad greens from planting to harvest to market. This story looks in part at the field’s second crop--corn--and explores the farmers’ attempts to develop new products to compete in a crowded industry. Future stories will focus on a continuing battle with the U.S. Environmental Protection Agency and will evaluate the economics of the field’s first year.
