The Cherry War (2)
“He should have read it by now.”
William Hartford murmured the words under his breath, eyes on his watch. Clear ice clinked softly against the glass in his hand. A faint smile, rare on his face, tugged at the corner of his mouth.
“I only hope our friend Fredrick hasn’t keeled over clutching his neck first thing this morning. A two-million-dollar repayment notice—William, you really are ruthless.”
Samuel Reed chuckled and took a long pull of whiskey. He had spent the year watching Fredrick’s brand-new Royal Taioga cherries with nothing but envy; this measure was an opportunity he could not afford to miss.
William polished his glasses and answered coldly.
“Ruthless, Samuel? This is nothing more than a legitimate defensive mechanism for the health of our cooperative. If we leave a turncoat who shakes hands with opaque outside capital and shares our secrets free to operate, we’ll all end up dancing in the palm of that upstart Redwood. I have simply protected the order our families have maintained on this land for decades.”
Thomas Cromwell unrolled a map, unable to hide his excitement.
“Reasons don’t matter—next year is already looking bright! William, just as you promised, the Whole Foods and Gelson’s quotas Fredrick held are coming our way, right? Just imagining our cherries filling those shelves… heh heh heh.”
“Of course. It’s already written into the resolution. You gentlemen will fill Fredrick’s empty seat. The distributors ultimately take product under the cooperative’s name, so only the supplier changes. Consumers won’t even be able to tell whether it’s Fredrick’s fruit or yours.”
Another member swallowed hard, mouth watering.
“With the fertilizer and pesticide subsidies we’ll save, next year I’m bringing in a brand-new sorter. That Fredrick—always racing ahead on his own—and look where it got him.”
“Exactly. He thought he could turn his back on us in Brentwood just because he landed a clever son-in-law. By this time next year a few parcels of Harris Orchard might even hit the auction block. We’ll divide them up nicely among ourselves.”
William Hartford listened to the buoyant voices of the members and quietly studied the view beyond the window. He believed his decision was perfect. He had severed the distribution channels, dried up the money, and secured legal justification; the only paths left for Fredrick were to kneel in surrender or go bankrupt.
“Gentlemen, raise your glasses—to Brentwood’s great traditions and to a cooperative that will grow even stronger.”
At William’s lead, the vigorous clash of glasses filled the lounge.
At the very hour William Hartford and the cooperative members were discussing how to divide the sweet fruit of victory,
“Brian, you… you don’t understand what this means. This isn’t just a matter of losing supermarket shelf space. You don’t know how this business works.”
Fredrick fixed me with worried eyes and pressed on.
“First of all, big chains like Costco or Walmart won’t even speak to individual growers like us. They only contract through a single window—the cooperative. When William Hartford used the president’s seal to suspend my brand rights, it meant I was thrown off the on-ramp of the interstate highway that runs across America. Next year’s harvest has nowhere to go. You can’t just set up a roadside stand and sell a hundred acres of cherries.”
“……”
I folded my arms and listened quietly while Fredrick sat on the sofa, face grave, stroking his chin.
“And it’s December. You know what that means. Because of the subprime mess the banks are going crazy. The two-million-dollar loan that would normally have been rolled over against cooperative collateral just got a demand for immediate repayment. William almost certainly whispered to the bank that ‘Fredrick’s opaque outside contracts have lowered the collateral value’… Every scrap of land I could still pledge is already tied up from acquiring new farming methods and the extra acreage. What’s left is real estate and cash deposits, and they fall far short of two million. Once the cash flow stops, the orchard goes straight to auction.”
Thinking back, the sums Harris Orchard had spent following my advice had indeed been considerable. Cherry revenue had risen, yet every year a portion of the trees was being grafted over to new varieties, and the almond orchard acquisition had drained serious capital. The almond harvest was still far off, and the pears would need at least two more years before any return on investment could be expected. A two-million-dollar maturity repayment was unquestionably a heavy burden.
“On top of that, once the cooperative subsidies stop I’ll have to buy fertilizer and pesticides at full retail. That means farming at least thirty percent—sometimes fifty percent—more expensively than everyone else.”
“I see.”
“Do you know why the MDs at places like Whole Foods meet with me? Yes, our cherry quality is excellent, but more than that they have the quality guarantee issued by the cooperative. The moment William sends a single official letter saying my cherries are no longer under cooperative management, those MDs will stop taking my calls purely out of risk aversion.”
He raked his fingers through his hair in frustration.
“Finally… the operating funds I already received from distributors against next year’s crop are, for all practical purposes, grounds for contract termination. I may even have to pay penalties. William isn’t trying to harass me. He means to cut off my air, tear the orchard into pieces, and hand them out.”
A heavy silence settled over the living room. Fredrick’s reasoning was sound; inside California’s agricultural structure the trap was nearly impossible to escape. Hartford had frozen Harris Orchard’s distribution, financing, production, and guarantees all at once.
Having grasped the depth of his trouble, I took the sofa beside him. Chloe, who had been frozen solid at her father’s distress, saw the faint smile at my lips and seemed to find enough reassurance to sit down next to us.
“I understand completely. William Hartford has set a very precise snare. Inside the existing cooperative system, the damage would be fatal—just as you said.”
Fredrick gave a hollow laugh.
“So now you see? That’s what I’ve been trying to tell you…”
Yet when he confirmed the composure still on my face, the complaining died away.
“I understand, I really do… but this is actually a good thing.”
“A good thing?”
I smiled and continued.
“Yes. Cooperative president William Hartford thinks he has shoved you off a cliff. In reality he has simply cut the old iron chain that was locked around your ankle.”
“Is that true?”
“Uncle, William Hartford is the head of a twentieth-century cartel. Believing that control of the distribution channels equals control of the growers is natural enough—but the market I see is different. Power has already moved from the distribution pipeline to data and brand.”
“What does that mean?”
Chloe asked from beside us, and I answered carefully.
“Let’s start with distribution and guarantees. You said the Whole Foods MDs won’t take your calls without the cooperative certificate. That isn’t wrong. They demand the cooperative’s quality guarantee not because of personal preference but because of the company’s strict internal procedures. Turn the thought around, though: if we give them a documented history that can take responsibility when a quality incident occurs, they will no longer insist on the cooperative’s paper.”
“History data?”
“I intend to propose an independent quality-certification system that replaces the cooperative guarantee. Their certificate is essentially a subjective promise—‘trust us, he’s one of our members.’ The documents I will create show objective indicators: what nutrients the cherry trees absorbed, what stresses they endured.”
“Ah…”
Fredrick nodded; the light in his eyes told me he was not merely letting the words pass.
“They are professionals. They will be far more captivated by the objective metrics I send than by any cooperative seal. As for compliance, we take the direct route: request Direct Vendor approval for an individual farm that does not go through the cooperative. Instead of Hartford’s certificate we attach a product liability insurance policy at the highest coverage limit we can buy, plus inspection reports from a third-party auditor. They will actually be delighted—they can market that story to their customers.”
“…That could work. Whole Foods shoppers are obsessed with organic and safety.”
I turned to Chloe.
“Send an email to the West Coast produce buyer at Whole Foods. Subject line: ‘Proposal for a High-Value Direct-Trade System Replacing the Cooperative.’ Add that the fruit is co-grown and guaranteed by Redwood of Napa Valley. That should give it real weight.”
“Got it. I’ll do it right away.”
Chloe’s face had brightened; she now understood that William Hartford’s maneuver was not a threat but an opening.
I looked back at Fredrick.
“As for the financing… isn’t that solved the moment we secure Letters of Intent from Whole Foods, Gelson’s, Bristol Farms, Walmart, and the rest?”
Fredrick, who had already half-suspected I might push into partial distribution myself, nodded in understanding.
“Exactly. The problem was whether we could deliver. Once delivery is locked and we hold LOIs, the bank can run inventory-secured loans or factoring. Even with the subprime banks being tight, collateral that solid should clear at least a million dollars. With that much I can handle the rest.”
“If it’s still short I can advance some funds myself. The cherries have to flow into Redwood every year anyway, so procedurally it’s clean.”
“I’m truly grateful.”
“Not at all. As for buying fertilizer at retail prices… that can’t be helped. We’ll just pay the higher price. But thanks to the biochar the fertilizer volume is lower, so the damage won’t be severe.”
“I haven’t run the numbers, but… now that you mention it, that makes sense.”
With the problems dissolving, color returned to Fredrick’s face; a smile even touched his lips. The worst of the worry had lifted.
“I always believed we would have to leave the cherry cooperative eventually. They simply removed us before we even asked. Looked at that way, it’s a stroke of luck… The Royal Taioga first hit the market this year, didn’t it?”
“That’s right. And they came from trees in their first year after grafting, so the yield was less than forty percent of normal.”
“Next year it will climb to eighty percent.”
Fredrick clenched a fist.
“When the Royal Taioga appeared last year the wholesale market went wild… Gelson’s ultimately paid twice the price of ordinary Bing cherries. It was heartbreaking how little volume we had…”
The ability to sell Royal Taioga at twice the price of Bing cherries rested not only on fruit quality but, more importantly, on timing. Royal Taioga ships ten to fourteen days earlier than Bing, arriving when the market still has no cherries at all.
Then something seemed to occur to him; he lifted his head and looked at me.
“Ah—why did you always think we needed to leave the cherry cooperative? Because of the independent brand?”
“That, and distribution.”
“Distribution? Individual distribution?”
“Yes.”
“What do we gain by going independent on distribution?”
I smiled faintly.
“When I first laid out the strategy for maximizing grower profit, I told you we would grow through staged goals. First soil management and fertilizer, second irrigation and pollination, third variety conversion. You’ve done all of those well. And the final stage… is innovation in distribution.”
“Innovation? How?”
“I intend to target overseas markets with air freight.”
At the words “overseas air freight,” both Fredrick and Chloe stared at me in open astonishment.