October 25, 2025 • 40 mins
If you go out to eat at a restaurant, whether it's a fast food chain or a Michelin-starred bistro, there's a good chance the ingredients on your plate came from the same source. Sysco is the dominant foodservice distributor in the US, using its massive logistics network to quietly supply the food that goes into meals in thousands of restaurants across the US. Sysco's scale and product standardization have helped define what American dining tastes like -- sometimes literally. But critics say its power has gone too far, leaving chefs and diners with fewer choices and blander outcomes. In this episode, we talk with Austin Frerick, author of Barons: Money, Power, and the Corruption of America's Food Industry, about how Sysco became the middleman shaping America's menus.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2 (00:17):
Hello and welcome to another episode of the All Thoughts Podcast.
I'm Tracy Alloway.
Speaker 3 (00:21):
And I'm Joe. Wasn't thal Joe.
Speaker 2 (00:23):
I have a question, go on, what is your favorite
chain restaurant. It has to be a sit down chain restaurant.
Speaker 3 (00:31):
Sit down chain restaurant. That's a really good question.
Speaker 4 (00:35):
You know.
Speaker 3 (00:35):
I actually really like Chilia's. I think they have Their
fijidas are absolutely legit. And I say this as someone
who is eating quite a lot of text mex Fijidas
from my time in Texas, and so I think I
have credibility and as a kid, and I haven't been
there in years, but I still think my memory of
the food is really good. I love Cracker Barrel.
Speaker 2 (00:52):
Oh, breakfast at Cracker Barrel is really really good. Well,
I bring it up because today we're going to be
answering the question of where all of these restaurants actually
get their food from.
Speaker 3 (01:02):
That's a great question. I don't I don't know anything
about it. I don't know anything about sit down chain restaurants.
Speaker 4 (01:06):
I mean, I don't know.
Speaker 3 (01:07):
I think about most chain restaurants period, let alone fast
food ones. But the world of sit down ones that
are real restaurants where there's waiters, waitresses, et cetera. I
don't know a thing about it.
Speaker 2 (01:17):
You're not interested in my favorite restaurants. Oh, this is
how it works. I asked you a question, and you
were ciprocate.
Speaker 3 (01:24):
I was going to and I was planning to, and
then you like turned a ninety degree angle to talk
about to talk about we were going to start answering
the question of where these comfort was like, oh, okay,
I guess we're going on to some new direction here.
We could just keep talking about favorite restaurant, Tracy, what
is your favorite restaurant to sit down in?
Speaker 2 (01:40):
I actually have many? Okay, Red Robin, Oh, I still
love that place. They had a salad that was basically
just a plate of chicken tenders.
Speaker 4 (01:48):
It was so good.
Speaker 2 (01:49):
But build does a salad Fridays. You still love that place?
Speaker 4 (01:53):
I know.
Speaker 2 (01:54):
And there was one in London and it was like
my anchor to America in the early two thousands. And
Chili's Chili is with my Chili.
Speaker 3 (02:02):
Yeah, yeah, it's legit. Keep going. We're going to make
up for the fact that I didn't ask you. But
now I'm just keep going well.
Speaker 1 (02:08):
One thing.
Speaker 2 (02:09):
One thing I did realize recently. I've never been to
an olive garden. I don't know why that is.
Speaker 3 (02:13):
I've been a few times. It's not that terrible. I
don't think like I've been. I've even been to the
one in Times Square.
Speaker 2 (02:20):
Yeah, but I feel like it's very hard to make
carbs badly. Right, it's just pasta and bread.
Speaker 3 (02:26):
Yeah, uh, it's good.
Speaker 2 (02:29):
Okay, all right, I am going to move the conversation
on now Apple Bee's.
Speaker 3 (02:33):
Have been to the one in Times Square? There, solid
I do not like it. Why do we have to
move the conversation on. I don't get it. Why can't
we just keep talking about it? Sit down restaurant?
Speaker 2 (02:41):
All right, Well, we'll get back to them. We'll get
to our recommendations. But on a serious note, one of
the reasons we are interested in this subject is because
we did a series last year called Beat Capitalism, where
we talked a lot about agriculture and the chicken industry specifically,
and anti trust and monopolies and things like that. And
one of the things that stood out to me from
(03:02):
that series was a comment from Doha Mechi, who is
the former Assistant Attorney General, where she talked about the
tyranny of the middleman in the economy, and I think
this is something that people are, you know, perhaps just
waking up to. There are all these companies out there
that you have probably never heard of, but have massively
(03:24):
dominant positions in the economy and charge a lot for
their services. And one of those happens to be a
very large company that provides food for all these sit
down chain restaurants.
Speaker 3 (03:38):
You know, I'm going to play Devil's advocate on this
episode because, as.
Speaker 2 (03:41):
You know, because you love chili so much, because I love.
Speaker 3 (03:44):
Chili's, and I love food production at massive scales, and
I love.
Speaker 4 (03:49):
All of this.
Speaker 3 (03:50):
But it is true that there are all these companies
that are really important that sort of sit between whether
the retailer, the customer, or more in the case of food,
more frequently the farmer and the end retailer of the
farmer and the restaurant do we literally know nothing about.
And they're huge and they're massive, and they don't get
any attention, and so I am very interested in this topic.
Speaker 2 (04:10):
All right, Well, we do have the perfect guest. It
is someone who has been on the show before I
think maybe a year or two ago. Now, yeah, wow,
time flies. But we're going to be speaking with Austin Frerik.
He is an anti trust and agricultural expert and also
the author of Baron's Money Power and the Corruption of
America's Food Industry. It's a great book even if you're
(04:32):
not interested in agriculture or anti trust specifically, it says
a lot about the US economy, so I would highly
recommend it. And Austin actually has just written a new
chapter for his book that is all about this particular company,
and I guess I should just say what it is.
It's called Cisco.
Speaker 3 (04:51):
It's not the networking gear company.
Speaker 2 (04:53):
Not the networking gear company, although it does have the
most generic origin story ever. So Cisco's stands for systems
and services company.
Speaker 3 (05:03):
Yum delicious.
Speaker 2 (05:05):
All right, Austin, welcome back to the show.
Speaker 4 (05:07):
Thanks for having me on again. And I just want
to say, you guys have me on last year really
changed the course of my book, so I appreciate that.
Speaker 2 (05:14):
Oh, thank you.
Speaker 4 (05:15):
Well.
Speaker 2 (05:15):
It was genuinely excellent. I am not just saying that.
I really enjoyed it. Okay, speaking of which, how does
it work when you decide to add a new chapter
to a book and why did you decide to do this?
Speaker 4 (05:25):
Yeah. So the funniest thing about this book was when
I would do book talks, people kept telling me about
barons I missed, Like I was in Idaho. They're like,
let me tell you about a potato baron when I
was in Indiana. There.
Speaker 3 (05:35):
We're going to get the name of the potato baron
after the episode.
Speaker 4 (05:38):
So oh yeah, I have a whole purgatory folder that
I just put this information into. But Cisco kept coming
up and it was the weirdest placed origin story where
so I talked fast and I know it. So I
purposely been doing book talks and nursing.
Speaker 2 (05:51):
Homes, so you have to slow down and practice.
Speaker 4 (05:54):
Okay, I blame it on. I listened to podcasts like
one point five point five, especially Midwestern and older people.
You gotta take it down. And what kept happening when
I was doing.
Speaker 3 (06:05):
You realize, if you're speaking fast because you're used to it,
then people who listened to you on those podcasts are
now listen you two and a half to three x speed. Anyway.
Speaker 4 (06:13):
It's bad because my husband listens to them on two
x twos. We talked that way, and it's so a
lot of times you do nursing home gigs, they'll value
for dinner before and after. And it was people kept
complaining about the food. And I mean, anyone that's been
to a hospital or there's home in America, it's pretty bad.
I mean, we're serving our most vulnerable people the worst food.
(06:33):
And they kept coming up. But it's Cisco's one of
those things everyone kind of complains about, but no one knows.
And my mom used to have a bakery and I
write about that in my Coffee chapter. And she had
a Broadliner and her Broadliner disappeared. They got bought up
by a bigger entity, and so I was just curious.
Speaker 2 (06:47):
And then that's broadline distribution.
Speaker 4 (06:49):
Yes, right, thanks for that's an industry term. I think
of them as grocery store for restaurants. They were Amazon
Before Amazon, they were the everything store.
Speaker 3 (06:58):
This is really important because when we're talking about Foo distribution,
so there are broadliners. You get everything there from well,
you know, your huge jar of olives to cheese or whatever.
But then also a restaurant might also have specialty distributors
too that like just really focus.
Speaker 4 (07:14):
On one thing, right if they have the option. Okay,
in certain markets, usually most rural communities, there's very few options.
But like for example, New York has one most competitive
broadliner market, so restaurants here have a lot of different
source and options.
Speaker 2 (07:25):
Yeah, I should just say this is going to be
a very odd, lotsy episode because it brings together baking, warehouses, logistics, trucking,
anti trust, all that good stuff. So I'm very excited. Okay, Well,
on that note, how did Cisco get to be a
dominant player in this particular space.
Speaker 4 (07:43):
I love this origin story John Bot. He's a different
type of character compared to other barons my book. I
really like him, like he's like a model businessman where
he's one of those people comes out of Waco, Texas.
His brother and dad died young, dropped out of college,
leap Baylor to support his mom, worked at AMP, got
transferred to the AMP in Houston, and he's one of
(08:04):
those people you see in business history that just saw
things before other people. He saw two important things. Number one,
the rise of frozen food. We're talking like right after
World War two and how that was going to and
then also frozen food mixed with women entering the work
at workforce knowing that they want to make quicker meals.
So he thought, oh, people are gonna eat out more.
And the thing to keep in mind here is our
(08:25):
norm of eating out is a very new thing in America.
Historically used to like bring a dish to something, it
was like a church function. Now we eat up about
once a day. So he saw that thing ahead of people,
and he didn't think amp was moving fast enough. So
he founded a frozen essentially a frozen berry company. But
going back to this point, you made Joe about all
these different things. That's how the idea from Cisco came
(08:46):
from where literally some Irish oil man was opening a
fancy hotel in Houston, and he was working the loading
dock that night and he saw in the day a
frozen strawberries. A frozen strawberry. I don't have a competitive advantage,
but what I can do is this food buyer has
like thirty different vendors for all these different things. What
I can do is offer him as much as possible.
So the origin of Cisco was he brought nine companies
(09:08):
together to create it, and you realized some's gonna fill
this at some point. So even though they only did
business in a few state, he registered in all fifty
states so that's how Cisco is created.
Speaker 3 (09:16):
I am fascinated by this idea because it's just one
of those things that hadn't really occurred to me until
like a read ear chapter, just like yeah, like it's
really weird how much we eat out or it's just
really novel in terms of the prevalence of restaurants. I
mean I eat out way more than I did, like
when I was a kid growing up.
Speaker 4 (09:35):
I think about that all the time. Used like Bonanza
was like a buffet was like a special occasion once
a week.
Speaker 3 (09:40):
And now I sit down Pizza Hut. That's another one
that was such a big deal. Yeah and yeah, no,
I just you just do it.
Speaker 4 (09:46):
Now, Well, let me pose a question to you. What
do you think? And there's a new king The number
one sit down chain restaurant in America is where you
order off the menu.
Speaker 3 (09:55):
Oh, this is tough.
Speaker 4 (09:58):
Before I tell you it's my favorite train, your favorite chain,
maybe my husband.
Speaker 3 (10:03):
I'm worried that, like I'm not going to know it,
and then I'm going to be really embarrassed at how
out of touch because you're going to say it is
going to be really obvious. What is it?
Speaker 2 (10:10):
Cheesecake factory?
Speaker 3 (10:11):
No are we are we talking about by dollar volume?
Speaker 4 (10:15):
Dollar volume?
Speaker 3 (10:16):
Okay?
Speaker 2 (10:18):
All right, yeah, you're gonna have to tell us.
Speaker 3 (10:20):
I think I'm having stage fright.
Speaker 4 (10:21):
What's the Texas Roadhouse?
Speaker 2 (10:23):
I love Texas Roadhouse? Oh my god. They have the
best red rolls.
Speaker 4 (10:28):
My mom brings to block bags and like I should.
Speaker 2 (10:30):
Have said, that was my favorite. They had one of those.
When I was living in Abu Dabi, they had one
and it was absolutely fantastic.
Speaker 4 (10:37):
You want to understand America, go to a text roadhouse
on Friday night. Yeah, I wasn't one to buke Iowa.
I was on book tour last weekend. I got a steak,
vegetable and mashed potatoes homemade fourteen dollars.
Speaker 2 (10:47):
Un ironically, their sticks are really good, Like they're good.
I always have to pull.
Speaker 3 (10:51):
Where do they get there? Where do they get their food?
Speaker 4 (10:54):
Oh? I mean who knows how they I mean you
need to get it from Cisco and they you don't.
I don't know.
Speaker 3 (10:58):
They only charged fourteen because of the incredible miracle of capitalism.
Have been scared, Joe.
Speaker 4 (11:03):
My hotic is two things they do scratch cooking. Most
chain restaurants now do frozen food. They're actually kind of
brocoling in the back and number two volume. Okay, yeah,
their surfers only have three tables and they move you
so quick.
Speaker 2 (11:30):
I love that you're doing in person research on the
subject of chain restaurants. But you know, you mentioned that
we're not entirely sure where Texas Roadhouse gets its food from.
How does it work the contracts between a restaurant and
someone like a Cisco. What do we know about those
specific agreements?
Speaker 4 (11:49):
So a few things. One we can kind of figure
out what chain Cisco does based on its website. So
it has a subdivision called Sigma. So if you go
to Sigma's website, it will rage about its corporate clients.
Some of them are all Garden Red Robin's one, you know,
different chains like that. The agreements, there's a lot. I mean,
what I do know from these agreements is what we
see with public universities, and even that are not transparent.
(12:11):
There's a famous one at the University of Iowa. Someone
wanted to know what's the contract for food here? And
it went up to Supreme Court in Iowa and it
was rejected, which is kind of a weird thing, Like
you think that our cultural state would have a really
good source in the food. You would know the contracts.
There's not a lot of disclosure here.
Speaker 2 (12:26):
They filed to see the actual contracts.
Speaker 4 (12:28):
Keep it closed.
Speaker 3 (12:29):
Yeah, Okay, So let's say a red Robin is it
or an olive Garden is a client of Cisco. Would
that be a national contract that would cover every Red
Robin or Olive Garden or would there be any variation
and read in regional distribution or anything like that, Like I.
Speaker 4 (12:45):
Would think so I would contextualize Cisco as think of
it as like fed extra food. Okay, A lot of
these companies that pattern products, and Cisco's just moving their
patent pattern fries, you know what I mean? Like they
all have their kind of That's what Cisco's there to
do is outsource that part or handle that.
Speaker 2 (13:00):
Is there some giant like Cisco food production center in
like I don't know, the wilderness of Wyoming or something,
or are they sort of like scattered around the United States.
Speaker 4 (13:09):
Scattered around? I mean, this is this is harder to understand.
There was a good Wall Street Journal article like twenty
years ago, how a lot of your Jollopeno poppers in
a restaurant I'll be all being made at one factory
in Mexico. You know, it's cheaper to pay someone offshore. Essentially,
you know, stuff it, but then you are sacrificing taste
at some point. But Cisco doesn't own production facilities. It
owned a slaughterhouse in Iowa at one point, but then
(13:31):
it sold it off. So I can't quite figure out
what they got into that. My guess is is for
most restaurants, people pick their vendor based on They called
center of the plate the protein, so they were trying
to do quality control.
Speaker 3 (13:43):
Yeah, I'm sure you're the center of the plate. Yeah,
a restaurant to refer to whichever protein. I already but
this is so they don't have production what basically it
is and you already said it's like fed eggs at
its core, it sounds like it's logistics companies.
Speaker 4 (13:58):
Yes, most of theirm place are truck drivers. Huh.
Speaker 2 (14:01):
Your dad was a truck driver, right, you talk about
this in the book.
Speaker 4 (14:04):
Yes, he works from a corn start company.
Speaker 2 (14:07):
So what did that experience of growing up with a
truck driver dad teach you about a company like Cisco.
Speaker 4 (14:14):
So my dad used to be first he's being in
the beer business, so he's a beer truck driver, and
then he worked in beer sales. So that's actually where
a lot of my I love looking at displays and
grocery stores because my dad used to merchandise, so I
love good merchandising. So like, my favorite grocery store is
HAP in Texas LOVEHV No One merchant, No One merchandise
is like that, Yeah, this is a fact, and so
you look at that. And so like my dad always
(14:36):
taught me like he could, he knew the type of
demographics of a grocery based on the number one beer,
like oh, this is a blue Moon hivy or this
is a you know, red red Dog hivy. So there's
different price points. And so my dad now does corn products.
But just understanding because there's independent truck drivers, there's in
(14:58):
house truck drivers, and there's kind of hierarchy to these
different worlds all that kind of stuff.
Speaker 3 (15:03):
So let's talk about the competitive landscape because that's an
addition to the fact that you know, you are a
big fan of the stakes at Texas Roadhouse. That's why
we're here. What does the competitive landscape for sort of
this sort of broadline or food distribution to restaurant really
look like.
Speaker 4 (15:21):
So that I mean, that's that's the big question anti
trusty market definition. I mean that is is like my
little pet peeve is, how do you define a market's everything?
So like Cisco try to buy us foods, you know,
back in twenty fifteen, and they argue their competition include
Sam's Club. I think people like I just remember personally
anadoltically my mom, we only went to Sam's Club when
she ran out cups and needed to get cups between
(15:43):
her next truckload. Most people would not include Costco and
Samski as a broadliner and Texas Roadhouse.
Speaker 2 (15:49):
Is it going to Costco to buy steakes?
Speaker 3 (15:50):
But in theory or restaurant, I mean, I take your point,
it's not really a comp but in theory, there probably
are restaurants that source from some of these whole Yeah.
Speaker 4 (16:00):
I mean you can tell when you go in certain
local restaurants, you'll see Costco branded products in the back.
My bigger thing here is right now, a lot of
what is a market is defined by highly paid economists,
and these things aren't publicly disclosed usually. I kind of
keep in mind, I come out of the Treasury Tax
Analysis Office. The beauty of that world is you have
Treasury doing tax revenue estimates UFCCBO, and then you have
(16:23):
independent academic institutions like you PEN doing revenue estimates, so
you have three different estimates coming at you for the
same thing. I will love if we did something like
this with market definition because here's the thing, these markets
are pretty stable. Having like there should be a government
agency doing market definition reports.
Speaker 3 (16:37):
So based on how you so the merger attempt was blocked.
It so based on however the regulators at the time defined, Okay,
this is the market, this is the circle we're drawing.
What are we talking about in terms of market share
and so forth?
Speaker 4 (16:52):
So keep so at the time too, there's basically three
national broadliners and they were number one Cisco is trying
to buy number two US Foods. That was read. But
what's really interesting here is basically, even though Cisco got
stopped two things number one, number two is trying to
buy number three. Right now, US Foods is trying to
buy I have to write it down performance foed. But
then Cisco basically is engaged. When people call roll ups
(17:16):
to my calculations, it's buying over two hundred and sixteen companies.
So even though it got stopped once for this big merger.
It's market dominance really comes from rolling up you know,
a local Miami seafood place, local produce place, and that
Anaheim that kind of stuff.
Speaker 2 (17:30):
So I know, roll up strategies started to get more
attention under the Biden administration, but historically it does seem
like regulators kind of go after the big M and
A deals and they kind of ignore all the small ones,
even though once you add up all the small ones,
it can get a company into a very very dominant position,
(17:51):
like with Cisco.
Speaker 4 (17:52):
I think this is the biggest one of the biggest
dowop poles and modern competition policy in America. I mean,
go back to my coffee bearing JB. Move they did
was clinics because this sounds awful. They realize people are
economically irrational with their pets when it comes to healthcare,
so they bought over like fifteen hundred vet clinics they
rolled up. Commissioner con helped put a stop to that.
(18:13):
I generally think with big companies like this, once you
reach a certain size, you basically don't allow them to
acquire because you just know they're not buying a company
for pro competitive reasons. But a lot of this flies
into the right art because the Federal Trade Comission, you know,
it's very understaffed. They can't keep they cannot keep tracking
a seafood provider in Miami who's buying it.
Speaker 3 (18:33):
Talk to us more about what they rolled up or
what they've been trying to roll up. So I take
it these aren't other broadliners. Are these specialty? Are these niche?
Are these regional?
Speaker 4 (18:45):
Like?
Speaker 3 (18:45):
What are they? What are the fragmented assets that they're
consolidating onto the Cisco umbrella?
Speaker 4 (18:49):
All above?
Speaker 3 (18:50):
Okay?
Speaker 4 (18:51):
I mean they generally don't compete. They buy. Okay, like
in Iowa, they came dial because they bought a broadliner,
a local broadliner. That essentially what they did for earlier
their history. Now they tend to buy more specialties. So
they'll buy like hotel things, like little soaps. They'll buy
a company that does like Asian food. They'll all these
little things, and then they're starting to buy four in
like an Irish broadliner, a Canadian broadliner, Coasta Rica broadliner.
(19:11):
It's just kind of a blop that keeps growing.
Speaker 2 (19:14):
Am I a tomato broadliner? I brought Joe tomatoes tomato,
really nice tomatoes.
Speaker 3 (19:19):
Niche, I think you're a specialty distributed.
Speaker 2 (19:21):
Yeah, okay, fair enough. I certainly don't do it in volume,
especially this year. Okay, Well, on that note, in your chapter,
it says that Cisco has something like twenty seven percent
market share.
Speaker 4 (19:33):
It's unclear what the market share is.
Speaker 2 (19:35):
Okay, So originally this was going to be my question,
like when we say that, what do we actually mean?
Speaker 4 (19:39):
We don't know. I originally in that chapter have A
quoted as a fifty percent market share, but you sometimes
you'll see forty, sometimes you'll see thirty. It really comes
back to the market definition. That's why I want to
go back to having some public entity debate this so
it's transparent. But also partly what stopped that purchase of
US foods is when you have to see looked into it.
(19:59):
They are looking at metropolitans and they realize, like in
Las Vegas and San Diego, it would have like an
eighty percent market share. So even with food, we tend
to talk national food is so local food markets particular,
we really need to drill down regionally.
Speaker 3 (20:12):
What do they use this power for? Sitting aside the
fact that they want to make a lot of money
like all companies do, like when I think about the
risk of anti competitive abuse or why I wouldn't want
one company to have such a dominant, you know, share
of a given market, I think, Okay, what is the
potential for abuse? So maybe they say no, you're not
(20:33):
you can't get access to all of this stuff unless
you buy our all of Maybe could be one sort
of thing, or they tell a restaurant you can't buy
X unless you buy our soaps. Like what is the
fear or what is the reality of what Cisco currently
does with the amount of power that they have.
Speaker 4 (20:49):
Yeah, so two things number one, So it's it's not
like you get a big sales book with the prices
of Cisco. Those days are gone. Most of it's on
an app and this is a black box. My understanding
from people I've talked to is they always want to
make their margin. So they might sell you your center
of a plate, the protein at a loss or costs.
They get you in the door, but then they'll make
the margins up by tweaking the napkin prices. Here's the
(21:11):
thing one could argue that's in violation the Robits and
Batman Act because in theory, you should charge everyone the
same price for x amount of units, but we don't
know because.
Speaker 2 (21:20):
Of Oh so we think it might be personalized up pricing,
but we're not sure.
Speaker 4 (21:26):
We're not sure. Okay, that is what some people have accused.
The other thing to keep in mind here and the biggest,
honestly part of the reason why I wrote this chapter
is just the quality decline. I feel like most eating
out in America, especially local places, it's all kind of
eh because CISC companies like Cisco, they don't want to
buy from like a local provider. They want one entity
to do a bunch, and so it's just stifling out
(21:48):
that kind of innovation, the quality, and especially in rural America,
Cisco doesn't want to deal with local things, and so
especially in I think an undercurrent two of my book
I realized after the fact was the communities producing our
food are actually being hit hardest by the food system.
We saw in the Coger Albertson merger case failed merger
that they're gouging the most in real communities. Most the
broadliner dominance tends to be highest in real communities, and
(22:10):
real communities tend to have the most fast food, So
it's kind of getting the worst of all these worlds,
So like New York has the best food, Like it's
kinda the more yuppie you are in America, that probably
the better food selection you have.
Speaker 2 (22:23):
That seems fair actually, and again like that's pretty ironic
given that most of the food is grown outside of cities. Obviously,
I'm going to ask the question that is very close
to Joe's heart. But with market dominance tends to come
pricing power. But on the other hand, with market dominance
and scale comes savings from volume. Do we have any
(22:46):
idea of like the net effect of a cisco on
food prices in restaurants?
Speaker 4 (22:52):
We don't. I mean kind of what I realized writing
this chapter and just in general with this book is
I just kind of do everything as Goldilocks, and there
is beauty to scale, but things have just gotten too
far and things are out of whack. And I think
with price and I brought this up last time, and
it's the first slide I show people anytime I talk anymore,
(23:13):
is Americans been more on average on food than most
Western democracies. And I think it's like cliche to say
I went to Europe and had cheaper food and it
was better. I think that's how you've seen the system
play out because you basically big big, gets big. You
have all these big boys kind of like going at
each other, and it's just kind of this race to
the bottom.
Speaker 3 (23:46):
Talk to us more about the food creator side of
the business. If I'm I don't know if I'm growing
tomatoes or if I'm or if me and Tracy are
growing tomatoes, to what degree the Cisco play us off
of each other or squeeze our margins in order to
get within the Cisco distribution system.
Speaker 4 (24:08):
I think the best example of that's in seafood. Okay,
the seafood. Seafood in general America is just a dumpster fire.
To to be blunt with you, there's a really and
I'm gonna make a comparison here. CNBC came up with
a really good story the other day where Walmart and
Amazon are this big fight right now. Yeah, and Walmart
basically has very low standards for its third party platform.
There's a lot of fraud, a lot of abuse going
(24:28):
on that platform because it's trying to get market share
from Amazon. I would compare Cisco to that, where they
don't here's the thing, they don't really care how their
seafood source I mean, there's been so many allegations of
the calamari coming from Chinese slave labor fish that's saying
it's Gulf shrimp from the you know, from America. It's
not just all these like these constant abuses in this
(24:50):
seafood system, but Cisco not caring because all it cares
about is price. Think of Cisco like the Walmart food distribution.
Speaker 2 (24:56):
That makes sense. So when you were reporting out this
particular chapter, did you hear any specific stories from either
restaurant owners or food producers about dealings with Cisco and
what it's like to actually negotiate with them.
Speaker 4 (25:11):
The biggest critique I've heard is just the lack of selection.
Cisco is such a dominance in a lot of these markets,
local restaurant owners really don't have a lot of choices.
That's probably the biggest critique I heard. And just my
favorite phrase, and it's a subtitle of the chapter of
this chapter is Tonight's dinner fell off the Cisco truck.
We've all had those meals, you know what I mean.
You go to wedding and you can just tell it's
(25:31):
like the low Staer Cisco where it's just so blah
and tasteless, but a lot of restaurants. I mean, that's
kind of this whole undercurrent of this book. This chapter
is I kind of think of this as my Frankenstein chapter.
What started off as an aid to local restaurants make
their life easier is now undermining them because they're losing
their specialness.
Speaker 2 (25:47):
Oh yeah, On that note, didn't the founder at one
point try to I guess he retired but was still
connected to the company, and then he tried to correct
some of what you're describing.
Speaker 4 (25:57):
Yes, I mean, I can't say this enough. He is
a model business man. I mean, this guy he retired
in the late eighties. He stepped aside, donated the charities,
kept coming into the office each day, didn't want to
sign parking, and he always trusted his people especially. He
let basically each warehouse do its own thing, and I
would compare it to like Whole Foods, famously Whole Foods
let the managers do its own thing pre Amazon, so
(26:19):
if they saw a good thing at the farmer's market,
they could bring that producer in. He retires, few CEOs
come along. One comes along, and the old man hated
consultants number one. He's like they don't know my business.
Number two, they'll probably chait even though they're not supposed to.
They'll share my secret sauce with my competitors. New guy
comes in, hires consultants, and what the first thing he
says is centralized procurement. You instead of having all these
(26:41):
local different things, get all your berries from one person.
And what John saw is he saw change the numbers.
So he wanted to go to the board to talk
about this CEO. Time was kept being like, no, no, no,
this is a nine year old man who built this company.
This is his everything. He went around and got it
to the board. According to one ext if he was
in estquartered out the building, this broke the old man.
Speaker 2 (27:03):
Did he like literally go into the building and like
find the.
Speaker 4 (27:06):
Board and no, he had a it could be a
certain staffer, get it to all the board members and
he was shown the door. This broke the old man.
And you see the quality decline, you know, centralized procurement.
Like you, I don't want to romanticize the Hall of
Peanut pepper or like this kind of stuff, but you
are cutting corners at some point when you're doing these
(27:26):
like not everything can be frozen and taste just as
good as a fresh thing. It's like a good example,
it's actually a tomato, like a good summer tomato. Like
there's no reason iohy can't get a good summer tomato.
It's so easy to grow a tomato there. But they're
all the same blah tomato grown who knows where. And
that's kind of that kind of story. And part of
it the argument I'm making there is part of regulation.
Guard rails, whatever you want to call them, is almost
(27:48):
prevent companies from themselves to stop a race to the bottom.
Speaker 3 (27:51):
It's interesting this idea that the restaurants can't distinguish themselves
to the same degree because of the sort of decline
in quality. And it strikes me. We did in upsisode
with some guys who actually opened up a pizza restaurant
right around the corner from Bloomberg, and in that case
we were talking about the delivery apps, and the idea is, like,
you know, one point in theory service delivery, et cetera,
(28:16):
might have been a restaurant's calling card, right, we have
really good we really know you, et cetera, And we have.
Speaker 2 (28:22):
We'll get to your house and fifteen minutes or the
pizza is free.
Speaker 3 (28:26):
But then everyone in theory. It's like this game theory
thing where everyone feels compelled to Okay, we're going to
distribute through the well known delivery apps that everyone has
heard about. And that's great, and on some level it
makes markets more efficient perhaps although they've gotten so expensive.
I think it's for me, it's more efficient often to
just go pick it up. But that's besides the point.
(28:48):
But the long term effect is essentially this sort of
elimination of the specialness of the place. And so maybe
there is more efficient, maybe the food is cheaper, maybe
it does get too faster, maybe even gets too faster
and hotter, et cetera. But this idea that we have
this sort of textured economy with this sort of flora
and fauna of businesses that are distinct, that of texture
(29:10):
sort of disappears once they plug into these giant platforms.
Speaker 4 (29:14):
You just made a great neo brandeis argument.
Speaker 3 (29:16):
Oh great.
Speaker 4 (29:17):
I mean this might not shock anyone. I'm a neo
brandised person. But that is my critique of the crant
I trust framework is not everything can be put into Excel.
How many hogs when persons shown, it's a question society
is has to wrestle with and I make that kind
of point in this chapter was at my wedding, I'm
part check and we start col watches, which colatches and
(29:37):
I are very different than the ones in Houston. Houston,
they put meat in them, but like you can't buy
col watches from Cisco. It's like the local little things
make a place of place, and you're losing this the
homogenization of the American food system. Everything's kind of the same.
It's kind of blah. And that's what's it's hard to art.
You can't. That's what's the thing that's missing. That's why
(29:57):
it is a little it does seem, frankly a little
hard to quantify this effect that everybody feel. I think
of two little examples is my mom had her own
coffee store and then she went worked at Starbucks. And
what drove her the nuts the most, or something called planograms.
She was told where to put every single thing on
the shelf. And my mom worked next to a General
Mills plan She knew that audience and she knew how
to merchandise, but they didn't trust her. It's like the
(30:20):
lack of trust and employee.
Speaker 3 (30:21):
We learned about planograms. Oh yeah, that's right with the
Celsia CEO.
Speaker 4 (30:26):
Yeah, that was a good episode. Yeah.
Speaker 2 (30:28):
I have since walked into CVS's looking at the shelf
space very very differently, and I'll just too.
Speaker 4 (30:34):
Oh, I'll just add on. The thing keep in mind
is no one gets rid. No one opens a restaurant
to get rich. Everyone. It's a really really hard industry.
You're willing to sacrifice incomes because you do because what
you love, and you just you feel that pride in
local places and they're just running, they're running up hill
more and more based on because of these structures.
Speaker 2 (30:51):
You know, you mentioned frozen berries earlier, and I know
Barry Barons are in your book. Do the dominant companies
like a Cisco or a Berry Baron, do they kind
of like feed on each other? You think, like does
Cisco naturally lean towards producers who are making stuff in
huge volumes?
Speaker 4 (31:10):
I mean, I think it goes back to Walmart. I
mean part of it was people in negotiating power when
they negotiate deals with these companies. So you've got to
get big, so you have some volume so you can negotiate,
Like I think of I go back to Walmart just
because I think of Walmart as the closest thing America's
ever had to Soviet unions out Paula Buro. That's the
weirdest chapter people have reached out to me about. Is
all the suppliers, like you don't negotiate with Walmart. Walmart
(31:32):
dictates to you. I think with Cisco, is they're just
so big.
Speaker 3 (31:35):
These are centrally planned internal economies.
Speaker 4 (31:37):
Yeah, absolutely, and it's I think the best example of
the bad qualities. Actually, the produce system in America partly
is because of the farm bell we subsidize corn, we
don't subsidize carrots, So our protoce system went offshore, you know,
because you can exploit labor and exploit environmental stuff, so
that green pepper's coming from who knows where, traveling long
things and so. And it's also designed for durability, not
(31:58):
for taste. And you're seeing the play out in your
local restaurants where just the foods kind of.
Speaker 3 (32:03):
It's interesting you used the phrase earlier saving companies from themselves.
I think even the companies seem to be aware of this.
And you mentioned Starbucks is a great example because I
forget what's the name of the Starbucks founder.
Speaker 4 (32:15):
He could everyone it's not Howard Schultz. That's who we
think it is.
Speaker 3 (32:18):
Oh well, Howard Schultz. Every every few years his name
is back in the headlines, and he himself seems to
rue the fact that this company, which early on sort
of had a local coffee shop vibe which I think
he really liked, has not been able to sustain that
in part because of, yeah, the required programs, and he
(32:39):
complains about that. Everyone's like, we got to get back
to feeling like a real Italian coffee shop. It never
seems to happen.
Speaker 2 (32:44):
Well, one of the Ben and Jerry's founders just quit
as well because Ben and Jerry's was bought by Unilever.
Speaker 4 (32:50):
So the funding each chapter, I realized, there's they all
had these like niche Every commodity is different in America,
and the like Therey's actually to be the most complex commodity.
The whole Harry regulation America's written in the nineteen before we
had refrigeration, So it makes no sense. The joke and
dairy is only five people understand the dairy program and
four are dead. And I was kid it seen with
this dairy guy in Wisconsin last week. And there's a
(33:11):
glut right now in the butterfat market be engineered, soybeans
increased the butterfat. And the rumor right now in the
street too is are feeding palm oyld the cows.
Speaker 3 (33:19):
Oh wow, speaking of dry you know when we did
that episode with Mike Frohman recently and you mentioned that
you asked him what was the bigg surprise? He learned
as US trade repert He's like, oh, there's five hundred
different things you could do with a dairy molecule, and
because of trade rules. Anyway, by the way, just following up,
I am currently in a touch with someone from the
Big New Zealand Dairy cooperative Fonterra from Big Dairy, I
(33:41):
am working on finding the dairy molecule specialist for that episode.
Speaker 2 (33:44):
Oh well, that's very exciting. Maybe we'll end up doing
a three part milk series. Yeah, I'm sure we better
hurry it up since it's almost October. Okay, is there
anything that can be done about this? Like now that
a Cisco has rolled up all these different companies and
substantial market share, although as we were discussing, we can
debate what that actually means. Is there like what swings
(34:09):
that dominance the other way?
Speaker 4 (34:11):
Yeah? I mean to Joe's and just I just want
to add on to Joe's point earlier about the companies
not wanting to have to do this, but if they
don't engage this beat, like the system design right now
is they have to do this behavior. And I actually
think about that with farmers now in America. The farm
building right now is designed to maximize corns. You have
to overplant corn even though it's bad for the environment,
else you go broke. So everyone's behaving this way because
(34:32):
we're in a Las Fair era. What to do about it?
And that's kind of why I profiled this woman named
Ellen in that chapter. She I think people crave heroes
right now. No one's really articulating hope on whatever your
local party is, what is a positive food system? And
Ellen Ellen's fascinating where she's a farmer's two kids. She
(34:53):
opened her own restaurant and then she opened her own
like Cisco, because the problem she has with Cisco didn't
want to take her product and sell to restaurants on
Almahon to mooin, So she created a nonprofit Got it Up.
They would basically pull different farmers in Western Iowa to
sell into these It was using and they're also doing school,
so that was a big one, but then they got
hard hit by the Doge cuts. That to me is
(35:13):
like maybe one possible thing is maybe extension. You have
extension all across the world America. Maybe they can kind
of get into that help this kind of procurement.
Speaker 2 (35:21):
Yeah, maybe you don't try to compete against Cisco on volume,
but you go like hyper localized hyperlocal.
Speaker 4 (35:27):
But also something we got a rein in Cisco. I mean,
looking at the black box of the pricing strategy would
be huge. But also I think we should put merger
acquisition freezes on these large entities. At some point it's
like you can't buy anymore, like you've hit your cap.
Speaker 3 (35:41):
It's interesting, tracy. Like the other great homogenizing effect, of
course on society is big digital platforms, right Instagram, et cetera.
And everyone feels that they have to constrain whatever they do,
whether it's a restaurant or media company, et cetera, in
order to serve the elgo guy that is sort of
capricious and unpredictable in some way. And it feels like
(36:05):
the story, whether we're talking about the physical world or
the digital world, is that scale has this homogenizing effect,
which nobody really likes these conditions.
Speaker 2 (36:16):
Yeah, I think that's right. But also there are these
like hidden tears of scale, viz. These middleman companies. All right, well, Austin,
thank you so much for coming back on Odd Blots.
Congrats on the new chapter, and I'm sure a lot
of people will be looking forward to picking up the
revised book.
Speaker 4 (36:33):
Thank you so much for having me on again. Joe.
Speaker 2 (36:47):
That was really enjoyable.
Speaker 3 (36:48):
Yeah.
Speaker 2 (36:49):
I always love talking about food. Although I haven't had
lunch today, so I knew that. I'm a little bit
Can we go to Olive Garden in Times Square?
Speaker 3 (36:56):
Let's do it right soon, I'll go. I'm happy to
go there soon.
Speaker 2 (36:59):
Okay, I actually would like to go.
Speaker 3 (37:02):
Yeah, it's got great views. It's actually really fun and
it's got great views.
Speaker 2 (37:06):
Oh you've been to that specifically one? Oh, I didn't realize. Okay,
so there's a lot to pick out from that. I
know you're on the side of cheap and plentiful food,
but perhaps perhaps I guess the homogeneity of the offering,
maybe that concerns you.
Speaker 3 (37:24):
It definitely concerns me. And this idea that no, and
this idea that restaurants if they you know, so much
of the preparation is done off site, et cetera for
curious things that you eat, and so what is the
restaurant anymore? And so this is a thing where scale
is great and cheapness is great, and I'm all for this,
(37:47):
And I think food should be a lot cheaper than
it is, because we've had a lot of food inflation
in this country and I think it's very worrisome, and
so food should be a lot cheaper and more efficient,
et cetera than it is. But when we think about
the things that sort of make us a society. Nice,
If if a restaurant is really just a sort of
Cisco microwave, yeah, or Cisco man, right, a giant microwave
(38:09):
that can connects a Cisco manufactur distribution system to a
Grubhub delivery system, what world are we living in?
Speaker 2 (38:16):
Yeah? And I think it gets back to the flora
and fauna point that you were making. So maybe you
could have you know, uh, food that's cheap and maybe
not of the highest quality, but it is plentiful and inexpensive.
But then you should have you know, more local options.
Speaker 3 (38:33):
We brought me those really nice tomatoes yes, so thank
you for those.
Speaker 2 (38:36):
You're welcome. So I'm doing my part.
Speaker 3 (38:38):
But I do not think that is a scalable solution
for most people. No, And I grew up hating tomatoes
because I thought that they were all really bland because
I only got them.
Speaker 2 (38:47):
In the supermarkets. Yeah, it is phenomenal. How different a
supermarket tomato taste from a homegrown one? Anyway, shall we
leave it there?
Speaker 3 (38:56):
Let's leave it there.
Speaker 2 (38:57):
This has been another episode of the All Thoughts podcast.
I'm Tracy Alloway. You can follow me at Tracy Alloway.
Speaker 3 (39:02):
And I'm joll Wisenthal. You can follow me at the Stalwart.
Follow our guest Austin Ferk, He's at Austin Ferk, and
check out the new edition of his book Bearings, which
has a whole chapter about Cisco. Follow our producers Carmen
Rodriguez at Carman armand Dash E Bennett at dashbod at
Calebrooks at Kilbrooks. For more odd Loots content, go to
Bloomberg dot com. Slash od Lots have a daily newsletter
(39:23):
and all of our episodes, and you can chat about
all of these topics. Twenty four seven in our discord
Discord dot gg slash.
Speaker 2 (39:30):
Outlocks and if you enjoy odd Lots. If you want
us to dig into Dary, then please leave us a
positive review on your favorite podcast platform. And remember, if
you are a Bloomberg subscriber, you can listen to all
of our episodes absolutely ad free. All you need to
do is find the Bloomberg channel on Apple Podcasts and
follow the instructions there. Thanks for listening in
Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2 (00:17):
Hello and welcome to another episode of the All Thoughts Podcast.
I'm Tracy Alloway.
Speaker 3 (00:21):
And I'm Joe. Wasn't thal Joe.
Speaker 2 (00:23):
I have a question, go on, what is your favorite
chain restaurant. It has to be a sit down chain restaurant.
Speaker 3 (00:31):
Sit down chain restaurant. That's a really good question.
Speaker 4 (00:35):
You know.
Speaker 3 (00:35):
I actually really like Chilia's. I think they have Their
fijidas are absolutely legit. And I say this as someone
who is eating quite a lot of text mex Fijidas
from my time in Texas, and so I think I
have credibility and as a kid, and I haven't been
there in years, but I still think my memory of
the food is really good. I love Cracker Barrel.
Speaker 2 (00:52):
Oh, breakfast at Cracker Barrel is really really good. Well,
I bring it up because today we're going to be
answering the question of where all of these restaurants actually
get their food from.
Speaker 3 (01:02):
That's a great question. I don't I don't know anything
about it. I don't know anything about sit down chain restaurants.
Speaker 4 (01:06):
I mean, I don't know.
Speaker 3 (01:07):
I think about most chain restaurants period, let alone fast
food ones. But the world of sit down ones that
are real restaurants where there's waiters, waitresses, et cetera. I
don't know a thing about it.
Speaker 2 (01:17):
You're not interested in my favorite restaurants. Oh, this is
how it works. I asked you a question, and you
were ciprocate.
Speaker 3 (01:24):
I was going to and I was planning to, and
then you like turned a ninety degree angle to talk
about to talk about we were going to start answering
the question of where these comfort was like, oh, okay,
I guess we're going on to some new direction here.
We could just keep talking about favorite restaurant, Tracy, what
is your favorite restaurant to sit down in?
Speaker 2 (01:40):
I actually have many? Okay, Red Robin, Oh, I still
love that place. They had a salad that was basically
just a plate of chicken tenders.
Speaker 4 (01:48):
It was so good.
Speaker 2 (01:49):
But build does a salad Fridays. You still love that place?
Speaker 4 (01:53):
I know.
Speaker 2 (01:54):
And there was one in London and it was like
my anchor to America in the early two thousands. And
Chili's Chili is with my Chili.
Speaker 3 (02:02):
Yeah, yeah, it's legit. Keep going. We're going to make
up for the fact that I didn't ask you. But
now I'm just keep going well.
Speaker 1 (02:08):
One thing.
Speaker 2 (02:09):
One thing I did realize recently. I've never been to
an olive garden. I don't know why that is.
Speaker 3 (02:13):
I've been a few times. It's not that terrible. I
don't think like I've been. I've even been to the
one in Times Square.
Speaker 2 (02:20):
Yeah, but I feel like it's very hard to make
carbs badly. Right, it's just pasta and bread.
Speaker 3 (02:26):
Yeah, uh, it's good.
Speaker 2 (02:29):
Okay, all right, I am going to move the conversation
on now Apple Bee's.
Speaker 3 (02:33):
Have been to the one in Times Square? There, solid
I do not like it. Why do we have to
move the conversation on. I don't get it. Why can't
we just keep talking about it? Sit down restaurant?
Speaker 2 (02:41):
All right, Well, we'll get back to them. We'll get
to our recommendations. But on a serious note, one of
the reasons we are interested in this subject is because
we did a series last year called Beat Capitalism, where
we talked a lot about agriculture and the chicken industry specifically,
and anti trust and monopolies and things like that. And
one of the things that stood out to me from
(03:02):
that series was a comment from Doha Mechi, who is
the former Assistant Attorney General, where she talked about the
tyranny of the middleman in the economy, and I think
this is something that people are, you know, perhaps just
waking up to. There are all these companies out there
that you have probably never heard of, but have massively
(03:24):
dominant positions in the economy and charge a lot for
their services. And one of those happens to be a
very large company that provides food for all these sit
down chain restaurants.
Speaker 3 (03:38):
You know, I'm going to play Devil's advocate on this
episode because, as.
Speaker 2 (03:41):
You know, because you love chili so much, because I love.
Speaker 3 (03:44):
Chili's, and I love food production at massive scales, and
I love.
Speaker 4 (03:49):
All of this.
Speaker 3 (03:50):
But it is true that there are all these companies
that are really important that sort of sit between whether
the retailer, the customer, or more in the case of food,
more frequently the farmer and the end retailer of the
farmer and the restaurant do we literally know nothing about.
And they're huge and they're massive, and they don't get
any attention, and so I am very interested in this topic.
Speaker 2 (04:10):
All right, Well, we do have the perfect guest. It
is someone who has been on the show before I
think maybe a year or two ago. Now, yeah, wow,
time flies. But we're going to be speaking with Austin Frerik.
He is an anti trust and agricultural expert and also
the author of Baron's Money Power and the Corruption of
America's Food Industry. It's a great book even if you're
(04:32):
not interested in agriculture or anti trust specifically, it says
a lot about the US economy, so I would highly
recommend it. And Austin actually has just written a new
chapter for his book that is all about this particular company,
and I guess I should just say what it is.
It's called Cisco.
Speaker 3 (04:51):
It's not the networking gear company.
Speaker 2 (04:53):
Not the networking gear company, although it does have the
most generic origin story ever. So Cisco's stands for systems
and services company.
Speaker 3 (05:03):
Yum delicious.
Speaker 2 (05:05):
All right, Austin, welcome back to the show.
Speaker 4 (05:07):
Thanks for having me on again. And I just want
to say, you guys have me on last year really
changed the course of my book, so I appreciate that.
Speaker 2 (05:14):
Oh, thank you.
Speaker 4 (05:15):
Well.
Speaker 2 (05:15):
It was genuinely excellent. I am not just saying that.
I really enjoyed it. Okay, speaking of which, how does
it work when you decide to add a new chapter
to a book and why did you decide to do this?
Speaker 4 (05:25):
Yeah. So the funniest thing about this book was when
I would do book talks, people kept telling me about
barons I missed, Like I was in Idaho. They're like,
let me tell you about a potato baron when I
was in Indiana. There.
Speaker 3 (05:35):
We're going to get the name of the potato baron
after the episode.
Speaker 4 (05:38):
So oh yeah, I have a whole purgatory folder that
I just put this information into. But Cisco kept coming
up and it was the weirdest placed origin story where
so I talked fast and I know it. So I
purposely been doing book talks and nursing.
Speaker 2 (05:51):
Homes, so you have to slow down and practice.
Speaker 4 (05:54):
Okay, I blame it on. I listened to podcasts like
one point five point five, especially Midwestern and older people.
You gotta take it down. And what kept happening when
I was doing.
Speaker 3 (06:05):
You realize, if you're speaking fast because you're used to it,
then people who listened to you on those podcasts are
now listen you two and a half to three x speed. Anyway.
Speaker 4 (06:13):
It's bad because my husband listens to them on two
x twos. We talked that way, and it's so a
lot of times you do nursing home gigs, they'll value
for dinner before and after. And it was people kept
complaining about the food. And I mean, anyone that's been
to a hospital or there's home in America, it's pretty bad.
I mean, we're serving our most vulnerable people the worst food.
(06:33):
And they kept coming up. But it's Cisco's one of
those things everyone kind of complains about, but no one knows.
And my mom used to have a bakery and I
write about that in my Coffee chapter. And she had
a Broadliner and her Broadliner disappeared. They got bought up
by a bigger entity, and so I was just curious.
Speaker 2 (06:47):
And then that's broadline distribution.
Speaker 4 (06:49):
Yes, right, thanks for that's an industry term. I think
of them as grocery store for restaurants. They were Amazon
Before Amazon, they were the everything store.
Speaker 3 (06:58):
This is really important because when we're talking about Foo distribution,
so there are broadliners. You get everything there from well,
you know, your huge jar of olives to cheese or whatever.
But then also a restaurant might also have specialty distributors
too that like just really focus.
Speaker 4 (07:14):
On one thing, right if they have the option. Okay,
in certain markets, usually most rural communities, there's very few options.
But like for example, New York has one most competitive
broadliner market, so restaurants here have a lot of different
source and options.
Speaker 2 (07:25):
Yeah, I should just say this is going to be
a very odd, lotsy episode because it brings together baking, warehouses, logistics, trucking,
anti trust, all that good stuff. So I'm very excited. Okay, Well,
on that note, how did Cisco get to be a
dominant player in this particular space.
Speaker 4 (07:43):
I love this origin story John Bot. He's a different
type of character compared to other barons my book. I
really like him, like he's like a model businessman where
he's one of those people comes out of Waco, Texas.
His brother and dad died young, dropped out of college,
leap Baylor to support his mom, worked at AMP, got
transferred to the AMP in Houston, and he's one of
(08:04):
those people you see in business history that just saw
things before other people. He saw two important things. Number one,
the rise of frozen food. We're talking like right after
World War two and how that was going to and
then also frozen food mixed with women entering the work
at workforce knowing that they want to make quicker meals.
So he thought, oh, people are gonna eat out more.
And the thing to keep in mind here is our
(08:25):
norm of eating out is a very new thing in America.
Historically used to like bring a dish to something, it
was like a church function. Now we eat up about
once a day. So he saw that thing ahead of people,
and he didn't think amp was moving fast enough. So
he founded a frozen essentially a frozen berry company. But
going back to this point, you made Joe about all
these different things. That's how the idea from Cisco came
(08:46):
from where literally some Irish oil man was opening a
fancy hotel in Houston, and he was working the loading
dock that night and he saw in the day a
frozen strawberries. A frozen strawberry. I don't have a competitive advantage,
but what I can do is this food buyer has
like thirty different vendors for all these different things. What
I can do is offer him as much as possible.
So the origin of Cisco was he brought nine companies
(09:08):
together to create it, and you realized some's gonna fill
this at some point. So even though they only did
business in a few state, he registered in all fifty
states so that's how Cisco is created.
Speaker 3 (09:16):
I am fascinated by this idea because it's just one
of those things that hadn't really occurred to me until
like a read ear chapter, just like yeah, like it's
really weird how much we eat out or it's just
really novel in terms of the prevalence of restaurants. I
mean I eat out way more than I did, like
when I was a kid growing up.
Speaker 4 (09:35):
I think about that all the time. Used like Bonanza
was like a buffet was like a special occasion once
a week.
Speaker 3 (09:40):
And now I sit down Pizza Hut. That's another one
that was such a big deal. Yeah and yeah, no,
I just you just do it.
Speaker 4 (09:46):
Now, Well, let me pose a question to you. What
do you think? And there's a new king The number
one sit down chain restaurant in America is where you
order off the menu.
Speaker 3 (09:55):
Oh, this is tough.
Speaker 4 (09:58):
Before I tell you it's my favorite train, your favorite chain,
maybe my husband.
Speaker 3 (10:03):
I'm worried that, like I'm not going to know it,
and then I'm going to be really embarrassed at how
out of touch because you're going to say it is
going to be really obvious. What is it?
Speaker 2 (10:10):
Cheesecake factory?
Speaker 3 (10:11):
No are we are we talking about by dollar volume?
Speaker 4 (10:15):
Dollar volume?
Speaker 3 (10:16):
Okay?
Speaker 2 (10:18):
All right, yeah, you're gonna have to tell us.
Speaker 3 (10:20):
I think I'm having stage fright.
Speaker 4 (10:21):
What's the Texas Roadhouse?
Speaker 2 (10:23):
I love Texas Roadhouse? Oh my god. They have the
best red rolls.
Speaker 4 (10:28):
My mom brings to block bags and like I should.
Speaker 2 (10:30):
Have said, that was my favorite. They had one of those.
When I was living in Abu Dabi, they had one
and it was absolutely fantastic.
Speaker 4 (10:37):
You want to understand America, go to a text roadhouse
on Friday night. Yeah, I wasn't one to buke Iowa.
I was on book tour last weekend. I got a steak,
vegetable and mashed potatoes homemade fourteen dollars.
Speaker 2 (10:47):
Un ironically, their sticks are really good, Like they're good.
I always have to pull.
Speaker 3 (10:51):
Where do they get there? Where do they get their food?
Speaker 4 (10:54):
Oh? I mean who knows how they I mean you
need to get it from Cisco and they you don't.
I don't know.
Speaker 3 (10:58):
They only charged fourteen because of the incredible miracle of capitalism.
Have been scared, Joe.
Speaker 4 (11:03):
My hotic is two things they do scratch cooking. Most
chain restaurants now do frozen food. They're actually kind of
brocoling in the back and number two volume. Okay, yeah,
their surfers only have three tables and they move you
so quick.
Speaker 2 (11:30):
I love that you're doing in person research on the
subject of chain restaurants. But you know, you mentioned that
we're not entirely sure where Texas Roadhouse gets its food from.
How does it work the contracts between a restaurant and
someone like a Cisco. What do we know about those
specific agreements?
Speaker 4 (11:49):
So a few things. One we can kind of figure
out what chain Cisco does based on its website. So
it has a subdivision called Sigma. So if you go
to Sigma's website, it will rage about its corporate clients.
Some of them are all Garden Red Robin's one, you know,
different chains like that. The agreements, there's a lot. I mean,
what I do know from these agreements is what we
see with public universities, and even that are not transparent.
(12:11):
There's a famous one at the University of Iowa. Someone
wanted to know what's the contract for food here? And
it went up to Supreme Court in Iowa and it
was rejected, which is kind of a weird thing, Like
you think that our cultural state would have a really
good source in the food. You would know the contracts.
There's not a lot of disclosure here.
Speaker 2 (12:26):
They filed to see the actual contracts.
Speaker 4 (12:28):
Keep it closed.
Speaker 3 (12:29):
Yeah, Okay, So let's say a red Robin is it
or an olive Garden is a client of Cisco. Would
that be a national contract that would cover every Red
Robin or Olive Garden or would there be any variation
and read in regional distribution or anything like that, Like I.
Speaker 4 (12:45):
Would think so I would contextualize Cisco as think of
it as like fed extra food. Okay, A lot of
these companies that pattern products, and Cisco's just moving their
patent pattern fries, you know what I mean? Like they
all have their kind of That's what Cisco's there to
do is outsource that part or handle that.
Speaker 2 (13:00):
Is there some giant like Cisco food production center in
like I don't know, the wilderness of Wyoming or something,
or are they sort of like scattered around the United States.
Speaker 4 (13:09):
Scattered around? I mean, this is this is harder to understand.
There was a good Wall Street Journal article like twenty
years ago, how a lot of your Jollopeno poppers in
a restaurant I'll be all being made at one factory
in Mexico. You know, it's cheaper to pay someone offshore. Essentially,
you know, stuff it, but then you are sacrificing taste
at some point. But Cisco doesn't own production facilities. It
owned a slaughterhouse in Iowa at one point, but then
(13:31):
it sold it off. So I can't quite figure out
what they got into that. My guess is is for
most restaurants, people pick their vendor based on They called
center of the plate the protein, so they were trying
to do quality control.
Speaker 3 (13:43):
Yeah, I'm sure you're the center of the plate. Yeah,
a restaurant to refer to whichever protein. I already but
this is so they don't have production what basically it
is and you already said it's like fed eggs at
its core, it sounds like it's logistics companies.
Speaker 4 (13:58):
Yes, most of theirm place are truck drivers. Huh.
Speaker 2 (14:01):
Your dad was a truck driver, right, you talk about
this in the book.
Speaker 4 (14:04):
Yes, he works from a corn start company.
Speaker 2 (14:07):
So what did that experience of growing up with a
truck driver dad teach you about a company like Cisco.
Speaker 4 (14:14):
So my dad used to be first he's being in
the beer business, so he's a beer truck driver, and
then he worked in beer sales. So that's actually where
a lot of my I love looking at displays and
grocery stores because my dad used to merchandise, so I
love good merchandising. So like, my favorite grocery store is
HAP in Texas LOVEHV No One merchant, No One merchandise
is like that, Yeah, this is a fact, and so
you look at that. And so like my dad always
(14:36):
taught me like he could, he knew the type of
demographics of a grocery based on the number one beer,
like oh, this is a blue Moon hivy or this
is a you know, red red Dog hivy. So there's
different price points. And so my dad now does corn products.
But just understanding because there's independent truck drivers, there's in
(14:58):
house truck drivers, and there's kind of hierarchy to these
different worlds all that kind of stuff.
Speaker 3 (15:03):
So let's talk about the competitive landscape because that's an
addition to the fact that you know, you are a
big fan of the stakes at Texas Roadhouse. That's why
we're here. What does the competitive landscape for sort of
this sort of broadline or food distribution to restaurant really
look like.
Speaker 4 (15:21):
So that I mean, that's that's the big question anti
trusty market definition. I mean that is is like my
little pet peeve is, how do you define a market's everything?
So like Cisco try to buy us foods, you know,
back in twenty fifteen, and they argue their competition include
Sam's Club. I think people like I just remember personally
anadoltically my mom, we only went to Sam's Club when
she ran out cups and needed to get cups between
(15:43):
her next truckload. Most people would not include Costco and
Samski as a broadliner and Texas Roadhouse.
Speaker 2 (15:49):
Is it going to Costco to buy steakes?
Speaker 3 (15:50):
But in theory or restaurant, I mean, I take your point,
it's not really a comp but in theory, there probably
are restaurants that source from some of these whole Yeah.
Speaker 4 (16:00):
I mean you can tell when you go in certain
local restaurants, you'll see Costco branded products in the back.
My bigger thing here is right now, a lot of
what is a market is defined by highly paid economists,
and these things aren't publicly disclosed usually. I kind of
keep in mind, I come out of the Treasury Tax
Analysis Office. The beauty of that world is you have
Treasury doing tax revenue estimates UFCCBO, and then you have
(16:23):
independent academic institutions like you PEN doing revenue estimates, so
you have three different estimates coming at you for the
same thing. I will love if we did something like
this with market definition because here's the thing, these markets
are pretty stable. Having like there should be a government
agency doing market definition reports.
Speaker 3 (16:37):
So based on how you so the merger attempt was blocked.
It so based on however the regulators at the time defined, Okay,
this is the market, this is the circle we're drawing.
What are we talking about in terms of market share
and so forth?
Speaker 4 (16:52):
So keep so at the time too, there's basically three
national broadliners and they were number one Cisco is trying
to buy number two US Foods. That was read. But
what's really interesting here is basically, even though Cisco got
stopped two things number one, number two is trying to
buy number three. Right now, US Foods is trying to
buy I have to write it down performance foed. But
then Cisco basically is engaged. When people call roll ups
(17:16):
to my calculations, it's buying over two hundred and sixteen companies.
So even though it got stopped once for this big merger.
It's market dominance really comes from rolling up you know,
a local Miami seafood place, local produce place, and that
Anaheim that kind of stuff.
Speaker 2 (17:30):
So I know, roll up strategies started to get more
attention under the Biden administration, but historically it does seem
like regulators kind of go after the big M and
A deals and they kind of ignore all the small ones,
even though once you add up all the small ones,
it can get a company into a very very dominant position,
(17:51):
like with Cisco.
Speaker 4 (17:52):
I think this is the biggest one of the biggest
dowop poles and modern competition policy in America. I mean,
go back to my coffee bearing JB. Move they did
was clinics because this sounds awful. They realize people are
economically irrational with their pets when it comes to healthcare,
so they bought over like fifteen hundred vet clinics they
rolled up. Commissioner con helped put a stop to that.
(18:13):
I generally think with big companies like this, once you
reach a certain size, you basically don't allow them to
acquire because you just know they're not buying a company
for pro competitive reasons. But a lot of this flies
into the right art because the Federal Trade Comission, you know,
it's very understaffed. They can't keep they cannot keep tracking
a seafood provider in Miami who's buying it.
Speaker 3 (18:33):
Talk to us more about what they rolled up or
what they've been trying to roll up. So I take
it these aren't other broadliners. Are these specialty? Are these niche?
Are these regional?
Speaker 4 (18:45):
Like?
Speaker 3 (18:45):
What are they? What are the fragmented assets that they're
consolidating onto the Cisco umbrella?
Speaker 4 (18:49):
All above?
Speaker 3 (18:50):
Okay?
Speaker 4 (18:51):
I mean they generally don't compete. They buy. Okay, like
in Iowa, they came dial because they bought a broadliner,
a local broadliner. That essentially what they did for earlier
their history. Now they tend to buy more specialties. So
they'll buy like hotel things, like little soaps. They'll buy
a company that does like Asian food. They'll all these
little things, and then they're starting to buy four in
like an Irish broadliner, a Canadian broadliner, Coasta Rica broadliner.
(19:11):
It's just kind of a blop that keeps growing.
Speaker 2 (19:14):
Am I a tomato broadliner? I brought Joe tomatoes tomato,
really nice tomatoes.
Speaker 3 (19:19):
Niche, I think you're a specialty distributed.
Speaker 2 (19:21):
Yeah, okay, fair enough. I certainly don't do it in volume,
especially this year. Okay, Well, on that note, in your chapter,
it says that Cisco has something like twenty seven percent
market share.
Speaker 4 (19:33):
It's unclear what the market share is.
Speaker 2 (19:35):
Okay, So originally this was going to be my question,
like when we say that, what do we actually mean?
Speaker 4 (19:39):
We don't know. I originally in that chapter have A
quoted as a fifty percent market share, but you sometimes
you'll see forty, sometimes you'll see thirty. It really comes
back to the market definition. That's why I want to
go back to having some public entity debate this so
it's transparent. But also partly what stopped that purchase of
US foods is when you have to see looked into it.
(19:59):
They are looking at metropolitans and they realize, like in
Las Vegas and San Diego, it would have like an
eighty percent market share. So even with food, we tend
to talk national food is so local food markets particular,
we really need to drill down regionally.
Speaker 3 (20:12):
What do they use this power for? Sitting aside the
fact that they want to make a lot of money
like all companies do, like when I think about the
risk of anti competitive abuse or why I wouldn't want
one company to have such a dominant, you know, share
of a given market, I think, Okay, what is the
potential for abuse? So maybe they say no, you're not
(20:33):
you can't get access to all of this stuff unless
you buy our all of Maybe could be one sort
of thing, or they tell a restaurant you can't buy
X unless you buy our soaps. Like what is the
fear or what is the reality of what Cisco currently
does with the amount of power that they have.
Speaker 4 (20:49):
Yeah, so two things number one, So it's it's not
like you get a big sales book with the prices
of Cisco. Those days are gone. Most of it's on
an app and this is a black box. My understanding
from people I've talked to is they always want to
make their margin. So they might sell you your center
of a plate, the protein at a loss or costs.
They get you in the door, but then they'll make
the margins up by tweaking the napkin prices. Here's the
(21:11):
thing one could argue that's in violation the Robits and
Batman Act because in theory, you should charge everyone the
same price for x amount of units, but we don't
know because.
Speaker 2 (21:20):
Of Oh so we think it might be personalized up pricing,
but we're not sure.
Speaker 4 (21:26):
We're not sure. Okay, that is what some people have accused.
The other thing to keep in mind here and the biggest,
honestly part of the reason why I wrote this chapter
is just the quality decline. I feel like most eating
out in America, especially local places, it's all kind of
eh because CISC companies like Cisco, they don't want to
buy from like a local provider. They want one entity
to do a bunch, and so it's just stifling out
(21:48):
that kind of innovation, the quality, and especially in rural America,
Cisco doesn't want to deal with local things, and so
especially in I think an undercurrent two of my book
I realized after the fact was the communities producing our
food are actually being hit hardest by the food system.
We saw in the Coger Albertson merger case failed merger
that they're gouging the most in real communities. Most the
broadliner dominance tends to be highest in real communities, and
(22:10):
real communities tend to have the most fast food, So
it's kind of getting the worst of all these worlds,
So like New York has the best food, Like it's
kinda the more yuppie you are in America, that probably
the better food selection you have.
Speaker 2 (22:23):
That seems fair actually, and again like that's pretty ironic
given that most of the food is grown outside of cities. Obviously,
I'm going to ask the question that is very close
to Joe's heart. But with market dominance tends to come
pricing power. But on the other hand, with market dominance
and scale comes savings from volume. Do we have any
(22:46):
idea of like the net effect of a cisco on
food prices in restaurants?
Speaker 4 (22:52):
We don't. I mean kind of what I realized writing
this chapter and just in general with this book is
I just kind of do everything as Goldilocks, and there
is beauty to scale, but things have just gotten too
far and things are out of whack. And I think
with price and I brought this up last time, and
it's the first slide I show people anytime I talk anymore,
(23:13):
is Americans been more on average on food than most
Western democracies. And I think it's like cliche to say
I went to Europe and had cheaper food and it
was better. I think that's how you've seen the system
play out because you basically big big, gets big. You
have all these big boys kind of like going at
each other, and it's just kind of this race to
the bottom.
Speaker 3 (23:46):
Talk to us more about the food creator side of
the business. If I'm I don't know if I'm growing
tomatoes or if I'm or if me and Tracy are
growing tomatoes, to what degree the Cisco play us off
of each other or squeeze our margins in order to
get within the Cisco distribution system.
Speaker 4 (24:08):
I think the best example of that's in seafood. Okay,
the seafood. Seafood in general America is just a dumpster fire.
To to be blunt with you, there's a really and
I'm gonna make a comparison here. CNBC came up with
a really good story the other day where Walmart and
Amazon are this big fight right now. Yeah, and Walmart
basically has very low standards for its third party platform.
There's a lot of fraud, a lot of abuse going
(24:28):
on that platform because it's trying to get market share
from Amazon. I would compare Cisco to that, where they
don't here's the thing, they don't really care how their
seafood source I mean, there's been so many allegations of
the calamari coming from Chinese slave labor fish that's saying
it's Gulf shrimp from the you know, from America. It's
not just all these like these constant abuses in this
(24:50):
seafood system, but Cisco not caring because all it cares
about is price. Think of Cisco like the Walmart food distribution.
Speaker 2 (24:56):
That makes sense. So when you were reporting out this
particular chapter, did you hear any specific stories from either
restaurant owners or food producers about dealings with Cisco and
what it's like to actually negotiate with them.
Speaker 4 (25:11):
The biggest critique I've heard is just the lack of selection.
Cisco is such a dominance in a lot of these markets,
local restaurant owners really don't have a lot of choices.
That's probably the biggest critique I heard. And just my
favorite phrase, and it's a subtitle of the chapter of
this chapter is Tonight's dinner fell off the Cisco truck.
We've all had those meals, you know what I mean.
You go to wedding and you can just tell it's
(25:31):
like the low Staer Cisco where it's just so blah
and tasteless, but a lot of restaurants. I mean, that's
kind of this whole undercurrent of this book. This chapter
is I kind of think of this as my Frankenstein chapter.
What started off as an aid to local restaurants make
their life easier is now undermining them because they're losing
their specialness.
Speaker 2 (25:47):
Oh yeah, On that note, didn't the founder at one
point try to I guess he retired but was still
connected to the company, and then he tried to correct
some of what you're describing.
Speaker 4 (25:57):
Yes, I mean, I can't say this enough. He is
a model business man. I mean, this guy he retired
in the late eighties. He stepped aside, donated the charities,
kept coming into the office each day, didn't want to
sign parking, and he always trusted his people especially. He
let basically each warehouse do its own thing, and I
would compare it to like Whole Foods, famously Whole Foods
let the managers do its own thing pre Amazon, so
(26:19):
if they saw a good thing at the farmer's market,
they could bring that producer in. He retires, few CEOs
come along. One comes along, and the old man hated
consultants number one. He's like they don't know my business.
Number two, they'll probably chait even though they're not supposed to.
They'll share my secret sauce with my competitors. New guy
comes in, hires consultants, and what the first thing he
says is centralized procurement. You instead of having all these
(26:41):
local different things, get all your berries from one person.
And what John saw is he saw change the numbers.
So he wanted to go to the board to talk
about this CEO. Time was kept being like, no, no, no,
this is a nine year old man who built this company.
This is his everything. He went around and got it
to the board. According to one ext if he was
in estquartered out the building, this broke the old man.
Speaker 2 (27:03):
Did he like literally go into the building and like
find the.
Speaker 4 (27:06):
Board and no, he had a it could be a
certain staffer, get it to all the board members and
he was shown the door. This broke the old man.
And you see the quality decline, you know, centralized procurement.
Like you, I don't want to romanticize the Hall of
Peanut pepper or like this kind of stuff, but you
are cutting corners at some point when you're doing these
(27:26):
like not everything can be frozen and taste just as
good as a fresh thing. It's like a good example,
it's actually a tomato, like a good summer tomato. Like
there's no reason iohy can't get a good summer tomato.
It's so easy to grow a tomato there. But they're
all the same blah tomato grown who knows where. And
that's kind of that kind of story. And part of
it the argument I'm making there is part of regulation.
Guard rails, whatever you want to call them, is almost
(27:48):
prevent companies from themselves to stop a race to the bottom.
Speaker 3 (27:51):
It's interesting this idea that the restaurants can't distinguish themselves
to the same degree because of the sort of decline
in quality. And it strikes me. We did in upsisode
with some guys who actually opened up a pizza restaurant
right around the corner from Bloomberg, and in that case
we were talking about the delivery apps, and the idea is, like,
you know, one point in theory service delivery, et cetera,
(28:16):
might have been a restaurant's calling card, right, we have
really good we really know you, et cetera, And we have.
Speaker 2 (28:22):
We'll get to your house and fifteen minutes or the
pizza is free.
Speaker 3 (28:26):
But then everyone in theory. It's like this game theory
thing where everyone feels compelled to Okay, we're going to
distribute through the well known delivery apps that everyone has
heard about. And that's great, and on some level it
makes markets more efficient perhaps although they've gotten so expensive.
I think it's for me, it's more efficient often to
just go pick it up. But that's besides the point.
(28:48):
But the long term effect is essentially this sort of
elimination of the specialness of the place. And so maybe
there is more efficient, maybe the food is cheaper, maybe
it does get too faster, maybe even gets too faster
and hotter, et cetera. But this idea that we have
this sort of textured economy with this sort of flora
and fauna of businesses that are distinct, that of texture
(29:10):
sort of disappears once they plug into these giant platforms.
Speaker 4 (29:14):
You just made a great neo brandeis argument.
Speaker 3 (29:16):
Oh great.
Speaker 4 (29:17):
I mean this might not shock anyone. I'm a neo
brandised person. But that is my critique of the crant
I trust framework is not everything can be put into Excel.
How many hogs when persons shown, it's a question society
is has to wrestle with and I make that kind
of point in this chapter was at my wedding, I'm
part check and we start col watches, which colatches and
(29:37):
I are very different than the ones in Houston. Houston,
they put meat in them, but like you can't buy
col watches from Cisco. It's like the local little things
make a place of place, and you're losing this the
homogenization of the American food system. Everything's kind of the same.
It's kind of blah. And that's what's it's hard to art.
You can't. That's what's the thing that's missing. That's why
(29:57):
it is a little it does seem, frankly a little
hard to quantify this effect that everybody feel. I think
of two little examples is my mom had her own
coffee store and then she went worked at Starbucks. And
what drove her the nuts the most, or something called planograms.
She was told where to put every single thing on
the shelf. And my mom worked next to a General
Mills plan She knew that audience and she knew how
to merchandise, but they didn't trust her. It's like the
(30:20):
lack of trust and employee.
Speaker 3 (30:21):
We learned about planograms. Oh yeah, that's right with the
Celsia CEO.
Speaker 4 (30:26):
Yeah, that was a good episode. Yeah.
Speaker 2 (30:28):
I have since walked into CVS's looking at the shelf
space very very differently, and I'll just too.
Speaker 4 (30:34):
Oh, I'll just add on. The thing keep in mind
is no one gets rid. No one opens a restaurant
to get rich. Everyone. It's a really really hard industry.
You're willing to sacrifice incomes because you do because what
you love, and you just you feel that pride in
local places and they're just running, they're running up hill
more and more based on because of these structures.
Speaker 2 (30:51):
You know, you mentioned frozen berries earlier, and I know
Barry Barons are in your book. Do the dominant companies
like a Cisco or a Berry Baron, do they kind
of like feed on each other? You think, like does
Cisco naturally lean towards producers who are making stuff in
huge volumes?
Speaker 4 (31:10):
I mean, I think it goes back to Walmart. I
mean part of it was people in negotiating power when
they negotiate deals with these companies. So you've got to
get big, so you have some volume so you can negotiate,
Like I think of I go back to Walmart just
because I think of Walmart as the closest thing America's
ever had to Soviet unions out Paula Buro. That's the
weirdest chapter people have reached out to me about. Is
all the suppliers, like you don't negotiate with Walmart. Walmart
(31:32):
dictates to you. I think with Cisco, is they're just
so big.
Speaker 3 (31:35):
These are centrally planned internal economies.
Speaker 4 (31:37):
Yeah, absolutely, and it's I think the best example of
the bad qualities. Actually, the produce system in America partly
is because of the farm bell we subsidize corn, we
don't subsidize carrots, So our protoce system went offshore, you know,
because you can exploit labor and exploit environmental stuff, so
that green pepper's coming from who knows where, traveling long
things and so. And it's also designed for durability, not
(31:58):
for taste. And you're seeing the play out in your
local restaurants where just the foods kind of.
Speaker 3 (32:03):
It's interesting you used the phrase earlier saving companies from themselves.
I think even the companies seem to be aware of this.
And you mentioned Starbucks is a great example because I
forget what's the name of the Starbucks founder.
Speaker 4 (32:15):
He could everyone it's not Howard Schultz. That's who we
think it is.
Speaker 3 (32:18):
Oh well, Howard Schultz. Every every few years his name
is back in the headlines, and he himself seems to
rue the fact that this company, which early on sort
of had a local coffee shop vibe which I think
he really liked, has not been able to sustain that
in part because of, yeah, the required programs, and he
(32:39):
complains about that. Everyone's like, we got to get back
to feeling like a real Italian coffee shop. It never
seems to happen.
Speaker 2 (32:44):
Well, one of the Ben and Jerry's founders just quit
as well because Ben and Jerry's was bought by Unilever.
Speaker 4 (32:50):
So the funding each chapter, I realized, there's they all
had these like niche Every commodity is different in America,
and the like Therey's actually to be the most complex commodity.
The whole Harry regulation America's written in the nineteen before we
had refrigeration, So it makes no sense. The joke and
dairy is only five people understand the dairy program and
four are dead. And I was kid it seen with
this dairy guy in Wisconsin last week. And there's a
(33:11):
glut right now in the butterfat market be engineered, soybeans
increased the butterfat. And the rumor right now in the
street too is are feeding palm oyld the cows.
Speaker 3 (33:19):
Oh wow, speaking of dry you know when we did
that episode with Mike Frohman recently and you mentioned that
you asked him what was the bigg surprise? He learned
as US trade repert He's like, oh, there's five hundred
different things you could do with a dairy molecule, and
because of trade rules. Anyway, by the way, just following up,
I am currently in a touch with someone from the
Big New Zealand Dairy cooperative Fonterra from Big Dairy, I
(33:41):
am working on finding the dairy molecule specialist for that episode.
Speaker 2 (33:44):
Oh well, that's very exciting. Maybe we'll end up doing
a three part milk series. Yeah, I'm sure we better
hurry it up since it's almost October. Okay, is there
anything that can be done about this? Like now that
a Cisco has rolled up all these different companies and
substantial market share, although as we were discussing, we can
debate what that actually means. Is there like what swings
(34:09):
that dominance the other way?
Speaker 4 (34:11):
Yeah? I mean to Joe's and just I just want
to add on to Joe's point earlier about the companies
not wanting to have to do this, but if they
don't engage this beat, like the system design right now
is they have to do this behavior. And I actually
think about that with farmers now in America. The farm
building right now is designed to maximize corns. You have
to overplant corn even though it's bad for the environment,
else you go broke. So everyone's behaving this way because
(34:32):
we're in a Las Fair era. What to do about it?
And that's kind of why I profiled this woman named
Ellen in that chapter. She I think people crave heroes
right now. No one's really articulating hope on whatever your
local party is, what is a positive food system? And
Ellen Ellen's fascinating where she's a farmer's two kids. She
(34:53):
opened her own restaurant and then she opened her own
like Cisco, because the problem she has with Cisco didn't
want to take her product and sell to restaurants on
Almahon to mooin, So she created a nonprofit Got it Up.
They would basically pull different farmers in Western Iowa to
sell into these It was using and they're also doing school,
so that was a big one, but then they got
hard hit by the Doge cuts. That to me is
(35:13):
like maybe one possible thing is maybe extension. You have
extension all across the world America. Maybe they can kind
of get into that help this kind of procurement.
Speaker 2 (35:21):
Yeah, maybe you don't try to compete against Cisco on volume,
but you go like hyper localized hyperlocal.
Speaker 4 (35:27):
But also something we got a rein in Cisco. I mean,
looking at the black box of the pricing strategy would
be huge. But also I think we should put merger
acquisition freezes on these large entities. At some point it's
like you can't buy anymore, like you've hit your cap.
Speaker 3 (35:41):
It's interesting, tracy. Like the other great homogenizing effect, of
course on society is big digital platforms, right Instagram, et cetera.
And everyone feels that they have to constrain whatever they do,
whether it's a restaurant or media company, et cetera, in
order to serve the elgo guy that is sort of
capricious and unpredictable in some way. And it feels like
(36:05):
the story, whether we're talking about the physical world or
the digital world, is that scale has this homogenizing effect,
which nobody really likes these conditions.
Speaker 2 (36:16):
Yeah, I think that's right. But also there are these
like hidden tears of scale, viz. These middleman companies. All right, well, Austin,
thank you so much for coming back on Odd Blots.
Congrats on the new chapter, and I'm sure a lot
of people will be looking forward to picking up the
revised book.
Speaker 4 (36:33):
Thank you so much for having me on again. Joe.
Speaker 2 (36:47):
That was really enjoyable.
Speaker 3 (36:48):
Yeah.
Speaker 2 (36:49):
I always love talking about food. Although I haven't had
lunch today, so I knew that. I'm a little bit
Can we go to Olive Garden in Times Square?
Speaker 3 (36:56):
Let's do it right soon, I'll go. I'm happy to
go there soon.
Speaker 2 (36:59):
Okay, I actually would like to go.
Speaker 3 (37:02):
Yeah, it's got great views. It's actually really fun and
it's got great views.
Speaker 2 (37:06):
Oh you've been to that specifically one? Oh, I didn't realize. Okay,
so there's a lot to pick out from that. I
know you're on the side of cheap and plentiful food,
but perhaps perhaps I guess the homogeneity of the offering,
maybe that concerns you.
Speaker 3 (37:24):
It definitely concerns me. And this idea that no, and
this idea that restaurants if they you know, so much
of the preparation is done off site, et cetera for
curious things that you eat, and so what is the
restaurant anymore? And so this is a thing where scale
is great and cheapness is great, and I'm all for this,
(37:47):
And I think food should be a lot cheaper than
it is, because we've had a lot of food inflation
in this country and I think it's very worrisome, and
so food should be a lot cheaper and more efficient,
et cetera than it is. But when we think about
the things that sort of make us a society. Nice,
If if a restaurant is really just a sort of
Cisco microwave, yeah, or Cisco man, right, a giant microwave
(38:09):
that can connects a Cisco manufactur distribution system to a
Grubhub delivery system, what world are we living in?
Speaker 2 (38:16):
Yeah? And I think it gets back to the flora
and fauna point that you were making. So maybe you
could have you know, uh, food that's cheap and maybe
not of the highest quality, but it is plentiful and inexpensive.
But then you should have you know, more local options.
Speaker 3 (38:33):
We brought me those really nice tomatoes yes, so thank
you for those.
Speaker 2 (38:36):
You're welcome. So I'm doing my part.
Speaker 3 (38:38):
But I do not think that is a scalable solution
for most people. No, And I grew up hating tomatoes
because I thought that they were all really bland because
I only got them.
Speaker 2 (38:47):
In the supermarkets. Yeah, it is phenomenal. How different a
supermarket tomato taste from a homegrown one? Anyway, shall we
leave it there?
Speaker 3 (38:56):
Let's leave it there.
Speaker 2 (38:57):
This has been another episode of the All Thoughts podcast.
I'm Tracy Alloway. You can follow me at Tracy Alloway.
Speaker 3 (39:02):
And I'm joll Wisenthal. You can follow me at the Stalwart.
Follow our guest Austin Ferk, He's at Austin Ferk, and
check out the new edition of his book Bearings, which
has a whole chapter about Cisco. Follow our producers Carmen
Rodriguez at Carman armand Dash E Bennett at dashbod at
Calebrooks at Kilbrooks. For more odd Loots content, go to
Bloomberg dot com. Slash od Lots have a daily newsletter
(39:23):
and all of our episodes, and you can chat about
all of these topics. Twenty four seven in our discord
Discord dot gg slash.
Speaker 2 (39:30):
Outlocks and if you enjoy odd Lots. If you want
us to dig into Dary, then please leave us a
positive review on your favorite podcast platform. And remember, if
you are a Bloomberg subscriber, you can listen to all
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Hosts And Creators
Joe Weisenthal
Tracy Alloway
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