What it takes to run a Northern California food company during economic upheaval: 4 views from the C-suite

Facing inflation, supply chain issues and how to keep staff together, three area food producers took time answer some questions from the Journal.

Can you tell us if inflation for raw materials has had a strong, mild or no great impact on your production costs? In what areas, of most relied on ingredients has inflation been most apparent in?

Kristin Bastoni-Frazee, president, Franco American Bakery in Santa Rosa (courtesy photo)

Kristin Bastoni-Frazee

President, Franco American Bakery, Santa Rosa;

“I am third generation, and we are now moving forward with the fourth generation coming in. My grandfather, Mario Bastoni and his brother Frank, started working at Franco in 1928. Ten years later, in 1938, they bought the business. Mario and Frank’s sons started working at the bakery at a young age and they are now retired. My father, Robert, and I have been running the business together for the past ten years, until his passing in late 2021.”

We have definitely seen an inflation in ingredient prices. It has had a mild impact on our production costs. We try to cut costs in other ways where we can.

Jill, Lynn and Diana Giacomini, co-CEOs of Point Reyes Farmstead Cheese Company.  (courtesy photo)

Jill, Lynn and Diana Giacomini

Co-CEOs, Point Reyes Farmstead Cheese Company;

“In 1959 Bob and Dean Giacomini established their successful dairy farm along Highway 1, just north of Point Reyes Station. The company says that in 2000, together with their daughters, the family began making cheese on the farm with milk from their own herd of Holsteins. In 2010, the family opened The Fork, a culinary and educational center, offering farm-to-table educational experiences for both consumers and the trade. Three of the Giacomini sisters, Diana, Lynn and Jill now own and run the company.”

The effects of inflation are hugely apparent. We had to push an expansion project for our Petaluma facility from the fall of 2021 and now that we are ready to break ground, our initial quotes have increased by 20%-25%.

We are also seeing rises in production equipment by approximately 15%-20% from just nine months ago. In addition, we have experienced an increase in packaging supplies across the board as well as freight and delivery costs.

Sarita Lopez, CEO and founder, The Cactus Water Co. LLC, Oakville

Sarita Lopez

CEO and founder, The Cactus Water Co. LLC, Oakville;

“Sarita Lopez first farmed organic nopales (aka prickly pear leaves) before creating her organic cactus water line in 2017. Along with cactus water, Sarita has two published Young Adult books, a clothing line and is very active in volunteer work within the Napa Valley. The Cactus Water Co. LLC is home to ¡CACTUS! Organic Cactus Water.“

Every single vendor I work with has raised their pricing. That, along with freight prices being what they are, my COGs (cost of goods) have increased. It's been difficult.

Carol Pool, CEO, Taylor Lane Organic Coffee (courtesy photo)

Carol Pool

CEO, Taylor Lane Organic Coffee, Sebastopol;

After decades in the retail automotive industry, Carol Pool took on leadership of a family owned organic coffee company which has been in business since 1993.

“The complexity and uncertainty caused by the pandemic was challenging, but I was eager and determined to meet the challenge. I absolutely love what I do!” she says.

With coffee beans, we had no issues with supply or distribution other than the price fluctuations of the coffee market. As an essential business, our roasting operation did not have to shut down enabling us to meet the demand for coffee and fulfill our orders.

Various items we utilize in our coffee bar have increased. Our vendors have been impacted by similar issues and unfortunately have passed on increases to us. The unavailability and back order of paper goods causes concern.

And in response, did your company raise prices of the product or hold the line? Or did you take any other action in response, such has reducing the size of your product or change packaging to reduce overall costs?

Kristin Bastoni-Frazee: We did end up doing a price increase on our products across the board last year. We always hold off as long as possible before we pass on our increases to our customers, but it came to the point where we had to do something.

Jill, Lynn & Diana Giacomini: We were able to refrain from increasing our prices throughout COVID, as this would have directly affected our consumers, many who were also feeling the financial effects of the Pandemic. For the first time in nearly three years, we increased our wholesale distribution prices by 5% in January of 2022.

Sarita Lopez: I had rebranded and reformulated, so my new line is relatively new. Currently, I am not raising my pricing to stay on shelves. I am making smaller runs and am not applying for reviews that require large slotting fees.

Carol Pool: Staggering price increases in the coffee market continue to trend upwards. This has definitely taken a toll on our growth and profits. Unfortunately, with the current state of the market, holding steady was no longer sustainable. We increased prices conservatively. We made no other changes to packaging

As for another issue which has been a problem for businesses, please explain if production of hiring workers continue to be an issue or not? Has your company changed rates of pay or benefits to attract workers? As from that, what other ways have you addressed keeping enough workers?

Kristin Bastoni-Frazee: We had to lay off employees during COVID, so trying to hire some back and hire new employees has been tough. It’s hard to find help these days with all the perks that the State has been giving people on unemployment and extra COVID pay.

With that being said, we have a great crew right now. We do hire people based on experience and we try to be as competitive as possible when it comes to our pay scale.

Jill, Lynn and Diana Giacomini: There has been a significant decrease in the number of candidates applying for open positions. As a company, we’ve always believed that our best employees are our existing employees.

Along with what we consider the basics (great health benefits, 401(K), two weeks starting vacation, eight paid holidays, free lunches and lots of cheese), we maintain a focus on both personal and professional growth, encouraging our employees to utilize our educational subsidy program.

Throughout the Pandemic and into 2022, we added to our benefit programs with monthly mental health days, additional floating holidays and for non-production staff, flexibility with working from home. We also continually look at compensation in our market to ensure we’re always competitive with wages at every level.

Sarita Lopez: I'm my only employee so this is not an issue for me.

Carol Pool: We have a wonderful team of employees and have not experienced any issues. We have been very fortunate. Retaining our employees and providing them with a sense of purpose and a pleasant work environment is extremely important. We are fair with our wages and benefits. As a matter of fact, job applicants continue to inquire about Barista positions in our Coffee Bar daily. Many are fans of our coffee.

Supply chain issues proved to be vexing in the last two quarters of 2021. If that was true for your company, how specifically were you impacted and how did you resolve the problem, or at least mitigate it?

Kristin Bastoni-Frazee: Yes, we were impacted by supply chain issues. We had a hard time getting parts for our machines. We have been getting loaner equipment, and if none are available, we have been continuing production without that piece of equipment and have been improvising.

Jill, Lynn and Diana Giacomini: We have experienced a significant delay in the delivery of production equipment and supplies from overseas. What once took four to six months now takes an average of eight to ten months.

To mitigate extended lead time, we’ve committed to ordering larger volumes and planning much further into the future, which then becomes challenging for storage and inventory management. Additionally, from a financial perspective, ROI associated with capital expenditures is taking longer to materialize.

Sarita Lopez: Aluminum was incredibly hard to find! That and my co-packer had many issues trying to find enough employees to keep production runs on schedule. All I could do was wait until both were handled internally.

Carol Pool: Availability and cost of products definitely have impacted our business not only in the last several quarters of 2021, but have continued in 2022. The pandemic affected the global supply chain, causing severe shortages of both goods and labor. Thus, driving up costs. We had an open mindset, learned to react faster, and make necessary changes to meet the needs of our employees and customers.

And as a follow up, are those supply chain issues still a problem in production today, or have they lessened?

Kristin Bastoni-Frazee: Yes, it is still an issue. We were supposed to have received a new machine by now and we were notified it will be another 4-6 weeks out. It’s really all a waiting game. No one really knows when they will arrive.

Jill, Lynn and Diana Giacomini: Yes, we continue to experience shipment delays as well as storage issues.

Sarita Lopez: They are no longer an issue, thank gosh!

Carol Pool: Yes, this continues to be a problem in many aspects of our business. Nothing has lessened. As a matter of fact, costs have soared across the board. We are paying more for products that we utilize. The price fluctuations of the “coffee market” have definitely had an impact on our profit margins. We don’t see anything changing in the near future. Inflation is here to stay long term

Lastly, what consumer trends are your seeing in your area of the food business coming over the next two years? Are they going to have a positive or challenging impact on your company?

Kristin Bastoni-Frazee: With all the price increases and supply chain issues we are facing, I think it will be challenging for a lot of the smaller businesses we serve to remain open. Rising costs can quickly outweigh revenue coming in but should many of those businesses close it will have a huge impact on my businesses.

Jill, Lynn and Diana Giacomini: Sustainability in farming and food has always been at the forefront of our business practices, and while it has always been of great importance to us, it has been gaining momentum in the eyes of the consumer. Sustainability touches every aspect of our company -from farming practices all the way down to the way we ship our cheese in eco-friendly, compostable packaging.

Sustainability is about the big picture; taking care of the land so it takes care of us. Caring for the environment where we farm directly correlates to the overall quality of the milk each cow produces, and those benefits can be tasted in every bite of our cheese… which adds to our brand loyalty and continued success.

We feel this trend is here to stay as both retail and wholesale customers are looking for exceptional environmentally conscious producers. This is not only a positive for us as a business strategy, but also for the future of economic sustainability in our community and for the benefit of land stewardship in the North Bay.

Sarita Lopez: Plant-based is still huge and with the warmer weather, business is picking up from winter. Overall, yes my COGs (cost of goods) have increased, but so has demand for my product.

Carol Pool: We will need to stay connected to our customers and to our community. Support for local retailers is increasing and the “buy local” trend has helped us and also supports the community in general. Of course, the shift to a more digital world has definitely triggered an increase in our online sales.

Consumer behaviors have changed, relying on availability and convenience. We must be flexible to accommodate their needs.

Sustainability matters more and has been a growing trend for a long time, but it’s even bigger now. Sebastopol adopted a “zero waste” policy. A challenge we face are increased costs of products to meet these policies.

Some trends will have a positive impact and others will be challenging. The continued support of our customers is the key factor to our ongoing success. Our business will always be customer service driven. We will strive to provide our customers with responsibly sourced, organically grown and locally roasted coffee.

Read more about the business of producing food in the North Bay.

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