In this episode of the Sustainable Supply Chain Podcast, I’m joined by Pat McCullough, CEO of ProducePay, a company focused on reducing waste and inefficiencies in the produce supply chain. Pat shares insights into the challenges and solutions involved in ensuring the sustainability and resilience of our food systems.
We discuss the critical issues of perishability and supply chain inefficiency, which can lead to a significant percentage of global fruit and vegetable harvests perishing before reaching consumers. Pat explains how ProducePay integrates innovative financial solutions and technology to address these problems, focusing on improving the lifecycle management of produce from farm to shelf.
Key topics include the role of capital in aiding farms, the impact of climate change on agriculture, and the strategic importance of entering new markets like India and Asia. Pat also highlights the importance of collaboration with large retailers and governments to create a more sustainable supply chain.
This conversation sheds light on the urgent need to support our farms and ensure that they can continue to feed the global population in the face of environmental and economic challenges. For more insights and to learn about the transformative work ProducePay is doing, visit their website and follow their updates on social media.
If you liked this, check out the vi
Elevate your brand with the ‘Sustainable Supply Chain’ podcast, the voice of supply chain sustainability.
Last year, this podcast's episodes were downloaded over 113,000 times by senior supply chain executives around the world.
Become a sponsor. Lead the conversation.
Contact me for sponsorship opportunities and turn downloads into dialogues.
Act today. Influence the future.
Listen on: Apple Podcasts Spotify
Podcast supporters
I'd like to sincerely thank this podcast's generous supporters:
And remember you too can Support the Podcast - it is really easy and hugely important as it will enable me to continue to create more excellent episodes like this one.
Podcast Sponsorship Opportunities:
If you/your organisation is interested in sponsoring this podcast - I have several options available. Let's talk!
Finally
If you have any comments/suggestions or questions for the podcast - feel free to just send me a direct message on LinkedIn, or send me a text message using this link.
If you liked this show, please don't forget to rate and/or review it. It makes a big difference to help new people discover it.
Thanks for listening.
In this episode of the Sustainable Supply Chain Podcast, I’m joined by Pat McCullough, CEO of ProducePay, a company focused on reducing waste and inefficiencies in the produce supply chain. Pat shares insights into the challenges and solutions involved in ensuring the sustainability and resilience of our food systems.
We discuss the critical issues of perishability and supply chain inefficiency, which can lead to a significant percentage of global fruit and vegetable harvests perishing before reaching consumers. Pat explains how ProducePay integrates innovative financial solutions and technology to address these problems, focusing on improving the lifecycle management of produce from farm to shelf.
Key topics include the role of capital in aiding farms, the impact of climate change on agriculture, and the strategic importance of entering new markets like India and Asia. Pat also highlights the importance of collaboration with large retailers and governments to create a more sustainable supply chain.
This conversation sheds light on the urgent need to support our farms and ensure that they can continue to feed the global population in the face of environmental and economic challenges. For more insights and to learn about the transformative work ProducePay is doing, visit their website and follow their updates on social media.
If you liked this, check out the vi
Elevate your brand with the ‘Sustainable Supply Chain’ podcast, the voice of supply chain sustainability.
Last year, this podcast's episodes were downloaded over 113,000 times by senior supply chain executives around the world.
Become a sponsor. Lead the conversation.
Contact me for sponsorship opportunities and turn downloads into dialogues.
Act today. Influence the future.
Listen on: Apple Podcasts Spotify
Podcast supporters
I'd like to sincerely thank this podcast's generous supporters:
And remember you too can Support the Podcast - it is really easy and hugely important as it will enable me to continue to create more excellent episodes like this one.
Podcast Sponsorship Opportunities:
If you/your organisation is interested in sponsoring this podcast - I have several options available. Let's talk!
Finally
If you have any comments/suggestions or questions for the podcast - feel free to just send me a direct message on LinkedIn, or send me a text message using this link.
If you liked this show, please don't forget to rate and/or review it. It makes a big difference to help new people discover it.
Thanks for listening.
Why do governments, why do big business not care about farms dying? We care more about the semiconductor technology that we pushed offshore to the Taiwanese 20 years ago, because that's perceived as a national security or a global security interest. Let me tell you something, farms dying is a global security issue that has to be dealt with. And if we can't come together to solve that, you know, our children and our grandchildren should think very critically of the leadership that's happening right now or not happening in this case
Tom Raftery:Good morning, good afternoon, or good evening, wherever you are in the world. This is the Sustainable Supply Chain Podcast, the number one podcast focusing on sustainability and supply chains, and I'm your host, Tom Raftery. Hi everyone. And welcome to episode 15 of the sustainable supply chain podcast. My name is Tom Raftery, and I'm excited to be here with you today, sharing the latest insights and trends in supply chain sustainability. Today, I'm rolling out a new feature in the podcast. So if you open up the show notes of this episode today, or any episode now, you'll see at the very start of the show notes, a link saying, send me a message. If you click on that link, it'll open up the messages app on your phone or your computer. And that will allow you to straightaway send a message directly to me. Right from the messages app on your phone, be aware there could be messaging costs involved. There's also a number pre-populated in the text message. Don't remove that, leave that there, because it goes to my podcast hosting provider. And that number is to identify this podcast. So it'll have the number it'll say, do not remove. And then after that you can write anything you want. When I received that message. I won't be shown your phone number. So do remember to let me know who you are. Who's sending the message and feel free to let me know, feel free, to give me suggestions for episodes. Feel free to comment. Feel free to ask questions. Anything you want. Just click on that, send me a message. The new feature in the podcast. Now you can send a message directly to me. Anytime you want. And with that out of the way. On with the show with me on the show today, I have my special guest, Pat. Pat. Welcome to the podcast. Would you like to introduce yourself?
Pat McCullough:thanks Tom. Thanks for having me. My name is Pat McCullough. I am CEO of ProducePay, and we are, attempting to change the world in terms of reducing supply chain waste in the produce space.
Tom Raftery:Okay. That's quite a, a lofty ambition. Pat, let's, let's dig into it a bit. First of all, what part of produce waste is it that you're trying to address?
Pat McCullough:Yeah, there's been quite a few studies done that show us that between 33 and 40% of the harvested global fruits and vegetables actually perish before they're consumed or processed for restaurants or for food brands. We're primarily focused on the Americas today, although we're expanding into Europe in the past year, and we're looking at opening Australia, Asia, and Africa in 2024. And we believe that through bringing capital and really forcing behavioral change within the vertical, the industry. And with the technology that we have in the field and through the supply chain, we're able to eliminate quite a bit of the time and waste that happens in the center of the, the supply chain. Unfortunately, when you have inefficiency in the produce supply chain, you're not just dealing with miles on the road or at sea, or time in warehouses, you're dealing with refrigerated containers, and refrigerated warehouses, so the carbon footprint is quite a bit more negative than the the normal vertical.
Tom Raftery:Okay. And what would be the causes of this loss?
Pat McCullough:Perishability is one of the primary drivers. So once that fruit or vegetable is harvested or, or picked, if you'll think about it that way, it starts its death curve, right? So we've got a matter of days, weeks, or months, depending on which commodity that we're talking about, to successfully transport that to an end market. And have an efficient use of, of that fruit or vegetable. Weather variation is an incredible deterrent and something that gets harder and harder with every year that goes by. Climate change is real. We see it at farms. And then thirdly, the, the realization of all these challenges, perishability and weather on the vertical means that for decades, the buyers of this produce and end markets like Europe or the United States and the sellers, which are oftentimes importing from outside, about two thirds of market receipts come from outside of the market that's being served. And if you think about an annual blooming fruit or vegetable it requires South America, the equator and North America to serve 52 weeks supply, which is the general principle that retail grocers are trying to serve. All of that has led to, frankly, a massive spot market being created. Even in Europe where there are fixed contracts that are multi-year, the price can be changed up until the last minute. And as a result, we have organizations that have been designed to wake up every morning and go to war over price versus allowing the farm to farm and think about strategic pricing and, and off take once a year like most other industries around the world. So. The organization of that vertical, the intention of buying in advance for a fixed price. That's the type of work that ProducePay is engaged in right now, and we think it's having a big difference.
Tom Raftery:Okay, we'll come back to that in a second, but tell me the, the origin story of ProducePay. Why, you know, who set it up, when, and why.
Pat McCullough:Yeah, it's really interesting. Our founder, Pablo Borquez, is a fourth generation Mexican farmer, from Caborca in Sonora Mexico. His father and his brother today farm everything from table grapes to avocados, to mangoes, to winter vegetables, asparagus, and is another key commodity. Pablo grew up on that farm farming as a farmer. Was actually able to go to Cornell to receive his MBA and work for a US distributor. So in his early academic and professional career, he was able to see the majority of the produce vertical. He was also able to get the attention of the Cornell Seed Fund, so the, the venture investment that the university does and ProducePay was founded to solve a Mexican farming problem nine years ago. Now, of course, that vision has been developed over the nine year course of the, the company's history. And the realization that Pablo had at a very young age and got the attention of venture investors in the United States, primarily out of New York was a universal problem. This wasn't just a problem that Mexican farms had importing into the United States. This is a problem US Farms had serving the US market and African Farms have serving the European market. So as we set out to solve this problem years ago, and it started with. There's capital required for the farms that that need is not being met. And farms, unfortunately, because they're wearing the risk of the industry. So weather, crop disease, fraud, who's their counterparty, what price are they gonna sell it to? The farm is wearing very volatile rollercoaster size risk. And until that gets stabilized, these farms are at risk. To insolvency. So that was kind of his first mission that we carry to this day. Pablo's still an executive director that's carrying the, the, the farming torch to places like Africa this year as we develop those markets and open this up. But we are a farmer first company. We are a company that has a noble cause that's much bigger than doing business or expansion. And we live it and wear it every day. There was an example in December. A US Farm was in trouble. It was being foreclosed upon in California bankruptcy courts. The regional lender that had supported this farm for years was pulling out for strategic reasons bigger than the farm. This farm happened to be excellent at farming. Had amazing customers, some of the biggest retail names that you and I know. And it was going under and we had to hop in and lead an inner creditor, take half of the debt ourselves, which we, we use trade finance, short term working capital products that we do well. But we had to bring two partners in to support loans against land to ensure this farm survived. This farm did survive. It's a positive story, but we had 45 days to pull this off. We worked the majority of the time between Christmas and New Year's holidays to get this done in the last day possible last working day of 2023. And this farm came to our sales kickoff two weeks ago. And shed tears and shared this emotional journey with us. And this was one of these things that when you get involved with saving a farm from death's door, there's a purpose that ProducePay is doing that has nothing to do with business and making money. But that's our journey. We end up being at those moments where the farm's in the worst case, and we have to try and figure out is there a way to recapitalize, restructure this business? And because we're involved with the matchmaking and the trading side, we were able to lure other lenders in and say, you know, we believe we can add 8% to the unit economic revenue of this farm because we notice they're selling under the market price. We believe we can bring more strategic volume from South America through this US farm and allow them to make incremental margin. So we weren't just bringing capital or recapitalizing a distressed farm, we were actually helping improve that business model so that others were attracted to it. You know, and this is how Pablo's idea nine years ago, which started in pretty simple fashion has become a very important, very relevant thing. That intercreditor leadership, recapitalization, let's not just allow the capital to happen, but let's also allow the business to improve. That's something we're taking on with approximately 10 farms right now globally. So that is not a one-off story that we found ourselves in the middle of. This is something that we realize our, our role is to help these small farms that may not have a chief financial officer capable of managing hundreds of millions of dollars.
Tom Raftery:Okay. And just to clarify for people listening, so is your product, a software product? Is it a capitalization product? Is it a hardware product? I, I know it's not a hardware product, but you know, where are you on that spectrum? What is it you actually offer?
Pat McCullough:Yeah, thanks for the clarification. So we are a capital provider and we are a technology, a software provider, and those are the lanes that we try to stay in. So we do not physically receive produce. We don't have any brick and mortar, you know, buildings or trucks to move it. But we are providing capital to the vertical, not just to the farms. We're also providing technology that shows the quality as it's developed in the field through the growing cycle. So prior to harvest. We're also managing and bringing contracts to an industry that has classically not used contracts. It's mostly been a spot market. And then, you know, along with order management and quality. We have shipping management module two, so we can track that quality continuum. If you want to think about table grapes, from bud break through development in the field to pre-harvest, to post-harvest. In the packing house, we mark pallets. We track pallets into shipping containers or vessels. All the way to the retail distribution center. This is an important role we play because classically distribution centers reject 5% of the inbound fruits and vegetables. There's not a live secondary market at every distribution center, so the risk, if it gets rejected is it may be disposed of. It may be wasted. So we're able to take that 5% global industry reject rate down to zero to 0.5% in our two big instances where we've applied this technology. So that's an important demand unlock, but it's an important waste reduction for the vertical.
Tom Raftery:And just spell it out for me. How do you get that 5% down to 0.5 to 0%?
Pat McCullough:By optically showing the quality of the fruit before it's harvested and immediately after it's harvested. So the idea here is we use applications on smartphones that our agronomists in the field use. That creates digital objective records versus the specifications. So for example, there's 28 varietals of grapes that Walmart purchases from our farms. We're able to take and reverse engineer their specification to the actual quantitative quality that is in the field, and we're able to say we are adhering to that tier one spec. This produce can now be harvested and shipped for Walmart's benefit. And that's what we're now seeing and measuring from the retailer's perspective. And we're told directly by the largest retail companies in the world, we see the reject rate at our DCs now, which was, in one case, 9% out of Mexico in 2022 come all the way down to 0.5%, and we attribute that to us being able to tell the farm too early, don't harvest yet. You're not meeting that full spec. And then being able to say to the entire vertical, both the marketer and the center and the retailer at the end, we're adhering to spec. We have evidence, it's objective, and it's in our dashboard, and it's in our quality reports, and it's attached to your shipment. Okay. And one of the interesting conundrums of our industry is when supply is tight. Those tier one specs are not enforced in a, in a great manner when supply is high, remarkably a lot of fruit gets rejected that might be of similar quality to the first instance. So we're bringing objective real data where there hasn't been data in the past.
Tom Raftery:Interesting. And you mentioned as well, moving from spot market to contract pricing. How is that benefiting farmers? Is it just that they know that in eight or nine months time when harvesting, this is the price they're gonna get and that then allows them to raise capital? Or is it something else? Am I, you know, spell that one out for me as well. I'm a bit slow today.
Pat McCullough:Yeah, it's a real dilemma because we are in mostly spot market and because of perishability, weather, and the gearing of the industry to, to really fight on price, our industry experiences the highest price volatility of any commodity in the world. In 2022, produce was studied to have 117% annual price volatility across 60 commodities. Okay. That means the worst commodity, melons, tomatoes, cucumbers is four and 500% annual price volatility. So if you are a farm and if the price is moving due to things outside of your control, maybe weather change, which impacts supply or demand maybe it's changed because of the preceding market. For example, the south southern hemisphere supplies the northern hemisphere, many products in the winter. And then the, the equator nations come on in the spring and then the Northern Hemisphere comes on in the summer and the fall. We may be in a situation where that price change is a result of that old market or that preceding market having more supply. So I might be a Mexican farmer ready to ship my blueberries into the United States, but I have to wait and the prices are falling and staying low because there's an abundance of supply. Nothing I can control as a farmer in Mexico. And the reality of that situation is, if we can buttress fixed pricing for the farm's benefit. They won't experience those bad years that I'm trying to describe. And those bad years are so significant that they might end up not harvesting because the incremental labor costs doesn't cover the margin that they're gonna sell that product for. So they end up in a depth spiral very quickly because they invested all year. They're waiting for the revenue associated with that annual harvest in many cases, and they're not able to reach it because of a supply and demand dynamic from outside of their nation or their farm. So this is, and of course if we play that out, they may be on the brink of insolvency, they may be in bankruptcy. That farm may not get re repurchased or, or replanted depending on, on the case. And we saw this case in our, my United States example earlier where there was a concrete jungle being planned where that farm exists today. So this is really about saving the global food supply. It's not a small matter whatsoever, and it is largely the risks that these farms wear outside of their control. So our view of this is having a concentrated farmer credit risk model is not a sustainable industry. Having a shared industry credit risk model where retail takes the responsibility of the volume commitment and the pricing commitment where insurance companies and their investment grade balance sheets take the responsibility with our premiums and the farm's premiums for weather and crop disease, that's a more viable, more sustainable, long-term model to support the world's food needs. That's what we're passionate about. That's the big problem that we're attempting to solve.
Tom Raftery:Okay. And who do you see as being your customers?
Pat McCullough:Yeah, great question.'cause it's a hard one for us. We, we believe the vertical, the entire, the entire industry is our customer, which makes what we're up to quite difficult. So we definitely know that the US and European and Asian consumers are served directly by the retail grocers. The retail grocers have the highest standards for produce. So if we were to solve for a restaurant's need or a food processor's need it would be a much lower standard. So the standard that we operate are, let's say our industry philosophies for are the standard of that retail grocery. It has to be large, beautiful no visible defects on the fruit or vegetable. And that's what we're attempting to support farming and distribution to serve. We recognize that the farm needs our help more than other parts of the industry. The marketers in the middle don't take a lot of this risk that we're talking about. They may find themselves taking price and, and volume risk and making commitments to retail that are hard to serve from farms. Retail, of course, has this need to have on time, high quality product at all times to serve their customers. But they don't need, ProducePay's help as much as the farm needs our help. What we've realized in our nine years though, is if we only focus on the farm and we don't partner with the retail or the marketer in the middle, we can't fully serve the farm's needs. The farm actually needs the retail demand to be there for them. And if we can plan that in advance. And pre allocate that future harvest to that demand unit, essentially matching realtime supply and realtime demand, but far in advance for the benefit of, you know, sustainability in this vertical. That's what we're attempting to do. So, in our earliest days, we focused on the farm. We brought capital and technology to the farm, and then we realized, wow, if we ignore the other side of this vertical, we're not doing everything we can for the farm. So let's make sure that we work openly with these large buying institutions and, and retail grocers. Let's make sure that these marketers in the middle that have 30 year relationships with the largest grocers. They have the repacking capability. If we have challenges and need to repackage fruit and vegetables, which, which can happen. It's not normal, but it can happen. We need those partners. So this is not a situation where ProducePay is so arrogant that we think we can solve one of the biggest problems that we're aware of in the food space. We know this takes retail partnership. It takes marketing partnership, and of course it takes the farms that, that have this this food supply, which still today is analog and, and push supply as a, as an industry we feel like it takes that village to come together. And think about operating differently. Our value proposition to the end retailer is quite interesting. Their number one buying criteria, and, and we've proven this to ourselves in Europe and, and the United States, they care most about surety of supply. They're not getting their full demand realization because they cannot get 52 week supply to serve that demand need. Their second most important buying criteria is quality. And specification adherence. And their third is price stability. We feel like our solutions address all three of those very squarely. We are very deliberate with our capital. We like to put our capital where there are moments in the annual supply chain where supply is low. We do that for defensive reasons, that the credit risk is lower because the price should be higher. Demand is fairly consistent throughout the year, the the month, or the week in produce. But supply is not, so it's that supply volatility that has a corresponding price signal that's the opposite. So we use data analytics to find that price spike, and then think about it, is it structural? Every year in November, Britain runs out of table grapes. Every year in April and May, the United States runs out of table grapes. So if we put our supply to Brazil and Peru and the nations and the farms that can serve, those supply gaps, we know that we're gonna create more value for the vertical and we're gonna potentially unlock demand that's not realized today. And then, of course, to be able to work with farms on developing new plantings of the right varietals of fruits and vegetables harvested, you know, pruned to be harvested at the right times of the year, then we're starting to strategically match new supply with those demand opportunities that aren't being served today.
Tom Raftery:Okay. And. You mentioned that the retailer's standards are particularly high. The produce has to be, as you said, big, beautiful zero defects or zero visible defects, at least. What does that mean for all the produce, which maybe has a slight defect or maybe isn't as big and beautiful? Does that then go to waste?
Pat McCullough:No it shouldn't. There's a concept in the avocado business called sell the whole tree. So if you, if you harvested an avocado tree a few times a year for retail specifications only, you would probably sell 60% of the tree's harvest. You would not sell maybe the fruit that fell off the tree and is on the ground, but you could still process the seed into oil, right? Or you could take the smaller avocado and you could sell that into the guacamole processing, you know, plant. So it's a very important thing in our business that we optimize the entirety of the resources that are invested into a farm. So, in the avocado business, if a retailer comes along and says, I only wanna buy X and Y. Then we have to go to work to ensure that we can sell the remainder of that tree, and sometimes it requires a partnership with the farm. There's local markets that can take, especially if you're thinking about an emerging market, 90% of the US avocados come from Mexico. The Mexican market will take a lower standard of, of fruit off an avocado tree. The guacamole processors don't need that skin that size to be perfect. They can take, you know, a ripened avocado that didn't make that that higher standard and, and use it and it's a very, very important part of the process. So, the industry's goal, ProducePays goal is to optimize you know, waste and ensure that waste is reduced to zero if possible. And in many cases it actually is, it is quite impressive of how these markets get made for that secondary fruit. There's actually companies that, that make an entire living off of selling those imperfect fruits and vegetables to markets.
Tom Raftery:Okay. Do you have any case studies or any success stories you can talk to?
Pat McCullough:Sure. One of the most interesting things that happened to us in the last year is a program we built called Predictable Commerce. And this was a situation where we were advancing capital to Mexican table grape growers. And there was a marketer named Four Star Fruit. This is a public press release that we've shared with the world a little bit about what we're doing with Fourstar. They came to us and said, you know, we're in the working capital business and to, to try and, you know, commandeer supply for the benefit of our retail partners. But every time Fourstar was attempting to use working Capital to do that, they might find themselves in difficult situations where they weren't being repaid on time or maybe at all. And we of course have structures and security and, you know, presence in the farm which allows us to advance capital and efficiently collect that. So we examined the problem with Four Star and the two companies started to go to work on what if we were the capital provider? They were the purchaser of the fruit. And what if ProducePay knew that Fourstar was gonna be there with a predetermined price, a predetermined volume and we thought that's great for us in our farms because that means that counterparty risk of, we don't know where the, the fruit in the case of table grapes is gonna be sold. We don't know for what price. It's very hard to underwrite that capital advance if you don't know some of these definitive things about the verticals. So we joined forces and came up with a fairly simple agreement. Fourstar had 30 year relationships with three of the top four retailers in the United States. They happen to be the largest US grower right now, serving three of those four accounts. So they, we knew they were an important strategic partner to think about something like this with, and then of course we knew we were advancing capital in large quantities to Mexican table grape growers, Peruvian, Chilean table grape growers. And we knew they weren't a large importer from those markets. So the two companies went to work to try and create fixed pricing assurances from retail that we could pre-finance and pre-sell, and ultimately buy the rights to that future inventories from some of the most talented farms selling, you know, growing and selling table grapes out of those nations. Of course, Fourstar serving the US market as the number one supplier. We are advancing to almost 15 Mexican table grape growers and working with them with our technology, and then over 20 Peruvian and Chilean farms. So when we brought that consortium of consolidated table grape growers together, we realized, wow, we have three times the supply of the largest consolidated retail buyer in the United States. Which is a big public company that we all know. So we realized that we have tremendous power and leverage that we've created, and we should use this for good. We shouldn't go into retail and say, now that we have all the supply, we're gonna raise your price. We should go into retail and say we'd like you to do your job earlier. We've got the supply. We don't need your capital. We've used our capital. We don't need a higher price. We're gonna give you a fair price that's consistent with your historic buying. Nobody's trying to take advantage of the situation we've created, but we do need you to do your job earlier. Giving a fleeting PO at the last second only to rip it up, if the spot market falls, that's not good enough. But if you'll give us that volume and that price commitment six, 10 months earlier, we can do something. We've had recent high level conversations with top executives of a couple of the largest retail grocers in the world, and we've talked to them about we can plant to that supply gap that you have. But if you could give us a three year commitment on off take, then we can go get some excellent low cost financing from some of the largest financial institu institutions or the World Bank. And we can start to really create an efficient model that we can all leverage. And those conversations are going super well. And the supply advantage of being able to just make a purchase commitment earlier, that's all we're asking the, the retail community to do has been received really well. And I think this opportunity has big legs. When we did this on half a million cases in 2023 out of Mexico and a million and a half cases right now from Chile and Peru, we saw reject rates go to virtually zero. Right now we have imported 1.5 million cases outta Chile and Peru. That's at about $28 a box for the retail market. To put it in some perspective, we have zero defects reported at distribution centers. There was not a single reject, and we attribute that to our quality monitoring system. We also know that we've taken out the potential open market opportunity in the middle because price has been determined and it was met with satisfaction at the farm, they're not interested in exploring, well, should I just sell my fruit into the open market and try to get a superior spot price? They recognize that the price commitments that we've made earlier than they're used to are safe and they can ship to. The farm, then gets to recategorize its time from commercial trading into farming, investing and ensuring a more sustainable future for themselves.
Tom Raftery:Nice. Nice, nice. And you've been recognized by the World Economic Forum.
Pat McCullough:Yeah, that was a, a fortunate coincidence last year as well, we were asked to participate in the incubator unicorn program, which is for the up and coming companies that are earlier stage that are perceived to be making a difference and, and we believe that our impact efforts were one of the primary reasons that we got noticed and, and asked to join. This was super helpful because our founder participated in Davos last month and was able to literally sit across the table from the largest financial institutions, the largest retail buyers, and talk about these problems openly, you know, in a safe place where people were thinking about strategic long-term solutions. So. You know, as you hear about Davos from afar as a consumer of media, you know, it looks like a group of very powerful elites that, you know, go have a nice little holiday on the top of the Swiss Mountains. The reality from our perspective is, boy, this serves a really noble purpose. We're able to actually be heard. The follow on meetings we've had from that series of discussions that our founder Pablo had are incredibly impressive. If you had told me I'd be sitting across from the top executives, the largest grocer in the world, having an honest conversation about what's wrong, as a follow up to that, I would've told you, that's a pretty ambitious dream of what Davos could be for you. But this is what's our experience has been. So I, you know, I went from a little bit skeptical on the World Economic Forum in Davos to now experiencing it and realizing, wow, this is definitely catapulting us into the center of the, the dialogue and you know, we don't need credit for what we're doing. We don't need to try and do this ourselves. We're putting our playbook out publicly so people understand there's probably a better way to manage produce, and we're one cog in this massive organism, but let's work together. And when you have the top brass of the largest retailers, the biggest marketers in the world, the most important farms in the world starting to get alignment, then you realize this really difficult change management challenge that we've taken on is possible. It gives you hope. It breeds, it breathes that fuel into, you know, your, your passion. Every day you wake up, you're like, this can happen. Like World Economic Forum is backing us. You know, Walmart, Amazon talking to us about these problems. Largest farms in the world realize ProducePay isn't just a little startup anymore. They're gonna be advancing as much as$2 billion to global farms in 2024. We've got over a hundred people, full-time, first party employees in these farms. We have technology that is unlocking waste and potentially the largest data trove of produce information in the world right now. This isn't about our ambition, this is about our fears that in 2050 there's been well studied that with climate change and population growth, maybe we will not have the food supply to serve the global population. Maybe the world hunger problem we have today won't be argued as to whether it's a supply problem or a distribution problem. Because it will clearly be a supply problem. We have an even bigger fear that those studies are based on today's farms existing in 2050. Our worst, our worst nightmare is we see farms dying every day in Mexico and the United States, and we fear those farms will not exist in 2050. And frankly, this is where I personally get passionate and personally get quite upset. Why do governments, why do big business not care about farms dying? We care more about the semiconductor technology that we pushed offshore to the Taiwanese 20 years ago, because that's perceived as a national security or a global security interest. Let me tell you something, farms dying is a global security issue that has to be dealt with. And if we can't come together to solve that, you know, our children and our grandchildren should think very critically of the leadership that's happening right now or not happening in this case.
Tom Raftery:Yeah, yeah, yeah. You've mentioned that you're working with farmers in Africa and South America and North America, but I haven't heard you mention the likes of India and Asia. Are you working with people there too, or is that next on the the, the, the to-do list or where are you with that?
Pat McCullough:Yeah, that is next on the to, to-do list. India has become a very important farming nation, especially if you think about the global farms that serve the European market today. We're well aware of the prominence of farming in India. We have not entered that market yet. That is definitely on our list of places to be by the end of 2024. We're working with an Australian company that is one of the largest aggregator and exporters of produce that serves the Asian markets. We're expecting that program to be off the ground this quarter, so we will be entering Asia via Australian imports. Today the South American farms that we support do ship into Asia, so we are matching Asian buyers with South American growers already today. So let's, let's call it a partial entry to those, those key markets. But yeah, unfortunately the problem we're worried about is global. Like we, we do not see a large end market that's not experiencing this problem. And our perspective which is very simple perspective, is if you're going to be able to serve these massive end markets with 52 weeks supply, you need to have a presence in every large farming nation in the world no matter where it is. What that means is, this is taking produce, pay into every corner of the planet. Emerging markets, you know, places that sometimes are harder to do business based on, you know, the lack of legal infrastructure, maybe corruption, maybe instability in local currency. There, there's a lot of challenges with with our business model and, and our global expansion, but we're, we're not shy on this. We've told our investors, we've told our board, without having a presence in the largest global farming nations of the world, we can't properly support this vertical and reduce the waste. So our ambition is to be in 60 plus nations in two years. We're in 20 plus nations today. Hope to conquer half of that in 2024. But that'll be a two year program to reach every large farming nation. There's quite a bit involved when you're in the capital business, as you might imagine.
Tom Raftery:Sure, sure, sure. Yeah, no, if I was mentioning India in particular, it's just, I remember reading several times about the number of farmer suicides that happen in India.
Pat McCullough:The farmer's plight is a very difficult one. We, we laugh and cry every day, as a company. It's the weirdest thing. I've never worked in a industry or a company where the what's at stake is family legacy. Thousands of families, livelihoods, you know, you're at one with the land. Think about a farm, a farmer, a farming family is committed to a piece of land for their life, and maybe for generations. So what's at stake is not small. These aren't companies where the shareholders, you know, return is at stake. We're talking about the livelihoods of thousands of human beings. So it is not uncommon for us to have customers come to our commercial kickoff, talk to our team, and break down in tears over their plight or maybe over our role we've played. It's an incredibly emotional thing. So when you bring up the extreme, you know, distressed endpoint of an Indian farmer that takes their own life because they can't solve these problems, that unfortunately is what's at stake. We are unfortunately, in a really tough position where sometimes we're that last phone call of, can you do something for me? We know you're unique, creative capital. We know you are in emerging markets and willing to take Peruvian market risk when the banks are fleeing the scene. You know, and, and we end up getting that phone call. And then it's, it's a purpose question. It's not a business question. And we say this so often, we're asking for credit underwriting approval for the human existence. Okay? Yes, there's credit worthiness to consider. There's operating capability that we consider. There's ESG impact that we consider. But another thing I'll tell you, when we find farms that take shortcuts on ESG, maybe they abuse water rights. Maybe they have a child in the field during harvest. We hate these things. We shut farms down over these matters. But generally, we do not see farms as being evil mal intentioned people. We see farms as desperate sur for survival and they might be taking a shortcut to make it the the next harvest. And it is a incredibly profound, deep emotional journey and plight that these farms go through and we're one support mechanism. And we're a small startup. You know, we're 318 people. Yeah, we have a lot of capital. So we're not small from that perspective, but it takes a lot more from, a lot more from the world than ProducePay to solve this thing. Like the fact that India needs us and we can't get there in the next 12 months. It's distressing, you know? But why are we the only one, you know, trying to do this? And it feels that way at times. The only other capital we're aware of that advances to farms, pre-input costs is the buyers that are trying to lock up supply. And they do not have big balance sheets. They cannot do as much capital as early as we can. And normally their capital comes with an ask called a lower price. So the farm ends up doing worse when they take that only other available capital. So we're in this weird situation where we're inviting competition to come join us because we're not gonna be able to serve a $1.5 trillion industry on our own. That's why we're not shy about putting our playbook out publicly. This isn't a competitive advantage we're trying to protect. We're trying to teach the world. There's a big problem here. It requires twenty ProducePays or an equivalent that we haven't thought of yet, come join us. This is worth solving. And it literally is the human existence that's at stake here. And I, and I hate to be overly dramatic, but you know, we do see this, you know, peril of the farm every day we live it, we get asked to join you know their plight when they need us, which means they're in a desperate situation when they reach out to us, they're not in a healthy situation. Those healthy farms that have big balance sheets, and there are some, it's unfortunately very rare in in the farming industry. They don't need to call, ProducePay. They might call us to help us make an end market, but they don't need our capital and they don't ask for it. Unfortunately, we're dealing with the other side of the equation and hoping to fix that in a permanent fashion.
Tom Raftery:Nice. Cool. Pat, we're coming towards the end of the podcast now. Is there any question I have not asked that you wish I had or any aspect of this we haven't covered off that you think it's important for people to be aware of?
Pat McCullough:You know, I think the vision of our business which we lean into and, and you're hearing it in, in how I am approaching the questions that you've asked, is our vision is to feed the world sustainably. So we've used a conceptual vision as we set the true north for our company and and our employees. And we know that suggested within that vision is an attempt to solve world hunger. 40% of what is harvested, meaning invested in with labor and money, and, you know seed and tender loving care, 40% of what's harvested perishes before it's consumed or processed. If that could be captured in theory and perfectly distributed to the places of need in the world, that is enough food to solve world hunger. So that's what's at stake here. This is not a little problem. This is a massive problem. And the unfortunate part when people argue is that a supply or a distribution problem to solve world hunger? Today, it's a distribution problem, but I fear it's about to be a supply problem in the future as well. So there's no wasted energy or or time in telling this message to the world. In talking to government leaders in big business and saying, wake up with us. We're letting our farms die. You're not noticing this. This shouldn't be allowed. We need intervention. We need help. Walmart, Amazon, give us price certainty earlier. That's all we ask. Governments, maybe think about rescue programs when farms are on death's door. Maybe think about ways to incentivize business to take this on and fix it with us. You know, we need help. ProducePay is alone in this journey on some days and we're banging the drum trying to get people's attention. Come join us in this journey. It's a worthwhile journey. Our employees know this and feel this. Our employees, the majority of our employees are here for the noble cause. They're not here for a paycheck, they're not here for wealth creation. They're not here for disruption in the produce space. We don't use those words. We don't think about those words because we care too much about the real problem that we're solving here. It's very, very, very noble cause and mission. It's one of the things that I know my children are proud I spend my time on. And I think anybody that wants to join this journey with ProducePay is welcome, competitive, or not. Please come join us. We need help. There's not enough capital. There's not enough tension. There's not enough people working on this, and it is certainly going to impact the, the future generations if we get this right.
Tom Raftery:Fantastic. Fantastic. Pat, if people would like to know more about yourself or any of the things we discussed in the podcast today, where would you have me direct them?
Pat McCullough:ProducePay.com. Check out our LinkedIn and our social media platforms. We put a lot of information out. We are trying to help share information about supply and demand or end markets or the ESG and impact matters that happen and are being managed in, in farms. But yeah, subscribe to our social media. Apply for a job, you know, come join us in this pursuit. We're we're we're hiring and we're welcome. We're welcoming the help from outside.
Tom Raftery:Tremendous. Pat, that's been fantastic. Thanks a million for coming on the podcast today.
Pat McCullough:Thanks, Tom. I appreciate the platform.
Tom Raftery:Okay. Thank you all for tuning into this episode of the Sustainable Supply Chain Podcast with me, Tom Raftery. Each week, thousands of supply chain professionals listen to this show. If you or your organization want to connect with this dedicated audience, consider becoming a sponsor. You can opt for exclusive episode branding where you choose the guests or a personalized 30 second ad roll. It's a unique opportunity to reach industry experts and influencers. For more details, hit me up on Twitter or LinkedIn, or drop me an email to tomraftery at outlook. com. Together, let's shape the future of sustainable supply chains. Thanks. Catch you all next time.