Celebrating 35 Years — Vanguards Who Made a Difference: FRANK PADILLA

Over the course of the year, we pay tribute to 35 living Vanguards and 12 departed heroes. This month’s featured Vanguard is Frank Padilla of Costco Wholesale.

Originally printed in the October 2021 issue of Produce Business.

During his remarkable tenure at Issaquah,WA-based Costco, Frank Padilla was part of the beating heart of Costco’s meteoric rise, and instrumental in changing the retail and industry landscape. Costco raised the bar for the warehouse club industry, pioneering fresh foods in 1987 and launching the first fresh produce department. Under Padilla’s savvy leadership, fresh foods grew into a critical, central business component, growing Costco substantially and the produce industry along with it.

Padilla grew up in the produce business in the San Francisco Bay area, starting with Richmond Produce, where his entry into the industry came from producing a fleet of trucks with his father and brothers. His relationship with Costco started in the late ’80s. He and his brother were sourcing from suppliers and then delivering directly into Bay area Costco stores and eventually down to southern California. He joined Costco in 1989 and became a supervisor.

The floodgates opened to pursue transformational change in fresh foods when he became the first field buyer for Costco around 1991. “Costco not only allowed us full liberty, but pushed us to develop items,” couched within Costco’s unique retail model.

Padilla helped build that strategic formula on a global scale: efficiently moving large sizes of “the highest quality products at the lowest possible price, with targeted, limited SKUs.”

An important component was “streamlining our buying to purchase as direct from the source as we could, eliminating the brokers and distributors and agents, a strategy in place today, and extremely meaningful in how we’re growing our business on a global basis as well.”

That idea, however, was “very, very difficult to peddle to produce suppliers at the start,” Padilla says. The Costco or Price Plus concept — how members were going to pay money to shop and save money when buying something — was hard for people to understand. “When I started buying as direct as I possibly could, I faced roadblocks. People didn’t answer my calls. Costco didn’t mean anything to anybody in those days, nor was there much interest to buy into our concept.”

“I took on that skepticism personally as a challenge, but it was industry suppliers who really helped us get that going. I’m grateful for the people who believed in what we were doing.”

Padilla is also lauded for his perseverance in searching out new products and working with suppliers to bring them to market to stimulate produce consumption.

“Frank Padilla was a true champion of proprietary products,” says David Marguleas, SunWorld.

“Costco was the first company to work with us in introducing the seedless watermelon to the American consumer,” he adds, pointing to Padilla’s penchant for breaking industry retail paradigms and creating a powerful platform to sell new products. “He saw the variety and the size of the melon lent itself really well for being merchandised and sold at Costco.”

It was, Marguleas adds, a harbinger of Padilla’s “immense impact on the exponential rise of Costco, and the growth of the produce industry through its winning fresh foods formula, emulated by competitors, and sending domino effects across retail, foodservice and industry supply chains.”

“In those days, our margins were extremely small,” says Padilla, “but over time, we were able to demonstrate that both companies could make money and be profitable by leveraging the volume that we had and committing to each other.”

Padilla has been a leader in driving organic produce sales and pushed Costco to transition to organic from the conventional when possible, he says, laying out ambitious goals.

“We’ve been selling organic produce for a long time, but in the early days, it was a hard sell,” says Padilla. “The availability was limited, it was extremely expensive, and the shelf life probably wasn’t very good.”

“But we were able to transition to organic for some of those products and bring them to market at a reasonable premium to what we were selling in conventional,” he says. “Over time, we realized organic was something our members were passionate about.”

“We’re not there yet, but our growers definitely have bought in and are transitioning on our behalf in many cases.”

Padilla is known as a true industry mentor, pushing and inspiring stakeholders across the supply chain. He supported an aggressive stance in implementing strict food safety requirements at Costco, from test and hold programs to involvement in industry initiatives. Costco has also been forward-thinking in ethical sourcing practices and in its partnerships with organizations and suppliers to safeguard the fair treatment and dignity of workers across the globe.

Costco currently buys from 28 countries for the U.S. and 44 countries overall.

Padilla says he’s fortunate Costco allowed him to serve on industry association boards, he says, including the United Fresh Produce Association and Produce Marketing Association, and to give his time to the industry, attending and speaking at as many different events as he can.

“Hopefully, the industry is in a better place as a result of Costco’s impact, and what it is that we do in promoting the growing and selling of high-quality products and increasing consumption along the way,” says Padilla.