San Francisco Metro: A Trend-Setting Market in a Tough Economy

ONLINE EXCLUSIVE

When you look at the San Francisco, CA, produce market, you need to know this — San Francisco demographics are driven by a simple fact: The median price for a condominium or house rose from $422,000 at the turn of this century to a million dollars today and the median rent is $2,000 a month.

When the federal Department of Housing and Urban Development set household income standards in 2018, a San Francisco family of four making $117,400 a year was considered low income, and a family making $73,300 qualified as very low income. Housing costs have fundamentally altered who can live in San Francisco and who cannot, as median household income went from $55,000 in 2000 to $123,000 in 2019.

While the city’s overall population increased by 4% in the first decade of this century, the African American population plummeted by 20% as housing costs soared. The move away from the city toward outlying areas also increased during the pandemic, as many employees of San Francisco’s high-tech industry took advantage of the opportunity to work remotely from areas with more affordable housing.

The fresh produce sector has had to shift with this undeniable housing trend.

SELLING BEYOND CITY

Earl Herrick began selling organic fruits and vegetables out of a converted beer truck at the entrance to San Francisco’s iconic Golden Gate Park in 1975. The time was ripe, as a growing number of Northern California organic farmers needed a way to connect with urban consumers looking for alternatives to conventional fruits and vegetables.

By 1988, Herrick’s business had grown enough to occupy a stall at the San Francisco Wholesale Produce Market, and Earl’s Organic Produce was born. Today, Earl’s Organic employs more than 100 people at a 30,000-square-foot facility run entirely on renewable energy at the San Francisco Market on Jerrold Avenue, a few hundred feet from Cesar Chavez Street, and has a fleet of trucks shipping produce throughout Northern California and beyond.

The market for produce has steadily moved in recent years away from the city as residents moved to slightly more affordable outlying areas.

“We’ve been selling outside the city since the get-go, mostly the East Bay,” says Ray Mah, general manager of Berti Produce, which wholesales a full line of greens including eggplant, broccoli and Napa cabbage from its facility at the San Francisco Market.

Another recent trend that increased during the pandemic is a decline in the number of customers who come to the San Francisco Market to look over the produce in person. “We’ve had fewer customers coming down to the market,” says Frank Cavaz, general manager of Carcione’s Fresh Produce Company. “It doesn’t help, because fewer customers mean less sales.”

Carcione Fresh was started by Joe Carcione, who became known throughout the region and beyond because of his Green Grocer radio and television spots delivered from his stall at the Golden Gate Produce Market, a short distance down Highway 101 in South San Francisco.

“Everyone wants delivery the last 10 to 15 years,” says Mah. “It is less labor to just have it delivered.”

Berti and San Francisco Market neighbor, Happy Farm Produce, are subsidiaries of GrubMarket, a uniquely Northern California variant of the trend to replace face-to-face produce interactions with technology. GrubMarket specializes in software to manage inventory and distribution of fresh fruits and vegetables.

STRONG ASIAN INFLUENCE

Despite the general population drain, San Francisco still has the oldest and one of the largest Chinatowns in North America and more than a third of the city’s residents are of Asian descent. Today, four of the 26 wholesalers at the San Francisco Market specialize in Asian fruits and vegetables.

Happy Farm Produce sources Asian fruits and vegetables from Central Valley farms, including Chinese eggplant, daikon, bitter melon, and mo qua. Down the row, stands Ocean Paradise Produce, which distributes Asian fruits and vegetables to retailers, restaurants, hotels and other institutional buyers.

Another merchant, Pay-Less Logistics, ships 2.4 million pounds of fruits and vegetables and other food products a year from its San Francisco location to buyers in Asia. And STC Distributing has offered a full line of Asian fruits and vegetables since 1983.

CENTRALLY LOCATED

“Post-pandemic, the city is in a state of depopulation and the future is unknown,” says Drew Knobel, director of sales and purchasing at Earl’s Organic Produce. “Food heals, and we need a lot of that right now. It could be an essential and first step to revitalization.”

But even as San Francisco suffers population decline, the city remains strategically located to serve as a vital hub receiving and shipping organic produce. The San Francisco Market is conveniently close to both area farmers who enjoy incredibly long growing seasons and the strongest consumer markets in the country for produce.

“Food heals and we need a lot of that right now. It could be an essential and first step to revitalization.”

— Drew Knobel, director of sales and purchasing, Earl’s Organic Produce

“We are centrally located,” says Knobel. “We are close enough to Watsonville and Salinas and serve as a good hub for Santa Barbara County and Mexico.We are fortunate to be in the middle of one of the most dynamic year-round growing areas and one of the most health-conscious and nutritionally educated populations in the world. Ninety-eight percent of all our organic produce stays in Northern California.”

There are 10 Whole Foods markets within this city of fewer than a million residents, and when you consider the metropolitan area extending east to Sacramento, that number increases to 45 Whole Foods outlets and growing.

Inflation has done nothing to slow this high-end produce purchasing: Whole Foods’ sales in Northern California and Nevada increased from $1.225 billion in 2020 to $2.051 billion last year.

The supply of organic fruits and vegetables from the Northern California countryside, and the demand within the region, are so strong that there is room for more than one pioneer organic wholesaler in the city. Around the time Earl Herrick started peddling produce out of a converted beer truck, another group of energetic pioneers started Veritable Vegetable to connect regional organic farmers with urban consumers.

By 1984, Veritable Vegetable began running produce trucks up the coast to Oregon and Washington. Veritable Vegetable leased and remodeled an additional 30,000 square feet of warehouse space in 2016.

San Francisco is also home to the Ferry Plaza Farmers Market, which is a sales haven for small organic farmers, in addition to supporting two large, thriving organic produce wholesalers.

FOODSERVICE

A thriving restaurant trade has also suffered mightily since COVID closures. According to statistics from business registration fees collected by the city, at least 120 restaurants went out of business in 2021.

“Distributors are the ones who are hurting,” says Mah. “We do not sell to restaurants. We are selling a little less to the distributors, but the grocery stores buy more.”

“It will be interesting to see what new trends emerge from this segment,” says Earl’s Knobel. “It has been battered through the pandemic lockdowns. One would think healthy eating would be at the forefront of renewed preventive health lifestyles. Organic fresh produce seems like a good fit.” 

DON’T OVERLOOK ORGANICS

The strength of the organic sector remains an enduring trend in San Francisco produce. “Our customers are dedicated and committed to organics and sustainability, both on the grower side, as stewards of the land, and as retailers who are looking for guidance on how to best support their missions of providing and supporting the freshest and most responsibly farmed product,” says Knobel.

The time and demographics are right for continued growth of organic fruits and vegetables in this metropolitan area.

“It’s all about access, education, and where you want to spend your dollar,” says Knobel. “As Earl’s has gone from a SF Market accessible company, where you pick up at the market, to being able to deliver to all neighborhoods and cities in Northern California, our reach and access has been more accessible to all, including the 1,040,390 pounds of fresh organic produce we donated during the pandemic.” 

A half-century removed from the humble beginnings selling out of that old beer truck, Herrick remains active in the business. “Earl is still involved in culture building and strategy,” says Knobel. “He has meetings with his teams regularly.”