John Gates Q&A

“As an independent wholesaler, our number one goal is — it says it right on our truck — ‘Best Quality, Fastest Service’ which is our tagline.”

courtesy of Food World and Food Trade News, October 2016

Food World/Food Trade News:
Tell us a little bit about your background and how you ended up in the produce business.

John Gates: Growing up, my uncles had produce markets throughout Central Pennsylvania. My retail experience originated there. Throughout high school and college, I owned and operated my own fruit markets, seasonal Christmas tree and flower stands, and summer wholesale operations.

I put myself through Penn State and earned my BS in Accounting. I was working as a CPA and my brother, Dave, was also working for a public accounting firm. After a couple of years, we decided that we wanted to get back into the food business, specifically the produce business.

Food World/Food Trade News:
Now, tell us a little bit about Lancaster Food’s growth over the past 30 years.

John Gates: Our first facility was a one-dock warehouse in Frederick, MD. In 1989 we moved to a larger facility on Route 1 near Jessup, MD, approximately 40,000 square feet. We saw tremendous growth there as a result of being closer to our customer base, which at the time was the Baltimore-Washington market. We grew revenue every year and in 1992 saw the opportunity to sell to Guest Services, Inc., one of the largest private hospitality management companies in the U.S. I remained as the president.

Shortly after the sale, we moved into our third facility that was 110,000 square feet and closer to the Jessup market. We remained there until 2008 when we moved into our current facility, which is approximately 230,000 square feet. This new space allowed us to jump into the value-added business.

We designed a flow-through facility where receiving is in the back and shipping is in the front. It has allowed us to be extremely efficient and take advantage of more distribution opportunities. Encompassed within our business is basically our manufacturing plant where we do our fresh cut. At this point in time, we have some room for growth, but we are probably going to need to add on to this facility very soon and we have that capability.

Food World/Food Trade News:
Which factors have been integral to Lancaster’s success over the past 30 years?

Gates: When we started Lancaster Foods, our first customers were the military commissaries. We quickly grew into the retail segment. In addition, because the Baltimore/Jessup market wasn’t even open on the weekends, we found a niche servicing retailers when they needed it the most – weekend delivery.

Recognizing consumer trends and demands, we saw that there were more and more packaged goods in the produce department. We were quick to jump on that trend which has just exploded. At this point in time, it is a large and growing percent of our business.

I am insistent that we are following the trends where the best quality is at that time, as we are in a perishable business. I also keep a watchful eye on the trends and what is going on in the marketplace. So, I stay very close to our larger retailers.

There are new products coming out all the time. In the fresh cut area, in particular, you continuously see new items emerge. We want to make sure that we are offering the relevant product mix. I am obsessed about getting that right.

As we grew, we became compartmentalized. For example, logistics are critical and crucial to what we do. We have a logistics director, a fresh cut director and, of course, a strong procurement team and sales team. Additionally, we have a finance team and a food safety team. All of these people are very important to our business and they all report directly to me.

As an independent wholesaler, our number one goal is – it says it right on our truck – ‘Best Quality, Fastest Service’ – which is our tagline. I do get involved in every facet of the business, but I am especially passionate about quality. My idea of quality may be different from others’.

I am concerned about where the product is coming from. We adamantly make sure that we find the very best place to source the product. For example, at any given time, melons may be grown in three different areas. We want to get Lancaster’s product to source from the area that has the very best quality. At the end of the day, we have the most success with the best quality. People remember the quality and the service long after the price is in the history books, as we all know.

So the long and short of it is, I spend time with each one of those departments I mentioned. And as stated before, quality, or the consistency of quality, is the foundation of what I want the company to stand for.

The quality, however, is no good if you can’t get it to the right place. Fortunately, our location here in the Mid-Atlantic allows us to reach customers in northern and central Florida as well as customers in Maine.

Because Lancaster has the right quality and the right quantity, if someone was looking for truckload volume, we could deliver it – next day. We truly offer retailers a unique solution for logistics.

Food World/Food Trade News:
What has changed the most at Lancaster Foods? Beyond just the internal growth, can you talk about changes in your go-to-market strategy and how the entire evolution and dynamic explosion of the produce business has impacted your business?

Gates: It definitely has to do with the value-added category. Again, we are in a good position. Many of the items that we produce could be done at the shipping point, but they can’t back it up with the service.

Our customers can order anything…cauliflower, broccoli florets, whatever…and receive it the next day. If stores have to order four days out, they are either going to be short and lose sales, or they are going to be heavy with outdated product that will increase inventory shrinkage.

Providing our customers that service, with consistent quality, has definitely made an impact. It spawned our growth. There is very little room for mediocrity in any business, but especially in our business. The retail fresh fruits and vegetables business is part art and part science. I believe that we have the formula to be Best in Class. I feel pretty good about our position in the marketplace. I learn from my customers.

Food World/Food Trade News:
What are the biggest challenges you face today?

Gates: Labor. We need people to work in a cold environment – in refrigerated space – and the work is seven days a week. It’s definitely one of our biggest challenges, especially in this tight labor market. We try to automate where we can, particularly in warehouse work. To combat the labor challenge we try to be a place where people want to work. We treat them right. Considering the challenge, we feel we do attract and retain good people. We’re proud of our labor force.

Equally challenging is the transportation situation. The one consistent complaint throughout the industry is that you can’t get good drivers. You can’t get consistency. And we are constantly hit with increased regulations in which we have to comply.

The government isn’t there to make it easy for us right now. Increased regulations hit all aspects of our business, not just transportation. We all know about FSMA (the Food Safety Modernization Act) coming out…that too is a constant challenge.

Food World/Food Trade News:
Your company is growing. Over the past five years, how much has Lancaster grown? What do you project for five years from now and how will that impact what you have to do with this facility?

Gates: We have experienced steady growth every year. It has been phenomenal. We have the ability to add on to this facility. We need to do that. We will be doing that within the next two to three years.

There is new business coming into the area and there are a lot of good retailers within our market. We intend to continue to partner with them, as well as our grower-shipper partners, where we will be doing forward distribution, additional processing and logistic services for everybody. We talked about it – transportation is tough. Whoever solves those problems and figures out the right formula is going to be successful. We intend to be in that group.

As far as growth, there is plenty of opportunity in produce. There are new ideas frequently coming on board such as vegetable pasta and cauliflower rice. These are just two examples which show that the produce department is far from stagnant. It is not like we are selling cigarettes. We are the good guys. We are selling things that are good for you.

Food World/Food Trade News:
You started out as a retailer and you know that world. If you had a “wish list” for your retail customers that would improve efficiency, what items might be on it?

Gates: We are in a perishable business where windows of opportunity come and go. The more nimble you are the better. Some companies have figured that out and can move and say, ‘We have a great opportunity here, we can work it through the system, not just as a commodity, but we can process it.’ But most retailers, especially the larger ones, sometimes are challenged to move quickly.

When that happens, we lose profit dollars, the customer loses profit dollars, and the consumer loses value. In a department like produce, time is of the essence, the efficiency of the entire system is paramount.

Food World/Food Trade News: Thank you.