“He should have read it by now.”
William Hartford muttered lowly, glancing at his watch. Transparent ice clinked inside the glass. A faint smile—one rarely seen—played at the corners of his lips.
“That Frederick fellow, I wonder if he collapsed clutching the back of his neck in shock this morning. A two-million-dollar repayment notice? William, you really are ruthless.”
Samuel Reed snickered and took a sip of whiskey. He had done nothing but envy Frederick’s Royal Taioga variety, which had debuted this year, so this turn of events was an opportunity he could not afford to miss.
William coldly replied, wiping his glasses.
“Ruthless? Samuel. This is merely a legitimate defense mechanism for the soundness of our cooperative. If we leave a defector who joined hands with opaque outside capital and shared the cooperative’s secrets, wouldn’t we all end up dancing in the palm of some upstart named Redwood? I have merely defended the order of this land that our families have maintained for decades.”
Thomas Cromwell interrupted, unable to hide his excitement, unfolding a map.
“Whatever the reason, next year is already looking promising! William, the quotas for Whole Foods and Gelson’s that Frederick held—they are definitely coming over to our side as promised, correct? Just imagining our farm’s cherries lining their shelves… hehehe.”
“Of course. It is already specified in the resolution. You will all fill Frederick’s vacancy. The distributors ultimately receive goods coming in under our cooperative’s
name, so it is simply a matter of the supplier changing. The consumers will not be able to tell whether it is Frederick’s or yours.”
Another cooperative member swallowed hard.
“I should bring in a state-of-the-art sorting machine next year with the savings on fertilizer and pesticide subsidies. That Frederick, acting like he was the only one thriving, and now look at him.”
“Exactly. No matter how clever a son-in-law he had, did he really think he could turn his back on us here in Brentwood? Around this time next year, several parcels of Harris Farm might hit auction. Let’s divide them up fairly and acquire them then.”
William Hartford gazed quietly out the window as he listened to the excited voices of the cooperative members. He believed his decision was perfect. He had severed the distribution network, dried up the money supply, and secured legal justification, so he was certain that the only paths left for Frederick were to kneel in surrender or go bankrupt.
“Now then, everyone raise your glasses. To Brentwood’s great tradition, and to our cooperative, which shall grow mightier still.”
At William’s lead, vigorous clinking of glasses filled the lounge.
At that very moment, as William Hartford was discussing with his fellow members how to divide the sweet fruit of victory—
“Brian, you… you do not understand what this means. It is not simply a matter of a supermarket sales route being blocked. You do not know how this industry works.”
Frederick continued, looking at me with worried eyes.
“First of all, large-scale distributors like Costco and Walmart will not even speak with individual farms like ours. They unconditionally sign contracts only with a single gateway—the cooperative.
William Hartford suspending my brand usage rights with the cooperative chairman’s seal means I have been kicked out at the entrance of the highway stretching across the United States. I have nowhere to sell next year’s harvest. It is not as if I can set up a roadside stand to sell them. I am talking about cherries pouring out of one hundred acres.”
“.......”
I simply crossed my arms and listened quietly to his words, while Frederick sat on the sofa with a grave expression, stroking his chin.
“And it is December right now. You know as well as I do—the banks are going insane because of the subprime crisis. I received a notice demanding immediate repayment of the two-million-dollar loan that would normally have been extended with cooperative collateral.
It is obvious that bastard William whispered to the bank that ‘Frederick entered into opaque external contracts and his collateral value has dropped’… Every piece of collateral I could possibly pledge to the bank is already tied up from acquiring new farming methods and farms. What remains is real estate and deposits, which fall far short of two million dollars. If the funds are cut off, the farm will go straight to auction.”
Come to think of it, the amount spent at Harris Farm to faithfully follow my advice until now had been quite substantial. Cherry sales had increased, but every year they had been raising the ratio of new varieties by grafting portions of the farm, and they had spent considerable funds acquiring an almond farm as well.
On top of that, the almond farm’s harvest was still far off, and the pears needed at least two more years of growth before any recovery of investment could be expected. Therefore, the two-million-dollar maturity repayment would inevitably be a burden.
“Furthermore, if the subsidies from the cooperative are cut off, I will have to buy fertilizer and pesticides at retail market prices. That means farming at least thirty percent, and up to fifty percent, more expensive than everyone else.”
“I see.”
“Do you know why the buyers at premium markets like Whole Foods meet with me? Of course, it is partly because our cherry quality is good, but above all, it is because of the quality guarantee certificate issued by the cooperative. If William sends just one official document saying my cherries are no longer under cooperative management, the buyers will definitely refuse to take my calls due to the risk.”
He ruffled his hair in anguish.
“Finally… the operating funds I received in advance from distributors, using next year’s harvest as collateral… since they have effectively all become grounds for contract termination, I might have to pay penalties on top of everything. William is not trying to torment me. He is trying to cut off my lifeline, tear my farm to shreds, and divide it among themselves.”
A heavy silence settled over the living room. Frederick’s explanation was logical, and within California’s agricultural structure, escaping this trap was inevitably difficult. Hartford had simultaneously halted Harris Farm’s distribution, financing, production, and certification.
Having fully understood his predicament, I first sat on the sofa beside him. Chloe, who had frozen solid at her father’s appearance, seemed to take heart from the faint smile at my lips and sat down beside me.
“I fully understand. William Hartford has truly laid an elaborate trap. As you said, within the existing cooperative system, you cannot help but suffer a fatal blow.”
Frederick laughed hollowly.
“Yes, now do you understand? That is what I have been saying…”
Still, having detected the composure in my expression, he stopped his lamenting.
“I understand, I do… but even so, this is a good thing.”
“A good thing?”
I continued with a smile.
“Yes. William Hartford, the chairman, probably believes he pushed you off a cliff, but in truth, he has cut the old iron chain that was bound around your ankle.”
“Is that true?”
“Sir, William Hartford is the head of a twentieth-century-style cartel. It is natural for him to believe that controlling distribution routes means dominating producers, but the market I see is different. Power has now shifted from distribution routes to data and brands.”
“What does that mean?”
Chloe, who had been listening from the side, asked, and I answered step by step.
“First, regarding the issue of distribution and certification—you said the Whole Foods buyers would not take your calls without the cooperative’s certificate, and you are not wrong.
The reason premium-market buyers like Whole Foods demand the cooperative’s quality guarantee certificate is not their personal preference, but the company’s strict internal procedures. But conversely, if we provide historical data that can assume responsibility should a quality incident occur, they will not necessarily demand the cooperative’s quality guarantee certificate.”
“Historical data?”
“I will propose an independent quality certification system to replace the cooperative’s certificate. If the cooperative’s certificate is a subjective guarantee of personal connections asking them to trust us because we are members, the documents I will create and propose are objective indicators showing what nutrients the cherry trees received and what stress they endured.”
“Ah…”
Frederick nodded, seeming to think my words made sense. Just from his focused gaze, I could tell he was not letting my words go in one ear and out the other.
“They are professionals, so they will be more fascinated by the objective indicators I send than by the cooperative’s stamp. And let us break through the compliance issue head-on. We will request approval for direct vendor supply from individual farms, bypassing the cooperative.
If we attach a product liability insurance certificate with maximum coverage that we subscribe to directly, along with an inspection report from a third-party auditor, instead of the guarantee certificate Hartford issued, they will actually be delighted that they can use this to appeal to consumers.”
“…They probably would. Whole Foods Market consumers are crazy about organic and safety.”
I said to Chloe.
“Send an email to the Whole Foods Western Region purchasing manager. With the subject line, ‘Proposal for a High-Value Agricultural Direct Trading System to Replace the Cooperative,’ and add that it is fruit jointly cultivated and guaranteed by Redwood of Napa Valley. That should be convincing enough.”
“Got it. I will do that.”
Now that Chloe, too, realized William Hartford’s scheme was not frightening but rather an opportunity, her face brightened visibly.
I spoke to Frederick again.
“And as for the financial issue… is this not simply a matter of obtaining letters of intent from Whole Foods Market, Gelson’s, Bristol Farms, Walmart, and the like?”
Frederick, who had suspected without saying so that I might even handle some of the distribution myself, understood my words and nodded.
“That is right. The problem was the fear that delivery would be impossible; once delivery is confirmed and we obtain the LOIs, the bank can execute inventory-backed loans or factoring (early cash conversion of accounts receivable).
Even if the banks are being strict about loans because of the subprime crisis, with collateral this solid, at least one million dollars is possible. If that much comes through, I can handle the rest.”
“If that is still insufficient, I can provide some funds. Since cherries must come into Redwood every year anyway, there will be no procedural issues.”
“I am truly grateful for that.”
“It is nothing. And as for buying fertilizer expensively… that cannot be helped. We simply have to buy it expensively… but thanks to the biochar, you will not need as much fertilizer, so it should not be too great a blow, right?”
“I have not calculated it, but… now that I think about it, that may be true.”
Now that the problems seemed resolved, Frederick’s face had recovered considerably. With even a smile playing at his lips, it seemed his worries had largely eased.
“I had been thinking we would need to leave the cherry cooperative eventually, and they pulled us out before we even asked. In a way, I think this has worked out for the best… Royal Taioga was first released this year, was it not?”
“Right. And since they were harvested from the first grafted trees, they did not even produce forty percent of the normal yield.”
“Next year, it will rise to eighty percent.”
Frederick clenched his fist.
“When Royal Taioga appeared last year, the wholesale market went wild… In the end, Gelson’s took them at twice the market price of Bing cherries. How regrettable it was that the quantity was so small…”
The fact that Royal Taioga could be sold at twice the price of Bing cherries was due to the fruit’s own quality, but above all, it was because of the release timing. Royal Taioga hit the market about ten to fourteen days earlier than Bing cherries, appearing when there was no cherry supply in the market.
Then Frederick seemed to think of something, raised his head, and looked at me.
“Ah, but why did you think we needed to leave the cherry cooperative? Because of the independent brand?”
“That is part of it, but it is because of distribution.”
“Distribution? Because of individual distribution?”
“Yes.”
“What profit is there in individual distribution?”
I smiled faintly.
“Did I not tell you when I first spoke about the strategy to maximize the farm’s profits? We would pursue step-by-step goals and the growth that follows. First, soil management and fertilizer; second, irrigation and moisture; third, switching varieties. You have done well up to this point. And the last… is innovation in distribution.”
“Innovation? How?”
“We are going to target overseas markets by air shipping.”
At the words “overseas air shipping,” Frederick and Chloe made expressions of shock.