Episode 11: How Catania Oils Overcame Pandemic Supply Chain Challenges and Thrived

Transcript

Adam Honig: Hello and welcome to Make it. Move it. Sell it. On this podcast, I talk with company leaders about how they’re monetizing the business of making, moving, and selling products, and of course, having fun along the way. I’m your host, Adam Honig, the CEO of Spiro.ai. We make amazing AI software for companies in the supply chain, but we’re not talking about that today. Instead, we’re talking to Stephen Basile, the Executive Vice President of Catania Oils, one of the nation’s leading processors and packers of the highest quality plant-based oils in the country. Mostly used for cooking, I just wanna point that out right at the get-go. Stephen, welcome to the podcast.

Stephen Basile: Thanks Adam, thanks for having me.

Adam Honig: Well, we really appreciate your being on the show, Stephen, so thanks for joining us. Maybe what we could do is start by talking a little bit about some of the oils that you guys are involved with.

Stephen Basile: Yeah, I’d be happy to do so. We carry a lot of different vegetable oils. So when you think of all the different oils that are available in the market, the standard ones being soybean oil, canola oil, and corn oil. And then we handle a lot of different specialty oils, whether it’s peanut oil, cotton seed oils, sunflower oils, and different varieties of those oils. Safflower oil, different varieties of olive oil, so really just covering the whole array of different oils that derive from various plants throughout the world.

Adam Honig: Gotcha. And what would you say is the most popular oil today?

Stephen Basile: Yeah, the most popular oil is certainly soybean oil, and I only say that just by looking at the sheer demand of our customer base because it’s low-cost oil. But avocado oil, I would say is probably one of the more hot oils over the past couple of years that continues to grow double.

Adam Honig: When you say hot, you don’t mean spicy, you mean like the demand is very high for it.

Stephen Basile: Correct, but also it’s a high heat oil as well, so it’s great for like high heat cooking and baking. Also, it’s very similar to olive oil, so olive oil’s very healthy for you. High-end monounsaturated fats, which are the good fats, lower and saturated fats. And when you look at avocado oil and olive oil and put them side by side from a chemical analysis, they’re very similar.

Adam Honig: Gotcha. And so I know you’re definitely involved in the selling of the oils, but what about the processing? What has to go on for the product to be ready for market?

Stephen Basile: Yeah, so we’re actually not a crusher and refiner, so we will import and partner with different crushers and refiners from all around the world. You know, avocado oil, predominantly Mexico, but also Spain has been planting more and more trees throughout the years as well as other countries. Olive oil, you know, Spain is the largest producer in the world, there are about 50% of world production. But then when you talk about some of the other oils that we mentioned earlier like soybean oil, it’s mainly a domestic product. Canola oil, it’s Canadian, but it’s land mass, we’re connected right to it. We’re still able to bring in rail cars of canola oil into our facility, then break it down into smaller packages, retail packages, food service packages for your restaurants as well as selling it to other manufacturers who are using oil as a raw material in their product. So as an example, somebody who makes salad dressings or fries, potato chips, you know, think of some of the big CPG companies out there servicing many of those brands.

Adam Honig: Gotcha. So you guys are selling to restaurants and restaurant chains to industrial uses and food makers? Is that sort of the scope?

Stephen Basile: Yes in retail. And so retail, we serve a lot of the private brands retailers throughout the country. So whether it’s like a big box national chain or even a smaller regional independent, we’ll white label it and put their label right on the bottle for them.

Adam Honig: Gotcha. And so one of the things that I was kind of thinking about in your business, is it must have been a sort of a challenging few years coming through the pandemic with supply issues and everything like that. How did that impact you guys?

Stephen Basile: Oh yeah, honestly, the employees that we have here, I mean, jumping through hoops just to make sure that we had something at the store. But yeah, it was very difficult from a supply chain perspective, specifically if it was a raw material that’s imported because that caused a lot of other challenges. But honestly even the primary packaging materials, right? So you’re a cap, and all the lead times just got pushed out 2X, 3X, all the forecasting challenges. So you have a forecast from customers that was very good. And when people aren’t going out to eat, then you see the retail business just go crazy and trying to keep products on the shelf for your customer was very difficult. But most customers, you know, collaborating with them and looking at skew rationalization. You know, can we eliminate this one smaller size and focus on these two sizes so we can increase our production output? And that really seemed to help early on in the pandemic. And the biggest thing was just really communicating with the customers, making sure that you guys were all on the same page and they even had a lot of challenges just getting stuff to the shelves. We had some of the buyers who were literally in the stores stocking shelves.

Adam Honig: Yeah. And were they doing that because of the lack of people to help them with this, like a lot of turnovers and stuff like that?

Stephen Basile: Turnover, and then honestly just the Covid bug hitting everybody and then not having people available to put stuff on the shelf early on during Covid.

Adam Honig: Oh man, yeah. I can definitely see that. We’ve been talking with some manufacturers, who for lack of one part, their whole product line was shut down, and they couldn’t deliver any products. It seems like maybe with caps, you guys saw a little bit of that.

Stephen Basile: Yep, absolutely, that happened to everybody. I don’t think anybody got through Covid without having some type of supply chain or product issue.

Adam Honig: Now how did it work from a customer perspective? I’ve been speaking to some people who basically decided that they couldn’t take on any new customers during Covid and other companies used it as a chance to really expand. How did you guys look at it?

Stephen Basile: Yeah, it was really by oil because depending on what was available at that specific point in time, there might have been upstream from our supplier base. There might not have been able to supply us with any more products, therefore we were not really able to bring in new business. And then to complicate things more with the whole Russia-Ukraine situation and Ukraine,  you’ve heard the statement that they’re the bread basket, right? 

Adam Honig: Are they the oil basket too? I didn’t realize that.

Stephen Basile: They are about 50% world’s production of sunflower oil. So there was a major issue early on when that occurred.

Adam Honig: I guess if they put it in a basket, it would all fall out the bottom, so maybe it’s the oil bowl or something like that. I don’t know.

Stephen Basile: Yeah, that makes more sense I guess.

Adam Honig: I’m sorry, so you were saying when Ukraine went offline, that whole market just kind of seized up? Is that what happened?

Stephen Basile: Yep. Like conventional sunflower, organic sunflower specifically, we had some suppliers who went force majeure on some of the contracts that we had. So yeah, it was a significant ripple effect. And then, okay, if customers can’t use sunflower oil as an example, and some customers are using sunflower oil because it’s non-GMO, you’re kind of limited to the other oils that you could flex over to. So a lot of collaboration and coaching with customers as far as, okay, sun is not available right now, here are some alternatives that we can help you with. Certainly that has forced a lot of customers to think about having flexibility on all of their ingredient statements on a go forward basis. And then also diversification within your supplier base. In some cases that helps us, in some cases, it hurts us. We certainly want to do everything that we can to maintain all of our supplier and customer relationships. 

Adam Honig: Yeah, it’s a really tricky position because you’re kind of in the middle of a lot of different things. A lot of people are talking about supply chain agility and it sounds like that was a balance that you guys were really going for.

Stephen Basile: Definitely.

Adam Honig: But even though Covid was sort of a big thing, I imagine it’s always kind of like that in the food industry, right? Because you’re dependent upon the weather or upon the harvests and so on as well.

Stephen Basile: Yep, they all play a big part of it. So specifically the weather, if you rewind to last year in Canada, specifically in August, there was a major drought that significantly impacted the canola crop, about 33% less than it typically is. So non-GMO canola prices soar to become pretty much not available. So then how do you navigate around those waters with customers when that’s all that they have and that’s all that they use. You just gotta really talk about well here’s the other oils that we have access to and here’s why these oils may fit for your specific application.

Adam Honig: Yeah, I remember I went to the store to buy some canola oil and I wound up coming home with a coconut oil blend as a result because it looked the same to me. I didn’t even realize they were out of canola oil.

Stephen Basile: That’s a little different, but yeah, absolutely.

Adam Honig: So I’m curious, for your customers that are in the CPG, the consumer packaged good manufacturing space, are they as happy to switch inputs as some of the other customers? Because their products are a lot more specifically made, I would imagine. 

Stephen Basile: Yeah, every customer is different in that regard. I mean, sometimes the CPG companies, they move a lot slower than some of the smaller companies, tend to be a lot more nimble. But in this situation that we were all facing, even those  big companies were able to move rather quickly. Because anytime that you can’t deliver them one of their production inputs, they’re shutting the facility down and shutting the facility down is big dollars. So yeah, they moved pretty quickly even. 

Adam Honig:  Even for them. Well that’s great to hear. You know, I’ve been talking with a lot of people about sort of changing customer expectations and people have been saying things like oh it’s the Amazon effect. Everybody expects everything to be right away and everybody expects everything to be returnable. How are you seeing that in your customer base?

Stephen Basile: Yeah, definitely. Our lead time used to be five days and now it’s 10 to 15 days, depending on this certain channel that we may be servicing. And all the customers certainly understand that because they’re experiencing a lot of the same challenges on a lot of their production input costs. So going from that kind of just-in-time model, I guess, to a model of supply security I think is the best way to kind of frame it up. That’s kind of been a shift. And certainly in the commodity market, which we’re serving, a lot of price conscious consumers are not necessarily not price conscious anymore, but prices becoming secondary to that of making sure that they have product available for their production, for their restaurant, and for their shelves in the retail market.

Adam Honig: That’s super interesting. So you mentioned supply security and I’m super interested in this topic. So does that mean your customers are building up a bigger inventory position or they’re just contracting with you for a guaranteed share of what they need?

Stephen Basile: Yeah, it means the former, like they’re building up more inventory. Right now, September 30th is a little bit early traditionally when customers are starting to build up their inventory for the holiday. They started building inventory a month ago.

Adam Honig: Wow.

Stephen Basile: Yeah, because they’re just concerned that they’re not gonna have products available to stock their shelves for the busiest season of the year. And then in addition to that, because the lead times have moved out a bit, they’re putting in more orders more frequently.

Adam Honig: I see. So are they putting in larger orders more frequently? I mean that would be great, right? 

Stephen Basile: It is, but when you’re forecasting your production and then all of a sudden the forecast is 30% over, it makes it very difficult from the operation, both from production input, and from labor as well. So if you’ve planned your production based on a specific forecast and then all of a sudden you’re coming in 30% over, you can’t flip a switch overnight. You have to add a shift. So how do you hire, train and then retain those employees, all along when the orders keep coming in? You gotta stay ahead of it. And when you use a forecast to try to stay ahead of it, and then you’re overshooting the forecast, it’s just not possible to maintain that, I guess.

Adam Honig: Yeah, no, I hear you on that. And a lot of the predictive analytic models, like it’s really hard for them to take into account the changes that are happening because they’re so unprecedented. 

Stephen Basile: Totally. 

Adam Honig:  Yeah. So I know that we’re kind of looking at different methods of forecasting, but the summer is just traditionally slow and the models, for so many years, have taken that into account. So is summer usually a slower season for you guys?

Stephen Basile: So because we serve into a few different channels, so we sell into that manufacturing space, we sell into the retail space, and then we sell into the food service space. We may see one channel take a break while the other channel’s picking up. Like in the summer, we typically see our food service business pick up, but because of inflation and labor shortages, we didn’t see the food service business pick up this year. We saw the retail channel continue to maintain that demand.

Adam Honig: Gotcha. So when you start to think about next year’s planning, I’ve been speaking with a lot of people who are like, I just don’t know how to plan, everything is so up in the air, what’s your perspective on that?

Stephen Basile: I have the same exact answer. We have these conversations weekly, monthly, quarterly of okay, what’s the next 30, 60, 90 looking like? What’s next year looking like? And when you’re talking to the customers, every single customer gives me that same exact answer that you just said, Adam, every customer.

Adam Honig: Yeah, so I guess we all just should plan for a lot of growth and then it’ll just happen. That’s the only advice I’ve got. If everybody’s like, well, we’re worried about the economy or stuff like that, it’s sort of a self-fulfilling prophecy in some ways, so yeah. And are there other trends that you’re seeing with your customers, are they doing anything innovative that you’ve been starting to sniff out?

Stephen Basile: No, not really because yes, there’s still new product introductions, but the focus on new product introductions is not like it used to be pre-Covid because a lot of people are really just concerned about how are we gonna take care of the customers and the items that we have today.

Adam Honig:  So in a sense, the focus on just taking care of today’s business is maybe lowering the innovation a little bit, is that what I’m hearing? New types of potato chips aren’t being launched? I’m trying to figure out what the new products would be. 

Stephen Basile: You know what, it’s a really good question and I have not heard of many new items that are getting launched at this time.

Adam Honig: Yeah, interesting. Well I wonder if the workforce issues have something to do with that as well because there’s such a big drain on talent right now.

Stephen Basile: A hundred percent, and I still try to figure that out. Because the Covid money’s gone, everywhere you go, everybody’s looking for labor or for talent. Where did all these people go? I can’t figure it out. Did people just leave the workforce completely? 

Adam Honig: Well from what I’ve been reading,  the economists have been saying that more people have been entering the workforce. I mean, people did come out of it. We’ve had a lot of issues with childcare. I don’t know if you’ve seen this on your team, people with young kids, it’s been hard to get nannies and daycare slots and stuff like that. So we’ve definitely had some people out as a result of that, but that seems to have kind of cleared itself up a little bit more. So I think people are back in the labor force, but I think for me it seems like people have made a little bit of a mental shift and they really want to choose a profession or a job that they really love and not just kind of doing whatever comes by. So I don’t know, maybe that has something to do with it.

Stephen Basile: I mean, certainly we’re experiencing more challenges with the workforce and the operation more so than anywhere else. So production, skilled labor, warehouse, forklift operators, those positions seem to be the most challenging to hire, train, and basically retain them.

Adam Honig: Yeah, and you’re competing for those kinds of positions with a lot of people now too.

Stephen Basile: Yeah, Amazon.

Adam Honig: Exactly, there you go. I think the other trend that I’ve been hearing a little bit about is if there’s gonna be more domestic United States production of material, that there’s gonna be more forklift job operators just to pick on one topic. And if people’s supply chains are kind of brittle and they wanna have more stuff locally,  again, it drives the demand for those kinds of employees.

Stephen Basile: Yeah, and then obviously those challenges can become opportunities when you look at maybe some of the functions of the forklift that are repetitive. Well there’s ways that you can automate that with unmanned fork trucks or just other ways to move products.

Adam Honig: Oh yeah, exactly. So again, take another page out of the Amazon playbook. I feel like when I talk with companies today, everybody either wants to be Amazon or Apple. And I think that you gotta find your own thing, man, but I think automating a lot of the stuff that goes on in the distribution center could be a good way to go.

Stephen Basile: Yeah, I, a hundred percent, agree with that.

Adam Honig: All right, so we’re looking at the future and we’re thinking, we don’t know, so we gotta figure out some way to improve on that. I guess we’ll get working on that. Maybe there’s something Spiro.ai can do to help. Stephen, I just wanna talk on another topic, which I know that you’re a family-owned business, and that’s a different work experience than most people, have you always worked at Catania Oils or do you have other outside-of-the-family experiences as well?

Stephen Basile: I’ve always worked for the family business. At the young age of 11 years old, my grandfather used to pick me and my younger brother up on the weekend, go to the plant, walk around. And you’d a have leaking product, change this, change that, clean this, clean that, and I always liked to joke around because back then we didn’t know what we were doing, so I’d always say that he miaged me into the business.

Adam Honig: Got it, yeah, that’s awesome. My sense of talking with a lot of family-owned businesses is that there is more of a family feel even to the employees and so on. Is that the case with you guys?

Stephen Basile: Definitely, one of our core values, we are family, it’s one of our most important core values. And we definitely do a lot of events around family, like coming up in a couple of months around Thanksgiving for the past 12, 13, 14 years. For some time we’ve been doing a major turkey fried and peanut oil here. The family and the sales team get together and we’ll fry 13, 14 turkeys for the entire company, you know,  all the fixings, the stuffing, and the mashed potatoes. And that’s just one really great example of how we treat everybody here like family.

Adam Honig: Yeah, that’s awesome. Well, I definitely would encourage people if they’re looking for employment in the sector to look out for family-owned businesses because I think it’s definitely a different feel than some of the corporate-owned ones, at any rate. 

Stephen Basile: Thank you. 

Adam Honig: Yeah, totally. Well Stephen, this has been awesome. I’m really happy that you were able to make it onto the podcast today.  Certainly learning a little bit about oils and the best ones for different circumstances. Avocado oil, I gotta look out for that.  I’ve never used avocado oil, so I’ll check it out.

Stephen Basile: We’ll have to send you some.

Adam Honig: Yeah, please, send me some, I’d love to see some. But also from a business perspective, learning a little bit about how you guys dealt with the challenges in the supply chain, super interesting. I wish that we didn’t have to guess as much about the future, but I guess we’ll see. Maybe we’re always guessing, and we just thought that we knew something before. Maybe there’s something to that as well, I don’t know. But anyway, it’s been really great to talk with you, and talk about the family business, really appreciate it. And just as a reminder I wanna let our listeners know that they can find every episode of the Make it. Move it. Sell it. podcast at Spiro.ai/podcast. Be sure to subscribe and if you liked what we were talking about today, maybe give us a thumbs up or a good review or something like that. Stephen, what do you think, should they do something like that?

Stephen Basile: Yeah, maybe some jumping jacks. Absolutely.

Adam Honig: I like that, exactly, and some pushups while you’re at it, yeah. Well thanks everybody for tuning in, we’re looking forward to seeing you on the next episode.

 

[class^="wpforms-"]
[class^="wpforms-"]