From Farm to FP&A: How California Dairies delivers 17 billion pounds of milk each year

Speaker A: If you would like to earn CPE credit for listening to the show, visit earmarkcpe.com FPA Download the app, uh, take a short quiz and get your uh, CPE certificate. Finally, if you enjoy listening to FP&A today, please go to your podcast platform of choice, click the subscribe button and leave a rating and review of the show. And now onto the show from datarails.

Speaker B: This is FPNA Today. Foreign.

Speaker A: Welcome to FP&A today. I'm your host Glenn Hopper. Our guest today is Brad Mooney. Brad is the director of FPA at California Dairies, one of the largest dairy co ops in the country where he supports planning and commercial finance across a business that lives at the intersection of manufacturing operations and commodity driven markets. Before California Dairies, Brad spent several years at Agriculture Capital leading FPA and later taking on uh, treasury across a portfolio of food and agriculture business. Earlier in his career he worked in advisory roles at firms like Grant Thornton. Across those roles, he's had a front row seat to what planning looks like when outcomes are shaped by yield, timing, pricing and working capital. Today we're going to dig into how FPA stays decision useful in industries where volatility is part of the operating model and what that teaches finance teams about forecasting, risk and business partnering. Brad, welcome to the show.

Speaker B: Thanks Glenn, thanks for having me.

Speaker A: We really geeked out in the pre call on this and I just, I love doing FP and A in a business where commodities are involved and I think you're juggling so many things that um, I really excited to dig in, maybe not to the deep level that we did in the pre call. I, I worry that we might lose some listeners if we go too far down a rabbit hole. But it's, it's fascinating to me and I think that FPA is, is challenging enough uh, when you're dealing with uh, with more stable markets. And it just, your background is very interesting to me. So I guess for our audience I feel like after that talk we're, we're old friends now but take us through your background and career path and maybe um, if there's any turning points that shaped how you work in FP&A and that kind of guided you to where you are today.

Speaker B: Yeah, yeah, I've had a very nonlinear career trajectory I would say. Um, so I, you know, studied foreign policy in my undergrad, thought I was going to work in the State Department and then uh, you know, enlisted instead after 911 in M. The Marine Corps, did that for a little over a decade. Um, and then got out and didn't know what I was going to do in my life. I was like, so accustomed to. So returned back to the Bay Area where I did my mba, uh, and then got into the advisory role with Grant Thornton. Focused a little bit in risk advisory, but also in strategic and performance improvement. As time clicked on there, we wanted, you know, the family wanted to settle down, you know, buy the house, 2.5 kids, et cetera. We realized, okay, we're probably not as feasible to do in the Bay Area. So we relocated down to where my wife is from here in Central California. Uh, now all my clients and my experience really has either been the government or had been in tech. So I was like, what am I going to do? Get down into the middle of Central California? Uh, so thankfully I landed a role with Olam International. They are a really large B2B ingredient company. Probably the brand behind the brand a lot of times. So your McCormick spices, your Hershey's chocolate, Starbucks coffee. Um, so got into the product side of that business. Brought me in on their tomato business with product line analyst and the product line manager after that for the tomato business, processed tomatoes and then got into the spice business. So they're big on the spice thing. Uh, so oil and garlic, um, onion and garlic and now so the capsicums. Um, so I did that for several years. Uh, my mentor at Olam was a VP of finance, so they had like a cross functional mentorship program. And he had moved on to agriculture capital and was a CFO for the, essentially the operating partner group. So that they had a different, they had a private equity firm, but they had a group that were standing up internally, was operating partners that managed all the portfolio companies that they had under management. So like 29 portfolio companies. Um, after getting there, he, you know, him and I had, you know, kept in touch and he was looking to build out an FPA team. He knew I would understand product, understand markets, and I was super analytical that. So he was like, you know, we're starting from scratch. And so there was, ah, like a little trailer outside of our processing facility in Duba, California, which is middle of nowhere. Um, and we started there with like 12 to 14 people, uh, scaled that, that business up, uh, in terms of like, corporate function, FKA function. And then he moved on to California Dairies. And then, you know, about a year later, I shortly followed over into the current role. And I think from like Turning Points piece, you know, getting in and building from scratch with Scrappy allowed me to understand like the different Dimensions of FP and A what the strengths and the weaknesses, um, in terms of what strong analysts could bring, um, and building on the processes from scratch. So I really enjoyed that piece of it. Um, and coming over to California dairies in a similar fashion. Much larger business, fortified top line business. But their FPA function is still relatively mature. So they stood it up maybe like two years ago. A lot of folks coming over from the accounting side to start it up or from the BI side to start to establish it. So settling in here. I've been here for about nine months now and we're building from there.

Speaker A: All right. Uh, so I didn't realize from our pre call that you were in the Marine Corps. So thank you for your service. I definitely want to say that I'm wondering speculating here, but in your first FP and a role, because I think I'm old. So my first FP and A role, it wasn't back then we didn't call it fpa. You were just in finance or what. I was an analyst or whatever. And uh, but it to me it was, and it was a telecom, but it was early stages of telecom, not a very big finance department. So I didn't even really know. There weren't all the definitions there are now and all the books and everything. So as you moved into fpa, did you feel like you were inventing the role or with your mentor? Did you kind of have a clear understanding of this is what I'm doing, these are the important KPIs or were you kind of building it out as you went?

Speaker B: We were definitely building the plane while we flew it, I would say in a lot of ways I think uh, one of our, I think FPA manager M, my boss at the time, I think he started with a gaming computer as his primary computer there. So there was a resource lean environment. Um, and so coming in, I mean from a process perspective and as we build out and similar we're going through here, um, I think of like people, processes, partnerships and platforms as we started to build the FPA functionale, um, and then also built out a rubric there like how I define what are the strong building blocks of an FPA analyst. So we were really inventing it as we went in some ways. But you know, the first focus was how do we get the team away from running reports and being involved in decision making and being relevant in that process. Because you'll find a lot of times in, in the AG and food and bev sector, like uh, the finance team is really just report Generators, right. Collating data, putting it out there. And then you know, the product teams or the GMs, they will you leverage that information to make decisions and you're just kind of a report monkey in some ways and putting it together. So. And the team was spending uh, an enormous amount of time just extracting data from our ERP system, cleansing, um, it, putting into the format, putting it back to the sales team in these Excel reports. Our financial consolidations there, because it's 29 portfolio companies and they all had different charts of accounts, but the reporting of one was all right. That was my first project. I came in was like, oh, it was Q2 closed. It's like put together the consolidated financials and like there's all these lookup tables pulling it together. Um, it took me about two weeks to put it into all the waterfalls, all that. Um, and so we did a kind of digitizing that process over the next six to 12 months. We, we went with uh, adaptive, um, and moved that was able to tap into all the different European instances and we created a single chart of accounts. They did the consolidation. So the consolidations were immediate. Um, so that was a huge time save on it. But from a people perspective or you know, getting them out of just doing Excel and reporting to start thinking about the business was like the first priority. Like, so we implemented Power BI as well. So I had experience with Power BI on the product side when I was at Olam M. So coming over and implementing that, you know, pushing out these reports and getting the team more engaged, I would be input analysts into the business functions. Like, you know, have the analysts go sit down, the sales team go have the analyst go sit with the operations team to get smarter on the business and kind of being that strategic advisor to the function. So it was, it was scrappy to say the least.

Speaker A: There's, there's something though that feels almost more honest or organic about when you come into it like that. Because I, when I finished my mba, my first role after business school was a marketing role. And I ended up sort of taking over a budget just because I was trying to get more budget for my product. And then I got, I ended up having an opportunity to move over on the op side and I was in procurement and had to do a lot of planning and forecasting around that. And I didn't, I didn't know what FP this was in the, you know, early 2000s, late 90s, whenever that was. Um, but I didn't really know what I was defining. I just knew what actually were the things that the operations team cared about and what we were being measured on. So I sort of fell backwards and then we were doing a bunch of M and A activity so we sort of fell into it. And, and I think that that made it. Not having a playbook made you think about it differently. Like oh, these are the 10 things that we do because we're FPA. It's just you're sort of meeting a need and in every business, I'm sure you found too, at every business slightly different. But uh, I do, I kind of like that, that approach. And it's, I think now, I mean it's great to come in more prepared, but there's also something to be said for kind of hacking your way through, through the jungle to find the path. Yeah.

Speaker B: Yeah. It's a funny thing. I started my uh, my initial master's degree in accountancy and then I pivoted over. I was like, wow, you want to do FP&A? I. But I didn't know how to get there either. I googled like finance roles. Right. For corporate and FDA was only. That sounds really interesting. But it's like what's the path to get there? And there wasn't, you know, this is 12 years ago. Even then I think it wasn't like a clear like guy. This is how you get into the FPA space. So like just life happened serendipitously ended up in our, in our role in ag. I never thought I'd work in food and death. Know you go to Puma Bay, you're like I'm going to work in tech for sure.

Speaker A: Yeah.

Speaker B: Yeah.

Speaker A: But I guess proximity still you come inland a little bit and you get, you do get into the food and ag world in California. So it, it does make sense. Stay regionally. Correct. And then go into the industry uh, where uh, you're not paying 10, uh, grand a month for a one bedroom apartment or whatever.

Speaker B: Yes. We were paying like 3,600 for a one bedroom there and we said it's a fraction of that for a full bed and build out house here on it. But yeah, coming into the batting, like it's a big business for, for central California. I mean like, like half of food consumed in the US is, is grown here in the valley. It's just as you learn more about it, it's a super unique place. I mean it's, it's effectively its own uh, like greenhouse, um, because it's low precipitation, high heat. Right. And all you really is you irrigate all the crops with the mountain runoff. And so it serves as like, which is why it's like some of the products do really well here that would not survive if you would to the, you know, southeast because high pest pressures, high water, you know, so it's a very interesting, uh, uh, economic environment here in the valley, for sure.

Speaker A: Yeah. And you've uh, you've done FBA in a few corners now of food and agriculture like you went through. Were there. I mean, I know we, each business is different, but you're dealing with the same issues. I guess maybe dairy slightly different than growing crops. But were there lessons that carried across or were there things that surprised you when you moved from one business to another? And uh, how does that kind of influence. I mean, yes, you're in the same industry, but every crop or every product has its, its own, um, its own sort of rules and playbook. Is do you have an approach? So now you've been in your new role nine months. Uh, do you have an approach when moving into a new finance leadership role that you kind of carry over between them?

Speaker B: Yeah, I think generally like the, the similarities across a lot of especially commoditized products. It's, it's the timing and the yield and just how much supply impacts the profitability of the business. Um, and you know, we're looking a lot of commoditized products, a lot of perishable products as well. So you got to think like it's, it's kind of a blow and go in some. Essentially you got to get through the crop. It can't just sit in the cooler. It's not widgets that can sit on a shelf for 12, know, 24 months. That being said, the spice business, you do because you, you dehydrate it down and shelf stable, um, and you can keep it for a longer time horizon. But you know, milk doesn't do well outside in time. Um, so you got, you have to clear it quickly. Um, and similar with, you know, fresh produce. You know, I worked in the blueberries and grapes and nuts and, and citrus business and as soon as that season turns on, it's, it's just go. And you try to clear through the season as quickly as possible, making the best decision, the most timely decisions possible. You know, and the differences is that kind of that phasing that, that pacing or seasonality of the business, um, when I worked in getting the spices, you know, the, the demand and the flow of the business is relatively level loaded because people consume spices all year long. And um, you can get, you can pack it away you can produce it, you know, and, and then you can sell it in six to 12 months time. Um, and it'd still be good. But on the produce side it's like it comes in and you've got like eight to 12 weeks to get it on a shelf and consumed by the consumer before it spoils. And so it's like boom and bust in terms of the seasonality. But you know, at AC we had ah, we had a lot of diversified crops. And so the, as soon as one season was tapering off, the next one was for sure ramping back up on it. Um, and then there's just structural differences I would say across the different businesses. On the pricing side in particular, you know, the dairy industry is unique in that it's, it's federally regulated. So a lot of the price, all the pricing is set after the fact by the federal milk marketing order. Um, and so you're kind of just weighing into issues. You're selling and you're pricing products which you kind of don't know what your input cost is going to be for the, for your raw inputs. And then on, you know, like on the tomato business is different structurally. The California Tomato Grower association, which sets the price at the head of the season for your inputs. And then on the produce side it's kind of really based on just market dynamics of supply and demand and so and then there's macroeconomic factors too that, that add to that blueberries in particular. You know, South America's done a lot of development uh, in new varieties. And so at the tail end of the US season, Peru comes in heavy. That has pricing pressure for us um, in the late half of, of the season. So there's some uniquenesses to each. But the generally is like it's, it's still supply and demand. Some are commoditized. You know, ideally you try to move much of the product into you know, value add products or you know, uh, through processing it into something more valuable or branding it something uh, at a higher quality.

Speaker A: That's amazing. Just thinking about all the pricing dynamics and you, you think about just regular market pricing, but when you have regulations that are in there and yields and, and so many. Yeah, it's gotta be tough. And uh, it's like when you were talking about the Tomato Growers association, uh, setting the price at the beginning of the season, it almost feels like picking the right flu vaccine at the beginning of the season, trying to guess where it's going. Yeah, but it's uh, yeah, but nice to have that Locked in and that certainty early on I think, I mean it could go, you know, it could go both ways I guess as a,

Speaker B: as a kind of a midstream processor that all on tomatoes and unfortunately ended up, you know, closing up shop there just to the again. So structurally the market was overcapacity in terms of processed tomatoes. We were doing like tomato paste, diced tomatoes, et cetera. Um, and so there was just too much supply, too much capacity in the network. And so you know you're getting squeezed at the processor because you're not, you're not marketing it, you don't have the brand, you don't have the sales component of it. You're just processing, commanding it for other CPG companies that will sell it. And so they're going to set what price that they want to sell that market. So they'll you get squeezed in the middle and of having the eat the margin through the power dynamics or as

Speaker A: such you're already using AI for your FP and a ChatGPT Claude copilot and they're incredible. But here's the thing. AI is only as good as the data you feed it. Right now you're getting confident sounding guesses that you'd never dream of presenting to your board. Now imagine typing a prompt and getting a board ready dashboard backed by your real numbers or a P and L that you'd stake your reputation on. Finance OS consolidates your erp, CRM, hris and spreadsheets into a governed data layer. Every AI output now accurate, governed, repeatable and auditable. Find out why nearly 2000 FP and A teams run on Finance OS with hundreds joining every week. Learn more at datarails.com financeos what is your role cover now and what does your team do day to day? And I, I know this is sort of setting it up for the leading indicators and the daily weekly sort of KPIs, but I think we need to establish that foundation first.

Speaker B: Yeah. Um, so as I mentioned getting into a new role, um, thinking about those, those four, the four Ps and I'm not the marketing four Ps but the four like the, the people, the processes, the partnerships and platforms. So really been focused on as I've got into, into this role, you know, working with the existing leadership, like do we have the right people, do they have the right skill sets? How do we build those skill sets? Right. And I talk about the five kind of components of that, you know, system and excel skills, financial acumen, business acumen, um, forecasting and modeling and Then communication and presentation. Those are the fundamentals that created a rubric around and like define what those were and the scoring and we scale it by you know fa SFA up to, up to director. And so really been focused on uh, the people side and the process side over the last six months. So I guess another way to say really in build mode in terms of uh, where the current role is we do the normal variance analysis, forecasting or supporting business cases. So it'd be product development, um, the financial partners for that we're doing SKU and customer rationalizations, investment decisions, expansions or do we just cube products um and other ad hoc like risk and opportunities um, and build. So we are doubt in the budget process I feel you know over the last, you know end of the last half of the year reached out. So we've gone through a lot of restructuring in terms of there used to be you know a few disparate companies that were under the umbrella and they've all kind of, they all kind of under, under the CDI corporate entity. Um and so working and building processes and then partnerships with, with those teams at the ultimate key. And so now we're in the platform stage and you know just because comfortable with, with the adaptive piece. Uh, and the CFO as well had used it. We use aac so we're, we're rolling that out as we speak. So really it's like kind of maintaining you know the core FPA deliverables of budgeting and forecasting and monthly variance now supporting the close business cases at the same time like building what the to be state with the future state is going to be for ftna like trying to get the analyst out of just managing power BI uploads and reports to digesting and thinking about what does it mean for the business and how do we use leverage this information to better advise our functional stakeholders.

Speaker A: And we've talked about it a little bit in your previous answers but I know we talked about it a lot before the show as well with all these variables and uh, uh not to discount what we do in other businesses but with so many variables that are out of your control and that are harder to predict. I mean what are the realities of running dairy and food manufacturing operation that make you know, the planning and the forecasting a different game than other industries. Uh, trying to factor all these in together.

Speaker B: Yeah, I think it's um, you have to be dynamic in terms of your planning and forecasting because it is so it's supply side driven. Right. We don't control the Amount of milk we receive through our facilities, it comes from our dairy members. And the similar like with the crops in a blueberry crop or whatever it's like what is, you know the yield could be what the yield is. Um, and then you have to figure out where to, where to put that in the most value add, you know, uh, end product or sales channel, uh, to maximize return. So it's, it's having strong models and having dynamic models that you can pivot during any given season um, to help the business make the right decisions. Um is I think much different than a steady state widgets manufacturer that's putting things through, not discounting the variability that could happen in those businesses. But it's fast paced. Um, in terms of, you're also trying to figure out at the same time what are the other market participants doing. Um, because they're in the same situation, right? It's other citrus, other ag companies, other dairy companies are going through the same, you know, milk flow. Uh, you know there's a push spring flush when cows are happy, you know, more milk tends to come. So that seems to be, you know it's across and then globally actually too. So there's the macro piece globally like supply is way up on top of that. So our export, you know, capabilities, our export opportunities, there's pressure there as well. Um and then it was a similar on the citrus side. So I think planning and forecasting is just, you need real time data. So when we took broad in power bi bring in both market, blending it with internal data, sales and uh, operational data, uh to make day to day decisions. So like on the tomato business we would meet every morning at like 6:30, 7:00 clock in the morning to look at what the market was doing, look at what's coming in for the day and help you know, make the right decisions. You're also, you're also trying to decide what, what products and you're going to put it in ahead of the demand. So you don't really know because once you, once you process a raw rag input and put it into its final good you can't rework it usually into something new. But you're trying to, trying to game, game uh, what the market, where the market's going to be, where the market opportunities and what form and function it's going to be as well. So like on the blueberry side in particular you're saying okay, what sales channel, what product is it going to go to? Iqf, which is a frozen blueberry, is it going to go to fresh packed Blueberries. Is it going to do it? A juicer? Right. What's going to give you the best return? Where does the market look like in each of those channels and then that may inform you uh, how you go out and harvest it. You harvest it by hand, you harvest by my machine. Like how many pass you're going through. Is it the right variety for the right time of the season? Did it come off late and now it's too soft and so it's being able to like from a forecasting perspective and just uh, even in budgeting you have to have a dynamic model that, that you can leverage on the day to day decisions and know that's going to be wrong as soon as you, you make that forecast.

Speaker A: So yeah, it feels like the idea of an annual plan is about as useful as the Farmer's Almanac. I don't know if they even still put the Farmer's Almanac out anymore but, but it's okay. This is all things being equal, just taking his historical overtime. You know this is roughly the ballpark we're going to be in. But um, what you just mentioned, looking at reports daily and making decisions. So let's drill down on that a little bit more like what are those decisions? And I imagine it's most of them but a little more on what the decisions that can't wait for monthly close. You know because historically finances have been. I know it's changing but it's, it's still very difficult. The uh, but being the backward looking organization that's just reporting on what we did in the past where we're trying to give data driven decision support in real time and with so many variables that could change that quickly. I bet there's a lot there. So what are you looking for daily, uh, weekly, monthly or whatever that's going to impact and it's an actual lever that makes a difference in the business.

Speaker B: Yeah, I think from a day to day can't wait for month end close. That's just the reality in terms of, in managing the ag business, you know, by the time especially if we're saying that we're basing our pricing off our input costs are going to be off the federal milk border which just gets published like weeks after your month is over and then, but you know you're three weeks after the end of the month, so seven weeks from the beginning of the prior month, it's not as useful to inform. So and, and on the produce side in particular mean those dashboards were super relevant to help guide decision making. You know Looking at what the pricing, looking what the market's doing. So constantly checking you know what's, what are the settled markets, um, on the CME for some of the commodities. But we just need good reporting analytics. I think we were pretty dialed in on at AC in terms of fpa, in terms we knew where the P and L was going to be trending at before the month even would close. So we can, we knew what was, where we were going to land for the most part. And honestly a lot of time was spent validating the accounting, leveraging the financial models. Um, I mean it's still very bad looking but you know the day to day analysis, um, and using leveraging those dashboards to inform on you know some of the key metrics would be like utilization. So essentially how much of the product is going to what uh, output. There's not actually a lot of waste in the food. Strength in the food system. Like everything kind of has a home at some point. So even if you're getting 70% of your, your product into you know, a fresh like citrus for example is a great example. So you see uh, citrus in bulk on the, in in your produce section of your store. That's the best quality that came through through the processing and sales and marketing strings right past all the, the quality issues. It's got no defects, no, no cosmetic defects whatever. Then you have a bagged. Most of your bagged produces. It is a value play in some way, a convenience play, but it's also can hide some of your sins in terms of the quality. Even if it doesn't eat those two like grades essentially you can still send it juiced. It's not a quality issue, but it's not going to. So it goes to a juice stream and then you know, at the very least it's going to go to animal feed. There's always a home for everything. So monitoring the quality and the grade of the products coming in, if you can do it out of the farm level, even better because then you can kind of start planning ahead of what you're going to then take to market and say okay, it looks like the fruit's coming in small. We're going to have heavy bags go out to the food service channels and start hustling the, and moving the product ahead of time, making the sales as it comes to the process facility's got a home and they can't you know, sit around in the cooler for, for a month similarly I think on the dairy side. But it's, you know, it's the milk Flows year round. Uh, and so it's a little less like dynamic in that way, but it's more about where's the market landing? Um, where do we, you know, think the market's going? Um, what end product again? Is it fluid, Is it butter, is it powder? Like, what's, what's the right end product to maximize, maximize returns for our, for your farmers?

Speaker A: As you were going through the list, um, of the quality breakdown and where it goes when you said animal feed, I was already in my mind trying to come up with a fast food joke. And then I figured probably better to not liable or slander a fast food company on the podcast. But it was, I was like, insert fast food, uh, name here. But anyway, we'll, we'll skip that part. Um, a lot of the data points you've been talking about are exogenous macroeconomic factors. I wonder. And, and maybe, you know, it sounds like also because of when what happens downstream, the product has already been grown or delivered, as the case may be. But are there internal data points that you look at? Is this something that you see in the future? Even more internal data points that are giving you real time kind of production levels or beyond what you're already getting? And then how do Those impact the KPIs that you look at? Because yes, you've got a plan for where this is going, but you've also got the production side of it as well.

Speaker B: Yep. Yeah. So that was coming into AC in terms of the, on the plant side. So at. Oh, I mean, I was on product side. So I was very focused on the commercial piece of it. I went down to gross margin. My standards are given to me. I got variances from the finance team when I was building out my models for, for those businesses, uh, coming over full on FP and A and having that kind of, that scope open up, where I had an operational component to it, both on the farm operations as well as the midstream processing operations and sales and marketing organizations. Getting into, you know, labor management in terms of productivity within the processing facilities. You know, it's comes very easy to be reflexive in, in terms of labor management. You want to give as many people as many hours as possible, but you know, kind of driving that mentality of productivity and flexing labor as needed, not just bringing on as many headcounts as you think you might need. And again, so when there is, uh, fluctuation in throughput or even from the farms, you have to then flex the amount of labor you need in the facility. And that could be in a weekend run as well. Um, so it was really working well with the operational partners to labor reports, building out staffing models for the lines based on what we expect to come in and that would vary by variety and um, especially nag. A lot of, we talked about the commodity input pricing. A lot of your other cost is less labor related. There's not a lot of material costs on there. It's just if it's a oranges, it's getting put in a corrugated box. So it's relatively less volatile than and less control. Well, your procurement can go out and use some savings. Um, and we, you know, we know, spend cubes and work with the procurement team to try to identify especially on the farms where you're buying lots of fertilizers and chemicals and stuff that goes into your, your farming inputs. But on the like the midstream operations side, it's really labor management. Um, that's the biggest lever you can control. And I think in like the first few years we saved several million dollars and just flexing that labor, being very diligent and reviewing and having you know, weekly touch points with the operations team, you know, trying to understand the variances like what happened on this day, why did we, you know, have an overrun of labor cost on a per unit basis. Um, what are lessons learned that we can leverage to drive productivity in the house there we look at plant downtime, we look at oe, um, overall equipment effectiveness, making sure that we're, we're sweating the assets as much as possible. And you know, outside of plan time,

Speaker A: uh, downtime, as you're looking at all that, are there any, I guess this is maybe going back to the external factors, but are there warning signs that you get early that tell you the month is starting to drift either positively or negatively, but that something that you see in real time, well before it shows up in the financials that you know it's going to, there's going to be an impact downstream from this.

Speaker B: Yeah, I mean really related to the market piece. Um, you can look at volumes of trade to tell you how much product is out there. Um, we try to pull as much USDA data, uh, whether it's relevant or not in terms of like it's either usually over reported or underreported, but at least gives you some direction as a baseline to say okay, maybe supplies come in hotter, prices coming in hotter than we expected. Um, imports, you can look at import export data, um, to see, you know, how much is coming in through the ports. Um, that is a Little bit backwards lurking. Um, so forward looking base. It's really market related. Yeah, I think, you know, weather is a huge component of uh, you know, take into consideration, you know, a lot of these crops like citrus in particular requires you know, really cold weather. I mean we've had some yo yo weather here in the last 12 weeks. So I feel, I feel for my citrus friends out there because it, it dips down cold, then it gets rain uh, on, on the fruit and then it gets warm and that just creates a lot of activity and potential for pathogens and then it gets cold. So that up and down really impacts the quality of the fruit and again getting a lot of spoils.

Speaker A: But so outside looking in it's easy to say yeah, that's, that's crazy, that's terrible. You can't really do this. But I know investors in the business, management in the business, you can't just shrug it off and blame the market or blame weather or whatever. So how, with so many variables, how do you perform or how do you explain performance in a way that drives action and set these, you know, you just have to pivot and roll with it. You have to understand what's going on and then adjust. But how do you, how do you communicate that in, in something that's m more meaningful than. Yeah, we all get it. Everybody had the same problem. Oranges got toasted because of the weather changes.

Speaker B: It's, it's really focusing on the controls for the business in terms of again so you could easily. And um, the blueberry example I gave earlier, just send it all to IQF because that's the easiest. That was your plan and you just keep with the plan. It's again going back to that dynamicism in terms of like you have to have the levers, you have to have the scenarios. Um, and you have to show like you're taking the, the right steps in terms of, to maximize the profits. Um, and, and the return based on the hand you've been dealt. So it's again it's. If you're having quality issues, it's like okay, we're showing that we're pivoting, we're making decision, we're pivoting to the right customer set. We're prioritizing who we need to get product to. It's going to return the most to our, you know, our growers on, on the produce side from a working capital but like from a finance, pure finance like solvency. We're making the right decision decisions in terms of, you know what we're Going to go out and get, we work with your, your farm, uh, your operations team that are the farmers for your internal farms. You know, they want to go and get all the produce and product they grew. Right. Because the first one and they didn't, they planted the tree, they grew the fruit. It's, it's, you know, it's, it's near and dear. So they want to go out and get everything off the bush, everything off the vine, everything. But you know, the economics might not pencil out that you need you do another pass to go through. It's like the market's where it's at. If you go out and pick that right now, you're gonna have negative net revenue and really driving that home with them. Um, and so yeah, I think on the finance side of working capital, those, those intercompany and then managing through the cash flows and the decisions that you're making to preserve, you know, talking about the investor side, you know, the solvency of the business, the cash flow of the business and citizens key.

Speaker A: Yeah and it's, it sounds like, I mean treasury has to be a, an important part of the business. And just thinking about that solvency, how you manage pricing risk, uh, with, with your future sales commitments and market exposure. I mean how do you uh, how do you think about managing price risk with all these variables going on and keeping that solvency and all that?

Speaker B: Yeah, um, definitely want to have a reserve of some sort in terms of uh, you know, you want to have a little bit. Not unless they're award chest but you want to make sure that there's enough conservatism built into your, your working capital models that, that you can weather the risk and then there are opportunities. You know, especially a lot of it was intercompany related. You know, if you're vertically integrated businesses you're able to like spread that risk between the different organizations. So it keeps the flow. So know it gives you a bigger ballast that kind of, that keeps the company going in times when maybe the farm's underperforming because of yield issues or quality issues or not getting the volume through the midstream and you got a heavy fixed overhead cost or fixed cost, um, or the pricing is just not there too critical. So I think you know, having strong working capital models to be that are also again able to run through scenarios that you can pull and push on lines of credit and pull and push on intercompany terms and to keep each asset functioning and properly funded through the season. And Ag in particular is a heavy working Capital, uh, intensive industry. So a lot of your input costs, all your money is going into the crop over a nine month horizon and you're hopefully getting your returns back, the cash flow back in about two to three months after it's harvested. Once it's gone through the whole supply chain, it's been processed, it's been sold, it's gone. The retailers retail sold it and then sent back the, you know, the returns back to, to the farms. And so that time horizon meal to fund that working capital is strategic uh, in your approach to it and a lot of times you, you can, you can rely on you know, debt instruments but you know I think the boom and bust cycle in the agriculture sector, you know, you know in a five year period you got one really great year, one really terrible year and like three years where you break even time, um, you can' Whether you know it's, it's difficult to continuously service debt so like as best you can, you want to avoid leveraging up your, your farming assets, your other like value add areas. You, you, you could have probably a little more, a little more debt on those but the farm side, if you have a mortgage on top of that, it's on the down years. It's, it's rough to service and yeah

Speaker A: and I would bet California obviously there's quite a few lenders who understand the um, industry and lines of credit are there. But again you don't want to look leverage up too much and it's just there's going to be a lot of calculus in figuring out okay, like you said, it's not a war chest but we have to have sufficient working capital and, and manage all this for either way it goes. And so when cost pressure goes up and whether your line of credit or dipping into your own cash reserves in a co op in particular, then maybe this goes both ways. But can you go into the um, operators and say, I assume, I don't know different in co op I guess but I was assuming sort of contractual arrangements were X quantity for X amount or whatever it is. But you have to go back to the operators in the co op and say uh, we need to think about the future here. How does that play out?

Speaker B: Thankfully my scope is very market and commercial focused. Um, I haven't yet, I, you know, been involved more in the cash flow modeling here but in previous roles in terms of like. Yeah, in the private equity space. Typically your fund has a reserve that you can tap as well. But you're talking like from the operations side of the business when performance Struggles, Uh, but you, you don't want to impact future performance, you know, especially on your farms. It's, it's working closely with your farming partners, um, to try to figure out where are the levers on the farm in turn that you can pull to reduce work capital requirements without really impacting, you know, future crop performance. Um, and so like target setting, um, with them and saying like, can we just cap it at a certain dollar spend per acre? Like what are the opportunities? Can you, can we cuddle back on the pruning side? You know, labor is a big component of cost. You know, may not have a year one impact, but if you do that for a few years that are bad years, then your yields start dropping off because you got too much other dead wood or you much foliage and you need some light in there. Um, and there are other, you know, you know, you don't want to cut too much on pest control because you can lose a lion's share of your crop if you have a pest event, it should or should occur. So, um, one that you really can't cut on is water. Um, which, you know, that's actually, I mean, learning more about the water industry in Central California is, was very interesting. The dynamics, the dash between the different irrigation districts, who, your water allocations. You know, we've had some new acts, uh, that have gone into effect. The Sustainable Groundwater Management Act, Nickel Sigma came in that, that caps how much of groundwater you can pump out, which was what a lot of these businesses were relying on during the drought, um, because there wasn't all the surface water coming from rain or snowpack. And so learning about the politics and the dynamics. I think there's even a book on there like something like on the water ward or something. In Surfer California, there's a few families that own a huge chunks of the water supply and the rivers. You think it would be public domain and publicly own it, but it's a lot of it's privately owned. Yeah. Canning water and then the cost of water. You know, you can create um, reservoirs and captures and what's rainwater and you can put that back into the groundwater, get credits for that, or you can exchange credits across irrigation districts. And um, so there are people that wholly specialize in water management for, for ag companies.

Speaker A: Yeah, I was going to say everything and maybe it's dated now, but everything I know about water in California I learned from Chinatown is, I don't know, certainly dating myself with that movie. Great movie though. But it's always interesting to me when these other markets pop up like the water trade in California or carbon credits or all that where you have these regulated areas. And I'm sure there's an economic study on supply and demand and how these markets come up and the, the trade comes. But yeah, that, that's kind of a fascinating place to be.

Speaker B: It's an interesting. Yeah, it's, it's an interesting industry. You know, it's interesting from private equity perspective or any kind of investment like. So I've, I did at one point I created my own LLC and was doing some advisory work. Um, which I wound down last year because we put enough time to it there really. I was like, yeah, do I. Am I really going to carve out and just like go full on and be an entrepreneur, you know, have a young family. So, you know, trying to focus more on that and just bandwidth as well on it. Um, if you want to take the island, you got to burn the boats, right? Burn the ships. So, so I was like, I would have to like definitely quit and just go all in. I think there's definite opportunity for it. But worked on a few things for like advisory um, like hunting terms of investments and development in, in the ag space. It's hard to make it like pencil cash flow from like a, you know, an exit value. To your point, like looking forward looking. It's like what are the consumer trends that, that because you're, you're investing at least 7 to 10 years of cash and hoping that in 7 to 10 years it's relevant. Right. Uh, you see in the almond industry a lot it's like the cy. It's, it's cyclical too, you know, so you're, they're going and they're doing developments because almond market's hot, the pricing's hot. So everybody goes and puts in almond trees and same with you know, certain or citrus trees. It takes at least four years before it's producing anything. And that's just four years of like if you own the land, great. If you're, if you're. Yeah. If you're m mortgage in the land and you repay all the debt service your input cost, the development costs, then you start getting pro, you know, you know, crop off the tree. And then by like maybe year seven, you're cash flowing in single year. It's usually like 12 to 15 years before you cumulatively cash flow in it. And then if you want to, if you want to transact that land, it's. You have. You got to hope that the buyer values the crop that you have on that land or that they're going to have to go and redevelopment, they're going to discount the land price on top of it. So it's really hard to. Unless you're going to be like a generational owner of just pure ag. Like I, you know, it's. But from a vertically integrated business, if you own the, the facility that processes that and you own the brand and the sales and marketing, then there's an unlock there that you could sell the whole shebang essentially for, for a premium. Yeah.

Speaker A: And I was going to say from a typical, you know, PE hold horizon of, uh, four to six or five to seven years, whatever the typical hold period is. Now, like you said, generational, it's. It's hard to think about locking up money. I mean, unless it had massively oversized returns, but then you're betting on something so far in the future, who knows what the market's going to be then. Yeah, that's a, uh, that's a tricky space to be.

Speaker B: Yeah. I mean, typically, you see it's asset rich, cash poor. That's the.

Speaker A: So, well, we are winding towards the end and I do, um, you know, I've really enjoyed talking to you about all the insights and the ways that you look at the market. But I know when we were talking before the show, you were talking a little bit about hiring and where you were going to get resources, and we talked a little bit about training and mentorship and I did before we kind, uh, of close out the show and get to our standard questions, thinking about your sort of how you've built your career and how you've built teams. For some of our listeners, maybe FP&A pros who want to grow into more strategic roles, how are you developing your teams? How do you look at FPA development? And what do you think people should be focused on if they want to move into that more strategic role? Like what should, what capabilities should they focus on building over the next, uh, 12 to 24 months?

Speaker B: I'd say the core characteristic to a really strong F in a strategic FP and A asset is to be just curious, consistently curious, wanting to peel back the un. Understand the mechanics of the business, the drivers, the drags, because that's going to help inform you, like, what really moves the needle in the business. But also get out from the office, go out to where your stakeholders are at. Right. Go visit them, go spend time with them. Um, it builds the partnership, builds the relationship and understand, you know, I think the beauty of FP&A. It sits at like, that nexus of like the whole organization. Right. So you have the opportunity to go play on the operation side and learn about the operation side of the business and hopefully become m fluent in that part of this. And same on the commercial side and same, you know, on just your corporate, your finance side, your treasury side, all that stuff and even the IT side. Right. I mean just if you understand power, bi understand like in business intelligence tools and dashboarding, all that stuff, you know, learning a lot about the technical side. So there's, there's ample room to grow and learn in, in the business. So be you know, just consistently curious about learning about the business, building those relationships with them and then allows you also to translate between, I know how often I'm translating between it and the commercial side, trying to explain the technical, trying to explain it in, in the business drivers and why it's important why we have this in this world added to, you know, to our ERP system. But I would say that's like getting out, learning about the business, becoming fluent in the business, in the mechanics of the business, um, building those partnerships too because they'll be the advocates for you. You know, I'll be like, wow, this, this FPA team is super supportive. It's, you know, bring all these insights and you know, we talk the same language. Um, yeah. So I think that's, that's, I think for the next one to two years we're trying to do, don't be as focused on backwards looking analytics. Don't be just generating reports and sitting on your desk like I did the variance analysis. It's out there. It's, it's building, building those bridges and being curious about the business.

Speaker A: Yeah. And I love that you brought up that point and I think if you've been in finance for a while, you almost take it for granted the way you do and can get. And if you have good business partnering especially, I mean uh, some people are very protective of their data and their operations and all that. But in finance you have legitimate reason to branch out into all the different divisions of the business. Whereas you know, maybe the uh, sales or ops may say, uh, why is the sales guy poking around what we're doing? This is not really his or her business. You know, but in finance it's everything kind of is your business. So it is a really great opportunity to be exposed to just the broad range of what's happening.

Speaker B: And that really makes you a uh, really effective support element to the executive team. Right. You can aggregate all that information, all those insights. Right. Filter what is appropriate and necessary to you know, give them a good update, understand what's going on in the business. Also problem solving. Right. Just I constantly feel like I'm a therapist. A lot of times I'm coming and so I think to. I used to bounce around all my jobs. We uh, go, go around and just you know, hear the problems here and then I try to like bring people able to facilitate the conversations kind of arbitrage like arbitrator like what's. Let's solve problems together. It's, that's the be about fpm. You're effectively. You should be uh, an objective party within it. You're not producing anything, you're not selling anything. Your job is insights. Your job is to, to be an advisor to the business and just you know, want to do what's best for you know it's always a multi stakehold environment. But whoever your end, investors, your, your farm members, your, your local resources. Yeah.

Speaker A: Ah, so, so uh, perfectly said. Yeah, really really appreciate that insight. Um, okay, so we're at the point of the show where we have two standard questions we ask everyone and the first is uh, what is something that most people don't know about you? Something that maybe isn't on your LinkedIn profile or other social media.

Speaker B: I don't think it's on my LinkedIn but I was an honor thespian so I was acting and singing and dancing and most people don't put that.

Speaker A: I was saying the marine coin. Yeah.

Speaker B: Like I was a judo guy, jiu jitsu guy, Muay Thai and then they're like oh, I also did tab and I did musical theater and I did uh, my first musical was how to succeed in business without really Trying. And uh.

Speaker A: Yeah, well kind of that probably set the, set the groundwork for everything you did after. Yeah. So that's uh, Were you tempted at one point, uh, and maybe 911 changed all that to move to head down south in California and try your hand down there.

Speaker B: I so actually I started my, my when I first started college my degree was in theater with a minor in music. Um, and then yeah, now I'm going to change that trajectory. I was like well why, why are being attacked and what's going on that and whatever the dynamics going on with that and then took me on a different course. It's a, it's a hard road. Yeah, I wasn't that committed.

Speaker A: And now you're in the always exciting ag business. Hollywood's got nothing on that.

Speaker B: Exactly.

Speaker A: Now, now time for uh, everybody's favorite question. What is your favorite Excel function And why.

Speaker B: That's a tough one. That's a. That's probably the hardest question you asked. Um, I'd say back in the day, like, Index Match was like, one of my favorites. Just, you know, but now you have xlookup, so that's. Honestly, I'd probably just go with.

Speaker A: With if.

Speaker B: The opportunities are endless. They're really just question. Like, whenever the scenarios, the nested ifs,

Speaker A: where you've got like 86 different nested ifs in one.

Speaker B: My tomato model and I had, I think it was like 364 megs. My Excel workbook, obviously, calculations off all the way. And then you, uh, hit calculations. I would walk away for like, 30 minutes. See, it would just be a white screen and then eventually come back. See the output.

Speaker A: Yeah. That's the kind of stuff that leads you into learning Python. You're like, I don't know what has happened. This. This spreadsheet has gotten. Or to Power Bi. There's other ways around. But.

Speaker B: Yeah, well, they had Power Pivot came in. So learning Dax Prob Tibbett was a natural gateway into Power Bi on it. And so. Yeah. But. Yeah, I'll. I'll go with if.

Speaker A: Good answer. Well, Brad, thank you so much for coming on the show.

Speaker B: No, I appreciate you.