[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]
HOW COVID-19 IS IMPACTING SMALL BUSINESSES
ACROSS THE FOOD SYSTEM
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HEARING
BEFORE THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
SECOND SESSION
__________
HEARING HELD
SEPTEMBER 30, 2020
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[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 116-096
Available via the GPO Website: www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
41-470 PDF WASHINGTON : 2021
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HOUSE COMMITTEE ON SMALL BUSINESS
NYDIA VELAZQUEZ, New York, Chairwoman
ABBY FINKENAUER, Iowa
JARED GOLDEN, Maine
ANDY KIM, New Jersey
JASON CROW, Colorado
SHARICE DAVIDS, Kansas
KWEISI MFUME, Maryland
JUDY CHU, California
DWIGHT EVANS, Pennsylvania
BRAD SCHNEIDER, Illinois
ADRIANO ESPAILLAT, New York
ANTONIO DELGADO, New York
CHRISSY HOULAHAN, Pennsylvania
ANGIE CRAIG, Minnesota
STEVE CHABOT, Ohio, Ranking Member
AUMUA AMATA COLEMAN RADEWAGEN, American Samoa, Vice Ranking Member
TROY BALDERSON, Ohio
KEVIN HERN, Oklahoma
JIM HAGEDORN, Minnesota
PETE STAUBER, Minnesota
TIM BURCHETT, Tennessee
ROSS SPANO, Florida
JOHN JOYCE, Pennsylvania
DAN BISHOP, North Carolina
Melissa Jung, Majority Staff Director
Justin Pelletier, Majority Deputy Staff Director and Chief Counsel
Kevin Fitzpatrick, Staff Director
C O N T E N T S
OPENING STATEMENTS
Page
Hon. Nydia Velazquez............................................. 1
Hon. Steve Chabot................................................ 3
WITNESSES
Mr. Jimmy Wright, President, Wright's Market, Opelika, AL,
testifying on behalf of the National Grocers Association....... 4
Ms. Kimberly Gorton, President and CEO, Slade Gorton & Co., Inc.,
Boston, MA, testifying on behalf of the National Fisheries
Institute...................................................... 6
Mr. Rob Larew, President, National Farmers Union, Washington, DC. 8
Mr. Collin Castore, Owner, Seventh Son Brewing, President, Ohio
Craft Brewers Association (OCBA), Columbus, OH................. 9
APPENDIX
Prepared statements:
Ms. Kimberly Gorton, President and CEO, Slade Gorton & Co.,
Inc., Boston, MA, testifying on behalf of the National
Fisheries Institute........................................ 30
Mr. Jimmy Wright, President, Wright's Market, Opelika, AL,
testifying on behalf of the National Grocers Association... 36
Mr. Rob Larew, President, National Farmers Union, Washington,
DC......................................................... 45
Mr. Collin Castore, Owner, Seventh Son Brewing, President,
Ohio Craft Brewers Association (OCBA), Columbus, OH........ 58
Questions and Answers for the Record:
Question from Hon. Nydia Velazquez to Ms. Kimberly Gorton and
Responses from Ms. Kimberly Gorton......................... 64
Additional Material for the Record:
Food Report.................................................. 66
COVID Fact Sheet............................................. 84
Statement of Jerry Scott..................................... 91
Tysons Foods - A Home Grown U.S. Company..................... 93
Tysons Foods Fact Sheet...................................... 94
Testing Procedures Fact Sheet................................ 95
Tyson Team Members Health and Safety - May 2020.............. 96
Craft Beverage Coalition Submission.......................... 98
HOW COVID-19 IS IMPACTING SMALL BUSINESSES ACROSS THE FOOD SYSTEM
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WEDNESDAY, SEPTEMBER 30, 2020
House of Representatives,
Committee on Small Business,
Washington, DC.
The Committee met, pursuant to call, at 10:03 a.m., via
Webex, and in 2360 Rayburn House Office Building. Hon. Nydia
Velazquez [chairwoman of the Committee] presiding.
Present: Representatives Velazquez, Finkenauer, Golden,
Kim, Davids, Evans, Schneider, Delgado, Houlahan, Craig,
Chabot, Balderson, Hern, Burchett, and Bishop.
Chairwoman VELAZQUEZ. Good morning. I call this hearing to
order.
Without objection, the Chair is authorized to declare a
recess at any time.
I want to thank everyone, especially our witnesses for
joining us today for our Committee's hybrid hearing. I want to
make sure to note some important requirements.
Let me begin by saying that standing House and Committee
rules and practice will continue to apply during hybrid
proceedings. All members are reminded that they are expected to
adhere to these standing rules including decorum.
During the covered period as designated by the speaker, the
Committee will operate in accordance with House Resolution 965
and the subsequent guidance from the Rules Committee in a
manner that respects the rights of all members to participate.
House regulations require members to be visible through a video
connection throughout the proceeding, so please keep your
cameras on. Also, if you have to participate in another
proceeding, please exit this one and log back in later.
In the event a member encounters technical issues that
prevent them from being recognized for questioning, I will move
to the next available member of the same party and we will
recognize that member at the next appropriate time slot
provided they have returned to the proceeding.
In the event a witness loses connectivity during testimony
or questioning, I will preserve their time as staff address the
technical issue. I may need to recess the proceedings to
provide time for the witness to reconnect.
Finally, remember to remain muted until you are recognized
to minimize background noise.
Over the last few months, the outbreak of COVID-19 has led
to an unprecedented public health crisis and created a dire
economic crisis for small firms. Three out of four businesses
are experiencing a decrease in revenue since March, and over
half of small businesses are concerned about being forced to
close. Small businesses across the food supply chain system
have been impacted.
As social distancing and stay-at-home orders became
commonplace, the closing of commercial kitchens put restaurants
and workers at the frontlines of the pandemic and the ripple
effects hurt small firms across food production, processing,
distribution, and retail chains.
Companies that process and deliver food to commercial
businesses faced abrupt order cancelations across their entire
customer base. Farmers who planted crops and tended livestock
for months based on pre-pandemic demands and markets were
unable to find processors to sell their products. Fishing boats
stayed in port, processors were backlogged, and stopped
bringing in materials. Grocery stores struggled to maintain
inventory as consumers rushed to buy food for at-home
consumption.
Many of the issues facing our food system and society
existed pre-pandemic. Now, because of the inability to control
the spread of the virus they are made worse. Our nation's food
banks were already under pressure--where millions of unemployed
Americans turn to feed their families. Sweeping consolidation
has left us with far fewer small farms, processors,
distributors, and retailers. Large multi-national corporations
have received millions in federal support while small
businesses continue to struggle to survive.
Essential farm and food system workers on the frontlines,
many of whom are immigrants and people of color, still lack
basic worker protections despite experiencing high rates of
coronavirus cases.
Congress, especially members of this Committee have worked
to secure funds to help America's small businesses survive this
crisis. The Economic Injury Disaster Loan Program and Paycheck
Protection Program (PPP) has helped millions of small
businesses and farmers to stay afloat. Along the way we have
tried to improve those programs ensuring that minority business
owners and rural business owners, who often do not have
relationships with national banks, are being served by the PPP
program and amending the EIDL program so that small American
farm businesses could access the program.
More needs to be done and that is why we are here today.
Yes, the PPP program greatly assisted five million businesses
but there are approximately 30 million small businesses in the
U.S. and they continue to face an uncertain future. In fact,
the SBA reports that in May 2020, employment in leisure,
hospitality, and foodservice was down 41 percent compared to
May 2019. We are still hearing reports of more and more farmers
facing bankruptcy.
This pandemic is further highlighting an economy that was
not working for everyone. Prior to the pandemic, 40 percent of
Americans did not have $400 in the bank for an emergency, and
more than 20 percent of households experienced food insecurity.
In the past 6 months, as millions of Americans are
unemployed, Amazon, Facebook, Target, and Walmart stock prices
are near all-time highs. This is a tale of two economies. One
that is working for Wall Street while main street businesses
are left behind. Many small businesses across the food system
are still in the difficult position of figuring out how to pay
rent and survive while many have shut down forever. As we work
to help assist the American people and America's small
businesses, I look forward to hearing from our panelists today
about how Congress can address the ongoing challenges facing
our food system and how we can further assist in their
recovery.
Again, I want to thank the panelists for joining us here
today, and I now yield to the Ranking Member, Mr. Chabot, for
his opening statement.
Mr. CHABOT. Thank you, Madam Chair.
Since March, our Nation's way of life has been disrupted
due to COVID-19. America's food system has been hit
particularly hard. Our favorite restaurants were closed. Meat
options were low at grocery stores and many essentials were
sold out.
Today's hearing will provide much needed context to these
experiences because if we better understand the why, we can
better prepare for the future.
Our Nation's food system is typically geared to meet
commercial demand--restaurants, buffets, and cafeterias, for
example--more than retail demand, grocery stores. When our food
demand flipped from eating out to cooking at home, businesses
along the supply chain had to pivot to survive. Unfortunately,
the system did not adjust quickly enough to repackage and
distribute fresh produce, milk, and meat originally prepared
for commercial use.
We have all made dramatic changes to our everyday lives.
Producers along the food supply chain have quickly adopted new
direct-to-customer business models. New strategies and services
such as online retail or local delivery require significant
investments of time and money.
Recently, I had the opportunity to spend some time in
Waynesville back home in my district to meet with small
business owners impacted by the COVID-19 pandemic. One business
owner, Lacie Sims, the owner of Village Family Restaurant,
spoke with me about how she utilized the Paycheck Protection
Program to keep her 25 workers employed so she could continue
to serve the community, and most importantly, those folks who
worked for her could continue to support their families. She
has quickly adapted her business to accommodate pickup,
delivery, and indoor dining.
At this Committee, we understand the power of our Nation's
innovative spirit. Now, the rest of the country can see it
firsthand. Investments being made by small businesses across
the supply chain are creating a more resilient food system for
all of us.
I want to thank each of our witnesses who will be sharing
their experiences and for being part of our national recovery.
Madam Chair, thanks for holding this hearing, and I yield
back.
Chairwoman VELAZQUEZ. Thank you, Mr. Chabot.
I would like to take a moment to explain how this hearing
will proceed.
Each witness will have 5 minutes to provide a statement,
and each Committee member will have 5 minutes for questions.
Please ensure that your microphone is on when you begin
speaking and that you return to mute when finished.
With that, I would like to thank our witnesses for taking
time out of their busy schedules to join us.
Our first witness is Ms. Kimberly Gorton, the president and
CEO of Slade Gorton and Co. She is the third generation of
Slade Gorton, a manufacturer and primary distributor of fresh
and frozen seafood products.
Our second witness is Mr. Jimmy Wright, the president of
Wright's Market, a family-owned independent grocery store that
has been innovative in online and mobile shopping.
Our third witness is Mr. Rob Larew, the president of
National Farmers Union, which represents family farmers and
ranchers across the country.
Finally, I would like to turn it over to the Ranking
Member, Mr. Chabot, to introduce our last witness.
Mr. CHABOT. Thank you, Madam Chair.
Mr. Collin Castore is cofounder of Seventh Son Brewing
which opened in April of 2013 and its sister brewery, Antiques
on High which opened in November of 2018. He developed a
passion for American craft beer, especially Ohio craft beer
while working in restaurants and bars across Columbus. For the
past 6 years, Mr. Castore has served as the president of the
Ohio Craft Brewers Association which represents more than 300
craft breweries across the state. I had the pleasure of meeting
Mr. Castore during the Brewers Association Virtual Hill Climb
in July. I want to thank him for taking time away from his
business to be with us here in D.C. today. It is nice to see
him and we definitely appreciate it, especially being here in
person. So thank you.
I yield back.
Chairwoman VELAZQUEZ. Thank you, Mr. Chabot. Thank you all
for being here.
I would now like to begin by recognizing Ms. Gorton for 5
minutes.
Ms. Gorton, you might need to unmute.
Ms. Gorton apparently is having some technical
difficulties, so we are going to recognize Mr. Wright for 5
minutes.
STATEMENTS OF JIMMY WRIGHT, PRESIDENT, WRIGHT'S MARKET;
KIMBERLY GORTON, PRESIDENT AND CEO, SLADE GORTON AND CO., INC.;
ROB LAREW, PRESIDENT, NATIONAL FARMERS UNION; COLLIN CASTORE,
OWNER, SEVENTH SON BREWING, PRESIDENT, OHIO CRAFT BREWERS
ASSOCIATION (OCBA)
STATEMENT OF JIMMY WRIGHT
Mr. WRIGHT. Good morning, Chairwoman Velazquez, Ranking
Member Chabot, and Committee members. I am Jimmy Wright, the
owner of Wright's Market, an independent grocery store located
in Opelika, Alabama. It is an honor to share my experience as a
single store food retailer serving on the frontlines of the
COVID-19 pandemic.
I am testifying on behalf of the National Grocers
Association, the trade association representing the independent
supermarket industry.
Wright's Market is a family-owned business. It started as a
small convenience store in 1973 and evolved to a 22,000 square
foot full-service grocery store.
Independent grocers like me are deeply rooted in the
communities we serve. Our Mayor Gary Fuller has allowed me the
opportunity to join you virtually from city hall, a testament
to the strong support we receive from our community leaders.
To say 2020 has been a challenging year would be an
understatement. Since mid-March, independent grocers have
experienced sustained and historic levels of demand for grocery
and household products. We have had to adapt to large volumes
of customers stocking up weeks' worth of food, straining the
supply of key product categories like paper, cleaning supplies,
and shelf-stable products. Seven months into the pandemic, the
supply chain continues to cope with major product shortages.
Throughout the pandemic, we have dealt with significant
operational challenges to keep up with demand while working to
provide the best environment for customers and employees,
including adapting enhanced cleaning measures and using
protective equipment.
It has not been easy. I would like to say independent
grocers are flying a plane and building it at the same time.
But I want to pause and say thank you to all our dedicated
employees who know the importance of our work to the community.
We call them our supermarket superheroes.
Although independents are resilient in overcoming
operational challenges, we have seen the competitive playing
field tilted against us and our largest competitors in the
pandemic in several ways.
The first is due to economic discrimination. Inconsistent
distribution and apparent shortages of high-demand products is
not just a symptom of the current crisis; it is a direct result
of a lack of anti-trust enforcement and the dominance of power
buyers in the marketplace. Dominant retailers use their size
and scale to impose discriminatory conditions on manufacturers
and suppliers in a way that disadvantages smaller independents
which impedes our ability to compete.
For decades, independent grocers have not had access to
pricing, promotions, and packaging deals that are provided to
larger firms. Since March, these problems have worsened as
power buyers use their market power to demand prioritization to
distribution of high-demand products. I have lost access to
both popular products and promotional pricing as I have watched
my big box competitors continue to sell all products
unavailable to me. This has made us much less attractive to
customers seeking one-stop shopping in the pandemic.
The effect of buyer power is not only felt by small grocers
but it harms consumers that live in rural areas serviced by
independents with a strong enforcement of U.S. anti-trust laws
ensure our ability to compete for the benefit of all Americans.
The second competitive issue is our limited ability to sell
products to SNAP customers online. The pandemic has accelerated
ecommerce, a trend we saw coming. Wright's Market lost our
ecommerce service in 2016. We were fortunate to have been
selected for the USDA SNAP online purchasing pilot which allows
customers to use their benefits online and launched in March,
just days before national emergency declaration. Unfortunately,
the technical barriers and cost to participate in SNAP online
make it difficult for small retailers and has also worked
through an extensive application and testing process. Our store
remains the only single-store operator to launch.
Meanwhile, Amazon and Walmart have expanded their SNAP
online program almost nationwide. Independents need a quicker
approval process, less technical barriers, and lower
implementation costs to compete. A level playing field is
critical to preserving a thriving and vibrant independent
grocery sector.
I appreciate your attention to my concerns. Thank you for
the privilege to testify today. I look forward to answering
your questions.
Chairwoman VELAZQUEZ. Thank you, Mr. Wright.
Now we recognize Ms. Gorton for 5 minutes.
Ms. Gorton, you need to unmute.
STATEMENT OF KIMBERLY GORTON
Ms. GORTON. Thank you, Chairwoman Velazquez, Ranking Member
Chabot, and distinguished members of the Small Business
Committee.
I am president and CEO of Slade Gorton and Company. I am
pleased to have the opportunity to appear before the Committee
today to discuss how the seafood supply chain has been impacted
by the COVID-19 pandemic.
Slade Gorton is a third-generation family business based in
Boston. We are one of America's largest seafood processors and
distributors and are proud of our record of supplying hundreds
of millions of healthy and safe seafood meals to American
families for over 90 years.
More than 1.7 million Americans work in the U.S. seafood
industry, half a million of whom work in the middle of the
supply chain, many for small family-run companies like mine.
Without us, the fishermen's bounty would never make it off the
docks. We are the vital link that gets seafood from our oceans
to your table.
Over two-thirds of our industry's $150 billion in annual
sales come from restaurants and other food service
establishments, such as university dining halls, hospital
cafeterias, and cruise ships. With capacity limits in place at
many restaurants and the closure of many other public eating
venues, seafood companies all across the supply chain are at
serious risk of failing.
This has left our industry in unchartered waters. We have
had to deal not only with billings and lost sales, but also
with the job losses that go with such an unexpected downturn.
My company alone lost over 70 percent of its business in the
immediate weeks following the nationwide shutdown. Many
struggling companies rushed to freeze and store product. Some
even began selling directly to consumers. Even with that
effort, millions of dollars' worth of fresh product that could
not be sold or stored had to be destroyed.
And when restaurants moved to curbside pickup and delivery
service, seafood did not get its fair share. Fish simply does
not travel as well as other meal options.
Even with partial reopenings, restaurant operators are
faced with increased costs at a time when many are operating at
below breakeven capacity. All have had to find ways to simplify
service and menus and cut food costs, so it is only through
ingenuity, resilience, grit, and determination that companies
like Slade Gorton have been able to survive thus far.
One of the biggest issues currently affecting the seafood
supply chain is related to the large unpaid debts owed to
distributors for food that restaurants could not sell during
the mandated shutdown.
Now that foodservice establishments are open and working to
reopen, they will need to rely on their suppliers to continue
to provide credit so they can restock their kitchens. We are
now faced with choosing to extend further credit at some risk
or abandoning what are in many cases decades-long customer
relationships. My company has chosen to stick by our customers
because without them we have no future.
We estimate that the seafood industry has about $2.2
billion in outstanding bad debt in addition to the estimated
$10 billion of bad debt for the larger foodservice community.
This is not something that can be absorbed by small business.
We need help to fix this.
While my company was fortunate enough to receive a PPP loan
which has certainly helped us to rehire our furloughed
employees and keep them onboard thus far, I am afraid these
funds will not be enough to sustain small businesses through
what is a much longer economic recovery than we imagined early
on.
If we are going to help the economy get back on track, we
need to help small businesses survive this pandemic. Current
figures suggest that 25 percent of all restaurants in the
United States have closed forever. It is imperative that
Congress pass another stimulus bill to include expanding the
scope of expenditures that qualify for forgiveness. Allowing
restaurants to use funds to pay off their current debt so they
can afford to purchase new food and supplies and rehire staff
will go a long way toward preventing additional business
failures.
Additionally, restaurants, retailers, and all businesses
seafood value chain are now faced with increased costs
associated with frequent sanitizing, new employee training
regimens, retrofitting processing lines, retail spaces, and
restaurant dining rooms and providing PPE for employees. These
increased yet necessary operational costs are prohibitive as we
struggle to adapt.
I urge Congress to consider Federal grants or tax credits
to help pay for these critical safety measures. Ultimately,
jumpstarting the economy requires continued support for those
businesses who drive 80 percent of our GDP, small businesses.
The seafood supply chain is a complex one but one that
helps ensure every American has access to this healthy and
sustainable protein. We need our government to recognize the
seafood community as the broad and diverse system we are. I
implore you to act now in support of small business, seafood
businesses, and our industry's lifeblood, restaurants. Food is
the foundation of health and well-being and is at the center of
happiness, human connection, and a vibrant Nation. Our families
have fed your families for generation. Our families now need
you.
Thank you for allowing me to discuss the impact of COVID-
19.
Chairwoman VELAZQUEZ. Thank you, Ms. Gordon.
Now we recognize Mr. Larew for 5 minutes.
STATEMENT OF ROB LAREW
Mr. LAREW. Good morning. Thank you, Chairwoman Velazquez,
Ranking Member Chabot, and members of the Committee. And thank
you for the opportunity to speak today.
As mentioned, I am Rob Larew, and I serve as president of
the National Farmers Union. We work to ensure that farm
families and their communities are respected, valued, and enjoy
economic prosperity and social justice. Thank you for
addressing the challenges that farmer and the food system face
during this time of crisis and public health in the economy and
in our society.
In recent decades, our members have been hard hit by
corporate consolidation among companies who sell inputs to
farmers and among companies who purchase what farmers produce.
This mounting market concentration has been compounded by low
crop prices, a global trade war, and increasingly frequent
severe weather events.
Since 2012, annual net returns for farmers have trended
downward for major row crops due to rising product costs and
declining prices for commodities. As the pandemic took hold,
consumer demand shifted dramatically with the closure of
restaurants, schools, and other institutions. Processing
facilities, particularly in the meat sector, were shut down due
to outbreaks among workers. At least 370 meat packing plants or
one-third of the national total experienced COVID-19 outbreaks
as of last week. There were nearly 43,000 cases in the meat
packing sector alone.
Supply chains were interrupted and many farmers suffered
financial struggles while the price of food for consumers
increased.
The U.S. Department of Agriculture prices received by
farmers index showed a 6 percent decrease from April through
July 2020 as compared to the same period in 2019. Farmers
losses have not been passed on to consumers who instead are
paying more for food. So far in 2020, the consumer price index
for food is 3 percent higher than 2019.
As supply chains adjusted to new consumer demand patterns
and processing facilities have largely reopened, problems
linger for the farm and food system. The price of corn has been
severely affected following demand for ethanol as 40 percent of
corn grown in the U.S. is used for biofuel production.
Stay-at-home orders kept Americans off the road and fuel
consumption dropped sharply costing the ethanol industry $10
million in sales. To make matters worse, EPA's broad allowance
of small refinery exemptions and an unwillingness to permit
higher blends of ethanol have further eroded corn prices.
While the disruptions caused by the pandemic are
unprecedented, many of the problems we face are nothing new.
The pandemic revealed the fragility underneath our food and
farm systems. As farmers, we are optimists and urge
policymakers to apply lessons learned this year to address the
long-term issues.
In order to be more resilient, we need to build a robust
regional food infrastructure. A good start would be stronger
anti-trust enforcement from Federal agencies, like the
Department of Justice, the Federal Trade Commission, and the
U.S. Department of Agriculture. Farmers and ranchers need more
choices for marketing their crops and livestock. To do this, we
need to spur development of small and mid-size processing
plants. In the meat industry, an important step in that
direction would be the RAMP-UP Act, which was included in the
recently revised HEROES Act.
Earlier this year, this Committee helped farm businesses
gain access to Small Business Administration Programs. A
lingering barrier to access PPP is the requirement to show
positive net income because more than half of farms have
negative income in recent years. And if you would support H.R.
7175, the Paycheck Protection for Producers Act which would
allow farmers with net negative income in 2019 to qualify for
the program using gross income instead.
Lastly, pandemic aid efforts have helped farmers withstand
the current crisis but future efforts should focus on policy
changes to address the causes rather than simply the symptoms
of a broken farm economy. One way to do this is through a cost-
effective supply management system for farm commodities that
would balance production with consumer demand.
Thank you for this opportunity to address the Committee and
I welcome your questions.
Chairwoman VELAZQUEZ. Thank you, Mr. Larew.
Now we recognize Mr. Castore for 5 minutes.
STATEMENT OF COLLIN CASTORE
Mr. CASTORE. Chairwoman Velazquez, Ranking Member Chabot,
and members of the Committee, thank you for your statements to
begin this, and thank you for asking me here to testify today.
My name is Collin Castore, and I am founder of Seventh Son
Brewing Company and Antiques on High located in Columbus, Ohio.
I also serve as board president of the Ohio Craft Brewers
Association, representing 351 breweries in the Buckeye state.
Seventh Son has been producing beer since 2013. In the past
7 years, we have watched our business grow to two locations,
around $5 million in sales, and around 70 employees.
I have always been proud of the fact that for every new job
created in beer there are 24 jobs generated in the industries
that help us to brew and sell our beer.
Unfortunately, this goes both ways. According to a recent
report by the economic firm John Dunham and Associates, 651,000
jobs supported by the U.S. beer industry will be lost by the
end of the year due to COVID-19.
Prior to the coronavirus changing our world, Seventh Son
sold our beer through taprooms, restaurants, bars, and
retailers throughout Ohio. The uncertainty over the past 6
months has made it extremely difficult to continue to run this
business. Summer is the busiest time for most breweries and in
Ohio we are limited to around 40 percent of our normal capacity
and have had a 10 p.m. curfew imposed since May on alcohol
sales. Some states have guidelines that have actually made it
impossible to operate on-premise tasting rooms and many would
welcome Federal guidance and consistency to help with these
issues.
The majority of breweries in the United States make the
majority of their revenue from taprooms and tasting room sales.
Estimates by the Brewers Association suggest that small brewers
have seen on-premise sales revenues go down 30 percent since
March.
Most breweries get their wholesale revenue from on-premise
sales to restaurants, bars, and concern venues which have been
severely restricted over the past 6 months. These outlets sold
nearly 20 percent of the total U.S. beer volume annually. Their
closures resulted in an estimated $900 million worth of beer
that will need to be destroyed.
Data from September shows draft sales still around one-
third lower than this point last year.
At Seventh Son, we have our own canning line and some
existing relationships that helped us to absorb most of this
on-premise volume loss. On March 16th, we began a home delivery
business and carryout sales model out of our shuttered tap
rooms. These measures were a lifeline but our head is very much
still barely above water.
We completed a $5 million expansion in 2018 and have a
wonderful facility but also the debt to go with it. When we
sell a can of beer to our distributor, we get $5 less than when
we sell that same can of beer out of our taproom. We built our
expansion for future wholesale growth but taproom revenue is
absolutely essential to support it.
I am sure you have seen the headlines referencing increased
alcohol sales. Those increases must be offset against the
massive decline in sales at on-premise channels. The size of
the overall pie has not shifted even as the individual slices
appear different.
Even with those increases that we have seen in off-premise,
the brewing industry is expected to lose $22 billion in 2020.
In addition, the increased demand for cans, both in and outside
of our industry, has caused an aluminum can shortage in the
U.S.
Another issue that we have seen during the pandemic is that
many ethanol plants that captured commercial CO2 were taken
offline. The production partially has ramped back up. Our
industry still sees signs of a shortage caused by natural
disasters and unexpected closures. For our industry to survive,
breweries need certainty and we need financial assistance.
Please pass the bipartisan Craft Beverage Modernization Tax
Reform Act and make the current Federal excise tax rates
permanent. If the current tax rates expire, my Federal excise
tax rates will go up 100 percent starting in January. This
would cost me $25,000 which essentially costs me an employee.
We appreciate Congress's swift action at the beginning of
the pandemic with the CARES Act. It resulted in thousands of
breweries receiving money from the Payroll Protection Program.
I would very likely not be here had it not been for the
$359,000 that we received. The program was not perfect but we
can ensure its success by forgiving all of the PPP loans of
less than $150,000 to small business. Adding additional funds
to this program and allowing businesses that can show revenue
losses to apply for another loan. Give us the ability to write
off the funds that were used as business expenses as well, and
allow 501(c)6s, like the Ohio Craft Brewers Association, the
ability to apply for PPP loans. Our guild has helped us more
than double the number of breweries in Ohio in the past 5 years
helping to create more than 21,000 jobs.
In conclusion, I feel strongly that Seventh Son needs
another round of PPP to survive the impacts of COVID-19, but
please also consider passing the Restaurants Act and Restart
Act, both of which would provide small breweries with grants
rather than debt and allow us more flexibility in how we use
those funds.
We also encourage Congress to consider a credit for
unmerchantable goods that had to be destroyed due to supply
chain interruptions caused by the virus.
For the past decade, the United States brewing industry has
been a success story in American manufacturing and job
creation. We need your help to weather this pandemic and
continue to grow and thrive.
Thank you very much for your time.
Chairwoman VELAZQUEZ. Thank you, Mr. Castore. We appreciate
all you have shared with us.
Let me begin by recognizing myself for 5 minutes.
I would like to start off with my first question to Mr.
Wright.
The Census just reported that one in 10 adults do not have
enough food to eat, and 27 percent of households with children
are food insecure. As we strive to ensure that hungry people
have access to food during this pandemic, why are there so few
small retailers approved by the administration for online SNAP
purchases?
Mr. WRIGHT. We appreciate the opportunity to be included in
that pilot. I think there are several things that make that a
challenge for smaller retailers. Certainly, one is the
technical aspect of navigating that to be able to get set up.
From a small retailer standpoint there are costs with setting
the system up. There are costs to processing part of that
overall assistance that are needed from a rate cutter to
understand a program. We have already experienced in our
launch, and we launched one week before the pandemic buying
started, we recognize in our launch already that there is an
education process we need to go through to be able to inform
the customers of how to use the program. We would advocate for
the SNAP Online Options Act. I believe it is H.R. 7535, to be
able to allow retailers to expand online options. In our own
area what we would have is the ability to deliver to rural
areas around us. So it is a technical process to work through,
an application process to work through. We were very fortunate
to have a----
Chairwoman VELAZQUEZ. Okay. Mr. Wright, time is running out
and I need to ask another question. Thank you so much for your
answer.
Mr. Larew, I recently introduced the Mobilizing Restaurants
in America Act so that SNAP recipients can gain access to food
and while also supporting struggling restaurants. How important
is updating and funding SNAP and other nutrition programs like
the Double Up Bucks Program to farmers, farm workers, and small
businesses across rural America?
Mr. LAREW. Oh, it is absolutely essential, and we
appreciate your leadership in this area. SNAP remains the most
efficient way to address food insecurity out there. So as we
look at ways to further bring resilience in that delivery, we
have certainly seen a lot of hiccups with the pandemic, ways to
pivot, if you will, to make sure that SNAP and ultimately good
quality food is available from farmers and connect that to
consumers including and especially those in food insecurity.
So, it is vital. And all of the programs along with it, you
have mentioned the Double Up Bucks, et cetera, and USDA
programs to connect farmers to the consumers, all of those
issues are critically important.
Chairwoman VELAZQUEZ. Thank you.
Ms. Gorton, restaurants and small firms across the supply
chain are continuing to struggle and that has resulted in
issues for food processors and distributors. PPP assisted many
in your industry, including yourself. What other steps do you
recommend that Congress and the Small Business Administration
take so that we could address the challenges that you are still
facing?
Ms. Gorton, you need to unmute yourself.
Ms. GORTON. Thank you, Chairwoman.
So I think there are several things that we would ask
respectfully that Congress address. I think, first and
foremost, that USDA must allow seafood in their programs. Thus
far, seafood has not been included in all of their programs. It
is an important protein and we would ask for it to be included.
Chairwoman VELAZQUEZ. Ms. Gorton, we are having
difficulties hearing what you are saying, so I will ask that
maybe you could submit an answer to the Committee on that
question.
Ms. GORTON. Certainly. Certainly.
Chairwoman VELAZQUEZ. Thank you.
Mr. Wright, since the outbreak of the pandemic, stores
around the country have struggled to stay stocked with in-
demand products. What role has increased corporate
consolidation and market control played in your ability to
source and sell products?
Mr. WRIGHT. We have seen an increase in the larger players
being able to access products that we are not able to get,
especially some of the key products such as comfort food items
such as pasta and rice and beans and some of those things.
Paper products, cleaning supplies. All those things have been
very difficult for us to source due to such power from the
larger retailers. I can walk in those stores and see those
products on the shelf that I am not able to source.
Chairwoman VELAZQUEZ. Do you feel that there is any role or
impact that corporate consolidation and market control has to
do with that?
Mr. WRIGHT. Yes, ma'am. As retail consolidation continues
on the retail side, we continue to see larger big box retailers
have more and more power and being able to put pressure on all
the manufacturers that they will get product to the point of
actually penalizing some of these suppliers if they do not get
the bill rate that they are looking for. Again, that is taking
product away from the smaller retailers, including grocers.
Chairwoman VELAZQUEZ. Thank you. My time has expired.
Now we recognize the Ranking Member, Mr. Chabot.
Mr. CHABOT. Thank you, Madam Chair.
Mr. Castore, I will begin with you.
You had mentioned that it is much more profitable in the
taproom than what you sell, you make per unit a lot more there,
obviously. And then you mentioned the 10 p.m. curfew that we
have in Ohio, that you have to cut off at 10 p.m. has had a
pretty dramatic impact on your sales. My district, we are down
at the bottom of the state. You are Columbus, I think, and I am
Cincinnati, so we have Kentucky right across the Ohio River
there. And so the 10 o'clock, what we have heard and it has
been on the news and written about, and I know the businesses
are feeling this, you know, they can just leave Ohio and go
over into Kentucky and take their business over there.
How have you been affected up in Columbus on the 10 p.m.
curfew, and do you have any recommendations on that perhaps?
Not that we can do that here but the states obviously make that
on a state-by-state basis, that determination.
Mr. CASTORE. Sure. My own experience with the curfew, it is
definitely hurting our sales. Definitely not helping our sales.
We do not have Kentucky across the river but we do have Ohio
State University, and we are a relatively large city, a million
and a half people. So what we are seeing is people go out until
10 p.m. and then they just go to house parties, gatherings
where they might not be socially distanced whereas at
responsible restaurants and bars across Ohio we are actually
practicing social distancing, passing out masks, doing all
these things. And ironically, I feel like people are a lot
safer going out sometimes than going to these more like private
gatherings.
Mr. CHABOT. Okay. Thank you very much. I appreciate it.
Ms. Gorton, I am going to go to you next, although I think
you and I purchased our wi-fi at the same place because when we
are at my home doing these things I had that breaking up a lot
apparently but I am going to try it.
You mentioned, you indicated that you lost over 70 percent
of your business in the weeks following the nationwide
shutdowns. How did you adjust your business operations to try
to survive during that time?
Ms. GORTON. Thank you. Hopefully, you can hear me now.
So, well, as with any businesses, you know, the first week
really affects the supply by slowing down the flow of goods in
our supply chain. Us and other companies, we had to freeze some
of our fresh product. We had to put product in cold storage.
Which affected the cash flow. We worked very hard with
customers to make sure that we could continue to support their
operational demands, working closely with our suppliers to be
able to help them.
And first and foremost, our primary focus was keeping our
employees safe, and that really required in our plans making
sure that we implemented additional measures. We invested in
new technology. We have invested in a tremendous amount in PPE
and in training to make sure that our workers are safe, we
could continue to process seafood. We are very fortunate in
that we have had no disruption in our supply chain during this
time.
I do understand though that a number of other seafood
processors have had disruption in their business. I think
particularly some of the processors in Alaska who have a
tremendous amount of seasonal workers and had to put them up in
hotels for 14 quarantine days.
Mr. CHABOT. Thank you. Thank you.
I am going to try to get one more question in. I have a
little over a minute to go.
Mr. Wright, I will go to you next.
How have you adjusted your inventory as we continue to deal
with the coronavirus restrictions? Has that changed over time?
You know, how have you handled that to try to stay maybe not
profitable but, you know, to survive?
Mr. WRIGHT. From the supply side we have just had to expand
on the items that we could source and our suppliers have had to
look for sources we traditionally would not, you know, be
buying product from. In our own case, we actually, with all the
toilet paper shortages that were there, we actually ended up
sourcing some toilet paper from a factory in Mexico in order to
be able to have some product to sell. A lot of brands and major
selling items we cannot get back to the large power buyers but
if there is a reasonable item or something we were able to
supply was fresh meat. That was the one that really was
critical to us because it is such a large portion of our
business. And again, that is evident if consolidation in that
industry and the challenges that were made on the retailers
side when the pandemic hit and so many of those places closed.
Mr. CHABOT. Thank you very much.
Madam Chair, my time has expired. I yield back.
Chairwoman VELAZQUEZ. The gentleman yields back.
Now we recognize the gentlelady from Iowa, Ms. Finkenauer,
Chairwoman of the Subcommittee on Rural Development,
Agriculture, Trade, and Entrepreneurship.
Ms. FINKENAUER. Thank you, Madam Chair. And thank you for
holding this hearing today. Obviously, this is a huge issue
that we are still dealing with in the middle of this pandemic,
and it is something that has hit close to home in my district
in particular.
So my question is to Mr. Larew. So in Iowa, workers in my
state and in my district lost their lives as a result of COVID-
19 outbreaks in large meat processing plants. Not only
obviously was this devastating for the communities and the
families where these processors are among the biggest
employers, it created disastrous consequences for our food
supply chain, especially for our livestock and poultry
producers.
I recently actually cosponsored something you talked about,
the RAMP-UP Act, which would obviously create more competition
into the processing sector. So how do you think, and can you
expand upon this, these types of investments in our small
plants could help us prevent some of the issues we saw with
worker safety and then depopulation in Iowa?
Mr. LAREW. Yes, absolutely. And it is an important issue
that you bring up because really what we are talking about here
is taking ourselves from what is a very concentrated, arguably
very efficient to some, but one that really has no resilience
built into it. And the RAMP-UP Act that you mentioned is an
important step in shifting ourselves from a very concentrated
marketplace to one that is much more local and regional based,
building in more systems for options for producers help take a
lot of the stress out. It also would ensure much more focus on
worker safety and support. So again, taking ourselves away from
a very efficient-driven system that is so concentrated and has
so many workers at all once into something that creates much
more opportunity for rural communities I think is a huge step
forward.
Ms. FINKENAUER. Great. And you know, I obviously agree but
I also want to touch even further here on the issue of
competition. I have heard real issues with price transparency
from our cattlemen and also helped introduce legislation to
require packers to buy at least half their slaughter on the
spot market. Thinking back to the high prices, obviously, of
beef and what we have seen during this pandemic, at least in
the grocery stores but does not always come back to our
producers, how could more transparency help our cattlemen and
make our supply chain more resilient?
Mr. LAREW. You touch on another key piece of this. Right?
Not only do we have a huge concentration, we have four beef
companies controlling over 80 percent of the beef market. We
have just 50 meat plants out there that manage 98 percent of
the processing. It is an incredible concentration.
But the other piece of this is that we do not have a true
cash market price out there. And so for these small business
owners, these independent family farmers and ranchers, they
have no way to truly understand where the market is. There are
a slew of lawsuits going on right now related to price
manipulation in the meat industry, and I think this is another
key component of that. So measures such as the one you
referenced and that our members are actively advocating for up
on Capitol Hill would be an important piece of reestablishing a
true operating market and certainly a key piece of that is
price discovery. And so more information will be better.
Ms. FINKENAUER. Well, thank you, Mr. Larew. And I know, you
know, obviously, these issues have always been important;
right? But now going through this pandemic, and I have seen
this now through many different issues, whether it is access to
broadband and needs for that, going through a pandemic these
issues are really heightened and under scored in a number of
ways and these are just things we have got to get right and we
have got to get right fast because especially when it comes to
our supply chain, when it comes to making sure of the flow, we
just cannot take for granted anything and thank you for your
testimony today as well.
Mr. LAREW. Thank you.
Ms. FINKENAUER. And with that I yield back, Madam Chair.
Chairwoman VELAZQUEZ. The gentlelady yields back.
Now we recognize Mr. Balderson from Ohio, Ranking Member of
the Subcommittee on Innovation and Workforce Development for 5
minutes.
Mr. BALDERSON. Thank you, Madam Chair, and Mr. Castore,
thank you for being here. I am one of the three representatives
along with Congressman Stivers and Congresswoman Beatty that
represent Central Ohio, so it is great to see you here, and I
know your establishment. So thank you.
In your testimony you mentioned three major efforts
Congress needs to undertake in order to help small business
brewers such as yourself. These three issues being passage of
H.R. 1175, the Craft Beverage Modernization and Tax Reform Act;
specific adjustments to PPP and other SBA loan programs; and a
tax credit for perishable goods that had to be destroyed due to
supply chain disruptions.
As a cosponsor of H.R. 1175, the Craft Beverage
Modernization and Tax Reform Act, I am hopeful we can pass this
bill and provide you with this tax relief.
I would like to ask you about your comment about a tax
credit for perishable goods. How did your business account for
the loss of perishable goods prior to COVID?
Mr. CASTORE. Thank you. Prior to COVID, we did not have a
lot of loss from perishable goods. We would, of course, we have
made a lot of different styles of beer every now and again.
Something would not work quite right. It is still a commodity.
It is a perishable good in general. But we did not run into the
kind of volume and the kind of circumstance that precipitated
just having to immediately cut off sales. And then in our case
we were able to repackage some as cans but we still just dumped
beer. I have never seen anything like it. And it is not just
us. It is restaurants dumping beer. It is wholesalers dumping
beer. It is the actual breweries dumping beer. But this is
good, when people mistreat beer and put it in their car or
something, you know, think of it like milk. It actually has an
expiation date. It goes bad. And a lot of beer went bad.
Mr. BALDERSON. I agree. I talked to a couple friends of
mine in my home county that also do the same thing and we
talked about that.
I would like to ask you about your comment about a tax
credit for perishables. How would this tax credit differ from
existing practice?
Mr. CASTORE. I would probably not be the best person to
comment on the mechanics of it. But it seems more like this was
a one-time circumstance. This was a once in a lifetime kind of
experience that we have been through, so some type of tax
credit, some type of structure, not a permanent structure like
the Craft Beverage Modernization. We would like that to be
permanent. In terms of practice, we would just like this to be
a one time help us out with what we need.
Mr. BALDERSON. Agree. Thank you very much, and again, thank
you for being here today.
Mr. CASTORE. Thank you.
Mr. BALDERSON. My next question is for Mr. Wright. I would
be interested to hear your perspective on this matter. How did
your independent grocery store account for food loss prior to
the virus?
Mr. WRIGHT. Prior to the virus we worked very hard every
day to control the amount of waste and shrink that we have.
Anything that we have that we can donate to food banks and such
as that we do those things. So we just try to manage that
supply chain very well and make sure we offer the freshest
product and do not have a tremendous amount of loss that we end
up having to pass on through our pricing somewhere.
Mr. BALDERSON. Thank you.
Would you be able to quantify the financial cost your
business has had to incur because of disruptions in the food
supply chain?
Mr. WRIGHT. For us it was a lot of overtime. Certainly as
business ramped up we had a tremendous amount of overtime for
employees. We did some additional bonuses. Investments that we
made in plexiglass dividers at the registers, PPP equipment and
all those things. Also, for us it was a loss of margin in a lot
of places as we tried our very best not to raise prices. And
this goes back to the situation with meat. We held our prices
down as low as we possibly could to cover our cost and be able
to try to give the customer the best price we could. Even
though things went up, we made very, very little margin on some
of those items. So we had loss of margin, increased expense in
operating the store, and investments also in the equipment in
the facility to be able to provide a safe shopping environment
for the customer.
Mr. BALDERSON. Okay, thank you.
I am going to try to get this in. I might run out of time
so I will cut you off. But finally, I introduced legislation to
provide small businesses with up to $25,000 in tax credits for
the purchase and replacement of PPE. How significantly would
this help your business?
And I am sorry, sir, but we are out of time. We will follow
up with you on that.
I yield back, Madam Chair.
Mr. WRIGHT. Thank you.
Chairwoman VELAZQUEZ. The gentleman's time has expired.
The gentlelady, Ms. Davids, from Kansas is recognized for 5
minutes.
Ms. DAVIDS. Thank you, Chairwoman. And thank you to you and
Ranking Member Chabot for holding this hearing today. I am
really glad we are focusing on the massive impact we have seen
from the pandemic, the devastating impact really on our food
system and especially on our restaurants.
You know, one of the things I get to do as the 3rd District
representative is talk up Kansas and the Kansas City metro
area. For folks who do not know, we cannot talk about our KC
region without talking about barbeque. And you know, this is
everything from Joe's KC to John's Barbeque and Slaps and so
many others that are really not just part of the culture of the
place but are huge economic drivers. And they are often small
businesses. And we know restaurants across the country are
facing enormous challenges and we have seen so many inspiring
examples of folks who are stepping up and doing everything they
can.
I have been proud to be a cosponsor of the Restaurants Act
which would create a new grant program for the restaurant
industry, and right now we are seeing the far-reaching impacts.
And that is on the restaurants and the suppliers.
Ms. Gorton, I wanted to ask you first, in your testimony
you had mentioned the difficult situation that you are facing
as a supplier as your customers try to reopen and need
additional credit. Could you talk a little bit on that position
that you are in, that your customers are in, and how you have
been addressing it?
Ms. GORTON. Yes. I am going to try to speak on my phone.
Hopefully this is more clear. We are having a bad storm here in
Boston. I think it is affecting us.
I think it is really just a matter of we have had to extend
credit terms, and the way we have worked it with our customers
is that as they ramped back up they are now paying us for the
products that they are buying now and what we are working with
them on is to put in place payment plans for them to help pay
us back for the product that they purchased just prior to the
shutdown. In some cases that is working well. In other cases it
is not. I think that if Congress is not able to pass more
relief and a stimulus for restaurants in particular, as the
original PPP funds run out we are going to start to see a lot
more failures which will have a domino effect on companies in
the food industry and specifically the seafood industry. I
think as I mentioned, 70 percent of seafood is consumed outside
the home, and so as restaurants fail, we, as an industry, have
a disproportionate effect to other industries.
Ms. DAVIDS. Yeah. So you started to get into legislation
that we have passed. I am curious, what are your thoughts about
how we as legislators can ensure that supply chains supporting
restaurants are also supported during this time?
Ms. GORTON. That restaurants are supported? Well, I think
that the legislature----
Ms. DAVIDS. And the suppliers.
Ms. GORTON. And the suppliers. Well, I think one of the key
things that you could do is to ensure that the PPP funds that
are available can be used for covering bad debts. That would go
a long way towards helping people in our supply chain. Right
now the funds are primarily used to keep people employed and to
pay utility and rent costs. However, our biggest challenges
come from the risk that we have associated with bad debt. So if
the PPP funds could be extended to include restaurants' ability
to use those funds to pay off their bad debt that would
certainly help companies like mine immeasurably.
Ms. DAVIDS. Thank you. And thanks for taking the time to
testify here today.
I was hoping to switch gears really quickly.
Mr. Wright and Mr. Larew, I wanted to know if you have some
ideas about improving food assistance programs during this
time. I am sure you all after seeing everything have some
thoughts on that.
Mr. WRIGHT. In my case, just continuing to have a strong
SNAP program would be a key to that. Also, being able for
independents to offer online SNAP would be a tremendous asset
for the customers that either cannot get to the store or choose
not to come to the store during the pandemic. So a strong SNAP
program and an ability to go online for everyone to be able to
offer that. Right now, only Amazon and Walmart are able to
offer that. Myself and one other operator, regional operator in
New York/New Jersey. So we would appreciate the opportunity to
be able to do that.
Mr. LAREW. And I would simply echo those thoughts. And from
the farmer perspective, we need strong access to SNAP and food
assistance that is critically important for all of us.
Ms. DAVIDS. Thank you. And thank you for your time, and I
yield back.
Chairwoman VELAZQUEZ. The gentlelady's time has expired.
The gentleman from Oklahoma, Mr. Hern, Ranking Member of
the Subcommittee on Economic Growth, Tax, and Capital Access is
recognized.
Mr. HERN. Thank you, Madam Chairwoman Velazquez, Ranking
Member Chabot, and our witnesses for testifying today.
As many of you know, I have been a small business owner in
the restaurant industry for over 35 years. As a franchisee for
the McDonald's Corporation, I built an extensive knowledge of
supply chain operations. Through this experience, I have
learned that restaurants rely heavily on their supply chain
operations where success is extremely dependent on the
efficiency of their wholesalers, distributors, and food supply.
Unfortunately, as our witnesses have duly noted in their
written testimonies, COVID-19 has taken a severe toll on each
of these services. Even with the SBA and USDA's government
assistance programs, farmers and food suppliers were still
facing excess supply issues where many of their perishable
products were going to waste.
On this Committee, my colleagues often hear me discuss my
business experiences with restaurants, but what many not know
is that one of my first ventures was farming. I built and ran a
successful hog farming operation and also formerly worked on
numerous poultry farms for Tyson Foods. Because of a background
within numerous aspects of the supply chain ranging from the
farm to the storefront, I can attest to the obstacles our
witnesses have brought forward.
As one of our witnesses mentioned in her testimony, farmers
are having to dump produce and euthanize their livestock, which
is devastating impacts on their bottom lines. These types of
issues also have a trickle effect. When farmers struggle, our
wholesalers, distributors, restaurants, and small businesses
struggle. This burden is then passed on to the American
consumer who might run into the issues of accessing the food
supply and certainly will have an impact on their pricing.
Going forward, Congress must ensure that we take the
appropriate actions to support the food supply system and
thereby provide for our local communities during this
unprecedented time.
As many of you know, at the brink of COVID-19, Congress
worked swiftly to pass emergency relief legislation. One of
those provisions of this relief expanded unemployment insurance
giving people the ability to draw unemployment and receive an
additional $600 per week. While well intentioned, this policy
created undue burdens for many businesses deemed essential.
These payments were not adjusted for cost of living which
caused employees to refrain from working as some made more from
government benefits than they did their actual job.
Mr. Wright, you touched on this issue in your written
testimony. Could you please elaborate on the issues you face
regarding staffing?
Mr. WRIGHT. Certainly. In the first wave of pandemic we had
2 weeks that were the largest volume weeks that we have ever
had and also I think across the industry. As we began to reach
out into the communities in looking for additional employees,
that was a challenge. We were very fortunate in our area to
have some college students that were essentially stuck at
school with classes being canceled. They came in and kind of
saved us so to speak. But as we reach through our traditional
channels, we had very little success on finding people.
Certainly, I agree with your remarks, Congressman, that
there was an incentive as a lot of people were making more off
of unemployment than they were working. I also agree that there
is some kind of cost of living analysis or metric put into the
VAT to adjust that. That has changed now for us in the last few
weeks. Just on Saturday this week I reached out through social
media with an ad for employees and very quickly by the end of
the day had 16 applicants. So it was a challenge in the
beginning but we are seeing improvement on the back side. A
real struggle on the supply side for people loading trucks and
warehouse workers and all retailers across the country.
Mr. HERN. Thank you, Mr. Wright.
I want to move on to another question. There has been a lot
of talk about lines of credit, grant program, forgiveness of
loans. As many of you are very familiar because you have
addressed this, alluded to it, on the floor we have an
opportunity to vote on H.R. 8265 that the Ranking Member has
put forward for us to try to get on the floor for helping our
small businesses survive. It is $138 billion of money left over
from the PPP program. Just a simple yes or no, I will start
with you, Mr. Wright, would you support that if you had the
opportunity? Would you encourage your congressman or
congresswoman to support that, the extension of the $138
billion, very targeted 25 percent down in sales and also it
would go through the end of the year? Would you have your
congressman support that, yes or no?
Mr. WRIGHT. Certain would want to assist all small
businesses out there. You know, we have seen a dramatic impact
in our communities.
Mr. HERN. So Mr. Wright, I am going to take that as a yes.
I have got 10 seconds left.
Mr. WRIGHT. Yes. Yes.
Mr. HERN. I want to get to Ms. Gorton.
Mr. WRIGHT. I am sorry.
Mr. HERN. Yeah, Ms.----
Ms. GORTON. Yes, hi, I am sorry. Could you repeat the
question? We are having a bad storm here.
Mr. HERN. No, I am sorry. I do not have time.
Madam Chair, I yield back.
Ms. GORTON. Sorry.
Chairwoman VELAZQUEZ. The gentleman yields back.
The gentleman from Pennsylvania, Mr. Evans, is recognized
for 5 minutes.
Mr. EVANS. Thank you, Madam Chair.
Ms. Gorton, there is a good business in Philadelphia that
is similar to yours, Samuels and Son Seafood Company, which is
a seafood supplier to hotels, restaurants, and casinos. Like
yours, his business dropped 75 percent in the span of a few
weeks leaving it with unused products and debt that would not
be affordable. With nearly two-thirds of fish being consumed
outside of the home that made businesses like yours adapt to
survive. What assistance do you need from Congress to help your
business adapt?
Ms. GORTON. Thank you. Hopefully you can hear me okay. And
yes, Samuels and Son is a very well-run company. They are a
customer of ours.
What needs to happen to make sure that we get the support,
we need a few things. First, that Congress includes processors
and distributors within the scope of any relief that you
provide. And agencies also at USDA would do likewise in
formulating relief programs for the food industry.
Second, despite the fact that you have allocated $300
million to the seafood industry through NOAA, they have been
very slow to get the money to the intended recipients. Congress
passed the CARES Act at the end of March. It took till May for
NOAA to even announce how they would distribute the funds, and
funds are still trickling in. We expect to not maybe even be
able to receive them until the end of the year.
And then finally, I think that additional funds being
allotted to the seafood industry in a nonstimulus act, if you
could establish a firm deadline for NOAA to do that and insist
that the agency meet those deadlines for any additional funds,
that would go a long way towards helping processors and
distributors like Samuels and Son and my company.
Mr. EVANS. Mr. Wright, I was pleased to see that you
mentioned the bill that I co-authored with GT Thompson, the
CHAIN Act which would provide protection for frontline food
workers. During this pandemic, food workers have been deemed
essential, yet many of them have not been getting essential
worker wages they deserve.
Tell me why you support this bill.
Mr. WRIGHT. Certainly, our employees that have stuck in
there and assisted our customers and ran our stores during the
pandemic, we have great respect for and we refer to them as
supermarket superheroes. Anything that we can do to award those
people for that commitment to our communities, to our customers
in the most important part of our economy which is the food
chain, especially during this difficult time would be greatly
appreciated. I think it would be a great act, and I appreciate
your leadership on that.
Mr. EVANS. Last question for Mr. Larew.
Mr. Larew, Philadelphia has over 24 percent poverty which
means that a significant portion of the city residents
experience food insecurity. Programs like the Farmer Food Box
are instrumental in fighting hunger. You mentioned in your
testimony that this program has been riddled with many
programs. What can Congress do to fix these problems to make
the program more effective?
Mr. LAREW. Yeah, I appreciate that. And it is an important
issue, right, being able to connect those growers of good
quality food like your Pennsylvania farmers to consumers and
making those connections.
The program that USDA developed I think, you know, had good
intentions. I think a big piece of this though is making better
connections to those smaller scale, both distributors and
farmers. I think that building those stronger connections which
USDA currently does not have will be one step. But also
recognizing as we stated before here, recognizing the
efficiency and benefit of SNAP itself and ways to continue to
improve not just with this program but also SNAP and other ways
to continue to build these connections to those who are food
insecure, it has been an important issue. Thank you.
Mr. EVANS. I yield back the balance of my time.
Chairwoman VELAZQUEZ. The gentleman yields back.
Now we recognize Mr. Bishop, the gentleman from North
Carolina, for 5 minutes.
Mr. BISHOP. Thank you, Madam Chairman. And one of the
things about being so low on the seniority totem pole is that
sometimes a lot of ground has been covered by the time it gets
to me. So I would like to focus on just one topic, I think, and
Mr. Castore, I would like to address a question to you.
I was minded in your exchange with Mr. Balderson and your
testimony--or reminded of a fellow named Spiro Kartsonis who
runs a great little family restaurant in Monroe, North Carolina
called Hilltop. And he told me shortly after he was required by
order of the governor of North Carolina to shut down, that he
had a dead loss of $75,000 of perishable goods in his
inventory. And you made reference to that in your exchange with
Mr. Balderson and in your testimony. So it is a working capital
loss that is irreplaceable for very small businesses in a lot
of cases. Would you not agree that fixing that through the
Paycheck Protection Program or a grant or something is critical
to lots of small businesses being able to survive?
Mr. CASTORE. Thank you, sir. Yes. I would agree
wholeheartedly with that sentiment. And I think a couple of the
other witnesses have kind of touched on it. We made PPP work.
We fit within the hours, the employer restrictions and
everything, but having more flexibility if there is another
round of PPP to cover some of those things, additional grant
funds, it is absolutely critical. We are small to medium sized.
There are so many in Ohio that are smaller than us that cannot
take that $75,000 loss that is closing down.
Mr. BISHOP. And following that up, and I do not know if it
was touched on by Mr. Hern, but he said there is $138 billion.
I think the number is actually $133 billion of money already
appropriated into the Paycheck Protection Program which has
basically expired. Ranking Member Chabot has a bill that would
just amend that to allow folks, companies, all sorts of very
small businesses who can document a very significant revenue
loss to get another round of that and they are forgivable loans
again like the first ones were, so sort of like a grant. And so
I think there is overwhelming support in the House for that.
There is a discharge petition pending for people to sign it and
yet the leadership is blocking it from a vote because we had
disagreements on illegal immigration and how many trillions
need to go to state and local governments.
Do you think the American people are as mystified as I am
why the House leadership will not allow that one point of
agreement to go ahead and go forward so people can make use of,
small businesses can make use of that $138 billion of money
already appropriated while we otherwise solve these other big
problems later?
Mr. CASTORE. You know, I think that it is getting
increasingly hard. I can hardly think of anyone except maybe
barring my wife who I agree with the politics entirely on in
the world, and I am dumbfounded a lot that we cannot focus more
on the things that we do agree on and the things that we do
need to do, and this falls into that category. I understand how
politics gets attached to everything, but this is just small
business. These are just people who need help. This is exactly
why government is supposed to be here is to reach out and get
us through this. We need you guys, and it is one of those
things that the less we can get all these other issues
conflated with it and the more we can just say breweries need
you, restaurants need you, small business needs you, let's get
something through. We can even fix it. We can add to it later,
but let's help out in some way because I think a lot of us will
not be around if it takes too much longer.
Mr. BISHOP. Yeah. Thank you, Mr. Castore.
As somebody who is new up here, I do not understand it
either. And interestingly, we have one more opportunity this
week before we are gone for October to fix that one little
problem and make an enormous difference in the lives of all
these small businesses out there that are struggling to survive
and all the employees who depend on them.
With that, Madam Chairman and Ranking Member Chabot, I
yield back. Thank you.
Chairwoman VELAZQUEZ. The gentleman yields back.
Mr. Castore, what would you prefer, debt financing or more
grants?
Mr. CASTORE. I would prefer all of the above, actually. In
terms of how I think debt financing works for some people in
some situations, I think that grants obviously work for some
people in most every situation. But we need dollars. We need
options and we need----
Chairwoman VELAZQUEZ. The CARES Act that we passed back in
May it is sitting in the Senate side and that includes grants
and the reforms to make those loans more--to provide more
access to those businesses that were left behind and, that did
not have an opportunity to access those loans in the first and
second tranche that we passed. So as a matter of fairness, that
is not included in the Ranking Member's legislation but it is
included in the CARES Act, in the HEROES Act, plus the new bill
that we just introduced this week.
Now we recognize the gentleman from Illinois, Mr.
Schneider, for 5 minutes.
Mr. SCHNEIDER. Thank you, Madam Chairwoman.
I want to in particular thank the witnesses today for
sharing your story. You represent the millions of small
businesses across our country who are struggling in this
crisis. The pandemic has affected every aspect of your
business, their business, and in no small part the impact on
our supply chains has been devastating.
And I also want to thank the Committee, and always the
Committee staff for working through the challenges to allow us
to have this hearing to talk about this important issue.
Later today, the House is going to be voting on a bill I
introduced, a bipartisan piece of legislation, again, the
example of us coming together, working together. It is called
the COVID Prepare Act. The idea behind the bill is fairly
straightforward. As we face the pandemic, as we have struggled
and so many small businesses have struggled through the spring
and the summer just scraping by to make ends meet, we need to
know that all aspects of our Federal government have a plan for
the expected rise in cases and new challenges we will face in
the fall and into the winter.
So the COVID Prepare Act would require each agency to
present to Congress their plan so the American people will have
transparency and confidence that their government is working on
their behalf.
As our witnesses can attest, a critical aspect of this is
supply chain, and every stakeholder within the food supply
chain in particular has had to adapt to the new reality. Like
all small businesses, they have had to be nimble and figure out
how to make a square peg fit into a round hole by switching
from indoor dining to a focus on carryout, shifting from a
delivery model as direct to consumer or the myriad of other
ways that they relied on their own creativity simply to stay
afloat.
But these small businesses and millions of others around
the country should not have to be on their own standing alone,
and that is what has been so deeply frustrating about this
pandemic, the Federal government not stepping up to this
challenge to provide industries with the necessary guidance for
safely operating in this pandemic and finding a way through to
the other side.
We all know that small businesses will need additional
financial assistance. As we just talked about a moment ago, the
question of whether it is loans or grants is an important
question. Businesses are already on the edge of financial ruin.
Many are closing their doors permanent.
That is why the assistance we are providing in the HEROES
Act is so important, and the revamped version of that bill
introduced this week has to come to the floor for a vote and
ultimately go to the Senate. But we also know that we need
guidance to get through and operate safely in this new
environment.
So let me start with you, Mr. Larew, if that is okay.
Thanks for joining us, and thanks for all you do on behalf of
our country as a farmer. One of my colleagues earlier mentioned
their experience working on a farm. I worked on a chicken farm
as well. I know how hard it is from a day-to-day basis, but
more importantly, I understand the complexities of trying to
get product to market on a consistent basis.
As you highlight in your testimony, with meat packing
facilities, certain parts of the food supply chain were
particularly impacted by COVID-19 because they could either not
or would not enact social distancing measures, and if they
could it had a severe impact on capacity.
Looking forward to the fall and the winter, what guidance
can Federal government provide from USDA, OSHA, and other
Federal agencies that would help agricultural producers
maintain capacity while incorporating best practices and social
distancing?
Mr. LAREW. Thank you. And thank you for the question there.
So one of the first things I think that bears repeating
here is the need to build more resilience into the system,
which I think would be beneficial from the farm level, actually
through the food chain itself, and particularly for farm
workers and for those food workers who have been severely
impacted.
So building that resilience involves a couple of things.
First of all, it is trying to remove some of the level of
concentration that is currently there, which involves anti-
trust enforcement. It is also supporting the ability for small
and very small processing plants right now to be able to get
their inspection to a level that they have more markets
available. Currently, it is cost-prohibitive for those small
and very small plants to be able to meet a level of inspection
that allows them to shift interstate. And so supporting
measures like the RAMP-UP Act is one of those pieces there.
The more that we can build resilience by taking the amount
of workers that we have I think, you know, as I mentioned
earlier, 50 meat processing plants process 98 percent of the
meat in this country. That is not good for farmers. It is not
good ultimately for the food chain and its resilience, and
ultimately for our food security. So from a farmer and consumer
point of view it is all about building that resilience.
Mr. SCHNEIDER. Thank you. And I am out of time but let me
just say with one last concluding thought, I know how hard it
is for you as business owners, business leaders, but also the
employees in your businesses. These essential workers are
showing up to work every day. We are so grateful for them. For
all you do, for all they do, thank you. And we will work to
make sure we get the relief necessary to move forward.
With that I yield back.
Chairwoman VELAZQUEZ. The gentleman yields back.
The gentleman from Tennessee, Mr. Burchett, is recognized
for 5 minutes.
Mr. BURCHETT. Thank you, Chairlady. I appreciate you all
being here and appreciate the panel very much.
I see one person up there, Mr. Wright, who probably does
not speak with an accent. I think I saw where he was from
Alabama, so I might just call on him if that is all right.
I am from Tennessee, so we can say that. I guess some are
snickering but I guess they get it pretty quick.
How long did it take you to obtain your PPE?
Mr. WRIGHT. I think it took probably less than 4 weeks for
us to get that. We were very fortunate in the fact of having a
medium-sized bank that still has local leadership in it that
kind of held our hand through that. So I think it was maybe 3
to 4 weeks at the most.
Mr. SCHNEIDER. Okay. You recorded in your testimony as
saying that you doubled the rate of pay for our employees early
in the pandemic and provided bonuses and overtime pay as the
pandemic wore on. Have your employees returned to their pre-
pandemic wages?
Mr. WRIGHT. What we did on that is that we paid an extra
week of pay for the first month and the second month. We
transferred our debt over to a percentage of their pay.
Everyone has returned to the same level of pay. We continued to
put some stuff out there time to time, but I chose to go the
bonus route with that extra week pay.
Mr. BURCHETT. Right. Okay. Has the $600 per pay in
unemployment compensation affected your store's workforce?
Mr. WRIGHT. Early on we saw the challenges with that as we
tried to reach out. And again, we were fortunate to find some
college students from Auburn that we were able to employ on a
short-term basis. Again, that has improved now in the last few
weeks reaching out. So initially it was an issue.
Mr. BURCHETT. Great.
Mr. Larew, let me ask you a question. Can you walk us
through a farmer's decision-making process when faced with
supply chain shocks?
Mr. LAREW. Yeah, well, that is a massive question. But you
know, which can vary greatly. And I might just reference the
reason why it is complicated, it is pretty obvious in the sense
that if you are a hog producer and you are raising a set of
animals up, they are being primed to be ready for market at a
certain weight to be processed. And when those challenges
happened that is where you saw processing plants being shut
down and therefore forcing producers to make very difficult
choices and in many cases needing to euthanize those animals.
If we are talking about beef, for those independent
ranchers out there, beyond the complexities of trying to
determine what the market price truly is, they also struggled
with these beef plant closures. For them, they can put animals
either on feed or on pasture for a little bit longer but those
take those animals out of condition if you will and means that
their ultimate price that they are going to get is much lower
and obviously, their input costs are higher.
If you were storing grain, that is a very different matter,
but the grain markets pretty much across the board have been
severely low for many, many years. So for all of these farmers
who have been operating on very low margins, these disruptions
along the supply chains have just been really devastating and
really kind of compounded the economic challenges that they
already had.
Mr. BURCHETT. I have found in Tennessee the meat
processors, they used to call them slaughter houses but I guess
that is not politically correct, but the meat processors, it is
hard to find one, and when you do you have to schedule them out
months in advance and that is just not a way to do business.
I do not know if it is by design or not, but during this
whole thing I have noticed that the big boys are systematically
going to crush the little people and I have found also that
over half of our meat processors in this country are foreign
owned and that to me is a scary proposition. It is very scary.
And thank you for that.
How much time do I have? I have 41 seconds. I will have to
go quick.
Mr. Castore--I do not know if I am saying that right or
not--why does a brewery make more money from taproom sales than
sales through distributors?
Mr. CASTORE. First and foremost, it is the cost of the
packaging. The packages that we put our beer into cost as much
if not more than the liquid itself. Each can runs about 20
cents. You have your Packtracker on top of it. The cardboard
case trays that they go into. Then you have delivery drivers,
other parts of the supply chain, and they just add up the cost.
That direct to consumer, I am just handing a can of beer to
somebody and they are giving me $6.
Mr. BURCHETT. Okay. Well, I have run out of time.
For the record, Chairlady, I just want you to know I have
had more beer spilled on me than I have ever drank, so being a
Baptist I need to say that.
Chairwoman VELAZQUEZ. The gentleman----
Mr. BURCHETT. And you know the difference between a Baptist
and Methodist, don't you, Chairlady? A Baptist does not speak
to you in the liquor store. So thank you all.
Chairwoman VELAZQUEZ. The gentleman's time has expired.
Mr. BURCHETT. Thank you, Chairlady.
Chairwoman VELAZQUEZ. The gentlelady from Minnesota, Ms.
Craig, is recognized for 5 minutes.
Ms. CRAIG. Well, thank you so much, Madam Chairwoman. And I
want to say thank you to both you and the Ranking Member for
holding this incredibly important hearing today.
As mentioned in various testimony, the reason for this
domino effect on our food systems is really down to the tightly
bound food supply chain which is incredibly reliant on each
step with little room for error.
I am a member of both the House Ag and this Committee, and
I have seen firsthand during this pandemic how the food supply
chain from farmers to meat processors to grocery stores to
fisheries to restaurants and more has been greatly affected by
this pandemic.
I also am a cofounder of the bipartisan Congressional
Supply Chain Caucus. I have been working directly with leaders
back in my district and here in D.C. to learn more about this
domino effect.
One industry that is a piece of the food supply chain and
that I know we have in all of our districts are these local
independent restaurants. The independent restaurant industry
continues to suffer as more are forced to close their doors,
and now in places like Minnesota, they are forced to figure out
how they are going to stay afloat when they lose that outdoor
seating. It gets pretty cold in Minnesota and it is impossible
to sit outdoors in the winter.
So I have two questions related to restaurants. The first
for Ms. Gorton and the second for Mr. Larew. Mr. Larew, it is
great to see you.
I will get my questions out of the way and then I will ask
each of you to answer those afterwards.
Ms. Gorton, you spoke about the trouble restaurants are in
in your testimony. Can you speak to how giving restaurants as
proposed by the updated HEROES Act, which contains $120 billion
for payroll and other expenses would help your business,
restaurants, and the overall health of the food supply chain?
And then second, Mr. Larew, I have heard extensively from
farmers in my district that programs to connect with local
schools and restaurants would be beneficial. Obviously, I am
right there with Ms. Finkenauer with the RAMP-UP Act. What
programs do you think could be helpful to increase the pipeline
of farm products to restaurants and to diversifying our food
supply chains?
So first, Ms. Gorton?
Ms. GORTON. Thank you.
The recently updated HEROES Act does a lot to address the
plight of restaurants, allowing for more flexibility for the
forgiveness of debt payments to us, their suppliers. And for
forgivability of the cost of supplies. And so this certain goes
a long way to sort of the reverse domino effect. If we can help
the ultimate restaurants, that is going to flow back up the
supply chain. It is going to unstick product from being backed
up in the supply chain. It is going to allow us as suppliers to
your constituents and their independent restaurants to continue
to extend credit and provide food as they ramp up and try to
fill up their pantries again.
I might say, however, though that while the independent
restaurants are absolutely hurting, one of the things that is
overlooked in this current bill are franchise restaurants. And
I just want to make one comment about that.
I think that there seems to be a misperception that the
name on the outside of the restaurant that is associated with a
chain means that there is money flowing into those restaurants
from the franchisor. Many of the small franchisees are just
like independent operators. They may have more than one
location but they, too, are suffering from the same problems
created by the pandemic, the smaller, independent restaurants.
So I would encourage Congress to include franchisees in any
relief that is provided. Thank you.
Ms. CRAIG. Thank you so much, Ms. Gorton.
And Mr. Larew?
Mr. LAREW. Absolutely. Thank you for the question because
it is always important to try to find those connections from
the family farmers out there to the businesses themselves and
in this case, independent restaurants.
There are a number of USDA programs that Congress included
in the most recent Farm Bill which I think is really helpful,
and the more that we can do to confer use of that, but the land
program which is a local agriculture market program really
helps farmers out there build marketing plans, build
connections out there that would include those restaurants. It
also ties in with farmers markets as well. And also, the local
food promotion programs. Those, along with the Farm to School
grant program collectively work to try to build these
connections.
So the more that we can do to kind of reinforce the access
to these programs I think will get us a long step toward
building that resilience they speak of.
Ms. CRAIG. Thank you so much, Mr. Larew.
Anda Madam Chairwoman, it appears I am out of time, so I
will yield back.
Chairwoman VELAZQUEZ. Thank you. The gentlelady yields
back.
Thank you again to all our witnesses today for their
testimony and for offering their views on the challenges facing
America's food system and what America's small businesses need
to recover from this historic, unprecedented crisis.
By sharing your experiences, we will be able to better
assist all small businesses in the difficult road ahead. Even
though I am proud of both the PPP and EIDL programs, we must
continue to work to find other ways to assist our country's
small businesses from restaurants and grocery stores to famers
and processors so that they and their workers can continue to
ensure that the rest of us can have access to food, whether
from a store, a restaurant, a farmer's market, or a food
pantry.
I ask unanimous consent that members have 5 legislative
days to submit statements and supporting materials for the
record.
Without objection, so ordered.
If there is no further business before the Committee, we
are adjourned.
[Whereupon, at 11:37 a.m., the committee was adjourned.]
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