But after the company snagged the kosher produce contract, Preferred Produce founder and co-owner Matthew Stong began plans to rapidly ramp up operations to fulfill orders for $4 million in annual kosher lettuce sales to its East Coast distributor for the next five years.
If the company meets those milestones, the deal will turn into a 40-year, standing contract for lettuce, plus some additional kosher products, including spinach, dill and strawberries, Stong said.
The produce is distributed among East Coast retail establishments that want kosher goods. That means food fit for consumption under Jewish dietary law.
In the case of Preferred Produce’s products, it means no vegetable contact whatsoever with insects, which the Torah refers to as “creeping things” that fly or crawl the earth. The exceptions are two types of locusts, beetles, crickets and grasshoppers.
“Until now, the only other place in the world for kosher lettuce was Israel,” Stong said. “We’re now the second. Before our contract, the distributor was importing everything in refrigerated containers from Israel.”
The distributor’s identity remains confidential, but the company has been operating for over 100 years, serving Jewish communities throughout the Northeast, Stong said.
“The company has existed through generations and they want an ever-lasting supply for their operations,” Stong said. “That’s why, if we meet our milestones, after five years, this will convert to a 40-year contract.”
To fulfill the kosher contract – and to meet growing demand for the greenhouse operation’s organic vegetables – Preferred Produce is now expanding the business to five or six times its current size. The company currently operates three acres of greenhouses, including 2.5 acres in Deming and one half-acre in Radium Springs, just north of Las Cruces.
Now, the company is establishing more than a dozen additional acres in Las Cruces for both the kosher and organic products. The Las Cruces greenhouses began growing produce in March, with the entire operation expected to be up and running by September.
Stong is also expanding operations in Deming, with up to eight more acres of greenhouses planned there.
The company expects to reach $4 million in sales this year, up from just under $1 million last year. It projects nearly $12 million in revenue in 2017, Stong said. And it will triple its current 34-employee workforce by June, with 20 more people hired in May and 50 more next month.
The operation is unique, not just because it’s cultivating acres of organic produce in the open desert, but because it promotes a “triple bottom line” of making a profit, benefitting local communities and paying workers a “living wage.” Preferred Produce pays all employees at least $12 an hour and many future supervisors can expect to earn up to $80,000 a year, Stong said.
“Matthew has a successful formula to grow produce in greenhouses and turn a profit,” said John Elling, a serial entrepreneur and New Mexico Angel who invested in the company. “He’s worked out the nuts and bolts of managing a greenhouse operation profitably.”
The company launched in 2010 with about $200,000 in investments from the NM Angels and New Mexico Community Capital. It also received a $1.25 million debt-equity investment from the New Mexico Mezzanine partners, a $50,000 grant from the U.S. Department of Agriculture’s Rural Development program, and $135,000 in state Local Development Act funds.
The company distinguishes itself through an innovative, fast-to-market strategy that means its goods are sold to shoppers within a maximum of 48 hours after being picked, and usually within eight to 12 hours. That allows vegetables to retain a lot more taste and nutritional bang than produce from many other farms, Stong said.
That locally-grown, fast-to-market value caught the attention of Whole Foods, which now regularly buys Stong’s produce for its four stores in Santa Fe and Albuquerque. And Preferred Produce is in negotiations to supply Whole Foods’ first planned outlet in El Paso.
Michelle Franklin, manager of La Montañita Co-op’s distribution center, said Stong consistently provides quality products and service.
“We look for producers who are sizeable enough for proper packing and hauling procedures, and who can deliver value,” Franklin said. “In that regard, (Stong) is probably one of the larger growers here now that I’m aware of.”
Preferred Produce is among about 150 certified organic farms, ranches, and other food and agricultural businesses in New Mexico, according to the New Mexico Department of Agriculture. Local organic production and processing generates about $50 million in revenue per year.
But that represents just a tiny slice of the national market for organic food, suggesting a lot more opportunity for successful growers like Stong.
Consumer sales of organic products in the U.S., including produce and meat, reached $39 billion in 2015. That’s up from $12 billion reported in 2012, according to the national Organic Trade Association.
Still, it takes skilled growers to run an organic operation profitably and that’s one of Stong’s strong points. He has a master’s degree in soil and water science from the University of California at Riverside, and a doctorate in agricultural and biosystems engineering from the University of Arizona. He taught agriculture for two years at Taiwan’s National University in Taipei, and worked for six years as an agricultural consultant in Taiwan and mainland China before launching the Deming operation.
Stong’s operation is based on hydroponics, which uses no soil, just water. Greenhouse growing tables are lined with plastic tubing that continually circulate water throughout the system. Plant roots are placed in nestlike holes in the tubing.
The water is continuously recycled, reducing use to about 5,000 gallons per week pumped from ground wells.
For now, Preferred Produce is expanding its organic production through current distribution partners. Eventually, the company could consider shipping to bigger markets outside New Mexico. Franchising its greenhouse model is another possibility.
In the meantime, however, Preferred Produce’s new, lucrative niche market for kosher produce is helping to kick the entire operation into high gear.
The kosher produce isn’t organic. The company uses at least one nonorganic pesticide to eliminate spider mites, which are hard to kill. But that’s not important to the company’s East Coast distributor, which wants to eliminate only all contact with insects.
And, thanks to the kosher contract, Jewish holidays and traditions are now becoming a big part of Preferred Produce operations. On Passover, for example, demand for kosher lettuce ramps up to about 75,000 pounds in one day, compared to about 16,000 pounds the company strives to ship each week.
“Passover has become our biggest (holiday) of the year,” Stong said. “These traditions are driving my market now.”