Mr. Citrus Opines on Chinese Imports, Gold & The Recession

I ran into a friend on Sunday with whom I had a fascinating 'catch up' conversation.

While I thought I'd first written about him almost two years ago, it seems, when I search this blog for references to him, I can't find any. So I must have only intended to write the post I imagine recalling.

For both anonymity, and appropriateness, I shall call my friend Mr. Citrus.

You see, he owns and operates the dominant fresh citrus juice-for-cooking-and-beverage business in the US. You know those little lemon- and lime-shaped plastic squeezie things you find in the produce aisle? That's him.

And of all the gyms in the world, he happens to belong to mine. Well, my old one, and, probably, soon, my new one, as well.

One day, I'll write more elaborate post about Mr. Citrus, but for now, suffice to say he's a European immigrant of more than a decade. He conceived his business- the importation of fresh, dated lemon and lime juice- shortly after arriving in the States. While it's been a long haul, he has overtaken the once-king of the market, RealLemon.

Just in case someone from a competitor finds this post via Google, I will keep the information he shared with me somewhat disguised.

Mr. Citrus told me that January sales were up at one of the highest rates ever. To him, it is logical, as he saw sales growth like this during a prior recession.

I asked about a similar-looking squeezie product I'd recently seen, and he dismissed it as a knock-off which isn't coming close to bothering his business. When I observed that I found it at a local, large grocery chain, where his products are absent, he snorted and said,

'(That chain) has the most corrupt buyers in the business. They have a supplier of lime juice who is local to their corporate headquarters, and someone is getting paid off to stock them. Therefore, they only want my lemon juice.'

Back a few years ago, when he explained the nature of his operations, which I'll share in another post, I asked him why a local premium grocery chain's fresh, soft fruit prices were double that of the other major chains. He replied that, due to a quirk in that chain's distribution process, they double-shipped those fruits to a local warehouse, then back to each store, incurring added costs.

From such small details, pricing gaps can occur.

On Sunday morning, however, our discussion turned to US macroeconomics, the recession and the 'stimulus' package. Being from Europe, still traveling there frequently, and a quintessential small, entrepreneurial businessman, I was interested in Mr. Citrus' opinions.

First, he agreed that the so-called stimulus won't work. But, thanks to global economic weakness, he doesn't think the immense added US debt will drive the price of the dollar down. Rather, he felt, it will drive up interest rates to fund the debt, as well as stoke inflation.

He continued by sharing that he had observed what asset strategies did well in the 1930s. Consequently, he's buying residential real estate in Switzerland, for use as a main residence, if necessary, as well as precious metals. This is a guy who has at least one other local business besides citrus distribution, and could easily afford to scoop up local, undervalued real estate. But he's not.

Then he launched into a well-reasoned argument, in common with some leading economists, that the US is about to foolishly rely on an unfriendly power, i.e., China, to hold and continue funding our debt. Being European, he is fairly sensitive to currents of international economics and influence.

On that subject, he began to recount a recent business event which ended with him impassioned and red-faced.

Mr. Citrus' business practices all adhere to ISO 9000 standards. As he put it, they are the international gold standard for importation. So when a Federal inspector visited his offices recently to inquire as to his various certifications for importation, Mr. Citrus greeted him by saying something like,

'I'm glad someone finally asked to see my ISO 9000 certificate. You're the first person who has done so.'

He was shocked when the government agent replied,

'Well, that's very nice. But it doesn't meet our USDA rules.'

I won't bother with the details of the apparently-heated interchange that followed, which left Mr. Citrus agitated just in retelling the story.

But he made two very interesting points.

First, he noted that by insisting on a totally separate set of import rules, the USDA risked making US businesses globally less competitive, since they would focus on a rule set unique to the US, but inappropriate for global business.

Second, as he noted to the government agent, the USDA rules allow one exception- China. If you ship anything from China, the importation rules are suspended.

Mr. Citrus then drew the obvious conclusion. China, he said, had used its financial influence with America to obtain for itself carte blanche exemptions to import regulations and standards to which all other countries are held.

In his conversation with the agent, Mr. Citrus noted the expense he incurred to comply with ISO 9000. And that, maybe now, he'd simply reroute all his shipments through China, in order to lessen costs and quality.

He doesn't really intend to do this, but the threat was ironic.

And his story was very eye-opening. If this has already happened prior to flooding global financial markets with another trillion dollars in US obligations, what other standards will Congress and the current administration relax, on the quiet, in order to fund our debt?