Freaky Farm

Two years ago, Fillmore grower Tony Dighera was on the brink of losing his business just when his obsession – growing pumpkins in the shape of a Frankenstein head – finally paid off. National media outlets put his product in the spotlight. Retailers including Whole Foods Market Inc. showered him with thousands of dollars for the ghoulish gourds he calls Pumpkinsteins, saving his business. Then last fall, excessive heat right before the pumpkin harvest wiped out Dighera’s high-cash crop. Once again, he found himself on the brink. This time, his other crops – organic leafy greens and vegetables – saved his business, but just barely. The grower has lived the boom-and-bust cycle common to entrepreneurs. Experts say many don’t survive because they can’t ramp up production quickly and sufficiently enough to meet demand once their products are finally discovered by consumers. But Dighera, faced with orders for 200,000 Pumpkinsteins this season compared to 40,000 last year, has adopted new strategies to meet the demand, and come up with new growing techniques to eliminate the weather impacts from last year. If he can fulfill all the orders, he stands to generate sales of $3.5 million, assuming he sells the pumpkins for $17.50 each. To cover his costs and turn a profit, he needs to sell half of those ordered, he said. “There’s nothing to compare this to; it’s not like any other crop out there,” Dighera said. “It’s still a learning curve. It’s not perfected, and until it is, there are going to be issues.” Face value Dighera started Cinagro Farms Inc. (organic spelled backwards) about six years ago after a career with the Los Angeles Department of Water and Power. His initial focus was on spinach, kale, herbs and onions. But then he saw that consumers would pay at least $100 for Japanese cubed watermelons – which weren’t even edible – so he decided to grow his own, testing 27 watermelon varieties and 12 different processes. Dighera succeeded, and produced edible ones in the shapes of hearts and cubes. That evolved into the idea to mold pumpkins for Halloween – and the Pumpkinstein was born. It would be a stronger sell than just a cube, he felt. But while developing a process to mold a watermelon into a simple, geometric shape took only a year and a half, coaxing pumpkins into the shape of a nose, eyes, hair and mouth required four years and $400,000. Dighera experimented with different gourd varieties and growing techniques. For molds, he tried different food-safe plastics and injection mold designs that would encase the gourds without damaging the skin – which would cause them to rot – and also easily separate from the pumpkins once ripe. In 2014, Dighera harvested 5,500 Pumpkinsteins for national retailers, and they fetched $100 to $125 each at retail. The ghoulish gourds were an instant media sensation, attracting the New York Times, Forbes, CNN, CNBC, Fox News, Huffington Post and others. Last year, Dighera ramped up production to 40,000 Pumpkinsteins to meet demand. But a week of 100-degree temperatures just before harvest burned the gourds while still in their molds. Dighera lost 90 percent of the crop. “It was a real devastating blow to us,” Dighera said. “That’s farming.” Sales of his other crops offset some of the loss, he said, but now the business is “running on fumes.” Boom and bust cycles are typical with startups, said Greg Autry, assistant professor of clinical entrepreneurship for USC’s Marshall School of Business. “It’s very common with entrepreneurs – sometimes their own inventiveness is their enemy,” Autry explained. While they create a product that generates high demand, “they often can’t fulfill the volumes they create.” But after last year’s disaster, Dighera came up with a new way of growing the gourds so they are unaffected by high temperatures. The technique also cuts down the cost of growing them, and even makes them look more real. Half-molds Dighera grew the original Pumpkinstein inside two separate halves of a heavy plastic mold – one half has the shape of Frankenstein’s face, and the other the back of its head. The two halves were bolted together and then pulled apart when the Pumpkenstein was ripe. Now Dighera is growing the gourds in only the half of the mold with the face design, which eliminates heat from building up inside, he said. Now the fictional monster’s head emerges from half of the gourd. The technique also makes the Pumpkinsteins bigger – between 18 and 25 pounds. They’re also now in the traditional round pumpkin shape versus the narrow cubes of before, Dighera said. “The one that was complete (in the molds) was too perfect – people thought it was fake,” Dighera said. “This one, you can tell immediately it’s a pumpkin. People just gravitate to it.” Using only half a mold, rather than bolting two halves together and then pulling them apart, takes less time, he added, making the process less expensive. The easier and cheaper process is critical now with the greater production demands. Dighera’s other new strategy this year is to enlist the help of other growers. He signed agreements with two local pumpkin producers to grow gourds for him. “It’s too much for us as a small company to try and do in-house, so it makes sense,” Dighera said. “It’s also lucrative for the growers.” Local pumpkin growers usually make about $3.20 a pumpkin, Dighera said, but he’s paying them about $6.50 a pumpkin. And he’ll resell them for more than twice that amount, probably. He’s able to do that because the 18- to 25-pound Pumpkinsteins will probably fetch a higher price. While retailers are no longer selling them for the $100 each they were two years ago, Dighera estimated they will sell for about $20 a piece, although it will vary depending on the retailer, he said. If that’s correct, Pumpkinsteins could cost consumers about $3 more than what the average pumpkin’s retail price last year, based on data from the Department of Agriculture. Local pumpkin growers are also incentivized to produce for him, Dighera said, because it gives them a summer crop to fill in gaps between fall and spring crops and growing a different crop helps preserve soil health. In addition to the other growers, Dighera will increase his output as he has leased 30 acres to supplement the 10 or so acres he owns. Although the huge profit margins of $100 pumpkins are gone, the lower prices are a sign the market has matured. “I don’t think the other way was sustainable – it was a small niche market,” Dighera said. “At this price point, it appeals to the mass market and there’s much more sustainability.” Smart growth Autry, the entrepreneurial expert, was impressed with Dighera’s business but said it could be much more profitable if he switched to a different business model. The process to grow the Pumpkinsteins that Dighera invented, and the technology – the reusable molds – are where the business’s value is, Autry said. To capture revenue from that, Dighera first needs to patent the entire process – and soon, Autry said. Dighera may have to get several patents to protect the full process and should also consider copyrighting the Frankenstein image so he owns the whole system. Then he can sell it to other growers, Autry added. “The technology is much more valuable (for Dighera) than being the farmer,” Autry said. “Not being the farmer is the solution, and (instead) being the developer.” Using this model, other growers would do the investing to produce the Pumpkinsteins rather than Dighera, he said. And by increasing the number of growers, he could scale up to fulfill increasing demand. Dighera’s role would be in making deals with retailers, and growers would pay him for the process, the molds and from the proceeds of sales. This is essentially the same model that sports shoe and apparel brand Nike Inc. developed, Autry said, and that most jean manufacturers like Levi Strauss & Co. have adopted. “Levi’s doesn’t make anything; they only design the jeans and license the design to clothing factories all over the world,” Autry said. “They (the factories) then ship them directly to customers and send the checks (they receive) to Levi’s. Levi’s puts no money in inventory, or into workers’ compensation insurance, or environmental issues. All they do is design clothing and receive checks.” That would free up Dighera’s time so he could stay involved in growing and innovating new ideas. Also, this model would enable Dighera to get upfront capital to buy large quantities of molds to then sell to the growers, Autry said. He could raise money by pre-selling the molds needed for the following year, or secure angel investors through groups such as Pasadena Angels Inc. One thing to avoid, Autry advised, is selling the molds in China, where producers have been known to resell ideas, substitute materials with less expensive and inferior ones and have also had food safety issues. “It’s an impressive business – really cool and fun,” Autry added. White skulls Dighera has learned several lessons from his startup. One is that whatever capital an entrepreneur thinks he will need, he should double it. He also needs a consistent source of that capital, Dighera said. Third: resources have to be able to meet demands. And if an entrepreneur is not willing to lose something, don’t risk it, Dighera said. When developing something innovative, you have to anticipate problems and need the resources to cover those problems, he added. “I didn’t expect to have the losses that I’ve had,” he explained. “I didn’t expect to have to invest – the money and time – as much as I have. It’s been an extremely time-consuming and money-consuming program.” But he’s also now forming partnerships with customers. Sam’s Club – which ordered 100,000 Pumpkinsteins – will support him in any new products he develops rather than just acting as a customer, Dighera said. Dighera already has planned his next invention – a white pumpkin skull, edible watermelons in customized shapes and designs and a line of kale-based food, such as croutons, stuffing, bread, cereal and protein powder. “This was a business that was going to succeed – or die trying,” he said.