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Sunkist leaders upbeat after year’s freeze, facing record 2007-2008 crop

Mar 25, 2008 10:05 AM, By Marni Katz
Contributing Writer

Despite a record crop of navel oranges looming on the horizon for 2007-2008, leaders at Sunkist Growers were upbeat about profit prospects for 6,000 grower members at the cooperative’s 114th annual meeting recently in Visalia.

The official projection for the 2007-2008 U.S. navel crop was revised upward by 10 million cartons to 95 million cartons. If realized that projection would be a new record.

Sunkist President Tim Lindgren said the cooperative is well poised logistically, operationally and in the marketplace to move the large volume for California and Arizona growers, in large part due to efficiencies and consolidations the company has implemented in the last year.

Lindgren said that the freeze year of 2006-2007 coincided with a “top-to-bottom review” of Sunkist operations from its citrus juice and oils business to its sales and marketing and research and technology divisions that have made the cooperative more efficient and effective and helped improve returns to growers.

Operational restructuring will simplify the sales process, generate additional revenue, create opportunities to improve efficiency, and invigorate the Sunkist brand through its global licensing business, he said. Already, realignments have helped the cooperative reduce expenses by 22 percent this year, while at the same time selectively gaining volume.

Lindgren said Sunkist has set a goal of adding 2,000 acres of citrus annually to fit strategically into the cooperative’s marketing programs and easily hit that mark last year.

Despite last year’s freeze, Nicholas Bozick, Sunkist chairman and grower with Richard Bagdasarian Inc. in Mecca, Calif., said last year in fact proved to be a banner year for those Sunkist growers who had marketable fruit remaining on the trees.

“Last season’s results, which could have been disastrous for most, were instead, excellent for many,” Bozick said. “Growers with harvestable fruit enjoyed very good returns.”

He credited Sunkist staff and directors with leading the industry through a unique and challenging year.

“As a company, we faced unique challenges the last few years and operated under very difficult circumstances and I’ll be the first to admit that it wasn’t easy,” Bozick said.

In the end, with the help of Mother Nature and industry leadership, most growers fared well, he said.

Bozick said an unexpectedly large volume of marketable fruit remained on trees after the freeze and the growing, packing and distribution chain did a good job keeping low quality fruit out of the marketplace to bolster strong market support for remaining fruit in both fresh and juice channels.

Even though 70 percent of the state’s navel crop was still on trees when the freeze struck in January, Sunkist ended up shipping roughly 60 percent of the prior year’s navel volume and generated about 87 percent of the same year’s revenue.

“The industry worked together to get quality fruit in the hands of consumers and keep fruit in the system to properly pace the distribution of quality fruit to market,” Lindgren said. “We walked a fine line to maximize returns to our growers and maintain long-term relationships we have in the marketplace.”

Lindgren said 2006-2007 sales approached $1 billion despite the freeze, and member growers enjoyed strong returns. As a result, Sunkist growers saw their fresh fruit assessments for 2007-2008 reduced to 55 cents per carton, a 19-percent drop from last year and the lowest assessment in several seasons. Growers in 2007 received a 5-cent refund and Lindgren announced there would be no 13th assessment in 2007-2008.

Lemon growers in particular had a strong year last year with strong demand and record revenues for their crop. The cooperative shipped 3 million fewer cartons of lemons in 2007 but still generated revenues of $380 million, topping the previous record by about 11 percent. Lemon growers were also helped by anti-dumping action against companies in Argentina and Mexico, resulting in a suspension agreement by the U.S. Department of Commerce that set competitive price floors for South American lemon juice.

Lindgren said the freeze year provided a challenge and an opportunity to Sunkist’s Citrus Juice and Oils Division, which suddenly found itself operating 24/7 to handle a record tonnage of post-freeze fruit.

“The post-freeze navel processing tonnage surpassed the record set the previous year and achieved the best pay price in five years,” Lindgren said.

Sunkist embarked on a major consolidation of its juice processing plants last year, closing its lemon processing unit in Ontario and moving it to Sunkist’s facility in Tipton, which has traditionally handled oranges and tangerines. The efficiencies and economies of scale of the consolidation, which will be financed through land sales of the Ontario property, will pay for itself several times over, Lindgren said.

The division’s new Vice President Ted Leaman expects the move will increase capacity 15 percent during heavy production years and provide overhead savings in lean years.

Sunkist is also on-track to become the nation’s largest supplier of citrus bi-products and is exploring technology to convert peels into energy.

“This will allow us to improve our returns while eliminating our waste products in an environmentally friendly way,” Lindgren said.

Russ Hanlin Jr., senior vice president of sales and marketing for Sunkist, said the cooperative is creating a more centralized and strategic model for its sales program to satisfy increasingly consolidated buyer demand.

“It will not be ‘pick, pack and sell a size at anything-better-than-juice’ approach,” Hanlin said.

Bozick said the restructuring of Sunkist’s businesses during the freeze year has helped provide better service to growers and customers and create efficiencies and cost savings in its operations.

Despite a generally upbeat assessment for 2007-2008, Sunkist officials were cognizant that it has not been an easy road for all citrus growers. Many growers are still trying to recover after having little post-freeze crop to harvest. And Valencia growers were caught between a long 2006-2007 crop and early 2007-2008 crop with more than a million cartons of Valencias never making it to juice markets and both quality and prices down.

One grower in the audience from the Fillmore-Piru area reminded directors that “the wheels have come off the cart” for growers in that area as the size structure in the global market changed and growers, particularly those with older Valencia trees, found themselves with fruit the market did not want.

But judging by the mood and general lack of comment during the question-and-answer session following the business meeting, most Sunkist growers appeared upbeat.

In addition to the business meeting, growers and affiliated attendees reviewed new technologies and services for the citrus industry in the exhibition hall. Several also were photographed with their “Sunkist Smile,” posing for the camera with an orange wedge in their grin in honor of the 100th anniversary of the Sunkist brand.

The images, along with photos of licensees, consumers and employees, will be part of a montage of “Sunkist Smiles” photos, culminating with a billboard in New York’s Times Square.

“For one day, anyway, we will turn the Big Apple into the Big Orange,” said Hanlin.

Hanlin’s father, Russ Hanlin Sr., former Sunkist president, was among those spotted posing with a Sunkist Smile at the annual meeting.

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