Calavo Growers, Inc., is a global leader in the avocado industry and an expanding
provider of value-added fresh food. Our expertise in marketing and distributing
avocados, prepared avocados, and other perishable foods allows us to deliver
a wide array of fresh and prepared food products to food distributors, produce
wholesalers, supermarkets, convenience stores, and restaurants on a worldwide
basis. We procure avocados principally from California and Mexico. Through our
various operating facilities, we (i) sort, pack, and/or ripen avocados, tomatoes
and/or Hawaiian grown papayas, (ii) process and package fresh cut fruit and
vegetables, salads, wraps, sandwiches, fresh snacking products and a variety
of behind-the-glass deli items and (iii) produce and package guacamole and salsa.
We distribute our products both domestically and internationally and report
our operations in three different business segments: Fresh products, Calavo
Foods and RFG. Our principal executive offices are located at 1141-A Cummings
Road, Santa Paula, California 93060; telephone (805) 525-1245.
Calavo was founded in 1924 to market California avocados. In California, the
growing area stretches from San Diego County to Monterey County, with the majority
of the growing areas located approximately 100 miles north and south of Los
Angeles County. The storage life of fresh avocados is limited. It generally
ranges from one to four weeks, depending upon the maturity of the fruit, the
growing methods used, and the handling conditions in the distribution chain.
We sell avocados to a diverse group of supermarket chains, wholesalers, food
service and other distributors, under the Calavo family of brand labels, as
well as private labels. From time to time, some of our larger customers seek
short-term sales contracts that formalize their pricing and volume requirements.
Generally, these contracts contain provisions that establish a price floor and/or
ceiling during the contract duration. In our judgment, the shift by our customers
to drafting sales contracts benefits large handlers like us, which have the
ability to fulfill the terms of these contracts.
The Hass variety is the predominant avocado variety marketed on a worldwide
basis. Generally, California grown Hass avocados are available year-round, with
peak production periods occurring from April through August. Other varieties
have a more limited picking season and generally command a lower price. Approximately
1,900 California growers deliver avocados to us, generally pursuant to a standard
marketing agreement. Our share of the California avocado crop approximated 28%
of the 2016 shipped California avocado crop, based on data published by the
California Avocado Commission. We attribute our solid foothold in the California
industry principally to the competitiveness of the per pound returns we pay
and the communication and service we maintain with our growers.
California avocados delivered to our packinghouses are grouped as a homogenous
pool on a weekly basis based on the variety, size, and grade. They are then
graded, sized, packed, cooled and, frequently, ripened for delivery to customers.
Our ability to estimate the size, as well as the timing of the delivery of the
annual avocado crop, has a substantial impact on both our costs and the sales
price we receive for the fruit. To that end, our field personnel maintain direct
contact with growers and farm managers and coordinate harvest plans. The feedback
from our field-managers is used by our sales department to prepare sales plans
used by our direct sales force.
A significant portion of our California avocado handling costs is fixed. As
a result, significant fluctuations in the volume of avocados delivered have
a considerable impact on the per pound packing costs of avocados we handle.
Generally, larger crops will result in a lower per pound handling cost. We believe
that our cost structure is geared to optimally handle larger avocado crops.
Our strategy calls for continued efforts in aggressively recruiting new large
growers, retaining existing growers, and procuring a larger percentage of the
California avocado crop.
We have developed a series of marketing and sales initiatives primarily aimed
at our largest customers that are designed to differentiate our products and
services from those offered by our competitors. Some of these key initiatives
are as follows:
·
We continue to have success with our ProRipeVIP™ avocado ripening program.
This proprietary program allows us to deliver avocados ~evenly ripened to our
customers’ specifications. We have invested in TasteTech Near Infrared
(NIR) technology and equipment. The most significant reason we invested in the
TasteTech systems is because the NIR technology measures internal qualities
of the entire piece of fruit, as opposed to competitive mechanical tests that
use pressure and calculated averages to measure firmness. We believe that ripened
avocados help our customers address the consumers immediate needs and accelerate
the sale of avocados through their stores. We currently have three TasteTech
systems in use in the United States, which, we believe, can effectively meet
our customers’ demand for conditioned fruit.
·
We have developed various display techniques and packages that appeal to consumers
and, in particular, impulse buyers. Some of our techniques include the bagging
of avocados and the strategic display of the bags within the produce section
of retail stores. Our research has demonstrated that consumers generally purchase
a larger quantity of avocados when presented in a bag as opposed to the conventional
bulk displays. We also believe that the value proposition of avocados in a bag
provides for a higher level of sales to grocery stores.
Other perishable food products include various other fruit, such as tomatoes,
papayas, and pineapples. The majority of our other perishable food sales are
generated from tomatoes and papayas. Tomatoes are primarily handled on a consigned
basis, while papayas are handled on a pooling basis, generally at a fixed fee
per papaya delivered. Sales of our diversified Fresh products generally experience
fluctuations related to seasonality. We believe our efforts in distributing
our other various types of fruit complement our offerings of avocados
We utilize ultra-high pressure technology equipment, which is designed to protect
and safeguard our avocado and guacamole products without the need of preservatives.
Using high pressure only, this procedure substantially destroys the cells of
any bacteria that could lead to spoilage, food safety, or oxidation issues.
Once the procedure is complete, our packaged guacamole is cased and shipped
to various retail, club, and food service customers throughout the markets we
service in the U.S and abroad.