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Calavo shows Wall St. how to make money

By   /   Sunday, March 15th, 2009  /   Comments Off on Calavo shows Wall St. how to make money

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While a host of tri-county companies turned in dismal first quarter results, one Ventura County firm had its best ever.

Calavo Growers, the Santa Paula-based avocado and produce giant, reported the highest quarterly profit in the company’s 85-year history. Though the first fiscal quarter is usually Calavo’s smallest, recent diversification in both products and geography gave the company and unprecedented boost.

First quarter net income was $4.4 million, up 498 percent from a year ago – something Calavo President and Chief Executive Officer Lee Cole said reflects the successful implementation of the company’s global sourcing strategy.

The robust financial results “weren’t a surprise for us,” Cole said. “I know the world is falling down around us, but diversifying our business model is working well for us, and we’re not going to change a thing. The year is off to a formidable start.”

And Cole said that’s just the beginning. With its global sourcing capability, Calavo is diversifying and expanding, and he sees the potential for further gains in the future.

The diversification of suppliers “is fundamental to our ability to operate effectively under a variety of market conditions,” Cole told the Business Times. “We diversified into new commodity products over the last year, primarily tomatoes, papayas and pineapples. Those items are leveraging the Calavo brand and have played a significant part in our results.”

Sales of the company’s fresh products — avocados, tomatoes, pineapples, papayas and mushrooms — grew throughout the economic turbulence of 2008. In fact, the fresh products are doing so well that the company is considering expanding further into the market.

“More than likely, we’ll be branching into some additional fruits,” Cole said. “Diversifying our products like this definitely stabilizes the supply. As an example, if there’s a weather problem and we don’t get our mushrooms from Canada, we still have the papayas and pineapple from Hawaii.”

Branching into other fruits – and other regions – proved to be a smart move on Calavo’s part, especially considering industry experts are forecasting an extremely short California avocado season.

“It’s going to be probably the smallest crop California’s had in the last 10 years,” Cole explained. “The avocado trees are very temperamental, and last year when they were blooming, there was a cold spell or a heat spell — something that caused the blooms to fall and not sit on the tree.”

Though Cole recognizes the severity of the problem, he said the fact that Calavo is sourcing out of Mexico will make up for any lost California supply. Mexico his a year-round supplier of avocados, and Cole said Mexican avocados will always be on the shelves.

“During the Mexican season, we source heavily out of Mexico – from October until January or February,” Cole said. “We do buy in pesos, and financially that helps to some extent, but all of our U.S. competitors have that same advantage.”

One thing setting Calavo ahead of its competition is the company’s exclusive selling rights for all pineapples grown on the Hawaiian island of Maui.

“The pineapple is a major contributor to our success; they’re doing fantastic,” Cole said. “Between the pineapples — which we added about a year ago — and the papayas, we’re the biggest importer of produce from Hawaii.”

Calavo knew Hawaii was a good bet for produce; the company started importing its papayas from the Big Island years ago. In 2007, it started importing tomatoes from Mexico, followed shortly by Canadian mushrooms.

“It’s really interesting to look at all the different areas they come from,” Cole said. “We really have diversified, and those are all really good items that are good for you. We’re going to stick to items that are healthy, because they’re doing pretty well. I mean, we were able to post historically high profits during one of the most severe and painful periods of economic decline in the past 100 years. As for 2009, I think we’re going to come out OK.”

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