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After More Than a Century, Sunkist Has Learned to Adapt

After More Than a Century, Sunkist Has Learned to Adapt By CARLOS MARTINEZ Staff Reporter When consumers began taking notice of the cut-fruit items on store shelves a few years ago, so did Sunkist Growers Inc. As more consumers shunned whole fruit for the cut variety, Sunkist, which was already struggling with a tough economy, moved forward with plans to enter the market this summer with their own brand of the fruits. The move is only the latest in the company’s long history of adapting to a changing market. The 110-year-old Sherman Oaks-based cooperative, which is being recognized by the Business Journal as the Longest Established Valley Company, was borne out of disgruntled growers who grew tired of unscrupulous sales agents who kept most of their sales profits. Originally called the Southern California Fruit Exchange in 1893, the co-op changed its name to Sunkist Growers Inc. in 1952. Today, the fruit co-op is still going strong, continuing to change with the market and the needs of its customers. “We’re always in the middle of changing and it tends to be slow, but in the end it’s always a positive change,” said Jeff Gargiulo, Sunkist president and CEO. As the co-op finds itself struggling for shelf space against bananas, peaches and exotic fruits at local supermarkets, it’s had to change to meet new customer demands. Sunkist’s latest effort is to enter the cut-fruit market, for customers who would rather not spend time cutting their own fruit. “This is what it takes to be competitive because there is a proliferation of new specialty type products and people want a lot of choices,” Gargiulo said. Already, Sunkist has been testing the cut fruit at some stores and the response has been good, Gargiulo said. Amid a down economy in recent years and a declining juice market, Sunkist finds the need to change once again. Trade problems Although cold weather and short growing seasons have hampered Sunkist crops from time to time, the biggest damage to its finances have been man-made. European Union subsidies to Spanish Clementine orange growers in 1997 allowed those growers to flood the U.S. market with inexpensive oranges that priced Sunkist’s oranges out of the market. After four straight years of losses from the cheap oranges and a 1998 freeze in central California, Sunkist bosses lobbied heavily with U.S. and European government officials to put an end to the subsidy. The lobbying effort, which lasted nearly two years, ousted the Clementines from American grocery stores, but at the same time forced Sunkist to re-evaluate its business model. Sunkist would now have to play a bigger role in overseas trade politics. So in 2001, the company hired Gargiulo, an international trade specialist who heads his own agriculture and real estate development firm, to be its new chief executive. In the short time at the company’s helm, Gargiulo has reorganized the way the cooperative does business by redesigning its sales and marketing teams to better fit the economic climate. Gargiulo has also reduced the size of the board of directors and recruited outside directors for expert advice. Sunkist has also moved into Texas grapefruit production and has ramped up the licensing of its brand for overseas markets while pushing its member growers to better adapt to the needs of the market. “We’re a cooperative and when change is needed, we can’t act as fast as we want to because we have to get input from the growers,” Gargiulo said. “But things are changing and we’re reacting faster than ever.” Adapting to conditions But change has been at the heart of Sunkist’s success throughout its history. Early in its history, when it found wood for its crates too expensive, the company got into the timber business. Today, it owns 360,000 acres of forest in Central California. The new soda became the best selling orange drink over the next two years, giving the co-op needed licensing revenue. By 1980, Sunkist’s orange crops took a beating by the Mediterranean fruit fly which dogged the state’s crops for two years before being eradicated in a controversial aerial spraying campaign. With some countries banning California produce altogether, Sunkist and others cut prices and focused on the domestic market until the bans were lifted. “They’ve always managed to roll with the punches,” said Dennis Johnson, a Kern County grower. “Sunkist manages to keep changing and moving to the beat of the market.”

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