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2010 citrus expectations

Despite a recession that cut into 2009 citrus sales – most notably for lemons – things are expected to be a bit brighter in 2010, according to Russ Hanlin, president and CEO of Sunkist Growers Inc.

Hamlin set the scene for his address at the 116th Sunkist Growers annual meeting in Visalia with a video that had as its soundtrack music by rockers R.E.M. — “It’s The End of the World as We Know It (And I Feel Fine).”

Recapping his first year as CEO, Hanlin cited many changes at Sunkist and the challenge of taking the reins in the midst of the worst global economic slump since the Great Depression.

The cooperative’s annual report, which was released at the meeting, showed gross revenues of $860.5 million, down from a little over $1 billion in 2008. Payments to growers dropped to $646.3 million, a 21.5 percent from 2008’s $823.5 million.

Sunkist’s retain annual income in 2009 was just over $6 billion down nearly a third from 2008.

Hanlin said lemons were particularly hard hit last year by the economic decline and the largest negative restaurant growth in 40 years.

“There were too few lemons chasing too few dollars,” he said.

Hanlin said the Food Network on March 15 will be airing – on its “Unwrapped” program – a feature on Sunkist lemons.

A lighter Navel crop in 2009 brought better farm gate prices for some, Hanlin said. “F.O.B. prices of $13 made up for the lighter sets,” he said, adding this year’s prices are higher than last year and crop is bigger.

Other sore spots last year included a short crop of Valencias and lower demand. This year, a larger Valencia crop is expected, and Sunkist is marketing that variety as a “value fruit” to price-conscious shoppers.

“This should be a great season for growers of Valencias,” Hanlin said.

Hanlin said the bright spots include demand for the Cara Cara variety, which he termed the “power orange.” He said it is expected that the cooperative will market 1 million cartons of that variety for the first time this year.

Grapefruit also did well in 2009. In Asian markets, Florida’s early exit and South Africa’s late entry allowed Sunkist to sell 475,000 cartons of Star Rubies.

Other specialty oranges – including moros, minneolas, fairchilds, satsumas, clementines and murcotts – fared well.

Sunkist’s Board Chairman Nick Bozick said Sunkist’s “experience in managing through difficult times helped turn what could have been a very bad year, into a relatively good one.”

Both men talked of threats hanging over the industry and the cooperative itself. They included concern over citrus greening and efforts to keep at bay the citrus psyllid, which carries a bacterial disease called Huanglongbing.

“The disease has not yet been discovered in California or Arizona, but it has been found south of the border in Mexican citrus,” Hanlin said.

Hanlin and Bozick also expressed concern about political action that could modify or repeal the Capper Volstead Act, which created the cooperative business structure.

“A loss of our cooperative status would adversely affect your ability to compete with large public agricultural conglomerates both here and internationally,” Hanlin said.

Bozick pointed out that a new tagline has been added to the Sunkist name: “a cooperative of family farms since 1893.” He said it was added “because Sunkist is perceived by many as a large, impersonal corporation when nothing could be further from the truth.

“Not only does our new identifier enhance our brand image with the trade, government agencies and consumers, it also positions us in our proper perspective as ‘local growers’ rather than ‘corporate farmers.’”

Hanlin said 2009 was a difficult year for Sunkist’s Citrus Juice and Oil Division, partly due to low processing volume and continued costs related to consolidation at the Tipton, Calif., plant. But he said the future looks better “as we are seeing a slight reversal in the downward trend of juice consumption, and sales are on the increase.”

Despite the recession, Sunkist’s global licensing business continued to grow with 73 new Sunkist-branded products introduced in 2009.

Hanlin said economic improvement – particularly in food service has been “very slow and spotty. Until global markets recover and unemployment numbers come down dramatically, our industry will continue to face substantial challenges.”

The meeting closed with a keynote address by Marci Rossell, former CNBC chief economist and co-host of “Squawk Box.” She believes full recovery began three months ago and that “recovery creates jobs, jobs don’t create recovery.”

Rossell also believes the recovery will come from exports.

Hanlin said as much as 30 percent to 40 percent of Sunkist citrus is exported.

He said the cooperative is trying to reach new markets in India, Russia and the Middle East.

“New varieties of citrus, along with adding to our portfolio, increase the value of our offerings to key customers around the world,” Hanlin said.

He said bright spots include adding nearly 5,000 acres to the Sunkist portfolio over the past two years. A recent addition to the cooperative is Bravante Produce with nearly 1.4 million cartons of citrus.

Hanlin said the changing landscape for citrus sales includes greater outreach through social networks such as Facebook, Twitter and YouTube. “People rely less on traditional media outlets.”

In addition to social networks, Sunkist has redirected its marketing efforts from national ad campaigns to customer and market-specific programs.

“This allows to us to do more business with the right mix of customers rather than just more business,” Hanlin said.

Bozick of Mecca, Calif., was re-elected to a fifth term as chairman of the board of Sunkist Growers following the annual meeting. He is president of Richard Bagdasarian, Inc., a family run multi-commodity produce, growing packing and shipping business in the Coachella Valley.

Re-elected vice chairmen for 2009 were Craig Armstrong of Palm Desert, Calif.; Gerald Denni of Strathmore, Calif., and James Finch of Ojai, Calif.

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