Despite “the biggest existential threat” the Florida citrus industry has ever faced, Florida’s Natural Growers had one of its best financial years in 2015-16. That was the take-home message Dennis Broadaway, chairman of the board at the Lake Wales juice cooperative, gave to more than 250 citrus growers and guests its annual meeting this week in Haines City.
One reason for the financial success of Florida’s Natural, however, is the income it receives from packaging other beverage products for companies that include Campbell’s, AriZona iced teas and Welch’s and from its own lines of other beverages, such as lemonades, apple juice and juice blends.
“We have been focused this past year in obtaining third-party packaging opportunities,” Broadaway said. “This non-member business activity not only generates income, but it also fills (processing) capacity and spreads overhead, which helps member fruit returns,” or profit shares.
Florida’s Natural and its parent company, Citrus World Inc., is a juice processing cooperative owned by 14 citrus grower organizations representing about 1,000 growers with roughly 60,000 grove acres. The owner-members include the Dundee, Haines City, Winter Haven and Lake Wales citrus grower associations; Hunt Bros. Cooperative, a Lake Wales-based grower; Ben Hill Griffin Inc. of Frostproof; and Peace River Packing Co., a Fort Meade grower and fresh fruit packer.
Florida’s Natural delivered on its primary mission of delivering better-than-average returns on the oranges and grapefruit its members provide to the cooperative, said Broadaway and William “Chip” Hendry, chief financial officer.
The cooperative paid its growers an average of $1.95 per pound solids for early and mid-season orange varieties harvested from October to March and $2.30 for Valencias picked from March to June, Hendry said. Pound solids is a standard industry measure of the amount of juice squeezed from fruit.
Grapefruit growers got $2.12 per pound solids for white varieties and $2.09 for colored grapefruit, he said. Those returns were the highest in the company’s history, Hendry said. The returns also compared well to the industry averages for the 2015-16 season as reported by the Florida Department of Citrus. Orange growers earned an average $1.89 per pound solids for early-mids and $2.29 for Valencias. Grapefruit growers got $1.83 for white varieties and $1.89 for colored grapefruit.
Needing those returns
Growers need the superior returns because of the rising costs of growing citrus in Florida following the introduction of the deadly citrus greening disease in 2005. The Florida orange crop has declined 70 percent since that time, largely due to the disease’s effects on trees.
Production costs needed to combat greening rose to nearly $2,400 per acre in 2015-16, Broadaway said. That’s more than triple the average grove caretaking costs before greening.
Florida’s Natural also needs to pay high returns to ensure it can get enough oranges and grapefruit to meet its juice production demands, Broadaway said. The cooperative processed 12.6 million boxes of oranges from members in 2015-16, down from 13.8 million boxes the previous season and more than 16.3 million boxes in 2012-13, a company report shows. “We know maintaining fruit supply is not a given, and consistent supply depends on the cooperative’s ability to deliver superior fruit returns,” Broadaway said.
Florida orange production, estimated at 72 million boxes for the current 2016-17 season, will likely remain low for the next decade as the industry rebuilds from its greening losses, said Bob Behr, Florida’s Natural CEO. Florida growers produced 242 million orange boxes in 2003-04. Several growers at the meeting agreed with Behr’s assessment. “It’s going to take a while for the young trees to replace the losses of all the mature trees (to greening),” said David Wheeler, a Lake Placid-based grower who supplies to Florida’s Natural.
“Fruit production will be low for the next decade,” said Ben Hill Griffin III, a grower-member.
Lower sales revenue and market share
Florida’s Natural was able to pay record returns despite a 4 percent decline in sales revenue to $441.4 million in 2015-16, a company report shows. It has managed to compensate for the revenue loss by cutting production costs and reducing short- and long-term debts, Hendry said. The decline is consistent with the shrinking supply of oranges and the 5.4 percent decline in total orange juice sales at major U.S. retail outlets in 2015-16, said Chris Groom, vice president of sales and marketing.
The Florida’s Natural brand also lost a half percent market share in the not-from-concentrate orange and grapefruit juice markets, he added. The brand consists exclusively of not-from-concentrate juices, a chilled, ready-to-pour product. The cooperative saw its orange juice market share decline to 19.3 percent in 2015-16 compared with Bradenton-based Tropicana, at 37 percent, and Minute Maid, at 25.3 percent, Groom said. Its grapefruit juice market share fell to 33 percent behind Minute Maid’s 36 percent. But Florida’s Natural’s sales are growing in the non-retail segment, including hotels, restaurant chains and other corporate buyers and in the export market, he added. Non-brand business will become a growing part of the cooperative’s future until the industry emerges from the greening threat, Broadaway said.