Billion-Pound Baby
High-octane almond orchards fuel sustained growth
as Blue Diamond expands global market reach
By Dan Campbell
Editor
Blue Diamond featured its own growers
(and the honey-bear mascot) in television ads in the 1980's.
Photos courtesy Blue Diamond
n the mid-1980s, Blue
Diamond Growers ran a
series of humorous TV
commercials, showing coop
growers buried up to
their waists in almonds, asking
Americans to buy “a can a week, that’s
all we ask.” In those years, the U.S.
almond industry (then as now, virtually
100-percent California based) was producing
around 400 million pounds of
nuts in a typical year.
If those same commercials were
filmed today, the growers would be
buried up to their necks, as the
California crop now tips the scales at
more than 1 billion pounds in a typical
year. The co-op anticipates a 30-percent
increase in bearing acreage by
2010 and that crops will then top 1.5
billion pounds.
In the history of specialty crops, few,
if any, can match this success. In 1950,
U.S. production of 50 million pounds
represented just 17 percent of the world
market, while Spain commanded more
than 75 percent of the market. Today,
that picture has been turned on its
head. California’s slice of the world
almond market is now 80 percent. Yet
the market has not been glutted, and
crop prices remain strong.
How have they done it?
On the production side, the gains are
not only the result of new orchard
plantings (statewide acreage now totals
680,000 acres), but through continual
advances in the art and science of farming.
More sophisticated fertility and
irrigation technology and practices are
playing a big part. So are new orchardplanting
strategies, which involve various
combinations of almond tree varieties
(there are dozens) and planting
patterns (there are hundreds) that
increase the odds of a successful crop
set during the crucial spring pollination
season. Orchard pollination is a science
unto itself, involving close teamwork
with the honey-bee industry.
Of course, none of this industry
growth would have been possible without
parallel advances in almond processing
and marketing, where for 96 years
Blue Diamond and its more than 3,000
grower-members have been the industry
leader in developing new almond products
and opening domestic and
international markets. From its
own brand of almond snack and
cooking nuts, to the dozens of
different sliced, diced and slivered
almonds and almond
pastes developed in its own
research and test kitchens, Blue
Diamond has proven that there
are limitless ways to improve all
foods with almonds. The co-op
works closely with major food
companies that produce pastry,
candy, ice cream, breakfast
cereal, marzipan, frozen foods
and vegetables, breads, salads
and other foods.
Rural Cooperatives recently
spoke with Blue Diamond
President and CEO Doug
Youngdahl, Board Chairman Clinton
Shick, and long-time Public Affairs
Director Susan Brauner about the role
the co-op plays in ensuring the continued
success of its member-growers.
Question: How has the almond industry
sustained such dramatic growth
without glutting the market?
With
even bigger crops to come, where will
they all be sold?
Doug Youngdahl: Demand has actually
out-paced supply. Although prices are
cyclical, the overall trend has been sufficiently
profitable to support and
encourage increased almond plantings.
We’ve expanded markets around the
world and now sell in 95 countries. In
the United States, where about 30 percent
of each crop is consumed, we’ve
seen annual per capita consumption rise
from around three-fourths of a pound
to one pound.
The marketing challenge involves a
combination of making gains in mature,
well-established markets and opening
new markets in developing countries
where the standard of living is rising.
The biggest growth opportunities today
are probably China and the rest of Asia.
We’ve made significant gains—especially
this year in China, a market of 1.3
billion people where we’ve only had a
real presence for about five years. India
is a market of another 1 billion people,
and more of them now recognize that
almonds are a delicious source of protein
and 21 vitamins and minerals.
Q. Where are the major almond-production
growth areas?
Clinton Shick: There has been huge
growth in Kern County [the Bakersfield
area] and along the west side of the
Central Valley in Fresno and Kings
counties. Growth is being fueled by
both new, ‘high-octane’ orchard plantings
and conversion of other tree and
row crops into almonds. We used to
think a ton of almonds per acre was nirvana,
but now 3,000-pound yields are
produced regularly, and some orchards
produce 4,000 pounds per acre. We are
just much more productive with our
land.
Q. How have Blue Diamond members
fared during this period of growth?
Youngdahl: During the past five years,
Blue Diamond returns to our growers
have increased each year—on a per
pound basis, compared to the prior year
—by 26 percent, then by 35 percent,
then 43 percent and now 27 percent.
What is particularly amazing about this
recent trend is that the increases have
occurred over the four largest crops in
California almond history.
Q. Internationally, who are your major
competitors today?
Youngdahl: Spain ranks second.
Ironically, it is also our largest export
market. They have equipment in place
to process almonds and have found that
our California almonds are actually easier
to process than their own. So Spain
re-exports a lot of what they buy from
us. Spain has the necessary
Mediterranean climate and a lot of
acres to cultivate, but water is the limiting factor. Australia, which currently
produces around 45 million pounds, is
expanding and hopes to double its production
in about five years, which
would give it about the same size crop
as Spain.
Q. What’s been the impact of the
strong euro vs. the U.S. dollar on your
sales in Europe?
Did the creation of the
euro make business transactions a little
simpler for you?
Youngdahl: The strength of the euro
has helped us in Western Europe, our
largest market, because they can afford
to buy more almonds. But currency
rates go in cycles. People often ask what
happens when the dollar gains strength
again. I like to point out that fastest
market growth rate is in the U.S.,
where consumers obviously are paying
in U.S. dollars.
Fortunately, we have always sold
internationally in U.S. dollars, so the
euro has had no real impact on our sales
transactions there. However, it has
made it easier for some of our
European customers to buy from us and
then move almonds around by trading
with a uniform currency.
Shick: We’ve had a pretty stable, cheap
dollar for a number of years, and it’s
played a big part in avoiding a
supply/demand problem. I can remember
back in the 1980s and early 90s
when it was the other way around, and
it really fouled up our ability to market
overseas. So we really put a premium
on trying to develop as much domestic
business as we can, because changes in
the dollar value vs. international currencies
do not affect us here. One day the
exchange rate may not be as favorable
for exporters, so you can’t get lulled
into false sense of security. You need to
plan accordingly.
Q. Any key international trade issues
facing BD?
Youngdahl: We work closely with our
government trade representatives to
open markets around the world for
California almonds, and we
very much appreciate the good
work they have done in the
trade arena. Blue Diamond has
always supported free-trade
agreements for almonds
throughout the world, whether
via bilateral or multilateral
agreements. In addition, the
Market Access Program has
been another key enabler supporting
the expansion of the
almond industry in export markets
over the years.
Q. Doug, you’ve been the CEO
there now for five years. What
was the biggest challenge facing you
when you came on board, and what
changes did you implement?
What’s on
top of your “to do” list right now?
Youngdahl: When I became CEO, the
biggest challenge was an almond market
price that was near or below the cost of
production for our members. In addition,
our Blue Diamond return was not
viewed as competitive with others in
our industry.
Working with our board of directors,
we began in 2001 to hold annual joint
strategic planning sessions between our
board of directors and key management.
Through this transparent strategic
planning process, we define, review and
agree upon clear strategies for the
future. During the last five years, we
have redefined our culture around the
business maxim: “Good planning is a
prerequisite for good execution on the
way to desirable results.”
Without spelling out all of the
changes, the results of this approach
have been highly successful. Blue
Diamond member-returns have been
among the best in the industry, our
operations have become leaner and
more efficient, our customer relationships
have been further enhanced and
strengthened, and our balance sheet is
stronger.
Blue Diamond CEO Doug Youngdahl
outside the gift store at the co-op's visitor center
in Sacramento; Blue Diamond's plant
in Sacramento is the world's largest
tree-nut processing facility;
We are now preparing for our next
strategic planning session. In this session,
we are looking out over a 10-year
planning horizon to ensure Blue
Diamond is properly positioned
to meet the challenges and the
golden opportunity that is sure
to come with the larger almond
crops forecasted.
Q. Any crucial factors for successful
strategic planning?
Shick: One reason it has worked
for us has been the transparency
of the process. When these
efforts don’t work, it’s often
because board and management
don’t have a relationship of trust
that allows for open and honest
dialog. Doug has been very
open, and the meetings have
been transparent. Not everything
that is said gets implemented,
but the process puts
issues on the table that we can talk
about openly and honestly. It’s really
been a good thing from both sides of
the equation: the farmer/producer side
and the marketing/processing side. It is
helping us get to where we need to go.
Brauner: In preparation for the next
session, management is already reviewing
our progress last year and drafting
new targets. When we meet with the
board in April, we will strategize off-site
for three days. We’ll get a clear picture
of where we are and where we need to
go.
Youngdahl: These six sessions so far
have provided a perfect opportunity for
board and management to reflect how
the company is performing within our
industry for our members. Are we
achieving our mission and vision? Are
we doing the job we need to do in the
short term, and what do we need to do
to prepare our organization for the long
term, in five and 10 years? It’s been a
key part of our success.
Q. Clinton, you’ve been vice chairman
for 17 years while Howard Isom served
as chairman. He was well respected not
only by the members and the industry,
but by co-ops
nationally. What
do you think his
greatest talent as
chairman was?
Shick: All Blue
Diamond board
members,
whether owners
of small or large
operations, are
successful businessmen.
In addition
to his almond
ranch, Howard
has a very successful
certified public
accounting (CPA)
business in Chico,
Calif. Most people
point to his
financial skills and
acumen as his greatest contribution to
our board. While important, I really
think that was secondary. Because of his
CPA work with many types of businesses
through the years, he could see
which practices work and which don’t.
He would never mention business
clients by name, but he obviously
gleaned an enormous amount of experience
and insight from them, and that
influenced the mindset he brought to
our board room. So I would say his
greatest contribution was bringing to
the table successful business practices
and ideas. He was sharp enough to
apply those practices to the almond
industry.
Q. What is your basic philosophy of
being a successful director?
Shick: First and foremost: you hire the
very best CEO you can find, and we’ve
done that. You hire good people, you
establish expectations, and then you
hold them accountable to hit the targets
the board sets. You evaluate openly and
honestly.
Directors need to stay out of the
operational issues as much as possible.
Farmers tend to be very operations oriented,
and it’s real easy for them to get
into the nuts and bolts of how a business
runs. I am going to try to resist
that tendency. Instead, we will sit down
with Doug and his management team
and set realistic goals every year, then
we as directors will concentrate on
monitoring and evaluating the co-op’s
real performance against those goals.
That is the critical role of the board.
It is vitally important that we take a
long-term view in managing our company’s
capital. For a time, I think we
were playing it too close to the vest
when it came to moving into new technologies
that could help us. We’ve
changed course there and are now staying
more on the cutting edge of technology
additions to our processes. We
realize that to maintain an industry
leadership position, we must be a lowcost
producer.
Q. A sensitive issue for many co-ops is
that they feel they pay most of the bill
to open markets, and then their competitors waltz in behind them and get
the gain without sharing in cost of
opening the door.
Youngdahl: Free-riders are a fact of life
whenever you are a market leader.
While you may pay the price of admission
to open markets, you do not own
them. You have to repeatedly earn market
share to keep it.
Shick: A rising tide lifts all boats. If you
are the biggest and smartest force in the
industry, it is just your lot in life. To
help ourselves as Blue Diamond members,
we know we will be helping the
industry as a whole, but that is a good
thing.
Q. Does the existence of the Almond
Board of California help ensure that
all pay a share for marketing and promotion?
Youngdahl: Blue Diamond was a key
supporter for the creation of the
Almond Board of California under a
federal marketing order in 1950. Today,
a three-cent per pound assessment
exists on all California almond production,
which is collected by almond handlers
and paid to the Almond Board.
This revenue supports a collective
investment in our industry’s future, primarily
to increase consumer global
awareness of California almonds. The
process is working, and it is partially
offsetting the “free-rider” syndrome.
Q. There’s been a lot of good news on
the health front for tree nuts and
almonds. Is that playing a part in
surging demand?
Youndahl: Absolutely. There has been
a lot of good news about almond nutrition
and the related favorable health
benefits. Scientific evidence continues
to mount suggesting that a regular diet
of almonds may help maintain healthy
hearts, reduce weight, prevent diabetes,
fight arthritis, inhibit tumor cell growth
and may even help lower the risk of
Alzheimer’s. The International Tree
Nut Council’s Nutrition, Research and
Education Foundation, which I chair,
has invested in new science and
research, resulting in the Food and
Drug Administration’s approval of a
health claim for almonds and other tree
nuts. Additional research, plus investments
by the Almond Board, has
brought forth some really exciting science,
and more studies are underway to
support the health benefits.
Brauner: Just 10 years ago, none of the
nine world tree nut industries were
talking to each other. They viewed each
other only as competitors. Through the
International Tree Nut Council, they
came together in California to figure
out ways to increase consumption of all
tree nuts. We pooled funds to get solid
nutrition research done. We got our
qualified health claim from FDA, and
that is a key success story for the entire
world tree nut industry.
Q. What are the major ways in which
Blue Diamond adds value to its members’
crop? What new products look
promising?
Youngdahl: We add value by creating
and expanding global market opportunities
and then by capturing the highest
margin product market segments for
our members. We sell to the most
refined processed-ingredient industrial
customers and to the less defined commodity
market customers.
Our Blue Diamond retail branded
business is in one of our fastest growing
market segments. Gross sales have
tripled in the last five years and will
double again before the end of the
decade. New products, like our Bold
line of wasabi and soy flavored almonds
and jalapeño smokehouse almonds, have
added excitement to the snack nut aisle.
Nut Thins and Almond Breeze have
achieved great success within the
Natural Foods category. These successes
are stimulating more new and exciting
products that will be introduced to
markets later this year.
Shick: I can’t emphasize enough how
our brand separates us from the pack.
Even beyond our retail-branded sales,
owning an internationally recognized
brand helps us in making sales to industrial
and food service buyers.
Youngdahl: With big crop increases
coming in the next decade, we need to
insulate ourselves as much as possible
for what could be a significant price
adjustment. Part of the way we do that
is to grow our consumer-branded business.
Q. How do you ensure a flow of qualified
new directors for the board?
Brauner: About 11 years ago, we started
a young leader program based on the
Land O’Lakes program. Dan
Cummings, our newest board member,
and I spent three or four days at their
annual meeting, learning about their
young leader program. Our program
has been very successful for us, with
three of our nine directors having come
up through the program, and several
more on our statewide Grower Liaison
Committee.
Shick: Continuing education for sitting
directors is also very important. The
National Council of Farmer
Cooperatives (NCFC) plays a big role
there. We try to get a majority of our
board members to the director workshops
NCFC holds at its annual meeting.
We’ve had some very good ‘takehomes’
from those sessions and from
comparing notes with other co-op
directors from across the country. We
get challenged in our thinking, and it
exposes us to the ways other co-ops are
doing things in other places. You get a
broader perspective.
Q. You also have to market the co-op to
keep and attract members. How competitive
is the almond industry in
California?
Youngdahl: The California almond
industry is very competitive. There are
over 110 California almond handlers.
Essentially, very large growers who
market their own crop are our principle
competition. Some of them—including
the No. 2 handler—also deliver to Blue
Diamond. They understand that supporting
the industry leader raises the
tide for all in the industry.
Q. Volume incentives for members
always seem to be a controversial issue
with co-ops, but they seem to be getting
more common. Are you offering them,
and if so, have they helped keep larger
growers in the co-op?
Youngdahl: We introduced a volume
premium two years ago, which is paid
in volume increments—the greater the
volume, the higher the premium, up to
six cents per pound. Yes, this premium
is working to retain and attract larger
volume growers to Blue Diamond.
Overall, Blue Diamond’s premium program
is the benchmark for our industry.
Shick: It’s also been a good thing from
the huller-sheller point of view. Blue
Diamond receives product either in
boxes or in bulk truck loads, the latter
being where volume premiums are
earned. I’m also a member of a co-op
sheller, so that program has caused us
to put more emphasis on planning our
runs so that we get more product into
bulk deliveries to qualify for those premiums.
It’s been good for Blue
Diamond and has helped us at the
huller-sheller level to become more
efficient.
Q. Any new member services being
offered or contemplated?
Youngdahl: Blue Diamond offers members
health insurance, workers’ compensation insurance and an investment certificate program
that is currently earning participants 6 percent on their savings.
Q. Here’s a situation your field reps probably face: I’m an
almond grower, and a small packer down the road from me
says he’s paid two or three cents a pound more than Blue
Diamond for the past couple of years. Give me some good
reasons why I should I should stay in the co-op.
Youngdahl: There are numerous reasons. We tell growers
they should partner with us at Blue Diamond for benefits that
include: balanced risk, industry-leading returns, year-round
selling strategy, worldwide marketing power, faster payments,
powerful consumer brand, innovative product development,
more payment options, more contract options and our cutting-
edge technology. In addition, we tell them that Blue
Diamond is the industry leader—the one all others benchmark
on. We influence the market for the benefit of all growers.
Such leadership should be supported.
Shick: There are growers who will move for two cents. It’s
not as important when prices are at $2 per pound as when
they were $1. If a guy wants to play that game, you probably
are not going to talk him out of it. But if you look closely at
other handlers, not one is consistently at the top. Blue
Diamond will consistently be right near the top.
