A Legacy of Cooperation & Innovation

Blue Diamond marks 100th anniversary as co-op that made U.S. world leader for almonds

By Gray Allen

Editor’s note: Allen is former editor of
“Almond Facts,” Blue Diamond’s
bimonthly magazine for co-op members
and customers. This article is excerpted
from a series of articles appearing in
“Almond Facts” to mark the co-op’s
centennial year. For more information on
the history of the almond industry and
Blue Diamond, visit:
www.almondhistory.com.



he goal in 1910 was straight forward and vital to growers: to bring order and prosperity to a chaotic and often unprofitable almond market.

Founded by almond growers as the California Almond Growers Exchange (now Blue Diamond Growers), the co-op put growers in the drivers’ seat of their industry, propelling California from being a small player in the almond industry into the world’s major almond producer.

Blue Diamond today is a processing and marketing cooperative of more than 3,000 California almond growers with annual sales approaching $1 billion. From that seedling planted 100 years ago, Blue Diamond has grown into the world’s leading supplier of high-quality almonds, with its products sold in 95 markets around the world. It achieved this status through constantly pushing the technology curve forward, and with product research and marketing efforts that expanded the ways, and places, in which almonds are consumed.

Along the way, Blue Diamond has adhered to the core co-op principles: member-owned, member-controlled and member-benefited. This has involved an equally strong commitment to keeping members informed and involved in their co-op.

Deep roots
The almond story began 6,000 years ago, when early travelers in the Mediterranean region discovered sweet almonds growing wild on rocky mountainsides. They collected handfuls of the nuts and carried them on their journeys for sustenance. By 4,000 B.C., almonds were a staple of people’s diets in the region; 2,000 years ago, farmers throughout the Mediterranean region were cultivating almonds.

California growers first experimented with commercial almond production in the 1840s. By the 1880s, an industry had been born, but too many growers with too many trees and not enough marketing clout yielded unprofitable results for growers.

In an effort to gain some marketing leverage, growers tried pooling their crops for sale through local dried fruit associations. But the small associations were no match for the handful of buyers and speculators who played one group of growers against another to drive down prices.

J. P. Dargitz, an almond grower from Acampo, southeast of Sacramento, believed the necessary marketing power could be achieved by forming a statewide growers’ association. On May 6, 1910, in Sacramento, he organized nine local cooperatives representing 60 percent of the state’s almond production into a single marketing cooperative: The California Almond Growers Exchange.

The following year, Dargitz — who had been hired to manage the fledgling cooperative — reported: “We have sold 600 tons of unshelled almonds and 177 tons of shelled almonds. Our members have been paid more than a quarter of a million dollars.”

It hadn’t been easy. The first year proved difficult. Dargitz reported: “Growers who were outside [the co-op] came under cover by selling out at prices a little under our quotations…It is regrettable when growers have their output placed so that it competes with other growers.”

Success breeds growth
While others attempted to sink the co-op, the Exchange hired T. C. Tucker to travel east to interview important players in the nut trade, select brokers to work with and to sell as much of the crop as he could. Dargitz, meanwhile, stood his ground with buyers who were attempting to beat down the Exchange’s prices. The market research he had done the previous summer served him well.

In the end, the Exchange sold its first crop at fair and reasonable prices. As news of the cooperative’s success spread, membership grew to 14 associations representing growers in southern, central and northern California.

In 1912, Tucker introduced what would become one of the world’s most widely recognized food brands: Blue Diamond almonds. Four-pound cellophane packages of unshelled almonds were sold in department stores on both coasts “to increase demand for California almonds and standardize the price to growers and consumers year in and year out.” In the early years, almonds were strictly a holiday treat, when the vast majority of sales were concentrated. In 1915, Blue Diamond introduced a novel marketing scheme in hopes of extending almond sales into the spring months.

Working with a major department store in San Francisco, Tucker created elaborate window displays, developed an ad campaign and distributed samples to attract consumers during March. A great success, the promotion was repeated in following years, with steady sales growth. It evolved into a Blue Diamond nationwide advertising and promotional program that focused on lengthening the traditional sales period and boosting consumption, helping to move mounting almond surpluses.

Co-op pioneers new products
From the beginning, the association worked to improve grower income and expand the market for California almonds. It pioneered new almond processing and manufacturing technologies to produce products that expanded the market and maximized member returns. In 1914, the Exchange opened a shelling plant on C Street in Sacramento.

Told by many that California almonds could not be satisfactorily blanched and salted, Blue Diamond proved them wrong. By 1926 the co-op was offering blanched/salted almonds in glass jars and in tins for retail sale. It also sold roasted almonds in barrels for ice cream manufacturers.

By 1928, the product line included Nonpareil almonds in jars, as well as roasted, ground-roasted, whole-blanched, split-blanched, blanched-pieces and sliced-blanched almonds. It also sold almonds processed for ice cream topping. By the end of the 1920s, the co-op’s own manufacturing department had become Blue Diamond’s largest customer for shelled almonds.

High rail freight rates and unreliable scheduling plagued the almond industry from the start. With the outbreak of World War I, those problems became worse. Tucker, who had been appointed general manager in 1913, led successful efforts to remedy the situation. The effort included the launch of the co-op’s government relations program, which to this day helps Blue Diamond Growers to achieve its legislative, regulatory and foreign trade goals.

The co-op continued to experiment with new products and markets, establishing a research lab to develop new products and quality-control methods. It made the initial sales of shelled almonds to chocolate candy manufacturers and began to produce a variety of manufactured items for ice cream, baking and confectionery businesses. The co-op’s technicians continued to design, build and patent the equipment and processes to produce these products.

All through the difficult years of the Great Depression, the Exchange’s pioneering efforts, superior grower returns and stability attracted increasing numbers of new members.

Establishing a
beachhead in Europe

Blue Diamond also led the way in establishing quality grading, setting up a formal system in the early 1930s. Later, it used its proprietary grading techniques and equipment — developed on the spot by the association’s staff — to salvage salable almond meats from the 1938 crop, which had been badly damaged by peach twig borer. More than 70 percent of the damaged material was salvaged.

That same year, Blue Diamond ventured into the European market, which would eventually grow into the No. 1 export market for California almonds. A short crop in Europe had opened the door to California’s surplus almonds. The cooperative tested the market with a small shipment, found a good reception and discovered that some buyers preferred the California nuts because of the soft shell and high quality. This sale set the stage for rapid expansion of export markets following World War II.

One of Blue Diamond’s most successful innovations — and one that prepared the way for tremendous growth in consumption worldwide in the decades to follow — occurred beginning in 1940. Needing a way to win back customers who had been lost to high prices following two short crops, D. R. Bailey, the co-op’s general manager, took advantage of the U. S. government’s New Deal program to improve nutrition in America.

Bailey believed that “tremendous benefit can be obtained from the widespread dissemination of an almond nutritional story.” Blue Diamond had used the nutritional story in a modest way in years past to promote almonds, but the science of nutrition had evolved and new studies were needed to update the nutritional story on almonds.

Blue Diamond engaged the California Foods Research Institute to make a complete analysis of the nutritive values of almonds, which determined that almonds are rich in vitamins, minerals, protein and energyproducing fats. The co-op took the story to the media, cooking schools and nutrition classes all across America, as well as to the U.S. military and scientific publications.

Soon afterward, the U.S. government granted almonds an “essential food” status, which gave Blue Diamond and almond growers special access to materials and supplies during World War II. The public image of almonds was forever enhanced and the foundation was laid for future campaigns based on nutrition.

Post-war almond boom
The post-war era saw almond production boom as growers mechanized their production with mechanical tree shakers and almond sweeping and pick-up machines. They planted orchards in fertile bottomlands and added improved irrigation systems. To cope with the surge in supply, Blue Diamond created new products and more appealing packaging to build retail sales.

One of the most popular and enduring products introduced was the 6-ounce tin of Smokehouse Almonds. To increase sales of its popular line of consumer products, Blue Diamond started a gift-pack business and opened retail stores in several California cities.

In the plant, Blue Diamond engineers and technicians continually developed more efficient equipment and processes that increased output, lowered costs, produced a steady flow of new products and raised quality levels. Electric-eye sorters, faster packaging machines, new roasting and drying equipment and bulk delivery and storage revolutionized almond processing and handling.

Co-op seeks marketing order
Pursuing all avenues to deal with rapidly growing crops, Blue Diamond lobbied hard for an amendment to the Agricultural Adjustment Act to include almonds. In June of 1949, President Harry Truman signed the bill to make almonds and filberts eligible for federal marketing programs. California almond growers overwhelmingly approved the marketing order.

Blue Diamond hoped an almond marketing order would enable the industry to bring supply into balance with demand through set asides and to set import quotas on the flood of cheap almonds arriving each year from Europe.

Quotas were finally approved in 1951, and set asides as high as 25 percent of the crop helped balance supply from year to year. Production continued to soar, however, rocketing up 375 percent in just over a decade.

Encouraged by the new machinery that improved yields and took much of the drudgery out of producing and harvesting, growers continued to plant new orchards. Throughout the 1940s and 1950s, almonds were the fastest growing deciduous tree crop in California.

In the 1960s, Blue Diamond pioneered almond paste and almond flour, two important ingredients for food manufacturers. The association also offered buyers more than 40 blanched, sliced, diced and roasted almond products – all produced with equipment and processes developed by Blue Diamond staff.

A revolutionary new shelling system, developed and perfected by Blue Diamond, was shared with grower-owned hulling and shelling cooperatives, helping to lower their costs and increase the quality of nuts and meats delivered to the co-op.

On the marketing front, Blue Diamond stepped up its export sales development, opening markets around the world to provide an outlet for everincreasing crops. A sales coup put Blue Diamond Smokehouse Cocktail almonds on every major airline.

In the 1970s, American consumers discovered health foods. Blue Diamond jumped on the bandwagon, marketing its almonds as a health food to cereal makers, trail mix and energy bar producers and directly to consumers. In 1982, Blue Diamond almonds were launched into outer space aboard the Columbia space shuttle. In 1984, the co-op introduced the first almond cookbook to be published in the United States.

Throughout the 1980s and 1990s, Blue Diamond’s research department pumped out a string of new snack almonds and products for the food service and manufacturing trades. All of these efforts expanded the market for almonds as bigger and bigger crops poured in.

Expanding its market horizons to special needs populations, Blue Diamond developed Nut*Thins, a gluten-free snack cracker, and Almond Breeze, a lactose-free beverage based on almonds and rice. Both product lines were hits with the retail trade.

As the 2000s arrived, new emphasis was placed on the co-op’s growing retail business, giving rise to numerous new products in the snack and natural foods categories. Snack almonds for different age and ethnic groups were developed with great success; unsweetened Almond Breeze appealed to those who avoid sugar and new flavors of Nut*Thins broadened the line’s appeal.

With nutrition again top of mind for consumers in the 2000s, Blue Diamond advertising and product promotions built around the qualified health claim labeling granted by the U.S. government to California’s almond industry. Consumers worldwide responded as retail sales doubled and doubled again.

Meanwhile, innovative products for domestic and export markets, along with more sophisticated processing techniques that sorted out the best meats for premium sales, elevated product values in the industrial side of the business.

The future
Blue Diamond’s founders back in 1910 would undoubtedly be amazed to see how the California almond industry has blossomed, and their crop has grown from under 5 million pounds in those early years to a crop that now tips the scales at over 1.5 billion pounds and accounts for over 80 percent of the world’s almond supply. They would also be gratified to know that the co-op they founded still leads the industry in the 21st century.

No longer just a holiday treat, almonds are today an important part of the American diet, and of consumers around the globe. Those co-op pioneers would be amazed that sales of branded products in the last decade alone increased an amazing 600 percent, due in large part to Blue Diamond’s work with the natural foods market.

“In the years ahead, Blue Diamond will continue to develop new products and technologies and use the expertise gained in its century in the business to open new markets at home and abroad for almonds. It will do this while ensuring that growers are the major beneficiaries of the value their co-op adds to the crop,” says Doug Youngdahl, the co-op’s current president and CEO.

On its 100th birthday, Blue Diamond remains a prime example of what farmers can accomplish if they stand united and invest their resources and time to build a strong value-added business with top-notch management, governed by a board of growers with strong business skills and who never lose sight of their ultimate responsibility to the membership.



Blue Dimond: 100-Year Time Capsule

1840s Following failed attempts to grow almonds in the eastern U.S., crop proves well adapted to California climate.
1897 Davisville Almond Growers Association formed to help local growers pool their crops and bargain for higher prices. Their success encourages growers in other districts to form similar associations.
1910 Nine grower associations – representing 1,200 tons of almonds and 60 percent of the California crop – form the California Almond Growers Exchange (CAGE) in Sacramento.
1911 Co-op offers packages of in-shell almonds for retail trade through department stores, launching the Blue Diamond brand.
1914 CAGE erects an almond hulling and shelling plant on C Street in Sacramento.
1917 Co-op lobbies U.S. government to improve railroad rates and service for almond shippers, establishing co-op’s government relations function.
1918 CAGE invents an almond bleaching and drying system, salvaging rain-stained, in-shell almonds.
1922 “The Minute Book” introduced, a publication to keep members “informed of what their cooperative is doing, its decisions and the reasons for those decisions.”
1926-28 Co-op develops chocolate candy market for California almonds. Successfully blanches and salts California almonds to compete with imports.
1939-40 Creates an in-house advertising program; introduces seminars to help growers cope with rising insect damage in orchards.
1942 Adopts nutrition message for almonds, funds new research on almond benefits and distributes results nationwide.
1949 Smokehouse Cocktail Almonds introduced.
1950 Almond growers overwhelmingly approve almond marketing order.
1957 CAGE completes construction of 14-silo, bulk-storage complex to hold 9,000 tons of almonds for processing.
1962 Electric-eye sorting technology developed at CAGE.
1964 California almond growers out-produce both Spain and Italy. Exports to Europe continue to set records.
1965 Smokehouse almonds take to the skies; at its peak, this effort sees every major airline serving the snack almonds on flights.
1966 Introduces new hulling system that provides high-volume hulling at relatively low cost.
1968 Salida almond receiving station opens.
1975-77 Blue Diamond is the first California almond company to visit People’s Republic of China; co-op also obtains lower tariff on almonds shipped into India, opening that market to California.
1986 The “A Can a Week, That’s All We Ask” television campaign hits the airwaves.
1987 Official name of cooperative changed to Blue Diamond Growers.
2000 Purchases MacFarms of Hawaii, world’s largest macadamia producer.
2001 Board and management begin annual strategic planning sessions, resulting in new goals to increase competitiveness and expand global demand. CEO Doug Youngdahl promotes “rational marketing” to reduce effect of speculation and let market prices reflect facts of supply and demand.
2003 After 2001 crop is declared the first 1-billion-pound crop, Youngdahl says: “We needed it to meet worldwide demand!” Growers enjoy higher prices. Almonds approved by U. S. Food and Drug Administration for first qualified health claim on packages.
2004 Blue Diamond brand is the No. 1 snack almond, with a 43-percent market share. Grocery sales are up nearly 50 percent for second year in a row.
2006 Blue Diamond’s Natural Foods group (Almond Breeze and Nut*Thins) sees sales accelerate three years in a row. McDonald’s introduces Asian Salad with Blue Diamond almonds. Construction begins on new Salida Distribution Center and state-of-the-art production line. Orchard plantings accelerate.
2010 Crops now averaging over 1.5 billion pounds, doubling in size since 2000. California is producing more than 80 percent of the world’s almond supply, but barely keeping up with rising world demand. Blue Diamond’s array of new products continues to expand, creating greater demand for almonds, adding value for members.




Communications plays
a major role in co-op’s success

T.C. Tucker, Blue Diamond’s general manager from 1912 to 1936, believed that a cooperative can succeed only if its members are well informed. Knowledgeable, engaged members make better decisions and are more loyal and committed to the co-op, he believed. He communicated prodigiously through his board of directors, in letters to members, detailed annual financial reports, member meetings and—beginning in 1922—through a member publication, now titled Almond Facts. It has been in continuous publication ever since, except for a few years during the depths of the Depression. Tucker’s tireless communication about what the cooperative was doing, its methods of operating, its decisions and the reasons for those decisions held the membership together during some of the most turbulent times in the nation’s and cooperative’s history.

His example was followed by each of his successors, but perhaps with no greater effect than by Doug Youngdahl, president and CEO from 2000 to the present (he is retiring at the end of 2010). Youngdahl’s use of accurate information and open discussion of global almond market fundamentals has benefitted not just co-op members, but all California almond growers.

Today, Blue Diamond communicates in both traditional and new ways. A revamped website uses the latest technology to communicate in real time with members, customers, news media, regulators, legislators and consumers. The cooperative’s magazine has been judged in surveys as the “most read” publication dealing with the almond industry.

A monthly newsletter, annual report, news releases, a variety of grower meetings throughout the year and periodic management and field representative visits to the members’ farms maintain a constant flow and exchange of information.

Market intelligence vital to co-op
Youngdahl’s use of market intelligence to shape sound marketing strategies was a technique used by J. P. Dargitz to successfully market the cooperative’s first crop in 1910. Subjected to relentless pressures from buyers, speculators and competing almond marketers to lower prices, he stood firm, confident in his position because he had done his homework as the crop was being harvested.

Dargitz knew that the rumors swirling in the marketplace were inaccurate and that prices would eventually rise to reasonable levels. His position proved correct and the membership enjoyed superior returns that year and most years thereafter.

Blue Diamond continues to adhere to the principle that sound information, intelligently applied, produces superior results. Youngdahl’s annual address at the International Nut Congress—in which he analyzes the supply, demand and market outlook for all tree nuts —is eagerly anticipated by nut marketers around the world. Those speeches and periodic updates throughout the year help stabilize an otherwise unstable industry, made up of hundreds of sellers and few buyers, proof of the value of knowledge appropriately applied.




May/June Table of Contents