New global strategy
Year-round citrus demand has Sunkist
tapping foreign market supplies
By Claire Smith
Sunkist, Public Affairs Director
aced with mounting
competition
from lower cost
offshore citrus and increasing
customer demand for
specialty varieties and yearround
supplies from customers,
Sunkist Growers has
begun sourcing fruit from
foreign producers. This step
is being taken to strengthen
its leadership position in the
evolving global
marketplace.
This summer, Sunkist began
importing citrus from offshore sources
to complement the citrus produced by
its 6,000 grower-owners in California
and Arizona. Lemons and grapefruit
from South Africa and Chile bearing
the Sunkist label are being shipped to
Japan and Hong Kong, where sales of
the cooperative’s first non U.S. grown
fruit is being test-marketed.
Customers demanding
year-round fruit supply
While the decision to handle foreign
fruit was not an easy one, maintaining
its position as the fresh citrus
market leader meant Sunkist had to
respond to its customers’ demand for a
single, year-round supply of citrus.
“We had no choice,” says Jeff Gargiulo,
Sunkist’s president and CEO. “We
operate in a global marketplace. U.S.
politics promote it; economists support
it; retail customers demand it; and consumers
want great citrus, year round.
“Sunkist has always been supportive
of liberalized trade,” he continues, “but
the free-trade agreements we’re seeing
now are one-way streets, benefiting
foreign producers, but not American
growers.”
Almost half the produce sold in the
United States today is grown outside
its borders. American producers face
increasing competition as the domestic
markets are opened to more imports.
Those low-cost products, entering
virtually duty free, put American producers
at a substantial competitive
disadvantage, says Gargiulo.
Sunkist lemons grown in California
and Arizona, for example, command
about $16.50 per 40-pound box
wholesale, while lemons transported
from Chile earn about $13.50 per
box. The major reason for the difference
is the average hourly cost for
farm and packinghouse labor. In
Chile, it’s less than $1 vs. $16 in
Sunkist country.
Couple this increasing domestic
competition with stagnant export
opportunities due to foreign tariff
barriers, and American fresh citrus
growers face enormous competitive
challenges.
“Our customers tell us they are
going to buy the best product for the
lowest price, and they don’t care where
it comes from,” Gargiulo says.
Category managers
Today’s large, international retailers
require a comprehensive package
of services. To increase efficiency,
they want their suppliers to become
‘category managers’ and to meet all
their needs for a specific product area.
While Sunkist’s 6,000 plus members
own more than 175,000 acres of groves
across some of the richest agricultural
land in the world and harvest a variety
of citrus, they are limited by seasonality.
“Our customers expect us to provide
all kinds of citrus all year-round,” said
Gargiulo. “With this change, Sunkist is
acknowledging that our growers can’t
always supply what our customers
want.”
The changes being made at Sunkist
are evolutionary, not revolutionary.
Over its 110-year history, Sunkist has
continually analyzed its processes and
implemented ways to compete more
effectively in a changing marketplace.
It has developed a comprehensive,
worldwide marketing strategy, and
now it will source product where the
market demands, where the opportunity
exists and, in the end, return the
profits to its grower-owners.
Sunkist is currently formulating an
operational structure and exploring different
options for offshore sourcing.
The final organization could involve
partnerships, export/import subsidiary
companies or licensing agreements.
Arrangements may differ from country
to country.
This new marketing strategy may
also enable the cooperative to recover
its prominence in the European market,
where the Sunkist name is still
highly regarded but where the European
Community’s tariff practices and
high transportation costs have kept its
citrus out. Sunkist will soon be in a
position to overcome those obstacles
and outsource fruit into that market
under the Sunkist name.
Vigorous internal debate
“Would we rather not have to make
the change? Yes,” says Gargiulo. “Do
we feel we have a choice? No.”
During the past decade, Sunkist and
its growers have vigorously debated
“going global.” The Sunkist name is on
hundreds of licensed products such as
juices, beverages and confections in 45
countries. However, except for some
short-lived experiments, it has sold
only the fresh citrus produced in the
United States by its grower-members.
The change, though long in coming,
was inevitable, says Gargiulo. Export
sales began reflecting the effects of
high-quality, low-cost foreign competition
on Sunkist’s share of key Asian
markets. Domestic sales reflected the
retailers’ growing interest in exotic new
items and their use of imports to bring
year-round supplies to American consumers.
In today’s global marketplace,nothing
is “out of season.” Consumers can
now choose from among more than
600 produce items available every day,
all year long. Now that consumers are
used to the variety and availability of
foreign fruit, Sunkist has little choice.
If it doesn’t market it, someone else
will, says Gargiulo.
While the imports will increase the
cooperative’s revenues at certain times
of year, they will no doubt also compete
with California and Arizona citrus.
Sunkist’s western-grown Valencia
oranges already share shelf space with
Australian-grown navels during the
mid-to-late summer. And Sunkist’s
western-produced navel oranges
already face heavy competition from
imported Spanish clementines during
the winter. The only difference is that
now the Australian and Spanish fruit
might also be wearing the Sunkist
name.
Inevitably, some traditional growers
will be unhappy. The bottom line,
however, is that those Australian
navels and Spanish clementines are
going to be in the markets anyway. It
is to Sunkist growers’ advantage,
Gargiulo says, if their marketing
cooperative can exert some management
control of the situation. By
teaming up with quality foreign producers
instead of trying to compete
with them Sunkist believes it can
benefit its grower-members.
The key to Sunkist’s future lies in
the broad base of its marketing
strength and its ability to be the kind of
supplier with the fruit varieties and the
kinds of services today’s retailers
demand. In addition, Sunkist has the
strength of its brand, denoting quality,
value, health and safety to consumers
worldwide.
As a cooperative, Sunkist’s charge
has always been to sell the fruit its
members grow today. In the long
term, however, Sunkist must ensure
that it has the opportunity to sell it
growers’ fruit in the future. “But as
the market changes and the produce
industry evolves,” Gargiulo promises,
“Sunkist will never forget who it
works for.”
