Blue Diamond Growers

views updated

Blue Diamond Growers

1802 C Street
Sacramento, California 95814
U.S.A.
(916) 442-0771
Fax: (916) 329-3335
Web site: http://www.bluediamondgrowers.com

Cooperative
Founded : 1910
Employees : 1,200
Sales : $434.5 million (1998)
NAIC : 311911 Roasted Nuts & Peanut Butter Manufacturing

Blue Diamond Growers is the world’s largest tree nut marketer and also ranks as one of the largest agricultural cooperatives in the United States. Headquartered near the almond-producing areas of the Sacramento and San Joaquin Valleys, the 4,000-member grower cooperative is known especially for its name brand California Blue Diamond Almonds. The co-op also produces a variety of nuts in special cuts, sizes, and shapes as well as a growing list of nut-based products, which it sells to retailers, supermarkets, the foodservice industry, and confectioners worldwide. Operations are centered on a 180-acre complex featuring a 1.75-million-square-foot plant, with a production capacity of more than two million pounds of almonds daily.

The Blue Diamond Story, 1910s-70s

California almond growers once sold their crops to independent dealers, negotiating price individually. In 1910, dissatisfied with returns, 230 growers formed the California Almond Growers Exchange, and hired professionals to run the organization. Each member was paid according to the amount and quality produced, and the group’s overall commitment was to find better ways of marketing California almonds, both domestically and internationally.

In 1914 the Blue Diamond label was introduced, and a small receiving and packing plant was built in Sacramento. In 1922 shelling and grading equipment were added, and in 1929 a five-story processing plant was erected to handle the increased business volume. Over 2,000 growers had joined Blue Diamond by the end of the 1930s, seeking better productivity and marketing capabilities. By 1940 8,000 tons of almonds were being processed annually, and that volume increased during World War II to supply the Armed Forces.

Concrete storage bins, cold-storage facilities, and automated equipment were added following the war. In 1955 the organization’s marketing division branched out, additional sales agents were hired, and a worldwide advertising campaign was launched. Commercial airlines were persuaded to carry foil packets of Smokehouse Almonds, and passengers from all over the world asked where they could purchase the snack. In 1960 electronic sorting machines were installed, and cooking and packing facilities expanded. National advertising sparked consumer interest in almond recipes and growers steadily increased crop output from 1968 on. In 1973 Stanford graduate Walter F. Payne joined the co-op as planning and marketing director, bringing a unique combination of farsightedness and a penchant for “team-playing” to his task.

Moving Ahead, 1980s-90s

In 1986 almond prices seemed stuck at $1 per pound. CEO Roger Baccigaluppi began an aggressive overseas marketing campaign, tailoring his pitch to each country’s needs. Yearly contracts with guaranteed prices were provided in West Germany, the almond’s nutritional value was emphasized in Russia, and new almond dishes were developed for the Japanese market.

In spite of these efforts, a lag in profits continued until 1992, when Walt Payne stepped in as president and CEO. He established a management team that cut across departmental lines, encouraged employees to find practical solutions to difficult problems, and ordered $30 million in plant improvements over the next decade. The improved operating efficiency paid off. Record returns were posted over the next three years, and members were paid an unprecedented $344 million on the 1994 crop. Board Chairman Howard Isom stated at the 1995 board meeting that the cooperative’s real strength was, “the commitment of its members, belief in their product, and the company’s financial strength, which give it credibility and staying power.”

In 1996 Jilian Morley, Blue Diamond’s transportation manager, blasted the International Longshoremen’s and Warehousemen’s Union (ILWU) as a primary obstacle to international transportation. Since the almond industry spends over $100 million annually on transportation, the complaint did not go unheard. Morley spoke out again in 1997, decrying centralized customer service centers with little knowledge of almonds. Ocean exports are subject to carrier conference rates, but Blue Diamond’s domestic transportation bids are let several times a year, allowing more flexibility over the terms of shipper contracts. Morley was not necessarily looking for the lowest bid for her organization, she stated, but she was more likely to go with brand name carriers who were willing to ensure quality service.

Blue Diamond’s snack sales had reached $16 million in 1996, when a marketing agreement with candymaker Brach & Brock for Almond Supremes was announced. In January 1997 the firm linked with Hornsby’s Amber Hard Cider to provide Super Bowl tie-ins. In June 1997 Algernon Greenlee, Blue Diamond’s business manager of retail products, announced that the company would enter nationwide test markets with Nut Thins, a specialty cracker produced by Sesmark Foods. In September 1997 almonds were added to International Home Foods’ Crunch ‘n Munch ready-to-eat popcorn. Smokehouse Almonds were featured in the 1998 film Sphere, with movie lobby samplings, couponing, and point-of-purchase offers at supermarkets and convenience stores. The almond’s positive aspects were substantiated by research and heavily advertised. World almond consumption, led by an expanding U.S. market, was on the upswing.

Record Returns Followed by Bad Weather, 1997-98

The year 1997 was an excellent one for almond production, with an early harvest and record shipments. Domestic consumption climbed, retail sales revenues increased, and prices remained firm. Some $370 million in distributable pool proceeds were returned to the growers, representing 77 percent of the overall 1997 crop sales value, attributed in part to Walt Payne’s new management team. Payne noted in a members’ report that selling prices “are the result of the balance or imbalance between supply and demand. Our job is to create a shortage for your product so that you will continue to receive profitable returns.” Payne’s expertise was recognized when he was named 1998 CEO Outstanding Communicator of the Year by the Cooperative Communicators Association (CCA).

Following the record 1997 returns, negative weather conditions dominated sales activity through 1998, the fourth wettest winter recorded for California since 1849. Almond trees require good weather to bring out the bees needed for pollination, explained Heidi Savage of the Almond Board of California (ABC) in Traffic World. Receipts and shipments were lower than expected, caused in part by the late crop coupled with conservative overseas buying. The market continued to weaken through the end of 1998, and almond prices traded down to $1.47 per pound for projected 1999 shipments. On the plus side, an agreement was reached with Diamond Walnut, guaranteeing each company’s right to ownership of the brand name of their specific product.

Based upon new members and plantings, Walt Payne warned in his 1998 year-end message that the “optimum handle level,” or most cost-effective processing level, for Blue Diamond would soon be reached. Consequently, he asked that grower membership be closed effective January 31, 1999. By doing so, the cooperative hoped to guarantee a home for all current members. While non-member contracts would be honored, conversion to full membership in the group by outside growers could no longer be guaranteed.

Company Perspectives

In 1910, 230 growers banded together to form an agricultural cooperative called the California Almond Growers Exchange. Their commitment was to find better ways of bringing California almonds to both domestic and international markets. From the beginning, we’ve been the leader in the industry, and today, as Blue Diamond Growers, we’re the World’s largest tree nut company.

Future Prospects for World’s Largest Tree Nut Marketer

During the 1990s, Blue Diamond planting acreage doubled and crop tonnage tripled. Blue Diamond’s goal for the future was to increase retained earnings and decrease reliance on revolving reserves to finance working capital needs. Smaller unsold inventories held at the end of the year translated into accelerated payments to growers. Exciting, “cutting edge” projects were on the horizon, including enhanced farming techniques that would allow delivery of a fully sterilized product without the use of fumigants. Through the Almond Research Center (ARC), staffed with scientists and technologists who worked with consumers to develop nutritional products, increasingly versatile uses for the almond continued to be discovered. The ARC’s efforts in the area of nutrition were validated by other research, including a five-year study conducted by the University of Nevada School of Medicine, which found that nut consumers were more likely to maintain or lose body weight, and since 90 percent of fat in almonds was unsaturated, frequent consumption could also help lower blood cholesterol levels. The ARC continued to create innovative uses for almonds, including in cosmetics, soaps, and pharmaceutical products. The blending of nature and technology which began in 1910, when the first delivery of almonds arrived at the California Almond Growers Exchange, now thrived as a proud tradition of providing customers with the highest quality almond products available anywhere.