Calavo Growers Stock

Calavo Growers, Inc. (Calavo) is a global leader in the avocado industry and a provider of value-added fresh food.

The company’s expertise in marketing and distributing avocados, prepared avocado products, and other perishable foods allows it to deliver a wide array of fresh and prepared food products to retail grocery, foodservice, club stores, mass merchandisers, food distributors and wholesalers on a worldwide basis. The company’s procure avocados from California, Mexico and other growing regions around the world. Through its various operating facilities, the company sorts, packs, and/or ripens avocados, tomatoes and/or Hawaiian grown papayas; creates, processes and packages a portfolio of healthy fresh foods, including fresh-cut fruit and vegetables, and prepared foods; and processes and packages guacamole.

Segments

The company operates through two segments, Grown and Prepared.

Grown

The Grown segment consists of fresh avocados, tomatoes and papayas. The company’s Grown products business grades, sizes, packs, cools, and ripens (if desired) avocados for delivery to its customers. For the year ended October 31, 2023, the company operates three packinghouses and five operating and distributing facilities (also known as value-added depots or VADs) that handle avocados that are sold across the United States and to select international markets. The company’s diversified avocado sources help provide a level of relative supply stability that may, over time, serve to increase the availability and demand for avocados among consumers in the United States and elsewhere in the world. The company continues to explore the distribution of other crops that provide reasonable returns to its business.

The company sells avocados sourced from a variety of locations (including but not limited to California, Mexico, Peru, and Colombia) to a diverse group of retail grocers, foodservice operators, club stores, mass merchandisers, food distributors and wholesalers, under the Calavo family of brand labels, as well as private labels. Many of the company’s customers desire consistent year-round supply across multiple sourcing locations, the ability to receive just-in-time deliveries at their desired level of ripeness and a variety of packaging and display options. In its judgment, these factors benefit large handlers like the company, which has the ability to cultivate a variety of diverse sourcing relationships and the value-added/bagging capabilities, ripening assets and distribution infrastructure to meet the needs of these large nationwide accounts.

Avocados delivered to the company’s packinghouses are graded, sized, packed and cooled. The company is subject to USDA, Mexican Secretary of Agriculture, Livestock, Rural Development, Fisheries and Food/Plant Protection (SAGARPA) and other regulatory inspections to ensure the safety and the quality of the fruit being delivered.

The company has also developed a series of value-added programs that are designed to offer products and services to its customers that meet their various needs. Some of these key programs are as follows:

Value-Added Ripening: Retailers require that their avocados meet strict quality and ripeness specifications and the company’s nationwide ripening infrastructure using the latest technology and experienced avocado handling workforce best position it to service those customers.

Value-Added Packaging: The company has developed various display techniques and packages that appeal to consumers and, in particular, impulse buyers. Some of the company’s techniques include the bagging of avocados and the strategic display of the bags within the produce section of retail stores. The company’s research has demonstrated that consumers generally purchase a larger quantity of avocados when presented in a bag as opposed to the conventional bulk displays.

The company’s Grown business segment also markets and distributes other perishable food products, such as tomatoes and papayas (Other Fresh Products) Tomatoes are primarily handled on a consigned basis, while papayas are handled on a pooling basis, generally at a fixed fee per papaya delivered. Sale of the company’s Other Fresh Products generally experience fluctuations related to seasonality.

Prepared

The Prepared segment consists of all other products, including fresh-cut fruits and vegetables, ready-to-eat sandwiches, wraps, salads and snacks, guacamole, and salsa sold at retail and food service, as well as avocado pulp sold to foodservice. The company’s Prepared business produces, markets and distributes nationally a portfolio of healthy, high quality fresh packaged food products for consumers sold through the retail and other channels. Prepared products include prepared avocado products (including both frozen and fresh guacamole), fresh-cut fruit and vegetables, fresh prepared entree salads, wraps, sandwiches and fresh snacking products, as well as ready-to-heat entrees and other hot bar and various deli items, meals kit components and salad kits. Prepared products are marketed under the Calavo, Garden Highway Fresh Cut, Garden Highway, and Garden Highway Chef Essentials brands, as well as store-brand and private label programs. The company is well positioned to address the diverse taste and needs of today’s foodservice and retail customers. The company’s Prepared business maintains relationships with foodservice companies and food retailers. The company continues to seek to expand its relationships with major foodservice companies and food retailers and develop alliances that allows its products to reach more consumers.

The company’s Prepared segment has also expanded its capacity to provide products for a larger portion of the fresh deli department.

The company’s Prepared segment consists of its prepared avocado products (guacamole) division and its fresh-cut division. The company utilizes ultra-high pressure technology, a cold pasteurization process, on all of its guacamole products, which is designed to protect and safeguard foods, without the need of preservatives. This procedure substantially destroys the cells of any bacteria that could lead to spoilage, food safety, or oxidation issues, without affecting the taste profile of the finished product. Once the procedure is complete, the company’s packaged guacamole can be frozen to ensure a longer shelf-life or shipped fresh to customers in the U.S and abroad. While the majority of the company’s prepared avocado products are produced in its Uruapan, Mexico production facility, it also often utilizes high-quality co-packers (using similar ultra-high pressure technology), to produce some of its retail and foodservice products.

As a leader in refrigerated fresh packaged foods, the company utilizes a network of company-operated and independently-operated USDA and organic certified fresh food facilities strategically located across the U.S. These facilities allow the company to offer national retailers high quality, refrigerated fresh foods that can generally be delivered within hours from time of production. Consumer demand is high for quality refrigerated fresh packaged foods and the company’s speed to market, product innovation and broad product portfolio position the company well to serve retailers addressing this consumer trend. The company’s prepared products include fresh-cut fruit and vegetables, fresh prepared entree salads, wraps, sandwiches, parfaits and fresh snacking products, as well as ready-to-heat entrees and other hot bar and various deli items, meals kits and related components and salad kits.

Customers

The company sells to retail grocery, foodservice, club stores, mass merchandisers, food distributors and wholesale customers. The company’s top ten customers accounted for approximately 66% of its consolidated net sales for the fiscal year ended October 31, 2023 (fiscal year 2023). Sales to the company’s largest customer, Kroger (including its affiliates), represented approximately 17% of net sales in each of fiscal years 2023. Trader Joes, represented approximately 13% of net sales in fiscal year 2023. Additionally, Wal-Mart (including its affiliates) represented approximately 9% of net sales in fiscal year 2023.

Patents and Trademarks

The company’s trademarks include the Calavo brand name and related logos. The company also utilizes the following trademarks in conducting its business: Avo Fresco, Bueno, Calavo Gold, Celebrate the Taste, El Dorado, Taste of Paradise, The First Name in Avocados, The Family of Fresh, ProRipeVIP, RIPE NOW!, Renaissance Food Group, Garden Highway Fresh Cut, Garden Highway, and Garden Highway Chef Essentials.

Research and Development

The company’s total research and development costs was approximately $0.1million for the year ended October 31, 2023.

Compliance with Government Regulations

As a purchaser, manufacturer, distributor, marketer, and advertiser of food products, the company’s operations are subject to extensive regulation by various federal government agencies, including the U.S. Food and Drug Administration (FDA), the United States Department of Agriculture (USDA) and the Federal Trade Commission (FTC), as well as state and local agencies, with respect to production processes, product attributes, packaging, labeling, storage and distribution. In addition, the company’s operations are subject to certain employment health and safety regulations, including those issued under the Occupational Safety and Health Act (OSHA). The company’s packinghouse facilities and products are subject to periodic inspection by federal, state and local authorities, including the FDA and the California Department of Food and Agriculture (CFDA), which oversees weights and measures compliance at its California facilities. All of the company’s the U.S. facilities are also in compliance with the FDA’s Food Safety Modernization Act (FSMA). In addition, the company’s operations in Mexico are subject to Mexican regulations through the Secretary of Agriculture, Livestock, Rural Development, Fisheries and Food/Plant Protection (SAGARPA).

As a large importer of perishable products in the U.S., Calavo was an early adopter of the U.S. Customs & Border Protection’s C-TPAT certification programs for monitoring and expediting all imports to the U.S.

As a purchaser and manufacturer of perishable agricultural commodities, the company is subject to, and compliant with, USDA’s Perishable Agricultural Commodities Act. Certain agricultural commodities sold by Calavo are subject to additional specific government acts or regulations, including the Hass Avocado Promotion, Research and Information Act of 2000 for the company’s avocados and the federal suspension agreement guidelines which govern tomato imports to the U.S.

History

Calavo Growers, Inc. was founded in 1924.