Sun World sells its farming operations

May 06 , 2019

From the pages of the Perishable Pundit

The winds of change are in the air for the produce industry. Grocery giants such as Danone and the Campbell Soup Company are divesting their produce interests. Non-US interests now own, control or have substantial stakes in every banana giant. Today, there is breaking news out from Sun World, a company that has long stood in the forefront of innovation in this industry:

Sun World International Announces Land Sale
Shifts Focus to Fruit Breeding, Licensing

BAKERSFIELD, CA – Sun World International LLC (Sun World) today announced the sale of its leased and owned California farming property to an investor group, which has contracted with Sun Pacific to farm the vineyards. The acquired entity will be called Famous Vineyards.

This move triggers a redeployment of resources to Sun World Innovations the company’s technology, breeding and licensing business. Sun World is owned by Renewable Resources Group LLC, a California-based asset management firm specializing in sustainable investing.

“We’re convinced of our team’s limitless potential to break new ground in fruit breeding and genetics,” said Sun World executive vice president and head of Sun World Innovations, David Marguleas. “By focusing additional investment on this side of the business, we intend to accelerate growth in a meaningful way.”

The company retains its SUN WORLD® brand, global fruit and intellectual property licensing business and longstanding table grape and stone fruit variety development program. All business entities will be operated as Sun World Innovations at transaction close and will be headquartered in Palm Desert, California.

Included in the transaction are Sun World’s farmland in California’s San Joaquin and Coachella Valleys. The understanding is that the acquired land will continue to be farmed for table grapes. The new owners have indicated that they will finalize staffing decisions within the coming 10 days. Jason Fuller, VP of Sales for Famous Vineyards, expressed enthusiasm for the transition and noted, “We are committed to maintaining the strong supply programs and relationships built over the years.” 

Current Sun World CEO, Merrill Dibble, will stay on to work closely with all parties to manage a smooth transition. “As enthusiastic as we are about advancing our breeding and licensing business, we’re mindful of Sun World’s farming heritage and the sale of this land was a carefully considered decision,” said Dibble.

“Our understanding that the new owner plans to farm the acreage was critical to us in terms of our colleagues’ continued employment,” continued Dibble. “RRG has invested significantly in Sun World. They planted new vines and brought their expertise in operations and sustainability to virtually every aspect of our business. There’s every reason to feel optimistic about the future of this land and the people who’ll farm it.”

About Sun World International LLC

Sun World International is a grower and marketer of sustainably-grown premium red, green and black table grape varieties.

About Sun World Innovations

Sun World Innovations is the genetics, breeding and licensing arm of Sun World International, LLC. It was formed in 2015 to drive growth of fruit breeding, varietal development, licensing, agricultural technologies and international investments. It has a network of licensed partner growers and maintains international offices in Italy, Australia, Chile, Israel, and South Africa.

About Renewable Resources Group LLC

Renewable Resources Group is an asset management firm specializing in land management, agriculture, water, conservation and renewable energy. They are privately held and headquartered in Los Angeles.

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Of course, though this is an important event to those directly involved, there is a sense in which this is a small event for the produce industry. Sun World used to have two parts — one a growing operation in California, and one a breeding, intellectual property and licensing business. Both will still exist. But now an investment group affiliated with Sun Pacific will take over the growing, and Sun World will refocus its attention and resources on its Sun World Innovations unit, the pioneer in the space of developing new genetics for grapes and stone fruit with a global footprint of licensees selling the fruit under specified brands.

Yet there is something of “The Minnow Swallowed the Whale” element to the story, and that story is a mirror of the changing nature of the produce industry. When he passed, we wrote about the founder of Sun World in a piece titled, Looking Upward at Howard Marguleas. Yet for all his innovation, we think it unlikely that when Sun World was launched, he imagined that the day would come that a sophisticated player such as Renewable Resources Group would one day look at Sun World and see the value not in countless acres of land, packing houses and plantings but in intellectual property, brands and a licensing network.

For as long as we have records, the food business has been changing in ways that have displeased the growers. On the one hand, a smaller and smaller percentage of the amount consumers pay for food has been winding up in the farmers’ hands. What government statistics call “marketing” but in reality is everything beyond growing — packing, processing, transport, advertising, etc. — each decade takes a higher percentage of the consumer’s expenditure on food, leaving farmers with a smaller percentage (although not necessarily smaller dollars, as higher value foods are more common, whether due to more processing, as in fresh-cuts, or higher value varieties, as in grapes or berries). 

On the other hand, at the very same time the cost of inputs continues to rise, not only because the price of labor and whatnot rises, but because the nature of growing changes.  It might be the need for controlled environments or the need to pay license fees for the best varieties.

In just one month, we are launching a new event for the grape industry — the Global Grape Summit. This event gathers thought- and practice-leaders from around the world to assess the industry of today while creating the industry of tomorrow. As we have spoken to leaders in the California deal, we have gotten some not particularly optimistic feedback:

1) California’s minimum wage law raising the cost of production

2) Worldwide over-production of grapes

3) Mexico on the front end and Peru on the back end, eliminating the once profitable shoulder seasons

4) Many new varieties not delivering on a promise of better taste, but still costing in royalties and licensing fees.

5) Consolidation on the buying end of the business, allowing for great pricing pressure to be put on producers.

6) Spain and other producers competing for Asian business that once was exclusively a market for California grapes.

So, in a sense, one can see in the Sun World deal an expectation that time and money will produce better returns invested in the Sun World Innovations business than in growing grapes in California.

Yet for every seller there is a buyer, and anyone who knows Berne Evans and the Sun Pacific story would have nothing but expectations of success. 

As we thought about this piece, we had the opportunity to chat with Merrill Dibble, Chief Executive Officer and President of Sun World International LLC. He was brought in by the Renewable Resources Group people when they acquired Sun World. He is a soft-spoken man and, in studying his career, he has been particularly concerned at every stage about the human cost of corporate actions. 

Even as we chatted, in what is really a pinnacle moment of his career, he seemed especially happy that with Sun Pacific moving forward and their having taken on Sun World’s Jason Fuller to run sales for the new entity, the future was very bright. 

“It is certainly true that when we California grape growers get together, we might worry about many of the points you raise. In the end, though, the higher quality of the new varieties of grapes leads to more consumption, and high quality growers know how to deal with the obstacles ahead.”

Though Merrill is too modest to say so, the issue is not investment in genetics and breeding and branding vs growing and selling grapes. If you look at the various problems confronting growers in California and around the world, it is hard to imagine anything other than superior genetics, breeding and branding that will allow growers to overcome these issues. You need higher value fruit to cover higher costs; you need breeding to make sure the fruit is optimally timed; you need better taste and more interesting options to boost consumption, and you need proprietary product and branding so growers can reshuffle the deck when dealing with big buyers to make sure consumers know what is worth paying up for.

Merrill continued: “It is hard to be best at everything. We feel confident we have found a good home for our land, our vineyards and many of our people and that this transaction will allow us to focus our time and resources on the incredible opportunities that exist for our Sun World Innovations unit.

Merrill said he expects to stay through the California grape season, making sure customers, vendors and employees transition smoothly. Then he expects to stay with Renewable Resources Group, whose executives, he notes, are very excited about this space. They hope, and expect, that Sun World Innovations will find opportunities to make a difference in other specialty crops and thus help growers become more prosperous while enticing consumers to eat more produce.

Fortunately, Sun World Innovations has at its helm David Marguleas, scion of the founder of the company and, even while serving as this year’s Chairman at PMA, a secret giant in the industry who has virtually built the model that most of the global trade relies on in bringing better genetics to the world of produce.

So today the industry can celebrate, for while it remains obvious that we depend on great growers to produce the fruits and vegetables that feed the world, it is also obvious that our industry has reached a level of sophistication in which science and marketing are as much a key to success as anything else.

So, as Sun World splits, it is not like two ships passing in the night; it is two separate ships steaming side by side, each with its own dedicated design and crew, optimized to its own sector, jointly working to elevate the consumer experience. Jointly working to boost the sale and profitability of the crops we bring to market. Jointly enticing consumers across the globe to sample more, buy more, consume more… and enjoy more.

This is the future of Sun World and the global produce industry.

If you would like to know more about the latest and most relevant developments in the table grape industry, come to the Global Grape Summit in London on June 5th. For tickets and more information, click here.
 

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