Sun-Maid Growers of California

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Sun-Maid Growers of California

13525 South Bethel Avenue
Kingsburg, California 93631
U.S.A.
Telephone: (559) 896-8000
Fax: (559) 897-2362
Web site: http://www.sunmaid.com

Cooperative
Incorporated: 1912 as California Associated Raisin Company
Employees: 550 (est.)
Sales: $253 million (2005)
NAIC: 311423 Dried and Dehydrated Food Manufacturing

Sun-Maid Growers of California is the largest producer of raisins in the world. The firm's output is split about equally between packaged raisins bearing the Sun-Maid logo and those used as ingredients by the likes of cereal and baking companies. Sun-Maid also produces different varieties of dried fruits, including apricots, dates, and cherries, and licenses its name to companies that make derivative foods like bread, rolls, candy, and fruit juice. Structured as a cooperative, Sun-Maid is owned by its member-growers.

EARLY YEARS

The origins of Sun-Maid date to 1912, when a group of San Joachin Valley, California, raisin growers formed a cooperative organization called the California Associated Raisin Company (CARC). Raisins, made from grapes that were left in the sun to dry, had long been used around the world, but had become a cash crop in California only in the late 1800s. Growers had formed the organization to help combat low prices and fluctuating demand, following in the wake of earlier agricultural cooperatives like Sunkist and Welch's.

CARC was organized as a corporation under the laws of California and had capital stock worth $1 million, which both member-farmers and nonmembers could buy. The stock was held by a group of 25 trustees, many of whom were bankers or community leaders. Growers sold their raisins to CARC for a guaranteed price and then shared in any net profit, less a fee of one-quarter cent per pound to run the organization and pay a dividend to shareholders. CARC would take care of packaging the raisins and help promote their use around the country.

The prospect of guaranteed prices was appealing, and by the spring of 1913 the raisin cooperative had signed up 4,400 of the 6,500 raisin growers in California. CARC, headed by President Wylie M. Giffen and Treasurer James Madison, contracted with 16 of the 21 fruit packing companies in the area to process and pack the raisins for sale. Some disgruntled packers soon began to complain that the cooperative was a monopoly, but no action was initially taken by regulators.

The firm, meanwhile, had begun using marketing efforts like a "Raisin Train" that traveled eastward to Chicago bearing signs promoting its product. Deciding that a brand identity would be helpful as well, in 1915 the Sun-Maid name was created by advertising executive E. A. Berg, and the following year raisin boxes began to feature an illustration of a young girl with a red bonnet holding a tray of fresh grapes. The model, Lorraine Collett Peterson, worked part time for a packing company and was chosen for her fresh-faced beauty. She and other "Sun Maids" employed by the firm made personal appearances in red bonnets to promote the raisins, while the firm also used magazine and newspaper ads and issued a steady stream of recipe booklets and other materials, which helped increase Americans' consumption of raisins significantly. In 1915 the raisin cooperative also began to employ a national team of sales agents to pitch raisins directly to grocers, reducing the need for an outside distribution network.

In 1918 CARC, which had signed 88 percent of the state's raisin growers and was spending $400,000 per year on advertising, took another step toward vertical integration by opening a huge new plant near downtown Fresno to process and package raisins. It virtually eliminated the opportunities for outside packers, and the CARC's near-monopoly finally caught the attention of federal regulators, who in 1920 sued the raisin cooperative for violating antitrust laws. Two years later a consent decree was signed that allowed the cooperative to continue operating with some modifications to its structure, and the federal Capper-Volstead Act was signed, which exempted agricultural cooperatives from most antitrust laws.

CARC BECOMES SUN-MAID RAISIN GROWERS IN 1922

In 1922 CARC's name was changed to Sun-Maid Raisin Growers of California, reflecting the success of its national branding efforts. It was suffering from financial woes, however, and after first seeking additional funding, in 1924 Sun-Maid declared bankruptcy and was restructured. The industry also was experiencing serious problems with "night riders" forcing nonmember growers to join Sun-Maid through intimidation, as well as disloyal members refusing requests to cut back on production, which caused an oversupply that drove prices down. As members began to quit, Sun-Maid's debts mounted, and in 1927 the organization issued $5 million worth of bonds. When raisin prices bottomed out a year later, the cooperative declared bankruptcy and its assets were taken over by creditors. Only 32 percent of California raisin growers were now members of the organization.

In 1930 the cooperative's bank debts were paid off with loans from the federal government, and ownership of Sun-Maid was returned to its members. The firm's sales force was subsequently let go, and distribution of raisins was taken over by a network of 100 food brokers around the United States. In 1934 the cooperative began offering to buy raisins from nonmembers to boost output.

In 1942 some of Sun-Maid's continuing debt to the federal government was paid by transferring several properties to it, though the large Fresno processing facility was retained. Later that same year, the H.J. Heinz Company took over national distribution of raisins for the cooperative.

In 1952 Sun-Maid terminated its contract with Heinz and returned to selling through food brokers. By the end of the decade, about 40 percent of the U.S. raisin crop was handled by the organization. Sales of raisins had grown during the 1950s, and in 1961 the firm broke ground on a new $12 million plant in Kingsburg, California, which would replace the Fresno facility. Completed in 1964, it had 5.5 acres of floor space and could accommodate a line of raisin-filled trucks ten abreast at its inspection stations. It would employ 600. In addition to raisins sold to consumers in the familiar red Sun-Maid box, the firm was producing nearly an equal amount for sale to bakeries and other food companies for use in their products.

Over time the original Sun-Maid logo had received several minor alterations to keep up with the times, and in 1970 it was modified to feature a large yellow circle with bursting sun rays behind the familiar "maid." Considered one of the most recognizable advertising logos in existence, it was credited with helping make Sun-Maid the leading brand of raisins in the world, with millions of children taking lunches to school each day that included a small red box of raisins.

COMPANY PERSPECTIVES

At Sun-Maid Growers, we try to embody these principles. Our core cooperative principles are: Member-growers gain through cooperation; Members share in the cooperative's marketing efforts; Economies of scale produce higher grower returns; Education and technical support assist growers in their own operations as a building block for success; and Members participate in governance through democratic process.

1972–78: HARD YEARS FOR RAISIN GROWERS

Like any agricultural producers, raisin growers were always at the mercy of the weather, and in the 1970s they suffered several difficult years. In 1972 a spring freeze devastated the crop, resulting in the smallest yield since the beginning of the century, and between 1976 and 1978 heavy rain at harvest time caused more losses, with close to 75 percent of the crop destroyed in the latter year.

There were also difficulties with labor during this era. In 1975 the Agricultural Labor Relations Act was signed by California Governor Edmund Brown, but it failed to fully rein in problems that included boycotts of Sun-Maid raisins by Cesar Chavez's United Farm Workers of America.

In 1980 an umbrella marketing organization called Sun-Diamond Growers was founded by Sun-Maid, Diamond Walnut Growers, and Sunsweet Prune. Packaging of the firm's products also was evolving during this time, with new concepts including a resealable can that was introduced during the year.

The firm began to license its brand to bakeries in 1980, with Sun-Maid raisin bread soon available on shelves around the country. In 1982 a new unit, Sun-Maid Brand Licensing, was formed to facilitate more such agreements. Sun-Maid also would operate a quality assurance program that inspected manufacturing and distribution facilities. By mid-decade, Sun-Maid raisin bread was being made in the United States, Canada, Holland, and the United Kingdom.

In 1983, the year that original Sun-Maid Lorraine Collett Peterson died at age 90, the California raisin market was hit hard by surpluses brought on by overproduction and other grapes being converted to raisins due to falling wine sales. Prices fell from $1,200 a ton two years earlier to $500 a ton, and many farmers went bankrupt.

In 1986 the company's fortunes received a boost when the "dancing raisins" commercial series debuted, featuring claymation raisins dancing to the Motown hit, "I Heard It Through the Grapevine." It was produced by the state-sponsored California Raisin Advisory Board, and although it boosted raisin sales for a time, it also served to dilute the impact of Sun-Maid's brand identity.

In 1990 Sun-Maid began using laser sorting technology to improve quality, and in 1994 the firm received a patent for a new "dried-on-the-vine" production and harvesting method its growers had developed. Two other patents were received in 1995, one for a trellising system related to the 1994 patent, and the other for a new method of processing that retained higher amounts of natural grape sugars so raisins could remain tender during baking, which were marketed as Sun-Maid Baking Raisins. The firm also licensed its name to Ferrara Pan Candy Company, which began producing chocolate-coated Sun-Maid raisins. They would compete in stores and at movie theater concession counters with the well-known Nestlé Raisinets brand.

KEY DATES

1912:: California Associated Raisin Company is formed by raisin growers.
1915:: Sun-Maid brand is created.
1918:: A new packing plant is opened in Fresno.
1922:: The firm becomes known as Sun-Maid Raisin Growers of California.
1928:: Sun-Maid declares bankruptcy, and is taken over by creditors.
1930:: A federal loan pays off the banks, and the growers take back ownership.
1942:: H.J. Heinz Company begins distribution of Sun-Maid raisins.
1952:: Distribution by the Sun-Maid broker network resumes.
1964:: A new packing plant opens in Kingsburg, California.
1970s:: Spring freeze and late summer rains cause massive crop losses.
1980:: A licensing unit is formed to sell the Sun-Maid brand to bakeries and other firms. Improved harvesting and processing methods are introduced.
1998:: Membership in the Sun-Diamond cooperative ends; additional dried fruits are added.
2006:: New digitally animated commercials featuring the "Sun-Maid Girl" debut.

In 1995 Dole Food Company sold its California dried fruit operations to Sun-Diamond Growers Cooperative for $100 million, three-fourths of which was put up by Sun-Maid. A year later Sun-Diamond was banned from participating in government agriculture programs for three years after it was convicted of giving gifts to former U.S. Agriculture Secretary Mike Espy, who had resigned in 1994. In 1997 the U.S. Agriculture Department signed agreements with the four cooperatives that made up Sun-Diamond, allowing them to continue participating in government programs if they established a corporate code of conduct and ethics, instituted employee training programs, and improved rules for travel and entertainment expenses. Each would have to supply quarterly reports and submit to unannounced audits.

In 1998 Sun-Diamond was dissolved, with Sun-Maid once again taking over the work of processing and promoting raisins. At the same time a new state agency, the California Raisin Marketing Board, took on the promotional duties of the former California Raisin Advisory Board, which had been shuttered in 1994.

1999: EXPANSION OF FRUIT OFFERINGS

Sun-Maid had begun offering other dried fruit products, including currants and fruit mixes in addition to raisins, and in 1999 dried apricots, figs, cherries, and apples were added, as well as mixed fruit blends. The firm also had begun to sell grape alcohol for commercial use. Recognizing the more varied product offerings, the word "raisin" was dropped from its name and the organization became simply Sun-Maid Growers of California. The cooperative had 1,200 members.

In 1999 the company partnered with Simon & Schuster unit Little Simon, which published the Sun Maid Raisins Play Book. A collectible Sun-Maid doll was also made available. Sales for 1999 hit $221.7 million, with licensed products adding another $100 million. During the year Sun-Maid was fined $887,000 as a result of a lawsuit claiming it had wrongly collected crop insurance for rain-damaged raisins, then bought some back at a discount and reconditioned them to sell at full value.

In 2000 new product licenses included Honey Raisin Bran Muffin Mix and Oatmeal Raisin Cookie Mix and Sun-Maid fruit bars. The company also introduced more new packaging options, including a 12-ounce resealable foil container that stood on end. In 2001 Fast Fruit Packs debuted, in Natural, Yogurt, and Raisin Crunch versions.

By the early 2000s the organization had made a number of structural changes, including retaining some earnings for reinvestment, rather than giving them all back to growers. Its tax-exempt status was also shed, and its bylaws changed. Raisin growers were once again facing hard times brought on by oversupply, and in 2002 the Sun-Maid board of directors voted to support a proposal banning replanting of vineyards that had been pulled out for three years. Farmers who participated in the effort would get extra raisins to sell from the cooperative in compensation. Growers also were suggesting new methods to dispose of extra raisins as well, including as cattle feed or in ethanol fuel.

In late 2002 an agreement was signed with Cinnabon, Inc., to license that firm's cinnamon bread to bakeries. In 2003 A. Lassonde, Inc., licensed the Sun-Maid brand for a line of fruit juices in Canada that would include grape, cranberry, and blueberry blend flavors. The firm also bought the former International Raisins facility in Selma, California, during the year for $1 million. It would be used to receive, store, and inspect raisins, employing 20. Sun-Maid had once owned the property some 60 years earlier.

In 2004 the company added a variety of dried tropical fruits like pineapple, papaya, and mango, as well as Mixed Jumbo Raisins, which combined the standard Thompson variety with large Red Flame and California Golden types.

Raisin growers had a good year in 2005, with Sun-Maid reporting record net sales of $253 million for a crop of about 200 million pounds. Growers received a $200-per-ton premium over the field price set in 2004. The latest technical advancement, mechanized harvesting, had been used for about 40 percent of the total.

In 2006 the Sun-Maid girl received another makeover from the firm's new ad agency of McCann Erickson, this time becoming a digitally animated, talking cartoon character in advertisements that explained how raisins were made from nothing but "grapes and sunshine." The firm budgeted about $7 million for advertising during the year, up from the typical amount of $4 million to $6 million, with ads running in the United States as well as in foreign markets like France and Japan. About 70 percent of Sun-Maid's sales came from the United States, with most of the rest from Canada, Japan, the United Kingdom, Germany, and Scandinavia.

In April 2006 Sun-Maid's growers and the members of a similar organization called the Raisin Bargaining Association voted to continue to fund the California Raisin Marketing Board for another five years. The board was charged with promoting California-grown raisins and sponsoring research, with growers assessed $16.20 per ton. Shipments had risen by nearly 24 percent since 1999.

Nearly 100 years after its founding, Sun-Maid Growers of California was adhering to its mission of processing and marketing raisins and other dried fruit for its member-growers. Although its power had diminished from the early years when more than 80 percent of raisin growers were members, the cooperative's well-known trademark guaranteed its presence on store shelves and in school lunches, and its products appeared certain to remain in favor as healthy eating trends continued to grow in popularity.

PRINCIPAL SUBSIDIARIES

Sun-Maid Licensed Products.

PRINCIPAL COMPETITORS

Raisin Bargaining Association; Lion Raisins, Inc.; Sunshine Raisin Corporation; American Raisin Packers, Inc.; Caruthers Raisin Packing Co., Inc.; American Dried Fruit Company; Del Rey Packing Company; Fresno Cooperative Raisin Growers, Inc.; National Raisin Company; Sun-Beam Raisin Company; Sunset Raisin and Nut; West Coast Growers, Inc.