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Tri Valley Growers

 


Address:
12667 Alcosta Boulevard
San Ramon, California 94583
U.S.A.

Telephone: (925) 327-6400
Fax: (925) 327-6986
http://www.trivalleygrowers.com

Statistics:
Cooperative Company
Incorporated: 1932 as Tri Valley Packing Association
Employees: 11,000
Sales: $782 million (1998)
NAIC: 311421 Fruit and Vegetable Canning (pt)


Company Perspectives:


Tri Valley Growers' vision is to make it economically beneficial for the independent and family farmer and rancher to remain in the agricultural business. Moving growers up the food chain closer to the customer and enabling them to realize a fair share for their efforts.


Key Dates:


1929: Turlock Cooperative Growers (TCG) is formed.
1932: Tri Valley Packing Association (TVPA) is incorporated.
1963: TVPA and TCG merge to form Tri Valley Growers.
1966: Tri Valley Growers begins construction of Plant 7 in Modesto as it implements a major relocation of its primary canning operations.
1978: Tri Valley acquires S & W Fine Foods.
1995: Joe Famalette becomes Tri Valley's president and chief executive officer.
1996: Tri Valley offers stock to its grower-members.
1998: Company reports worst loss in its history.


Company History:

Tri Valley Growers is a leading U.S. food processor. Owned by its 500 member-growers, Tri Valley produces over 50 percent of the nation's canned peaches, 20 percent of its canned olives, and ten percent of its canned tomatoes. In addition to making its own private-label brands of canned fruits and vegetables, Tri Valley sells its goods under a variety of well-recognized brand names, such as S & W Fine Foods, Libby's, Oberti Olives, Redpack Tomatoes, Tuttorosso Tomatoes, and Sacramento Tomato Juice. The company runs eight plants in California, as well as one in New Jersey, and sells its canned goods to supermarkets, foodservice companies, and the government. Tri Valley Growers came into existence after the 1963 merger between two large California fruit and vegetable cooperatives: Tri Valley Packing Association and Turlock Cooperative Growers.

Tri Valley Packing Association: 1932-63

Tri Valley Packing Association (TVPA) was founded in 1932 by George Pfarr. A peach farmer, Pfarr was shaken by the plummeting prices of his key crop during the Great Depression and the devastation it wrought on the agricultural industry. (The price for yellow clingstone peaches dropped from $80 a ton to $6.50 a ton between 1929 and 1932). Pfarr's goal was to enable individual farmers like himself to withstand the vicissitudes of the market. If fruit and vegetable growers were able to band together and cooperate in the sale and marketing of their products, they could better protect themselves from the bust and boom cycles of the commodities market, command more favorable prices from suppliers, and access a greater pool of resources. As his first step towards making his ideal a reality, Pfarr purchased the fruit and vegetable canning plants of the Armour Packing Company in Visalia, Modesto, and San Jose, California, in 1931. After incorporating TVPA, Pfarr became general manager of the San Jose facility. To ensure harmony among the grower-members, all products were included in one pool--instead of operating separate pools for each commodity. After overhead costs were paid at the end of production, the net income was divided among all pool members. This system ensured that the producers of one crop could not dominate the co-op. At the close of 1932, TVPA had 89 grower-members.

TVPA survived the Depression, and experienced rapid growth during World War II. Demand for TVPA's canned fruits and vegetables was constant during the war years, as the federal government--needing to supply fruits and vegetables to the armed forces abroad--became a key customer. (At this time, canning was the only way to preserve these otherwise perishable goods). While wartime demand proved to be a boon to TVPA and the overall canning industry, other circumstances of that period posed significant challenges to canners' economic success. Profit margins were limited by the price ceilings the government imposed on canned goods and vegetables (as well as on a slew of other products). Moreover, labor shortages caused payroll costs to skyrocket. A substantial percentage of working men were shipped overseas to fight the Axis powers, and those workers who remained at home could command a hefty hourly wage. TVPA addressed these problems by using increased mechanization to reduce the number of employees it needed. For instance, the company worked to develop an effective pear ripening system, and a peach pitter that would speed the processing of fruit.

The prosperous postwar years brought their own challenges as well. The population of San Jose and the California Bay Area boomed. Between 1940 and 1950, San Jose's population rose from 68,457 to 95,280. As residential areas expanded, TVPA came under increasing pressure to make sure its processing plants could safely and comfortably coexist with its new neighbors. Waste disposal (especially of cull fruit) became a major concern.

The nature of the canned food industry had also changed in the postwar era, driven primarily by the emergence of regional and then national supermarket chains. While producers like TVPA had previously been able to sell their goods to a few local brokers and buyers (with whom the processors had cultivated personal relationships), the rise of grocery store chains necessitated a much more aggressive marketing and distribution system. As supermarket chains expanded over ever widening geographical areas, companies such as TVPA had to meet the needs of regional markets. The development of the interstate highway system meant that supermarkets could buy their canned goods from one (often geographically distant) producer. The result was that canning companies' transportation costs escalated, as they trucked their merchandise to far-away outposts. The dominance of supermarket chains also spurred canning companies to produce a wider range of products. TVPA's 'ability to supply a diversity of products was becoming a competitive necessity,' according to Tri Valley Growers: 50 Years of Survival and Growth.

TVPA responded to these pressures in several ways. In 1954, the company addressed the problem of product variety with the addition of several new canned products, including tomatoes, tomato juice, sweet potatoes, asparagus, freestone peaches, boysenberries, and mustard and turnip greens. In 1956, TVPA acquired the Aron Canning Company near Stockton, California, which allowed TVPA to expand its operations and also to enter into the burgeoning tomato paste sector. (Although tomatoes had once been considered an insignificant crop, their harvest and price soared in the 1950s.) The company also stepped up its marketing efforts--especially in the essential Los Angeles area&mdashø increase its visibility among both consumers and supermarkets.

Turlock Cooperative Growers: 1929-63

Tri Valley Growers' other progenitor, Turlock Cooperative Growers (TCG), was founded by five growers motivated by concerns and ambitions similar to Pfarr's. Initially, TCG served only as a marketing agency for its grower-members, but in 1934 the cooperative began packing its own fruit after it acquired the McHenry Station in Modesto, California. Buffeted by the same tectonic shifts as TVPA and other California food processors, TCG had the additional challenge of running a multiple pool payout system, which added to the friction between members. As the company's morale dipped in the late 1950s, TCG converted to a single pool system in 1957. One year later, the company acquired the Morpak Preserving Company in Stockton, California. With this purchase, Turlock decisively entered the production of tomato paste--Morpak had produced 41 percent of all tomato paste in the state.

The Formation of Tri Valley Growers

Although both TVPA and TCG had survived the tumultuous changes of the postwar decade, the canning business became more competitive in the early 1960s. Larger processors could cut better dealers with suppliers, such as can manufacturers and sugar producers, and smaller canners were being forced out of business as the industry consolidated. The board members of both TVPA and TCG began to contemplate a merger between the two cooperatives as a solution to the industry's fierce competition. As a TVPA board member stated in a leaflet circulated among his colleagues, '[The] concentration forces independents to expand or merge in order to survive.' Talks between the two companies began in 1962, and in 1963 TVPA and TCG agreed to merge their member pools. In an effort to preserve the identity of each corporation, the name Tri Valley Growers was adopted for the cooperative that emerged from the union. The new entity could claim $45 million in annual sales (TVPA had generated about $29 million in revenue in 1962, while TCG had taken in approximately $19 million that year) and, more importantly, was a much more commanding presence in the fruit and vegetable processing industry.

Tri Valley acted quickly to capitalize on its new power. In 1964, Tri Valley formed a joint venture with another California fruit and vegetable cooperative--California Canners and Growers (Cal Can)--in order to reduce the total overhead costs of the cans that were essential to both companies' business. To do so, Tri Valley and Cal Can launched CT Supply Company--a can manufacturing plant in Modesto. Both companies were expected to realize significant savings from this bit of vertical integration. As industry-wide consolidation continued apace, Tri Valley also acquired the Oberti Olive Company in 1965.

In 1966, Tri Valley made the bold decision to transfer its primary canning operations from San Jose to Modesto. The population of the Bay Area had continued to grow at a rapid rate, with San Jose's population alone doubling between 1950 and 1960. Waste management continued to plague Tri Valley, making a move to a more rural area an attractive option. Even more importantly, most of Tri Valley's member-growers had long since relocated their farms to the less populated San Joaquin Valley in central California. 'It was felt that transportation costs could be cut down by placing the food processing plants nearer to the production areas,' explained Tri Valley Growers: 50 Years of Survival and Growth.

The relocation was a massive undertaking. Plant 7, as the new facility was named, cost an estimated $15 million to build, and caused a great deal of upheaval. A part of the move to Modesto was to be the simultaneous closing of Tri Valley's outdated, urban processing facilities and the incorporation of their multiple functions under one roof. But in addition to the logistical nightmare this task presented&mdash⁄utting down operations and physically moving essential pieces of each plant's equipment to Modesto--the consolidation took its toll on Tri Valley's employees. Merging the four facilities into one created management redundancies. As a result, some senior employees at individual plants were demoted at Plant 7.

The 1970s and 1980s

After withstanding the upheaval of relocation, Tri Valley faced new obstacles. Returns for member-growers were dismal in 1969, 1970, and 1971 because of labor strikes, high interest rates, and general chaos stemming from the move. Just as the proverbial 'light at the end of the tunnel' emerged in 1971--with Plant 7 reaching full production capacity--the overall canned goods industry slid into what would become a two-decades-long slump. During this period, consolidation continued to exact its toll on fruit and vegetable processors. Between 1970 and 1985, the number of fruit canners decreased from about 70 to seven. Tri Valley responded to the rampant consolidation by trying to expand its own presence in the marketplace. In 1976 the company purchased two canneries owned by the Joan of Arc Company in Turlock, California. Tri Valley then acquired S & W Fine Foods, a manufacturer and distributor of premium quality fruits and vegetables in 1978. S & W, whose origins dated back to 1896, offered Tri Valley a formidable distribution network in the western United States, as well as in select markets in the Midwest, New York, and New England. Tri Valley operated S & W as a wholly owned subsidiary. In 1983, Tri Valley also bought California Canners and Growers, the second largest canning cooperative in the state.

Despite these efforts, however, Tri Valley--like its rivals--was plagued by increased competition from the cheap canned fruit imports that were flooding onto the U.S. market from countries such as Greece, Chile, and Argentina. Even more devastating to Tri Valley was the changing tastes of consumers. Canned food consumption steadily declined throughout the 1970s and 1980s. 'Canned food is considered old fashioned,' an industry analyst told the San Francisco Chronicle on September 25, 1989. While canning had once been the only way to preserve (and quickly prepare) fruits and vegetables, the widespread use of the microwave in the 1970s made frozen foods popular. Moreover, spurred on by the trend toward increased health consciousness in the 1970s and 1980s, consumers eschewed syrup-packed fruit in favor of fresh produce. Between 1982 and 1989, U.S. consumption of fresh fruits and vegetables rose on average 2.5 percent a year, while purchases of canned produce dropped 1.5 percent during the same period.

Trying to adapt to this shift, Tri Valley began offering more healthy canned choices. The company introduced fruit packed in 'its own juices' instead of heavy syrup, and also spiced up some of its products, rolling out concepts such as S & W Cajun Stewed Tomatoes. In 1984, Tri Valley joined a four-year industry-wide public relations campaign aimed at dispelling the false belief that canned produce was less nutritious.

The 1990s and Beyond

The prolonged canned foods decline came to a halt in the early 1990s, as U.S. consumption of canned fruits and vegetables steadied. In particular, Tri Valley benefited from the increased demand for canned produce caused by the Gulf War in 1991. In 1995, Tri Valley's board sought to boost the company's sales and profits, and appointed Joe Famalette as its new president and chief executive officer. Although Tri Valley's chairman of the board crowed to the Modesto Bee that 'Joe Famalette [was] clearly the kind of visionary we were seeking,' his hiring became a controversial decision. Famalette made it his mission to 'focus more on [Tri Valley's] core competencies of marketing, growing, and processing food products,' as he told the February 12, 1997, Modesto Bee. In January 1996, he consolidated S & W into Tri Valley's operations, cutting 60 jobs but generating $5 million in sales. Tri Valley next announced in October of that year that it would fire an additional 65 employees by moving the company's customer service operations from San Ramon, California, to Modesto. In 1997, Tri Valley also sold off its trucking division.

However, the most widespread change occurred in 1996 when Tri Valley issued stock to its 530 member-growers in an attempt to raise capital. Growers received shares of stock instead of cash from the cooperative's pooling system. 'The biggest problem cooperatives face is capital, being as fluid as a public company,' one member-grower told the Modesto Bee on August 3, 1996. 'This will help us compete with [huge food companies such as] ConAgra [and] Del Monte. ...' Another key strategic shift took place in 1997, when Tri Valley embarked on a joint venture with Cirio, an Italian food processor. In an effort to address a nagging trade imbalance (exports of produce had been declining for years--by 1992, the United States was the smallest fruit exporter in the world), the arrangement empowered Tri Valley to market Cirio's products in the U.S., Canada, and Mexico, while Cirio would sell Tri Valley's canned goods in Italy.

But this spate of restructuring had disastrous results. Despite booming agricultural yields in the San Joaquin Valley, Tri Valley reported a loss of $53 million for the fiscal year 1998. Accusations flew that Famalette had deliberately concealed the company's losses. In August 1998, Famalette resigned, and was replaced by Jeff Shaw. Although Tri Valley had to face its substantial losses, the company retained considerable advantages. Not only did the company control over one half of the market for processed peaches, pears, and apricots, it also maintained a 20 percent share of the market for olives and ten percent of the processed tomato business. 'I'm not here to change things that don't need to be changed,' Shaw announced in a Tri Valley press release. 'I'm here to get the company focused back on our customer and employees. ...'

Principal Competitors: Del Monte Foods Company; Dole Food Company, Inc.; Pro-Fac Cooperative, Inc.; Chiquita Brands International, Inc.; ConAgra, Inc.; Diageo plc; H.J. Heinz Company; Seneca Foods Corporation.





Further Reading:


Beckett, Jamie, 'Decline of California Canners,' San Francisco Chronicle, September 25, 1989.
Estrada, Richard, 'California's Tri Valley Growers Takes Back-to-Basics Approach,' Modesto Bee, September 14, 1998.
------, 'Top Executive at California's Valley Growers Departs,' Modesto Bee, August 8, 1988.
------, 'Tri Valley Growers Go Public, Privately,' Modesto Bee, August 3, 1996.
------, 'TVG to Sell Trucking Division,' Modesto Bee, February 12, 1997.
Schacht, Harry, 'Canned Fruit Industry Under Pressure,' San Francisco Chronicle, November 3, 1992.
Tri Valley Growers: 50 Years of Survival and Growth, San Ramon: Tri Valley Growers, 1983.
'TVG Timeline,' Modesto Bee, August 7, 1998.
Watson, Lloyd, 'New Chief for State's Top Canning Co-op,' San Francisco Chronicle, May 24, 1985.

Source: International Directory of Company Histories, Vol. 32. St. James Press, 2000.




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