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Squeeze Is On

Competition has taken a bite out of Sunkist sales.


With 108 years in the citrus business, Sunkist Growers has created a brand so powerful it can sell more than 600 products around the world, everything from jelly beans to vitamins to orange soda.

But when it comes to oranges, just having a well-known brand is no longer enough. Sunkist is fighting for its competitive life.

Foreign-grown fruit is eating into Sunkist's U.S. market share. Consumers are finding a much wider variety of choices in the supermarket produce aisle. Slumping citrus prices and rising costs are squeezing Sunkist member-growers' profits.

And with a bloated, inefficient organizational structure, growers say, Sunkist has found it hard to move as quickly as some of its smaller competitors.

"It's a challenging time for all of produce right now," said Sunkist President Jeffrey Gargiulo, recently brought in to breathe new life into the mighty brand after years of inexperienced and temporary management.

His biggest challenge is to convince supermarkets that the cooperative's products still are worth paying a premium price for.

Such pressure would have been unthinkable a few years ago, when fruit from Sherman Oaks-based Sunkist was a fixture in supermarket produce aisles and consumers around the world saw its brand as synonymous with oranges and lemons. Sunkist's marketing might brought California citrus to consumers from Canada to Japan, making it a model for American export prowess.

With its dominant position in the marketplace, the marketing cooperative reaped a healthy profit, which it funneled back to its 6,000 grower owners in California and Arizona. Although Sunkist is self-supporting, in recent years its growers have struggled and some of its contract packers that distribute its fruit have closed their doors.

Today the organization is still the market leader, representing 60% of the citrus production in California and Arizona. But it must work much harder to convince retailers its fruit is special.

That's partly because citrus has more competition than ever. Supermarkets have added new items to cater to a greater range of ethnic tastes and are importing more produce to ensure that shoppers can get their favorite fruit out of season. Convenience items, such as pre-cut vegetables, baby carrots, fresh herbs and bagged salads, also have stolen more shelf space.

Competition has become particularly fierce during the summer months. Sunkist's Valencia oranges compete not only against Florida oranges, but against California peaches, plums, nectarines and melons, Australian and Israeli oranges, and Spanish tangerines and mandarins.

Navel oranges, grown in winter and spring, have traditionally had less seasonal competition. But even navels have been losing ground to imported fruit, such as the seedless, easy-to-peel clementines from Spain.

With the quality of imported fruit rising, shoppers these days care less about where a product comes from, says Karen Caplan, president of specialty fruit marketer Frieda's Inc. in Los Alamitos.

The bottom line for most people, industry observers say, is how much fruit costs and how well it tastes.

When it comes to taste, American shoppers are increasingly finding California navel oranges somewhat wanting. That's partly because the best fruit is shipped abroad, leaving lesser-quality fruit in local supermarkets. "The quality could be better," Caplan said.

"People pick up the best item they see, regardless of brand," said Kathy Means, vice president of the Produce Marketing Assn.

If greater competition wasn't enough, the handful of giant supermarket chains--formed through mergers in recent years--are using their clout to demand lower prices for Sunkist and other fruit.

"We always prefer U.S.-grown product, except if the product isn't available or is out of season," said Jack Brown, chairman of Stater Bros. Markets, a Colton-based regional chain. But "it has to be fairly comparable in price [to imported fruit]. The quality of foreign-grown produce has improved greatly."


Turning Up the Volume on Marketing Efforts

To persuade retailers to continue to pay more for the Sunkist brand, the cooperative's marketing officials have put together special research telling retailers where its navel oranges and other fruit sell best, and how they must be packaged and displayed to get more shoppers to buy them.

Sunkist marketers also are putting together splashy displays that dispense recipes and tell shoppers why Sunkist citrus is healthier than some other fruit.

The cooperative also is negotiating with a celebrity chef to promote Sunkist citrus on his or her television cooking show as an ingredient, rather than as a garnish. Sunkist is test-marketing new, more expensive products, such as pre-peeled, pre-sectioned oranges that last 12 days in their container.

"I think our brand is still very strong and we have some great opportunities ahead of us," Gargiulo said.

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