New Challenge for a 100-Year-Old Brand
Maintaining vibrancy is a special challenge for long-lived brands. It’s a challenge that 100-year-old Sun-Maid Growers of California has tackled with a growth strategy emphasizing product line expansion. In 2021, the cooperative’s strategy included its first-ever acquisition.
Sun-Maid has, for years, introduced Americans and the world to new, dried fruit-based consumer products. Building from the iconic red and yellow boxes that have filled lunch boxes for decades, in more recent years it’s added yogurt-covered and fruit juice-flavored raisin product lines, as well as baked goods and other snacks.
One driver for Sun-Maid’s push to develop new, value-added products is the increasing price pressure from overseas raisin growers, where less stringent regulations make production less costly and improved processes have bolstered production. That the quality is correspondingly lower isn’t of concern to many bulk buyers, especially the cold cereal and baked goods industries that comprise the majority of the raisin market.
“The U.S. raisin industry has dropped from more than 50% to 15% of global production, and commodity pricing is being determined by the global market,” said Harry Overly, Sun-Maid president and CEO. “Despite this price pressure, Sun-Maid needs to continue to deliver value to our member-growers.”
Acquisition has been an identified part of Sun-Maid’s strategy for years, but it took until 2021 for the right opportunity to come around: word was out that Plum Organics, the second-most recognized brand in the baby and toddler food and snack category, was up for sale by its owner, the Campbell Soup Company. Not only does Plum enjoy strong market share, its philosophy of healthy food for young families aligns closely with Sun-Maid’s. Even better, it allows Sun-Maid to begin its brand relationships years earlier—just 90 days after a child’s birth—through Plum Organics’ products, graduating customers to the Sun-Maid raisin and snack lines as they grow up.
Having waited so long, Sun-Maid didn’t want to lose its chance, but anticipated competition from other potential buyers. It turned to its 60+-year financial partner CoBank for a letter of interest that detailed and confirmed the financing for the purchase—ultimately a $120 million syndicated package that included several Farm Credit participants. The letter also provided Sun-Maid with exclusive rights to the purchase while due diligence proceeded and the parties continued to negotiate. It turned out to be a very wise move.
“CoBank turned around the letter of interest extremely quickly, which was critical to safeguarding our purchase in the face of other interest,” said Overly. “Sun-Maid had never done an acquisition before, and working with CoBank gave us confidence and comfort throughout the process.”