 
2001 Annual Report
President's Message
On June 13, I came to Sunkist as your president. I appreciate very much the confidence and support that I have received from all of you since then. You have made me feel welcome at all levels of the company - the executive committee, the board, the management, the employees, and the membership.
As most of you know, I came from outside Sunkist and from outside the California citrus industry. However, I have been a grower and a part of the produce industry all of my working life. My former company was involved primarily in the production of tomatoes and berries in several states, including California, as well as abroad. I believe this and grower experience, as well as coming from the outside, will help all of us take a fresh and objective look at Sunkist, where we are today and where we need to go.
We all know the produce industry has changed radically in the last few years. The consolidation of retail has resulted in fewer, bigger buyers, all requiring a different bundling of services. Our opportunity is that we should be able to combine our size and brand name with the right services, such as category management and packaging, to work with the customer in a new and unique way. Then we will be competing on the basis of service, not just price.
The demand for consumer convenience is also having a major effect in our industry. Look at the growing amount of shelf space now devoted to "value added" salads and pre-cut vegetables. As technology improves, we will see similar products in fruit as well as a shift to fruits that are more easily consumed.
The globalization of the produce industry is also influencing the way we do business. Today, more than 50 percent of all the produce sold in the USA comes from outside our borders. We at Sunkist are global traders, exporting about 30 percent of what we produce. Our markets will continue to shift as new competition develops both inside the United States and abroad in our Asian markets. We must be prepared to respond.
To compete in this fast changing marketplace, Sunkist must reform itself. We must reform to earn and to keep our market share. We need to shift from being a supply-driven organization to becoming a customer-driven organization. By focusing on the customer, we will find new ways to compete.
To position Sunkist as a market-driven organization, it is necessary to implement some internal reforms. We must change how we do business as a cooperative and redesign our marketing and sales organization to better fit today's marketplace. An initial restructuring of our sales offices has already begun.
These initial reforms in the areas of governance and fresh fruit marketing will be the subject of much discussion within Sunkist in the first half of 2002. The current proposals include scaling back the size of the board and adding outside board members for their needed, specialized expertise and reforming fresh fruit marketing to move to a more centralized sales and marketing structure. Issues dealing with pool pricing and shipper right-of-refusal must also be addressed if we are to be empowered to get the best prices for our growers.
Cooperatives often have a difficult time with modernization. Sadly, there is a long history of failures by those who refused to change. With a reform of governance, we can achieve a business-like model to better govern ourselves, and with fresh fruit marketing reform we can become more customer-focused and assure a greater chance of success. I believe it is time for Sunkist to be proactive rather than reactive. By working together we can manage change in a cooperative manner to ensure our success in the years to come.
Jeffrey D. Gargiulo
President & CEO
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