 
2001 Annual Report
President's Message
It is difficult to believe that a year has past since the last annual report. The 2001-02 season, my first full year as your president, was one of successes and challenges and an even faster changing business climate than any of us could have imagined. Today more than ever, the concept of uniting to sell our crops is even more critical than it was at the birth of Sunkist 110 years ago.
One of the dynamics that doesn't change in our produce industry is the concept of supply and demand. Supply control can, and does, positively impact price. With the many choices available for consumers, oversupplying the market often produces very poor results for growers. This past year Mother Nature helped us by creating smaller volume crops. As a result Sunkist was able to manage pacing in a way that produced maximum grower returns for most crops. It is unfortunate that we often have to rely on the weather to manage our supply rather than to exercise the self discipline to deal with it in a proactive manner.
With a large market share of lemons, most of the time we are able to pace ourselves to maximize grower revenue. Unfortunately some growers take advantage of Sunkist's price leadership by cutting prices and increasing utilization. While this sometimes provides short-term gains, long-term this strategy can weaken the entire industry and create significant negative results for everyone. We must convince these growers that pacing within Sunkist will produce the best long-term results.
Supply control for orange growers is more difficult to manage, particularly in larger crop volume years. When crops are over-supplied, some growers try to outrun their neighbor and create negative pressure on the market. Sunkist was created to alleviate such situations by allowing growers to work together and, in later years, prorate was created to include the independents in a pacing strategy. Without Mother Nature's help the best possible way to control pacing and improve returns is by uniting growers.
The pace of change in our world and our economy continues to accelerate at break-neck speed. Companies that do not change fast enough to manage through this changing world do not prosper. Today's stock market is full of them. Some of them are long-standing companies with brands that are household names - companies we would never expect to have problems. Sunkist has made some changes during the past year, but we must accelerate the pace of change in order to ensure the best possible grower returns.
During the past year we have completed a major reorganization of sales and marketing. In addition to John McGuigan as vice president of domestic sales, Russ Hanlin was promoted to vice president of export sales and sales operations, Robert Verloop was promoted to vice president of marketing and sales promotions, and Jim Padden came aboard as chief operating officer. This team engineered our reorganization, which resulted in many of the traditional district sales offices closing and more strength added to the two centralized offices in Sherman Oaks and Visalia. These decisions were made based on our customers, both where they are located and how we can best meet and exceed their expectations.
The retail environment continues to dramatically change. The value retailers and club stores continue to rapidly expand. Sunkist's business with these retailers continues to expand along with them.
The consumer also continues to change with the incredible selection of available food - all of it very convenient. As a result consumers are more fickle about what they purchase. We must pay attention to the consumer and understand the long-term trends. Decisions about what crops to plant, what months certain products are needed, and what logistics and support are necessary, are all critical to our future.
We cannot stop the globalization of produce trade. The politics of our country promote it; economists demand it and consumers support it. We had a one-year reprieve from Spanish clementines and we may have another season's or two reprieve from Argentine lemons. Sunkist is a major global player with our significant export business, and we want to expand it. We must, however, develop a comprehensive domestic strategy, and execute it. Our customers are demanding it. And we must provide it in order to generate the best possible grower returns.
Certainly these times are dramatic and dynamic. It will take great effort for businesses and growers to compete long-term. By pooling resources, listening to change, and sticking together, the best possible alternatives will be explored and thus offer the best chance at survival. It is not easy to trust your neighbor, just as it wasn't easy 110 years ago, but the proof is in the success of Sunkist. The future
is to stay united and ensure a successful Sunkist.
Jeffrey D. Gargiulo
President & CEO
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