Low prices offset higher avocado volumes for Calavo

Calavo Growers reported avocado volume rose 18.2% in the quarter ending July 31, but that was offset by a 37% decline in average selling prices.

Total revenue of $270.4 million for the quarter represented a 24.7% decrease compared with the same quarter a year ago, according to a news release from the Santa Paula, Calif.-based company.

“Our third quarter results were impacted by a combination of lower avocado prices, reflecting increased supply from Mexico and Peru, and lower demand in our RFG (Renaissance Food Group) and foods segments resulting from the second wave of COVID-19,” James Gibson, CEO of Calavo Growers, said in the release.

The company maintained supply chain continuity across its 18 facilities in the U.S. and Mexico, he said.

Calavo’s gross profit of $30.8 million for the quarter was 11.4% of revenue, and the release said an increase in profit margin compared with a year ago was attributable to continued gross margin improvements in the RFG segment and foods segment. Calavo reported a net loss of $15.6 million for the quarter, which the company said primarily reflects a $37.2 million non-cash loss on reserve for meal-kit subsidiary FreshRealm, which has co-located facilities with RFG in Los Angeles, Indianapolis, Jacksonville and New Jersey.

Performance

Sales in Calavo’s fresh business segment dropped to $162.1 million, according to the release, off 21.9% compared with a year ago.

Avocado imports from Peru and Mexico combined with a strong harvest in California drove the average selling price of avocados down 37% from the same period last year, according to the release.

Avocado sales volume improved in May and early June as foodservice operators reopened and consumer buying patterns began to normalize at grocery retail outlets, according to the release, but Calavo said that growth was limited from late June from lower demand as reopening plans slowed due to a spike in COVID-19 cases.

Fresh segment gross profit for the third quarter of 2020 was $17.7 million, according to the release, or about 10.9% of segment sales. That compares with $25.4 million, or 12.2% of segment sales, for the same period last year.

The company reported its Renaissance Food Group business segment sales in the third quarter 2020 were $90.9 million, down 28.7% from $127.5 million in the same period last year. The decline in sales was principally due to the closure of the company’s co-packing partner in the Midwest in March 2020.

The release also reported sales were hurt by lower consumer demand for some of RFG’s short-shelf life prepared food items, particularly in May.

However, the company said those results were partially offset by increased sales in Calavo’s newer production facilities in Georgia and the Pacific Northwest and in its line of longer-shelf life cut fruit. Volumes returned to pre-COVID levels in July and continued into August with the product mix weighted towards fresh-cut fruit and vegetables as compared to grab-and-go prepared foods, according to the release.

Calavo also announced the publication of its sustainability highlights report for 2019.

The report summarizes the company’ sustainability plan and commitment to long-term ecological balance, environmental soundness and social equity, according to a news release.

“Our sustainability priorities are closely tied in with changing stakeholder expectations of what a strong, well-managed company should be,” Jim Gibson, CEO of Calavo Growers, said in the release. “Our investors want to see evidence that we are addressing climate change risks. Our customers want to see more recycled packaging on their shelves.”

Gibson said there is no corner of the business where sustainability is not a key topic of conversation.

Calavo’s sustainability report is on the company’s website.

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