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Pundit’s Mailbag —
In Defense of Sunkist’s New CEO

Jim Prevor’s Perishable Pundit, November 28, 2006

Regular readers of the Pundit know that we have been dealing regularly with the issue of the future of Sunkist. Our most recent piece was entitled Eastes Leaves Sunkist and dealt with the departure of Rick Eastes, who was Sunkist Global LLC’s first employee in 2004 and built it up to an organization that sourced almost 2.5 million cases of citrus in 2006.

We also congratulated Tim Lindgren on his appointment, after being called back from retirement, as President and CEO of Sunkist by asking a question: Will Tim Lindgren Go To China?This piece inquired as to what kind of CEO Tim Lindgren might turn out to be and what it might mean for the future of this iconic brand.

Now we receive a letter critical of the Pundit’s position:

Your November 8th piece, Eastes Leaves Sunkist, about Sunkist recently came to my attention and I found it to be interesting even though inaccurate. I read your pieces from time to time and find them interesting and thought provoking. It sure seemed like you were kind of an investigative reporter but, after reading this article (and a couple of other recent ones), I think you are morphing into some type of a tabloid reporter.

If you knew half as much about the Sunkist issue and their excellent choice of Tim Lindgren as CEO as you think you know, your article would have taken a completely different direction. Here you are writing about someone you’ve never met much less know and, under the circumstances, I would think that you would be motivated to get off your duff, get on a plane and go interview the man. Instead you apparently rely on rumor and innuendo to speak up with great authority just as though you knew what you were talking about.

Just for the record, as a consulting engineer to the organization for many years, I have been close to the situation. After two mistakes in a row in the selection of a CEO, Sunkist could not afford a third one. Therefore, after careful consideration, they selected by far the best candidate they could find. Tim not only knows the organization but he knows every player. As the CEO of Fruit Growers Supply (same board as for Sunkist), he improved the performance of that organization significantly in every aspect over the years and, when he left, his succession plan resulted in a change of the guard that was seamless. He is a manager and leader par excellence and that is exactly what Sunkist needs at this time, much more than a marketing guru and certainly not a person who would spend most of his time nurturing a wine operation in the Napa Valley.

With respect to some of your unkind comments about Tim and Sunkist, you must know that they have an excellent marketing staff and probably the most extensive involvement in the international trade of fresh fruit of any company out there. And you can be sure to know that Tim is a global thinker. Rick Eastes is a nice guy but was obviously not the man for the job at Sunkist and I’m sure that had nothing to do with the change in the guard. Sure, there have been a few people leave Sunkist recently but that had a lot more to do with their incompetence than with Jeff’s leadership or lack of same. As a matter of fact, it would be hard to find a more popular leader than Tim. He’s even received standing ovations from the employees and growers since the announcement that he was being put in charge. You see, those close to the situation could clearly see that Sunkist was in trouble under the former CEO and, quite frankly, if you knew the half of it, you would certainly agree.

So, why don’t you get off your high horse, make an effort to meet the man you choose to criticize and don’t be surprised to see Sunkist thrive under the his excellent leadership.

Sincerely,

— Bill Washburn, President
Foodpro International, Inc.

We appreciate Bill taking the time to write. Over 90% of the Pundit’s communication with the trade is “off-the-record,” so we enjoy it when someone is willing to put their name to a letter. We also appreciate being called “…interesting and thought provoking.”

Yet, this letter leaves us in a quandary. Bill explains that he found the November 8th piece “…interesting even though inaccurate.” Yet, he quotes no words from the article and leaves us mystified as to what might possibly be “inaccurate” in the piece. We’ve read it over thrice and find no inaccuracies. So we stand by the piece.

As far as his allegation that the Pundit is “…morphing into some type of tabloid reporter,” it is not even clear what this means. We received a press release indicating that Rick Eastes “…elected not to renew his agreement with the Sunkist subsidiary company…” and then we wrote an article about it. What would Bill think was responsible journalism? To ignore the subject?

Bill writes a long paragraph claiming that we rely on “rumor and innuendo” that we should “…be motivated to get off your duff, get on a plane and go interview the man” and, more generally arguing that the Pundit doesn’t know that much about Sunkist.

The whole paragraph is odd. First because Bill hasn’t told us what, precisely, we said that was incorrect, so the extent or source of our knowledge doesn’t even seem to be at issue.

Second, considering the Pundit’s family was buying Sunkist fruit before Bill Washburn was born and the Pundit has been thinking, writing, editing and lecturing about Sunkist since 1985, including this column written over 15 years ago, it seems odd to claim the Pundit is ignorant on the subject.

As far as interviewing Tim Lindgren goes, the Pundit has been to Sherman Oaks and would be happy to go again. So far the invitation hasn’t come. Besides, many years of experience teaches us that interviews, almost always staid affairs, are often less enlightening than the commentary given by players behind the scene.

Look at Bill’s letter itself. We have no reason to doubt our letter-writer’s sincerity, but it is a reasonable assumption that if our correspondent did think Tim Lindgren’s appointment a terrible mistake, we would never receive a letter on that subject.

After all, as he mentions, our letter-writer is “…a consulting engineer to the organization for many years…” That means his bread is buttered by Sunkist. In fact, if you look at the “What our clients say…” page of our letter-writer’s company’s website, the first thing you read is a note from Fruit Growers Supply Company, the Sunkist affiliate that had been run by Tim Lindgren for so many years:

What our clients say…

Fruit Growers Supply Company

“Your firm was involved in all phases of the project beginning with the presentation of this concept to our Board of Directors, through the site selection, design and engineering, construction supervision and start-up of systems. There is no question that your involvement in this project saved FGS and the Sunkist Growers substantial time and money and this was most appreciated.”

So interviews are a source of information, as are signed letters such as Bill’s, but often the more valuable information is the things people can’t say out loud.

Besides, the Pundit’s opinion of Tim Lindgren isn’t what started the current interest in Sunkist’s future. It was the decision of Sunkist’s largest grower, Paramount Citrus, to leave the Sunkist co-op. An issue we dealt with here.

Our letter-writer alleges that the Pundit has made “…unkind comments about Tim [Lindgren] and Sunkist…” and here the Pundit takes offense. Once again our letter-writer identifies no unkind comments and thus leaves these assertions as unsubstantiated charges.

We have neither made nor intended to make any unkind comments toward Tim Lindgren, and it is nonsensical to say we made an “unkind comment” about a company. We have critiqued the strategy that Sunkist is following and the goal of this critique is to help Sunkist. But the critique is neither “kind” nor “unkind.” It is either “correct” or “incorrect.”

Just to clarify. We have heard good things about Tim Lindgren. And we agree with our letter-writer that “Tim not only knows the organization but he knows every player.” If you define “player” to mean important growers and board members, some might argue that the customer base should also be considered “players” — and Tim Lindgren doesn’t know those folks.

Yet, we have no reason to doubt his competence as a manager and, indeed, it seems likely that the board of Sunkist got exactly what they wanted when they selected Tim Lindgren as CEO. And in our article we expressed the hope that Tim Lindgren might be the man who is perfectly suited to the moment. Here is what we wrote:

As President, when Nixon went to the Peoples Republic of China in 1972 and officially recognized the government in Peking — now Beijing — as the official government of China, Nixon was not vulnerable to attacks from the right that he was soft on communism.

So only the rabid anti-communist could, politically, make peace with the communists.

Perhaps Mr. Lindgren, so close to the grower/owners of Sunkist, is the one who can convince them that their interests lie in separating their ownership of Sunkist stock from their business of selling their crops. If so, he will have provided a value far beyond what any produce marketer could have done.

We hope it happens. If it does not, the problem is not Tim Lindgren; the problem is the board and, more broadly, the grower/owners of Sunkist.

And it is a problem endemic to co-ops. The nature of a co-op is that it isolates growers from marketing because the co-op takes over that function.

In our article Will Tim Lindgren Go To China? we used the situation in China as an analogy for the kinds of problems Sunkist confronts.

Sunkist exports a lot of fruit to Asia. Pulling and screaming, the growers were convinced to sell counter-seasonal citrus. Developing this program is principally what Rick Eastes has been involved with. Today, many of the Asian accounts that purchase California and Arizona citrus from Sunkist also buy Sunkist brand citrus from South Africa and Australia.

Sunkist growers were persuaded that in order to sell domestic accounts such as Wal-Mart and Costco, plus many overseas accounts, it was crucial to be a 52-week-a-year supplier of every product Sunkist sold.

Even now, there is great resistance in the grower ranks to this concept. Many growers feel that every moment a Sunkist executive spends talking or thinking about anything but California or Arizona citrus is a waste. They think that salespeople should be selling California valencias rather than Southern Hemisphere navels.

But because of the justification for the counter-seasonal produce to maintain relationships to sell more California/Arizona citrus, the board approved it.

Now, the issue facing Sunkist is more stark. China is planting citrus like crazy. There are experts in China bringing the most modern sorting and packing equipment. People from America, from Chile, from Europe and from Israel are helping to upgrade the quality of Chinese citrus production.

China will have both quality and quantity available for export to Japan, Korea, Taiwan, Singapore, Thailand and other Asian markets. The fruit will be significantly less expensive and Sunkist will lose these Asian export markets.

Because China and California/Arizona are both northern hemisphere fruit, they will be in direct competition.

Here is what we wrote:

The great strategic issue confronting Sunkist is what to do about massive plantings of citrus in China. Already Sunkist has virtually lost its European outlets. Inevitably this Chinese citrus will drive Sunkist out of its important Asian export markets.

The Pundit has urged Sunkist to open packinghouses in China. It could save the Asian markets for Sunkist, provide inexpensive fruit for sale in Europe and position Sunkist as a multi-national producer.

The Pundit believes that it is in addressing this great strategic question that Sunkist’s future will be decided.

We believe that the strategy for value maximization would be to end the Sunkist co-op and give each grower shares in Sunkist, then do a listing on the New York Stock Exchange and allow growers to freely sell, buy or hold shares in Sunkist.

This would free Sunkist management to maximize the value of the Sunkist brand and Sunkist marketing organization and thus the value of the shares that growers would hold.

Growers would have an initial contract to market through Sunkist and after, say, three seasons, they could seek alternative marketing channels if they so desire.

This is a case where division of the company would provide a multiplication of total asset value.

Our letter-writer is entitled to his opinion on others who have been affiliated with Sunkist, but his opinions are not widely shared. To say that “Rick Eastes is a nice guy but was obviously not the man for the job at Sunkist and I’m sure that had nothing to do with the change in the guard” is to deny reality.

In what sense was Rick not the man for the job? He built the company from nothing. And, why our letter-writer is so “sure” that Rick’s departure had nothing to do with the changing of the guard is beyond this Pundit.

To say that “Sure, there have been a few people leave Sunkist recently but that had a lot more to do with their incompetence than with Jeff’s leadership or lack of same.” Who are these incompetent people who left? Jim Padden, who was Vice President and Chief Operating Officer of Sunkist? Would that be the same Jim Padden who David Krause, then Chairman of Sunkist’s Board of Directors and President of Paramount Citrus, identified as an “in-house candidate” for President and CEO when Jeff Gargiulo announced his intention to leave? It is an absurd claim.

But the money shot is our correspondent’s explanation that Sunkist made “…two mistakes in a row in the selection of a CEO…” and his attack on Jeff Gargiulo as a “person who would spend most of his time nurturing a wine operation in the Napa Valley.”

It is a fascinating critique of Jeff. Note that our writer doesn’t point to any failures on Jeff’s part, doesn’t claim Jeff was negligent and didn’t do his job. He just leaves his ownership of a winery out there kind of hanging like an accusation.

Jeff is a highly intelligent and successful entrepreneur. He started out his career in produce with the Naples Fruit and Vegetable Company. Eventually he started Gargiulo, Inc., which was to become the market share leader in fresh tomatoes and was one of the top companies in strawberries and raspberries. He sold the company to Monsanto, where he served as president of the Produce Business Unit for two years.

During his time at Sunkist, Gargiulo improved revenues and payments to the cooperative’s members by introducing new products to leverage the Sunkist brand, expanding Sunkist’s distribution into Wal-Mart and Costco, and by sourcing fruits from other parts of the world to satisfy demand for year-round availability of citrus fruits. Gargiulo also served as chairman of the Produce Marketing Association.

Yes, Jeff and his wife, Valerie, have a winery. Their daughter, April, runs sales and marketing. More power to Jeff and his family. You can find their website here. Download an order form and fax it over.

What is interesting about our letter-writer’s critique is it echoes the kind of complaints about Jeff that board members at Sunkist told me about. Several Sunkist growers told me that they knew that Tim Lindgren would be a big win for Sunkist over Jeff Gargiulo. How did they know this? Well, it was explained to me that Jeff spent a lot of money on travel and Tim would spend a fraction of that.

We’ve never seen the Sunkist travel logs but that mode of thought strikes us as ridiculous. Sunkist is roughly a billion-dollar organization. The CEO’s travel is simply insignificant.

But our letter-writer’s complaint about the vineyard, the board members complaint about the travel expenses and the failure to keep Jim Padden and Rick Eastes, all speak to a cultural divide between the grower/owners of Sunkist and the necessities of a worldwide produce market.

We wish Tim Lindgren well and we are reminded of the advice Russ Hanlin gave his successor when he retired as Sunkist’s CEO after 47 years at Sunkist: “Remember every day that Sunkist is a voluntary membership association. You have to have the consensus of the membership to make it work. Massage that consensus, get out there and try to communicate as best you can what it is you’re trying to do. Work on that constantly and don’t feel that it’s an intrusion on your job. That is your job.”

And that is why Tim Lindgren may yet prove to be a great CEO for Sunkist. If he is able to persuade the grower/owners of Sunkist that converting to a stock company will enhance their interests, he will go down in history as the greatest Sunkist CEO ever.

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