Issue link: https://read.dmtmag.com/i/473131
12 MARCH 15, 2015 GOOD FRUIT GROWER www.goodfruit.com Valley Fruit and Larson Fruit are building a new apple packing line. by Geraldine Warner T wo of Washington State's long-established family tree fruit companies are joining forces to build a state-of-the-art $17 million apple packing facility that will help them remain competitive. Valley Fruit Company in Wapato and Larson Fruit Company in Selah have already been collaborating for several years as partners in the marketing company Sage Fruit, along with Olympic Fruit Company of Yakima. On January 1, they formed a company called Legacy Fruit that will operate their fruit packing businesses. It is not a merger, however, as each company retains its separate ownership and operates its orchards independently. Vertical integration has been common in the tree fruit industry over the last few decades, with companies bringing growing, packing, and marketing under one entity in order to capture profits throughout the value chain. But Peter Verbrugge, president of Valley Fruit, said as business becomes more competitive, there will likely be more horizontal integration. Very large companies are at a competitive advantage because of efficiencies of scale. Very small companies can succeed by finding specific niches. But mid-sized companies are in a vulnerable position. During the past five years, while apple growing has been profitable, many companies have put profits into upgrading their packing facilities. Verbrugge said he's concerned about whether some of the smaller companies that have made investments have enough throughput to sustain operations. Most of the recent apple plantings in Washington State have been made by the larger, vertically integrated companies; packers are competing for a diminishing number of independent growers. Future Keith Larson, who owns Larson Fruit with his cousin Barbara Walkenhauer, said that some time ago, as they contemplated the future, they decided they needed to hire a professional manager with broader experience and new ideas. "It was nerve-racking because we're a closely run family business," Larson said. "That's scary to think about handing that over to somebody else." Two years ago, they hired Dean Gardner as chief executive officer. Gardner, who was previously based in Portland, Oregon, had broad experience in guiding com- panies through transitions, mergers, and acquisitions and worked with many different industries. About that time, Verbrugge approached his family with a similar idea. He had taken over from his father, Marty, as president of Valley Fruit and felt increasingly stretched in his duties. He felt that hiring a CEO would free him up from day-to-day operations so he could work on the strategic long-term growth of the company. Verbrugge said it's a challenge to find good managers within the tree fruit industry who are not members of other fruit growing families. Several years ago, Sage Fruit Company hired from outside the industry when it appointed Steve Clement as general manager to succeed Verbrugge, who then became chair of the board. Clement previously worked for Moss Adams LLP and had a background in financial management and consulting. "I saw the success in that, and I went to my family and said, that's what I think we should be doing at Valley Fruit," Verbrugge recalled. "And I approached Keith and Barb about the possibility of having a joint CEO." Gardner became CEO of both companies, which both faced the same conundrum. "We each needed a new packing line, and we knew doing it alone would stretch our balance sheets, and espe- cially going into what could be a challenging fiscal cycle for the apple industry," Verbrugge said. Last fall, Washington harvested a record apple crop estimated at 148 million packed boxes. Average Gala and Fuji prices so far this season have been about $5 lower than last year. Verbrugge noted that economic challenges typically result in industry changes. To strengthen their positions, Larson and Valley Fruit decided to merge their warehouse operations and form a new company called Legacy Fruit to manage them. Packers JOIN FO TJ MULLINAX/GOOD FRUIT GROWER Valley Fruit and Larson Fruit together formed Legacy Fruit to handle their fruit packing businesses. From left to right: Peter Verbrugge, president Valley Fruit; Scott Jacky, director orchard operations, Valley Fruit; Keith Larson, owner, Larson )UXLW&RPSDQ\%DUEDUD:DONHQKDXHURZQHU/DUVRQ)UXLW&RPSDQ\'HDQ*DUGQHUFKLHIH[HFXWLYHRI¼FHU/HJDF\)UXLW Packers; Mary Jacky, owner, Valley Fruit; John Verbrugge, owner and manager of orchard operations, Valley Fruit. "To really put a partnership together and have one management team is a big step for a family-owned business." —Dean Gardner