B.C. fruit co-ops join forces
The merger will help the industry deal with a shrinking number of growers.
Apples are packed at the B.C. Fruit Packers plant.
In an effort to enhance and streamline operations, the four Canadian fruit packing cooperatives in British Columbia's Okanagan --Valley have joined forces.
Pending the outcome of a vote in early February, which is expected to be a formality, the fourth co-op, the Okanagan Similkameen Cooperative Growers Association in Oliver, British Columbia, will merge with the B.C. Fruit Packers in Kelowna, Sun Fresh Cooperative Growers in Naramata, and Okanagan North Growers Cooperative in Winfield.
The new co-op is expected to be named the Okanagan Tree Fruit Cooperative and begin operation June 1. The new entity includes six grower-owned packing houses in Kelowna, Summerland, Naramata, Winfield, Osoyoos, and Oliver, as well as smaller satellite facilities.
For the past two years, the three northern co-ops have been operating as a merged entity on a trial basis under the banner of the Okanagan Tree Fruit Company. The trial proved to be successful, and, in August 2007, members of the B.C. Fruit Packers, Sun Fresh, and Okanagan North voted overwhelmingly in favor of amalgamating.
The B.C. Fruit Growers' Association has long been pushing for the merger and its president, Joe Sardinha, considers it to be a necessary step to counter difficult times.
"A lot of growers worked very hard to get to this point," he said. "It's a big deal. These ideas were proposed many years ago. I think it comes at a key time. We have seen [tree fruit] acreage declining; our industry has downsized quite a bit."
He pointed out that about four years ago, there were 11,500 acres in the valley producing apples and pears, and that number has shrunk to 9,700.
"One of the things we're finding is it's a shrinking industry," agreed Gary Schieck, general manager of B.C. Fruit Packers and Okanagan Tree Fruit Company. "We're losing a lot of growers and acreage to grapes. This merger gives us a better opportunity to deal with this."
In January, Okanagan Similkameen members voted 89 percent in favor of amalgamating with the other three co-ops. The next step in the process was a vote by the first three co-ops approving the addition of Okanagan Similkameen to the new co-op. A new board of directors will be elected, consisting of ten members, and the present 40-member board will be disbanded.
"Amalgamation was strongly recommended by both management and the board," said Alan Tyabji, general manager of the Okanagan Similkameen co-op. "There has been extensive discussion. One reason we recommended merging is it's been demonstrated we are able to increase our returns to the growers substantially."
Sardinha credited part of that increase of returns to better inventory management.
"We don't have to have as many cold storage rooms open at the same time. We will be able to pack and sell in a more timely fashion. We can customize certain packing lines and pack certain varieties. We can also coordinate who packs what."
"I believe it's a positive thing for our industry," Schieck said. "Historically we've had several packing houses within the valley. By merging them, a) it eliminates the competition from within the valley, and b) it gives it better efficiency, which will give us better cost effectiveness.
"Instead of opening controlled---atmosphere storage rooms in each packing house, we would only open one room, and we end up with less shrinkage for the growers. Fruit won't store as long once the CA rooms have been opened. It also provides more consistent packing."
Greg Gauthier, chief executive officer of B.C. Tree Fruits Ltd., which has been providing sales, marketing, and promotional services to the packing organizations since 1936, also sees the merger as a positive step.
"I think it's good for the industry. For us, if we only have to deal with one organization instead of four, it should simplify things."
One of the concerns for the Okanagan Similkameen co-op, Tyabji said, was the loss of revenue for his co-op from other business ventures.
"We were concerned because we make substantial money in other businesses," he said. "We warehouse and distribute for Labatt Breweries in Creston and for Vincor, one of the biggest vintners in Canada. We are also very big in organic fruit."
Although the organic segment of the operation will be retained, the others won't. However, Tyabji said the increased revenue resulting from the amalgamation would more than offset the loss of the warehousing business.
He also said that all his reservations about the merger disappeared when he was assured that the new board of directors would include equal representation from the north and south of the valley.
"One of the most important things we had asked is for balanced --representation," he said.
The board will consist of five members elected from the north and five from the south.
Although streamlining the operation may include trimming in some areas, including the sale of some of the co-op's infrastructure, there is not expected to be a loss of jobs, at least in the immediate future."From a staffing point of view, there is not a surplus of quality employees," said Schieck. "Typically, between October and the end of February is the busy season for us. We would look at running more shifts if we had more employees. We may have to try to ramp up our output by --upgrading our equipment."
"I don't think you'll see a lot of jobs lost," agreed Sardinha. "We need a lot of hands for packing and moving fruit. As far as management goes, there have been some retirements, and there may be a few more. For the purpose of continuity, we want to hang onto management for a little longer to oversee what's being done. We still have a crop to deal with that's being packed and sold.
"Streamlining is going to happen in the future. Part of it is putting in new technology. It's going to take a little longer to figure out what --infrastructure we want to retain and which we want to liquefy."
However, one casualty of the amalgamation is Tyabji's position.
"I will be gone, just about definitely," he said.
He said Schieck has been running the Okanagan Tree Fruit Company since its inception more than two years ago, and would be the obvious choice as the general manager of the new co-op.
Tyabji, 63, said he wasn't concerned about his future, though.
"I will make myself available for any senior role that might be out there. I'm looking to see what the industry might need. It's going through tremendous change, and there will be a need for as many experienced people as possible."
Sardinha said the new cooperative might look at new options for process-grade fruit, which currently goes to Sun-Rype in Kelowna for juicing.
"There are some value-added opportunities we can look at for cull fruit—whether it's viable to use the fruit for ciders, fruit wines, and --additives," he said.
About 550 people are employed in the valley's cooperative packing houses. They receive, grade, store, package, and ship 260 million pounds annually of apples, cherries, pears, peaches, nectarines, apricots, and plums. The value of that fruit is more than $100 million annually.