Peter Truitt believes that to have processor stability, consolidation had to take place.
After almost 40 years as a major pear canner, Truitt Brothers of Salem, Oregon, is “bowing out” of the business in order to help the industry consolidate.
The company is no longer processing pears, and its 50 growers will instead take their fruit to Northwest Packing Company (part of the Neil Jones Company) in Vancouver, Washington, starting with the 2012 crop.
This is Plan B, says company President Peter Truitt.
Plan A was to acquire the business of Snokist Growers, Inc., in Yakima, Washington, which has gone through bankruptcy proceedings. Truitt made an offer to the U.S. Bankruptcy Court of $42.5 million, which was built around satisfying the creditors as far as possible.
However, Truitt Brothers was unable to put together a financing package by the court’s deadline. In early May, the court approved the sale of Snokist’s assets to Del Monte Foods of San Francisco, California, and Pacific Coast Producers of Lodi, California, for $27.8 million. Pears were just part of Snokist’s fruit-canning business, along with apples, cherries, prunes, and peaches. The purchasers are not expected to keep the pear operation running, which means that Snokist’s growers will be looking for other places to process their pears.
Had Truitt Brothers been successful in its bid, it would have kept the Snokist plant operating, and processed pears for both Snokist growers and its own growers. Truitt said the idea was to consolidate the pear canning industry, reduce canning capacity, bring prosperity back to the industry, and ultimately strengthen returns to growers.
Twenty years ago, Washington and Oregon produced about 200,000 tons of Bartlett pears for processing. The volume has been gradually declining and has averaged between 120,000 and 130,000 tons in recent years. Meanwhile, cannery capacity has not changed. Snokist, which was the largest pear cannery in the country with a capacity of 60,000 tons, was only processing about half that tonnage.
“When you run any plant at half capacity, you’re spreading a relatively fixed amount of overheads across half the units of production that the plant is capable of,” Truitt said.
Both Plan A and Plan B involved closing the Truitt Brothers’s pear canning plant in Salem. That was a decision that Truitt and his brother David made before they knew about Snokist’s financial difficulties. For the 2011 season, Truitt Brothers had its growers’ pears, as well as cherries, co-packed by Del Monte Foods in Washington, but the pears were still sold by Truitt Brothers under their own label. Truitt said it made more sense to can the pears in the region where most of them were grown and avoid the cost of transporting them to Oregon.
Truitt Brothers would have processed Snokist’s 30,000 tons of pears and its own 22,000 tons, bringing the Snokist plant almost up to capacity and reducing the per-unit costs, Truitt said. The Snokist plant has wells to provide water for processing and a good wastewater treatment facility, which Truitt said are two of the biggest challenges for canneries. And there was the potential in the future, with a manageable amount of capital investment, to house another processor in the same facility.
“We felt that would be the ideal place for us to process our pears and, more importantly, to provide a platform for industry consolidation,” he said. “We’ve been motivated from day one to help the industry achieve a consolidation that would enable the remaining processors in the industry to be prosperous.”
None of the canners had been doing well in pears in recent years, Truitt said. That’s one reason that negotiations on pear prices between the canners and the Washington-Oregon Canning Pear Association on pear prices have been so difficult, with canners limited in how much they were able to pay for the raw product.
“None of the processors were misleading,” he said. “For there to be stability on the processor side, there had to be consolidation. It just had to happen. I think it’s fair to say that the industry is still in a good deal of chaos. Until the dust settles surrounding Snokist, it’s going to be difficult for any of the growers to sense any stability in the short run, but they will in the long run.”
Then there were three
Truitt Brothers’s and Snokist’s exit from the canned pear business leaves just three remaining processors: Del Monte, Independent Foods in Yakima, and Northwest Packing.
Truitt said the decision to exit the processed pear business was something of a sacrifice in order to create the necessary stability in the industry. There are no immediate plans for the vacant pear plant, though it could provide room for growth of canned bean production. Truitt Brothers has a thriving business producing other types of canned foods and shelf-stable products for the retail and foodservice sectors. It does a lot of business in pumpkin.
So far, Truitt Brothers has been focused on helping its pear growers transition to Northwest Packing. In addition, its sales team has been working with Northwest on the marketing end. Some customers have been buying pears from Truitt Brothers since it formed 39 years ago.
Bowing out with dignity
“Our intent is to bow out with dignity and decency and to try to facilitate the most seamless consolidation that we possibly can,” Truitt said. “It’s been a very tough decision with our growers because our relationship with our growers has been so close. And it’s been a difficult decision with our customers. Some of our customers are just in shock. The reactions by some of our customers are just heartbreaking. How do you tell somebody you’ve supplied for 39 years you’re not going to be supplying them any more? It’s a consolation to know that the Neil Jones Company is very much like our company. They will maintain and manage those relationships as carefully as we’ve managed them and probably do a better job in the long run.”
Truitt said the process of trying to line up the financing to complete its offer for Snokist was challenging. The company was unable to meet the March 16 deadline when the bankruptcy proceedings were to be concluded, but the court allowed Truitt Brothers another 45 days to obtain the necessary financing. In order to raise the $42.5 million, the company had to put together a syndication of three banks. “We had two that were ready to go, and we were working on the third when the time clock ran down,” he said, noting that courts are reluctant to delay bankruptcy proceedings for fear of the assets losing more value.
Plan A would have been a better deal for the growers, the unsecured creditors, and the secured creditors, than the offer that the court accepted, said Truitt, who thinks the company could have obtained the financing given more time.
Still, the outlook for the industry is much improved, he added. “I think things are going to be chaotic over the next few months, but with this consolidation, things will definitely stabilize, and prosperity will return to the industry.”