Sunkist Sees Potential in Marketing Sliced Fruit

Confronted with consumers who would rather peel open a snack bag than a fresh orange, Sunkist Growers Inc. will announce a plan today to fight back with a line of grab-and-go cut fruit.

The Sherman Oaks-based growers cooperative said it would produce small bags of sliced Sunkist fruit to be sold in grocery stores, schools and fast-food chains this year through a joint venture with Taylor Farms of Salinas.

The idea is to make eating fruit as simple as munching on potato chips, said Sunkist Chief Executive Jeff Gargiulo, who will unveil the initiative at the co-op’s annual growers meeting in Ventura today.

“Not even my kids will peel an orange,” Gargiulo said.

The packaged fruit venture could grow to several hundred million dollars in sales over the next two years, said Bruce Taylor, CEO of Taylor Farms, which sells more than $750 million of cut lettuce and vegetables to clients such as McDonald’s Corp., Subway, Burger King Corp. and Darden Restaurants Inc., which owns Red Lobster and the Olive Garden.

Sunkist and Taylor Farms haven’t determined what the bags will cost, but other producers’ packaged items, such as sliced pineapple and melon in plastic containers, are significantly more expensive than whole fruit. In test marketing, Sunkist’s single-serving bags sold for 69 cents or less.

“We think there is a tremendous opportunity for fruit at the retail level as a consumer snack. It could be a healthy alternative to what people eat today,” Taylor said.

The venture represents sound health and business sense, said Barbara Rolls, a nutrition professor at Pennsylvania State University. Eating habits are formed at a young age and are difficult to change later in life, Rolls said, so getting healthy, tasty snacks into the schools could create more customers of Sunkist fruit.

That’s an important issue for the cooperative of 6,000 farmers in California and Arizona. Although its sales rose 3% last year, crossing the $1-billion mark for the first time since 1998, revenue growth has been flat for much of the last decade.

“A big barrier to getting people to eat more fruits and vegetables is convenience, the packaging and accessibility,” said Rolls, who sampled several packages of Sunkist fruit at an American Dietetic Assn. meeting last year and liked what she tasted.

“This could be great if they make it easy for people, if it tastes good and it is affordable,” Rolls said. In the past, sales of cut fruits and vegetables have suffered because the packaging couldn’t keep them fresh and appetizing, she said.

Taylor acknowledged that the venture would work only if Sunkist could deliver consistently good-tasting fruit and if his firm could get it to customers while it was still fresh.

“People won’t buy fruits and vegetables because you tell them it is good for them,” he said. “They will buy them only if they taste good.”

Although the venture faces some “technical” challenges, Gargiulo said Taylor Farms had pioneered the delivery of prepared lettuce and vegetables to the food service industry and could apply many of those techniques to distributing Sunkist branded snacks.

Taylor expects the fruit to hit the market in the fall, primarily in supermarkets and schools. The initial selection will be made up of small bags of sliced oranges, apples, pineapple and seedless grapes.

With the help of a small packager on the East Coast, Sunkist test marketed cut fruit in schools last year before deciding to jump into the line on a national scale, Gargiulo said.

Some Sunkist growers said they supported anything that might widen the market for their crops.

Competition from salty snacks and candy bars “is brutal,” said Charles Sheldon, who farms 1,000 acres of citrus orchards in Tulare County. “I am all for this. Our crop comes in assorted shapes and sizes and maybe this is a way for us to utilize more of what we grow than we are doing now. That could be a great advantage.”

The Taylor Farms deal looks to be the last major move by Gargiulo to improve Sunkist sales.

Last month, Gargiulo said he would step down in June after five years at the helm of the co-op to expand a small winery that he owned in the Napa Valley. Sunkist has begun to search for a new CEO.