Date: Oct 04, 2013
Magazine:
October 2013 -- Wellness Program: Company-wide Exercise Plan Reaps Benefits
Limoneira Ranch in Santa Paula

Harold Edwards

President & CEO

Limoneira Company

Santa Paula, California

Member Since 2005

 

Harold Edwards might be the poster child for everything modern agriculture wants to be.

He is a fifth generation farmer from Ventura County, whose family has been farming the same land for many, many decades.  He grew up in Santa Paula and fondly remembers his summers hanging out on the ranch and living somewhat of a rural life.  Many of his high school friends and neighbors make up the core of the county’s agricultural community.  He got a good education, cut his agricultural eye teeth at a neighboring produce business and then came home to run the family business.  He talks about the families that make up the business with terms of endearment.

He’s also the son of two Harvard graduates, and grew up with the privileges afforded a professional family.  He went to a boarding prep school on the East Coast, attended a private college in Oregon and got his MBA at the well-known Thunderbird School of Global Management in Arizona.  He received his hands-on business education via Ralston Purina, has extensive experience in international finance and has spent significant time working and living abroad.  He is well-suited to be the CEO of a publicly-traded company.  He discusses strategic alliances, core competencies, leveraging the economies of scale and governance philosophy as easily as yields, varieties and labor issues.

From his office at Limoneira Company in Santa Paula, Edwards can look out and see an old-line citrus and avocado grower-shipper-packer that is 120 years old with six multi-generational families at the core of its ownership.  He can also see a publicly-traded company that has developed a business model for modern agriculture that has doubled its size in the past generation and intent on further growth through innovative acquisition of established family produce companies.

Both Edwards and Limoneira appear to be on a course bridging the produce industry’s past to its future.

 

The Back Story

Five generations ago, around 1880, the Edwards family came to Ventura County and began farming.  His family’s holdings grew to 5,000 acres at its peak.  Like many family farming operations, he said the first generation started the business, the second generation continued it and grew it and by the third generation, kids were going off to college and leaving the farm. 

In that vein, Harold Edwards joined Ralston Purina after college moving up the ranks and spending time in several different divisions including Canada and Italy.  In the early 1990s, he came back to his roots and joined Mission Produce in Oxnard where, for five years as chief financial officer, he oversaw an incredible growth period.  After that, it was back to Italy as CFO of Ralston Purina’s Italian division for another five years.  When Ralston Purina was sold, Edwards came back to the United States and soon, thereafter applied for the CEO position at Limoneira, where he believed his roots, education and experience could make a difference.

About the same time that the ancestors of Edwards were starting their farm, the seeds of Limoneira Company were also planted.  The formation of Limoneira Company had its beginnings when Nathan Blanchard and Wallace Hardison purchased 413 acres of land in 1893. The company was named Limoneira, meaning lemon lands in Portuguese. The primary crops were lemons, Valencia oranges, and walnuts at that time.  The company hired C.C. Teague as its first general manager in 1901, which had a lasting impact on the development and success of the company.

Throughout the 20th Century, the company continued to grow with the Blanchard, Hardison and Teague family farming operations forming the base of the firm’s acreage.  Over the years they were joined by several other Ventura County farming families, including the Edwards family in 1985.  For much of that time, the company was part of two agricultural co-ops: Sunkist Growers and Calavo Growers, as lemons and avocados became its two main crops.  It had only five CEOs from 1893 until Edwards took the position in 2003.

 

A Decade of Growth

Since Edwards took the helm 10 years ago, the company has gone through some profound changes.  The management team, which includes Senior Vice President Alex Teague (a descendant of the first general manager), began marketing and selling its own citrus in 2010, the same year that the firm became publicly traded.

Today, 65 percent of the stock is owned by the core families, 15 percent is owned by Calavo, which transitioned from a co-op to a publicly-traded company in 2001, and the balance owned by institutional investors and private individuals through its position on NASDAQ.  The strategic alliance with Calavo occurred in 2005 when that avocado marketer purchased 15 percent of Limoneira and Limoneira became Calavo’s second largest stockholder as well as its largest supplier of avocados.

The company has both agricultural and real estate holdings with its total acreage under production in the neighborhood of 9,500.  It is one of the largest lemon producers in the United States and its avocado acreage makes it one of the top California avocado producers.  The firm also grows oranges, specialty citrus and pistachios.

The company has been a leader in green energy production with 2 megawatts of solar energy in five different systems.  It also has embarked on a project to turn green waste into electricity and has a goal to be completely off the energy grid within several years.

While the economic transition from a private company to a public one took place three years ago, culturally it is still making that transition.  “Seven of the 11 board members are from the original families and five of those are my dad’s generation,” said Edwards.  “As that generation cycles off the board, they will be replaced mostly with non-family members.”

 

The Future

Edwards expects Limoneira to experience tremendous growth over the next decade and he said the firm has developed an innovative acquisition plan to attract farming families ready to transition to a more corporate structure.

He said the experiences of the families that continue to be the base of Limoneira are fairly typical in the agricultural community.  And that is the concept he articulated earlier: “The first generation makes the business, the second generation works it and the third generation breaks it,” he quipped.

By the third generation, the kids are going off to college, starting their own careers and not necessarily interested in working the farm, however, they still may want to retain some level of ownership.  Or part of the family wants to continue to own the land and others want to cash out.

Without getting too deep into the economic particulars, Edwards said Limoneira has developed a plan that allows a farming family to bring its acreage and assets into the Limoneira Company on a stock transfer basis.  Limoneira becomes owner of the company and the family members become stock owners of Limoneira.  This allows those members that want to cash out the opportunity to do so at fair market value, while other family members can keep their farm ownership without incurring the tax burden of a sale.  He said it is somewhat similar to a 1031 Tax Exchange, where assets can be transferred from one investment to another without incurring a tax liability.

In fact on the day of this interview, Limoneira announced that it had acquired Associated Citrus Packers, Inc. of Yuma in such a fashion.  The privately-owned Arizona corporation was sold to Limoneira for approximately $18.6 million.  The purchase price, in part, was paid with the issuance of about 705,000 unregistered shares of Limoneira common stock with a value of $16.0 million.  ACP became a wholly-owned subsidiary of Limoneira, and several members of ACP's senior management remained in the firm as part of the management of the combined organization.  ACP’s 1,300 acres of property located in Yuma, including 950 acres of productive lemon orchards, are now part of Limoneira’s holdings.

Edwards expects these types of acquisitions to continue in the future and predicted that the 1.5 million cartons of lemons that Limoneira produced through Sunkist in 2010 will grow to 10 million cartons by 2020.  He said the growth has already begun with an expected 3.5 million cartons packed this year through the Limoneira facilities.

Though the company is committed to continuing to focus primarily on lemons and avocados, Edwards said board room discussions have broached the idea of broadening its scope and moving into other commodities, but he said he is very bullish on the potential growth for both avocados and lemons as both are classified as “super foods.”  With a burgeoning middle class around the world, he expects both commodities to experience tremendous growth over the next decade and Limoneira expects to significantly participate in that growth.

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