Co-op focuses on cutting costs, increasing sales

KELOWNA – BC Tree Fruits Cooperative is considering several strategies to revive its flagging fortunes, drawing on the expertise of business consultants John Kay and William Oeminchen, authors of a recent governance report for the co-op.

“The strategies we are working on touch every function of the business,” says CEO Warren Sarafinchan. “We can come out of this and provide better returns to growers.”

A top priority is the

re-negotiation of purchasing agreements ­– “the items that we buy to get the fruit to market,” says Sarafinchan.

Overhead costs are a big issue. With that in mind, the co-op plans to close its Water Street office in downtown Kelowna, a block from Lake Okanagan. It could be sold, but a final decision hasn’t been made.

“I don’t like fire sales. We really have to understand what the market is doing,” says Sarafinchan.

A similar approach applies to the 85-acre turf farm within the Agricultural Land Reserve  near the airport, which the

co-op bought last year for $6.5 million to consolidate its packing operations.

“The idea of holding on to a non-performing asset does not sit well with me,” says Sarafinchan. “Still, we have to make sure we are selling assets at the appropriate value.”

Sale of the co-op’s Broken Ladder cider brand is under consideration, too. It lost $850,000 last year, and Sarafinchan says it needs to be fixed pronto.

“I am not opposed to diversification, and turning process-grade fruit into something of higher value makes sense,” says Sarafinchan. “But selling cider is different from selling apples.”

Selling assets will not directly improve grower returns; for that, quality fruit is needed.

But growers will be on their own this year with the retirement of long-time field person Charlotte Leaming. She’s the sole survivor of lay-offs last year that saw five other staff terminated.

“We will need to contract a certain amount of technical expertise to support the packing house with information from the orchards,” says Sarafinchan.

But he says the co-op can’t keep providing support to growers in the current environment, especially when they’re not obliged to follow the recommendations and continue to ship poor-quality fruit. This past year, for example, calcium levels in apples were the lowest in 20 years, negatively impacting storage life.

“With our current model, I could put 100 field services staff out there and it would not change the growing practices or the fruit quality of some growers,” says Sarafinchan. “If you are looking to increase your production, you are going to have to invest in the support you need like any other business.”

Sarafinchan says the co-op is assessing its target markets and considering where it can compete and be both profitable and sustainable.

“We are very focused now in Western Canada and I think there is an opportunity for us to focus on other markets,” he says. “I would rather take the top-quality fruit that we have and sell that into markets that want to do more business with us and who see the value, rather than play a lowest-price game.”

The co-op recognizes that grower returns have been down for several years and that could limit the financial resources growers may have to work the 2020 crop.

“The cooperative is moving quickly to present a plan that will provide some financial support to growers for the 2020 crop,” says Sarafinchan. “We expect to be communicating this plan to growers in the upcoming weeks.”

 

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