The Fruit Growers News


To squash the media attention about the possible sale of Welch’s, the National Grape Cooperative said not so fast - the company’s not for sale. At its meeting on Feb. 13, the cooperative’s board of directors unanimously agreed that it is not in the best interest of the membership to pursue a sale of Welch’s. The co-op is the parent company of Welch’s, which is a wholly owned subsidiary of National Grape Cooperative.
“Well-run companies will, from time to time, evaluate strategic alternatives,” noted Welch’s President and CEO Dan Dillon. “National/Welch’s, with the assistance of outside financial advisors, has reviewed the possibility of selling Welch’s as a normal function of the long-range planning process. Unfortunately, the exercise has received unexpected and unwarranted attention and speculation in the press,” Dillon wrote in a memo to employees and the media. Juice grape growers who provide grapes to Welch’s know they have a market above the break-even point for all of the grapes they grow. Welch’s needs more grapes so growers have made the investment and planted more acres of Concords and Niagaras. So why were some growers talking about selling Welch’s? Welch’s is owned by more than 1,400 growers in Washington, Michigan, New York, Ohio, Ontario and Pennsylvania. Its principal raw products - Concord and Niagara grapes - come from 49,000 acres in those states. Some growers feel they need to know the value of the company they own and the value of the Welch’s name and maybe the wisdom of getting out while the getting’s good. Growers are split across the board on the emotional issue, but it was discussed at the recent Southwest Michigan Horticultural Days in Benton Harbor, Mich. in February.
Carl Kilian, 34, a grower and member of National Grape Cooperative from Sunnyside, Wash. researched the numbers and reported to growers at a packed meeting during the hort days. The proposal debated called for growers to seek a buyer for Welch’s, the 105-year old juice firm the National Grape Cooperative Association, Inc. bought in 1952. He termed his proposal a “hypothetical potential scenario.” He told growers that they could each receive a sizable chunk of money, retain their acreage by selling the Welch’s name and grape processing plants. Kilian compiled his research and sent letters to grape growers outlining the scenario in December. He said he knew the issue would be a very emotional one, but felt it was time to know what Welch’s is worth. He said he is not necessarily in favor of the sale if Welch’s would be sold for only .5 to .7 times its annual sales and he said he has no debt on his farm. He told growers that grape growers with yields of five to eight tons could get $395,780 to $913,248, while retaining their acreage. The value of the Welch’s name could be worth $2,827 to $6,577 per ton of grapes, according to Kilian’s research. Each grower’s situation is different with some growers with no debt against the sale and other younger growers with a lot of debt eyeing the sale of Welch’s as the road to a secure retirement. Other growers are facing development pressures. Large companies look for niche markets to buy and are interested in healthier drinks, according to Kilian. He based his research figures on 1.5 - three times the annual sales of the companies. Welch’s had sales of $649.6 million in 2001, according to the cooperative’s annual report. According to the report debt was trimmed by $13 million in 2001 and debt is now down to approximately $140 million, according to Kilian. He said he looked at the recent sale of the Snapple and Odwalla companies for reference. In 2000 Triarc Companies, Inc. sold its Snapple Beverage Group to Cadbury Schweppes for $1.45 billion. The purchase price consisted of approximately $910 million in cash plus the assumption of approximately $420 million of debt. Last year Coca-Cola Co. purchased Odwalla, Inc., a company with revenues of $128.3 million in fiscal year 2001. Odwalla produces a range of juices, vegetable drinks, fortified beverages, smoothies, shakes, soy, and lactic beverages. “There’s just concern out there. The grower wants to know what’s going on,” said Ed Kerlikowske, a grape grower from Berrien Springs, Mich. and president of the Michigan Grape Society. The discussion at the hort days was considered informational and Kerlikowske emphasized Welch’s is not for sale. “There’s not anybody trying to buy the company,” he said. “It’s speculation,” said Kerlikowske. “The company has debt like all other companies.” He described growers’ position on the sell of Welch’s as “all sorts of moods.” Selling Welch’s, world-renown for its juices and jellies, is a wrenching decision for grape growers involving tradition and long family histories of owning the company.
“Basically like everybody else, they want to be informed,” said Kilian about the 200-300 grape growers in Washington state. “Information is powerful.” The one-time payoff can look good to growers without children interested in taking over their vineyards. But few commodities enjoy a guaranteed market like the co-op members have with Welch’s. Many foresee the end of the juice grape business in the United States if Welch’s is sold to a large company that could turn to other countries for cheaper prices for grape concentrate. Currently there is no severe competition from foreign countries, although many feel that is a matter of time before countries start exporting more juice grapes. Kerlikowske said growers are concerned about future foreign competition. He’s concerned about countries such as China coming in with Concord grapes. “There’s definitely pressure out there. Argentina grows a Concord-like (grape for) juice,” Kerlikowske said. He noted that Welch’s juice has the distinctive flavor made from Concords and Niagaras from Michigan, Ohio and New York. Now that the board has said Welch’s is not for sale, Kilian said the issue needs to be revisited every few years. “We just need to look at it ever few years when everybody thinks it’s the right time,” said Kilian.