Harold Edwards has forged an expansive career that combines deep family roots in agriculture with extensive international business experience. Born in San Francisco in 1965, his early life was steeped in the world of farming, with his family operating a generational farming business in Santa Paula, CA. Nowadays that city is the headquarters of Limoneira, of which Edwards is the chief executive.
Edwards’ educational journey took him from Milton Academy in Massachusetts to Lewis and Clark College in Oregon, where he earned a BA in International Affairs. He further honed his expertise with an MBA in International Management from Thunderbird School of Global Management. His career began outside the family business, working as chief financial officer at Ralston Purina Italia, an animal nutrition and consumer packaged goods company, and Mission Produce, a grower-shipper of avocados and other fruits, during the 1990s. His roles at numerous companies took him across the globe, including stints in Milan and Manila. These experiences equipped him with a deep understanding of international logistics, finance, operations, and management.
In 2003, Edwards, whose family farming roots date back to 1880, took the helm at Limoneira. The company’s founders were co-founders of Sunkist, a grower-owned citrus cooperative that marketed all of Limoneira’s fruit until 2010, the year that it was listed on the NASDAQ stock exchange and began selling under its own brand. Limoneira has grown into a global agribusiness, specializing in lemons, avocados and other citrus products, and the company also runs a real estate business. In December 2023, Limoneira announced that it was “exploring strategic alternatives,” one of them being a potential take-private sale of the company.
In the following interview, Edwards shares insights into the reasons behind the aforementioned announcement, as well as Limoneira’s strategies and challenges in the ever-evolving agribusiness sector. He also discusses the impact of global market trends such as a U.S. market lemon oversupply in recent years, and his vision for the future of the company as it plans to significantly increase its production of California avocados.
The following interview has been edited for brevity and clarity.
Looking back over your career, what advice would you give to your younger self now starting out in agriculture?
I would say don’t be afraid to try to do everything, and to start at the bottom. Because by starting at the bottom, you learn everything. The greatest gift that you could be given is understanding how everything works.
During your two decades at Limoneira, what has been the biggest change you have witnessed at the company and in the industry?
The biggest change I’ve seen in the past 20 years is the lemon industry has gone through a massive transformation. Twenty years ago, produce distribution was predominantly through big wholesalers in major cities around the country. Now, large retailers and foodservice buyers deal directly with producers, who work with wholesalers much less.
For our company, which is now 131 years old, the biggest change was integrating forward from just farming. Historically, we sold our citrus through Sunkist. In 2010, we went public and started to market, sell and distribute under our own brand. It was a huge and scary change, but we retained 100% of our customer base and grew our market share.
We then used our packinghouse’s extra capacity to serve other lemon growers, and it also expanded our supply chain as we began to offer services to other lemon growers. We raised capital to buy agricultural properties, aiming for complete vertical integration from farm to customer, though this is capital-intensive and subject to agricultural volatility. Our strategy evolved to adapt to market demands for a 365-day supply, which was a big shift from our previous model of being in the market for eight months and out for four. This change required us to completely retool how we looked at and operated our business.
Could you speak a bit about the rewards of managing those agricultural and real estate businesses?
We own and operate valuable agricultural assets located near urban centers. When these cities and towns expand, we utilize our expertise in converting the entitlement and zoning of these properties from agricultural to urban development use. It’s not that we want to leave agriculture, but the value of these assets increases exponentially through this conversion. This can’t always be done due to regulations, but when it is possible, it creates significant value. We then seek alternative ways to maintain and grow our produce supply chains.
Historically, this is how Santa Paula developed. The city was built by converting farmland owned by the founders of our company. Currently, we are working on a 550-acre master-planned community, which is the next chapter in Santa Paula’s development.
In December you announced that Limoneira was actively exploring strategic alternatives for the company. Can you elaborate on this, and the reasons behind it?
We face two main issues: we’re too small to efficiently be publicly traded, and our compliance costs are high, about $5 million a year. With a market capitalization fluctuating between $250 million and $500 million, these costs are inefficient.
Additionally, there’s a significant gap between our company’s intrinsic value and its market capitalization. To address this, we’re exploring various strategic alternatives. The first option is to maintain the status quo. The second is to acquire other businesses to grow bigger. The third option is to seek new ownership, which could come from citrus or avocado producers, water investors, real estate developers, sovereign wealth funds, insurance companies or private equity.
We announced this exploration on Dec. 1, 2023, which sparked speculation about selling the company. We are considering it, but our goal is to get the best value for shareholders and ensure the ongoing operation of the business. We’re midway through this process and have received significant interest.
Personally, I prefer either becoming part of a larger publicly traded company or finding new ownership to take the company private, eliminating compliance costs while preserving the company’s operations. These options would allow us to create long-term value with a more efficient capital structure.
Do you see a need for additional capital to support your strategic plans?
The great thing about our current position is that we don’t need additional capital. We faced challenges when the global lemon market became oversupplied in 2019—massive lemon plantings in Argentina, Chile, South Africa, Spain, Italy, Mexico and other countries—and Covid-19 worsened the situation. With 70% of lemons consumed in now-closed restaurants and bars worldwide, 2020 was financially disastrous. Things improved slightly in 2021, 2022 and 2023, but we emerged post-Covid in an oversupplied market.
Our financial results struggled, leading us to pivot towards providing services and planting 1,000 acres of avocados. The company’s financial outlook has significantly improved—with forecasts predicting $50 million in EBITDA over the next three to five years—though it takes time for avocados to grow. Our strategic pivots have positioned us for ongoing prosperity. The greatest value will come from developing our entitled properties. While we can’t predict if this will happen in five, ten or fifty years, it will ultimately create substantial value for the new owner.
What ambitions do you have in the avocado space?
I can’t think of another item in the produce industry that has experienced such sustained global growth in per capita consumption as avocados. When I started in the industry, U.S. per capita consumption was less than one pound; it’s now at nine pounds, while in Mexico it’s about 24 pounds. By integrating California and Mexican avocados, we create a year-round supply chain. From May to July, when Mexican crops are between seasons, California avocados fill the gap, creating a sustainable niche due to our market proximity. This niche promises long-term value, potentially more so than our lemon production.
Lemons constitute 85-90% of our business, excluding real estate, but avocados offer a recurring annual yield. We aim to increase our avocado production from 10 million pounds to 30 million pounds annually, targeting 15 to 20% of California’s total crop.
This scale will enhance our leverage with handlers like Mission Produce, Calavo and WestPak, making it more efficient for them to work with us due to our substantial volumes, which help maintain packinghouse efficiency and meet long-term customer demands.
Currently, we’ve chosen to focus on this part of the supply chain because it is very competitive, and the handlers already have their established customer relationships. If we were to integrate further into this segment, we would want to do it through acquisition or merger, as building such relationships from scratch is challenging and time-consuming.
And what is your outlook for your lemon business?
The domestic lemon market grew annually by 5-6% over the past 20 years, and even faster in export markets such as Japan, Korea, China, Hong Kong and Southeast Asia. Until 2019, 30% of our California lemon production was exported to these regions. But the strengthening of the dollar and increased shipping costs made our lemons more expensive, allowing competitors from Egypt, Turkey and South Africa to capture market share with cheaper, albeit lower quality, lemons. As a result, our export share dropped from 30% to 10%, which increased supply within the U.S. market, especially as more lemons came from countries like Mexico, Chile and Argentina.
This oversupply has been challenging for California producers, now in their fifth year of grappling with it. The bottom line is profitability in lemon production now hinges on achieving high yields and quality. Our production remains profitable, although not as much as our avocado operations. We anticipate an eventual balance improvement as lemon production decreases, which would improve profitability.
We also aim to expand our supply chain by offering packing, marketing and selling services, especially as we optimize operations across California’s diverse microclimates. We’re significantly reducing our production in the desert and valley but continuing to support those regions’ growers. Our goal is to grow our supply chain to 12 million cartons annually within five years by engaging new grower partners; and acting as an agency for international suppliers and integrating their lemons into our supply chain.
Where do you see the wider U.S. lemon industry heading over the next decade?
In various regions, we are seeing declines in lemon production due to distinct challenges. In the desert, water scarcity is reducing output. On the coast, unfavorable economics and the potential to shift to more lucrative crops like avocados are leading to less lemon production. In the valley, there is an increase—with significant new lemon plantings in areas traditionally considered too cold—challenging old assumptions about climate suitability for lemons.
Weather remains a critical and unpredictable factor, with no significant freezes affecting production in the past eight years. However, the potential for a major freeze event continues to loom, which could drastically impact outputs from the San Joaquin Valley. Looking ahead, we anticipate a general decline in production over the next decade, mirroring trends in Argentina and Chile where profitability issues are impacting the industries there.
As global lemon supplies decrease, prices are expected to rise, potentially revitalizing the industry for producers who maintain high yields and quality. But this recovery won’t be uniform across all regions or for all producers due to the varied challenges mentioned.
What about the demand side?
In terms of demand, we’re very fortunate. Lemon consumption continues to grow annually, but it’s not the 5-6% growth we had over the past 20 years. It’s more like 2-3%. But there is still growth. New opportunities to consume lemons will continue to come up. I think probably the most exciting new opportunity for lemon consumption growth is fresh lemonade production in quick-serve restaurants. Today that opportunity represents one of the greatest for growth because only a select few restaurants have embraced the concept of producing and selling fresh lemonade in their stores yet the amount of annual lemon consumption this represents in our industry is significant—rapidly approaching 20%. We are excited by the prospect of new restaurants exploring producing and selling fresh lemonade in their stores because fresh lemonade outsells all other forms of lemonade. Now, lots of other quick-serve restaurants are looking at the fresh lemonade opportunity and hoping to do the same thing. So as that happens, you’re going to see faster growth. And in addition to that, new uses for lemons are being discovered, such as for cleaning products.
What future do you see for Argentina and Chile in the lemon business?
Here’s the secret about Argentina: At Limoneira, our key success metric is what we call “fresh utilization,” which measures how much of the lemon tree we can sell fresh. There are three grades and eight sizes of fresh lemons, each with its own demand profile. While some customers prefer small fruit, others opt for large, but all sizes have some level of demand. On average, Limoneira earns about $20 for a 40-pound box of fresh lemons. If a lemon can’t be sold fresh and goes to juice instead, we only get $1.50 per box, so the incentive to sell fresh is significant.
Now, let’s talk about Argentina, the largest lemon producer. Their fresh utilization is only around 20% to 30%, compared to our 70% to 90%. This is primarily because a significant portion of their production is dedicated to producing lemon oil for brands like Coca-Cola. However, only a few producers have contracts with major soda producers such as Coke and Pepsi. Those without contracts sell their lemons into the low-value juice market as well as a low percentage into the valuable fresh market. The results are challenging financially due to lower lemon market prices caused by global oversupply currently.
Despite the low percentage of fresh lemons, Argentina still produces a surplus, but the high costs of shipping to North America limit the profitability of exporting there. I predict a reduction in lemon acreage in California, Arizona and Argentina, though not as much in Chile. Chile is a high-quality fresh lemon producer but also boasts the highest per capita consumption of fresh lemons in the world. When export markets get saturated with lemons from other countries, Chilean lemons can always stay at home in the Chilean domestic market. South Africa’s production is increasing, which concerns us, although for phytosanitary reasons, they can’t ship to the United States. This shift in acreage should eventually put us in a better position.
What changes in consumer behavior do you see impacting the avocado industry?
One exciting development in avocados is the perfection of ripening technology by handlers, allowing avocados to ripen at specific times and intervals on store shelves. This is crucial because if retailers displayed only ripe avocados, any unsold avocados would quickly become overripe and have to be discarded, which leads to losses referred to as “shrink.”
Thanks to this technology, avocados can be staggered to ripen at different times, enabling consumers to buy either ripe or unripe fruit based on their immediate needs. This has greatly reduced shrink for retailers. Additionally, a high percentage of avocado purchases are impulse buys—people decide they want guacamole or an avocado that day, so it must be ripe and ready. The ability of retailers to confidently display ripe avocados without significant risk of loss has profoundly impacted avocado consumption and demand. Also, by having avocados available year-round, restaurants are now more comfortable having avocados and guacamole as permanent parts of their menus. This, too, has profoundly impacted avocado consumption and demand.
A lot of avocado trees have gone in the ground around the world in recent years. You’re not worried about a possible oversupply in the future?
I’m not, mainly due to California’s unique position in the avocado market. Despite competition from Peru and Colombia, which are sometimes perceived to offer lower-quality avocados, the U.S. consumes a staggering 3 billion pounds annually and consumption is still growing. Limoneira aims to produce 30 million pounds as part of California’s 300 million pound crop. This niche is particularly profitable during the seasonal window of four to five months each year. We also have a significant logistical competitive advantage against all other foreign avocado producers and shippers due to our proximity to the highest avocado-consuming regional markets in the United States.
We’re not overly concerned about the shifts seen in the lemon market possibly repeating with avocados. Our niche in California seems sustainable and gives us confidence to continue investing in avocado production. Demand for California avocados remains strong.
Interestingly, people often ask why we didn’t shift our focus from lemons to avocados sooner. A decade ago, lemons were highly profitable. However, as the lemon market became oversupplied, we began to pivot. In Ventura County, where we farm about 3,000 acres, the historical split was 2,000 acres of lemons and 1,000 acres of avocados. We’re now reversing that ratio, continuing to farm 1,000 acres of lemons and increasing avocado planting. As our 700 acres of young avocado trees mature, you’ll see our production continue to grow, replacing less productive lemon orchards with avocados.
How do you think the relationship between growers and supermarkets will evolve in the coming years?
I think relationships in the supply chain are becoming increasingly direct and crucial, driven by various factors such as food safety, traceability, fair trade practices and the need for transparency in the production process, akin to a blockchain of supply chains. This shift towards direct relationships means that as a producer, the closer connection we have with retailers, the better our chances of remaining a reliable and consistent supplier.
Looking back, the system used to rely heavily on wholesale buyers located near urban centers who then distributed to local retailers and restaurants. But with the emergence of large retail buyers like Walmart, Target, Aldi and Kroger, direct relationships are becoming more common and stronger. While there will always be a need for intermediaries like handlers due to the services they provide, the future is moving towards a joint relationship where both growers and handlers directly engage with retailers. This collaborative approach will enhance our impact in the market.
What worries you most and excites you most about the future?
The main worries are regulation, labor and water, in that order. Regulation remains our biggest challenge, particularly in California, where there is a push from legislators to separate us from our water resources and restrict our farming practices due to urban encroachment. Agricultural activities can be unpopular locally because they may be intrusive, noisy or produce odors. Despite our efforts to collaborate with local communities and influence realistic regulatory agendas, we face constant threats to our business—a common struggle for anyone in California’s agricultural sector.
What excites me, however, is discovering the highest and best uses of our assets to create shareholder value. This often involves the monetization of water rights or converting agricultural land to urban development. These strategies help us maximize the value we derive from our resources.
What also excites me is the growing global demand linked to feeding an increasingly hungry world population. People continue to seek out our products because they are healthy and beneficial. This demand presents us with the opportunity to constantly refine our approach to production and distribution.
As a company, we must be adaptable and ready for change, since consumer preferences and delivery methods evolve frequently. Our goal is to ensure the success and profitability of our trade partners in foodservice and retail by helping them meet consumer demands. We thrive on anticipating these changes to add value for our customers, enabling them to successfully market the products we produce.
