Running one of the oldest private table grape breeding programs in the world, Sun World has been making its mark on the produce industry since its establishment half a century ago.
The varieties developed by the Bakersfield, CA-organization are grown worldwide in over 15 countries on more than 50,000 acres. At the helm is David Marguleas, whose father Howard Marguleas, an innovator in California’s agribusiness industry, founded the company in 1976.
Having studied Communications and Food Marketing at Cornell University’s College of Agriculture, from which he received his bachelor’s degree, the younger Marguleas joined Sun World in the mid-1980s. He worked in different areas of the business, which at the time was a grower-marketer involved with around 250 produce items.
In 1989, Sun World made a pivotal move into varietal breeding through the acquisition of Superior Farming Company, a development that brought fruit breeding to the company’s portfolio and tripled the size of Sun World almost overnight.
Thirty years later, in 2019, after numerous metamorphoses that reshaped the company’s product line, ownership and business strategy but never veering far from its commitment to innovation, Sun World announced that it was divesting its farming and marketing operations.
The decision was made to focus entirely on breeding new fruit varieties and licensing them to growers around the world, with Marguleas simultaneously moving from executive vice president to chief executive officer. Then, two years ago, the remaining portion of the business was acquired by Bridgepoint, a UK-based private equity investment group.
Here, the industry leader discusses topics including what consumers want to know about the grapes they purchase, growth opportunities in the U.S. market, and changing global supply dynamics.
The following interview has been edited for clarity and brevity.
Sun World has continued to add numerous marketer and importer licensees around the world. What criteria do you use when assessing which companies to work with?
There are a number of criteria we use when making additional appointments of licensees. First and foremost, we look at supply, and we attempt to calculate the demand for the variety in the marketplace. The second motivator for us is insight from leading retailers with whom we have relationships around the world that are looking to expand their supply base or ensure that their traditional suppliers have access to Sun World varieties. And lastly, our ability to expand the reach and distribution of our varieties is dependent upon not only the number of licensees, but those licensees who have strategic customer relationships in each of the three mega-markets of Asia, North America and Europe.
What plans do you have for your stone fruit breeding division?
Early ripening peaches and nectarines along with our signature red fleshed Black Diamond brand plum line continue to be important drivers for our stone fruit breeding team. We are also placing special emphasis on cherries. And we’re very excited about a number of early-ripening cherry varieties that we’ve developed and are continuing to trial for adoption in growing regions around the world where we have a presence with our stone fruit and table grape varieties, such as Chile, the southern San Joaquin Valley of California and parts of Spain.
Do you see Sun World eventually expanding into breeding other fresh produce categories?
There are a number of underserved crops being bred around the world for which we continue to look for opportunities to bring the same kind of innovation that we’ve brought to the global produce industry in grapes and stone fruit.
To what extent do you think customers nowadays want to know more information about the grapes they purchase? And what information do you think nowadays is most important to U.S. consumers?
We’ve heard from our retailers and consumers over many years that people want to be able to identify and appreciate the special flavor attributes and other characteristics of table grape varieties and other fresh fruit, but they are frustrated by the inability to identify special varieties and traits when they are sold as generic red, green or black grapes. If someone buys a grape variety or a plum variety that they absolutely love, unfortunately in many retail settings, they don’t have the ability to identify that variety when they come back to repeat their purchase the next day or the next week. So flavor attributes are an important component of the purchasing decision, and the varietal brand plays a key role in facilitating purchase.
In terms of the future of what’s displayed on the packages and of marketing of varietal types, where do you see that going? Do you see more emphasis being put on the varietal name on the packaging, or perhaps more emphasis on the attributes and the flavor?
Ideally, the varietal brand conveys important consumer attributes. Over several decades, our conversations with retailers around the world — and our decades of work as a breeder and as a grower ourselves, as a marketer and as a licensor of grapes — suggest that varietal names or brands will play an increasingly important role in popularizing and continuing to grow grape consumption.
There’s a considerable investment made by everyone throughout the supply chain in these “new-generation” proprietary grapes. Breeders are investing many millions of dollars improving the genetics and characteristics of the fresh fruit that they introduced to the marketplace. The grower community is investing considerable resources in planting and nurturing these new varieties and ushering them through the supply chain. And the retailer is often paying a healthy premium for these specially-bred varieties that are now being grown in most fruit-growing countries of the world. Losing that value premium at retail — by virtue of those unique characteristics not being identified and the fruit effectively being sold solely as green, red and black grapes — really does a disservice to the investments made up and down the supply chain. I would encourage retailers to continue to look for ways to differentiate themselves at retail and to capture that value premium. The use of the varietal brand, brand-specific PLU numbers and UPC codes is certainly one way to do that.
What dynamics are you seeing in terms of supply for green, red and black grapes?
Over the past 20 years, there’s been a great shift from an emphasis on green seedless grapes in particular, which were the predominant driver of growth in the grape category until maybe 10 years ago. And then we saw a shift as more red grapes were introduced to the marketplace, creating a more balanced offering between green and red and a modest offer of black grapes in most major consuming markets. The introduction of a number of superior eating and tasting green grapes has shifted that balance once again. We’re starting to see a much stronger offering in the green category as retailers have more confidence in those varieties and their shelf life, and how they show up in the marketplace. And conversely, I think there is some rotation going on in the red category, with varieties that are falling out of favor due to not meeting the consumers’ needs.
How do you see the packaging formats and materials changing over the coming years for table grapes?
We see a number of more sustainable packaging options being introduced to try and minimize the use of plastic — either bags, punnets or clamshells. While there’s been some progress made in that regard, I think the majority of grapes — in North America at least — are still sold in poly bags by traditional retailers and in clamshells by the club store segment. I don’t see that changing in the near term, unless, and until there is a more sustainable solution developed for the industry. I think you see similar trends in many of the other major consuming markets around the world.
Is there anything you think United States retailers could learn from retailers in other regions in terms of how to market and/or merchandise grapes to increase sales?
One of the things that I admire most about what UK and Canadian retailers do is how they source a wide range of fruit varieties from multiple growing locations. The United States tends to be a little bit more traditional in sourcing fruit from a few specific growing regions around the world. There seems to be a greater willingness and sense of adventure in a number of other consuming markets of the world. I would think that could be an opportunity for the U.S. retail sector.
What do you think has been the impact of higher inflation both on the grape production sector and also on grape sales?
Producers continue to face significant cost pressures and those pressures have grown markedly in recent years as costs of labor in the vineyards and packhouses, as well as the crop inputs that they use to produce their table grape crops, continue to spiral. At retail, I don’t know that we’ve seen a softening of grape sales as a result of it, but it certainly forces consumers to make informed decisions about their fruit purchases.
Where do you see the biggest opportunities for growth in the U.S. market?
The two remaining months with some degree of a supply gap, or a relatively diminished supply, remain April and May. The rest of the calendar has essentially been filled with supplies from one or more grape-growing regions of the world. The U.S. market is really no different from any other in that the retail community is cleaning up supplies of the late-season South American crop, and they’re getting ready to receive initial fruit from the Southern California desert and the Mexican producing regions of Sonora as well as a new growing region that has begun to produce grapes in late March, April and early May, which is Jalisco.
We see the April/May window starting to close with supplies from some new growing regions that have the ability to trigger ripening at specific times. Those are probably the bigger opportunities left in the effort to close the global grape supply window. The opportunities on the shoulders of the season are starting to shift as well, because those shoulders are becoming less and less important as the supply of multiple new-generation varieties becomes more prolific and ubiquitous. As a result, the shoulders take on less significance with more consistent and continuous supplies of the same varieties available in a variety of different growing regions. There is a notable shift to focusing on the most desirable varieties rather than looking at supply and demand imbalance.
What dynamics are playing out in the higher-volume fourth-quarter period?
The October through December window is the inverse of the April-May window. At one time the other big opportunities were the three months in the fall and the three months in the spring, and most growing regions had the ability to alter their harvest timing for those two windows. For several reasons, the October-December window is approaching saturation. One reason is that new varieties have considerably greater shelf life and longevity, which facilitates storage during those months. California is not necessarily harvesting grapes later, but they have the ability to store them over a longer period of time while maintaining quality.
The second reason is that there are more regions that can trigger ripening and/or have natural harvest windows during that period. Peru, Spain and central California are the principal drivers in the October-December market window. In addition, countries like Brazil, Peru, and potentially Ecuador, have the unique ability to trigger ripening during that window, along with Asia. The sleeping giant, China, is another potential supplier to that late fourth-quarter window, and as a result, suppliers remain cautious about expanding during that window.
Which newer supply regions do you think will be most relevant to the U.S. and Canadian markets in the future?
There are plenty of supply regions aiming at those markets. I don’t know that there’s going to be a great number of new ones in the near term. But there is a maturation that has occurred in a number of regions that weren’t traditionally U.S. suppliers. And conversely, there were markets that were principally aiming exports at the United States that have shifted focus elsewhere. Brazil at one time was aiming a number of its exports for the United States, and today we’re seeing the majority of its crop is being distributed domestically within the Brazilian marketplace.
But certainly, new regions like Jalisco are custom designed for the U.S. market in April and May, and we’ll continue to see strong growth there from companies that have done the hard work to develop a growing region from the ground floor that can satisfy the global demand for grapes during a slow supply period.
What do you think will be the impact of major production regions like China, India and Turkey transitioning from older and seeded to newer, seedless varieties?
It will most definitely have an impact on the global supply, and the economics of growing and selling table grapes in regions like those in particular, which are three of the five largest producing regions of the world in terms of table grapes. China occupies 40% of the global grape footprint in terms of production, and it will disrupt the supply of table grapes. It’s not a matter of if, but when China begins to convert a number of their older, seeded-grape varieties into newer generation, seedless varieties.
How significant do you expect that transition to newer varieties to be?
If the transition in a number of growing regions that were traditional seeded grape-growing countries like South Africa, and more recently Italy is any indication, we can expect to see dramatic transformation and conversion from older legacy varieties that are considered obsolete or undesirable by leading retailers around the world into these new generation seedless grape varieties that have been introduced by Sun World and a number of other public and private table grape breeders.
The transition in some countries has been faster than perhaps in other regions. We saw South Africa convert the vast majority of its seeded grape production 15 or 20 years ago, really ahead of most growing regions, including the United States. So, you see countries like the United States and South Africa that I think have been at the forefront of adopting new generation fruit varieties, and in particular table grapes — and then you see some countries like Chile and Australia that were a little slower to adopt newer generation varieties. But that transformation is well underway, and I think the Chilean and Australian industries, and more recently, the Italian industry, are undergoing dramatic change in transforming to these new generation fruit varieties, as both a supplier to the Chinese marketplace, as well as a supplier to the broader Asian marketplace that is currently an important destination for the American grape crop and a number of other supply regions.
What advice would you have for the industry amid all these changing dynamics?
It is important to take advantage of new opportunities when they come — whether it’s varietal innovation or new merchandising techniques or new supply regions. I think our industry has always been responsive and agile when it comes to embracing innovation. Growers will need to remain agile, while retailers will need to continue to be open to doing things differently than perhaps they have in the past.
The grape industry is witnessing a profound transformation. As we reimagine the grape category — from new genetics and packaging innovations, varietal identification, and branding to dramatically different flavor profiles, textures and aromas — we will create more sustainability for the entire grape supply chain.