MARCH | APRIL 2015
Almond Facts
7
Barista Blend
is a special formulation of
Almond Breeze
that performs especially
well in coffee drinks requiring creamer
or frothing milk. We determined that
Australia, due to its deep coffee house
culture, was the ideal first market in
which to launch. The food service
customers named it "new product of the
year" and are making
Barista Blend
a huge
success. In 2016, we expect it will be
the country's second largest selling
Blue
Diamond
item. Building on the Australian
success, we will be expanding this product
throughout our
Almond Breeze
worldwide
markets.
In this high-price almond environment our
innovation efforts are increasingly targeted
at stretching the value of the almond
further. Almond flour is a great example of finding the highest and best
use for every almond including the almond pieces generated as by-
products of our value-added processing. The growing consumer interest
in gluten-free cooking and paleo diets makes this a highly demanded
ingredient. Our innovative marketing materials and new cook book are
supporting an energetic March launch by our ingredient sales team.
The growing strength of the
Blue Diamond
brand and our portfolio of
product innovation represent tremendous value creation for our growers.
The nature of the co-op financial structure is that this value is not recognized
on our balance sheet, but is seen in grower returns. Our returns of the last
three years testify to the positive impact of value-added sales.
What many may not understand is in an environment of rapidly rising
almond prices, this value is partially obscured. The
Blue Diamond
management team has rallied to maintain margins on value-added
products with cost savings, product adjustments and price increase to our
customers. There is a lag between recognition of rising market prices
and our ability to pass these increases through
to the market. This places a “squeeze” on the
margins we realize on our growers’ almonds.
It is a testament to our
Blue Diamond
team that
they have successfully navigated through these
challenges without impacting our competitive
position, thereby protecting the returns for our
growers who struggle with water shortages and
smaller crops.
The full benefit of our value-added product
strategy will be recognized when commodity
almond prices moderate. We do not know
when this will occur and likely not in the next
year. However, eventually, it will rain and snow
in sufficient quantities that will allow almond
orchards to return to more normal yields. With
expanded plantings, when this happens, we will
surely see new record crops and moderating
prices. This is when the stickiness of value-
added pricing works in the favor of our co-op.
The majority of
Blue Diamonds
sales will be
insulated from the immediate downward prices
of the commodity brown almond market. The
competitive advantage of
Blue Diamond
returns
in this period will testify to the full benefit of our
value-added model.
Looking toward a fifth consecutive year of
rising almond prices, value-added sales act as
an insurance policy for
Blue Diamond
growers.
This unique approach makes us a different
business model. In time, I believe that second
only to their orchards,
Blue Diamond
growers will
recognize that our brand and product innovation
represent their most valuable assets.
