CALIFORNIA AVOCADO COMMISSION

2018 ANNUAL REPORT TABLE OF CONTENTS

CHAIRMAN’S MESSAGE ...... 3

BOARD OF DIRECTORS ...... 5

PRESIDENT’S LETTER ...... 7

2018 MARKETING HIGHLIGHTS AT A GLANCE ...... 10

AUDITED FINANCIAL STATEMENTS ...... 11

Independent Auditor’s Report ...... 13

management’s Discussion and Analysis ...... 16

Basic Financial Statements ...... 21

supplementary Information ...... 36

INDUSTRY STATISTICAL DATA ...... 43

2 California Avocado Commission CHAIRMAN’S MESSAGE

alifornia avocado growers are a chains — for transparency. CAC devel- resilient bunch. Despite a season oped an expansive sustainability profile of plagued with drought, epic fires, California avocado cultural management floods,C freeze events and extreme heat practices to share with constituents. To coupled with high winds we harvested 338 prepare California avocado growers for million pounds of premium California the implementation of the Food Safety avocados and secured an average price of Modernization Act Produce Safety Rule, $1.13 per pound. Our resiliency is the re- CAC updated its Food Safety manual to sult of decades of hard work, collaboration align with Primus’ GFS audit, hosted Pro- and proactive preparation. There’s very duce Safety Alliance training sessions and little we haven’t encountered — and we conducted on-farm readiness reviews with learn from the challenges that face us. the Food and Drug Administration and Our resiliency is also due, in no the California Department of Food and John Lamb small part, to the experience and ex- Agriculture. Chairman perimentation of our Industry Affairs and Production Research teams.

Industry Affairs. This year, COMMISSION BOARD — STRATEGIC PRIORITIES: as labor shortages continued to intensify, the California Avocado Commission Quality improvement (CAC) continued to advocate for sensible add dimension to brand and targets legislative options for agricultural guest worker programs and provided growers pursue domestic and global premium market with critical updates about immigration opportunities legislation and workplace enforcement improve industry alignment with focus on actions by Immigration and Customs enhancing quality and availability of information Enforcement. To strengthen our position in the strengthen partnerships on issues market, the Commission expanded sus- tainability and food safety initiatives to Conduct effective production research and share meet increasing demands — by consum- the knowledge generated ers, legislators, retailers and foodservice

2018 Annual Report 3 In response to the increased frequen- addressing the impact of these policies on cy of wildfires in the state, CAC partnered California avocado growers. with Southern California Edison concern- On the international front, Industry ing fire prevention initiatives — the Public Affairs successfully pressed for Canada’s Safety Power Shutoff protocol and vegeta- Light Brown Apple Moth quarantine tion management — in order to effec- requirements on California avocado ship- tively aid in preserving public safety while ments to be removed. Development of Asian markets also was a critical focus this year. CAC secured $123,000 of Foreign Agricultural Services Market Access Pro- motion funding for limited promotional activities in Japan, explored market oppor- tunities in Thailand and India, and utilized the Commission’s marketing dollars for retail promotions in Korea. To counter- act delays in accessing Chinese markets caused by tariffs and stalled trade negotia- tions, Commission staff worked ceaselessly to maintain existent contacts and keep the process moving. The Commission also secured inclusion of GEM as an insurable variety covered by federal crop insurance and advocated for a project to update GEM The Commission hosted Produce Safety Rule training sessions for growers to prepare them maturity release dates. for on-site audits. Production Research. This year, several CAC-funded research projects reached conclusion providing valuable insights for growers.

• Findings indicated that ProGibb LV Plus® plant growth regulator, when applied at the cauliflower stage of inflorescence, significantly increased total yield and fruit size and thus could result in substantial increases in net dollar returned per acre for the grower

• The high density avocado production study — which examined impacts on production, cost of labor, water usage and pruning best practices — deter- mined this method is a viable way for Hass and Lamb Hass growers to increase income per acre especially in The Commission hosted Food and Drug Administration and California Department of regions with high water costs Food and Agriculture personnel to showcase California avocado growers’ commitment to food safety.

4 California Avocado Commission • Research indicated that the Shot Hole Borer – Fusarium dieback pest- disease complex causes less damage to avocado trees than native vegeta- tion and that pruning and sanitation practices can effectively control the pest-disease vector

• The Pine Tree Ranch soil moisture sensor trial calibrated the “sweet spot” depth at which avocado trees take up water and noted the efficacy of sen- sors based on cost and how user-friendly the technology is Board • The Online Avocado Decision Support Tool — a user-friendly website of housing digital tools to help growers make grove-specific decisions about Directors fertilizers — was launched District 1 Member/Jessica Hunter-Secretary Member/ Ryan Rochefort Alternate/Michael Perricone

District 2 Member/Leo McGuire Member/ Ohannes Karaoghlanian Alternate/Bob Schaar

District 3 Member/ John Lamb Member/ Robert Grether-Treasurer Alternate/John Lloyd-Butler

District 4 Member/ Ed McFadden Member/ Jason Cole Alternate/Bryce Bannatyne Jr.

District 5 Member/Rick Shade-Chairman Member/ Tyler Cobb-Vice Chair Alternate/Randy Douglas

Handlers Member/Egidio “Gene” Carbone Member/Gary Caloroso Alternate/Vacant Seat

Public Member Nina Ames

To contact a CAC representative, please visit: The Commission shared results from the first year of its soil moisture sensor study, which CaliforniaAvocadoGrowers.com/Commission/your-representatives is being conducted at its Pine Tree Ranch demonstration grove.

2018 Annual Report 5 As massive wildfires, and then mud- about new grove mapping technologies, slides, swept through California avocado fruit set, trellising techniques and laurel growing regions, the Commission com- wilt. While in South Africa, Dr. Timothy piled and distributed fire recovery best Spann toured the Allesbeste Boerdery, practices and timely information about Kwekery and Padstal farming operations federal aid disaster programs. to examine firsthand contemporary micro Collaboration has long been a strong cloning techniques, high density groves suit of the Production Research team and mechanical hedging and pruning. He also visited Westfalia Fruit and Westfalia Technological Services to explore their phytophthora root rot research projects, rootstock selection process, the efficacy of using shade netting and the possibility of utilizing the Maluma variety and phytophtho- ra-tolerant Bounty rootstock in California. Our continued success will lie as much in our experi- ence, as it does in our ability to experiment. As growers, we must continue to blend tried- and-true cultural management practices, cutting-edge technolo- gies and evolving strategies. As an organization, we will continue to streamline our structure and Dr. Timothy Spann, CAC research director, attended the Avocado Brainstorming meeting in South Af- prepare for a transition to new rica where he met with leading industry researchers and toured local packinghouses and research groves to learn about the latest advances in avocado cultural management and technologies. leadership. Our new board is a strong example. Balanced and diversified with members rep- and this year was no different. CAC as- resenting the older and younger genera- sembled avocado branch canker experts tions of growers — it can build off our for grove tours and ideation sessions in storied past to construct a secure future. which experts shared their expertise and And through it all, the Commission will brainstormed means of combatting the continue to support our vision to grow the increase in occurrence and severity of the most desired avocado in the world by foster- disease. The Commission also traveled ing a vibrant industry — collecting data, farther abroad to the Avocado Brain- conducting research, collaborating abroad, storming meeting held in South Africa crafting marketing programs, advocating where some of the industry’s most notable on our behalf and seeking opportunities to researchers shared the latest information advance our position in the market.

6 California Avocado Commission PRESIDENT’S LETTER

ike California avocado growers, the Commission’s “premium positioning” mar- Commission is firmly rooted in the keting strategies and future direction. present — but refuses to be limited In recent years, the California Avo- Lby it. We value experience gleaned from cado Commission has increasingly shifted the past, while working diligently to ex- marketing funds from traditional, broad- plore new ideas that will pave sustainable reaching media to targeted digital online paths for the future. vehicles. While the amount of internal data As our industry has changed — with the Commission can collect in the form imported avocados dominating the of media impressions, clicks, likes, shares, market, labor shortages compounded by comments and visits has greatly expanded legislative standstills, more intense and in the digital age, we requested the as- frequent weather events and a shift to sistance of an outside entity to effectively consumer engagement on digital plat- assess the impact of our digital advertising. Tom Bellamore forms — so has the Commission evolved. We engaged The Nielsen Company, LLC, President We have streamlined our organization, to specifically isolate the impact of digital and the Commission (like the Board) has ad exposure. The study determined that become a rich mix of veteran personnel CAC’s shift from traditional mass media to and emerging talent whose strategic direc- targeted digital media vehicles is working. tion is steeped in experience and flush with Unaided awareness of California as an avo- ideas that bring new opportunities to our cado growing region increased significant- doorstep. ly in households with less than $75,000 in The success of our marketing pro- income, among Hispanics, women and the grams gives credence to our approach. Commission’s targeted 25 – 34 age group. And we have the data to back it up. The In addition, the results indicated that 40 The Commission released a digital one-of-a-kind Commission has long utilized external years of CAC marketing in western states California Avocado Sum- research experts to examine our marketing (Arizona, California, Colorado, Nevada, mer Soundtrack Cookbook programs and evaluate their efficacy. It is Oregon, Utah, Washington) have led to featuring a collection of a process that lays bare our challenges and very high (80 – 90 percent range) ratings recipes inspired by various opportunities with equal frankness. musical genres with West This year Dr. Richard Sexton, a Coast roots. distinguished professor of agricultural and resource economics, and his colleagues at UC Davis evaluated the economic im- pacts of the Commission’s advertising and promotion programs from 2013-17. His econometric modeling demonstrated that, on average, a dollar of grower investment in promotions returned $2.63 in additional profits. The same study indicated that the real producer price has remained steady — or even increased — over this same period. Further, the research validated the

2018 Annual Report 7 of California avocado aided awareness, fa- Renowned registered dietitian Mitzi vorability, purchase intent and willingness Dulan, an award-winning sports nutrition- to recommend. ist (including her stint as the team sports It was, of course, gratifying to see nutritionist for the 2015 World Series external data validate the strategic vision Champions Kansas City Royals and the and direction of the Commission’s market- Kansas City Chiefs) also shared athlete- ing programs. It was doubly gratifying to themed California avocado posts on behalf witness the wins our marketing programs of the Commission during the Winter secured this year despite devastating Olympics. As part of the Commission’s weather events and increased import vol- in-person media relations program, which umes during California’s peak season. secures critical trade coverage, CAC hosted To generate excitement for the a luncheon at Dulan’s home, showcasing California avocado season, the Commis- California avocado usage and marketing sion hosted an #OpeningSharemony social programs with local trade media guests. media campaign centered on the official The Commission’s summer con- start of the Winter Olympics. As Olympi- sumer public relations campaign generated ans from different nations’ teams entered more than 461 million impressions — fu- the arena during the opening ceremony, eled by wide-ranging events and one-of- CAC shared posts showcasing Califor- a-kind California avocado-branded assets nia avocado guacamole recipes featuring that captured the attention of avocado fans ingredients specific to the country. The eager for unique recipes featuring their Commission ensconced itself in one of the favorite fruit. During California Avocado most tweeted-about moments of the win- Month, select vendors at two popular food ter games, securing 19,500 social engage- halls — one in Los Angeles, CA and the ments, 87,000 video views and 1,280,000 other in Portland, OR — showcased the social impressions. versatility of California avocados in a ro- bust selection of global cuisines. Artisanal chocolatier Compartés hand- crafted a limited-edition Califor- nia Avocado Toast Chocolate Bar and the Commission released a first-ever California Avocado Sea- son Summer Soundtrack Cook- book that showcased a collection of recipes inspired by the Golden State’s unique regional music. Even as the California avocado season was nearing

Compartés unique California Avocado Toast Chocolate Bar was a darling of the media with ten unique media outlets requesting exclusive mailers in order to provide editorial coverage and Bustle show- casing the artisanal treat in an article titled, “Comparté’s Avocado Toast Chocolate Bar Combines Everything Good In This World Into One Snack.”

8 California Avocado Commission conclusion, fans con- tinued to engage with the Commission on its social media plat- forms — sharing, liking, pinning and retweeting posts that showcased the fruit’s versatility, sea- sonality and nutritional value. In September and October, the Commis- sion garnered more than 1.5 million impressions on its Facebook, Twitter and Instagram plat- forms. To welcome new fans into the fold, CAC launched a four-part Engaging social media posts during popular sporting events — such as the Winter Games Opening Ceremony and Welcome Series for the world soccer championships — immerse California avocados in trending digital conversations and provide fans with relevant nutrition information and unique recipes. new email subscribers increasing the average open rate to nearly 70 percent and boost- messaging. The biggest selling point for the ing the average click through performance foodservice sectors? The avocado’s versatil- for the first email by 78 percent from ity. These insights clearly align with our benchmark. current and future marketing strategies We also secured several consumer and delineate a clear path to future oppor- ad campaign firsts including a custom tunities in this sector. California mixtape on the Pandora and These victories confirmed what the Spotify digital music platforms, as well as a external research data reported: the Com- sponsorship opportunity with Disney Cali- mission’s trackable, malleable and targeted fornia Adventure’s Food and Wine Festival. marketing program works and its future The successful marketing season direction is sound. These present victo- closed with a well-earned seventh consecu- ries and clear indicators of opportunity tive Marketing Excellence Award from for the future are of no small comfort as Produce Business. the Commission slowly transitions our Never one to sit on our laurels, the leadership from the hands of our veterans Commission also launched a multi-level to the shoulders of our youthful peers. The foodservice research project to identify op- Commission’s emerging leaders are well portunities and barriers to success in this acquainted with our history, have proac- sector. We were pleased to discover that tively assessed and managed our present patrons have very high positive expecta- challenges with data-backed tactics and tions for foods and beverages identified are uniquely well-versed in strategies that as being from California — noting they resonate with the Gen Z and millennial perceived them to be “fresh,” “healthy” consumers who will be an increasingly and of “premium quality” — all facets influential market in the coming years. We emphasized in California avocado brand are ready for the future.

2018 Annual Report 9 2018 Marketing Highlights at a glance

MAKING AN IMPRESSION • 1.54 billion consumer public relations impressions • 440.3 million consumer media impressions • 343.2 million consumer ad impressions (print, outdoor, social/social retail, digital/digital retail, in-store audio) • 9.9 million consumer impressions for Registered Dietitian Nutritionists program • 7.6 million trade public relations impressions

MELDING WEST COAST MUSIC WITH CALIFORNIA AVOCADOS • More than 25 million targeted consumer impressions using audio (digital radio) advertising • First-of-its-kind custom California mixtape on Pandora and Spotify

ENGAGING FANS WITH EVERYTHING AVOCADO ON CALIFORNIAAVOCADO.COM • More than 2.6 million consumer website visits and 757,000 visits to The Scoop blog • CAC continues to build a California avocado fan base steeped in information about California avocado growers, the nutritional value of the fruit and its versatility in a wide range of recipes suited to diverse dietary lifestyles

BROADENING SOCIAL MEDIA REACH WITH MORE FOLLOWERS • Facebook 1% increase (333,400) • Twitter 11% increase (20,200) • YouTube 63% increase (1.31 million) • Instagram 14% increase (42,300)

RETAIL AND FOODSERVICE PROMOTIONS • Nearly 40 retail promotions including demo programs, sales and display contests, feature ad programs and digital coupons • More than 5 million impressions from CAC retail health and wellness programs • 21 foodservice chain promotions, including 6 new participating chains

10 California Avocado Commission 11 2018 Annual Report 11 12 California Avocado Commission 12 13 2018 Annual Report 13 14 California Avocado Commission 14 15 2018 Annual Report 15 16 California Avocado Commission 16 17 2018 Annual Report 17 18 California Avocado Commission 18 19 2018 Annual Report 19 20 California Avocado Commission 20 21 2018 Annual Report 21 22 California Avocado Commission 22 23 2018 Annual Report 23 24 California Avocado Commission 24 25 2018 Annual Report 25 26 California Avocado Commission 26 27 2018 Annual Report 27 28 California Avocado Commission 28 29 2018 Annual Report 29 30 California Avocado Commission 30 31 2018 Annual Report 31 32 California Avocado Commission 32 33 2018 Annual Report 33 34 California Avocado Commission 34 35 2018 Annual Report 35 36 California Avocado Commission 36 37 2018 Annual Report 37 38 California Avocado Commission 38 39 2018 Annual Report 39 40 California Avocado Commission 40 41 2018 Annual Report 41 42 California Avocado Commission 42 Industry Statistical Data

10 Year Industry Statistical data froM 2008/09 through 2017/18

Footnotes: Bearing acres based on CAC’s acreage inventory, attrition factors and other sources Industry statistical data from 1971-72 through 2017-18 are available on CaliforniaAvocadoGrowers.com/industry/industry-statistical-data

California avocado pounds & dollars by variety november 2017 through october 2018

total us volume and california price per pound from 2008/09 through 2017/18

Footnotes: Total US Volume represents the estimated volume of fresh avocados sold in the US from the November through October time period

2018 Annual Report 43 2018 ANNUAL REPORT

California Avocado Commission 12 Mauchly, Suite L Irvine, CA 92618 949.341.1955

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