Produce Company Sows Seeds of Growth in Deal

0
Produce Company Sows Seeds of Growth in Deal
Pickup in Bag: Jim Leimkuhler at Progressive Produce’s Commerce warehouse.

A 50-year-old Commerce produce distributor with an appetite for expansion has gobbled up a competitor in the fruit and vegetable market.

Progressive Produce acquired produce distributor Keystone Fruit Marketing Inc. this month for an undisclosed amount. The deal will add $60 million annually to Progressive’s top-line revenue of around $230 million and make Keystone, based in Greencastle, Penn., a division of Progressive, said Jim Leimkuhler, Progressive’s president.

“We’ve known the company for over 20 years,” he said. “We’ve worked with them on asparagus and sweet onions. It was just a natural fit.”

Progressive, which sells its produce to large grocery stores and food service companies around the country, itself sold a majority stake last year. Irish giant Total Produce bought up 65 percent of Progressive, which now operates as a subsidiary.

The Keystone deal will grow Progressive’s offerings, adding apples and peaches to its menu of products, said Katie Horvath, a lecturer in agribusiness and food industry management at Cal Poly Pomona.

“Progressive has never done peaches and apples, so to acquire a business selling those fruits will bring them out of the vegetable market into (that new segment),” she said.

A representative from Keystone couldn’t be reached for comment.

The acquisition will also give Progressive and Total Produce a foothold on the East Coast, said Jim Prevor, editor-in-chief of trade publication Produce Business in Boca Raton, Fla.

“The ownership of Progressive just celebrated the company’s 50th anniversary,” said Prevor. “They saw it as an opportunity to become more of a national player, to continue the expansion they’ve been undergoing for decades, and to jumpstart their business by combining with an East Coast company.”

Progressive’s five distribution warehouses are in Commerce, the City of Industry, Bakersfield, and Washington state. It has about 250 employees.

Total, headquartered in Dublin, has been aggressively expanding its U.S. presence by acquiring regional wholesalers such as Progressive, according to Prevor. The parent company generated revenue of about $3.7 billion in 2015, according to its reported earnings.

A spokeswoman for Total declined to comment last week.

The consolidation in the produce industry follows a trend toward consolidation among grocery chains in the United States, said Prevor. However, the industry remains highly fractured and lacks dominant players.

“Progressive and Keystone combined are very substantial, but they’re still much less than 1 percent of the industry,” he said.

Revenue from fruit and vegetable wholesaling in the United States is projected to reach almost $92 billion this year and grow 2.1 percent annually for the next five years, according to market researcher Ibis World.

From seed

Progressive was co-founded as a seller of potatoes and onions in 1967 by Nace Cohen and Charles Gilb.

During the second half of the last century, as fewer people grew their own food, they came to rely more on commercial farms and distributors, Horvath said. Customers also came to expect all varieties of fruits and vegetables year-round, pushing companies to look outside the country for places growing produce during the off-season.

Progressive, which doesn’t own any farms but has its own logistics company, was purchased in 1988 by Chiquita Brands International Inc., which in turn sold it to Leimkuhler, Victor Rodarte, and Jack Gyben in 2003 after declaring bankruptcy. At the time, Progressive had sales of around $50 million, according to Leimkuhler.

The trio, who still manage the company, sold the controlling stake to Total last year, providing the company with greater capital and cash flow for operations. The investment allowed Progressive to put more money toward helping farmers, whose output can vary greatly from season to season, improve their output and ability to meet produce demands.

In 2007, Progressive teamed up with Keystone to create the Americas Asparagus line. That partnership allows the companies to sell asparagus year-round, since Progressive gets its asparagus from Mexico while Keystone buys from Peru; Mexico and Peru have complementary growing seasons.

“We have a joint asparagus line, so we wanted to put all of the business under one roof,” said Leimkuhler.

Prevor estimated that the companies are among the top five largest distributors of asparagus in the United States.

Asparagus is Progressive’s largest commodity, representing around 40 percent of sales, said Leimkuhler.

While the companies will integrate their asparagus business, Keystone’s operations will continue as before and there won’t be any layoffs, said Leimkuhler.

“I think what they have done with asparagus, they will continue, but in time, they will look to have a national collaboration with other things,” said Prevor.

No posts to display