Evolve with the needs of the market.
I know. Easier said than done.
But, at some point or another, we have all become intimately familiar with this pillar of fresh produce. While the industry-wide requirement is, of course, inextricably tied to seasonality and Mother Nature, I am talking about something that goes even further.
“We really wanted to transition the company into becoming very, very customer-focused and market-driven rather than more production-driven and supply-side controlled. That shift has been quite successful for us and was a great change for our company and our shareholders,” Harold Edwards tells me across the 375-plus miles that separate my office in Sacramento, California, from his in Santa Paula.
When Limoneira Company made the decision to file for its initial public offering (IPO) in 2010, the supplier was not only aiming to meet the needs of its growing shareholder base, but to strengthen its brand as a premium citrus provider.
Harold, who was the company’s President and Chief Executive Officer at the time it went public and still holds that title today, explains that the need to file for an IPO was the result of having too many shareholders to keep the company private after more than five generations in operation.
“Since our founding in 1893, we had operated as a family-oriented, privately held company,” Harold begins. “In the 1930s, there was a family shareholder that wasn’t satisfied with the valuation of their ownership, so they filed for a CUSIP number with the Securities and Exchange Commission (SEC) allowing Limoneira Company stock to be publicly traded, and then hired a market maker to basically start trading the shares in a quasi-public way.”
Fast-forward to about 20 years ago, as Harold recalls—the company shares were being traded in very small amounts on the pink sheets, which, he notes, was widely known as a risky way to do so.
“The underlying asset value of the investments we’ve made over the years has become extremely high because the core assets have continued to appreciate.” Harold Edwards, President and Chief Executive Officer, Limoneira Company
“In 2009, we were changing transfer agents, which is the entity that actually creates and exchanges the shares. I received a list of Limoneira’s shareholders, and there were a lot more on that list than I ever imagined,” Harold says before delivering a perfectly timed quip. “I reached out to our corporate council about what I should do, and they basically said, ‘The toothpaste is out of the tube. You have to become public because you have more shareholders invested in your company than the SEC will allow.’ Which, at the time, was 500.”
The opportunity to reduce the number of shareholders below 500 seemed almost impossible, Harold recalls, because a lot of the family shareholders were willing to sell some of their shares, but few of them were willing to sell all of their shares. Understandably, they treated their ownership like it was a sacred trust.
“Those shares had been given to them by their parents, which were given to them by their grandparents, and then their great-grandparents, and so on,” Harold outlines. “I myself am five generations deep in one of those families. So, with that knowledge and a lot of soul-searching, the Board of Directors decided it would embrace becoming public and use the capital markets to accelerate Limoneira’s growth.”
Limoneira officially became publicly traded on June 27, 2010.
“Typically, when companies file an IPO, they hire an investment bank to help raise capital,” Harold goes on. “Because Limoneira had been around for 117 years and operated successfully as a privately held company, we didn’t need to raise any capital. So, as a result, we just filed a Form 10 with the SEC and then floated all of our common stock onto the NASDAQ Global Exchange, and literally became publicly traded overnight. Representatives from our company went to New York and actually opened the NASDAQ market with the debut of publicly traded Limoneira Company public stock.”
In the same year, there was another big change to Limoneira’s corporate structure and its strategic plan that coincided with the IPO. To paint a clearer picture, I’ll have to jump back to 1893, which was also the year the Southern California Fruit Exchange (SCFE), now Sunkist Growers, was founded.
The Limoneira Founders were also Co-Founders of the SCFE—a federated cooperative Limoneira was directly affiliated with for 117 years. At that time, all Limoneira citrus was marketed under the Sunkist® brand name. In 2010, Limoneira elected to leave the Sunkist cooperative and begin to package, market, and sell its lemons directly under its own Limoneira brand.
Along with now having access to ample capital by being a publicly traded company, this decision allowed Limoneira to accelerate its One World of Citrus business model. The whole idea was to complement California and Arizona production with production from Mexico, Chile, and Argentina to perfect the supply chains for customers in Southeast Asia, Central and Eastern Europe, and all through North America.
“What’s great about this is when things are going well and you’re able to have successful financial results, the valuation you receive from the capital markets directly reflects that positive experience,” Harold relays. “The same holds true when it goes the other way, so one of the negatives about being a publicly traded company is it’s very, very quarter-to-quarter focused and short-term oriented in its view of the financial performance.”
This can cause particular challenges for producers who rely on Mother Nature for a successful quarter. However, Limoneira’s incredibly beneficial agricultural real estate has only increased the company’s value over time.
“The underlying asset value of the investments we’ve made over the years has become extremely high because the core assets have continued to appreciate,” Harold notes. “The public markets reward companies that can sustain consistent and regular quarter-to-quarter earnings and don’t always reflect the sometimes significant value created by asset appreciation.”
“...the number-one metric we use for success is to be able to provide the highest returns to our growers—some of which we have been working with for 130 years—for allowing us to represent their fruit.”
Since its IPO, Limoneira identified a certain number of what Harold refers to as non-core assets—land and water assets the producer has invested in over a period of time to monetize or sell to strengthen the balance sheet of the company. This also accelerates Limoneira’s pivot from being a fully vertically integrated producer/packer/marketer/seller into being more of a service provider. Not only does it provide services to its own acreage, but also to all of the other producers that exist in California and Arizona. This gives Limoneira a much better ability to create more regularity and consistency in its financial results.
“We’ve developed a grower services team at the company that focuses on recruiting, retaining, and providing the best-in-class services to our grower partners,” Harold goes on. “And ultimately, the number-one metric we use for success is to be able to provide the highest returns to our growers—some of which we have been working with for 130 years—for allowing us to represent their fruit.”
This pivot to being more asset-light, as Harold calls it, includes providing its services to outside growers and grower partners, and also offering farm management services to other agricultural land owners.
“In the growth of this model, we see tremendous promise, and that should allow us to provide a much more consistent results basis,” Harold says as our conversation winds down. “Now tying that to a publicly traded vehicle makes a lot of sense, because we’re able to more consistently drive results on a quarter-to-quarter basis, whereas before, when we were more of a farming company, that was a lot more challenging.”
If you have not gotten Harold on the phone yet, I highly suggest that you do. His knack for storytelling seems effortless, and I am positive there is much more to learn from the produce luminary.
For, as we all know, the needs of the market are ever-changing. And alongside that change will be the Limoneira name in bold, black letters. 
