Inside the two companies that control the American carrot crop

Inside the two companies that control the American carrot crop

Americans will eat 100 million pounds this Thanksgiving, as Bolthouse and Grimmway’s California neighbors call for a consumer boycott of water use.

by Chloe SorvinoForbes staff

He. She It may seem strange to say that carrots are having a moment, but social media has catapulted the humble root to near-stardom status. Anecdotal evidence suggests that online carrot recipes are only as popular as those for potatoes and Brussels sprouts among vegetables, and Pinterest’s numbers back this up: Balsamic carrot honey on the platform increased by 75% this year, while search requests for Roasted parmesan carrots It increased by 700%. Fresh carrots are an expanding $1.4 billion U.S. market Americans are expected to consume 100 million pounds this Thanksgiving — that’s nearly five ounces for every person in the country.

At least 60% of those islands are produced by just two companies, Bolthouse and Grimmway, both of which were acquired by buyout firms, in 2019 and 2020, respectively.

“There are only two sources,” said Adam Waglay, co-founder and co-CEO of Butterfly Equity, which owns Bolthouse. Forbes. “We’re joking, it’s like OPEC carrots.”

The cartels are less laughable to the producers’ neighbors in Southern California’s Cuyama Valley, who are calling for a boycott of Big Carrot because of the amount of water their farms are sucking from the ground. In 2022, Bolthouse and Grimway together were responsible for 67%, or 9.6 billion gallons, of the region’s total water use. Locals said they expect their wells to run dry if island farms continue to use as much water – said Jeff Huckabee, CEO of Grimmway Forbes His company has already reduced the amount of land it farms — and carrot producers have joined forces to defend their thirst in court. This worries local residents, who say they lack the financial resources to fight a long-term legal battle.

Such water disputes can take years to resolve, and often become a way to delay cuts, said Carrigan Burke, a professor at the University of California, California School of Law. Forbes. “You see these rights being curtailed over and over again by the state or the courts,” Burke said. “In some cases, savvy water users realize this, and for them, just delaying that reduction is a success, and the longer they can do it, the happier they are.”

Price concerns

Waglay uses the word “duopoly” to describe the two companies. Such consolidation in the market This often results in higher prices, and the government has for years used increased consumer prices as an indicator of potentially unfair competition. The USDA declined to comment on any antitrust issues.

Since 2019, prices for carrot producers have risen more than 40%, according to the U.S. Bureau of Labor Statistics, outpacing the 22% inflation rate in the U.S. economy.

Carrot top

Prices are near their highest levels since 2019, when Bolthouse was acquired by a private equity firm. Grimmway changed hands a year later.

said Huckabee, CEO of Grimmway Forbes The costs of a number of inputs also rose. Packaging, fertilizer and fuel prices have all risen at a higher rate than inflation, he said, and California’s minimum wage has increased 27% since 2018. At $15 an hour, it’s the second highest in the country.

However, the island trade remained a profitable game. The total value of US production has increased by 34% since 2019.

Binary origins

Bolthouse, founded in 1915 in Grant, Michigan, began selling carrots packaged in cellophane bags in 1959. In the 1970s and 1980s, production centered around Bakersfield, California. After Bakersfield farmer Mike Yurusk invented “baby carrots” in 1986, consumption skyrocketed.

In the 1990s, Bolthouse ballooned into the largest island operator, reportedly shipping about 80% of California’s islands. It accounted for half the US carrot market in 1992, followed by Grimmway, founded by brothers Bob and Rod Grimm in 1969, and the family-owned Eurosk. Grimmway eventually bought out Mike Yurosek & Son. Carrots are now the tenth largest commodity in California, where a third of America’s vegetables are grown.

Today, the industry’s growth can be limited by dwindling water supplies in the drought-prone Cuyama Valley, 150 miles northwest of Los Angeles and 90 miles west of Bakersfield. But the companies behind the duopoly are not giving up without a fight.

Both companies, which own their own manufacturing, reach a similar point in their ownership life cycles. Private equity-backed companies typically change hands every three to five years. In 2019, Butterfly Equity acquired Bolthouse from publicly traded Campbell Soup Company for $510 million in cash. A year later, Grimmway was acquired by Teays River Investments, an investment firm based in Zionsville, Indiana, for an undisclosed sum. This means that both companies are in the right place for what most investors consider to be the right time to offload an investment or go public.

Los Angeles, California-based Butterfly has sold just one of its investments, an organic protein company called Orgain, which Nestle Health Sciences acquired in February 2022 after two years of ownership of Butterfly. Grimmway is Teays River’s only current investment after exiting two others in 2019 and 2013. Teays River held these investments for eight years and one year, respectively.

Grimmway’s owner, which has $1.38 billion in assets under management according to Pitchbook, is backed by pension funds including Public Employees of Maine and Oregon, Texas Teachers, the New York State Teamsters Union, and the Producers and Writers Guild of America.

By comparison, Butterfly Equity has and supports $4 billion in assets under management Executives of private equity giant KKR, where Waglai worked for eight years. The company has concluded eight deals in the eight years since its launch. Butterfly also owns America’s largest striped bass farm, the largest egg producer, an avocado oil manufacturer with 60% of the market, and a large whey protein manufacturer.

Water rights

Bolthouse and Grimway began working with each other in a way that competitors rarely did. They filed a lawsuit together in 2021 in Kern County, California to ask a court to decide how to divide water in New Cuyama, where they farm.

What’s happening in Cuyama Valley is an example of the kinds of water battles surfacing all over California. Farmers of a variety of crops there have relied on irrigation for decades. Those years of pumping and spraying water on crops through sprinklers or complex drip irrigation systems had dire effects, including the threat of land submersion, a receding groundwater table that made it difficult to drill wells, and the threat of some drying up.

That’s why water use around New Koyama could drop by two-thirds over the next two decades. To bring the region back to a sustainable level by 2040, 5% water outages began this year and will continue every year from now on. The Cuyama Basin currently has an annual water deficit of more than 8 billion gallons, and much of the region’s island farmland may have to be taken out of production. Some experts say Bolthouse and Grimway They would have to reduce their water use by about twice what the city of Santa Barbara, California, uses annually.

But water-saving sprinklers can only save so much. The lawsuit filed by the island companies has forced area farmers, ranchers, residents and even the area’s public school to file legal bills. In response, a coalition of local residents launched a boycott of the islands in July. The district’s goals: The companies drop the lawsuit, pay all legal fees, and reduce the amount of water they pump. One flyer distributed by boycotters suggests a Thanksgiving recipe for Brussels sprouts instead.

Both Bolthouse and Grimmway lease rather than own farmland. They recently withdrew from the lawsuit, although the companies that own the farmland are still on it, and what the judge decides will determine how much the companies can grow there in the future.

Expand elsewhere

Huckabee said the Islands District targeted Grimway and Bolthouse because they were easy targets. According to Huckabee, only 3,700 of the 13,000 acres Grimway leases in the Cuyama Valley are farmed. “We cut back, we cut back, we cut back and no one has done that,” he said.

Companies may have to find new farmland to grow carrots. The average American now eats nearly seven pounds of fresh vegetables each year, with consumption up 2% so far in 2023, according to NielsenIQ.

Grimmway has already expanded its agricultural operations outside of California with facilities in Florida, Washington and other states.

Butterfly Wagley doesn’t deny that water is one of the biggest obstacles facing his investment in Bolthouse. “Water challenges,” he said with a sigh. “These assets have a lot of access to water, but it’s going to get worse, and you have to plan for that and try to work on ways to reduce that. That’s going to be a long-term challenge.”

California’s water battles often result in “large commercial players beating up residents and small business owners in the courts,” said Heather Williams, a professor of environmental analysis and policy at Pomona College and an expert on water issues. Forbes. She said the lawsuit is among the first of many.

“That started a race to the sink — pumping out as much as we could, putting it into production,” Williams said. “Water is property in California. That’s what a rational representative acting on behalf of investors would do. If they’re playing this game, they need to play hard.”

Grimway and Bolthouse can move forward, unlike most residents in New Cuyama, Williams said. “These are their homes and small farms. If the well dries up, it’s basically worthless,” she said. “They can’t pay lawyers for ten years of litigation.”

More from Forbes

More from ForbesTürkiye Day Dinner, brought to you by America’s largest private companyMore from ForbesThe gemstone collection was valued at $3.2 billion. The hurt around him is pricelessMore from ForbesYaccarino is in the hot seat as ad executives urge Twitter CEO to resignMore from ForbesMeet the Iranian-born billionaire helping NASA return to the moonMore from ForbesSatya Nadella and Microsoft are the biggest winners in the OpenAI collapse

    (Tags for translation) Islands 

You may also like...

Leave a Reply

Your email address will not be published. Required fields are marked *