PRESIDENT’S CORNER
6
Almond Facts
MARCH | APRIL 2016
President’s Corner
Mark Jansen
President and CEO
Marketing Needed
to Grow Demand
Much of the almond industry believes they are
“marketing” almonds by letting their call pool
handler inform its broker that they are ready to
sell. Respectfully, this is confusing marketing with
trading, which is no more than taking advantage of
timing. Marketing is distinguished by understanding
consumer needs, developing new products, building
brands and collaborating with customers to generate
profitable demand for almonds. Marketing is always
an effective strategy, but there are times when a
trading strategy can be nearly as effective. The
industry just completed one those eras when trading
almonds was so profitable that it attracted many new
entrants to the industry.
For more than six years, the market prices for almonds
consistently rose, never selling for less than the previous year.
As the drought suppressed yields, prices spiked. By last summer,
almonds had become the most costly tree nut. It was a good
time to strengthen balance sheets of growers and handlers.
As prices reached historically high levels, the industry
experienced a reduction in market demand. In times
of tight supplies, price is used to ration the available
quantities. However, demand-erosion occurred and pricing
had become over-inflated.
Blue Diamond’s
strategic plans anticipated the 2015 crop to
be the peak of almond prices over our five-year planning
horizon. We forecasted an El Niño water year, combined
with increasing acreage, would result in expectations for
larger future crops and price changes.
The unexpected news of a healthy 2015 crop with a slight
increase in market supply triggered the price decline. The
speed of the price correction unsettled the market. Purchases
were made at prices $1.50 above current market by the time the
product reached the customer. When those customers needed
to resell, they sometimes defaulted on those contracts leaving
containers orphaned in port, searching for new customers.
Later, they sold at discount to the already lower market prices,
further contributing to the downward pricing spiral.
It seems counter-intuitive, but lowering prices reduced
demand. This deflationary environment caused buyers to
delay purchases and even reduce consumption. They knew
that by waiting prices would go lower. Price stability or
defining a floor to prices was necessary to give buyers the
confidence to buy now.
As I write this article, it appears market prices have returned to
historically normal levels or similar to those of 2012. California
growers, the most productive, efficient and sustainable in
the world, are better positioned to maintain profitability at
these economic levels, but other producing countries will be
pressured to break-even. This gives us a platform from which
to restore market confidence and rebuild demand.
Blue Diamond
is a marketing co-op. Our business is almond
demand generation. In the last five years we have tripled our
advertising expenditures, continued to innovate new almond
products, opened 45 international markets to our consumer
brand and achieved two-thirds of our revenues through
value-added products.
With the moderation in almond prices,
Blue Diamond
is doubling
down on our marketing investments. We are debuting new
Almond Breeze
television advertising, committing to significant
advertising for snack almonds during the Olympics and
continuing to invest in new innovative products that will build
our growers’ bottom line.
Blue Diamond
will continue driving
market growth through innovative products and marketing,
ensuring a strong future for our cooperative.
Crop Year
August 2015
February 2016
5 Year Global Almond Pricing Cycle
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$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.50
$4.00
$5.00
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