Dive Brief:
- Mission Produce, one of the largest global suppliers of avocados, reported lower-than-expected profits in the third quarter after "abrupt change in growing conditions" upended Peru's harvest, CEO Stephen Barnard said on an earnings call this week.
- Excessive heat "negatively impacted anticipated volumes and fruit size across the Peruvian growing region," Barnard said. The produce giant had locked in lower prices for customers earlier this year on the expectation of a strong harvest.
- Higher supply out of Mexico helped offset lost volume from Peru, but it also pressured margins by pushing prices lower. Mission said adjusted earnings before interest, taxes, depreciation and amortization was $21.2 million, compared to $31.6 million for the same period last year.
Dive Insight:
Oxnard, California-based Mission sources avocado from around the world to ensure year-round supply and protect profits in the case where one region encounters growing challenges. However, as climate change causes more extreme weather events, it's becoming harder for the company to insulate itself from disruption.
Peru's avocado crop was a tale of two extremes: Cold weather in the summer delayed the start of the season, while a winter heat wave stunted fruit growth and dried up volumes, according to Barnard.
Although lower avocado prices, smaller volumes and high production costs all hurt profits, Mission was still able to keep up with demand due to its vertically integrated supply chain. Higher supply out of Mexico pushed North American volumes up 15%.
"This demonstrates the value of our vertically integrated and diversified global sourcing and distribution network, which allows Mission to remain in position to service new and existing customers regardless of the circumstances," Barnard said.
The company is expecting lower supply out of Mexico in the fourth quarter, which may push up prices and help profits. Higher demand out of China is also positioning Mission for future growth, with shipments to China tripling in one year, according to the earnings call.
"We're built for the future and we're just waiting on mother nature to leave us alone," Barnard said.
