'Mr. Avocado' takes back the helm at Calavo in Santa Paula

The good old days at Calavo Growers weren’t so long ago.

In 2019, the Santa Paula-based distributor of avocados and other produce reported a $36 million net profit. In 2022, it lost $6.2 million.

To right the ship, the company has brought back the CEO who led it in those more profitable times. His turnaround plan is a simple one.

“What I’m doing is just putting everything back in place like we had it,” said Lee Cole, who came out of retirement and back into the CEO’s office last month at age 83.

Cole was CEO of Calavo from 1999 until January 2020 and also served 28 years as chair of the company’s board of directors. This time around, he’s agreed to a three-year contract and says he plans to start looking for and training a successor almost immediately.

In his first tenure as chief executive, Cole made the company what it is today.

When he took over in 1999, Calavo was still a grower-owned cooperative, the business model it had since its founding in 1924. In 2002, it became a for-profit enterprise and began trading on the Nasdaq Stock Market. Two years later, Calavo moved its headquarters from Orange County to just outside of Santa Paula, where it leases an office from the avocado and citrus grower Limoneira.

Calavo is one of the nation’s largest distributors of avocados, most of them grown and packed in Mexico and California. It also packs and distributes papayas grown in Hawaii and hothouse tomatoes in Mexico, and has a division that sells packaged and prepared produce such as cut fruits and veggies and packaged salads.

Disruptions

In some ways, Calavo’s recent troubles are similar to those of the entire produce industry, and especially the avocado sector.

The COVID-19 pandemic was a huge disruption. Demand from restaurants dipped to almost nothing in the spring of 2020, and growers and distributors had to shift almost entirely to retail sales. Wholesale produce prices swung wildly in the early part of the pandemic and supply chain issues made shipping slower and more expensive.

But some of Calavo’s troubles were specific to the company and the choices it made.

The biggest problem has been instability at the top. In the three years between Cole’s retirement and un-retirement, Calavo went through two permanent CEOs and one interim chief executive. The revolving door in the finance office spun even faster, with four permanent chief financial officers and two interim CFOs in three years.

“When a company goes through that kind of turnover, that’s a big deal,” Cole said.

The result of all that disruption was a loss in confidence by investors. Calavo’s stock has dropped from nearly $100 a share in late 2019 to below $30 throughout the past month.

Mitchell Pinheiro, director of research at the Philadelphia investment firm Sturdivant and an analyst who covers Calavo’s stock, said Cole’s return is a clear sign that major shareholders, including Cole himself, weren’t happy with the direction of the company.

Cole owns 440,000 shares of Calavo, which are worth about $12.5 million, or 2.4% of the company. He bought 100,000 of those shares since he came out of retirement on March 10.

“They clearly want to get back to the leadership that was generating more consistent profitability out of the avocado business, and Lee is the guy for that. There’s really nobody else,” Pinheiro said.

“Lee is Mr. Avocado,” said Steve Hollister, the chairman of Calavo’s board and the interim CEO from a few months in late 2021 and early 2022. “He probably knows more than anyone in the industry.”

Organic return

Hollister said he doesn’t think Calavo handled Cole’s first retirement as well as it could have. A few other senior executives left at around the same time and the company filled important positions with people who didn’t have a lot of experience in avocados.

Hollister and Cole are friends. They were having dinner recently when Cole suggested coming out of retirement.

“It was just sort of an organic situation,” Hollister said. “Calavo was not doing well, we needed to make a change and Lee said he’d be willing to help.”

The board decided to bring Cole back on March 8. Two days later, he was on the job.

He replaced Brian Kocher, who spent about a year as CEO. Kocher was dismissed without cause and received a severance of one year of his base salary of $800,000, according to a Calavo filing with the U.S. Securities and Exchange Commission.

"I own quite a bit of stock in Calavo, and I bought some recently, so I had a reason to come back, to help the company and to help myself," Cole said. "I had a lot of emotion, seeing the company not doing well, and it seemed to me like it was because they were going through so many CEOs, along with COVID and everything else, and I felt I could bring it back."

As CEO, Cole’s base salary is only $64,480. The rest of his compensation will come in the form of stock options, allowing him to acquire as many as half a million additional shares.

That means the better Calavo performs on the stock market, the more money Cole will make.

“He’s got the right incentives,” Hollister said. “The investment community likes to know that the guy running the company is invested for it to succeed.”

Six-string ideals

Beyond his ownership stake, Cole is also a customer of Calavo’s. Cole and his children own one of the largest avocado and cattle ranches in Ventura County, a 4,000-acre property with 1,000 acres of avocados. Calavo packs and distributes the avocados from that farm.

“Retirement” might be the wrong word for the way Cole has spent the last three years. He’s built his family farm into one of the biggest avocado growers in the country, and he plans to plant another 10,000 avocado trees there this year.

He’s also had time for one of his hobbies: playing the guitar, which he likens in one respect to his new job.

“There’s six strings on a guitar and if one string is out of tune, nothing works. It sounds like hell,” Cole said. "And that's basically how I see this company. It got a little bit out of tune, and it just needs to be tuned up.”

Tony Biasotti is an investigative and watchdog reporter for the Ventura County Star. Reach him at tbiasotti@vcstar.com. This story was made possible by a grant from the Ventura County Community Foundation's Fund to Support Local Journalism.

This article originally appeared on Ventura County Star: Calavo CEO Lee Cole comes out of retirement to lead avocado giant