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CEO's Message




"Posting record revenues as our top line increased by double-digit percentages and surpassed the $1 Billion-in-sales threshold."


"Expanding fresh avocado productions capacity measurably to satisfy rising demand with the opening of our newest packinghouse in Jalisco, Mexico."


"Completing a multi-year series of initiatives - adding plants and products - in the Renaissance Food Group (RFG) business segment to pace our leadership in the value-added fresh fruit, vegetable and prepared foods category."

"Delivering higher shareholder return through an increased annual cash dividend on Calavo's common stock, even while making the aforementioned investments to drive our growth."

Reflecting on these achievements, what occurred to me is that underlying the growth and considerable value creation into which it translates for shareholders, Calavo avocados and family of fresh foods are themselves a formidable currency—specifically, Fresh Currency, the theme of this year’s annual report.

Let me recap operating results for the fiscal-year-ended October 31, 2017. Net income registered $37.3 million, equal to $2.13 per diluted share, virtually equal to $38.0 million, or $2.18 per diluted share—the all-time high recorded in fiscal 2016. Revenues climbed 15 percent to a record $1.08 billion from $935.7 million the prior year. Gross margin rose by $7 million in the most-recent year to reach a new historic level of $114.5 million from $107.5 million in fiscal 2016.

In recognition of our outstanding financial performance, Calavo’s Board of Directors declared a 95 cent per share annual cash dividend on our common stock, returning more than $16.7 million to owners. This year’s award was nearly a six percent increase from fiscal 2016. During the past five years, the dividend has increased at a compound average growth rate of almost eight percent. Our ability to deliver these returns and create value for shareholders—Calavo’s market capitalization standing at nearly $1.3 billion at fiscal-year end—are sources of immense pride.

The pace of Calavo’s progress continues to quicken. To place in context just how far our company has come, consider revenues have doubled in the past five years from just over $550 million in fiscal 2012, compounding at an annual growth rate exceeding 12 percent. Gross margin dollars, too, have virtually doubled in the past five years—again, a mid-teen growth rate. Revenue and margin growth have lifted Calavo’s bottom line, as adjusted per-share results registered an almost two-fold increase during this same five-year period.

To what do we attribute this success? A deep focus on our three principal business segments and disciplined implementation of the company’s strategic plan. These complementary units are the principal factor in our consistent, sustained revenue and earnings growth. As avocados have surged in popularity, we have built on our historic leadership to ride the crest of this growth. Our capabilities—end-to-end strength in sourcing, sales, marketing, distribution and production management—are the envy of the industry. In concert with surging domestic and global demand, Calavo has expanded fresh avocado infrastructure to capitalize on these opportunities. We remain on the forward edge of avocado-industry growth fueled by demographic change, health and outstanding marketing. While comprising a smaller portion of our Fresh business than avocados, our tomato and papaya operations provide solid incremental sales and margin contribution to round out the segment.

The second prong of this strategy is RFG. This business segment’s rapid advancement is compelling validation of Calavo’s decision to invest significantly to build a best-in-category, value-added fresh fruit, vegetable and prepared foods business. As we predicted, the rising groundswell of consumer preference for healthy and convenient food choices put RFG in the “sweet spot:” one of the fastest-growing segments in the retail grocery channel. Specifically, RFG’s ascent in the fresh meal-kits and ready-to-eat foods are game changers. RFG’s outstanding product-development capabilities, in concert with Calavo’s deep expertise in assembling a seamless, nationwide food-distribution infrastructure, have propelled the segment.

Together, our Calavo Foods business segment of guacamole, salsas and dips, along with RFG, make available a great family of products and strengthen the presence of our sterling brands—Calavo, Garden Highway, Chef Essentials and Salsa Lisa—at the retail grocery level. Strategic focus and disciplined implementation aside, I have long maintained there is no substitute in our business for great-tasting, high-quality products. That is the axiom essential to success—and a strength underlying our family of fresh brands. We source only the best. We possess innovative product development and state-ofthe-art manufacturing to create new offerings. And we have put in place the distribution apparatus to ensure that they reach customers and consumers fresh and bursting with flavor.

Calavo has not been reluctant to deploy its considerable financial resources to execute our strategy. In the past four years alone, our company made capital investments totaling more than $95 million in the “Three Ps:” plants, products and people. Among them are the Jalisco, Mexico fresh avocado packinghouse and, in the RFG segment, new production facilities in Riverside, California and Jacksonville, Florida, and expansion of an existing plant in Houston, Texas.

As internal growth quickens, we remain focused on our core businesses, each segment offering the platform for “bolt-on” acquisitions if opportunities present themselves. Our success integrating and building RFG is case-inpoint. We are vigilant, have the financial resources at our disposal, and routinely evaluate prospective transactions. However, any deal will have to
be complementary to our current segments and immediately accretive to earnings.

Similarly, Calavo’s judicious investments in unconsolidated subsidiaries hold excellent potential: Nasdaq-listed Limoneira Co., whose substantial avocado crop we also pack and market; tomato-growing partner Agricola Don Memo; and FreshRealm, a food technology and distribution platform for fresh prepared products.

Calavo’s future has never been more exciting. With the framework in place, I expect further acceleration of growth. Domestic avocado demand— increasing at double-digit rates—will remain on its extended upward arc. Global consumption—particularly emerging Asian markets but also Canada and Europe—will also increase at an equally brisk, if not faster, rate. RFG is
well positioned—with plants, products and people squarely in place—for continued customer and geographic penetration.

As we move forward into this ever-brighter future, I conclude, as always, with thanks—in fact, a billion of ‘em!—to our Board for stewardship and sound judgment, Calavo’s management team and employees for their tireless dedication, and to our customers and their customers, as well, for their support. To you, my fellow shareholders, I extend immense gratitude for your loyalty which we work day-in and day-out to maintain and reward.




Lee Cole

Chairman, President and Chief Executive Officer

March 4, 2018


      Lee Cole has been called a maverick, a risk-taker, a visionary and a savvy entrepreneur, and indeed, he is all these things. But first and foremost, he is a grower—whether he is tending his 400-acre avocado farm in Santa Paula, California or transforming a local, grower-owned cooperative into a publicly traded, diversified, world-class agribusiness.

Deep Roots in “Calavo Country”
      Born to Oklahoma cattle ranchers, Lecil Edward Cole decided early in life that he would follow his father’s footsteps into ranching. At age 13, he moved with his parents to Santa Paula, and set his sights on owning his own ranch. After a stint in the U.S. Army, he went home to Santa Paula to put his plan into action.

      Cole took a job with Safeway Stores to support himself, and quickly rose through the ranks. At age 21, he became the youngest store manager in Company history. Soon he was promoted to District Manager, overseeing all aspects of operations in 18 stores. All the while, Cole was purchasing land and water rights in Santa Paula. At age 33, with 80 acres of producing avocado trees and 100 head of cattle, Cole left his Safeway career to become a full-time rancher, avocado grower and entrepreneur. Before long, the avocado trees had taken over his ranch, eventually displacing the cattle.

      Then, as now, Santa Paula was “Calavo Country,” and Cole was quickly recruited to join the growers’ cooperative. Seeing a need for improved customer service, he campaigned for the director’s seat and won. Next, he leveraged his 15 years of retailing experience to win election to the directorship in 1982. He has remained on Calavo's board ever since, becoming Chairman and CEO in 1998, and assuming the added role of president in 1999.

A Grower’s Perspective
      Implementing an aggressive strategic agenda while also maintaining strong profitability is key to Cole’s leadership style. From the beginning, he applied his grower’s perspective to retool the Company to compete as an efficient, global enterprise in the 21st century. As a grower as well as a shareholder, he strives to maximize both corporate profit and returns to the farm. As a result, Calavo’s grower returns rank among the industry’s best.

Unlocking Value
      To unlock the Company’s value and pave the way for future growth, Cole spearheaded the co-op’s conversion to a for-profit corporation in 2001 and its listing on the NASDAQ in 2002. This forward-thinking transaction created a currency to use for all-stock acquisitions without needing to leverage Calavo’s strong balance sheet.

      In 2003, Cole led Calavo in its first strategic acquisition, Maui Fresh International, Inc., a multi-product distributor of specialty produce. The transaction extended Calavo’s brand equity and market stature into new perishable product categories and broadened Calavo’s product offerings to dozens of items, ranging from tropical fruits to fresh cut vegetables.  Since then, several acquisitions followed, the most recent being Renaissance Food Group.

Nurturing Grower Relationships
      Understanding that packinghouses thrive on volume, Cole made grower recruitment and retention Calavo’s number one priority. Accordingly, he instituted a strategic grower recruitment plan that resulted in a record 38 to 40 percent of the domestic market share. In 2005, he piloted the Company through an equity cross-investment with Limoneira Company. Calavo now packs and distributes the crops of the number one and number two domestic producers of avocados—Irvine Company and Limoneira, respectively—and has forged alliances with growers in Mexico, Chile, New Zealand and the Dominican Republic.

      To bring new operating efficiencies to its processed-products unit, Cole instituted a comprehensive restructuring of Calavo’s processed products unit, with a 90,000-square- foot production facility in Uruapan, Michaocan, Mexico, ending an inefficient two-step process of pulping and converting to finished product in separate plants. 

A Family Business
      More than 90 years after its founding as a grower-owned cooperative—and numerous years after Cole assumed leadership of the Company—Calavo is growing and profitable. As he continues to move the Company ahead, Cole’s family business continues to blossom as well.

     In addition to his Santa Paula avocado ranch, where he resided with wife, Jeannette, Cole owns a papaya farm and papaya processing plant on Hawaii’s Big Island. Cole’s papayas are sold domestically under the label, "Calavo Gold", his own "Cole" label, and internationally under the "Jeanette" label. Cole’s son, Guy, manages the avocado farm and his daughter, Suzanne, manages the papaya processing plant, which sells papaya purée worldwide.

     As he looks back over 90 years of Calavo history, Cole is characteristically humbled about his stewardship. “I never forget that I am charged with the oversight of a formidable legacy, and I am proud, humbled and even awed to be at its reins,” he says. “I do not feel that I inherited this company from those who preceded me; instead, I am borrowing it from those who will follow me.”

     Thanks to Cole’s leadership, those who follow will enjoy the fruits of a bigger, more broadly based Calavo, solidly positioned to lead the industry for the next 90 years and beyond.

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