For the last twenty years, Potter Farms operated as one of the most efficient fruit drying operations in California’s Central Valley. Located in Patterson, CA the dry yard was right in the middle of California’s apricot growing “Mecca”. The Patterson area has the perfect climate for apricot orchards. Although Potter had experimented with drying different fruits, he always came back to processing apricots.
By his own admission Dave was more of an operations expert than a salesman. His operation had become almost routine. He would buy fruit from local family orchards, cut and sulphur the fruit, dry it in the sun, and sell the dried product in bulk to wholesalers. It was a successful operation, fine-tuned over the years to be efficient and profitable.
In 2009 things began to get a bit dicey. A large amount of the final dried product was stolen. It was the first year that Potter Farms ever operated without a profit.
Then the current California Drought began. The apricot harvest tonnage fell and the price of apricots went from $200 cost per ton to $600. Water became a problem since apricot trees do not produce large fruit suitable for sun drying without a healthy spring watering. Local farms began to pull their apricot trees and plant almonds or just go out of business.
The fruit canneries just bought everything on hand and paid for all of the fruit both good and bad. And to make things a bit more difficult, the price of sun dried apricots lagged behind the price of raw fruit. Potter Farms was just squeezed from both ends of the market.
Mr. Potter was able to process fruit from his own orchard but his debt just increased. Potter heard about the Alliance SBDC consulting program and called to see what they could do to help him. SBDC Consultant Tim Douglas showed up at his doorstep. Mr. Potter had previously applied for a SBA disaster loan but he had just hit a brick wall with the time required for the loan process and necessary paperwork stopping his application cold. Tim encouraged Mr. Potter to refocus his efforts and set aside time to relentlessly pursue the loan. He worked with Potter to understand and address each question as they were raised by the SBA loan staff and helped Dave write responses as needed.
Tim even got Congressman Jeff Denham involved by having him write a letter inquiring about the delay in approving Potter Farms’ completed application. Persistence paid off and an SBA Disaster loan for six figures was awarded. This influx of funds gave the business a new life and an opportunity to change the business to fit the changing market.
Next, Tim worked with Potter to examine the business model that had been successful in the past but seemed somehow inadequate for today’s stressed agricultural system. The company began a five-step reform:
- Pursue an organic processing certificate for apricots and a variety of fruits;
- Examine the feasibility of a market plus business approach within the industry;
- Work with local growers and wholesalers to look at processing different varieties of apricots and other types of fruit (pears, tomatoes, peaches);
- Develop cost accounting models for different processing strategies; and
- Develop a business strategy to modernize the processing line by adding more automatic cutting machinery as needed.
2016 was a remarkable year both for Dave and Potter Farms. The business experienced a significant turnaround. To quote Mr. Potter, “In 2015, we operated for one month processing 30 tons of fruit but in 2016 we increased production to 1,100 tons, operating for five months. In 2015, I processed conventional apricots; but in 2016, I handled conventional and organic apricots, plums, peaches and pears. We now operate on a cost plus operation where I have partnered with a number of large growers. The result is that now I do not have to worry about the price of fruit, only my production costs.”
Mr. Potter expects to process 1,500+ tons of fruit in 2017 and to add additional cutting machinery to further modernize his line. Mr. Potter has been very loyal to his workforce, “I expect to keep my employees, some who have even worked for me for 20 years. I am going to increase tonnage processed and line efficiency, not eliminate positions.”
When asked how the Alliance SBDC helped him succeed, Mr. Potter summed it up with an anecdote. “I have been drying fruit for twenty years. When I walked through the drying yard last week and saw organic peaches, plums and pears drying in the sun, for the first time, I felt like I made it. I could not have done it without Tim Douglas and the Alliance SBDC pushing and pulling me across the finish line. They did not do the work, but they facilitated me doing the work and helped me do it right.”
Tim Douglas, CMA, EA
Valley Sierra SBDC Financial & Operations Consultant
Nov 16th, 2016