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Mission Produce leaps in first day of trading

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Mission Produce CEO Steve Barnard joins Yahoo Finance’s Zack Guzman to discuss the company’s public debut on the NASDAQ.

Video Transcript

ZACK GUZMAN: Today, Mission Produce, an Oxnard, California based company here, it's the leading distributor, grower and packer of fresh Hass avocados, went public. And right now, shares are trading a bit higher than their opening trade here at $14.17 on day one. It was lower than the initial range that they were looking for here in the $15 to $17 price point, and we're opening now a little bit below that.

But here to discuss the gross opportunity, the growth opportunity in the avocado space as more and more Americans are munching on guacamole, the CEO of Mission Produce, Steve Barnard, joins us now. And Steve, I mean, I noted there it might not have been a quite as high in terms of the price point here for shares in this. I'm not sure if that's tied to maybe the slowing growth as you guys reported it here in your S1, but talk to me about the opportunity here and the unique role that Mission Produce plays when it comes to avocados being consumed, not just in the US, but around the World

STEVE BARNARD: Well, thank you for having me, for starters. But Mission Produce is the largest producer and distributor of avocados in the world. We're based here in California. We started here in 1983, but as the avocado revolution took place, we expanded globally into Mexico and Peru and now in Guatemala and Colombia to have enough supply year round. But we actually led the revolution, the avocado revolution, by providing ripe avocados to retail back in about the year 2000 when we started. And what that did, it provided a ripe avocado to consumers at retail specifically, but also we're doing that for food service also. But consumption went up 200 to 300% at retail in the first year that those retail chains switched over to the ripe program.

So what we created is a revolution, and then from there, we had to back it up with enough supply to fill the need, and we're actually seeing that happen globally now. The consumption here in the United States went from two pounds per capita about the end of the '90s, early '90s, and now it's at eight pounds, and we continue to see growth opportunities ahead. Mexico, by comparison, is at 15. So I mean, we have a lot of runway to go here in the US, but we're continuing to look offshore. Europe is a big opportunity, and Asia is starting to eat avocados, so we've got lots of runway ahead. We're very excited about the future, and we're in position to get that job done.

ZACK GUZMAN: Yeah, normally I would jump in here and say hold on now, let's push back on the idea of this avocado thing being a revolution. But I mean, when you look at the growth rate, as you guys listed here, I was surprised to see a 12.5% compounded annual growth year in year volumes from 2009 to 2019. 14.5% in the same metric for revenues over the same time period. But also, I mean, the scale here is important when we talk about you guys vertically owning 10,000 acres in Peru, 8,300 which are already producing avocados. I mean, when you look at your customer base, I guess that might be a question when you think about COVID-19 and the impacts here, because your net incomes for the last nine month period did drop pretty considerably versus last year. So talk to me about that client mix since I know you work with Kroger, you work with Costco, you work with Chipotle, so what are you seeing in terms of demand now in this pandemic?

STEVE BARNARD: Well, the avocado is actually up. It's a healthy food. It's a superfood. People are eating healthier now. But how we sell them has changed a little bit. Prior to COVID, we were about 16% food service, that obviously has taken a hit. We're fortunate enough that over 50% of our food service businesses is fast food casual, which is the upper end scale of the food service business. So we're back to about 90% of our food service business, but the retail side of it has really boomed. People are shopping less but buying more when they're there, so what they're buying has changed a little bit. Rather than a ripe avocado, they're buying bags and bulk displays type of displays so the volumes there. It's just a different avenue to get it to their plate, so to speak.

ZACK GUZMAN: And when we talk about, I guess, your guys' own metrics and your own operation there. As you guys noted in 2019, you produced about 11% of the avocados you sold, and you expect that to grow here as your own farming endeavors continue to take off. How might that help maybe turn around the fall in net incomes that we saw so far at the beginning of 2020 here? I mean, talk to me about how that shift might actually help Mission Produce moving forward?

STEVE BARNARD: Well, most of that production is in Peru. We have purchased 10,000 acres of land down there. We planted about 8,300 of it. And of the 8,300, about a third of that is non-producing. It's planted. The money's been spent, so to speak, on the development, so we'll have ample supply is going forward. And one of the things that gives us is, obviously, a guarantee of supply as we continue to grow globally, we need to know where that products originating and what the time of year of it is. So that's why we're operating in Peru heavily.

We're trying to expand that season thereby planning on different altitudes and latitudes is how you manipulate the time of harvest. We're expanding into Guatemala and Colombia to help develop a product for Europe and Asia to fill those gaps. If we can provide a yearlong Hass avocado, which is the heavily skin, thick skin, it's the premiere avocado in the market today--

ZACK GUZMAN: It's a good one.

STEVE BARNARD: Year round, we can can change consumer behavior and increase consumption globally, and that's what our goal is.