There's no food inflation for avocados
Americans may be paying more at the grocery store for everything from steak and eggs to paper towel and detergent, but they're getting a veritable bargain when it comes to avocados.
The price of avocados is down 14% over the past year thanks, in part, to a bumper crop in Mexico. That has made the popular "super fruit," rich in healthy fats and fiber, even more attractive to consumers.
Rising avocado sales helped the avocado distributor Mission Produce (AVO) turn a profit in the second quarter of $7.4 million, after posting a loss of $14.8 million a year earlier.
Steven Barnard, founder and CEO of the Oxnard, California-based company told Yahoo Finance Live that consumers' appetite for avocados shows no signs of slowing down.
"If you look at the consumption rates here in the United States and even in Europe and Asia, we've been experiencing double-digit growth," Barnard said.
A 22% rise in avocado sales by volume offset lower prices and helped Mission Produce generate revenue of $234.7 million in the second quarter, 6% more than the same period a year ago.
Barnard is confident the company will continue to post profits this year, especially as the economy rebounds and more restaurants begin to operate at pre-pandemic levels.
He told shareholders on the company's second quarter earnings call that avocado consumption generally peaks during the summer, with over half the U.S. households purchasing the fruit between June and August.
Barnard warns that labor shortages could put pressure on avocado prices later this year. He says all but one of Mission Produce's 10 facilities across the U.S. and Canada are currently struggling to find workers.
"We're paying more to get more people to come back to work," he said. "In the long run, it's going to affect our cost, which will affect how we can sell [avocado] or what we sell it for."
Shares of Mission Produce have climbed 89% since the company went public in October 2020 at $12 a share.
'Tremendous' opportunity for growth
Barnard said he's focused on having enough supply "in the right place at the right time."
One of those "right" places is China, where Barnard said there is "tremendous" opportunity for growth.
"Avocados are new to the Chinese diet, but they're starting to catch on," he said.
Mission Produce was the first to send avocados to China from Peru, Chile and Colombia five years ago, but in March 2021, it began delivering California grown avocados to China for the first time, after the country approved them for import. Barnard said his company sends product to China on a weekly basis as consumption continues to grow.
"The Chinese eat a noodle soup every meal prior to the main meal, and if you just put a few chunks of avocados in every soup, it would make it healthier and I don't think we'd be able to fill the demand," Barnard said. "I did the math on it one time and it's like 76 million pounds a day they would consume if they put four chunks of an avocado in every soup. So there's a huge runway there."
Alexis Christoforous is an anchor at Yahoo Finance. Follow her on Twitter @AlexisTVNews.
