The big rollout

  @FortuneMagazine January 21, 2014: 7:59 AM ET
MAC03 paramount citrus

Inside the Paramount Citrus Halos plant in Delano, Calif., mandarins are photographed and "graded" as they are carried along on five miles of conveyor-belt chain.

(Fortune)

L.A.'s most flamboyant billionaire couple is turning the produce aisle into a battlefield over branding. Will a petite orange and a $100 million ad campaign change the way we buy fruit?

The factory for inspecting and packaging Wonderful Halos mandarins looks more like something Frito-Lay or Nestlé might own. Its industrial scale, settled among the quiet orchards in the southern end of California's fertile San Joaquin Valley, appears alien. Its 311-foot citrus conveyor can weigh, inspect, and package 800,000 bags of fruit, or 19 million mandarins, each day. The facility itself is the size of 11 football fields. It cost $220 million. Both the conveyor and the building are thought to be the largest of their kind in the world and were designed by the same people who make plants for SunChips and Cheetos. Indeed, Halos, which were introduced in late 2013, are backed by a big-budget business model that has more in common with potato chips than anything in the produce aisle. And it aims to accomplish something seldom attempted in agriculture: transforming a piece of fruit from a commodity to a premium brand.

Halos' owner -- Los Angeles-based company Roll Global, which also makes POM Wonderful pomegranate juice and Fiji Water -- plans to as much as double output in the next five years. In order to juice demand, the company recently launched a five-year, $100 million ad campaign, $20 million of which will be spent this year on marketing and TV ads already playing across the country. This season the Halos packinghouse will process the country's largest mandarin harvest, tens of millions of boxes of the fruit. Despite the sleek ads and the glamorous rollout (including a $400,000 launch party at New Orleans' House of Blues), Roll Global's path to mandarin domination has been troubled. Months before the product was slated to hit grocery store shelves, the Halos team was in crisis mode. It didn't have a name for its fruit, much less a strategy. What it did have was thousands of acres of soon-to-ripen citrus and competition: Cuties.

Cuties-brand mandarins weren't always the enemy. Through its subsidiary, Paramount Citrus, Roll Global was initially one of two major growers selling Cuties. The other was Sun Pacific. Roll came up with the name and slogan: "Kids love Cuties, because Cuties are made for kids." But the partnership fell apart in May. Sun Pacific took the name, paying an undisclosed sum for the trademark. The resulting contest between Roll's new brand, Halos, and its old brand, Cuties, is a rare thing: a real product rivalry in the grocery aisle devoid of products -- produce.

In a sleek white conference room, Lynda Resnick, one half of the billionaire couple behind Roll Global, presided over the meeting. Resnick, 71, has big hair, big jewelry, and the outsize personality of a standup comedian. She counts Arianna Huffington and Walter Isaacson as close personal friends. Her house, a sprawling 25,000-square-foot mansion on Sunset Boulevard, has more than 100 citrus trees planted in the front yard, behind an ornate wrought iron gate. In short, for an agriculture magnate, she's not your typical farmer.

"That's my Clem!" Resnick exclaims, as an executive brings out a mockup of the packaging, featuring a smiling clementine mascot. "I thought we had a better name besides Clem."

"Little Angel?" someone offers.

"I just wish it was cuter," Resnick replies.

"Unfortunately Mandy and Dandy are taken," says one exec.

"God," Resnick deadpans. "What a crushing blow."

"Well, Mandy like mandarin," he says.

"Not fruit names, he's a little guy," Resnick muses. "I want to play on 'angel,' like Angie but not terrible. It's a boy. How do I know that? We've talked."

Resnick has credibility as a brand whisperer. She's the marketing guru behind Teleflora's Flowers in a Gift concept and the Franklin Mint's hyperrealistic tchotchkes. Resnick and her team have a history of turning commodity items into lucrative premium products -- most famously she catapulted pomegranates from obscurity into supermarkets everywhere with POM Wonderful, the juice that helped launch the superfood craze. No matter that its ads with slogans including "Cheat death" and "Forever young" eventually earned the company censure from the Federal Trade Commission for overstating its health benefits. The company's Fiji Water successfully sells for nearly three times the price of average supermarket bottled water. And its top-grossing product, Wonderful Pistachios, launched an all-out ad blitz that propelled the oddball nut from relative obscurity to what the company's market data show is now the ninth bestselling salty snack food. You may have seen the Super Bowl commercial last year featuring Korean pop sensation Psy, of "Gangnam Style" fame, riding a pistachio with the legs of a Rockette. This year's Wonderful Pistachios Super Bowl commercial will star Stephen Colbert. Roll Global says the brand now brings in nearly $1 billion in revenue.

The company hopes the ascendance of mandarins will follow a similar story line. Just 10 years ago, few people outside the East Coast had ever tried the sweet, diminutive orange. Today, more than half of all American households buy mandarins, which cost considerably more than other citrus. In Wal-Mart's central and western regions, clementines were the third bestselling fruit (after bananas and strawberries). But Roll Global can claim only partial credit for the mandarin's induction into the mainstream. One of the first people to see its potential was a longtime citrus grower named Berne Evans III. In the early '90s, Evans, head of the Sun Pacific growing company, decided to try to harvest the fruit in California. It took years of research and development until eventually he found a way to make the plants thrive on California soil. When it did, he knew he had a hit on his hands.

However, Evans worried about local competition. So he took the idea to Stewart Resnick, president of $3.4 billion Roll Global, which is the world's largest grower and processor of pistachios, almonds, and pomegranates. "In the farming business, a guy gets an idea, makes a little bit of money, everybody jumps onboard," Evans says. To avoid getting outmaneuvered by a bigger player, Evans approached Resnick, and they entered into an unusual agreement. Evans and his company would grow some fruit and would pack and sell it to vendors for a fixed fee. Roll Global would also grow some fruit and take charge of the marketing of the product. "Eliminating competition was what the goal was," he says of his contract with Resnick. "And we did that until this year."

Quickly, the ethos of the two companies clashed. "He's sitting in Beverly Hills in a big house, I'm a slave out here doing all the work," Evans says of Resnick (who splits his time between L.A. and Aspen). Evans, wearing a plaid shirt and jeans with a big Western-style silver buckle, scoffed at Roll's pricey new packinghouse. Sun Pacific's cost $65 million -- less than half Roll's plant -- and can handle 75% of the capacity, he says. (Paramount Citrus contends it needs the new plant for quality and efficiency.) But the main reason the companies clashed was that marketing budget. Evans, who has been in the farming business for 43 years, didn't believe that the tens of millions being lavished on TV ads were actually helping the bottom line. For his part, Evans contends that supply, not demand, is the main constraint on mandarins' sales growth. "Why were they so hell-bent on national advertising?" he asks. "I don't want to say -- ego?"

Tensions escalated as the companies traded lawsuits over the Cuties contract until the spring, when, unexpectedly, they split. News of the separation came to the Roll Global rank and file on Friday, May 3. That Monday, the team had heard they might lose the trademark in the fallout of a breakup. Then, "Tuesday we got word that Lynda was saying, 'No, this is crazy, don't sell the brand,' " says Adam Cooper, Roll Global's vice president of insight and innovation. But by Friday, the trademark belonged to Evans.

Marc Seguin, VP of marketing at the company, says he doesn't remember what he said when Lynda called him with the news. "I was probably mostly in shock," he says. By the next Monday, they had pulled the lawyers, marketers, and advertisers (Roll runs its own in-house ad agency) into a room and came up with a new name, Halos. By virtue of the amount of fruit Roll Global and its partners are growing, it will be the country's top mandarin producer. "So that's exciting for us," Cooper says. "Creating the No. 1 brand overnight, or in two hours." Within the next few days they had a new label, a simple happy face on a fruit with a blue box, and a new slogan, "Pure goodness."

"Really, that's where it came from, two to three days of work," Cooper says. "It was unbelievable. I've never seen anything like it."

Back in the Roll Global conference room, the group worked to put together a marketing strategy in record time. Instead of picking a mascot name, they decided to let users vote for one on social media; a "Name the Clem" contest will launch in February. (Says Seguin: "I hope they pick something good.") The team also pitched Lynda on a new mobile game, targeted for the 6-to-11 age group, the company's sweet spot -- the years when kids ask parents for treats -- after they stop eating whatever their parents tell them to, but before they eat nothing their parents tell them to. In the game, if you don't eat the Halos, they become "Cruddies." One exec in the conference room quipped, "The alliteration with 'Cuties' is unintentional."

A member of the ad agency's creative team presented the storyboards for the new TV campaign. The plot is that parents try to take kids' fruit and get caught in the act. The kicker: "They're angels until you mess with their Halos." Resnick listens to the ideas for the ads, then asks the room, "Do we like them?" The answer: "We love 'em."

Wonderful Halos hit store shelves in November, the same month the advertising started playing in primetime across the country. So far, they're selling well, about on par with Cuties. In fact, the whole category is up 33%, according to research firm Fresh Look Marketing. That works out well for the Resnicks and for Berne Evans III. "If [Stewart Resnick] wants to create more demand," Evans says, leaning back in his chair, hands behind his head, "he'll create more demand."

Roll Global, meanwhile, is already on to the next thing. Marketing director Seguin says that soon the company will be looking at how to rebrand another citrus product. Roll Global recently bought half the grapefruit acreage in Texas. Don't be surprised to see grapefruits with Rockette legs dancing across your TV in the not-too-distant future.

A shorter version of this story appeared in the February 3, 2014 issue of Fortune. To top of page

Join the Conversation
CNNMoney Sponsors
Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.