Seed Oils Are Facing a Backlash. How Fresh Del Monte Has Responded.

Fresh Del Monte Produce, a provider of fruit, vegetables, and prepared foods, announced on Wednesday that it’s acquiring a majority stake in avocado-oil producer Avolio in a move to take part in the quickly growing market.

The stock was largely flat on Wednesday. Shares have increased nearly 15% in the past 12 months, outperforming the S&P 500‘s 11% gains.

Avocados are one of the few fruits from which oil can be extracted from the pulp. Avolio, of Uganda, produces oil from avocado fruit, including some that can’t be sold whole, reducing food waste.

Financial terms weren’t disclosed, and Fresh Del Monte didn’t immediately respond to a request for comment on the value of the deal.

The avocado-oil industry is valued at approximately $1.2 billion, and poised for an annual growth of 8% to 10%, according to Fresh Del Monte citing Fortune Business Insights.

Fresh Del Monte plans to develop new facilities in more regions and increase production capacity to meet the increasing global demand. It plans to scale Avolio’s extraction technology to process 140 metric tons of avocados per day.

The deal is in line with Fresh Del Monte’s strategy to expand in specialty ingredients, which could position the company to compete in higher-margin categories that drive profitable growth, the firm said.

“Acquiring Avolio is a strategic step aligned with our long-term vision to extract greater value across our supply chain while advancing our commitment to sustainability,” said CEO Mohammad Abu-Ghazaleh in a statement.

Avocado oil has surged in popularity in recent years, especially among health-conscious consumers. This can be partially attributed to the growing backlash against industrial seed oils extracted from canola, soybean, or corn. Robert F. Kennedy Jr., the head of Health & Human Services, has been a vocal critic of seed oil.

Consumers are concerned that the high amount of omega-6 fatty acid in seed oil could contribute to chronic inflammation. Some believe the industrial processes to extract and refine seed oils have stripped them of beneficial nutrients. Seed oils’ relatively low smoke points also means they might break down into harmful compounds in high-temperature cooking such as deep frying.

Avocado oil has become a go-to alternative for those that want to consume less seed oils. Avocado oil is often seen as less processed or “unrefined.” It’s rich in monounsaturated fats that are considered good for heart health. Avocado oil also has a high smoke point, making it ideal for cooking at high temperatures.

Food companies and restaurants are increasingly shifting to avocado oil to appeal to the health-conscious crowd.

A group of snack brands offer potato chips made with avocado oil, including Boulder Canyon and Good Health owned by Utz Brands. Sweetgreen, a fast-casual chain known for salad bowls, recently launched avocado-oil, air-fried potatoes—to differentiate from chains that deep fry in seed oil.

Write to Evie Liu at evie.liu@barrons.com