Description of Fresh Del Monte Produce Inc's Business Segments
Bananas
Bananas are the leading internationally traded fresh fruit in terms of volume
and dollar sales and one of the best-selling fresh fruit in the United States.
Europe and North America are the world’s largest banana markets and the
Middle East has now surpassed Asia as the third largest market. According to
the latest published statistics from the FAO, in 2013, Europe, North America,
the Middle East and Asia consumed 20.2, 11.2, 4.7 and 3.2 billion pounds of
bananas, respectively. Bananas are a key produce department product due to its
high turnover and the premium margins obtained by retailers.
Bananas have a relatively short growing cycle and are grown in tropical locations
with humid climates and heavy rainfall, such as Central and South America, the
Caribbean, the Philippines and Africa. Bananas are grown throughout the year
in these locations, although demand and prices fluctuate based on the relative
supply of bananas and the availability of seasonal and alternative fruit.
We believe that we are the world’s third-largest marketer of bananas,
based on internally generated data. Our banana sales in North America, Europe,
Asia and the Middle East accounted for approximately 50%, 20%, 17% and 13% of
our net sales of bananas in 2015, respectively. We produced approximately 35%
of the banana volume we sold in 2015 on company-controlled farms, and we purchased
the remainder from independent growers.
Bananas are one of the best-selling fresh produce items, as well as a high-margin
product for many of our customers. Accordingly, our ability to provide our customers
with a year-round supply of high-quality DEL MONTE® bananas is important
to maintaining our existing customer relationships and attracting new customers.
Our position as a volume shipper of bananas has also allowed us to make regular
shipments of a wide array of other fresh produce, such as pineapples, melons
and plantains, reducing our average per-box logistics costs and maintaining
higher quality produce with a longer shelf life.
We produce bananas on company-controlled farms in Costa Rica, Guatemala, Brazil
and the Philippines and we purchase bananas from independent growers in Costa
Rica, Ecuador, Colombia, Guatemala, Cameroon and the Philippines. Although our
supply contracts are primarily long-term, we also make purchases in the spot
market, primarily in Ecuador. In Ecuador and Costa Rica, there are minimum export
prices for the sale of bananas, which are established and reviewed on a periodic
basis by the respective governments.
Due in part to limitations in the Philippines on foreign ownership of land,
we purchase the majority of bananas in the Philippines through long-term contracts
with independent growers. Approximately 74% of our Philippine-sourced bananas
are supplied by one grower, representing 14% of the Philippines banana industry
volume in 2015. In the Philippines, we have leased approximately 4,900 hectares
of land where we have planted approximately 3,400 hectares of bananas for the
Asia and the Middle East markets.
Gold Pineapples
Pineapples are grown in tropical and sub-tropical locations, including the
Philippines, Costa Rica, Hawaii, Thailand, Malaysia, Brazil, Indonesia and various
countries in Africa. In contrast to bananas, pineapples have a long growing
cycle of 18 months, and require re-cultivation after one to two harvests. Pineapple
growing requires a higher level of capital investment, as well as greater agricultural
expertise as compared to growing bananas.
The premium pineapples, such as our Del Monte Gold® Extra Sweet pineapple,
which has an enhanced taste, golden shell color, bright yellow flesh and higher
vitamin C content, has replaced the Champaka and other traditional pineapple
varieties in popularity and demand and has led to increased competition.
The principal production and procurement areas for our gold pineapples are Costa
Rica and the Philippines. Given the complexity of pineapple cultivation relative
to our bananas, a higher percentage of the fresh pineapples we sell (84% by
volume in 2015) is produced on company-controlled farms.
Fresh-Cut Produce
Fresh-cut produce first gained prominence in many U.S. and European markets
with the introduction of washed and cut vegetables. While packaged salads continue
to lead the category of fresh-cut produce sales, the category has expanded significantly
to include pineapples, melons, mangos, grapes, citrus and assorted vegetable
produce items that are washed, cut and packaged in a ready-to-use form. Market
expansion has been driven largely by consumer demand for convenient, fresh,
healthy and ready-to-eat food alternatives, as well as significant demand from
foodservice operators. Within this market, we believe that there has been increasing
differentiation between companies active primarily in the packaged salad market
and other companies, like us, that can offer a wide variety of fresh-cut fruit
and vegetable items.
The majority of fresh-cut produce is sold to consumers through retail and club
store settings, as well as non-conventional settings such as convenience stores,
gas stations and airports. We believe that outsourcing by food retailers will
increase, particularly as food safety regulations become more stringent and
retailers demand more value-added services. We believe that this trend should
benefit large branded suppliers like us, who are better positioned to invest
in state of the art fresh-cut facilities and food safety systems and to service
regional and national chains and foodservice operators, as well as supercenters,
mass merchandisers, club stores and convenience stores. We also believe that
large branded suppliers benefit from merchandising, branding and other marketing
strategies for fresh-cut products, similar to those used for branded processed
food products, which depend substantially on product differentiation.
We believe that the fresh-cut produce market continues to be one of the fastest-growing
categories in the fresh produce segment, largely due to consumer trends favoring
healthy and conveniently packaged ready-to-eat foods. We established a platform
in this industry through acquisitions and by building upon our existing fresh-cut
pineapple business. We believe that our experience in this market coupled with
our sourcing and logistics capabilities and the DEL MONTE® brand have enabled
us to achieve a leading position in this highly fragmented market. We believe
that we are the leading supplier of fresh-cut fruit to the supermarket, convenience
and club store channels in the United States. Our fresh-cut fruit products include
Del Monte Gold® Extra Sweet pineapples, melons, grapes, citrus, apples,
mangos, kiwis and other fruit items. The fruit we use in our fresh-cut operations
are sourced within our integrated system of company-controlled farms and from
GAP-certified (good agricultural practices) independent growers. We also offer
fresh-cut vegetables for prepared salads. We purchase our vegetables for these
purposes from GAP-certified independent growers principally in the United States,
Europe and in the Middle East. Our purchase contracts for both fruit and vegetables
are typically short-term and vary by produce item. Our fresh-cut products are
sold in the United States, Canada, the United Kingdom, the Middle East and Japan.
Worldwide, our fresh-cut product sales volumes have increased by 21% during
the past year.
Melons
According to the latest available FAO data, for the 10-year period from 2003
to 2013, the volume of imports of cantaloupes and other melons increased (decreased)
in Europe, North America, Asia and the Middle East by17%, (2%), 84% and 6%,
respectively. Based on USDA Economic Research Service, during 2014, total per
capita consumption of melons in the United States was approximately 23 pounds,
of which seven pounds were cantaloupes. The Packer reported that cantaloupes
were the 12th most popular fruit in the United States and 44% of customers purchased
cantaloupes within the past 12 months. Melons are one of the highest volume
fresh produce items, and this category includes many varieties, such as cantaloupe,
honeydew, specialty melons and watermelon. During the summer and fall growing
seasons in the United States, Canada and Europe, demand is met in large part
by local suppliers of unbranded or regionally branded melons. By contrast, in
North America and Europe, imports significantly increase, and melons generally
command premium pricing from November to May. Melons are grown in temperate
and tropical locations and have a relatively short growing cycle.
Tomatoes
We source our tomatoes mainly from the United States, Mexico, Canada and Guatemala.
The tomato category is highly fragmented with many growers, re-packers and wholesalers
in various geographic regions of the United States. As a high volume item, tomatoes
are important for our network of distribution and re-packing facilities. This
product category allows us to add value through leveraging our purchase volumes
to reduce costs and perform the sorting, packaging and custom labeling locally,
in addition to delivering on a just-in-time basis to retail chains and foodservice
customers. With our fresh-cut fruit and vegetable facilities, we add additional
value by incorporating tomatoes into our consumer-packaged products. We have a
greenhouse tomato operation in Guatemala where we source volume for the North
America market. We also have tomato growing operations in Florida and Virginia
on approximately 9,800 acres of owned land. In addition to tomatoes, this land
is also used to grow other seasonal fresh produce.
Vegetables
We distribute and market a variety of vegetables including potatoes, onions,
bell peppers and cucumbers. While we sell bulk product, we also use our size
and distribution network to find opportunities that add value such as sorting
and packaging. We source our vegetables from independent growers in North and
Central America and from our own greenhouse operation in Costa Rica. We plan
to use the our agricultural production land in Florida and Virginia to grow
vegetables for the North America market.
Other Fruit, Products and Services
We produce, distribute and market a variety of other fruit, including strawberries,
plantains and mangos, as well as various other varieties of fruit. We source
these other fruit items from company controlled farms and independent growers
in Costa Rica, Colombia, Guatemala and the United States.
Included in Other Fruit, Products and Services is also our third-party ocean
freight business and our third-party plastics and box manufacturing business.
Our third-party ocean freight business allows us to generate incremental revenue
on vessels’ return voyages to our product sourcing locations and when
space is available on outbound voyages to our major markets, which reduces our
overall shipping costs. Our plastics and box manufacturing business produces
bins, trays, bags and boxes. The box manufacturing business is intended mainly
to satisfy internal packaging requirements. In the case of the plastic manufacturing
business, we principally sell these products to third parties and also use a
portion for our own internal packaging requirements.
Prepared Food
We have a royalty-free perpetual license to use the DEL MONTE® Trademark
in connection with the production, manufacture, sale and distribution of prepared
foods and beverages in over 100 countries throughout Western, Eastern and Central
Europe, Africa, the Middle East and countries formerly part of the Soviet Union.
In Europe, Del Monte is the premier brand with an approximate 90 year history
associated with fruit-based or fruit-derived products and is the leading brand
for canned fruit and pineapple in many Western European markets. The DEL MONTE®
brand has had a presence in the United Kingdom, the largest market, since 1926
and is perceived to be a quality brand with high consumer awareness. The DEL
MONTE® brand has a reputation with both consumers and retailers for value,
quality and reliability.
We produce, distribute and market prepared pineapple, peaches, fruit cocktail,
pears, tomatoes, fruit juices and other fruit and vegetables. Our prepared pineapple
products are sourced from our own facility in Kenya. Our deciduous prepared
food products, which include peaches, fruit cocktail, pears and apricots are
principally sourced from our own facility in Greece and from independent producers.
Our tomato products are sourced from our own facility in Greece and from independent
producers in Europe and the Middle East. We also distribute and market beverages,
including ambient juices and juice drinks as well as various snacks. Our prepared
food products are sold primarily under the DEL MONTE® label and under the
buyers’ own label for major retailers. We also produce and market industrial
products that are composed of fruit that has been processed in our production
facilities in the form of purees, pulps and concentrates for further processing
(juice, yogurt, cake manufacture and pizza) and for sale to the foodservice
industry worldwide. We expect to continue investing in new product development
to increase revenue, maintain our premium price position and market leadership
in our product categories. We plan to expand our offerings in the snack category
by offering multiple varieties and sizes of fruit and vegetables in plastic
pots and pouches with new and improved recipes and various juices, targeting
the convenience store and foodservice trade in addition to the traditional retail
stores in selected European and Middle East markets. We are focusing on improving
the European prepared food business and concentrating on higher growth markets
in the Middle East.
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