The man from Del Monte

At a time when many big brands are feeling the squeeze, Fresh Del Monte is hanging on to its position at the top of the food producers’ tree. Diana Milne meets Chairman and CEO Mohammad Abu-Ghazaleh to find out what keeps the company flourishing through good times and bad.

In today’s fiercely competitive food market, where brand recognition is a company’s most powerful weapon, Fresh Del Monte Produce has the edge. Its logo is instantly recognizable across the world and its 1980s Man from Del Monte advertising campaign – has stuck in the minds of today’s 30-something generation for ever more.  But there’s a lot more to this company than good PR. As one of the world’s largest producers and distributors of fruit and vegetables its reach extends to almost every corner of the world and it has successfully branched out as a producer of grains and poultry.

Today the company’s world domination in the fruit and vegetable production and distribution industries shows no sign of abating.  While other companies are floundering against a backdrop of harsh economic conditions, Del Monte’s shares have recently risen in value by seven per cent and its revenue rose by 10 per cent in the third quarter of 2008. At the time when its results were announced Mohammad Abu-Ghazaleh, Fresh Del Monte’s Chairman and CEO, said: “In contrast to the unprecedented volatility in the global economy and financial markets, the third quarter of 2008 was a period of steady growth and solid performance for Fresh Del Monte Produce. Our business continued to expand around the world, and consumers continued to purchase our fresh fruit and vegetables. These factors enabled us to deliver increases in net sales, gross profit and operation income; strong results in light of the uncertain global environment which prevailed in the third quarter and continues today.” He goes on to say that he believes the key strengths of the company are its business strategies, management skills, balance sheet and the strength of the brand.

Speaking to NGA at the company’s US headquarters in Florida surrounded by familiar Del Monte logos he reiterates that building brand strength remains a cornerstone of the company’s strategy: “Since 1892 the Del Monte brand has been recognized for quality, freshness and reliability. Over the years we have adjusted our product range and our communications to ensure that the brand remains relevant to today’s customers,” he says.

The bulk of Del Monte’s revenue traditionally came from banana sales. Today it has diversified its product range to such an extent that the majority of its sales are generated from sales of other fresh produce, including melons, tomatoes and other non-tropical fruit products. Its best selling range today is its speciality pineapple, the Del Monte Gold Extra Sweet.

This product diversification is not done solely to keep customers happy. Del Monte’s ability to adapt to market conditions, its ambitious acquisition strategy and ruthlessness when it comes to discontinuing unprofitable operations have enabled the company to steer successfully through stormy business waters, time and time again. It experienced its most challenging year to date in 2006 when soaring energy costs led to higher costs for packing, plastics and logistics and the currencies in the company’s producing countries shot up in value. At the time the company reported a loss of $83.6million in the three months ending September 2008.
Del Monte’s response was to swiftly shut down unprofitable potato and onion operations in North America and pineapple production facilities in Hawaii cutting 551 jobs and sending shockwaves through the country’s agricultural sector.

Today, says Abu-Ghazaleh, Del Monte is by no means immune to the economic woes facing other food producers – but he says the company’s “cost cutting initiative” will ensure it remains profitable: “Fresh Del Monte and the industry have faced a range of higher operating costs, including increased fruit procurement and logistics costs.   As mentioned previously Fresh Del Monte has an ongoing cost-saving initiative in place in company owned production areas and throughout our entire organization.  We shared with our investors that during the first half of 2008 we were able to continue securing higher banana contract pricing in North America.  We also set mandates to achieve higher price per unit sales prices on many of our other products, including DM Gold pineapples.”

To cut costs the company constantly expands its sources of fruit and vegetables around the world by acquiring smaller producers and distributors. Since 2002 it has acquired the likes of Fisher Foods in the UK, Envases Industriales in Costa Rica, Expans SP 2.0.0, a Poland based distributor, Best Produce, a US East Coast processor and the Costa Rican banana and pineapple producer Caribana.  Its biggest acquisition however was of Del Monte Foods Europe in 2004 – a producer of prepared fruit and vegetables, juices and deserts, which had originally been part of the same company until the Del Monte Corporation split into two separate entities in 1989. The acquisition added around $370million of sales potential and a range of new products to Fresh Del Monte’s existing portfolio. It also served to strengthen the company’s presence in Europe. Outlining the company’s strategy and its more recent acquisitions Abu-Ghazaleh says: “I remain intently focused on extending and expanding our globally sourced product line as a means to reduce our dependence on a single region or product.  In June 2008, we acquired a banana and gold pineapple production company in Costa Rica, significantly expanding our banana and gold pineapple production in this region.  Recently we capitalized on an opportunity to strengthen our melon product line by acquiring two melon operations in Guatemala, with a focus on production diversification, cost improvement and securing volumes to meet growing demand.”

He is also keen to expand the company’s international operations The company’s last set of figures for 2007 sales show that the US represented 45% of sales, Europe, 33 percent, Asia-Pacific, 11 per cent, the Middle east seven percent and other countries, three percent. He hopes to grow Del Monte’s operations in the Middle East in particular and to focus on the UAE, Jordan, Egypt and Saudi Arabia: “|Since 1996 we have focused on extending our reach into our existing markets and on penetrating new markets as a means for driving growth and expanding our product sourcing. Today, we market and distribute our fresh products around the world.  We are establishing a strong presence with our fresh and prepared products in emerging markets as well, including markets in the Middle East, and Central and Eastern Europe, where our brand recognition is strong.”

To date in the Middle East Del Monte has achieved great success in Jordan where it owns National Poultry Company.  Today it is the most successful poultry company in the country with 800 employees, its own slaughterhouse, breeder and broiler farms, hatchery and feed mill and a distribution fleet covering all areas of Jordan: “We are expanding our product offerings as we enter emerging markets in the Middle East. We expanded our poultry products in Jordan by introducing other meat products. We are building state-of-the-art multi-purpose distribution centres in the Middle East to further introduce products, and we continue to develop juice and snack products that appeal to this market,” he says.

Abu-Ghazaleh’s ambitious plans to expand his company internationally depend however only on factors he can control. And while global conditions place all food producers under considerable strain, this is not to the only potential spanner in the works for Del Monte. Its business is heavily dependent on weather conditions and achieving successful harvests: “There are a number of challenges, including increased fuel and fruit procurement costs. But in this industry weather remains a major factor, as does securing volumes to meet increasing global demand for fresh products,” says Abu-Ghazaleh.

The effect of climatic conditions on the company’s operations was demonstrated last July when flooding affected banana farms in Brazil and high winds in Guatemala significantly reduced the company’s banana outputs. Meanwhile in the same period the company suffered disappointing harvests from its domestic melon operations in Arizona.

Del Monte’s heavily agricultural operations, global processing plants and worldwide logistics network make it difficult for the company to meet the growing pressure on food producers to operate in a sustainable and environmentally friendly way. However Abu-Ghazaleh is keen to stress its green credentials, outlining the efforts it is making to reduce air pollution and minimise water usage: “For many years now, we have been employing sustainable agricultural practices in all our farming operations. This benefits the environment by reducing air pollution, creating safer and more efficient use of water, and protects local wildlife habitats and populations. We have also been utilizing improved farming methods to protect vital top-soil; including tillage practices, improving ground coverings, and replenishing the soil with natural nutrients that enhance soil fertility. In each stage of the farming operation, we ensure that environmental protection is an essential part of the process.”

He goes on to say that for Del Monte creating sustainable agricultural methods also makes good business sense: “Sustainable agricultural practices, which have been an integral part of our corporate responsibility systems for more than a decade, ensure that the natural resources we utilize to produce our products are going to remain productive for many years to come. This not only makes good business sense but it is also the right thing to do for our employees, their communities and our customers worldwide.” 

The company’s environmental programs have been certified under the ISO 14000 international standard for environmental protection and the EureGap protocol, the European food safety standard for good agricultural practices, worker health, safety and welfare and environmental protection.

It also supports a number of charities including Habitat for Humanity, The Make A Wish Foundation and the March of Dimes and runs a scholarship program for high school students. “Our corporate responsibility is not a PR exercise but a disciplined management practice,” says Abu-Ghazaleh.

However, Fresh Del Monte has also been dogged by bad press. In 2007 it was alleged by the US media that the company had been involved in payments to illegal paramilitary groups in Colombia – a claim it emphatically denied. In July of the same year it was reported in the media that Fresh Del Monte’s Portland Oregon facility had been visited by US Immigration and Customs Enforcement officer to inspect the company’s labour force. In the previous year a lawsuit was brought against the company by several former indirect minority shareholders following its acquisition by the IAT Group in 1996. The plaintiffs’ later lost their case in court.
For Abu-Ghazaleh such bad press is part and parcel of running a company that, thanks its own PR, remain consistently in the spotlight and ahead of the competition: ”I have faced many challenges over the years. We are a powerful company, holding leadership positions in several product categories.  We work to minimize our risk exposure, we have exceptional control over our business, and we have the most experienced management team in the industry. “
And he says he has no intention of changing the strategy that has taken the business to where it is today: “As we move forward, we will continue to face the challenges that are part of the business, we have a strong balance sheet, and thus we will grow the business organically and through prudent acquisitions. “

Mohammad Abu-Ghazaleh’s has served as Fresh Del Monte’s Chairman of the Board of Directors and Chief Executive Officer since December 1996. He is also the Chairman and Chief Executive Officer at IAT Group Inc, the parent company of Fresh Del Monte, a Chilean fresh fruit producer. Mr. Abu-Ghazaleh was President and Chief Executive Officer of United Trading Company from 1986 to 1996. Prior to that time, he was Managing Director of Metico from 1976 to 1986.