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Foul weather dampens Del Monte’s Q1 profit

Fresh Del Monte Produce Inc has cited higher banana procurement costs, lower pineapple yields, and tomato and grape quality issues – caused by adverse weather – as factors which reduced its first quarter earnings.

Fresh Del Monte Produce Inc has cited higher banana procurement costs, lower pineapple yields, and tomato and grape quality issues – caused by adverse weather – as factors which reduced its first quarter earnings.

The Florida-based fresh produce multinational reported on Monday that its gross profit was $100.4 million and operating income $56.3 million in the quarter to March 27, down from $106.7 million and $65.2 million respectively in the first quarter of 2014.

But on the positive side, net sales for the quarter rose above $1 billion, helped by a 4% increase in those for bananas, which Del Monte said was primarily driven by higher sales in North America.

For other fresh produce, net sales for the quarter were up 2% to $464.6 million, primarily due to higher sales volume in the company’s non-tropical, tomato and fresh-cut product lines, it said. Net sales of tomatoes jumped up 38% to $26.5 million. The volume increased 97% but pricing was down 30% as adverse weather in Del Monte’s production areas in North America and Chile took its toll, it said.

Despite the challenges, CEO Mohammad Abu-Ghazaleh said Del Monte had made progress toward long-term initiatives during the quarter, “with positive growth in our banana business, increased volume in several product lines in our other fresh produce business and strategic improvements in the prepared food business in Europe.”

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Source: Del Monte press release April 28, 2015

Banana photo: By Mschel (Own work) [Public domain], via Wikimedia Commons

 

 

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Banana sector logistics and challenges

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Shipping alliances to play a leading role

Shipping companies plying the banana export routes now also have to deal with the challenge of cutting costs in the face of falling ocean freight rates. Forging alliances will be a strong strategy to maintain competitive edge. One of the most important has been put forward by Maersk and MSC, with an alliance likely to move around a third of all banana cargoes through the world’s most heavily trafficked trade routes, which will bring enormous benefits, including a substantial reduction in operating costs.

Maersk proposes merger strategies

“You need to think inside the box”, says Thomas Eskesen, Reefer Ship Managing Director from Maersk Line, one of the leading companies in the sector, operating in 252 ports worldwide, in 75 countries. Eskesen has analysed the challenges faced in an increasingly demanding world, where consumers expect very high standards in terms of the quality and speed with which produce reaches them. In this sense, he noted that in Maersk there is still room for improvement in some areas, while new services and tools need to be incorporated in order to stay competitive, although they do have interesting strategies to achieve this. “It’s not only about defence, but also playing offensively; you need to unite in order to expand.” He explains that this way of “thinking inside the box” means that it is necessary to examine ways to improve the company “from the inside”, considering all the resources available and the information to hand. “Today we are trying to identify the root of the problem, attempting to analyse the data that we have and solve the problem along with the client we provide our services to, working together with a common goal, which is the only way to keep the customer satisfied”, adds Eskesen.

Port of Antwerp is strategic entry point for banana in Europe

The main port of entry in Europe for Ecuadorian bananas is Antwerp in Belgium, located very close to the three major fruit consumer markets on the continent (Rungis, Venlo and Duisburg). Representative Germán Calderón explains how “72 hours before the ship’s arrival, the process of releasing the goods begins and, within 24 hours of unloading, the produce is ready for delivery to any of these three big markets, unlike the Port of Rotterdam, which moreover suffers congestion issues, so much so that this year a significant percentage of vessels which used to dock there had to do so in Antwerp.” He also mentioned that the arrival of the fruit through Belgium allows delivery of the produce between 6 and 12 hours faster than if it was channelled through any other port in northern Europe.

New opportunities in banana route to Russia

On the other hand, Russia, with steadily growing per capita annual consumption in recent years, represented a great opportunity for the Ecuadorian banana sector, which has enjoyed a growing share in this market and is now the leading banana exporter to this country. The fruit is mostly traded and shipped in refrigerated containers and mainly enters through the port of St. Petersburg. Forecasts for 2015 point to 41% growth in banana uptake by Russian traders, equivalent to 10.6 kg of banana annually per capita. Vasiliy Shultsev, Sales and Marketing Manager for Global Ports, notes that “the port of St. Petersburg has special facilities for handling this commodity. We handle all transport of the product, even to the remotest locations in Russia, ensuring that the quality is maintained.”

More routes with the Mediterranean

The Marseille-based company is also strengthening its web of routes between southern Europe/Morocco and northern Europe/Russia, on which it uses 1300 reefer boxes. CGA-CGM already owned MacAndrews, acquired in 2002, and has just bought OPDR – which operates similar shortsea services, particularly from Morocco, the Canary Islands and the Iberian Peninsula – from the German shipowner Bernhard Schulte. “This increases our capacity and our commercial strength,” highlighted Michel, “allowing us to develop services that can compete with road transport. Even if our rotation is less flexible than with HGVs, our ships offer cheaper and more environmentally-friendly solutions.” Sea freight currently accounts for 10% of Spain’s fruit and vegetable exports, for instance. At the close of 2014, OPDR should have carried over 240,000 TEU and MacAndrews over 290,000. CGACGM, which carries 10% of the world’s reefer traffic, will have turnover of $16 billion this year (€13 billion), slightly up on last year “although our margins are lower owing to market pressure,” Michel pointed out. CGA-CGM handles the rotation of 10.6 million TEU (traditional and reefer) around the world, in 1.54 million containers carried by 429 ships, 83 of them owned by the company, serving 450 ports of call in 150 countries.

NV
 
 

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Developing economies: key to the future?

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After record exports in 2014, experts are looking at where new markets can be found for banana leader Ecuador
 
Banana exports worldwide totalled 872.9 million boxes in the last campaign, representing 4.4% growth compared to 2012. Some 74.3% came from Latin America, where Ecuador is the undisputed leader with 259.3 million boxes, followed by Costa Rica with 106, Guatemala with 104.1, Colombia 95.5 and Honduras, Mexico, Panama, Peru and Nicaragua bringing up the rear.

The forecasts fulfilled for 2014 show greater growth in global production, which would be 6.3 %, equivalent to 927.8 million boxes, with the lion’s share going to Latin America, Asia, ACP and the European Union at similar percentages to 2013.

What is striking is the Latin American countries’ share in this growth. As in previous years, Ecuador leads the field in banana exports, but with a remarkable growth of 13.8%, representing 295 million boxes, a figure forecast to reach over 300 million for 2015.

Guatemala would be the second largest exporter in 2014 and 2015 with 114.5 and 123 million boxes respectively, with Costa Rica in third place at 107.5 and 105, a slight drop in the second year analysed.

The other producing countries hold the same positions as in previous years. So, pride of place in Latin America’s share in the banana trade goes to Ecuador with 42.9%, followed by Guatemala with an average of 17 % for both years, Costa Rica with 15 % and Colombia with 12.8%.

Read the rest of this article on page 78 of edition 135 of Eurofresh Distribution magazine.

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Slight growth in US banana imports

Bananas

Guatemala remains top US banana source

US banana imports inched up just under 1% last year to nearly 4.9 million tons, with Guatemala remaining the top supplier.
Figures from USDA Foreign Agricultural Service’s Global Agricultural Trade System (GATS) also show that compared to 2013, the biggest growth was in imports from Peru, Nicaragua and the Dominican Republic, while the totals from Panama, Colombia and Honduras fell.

 

2012 tons

2013 tons

2014 tons

% 14-13

Guatemala

1,517,328

1,680,028

1,756,187

4.5%

Ecuador

851,567

889,711

905,021

1.7%

Costa Rica

850,21

798,698

828,526

3.7%

Honduras

536,257

603,309

572,971

-5%

Colombia

507,573

535,527

444,334

-17%

Mexico

238,376

272,548

273,493

0.3%

Nicaragua

43,857

41,372

58,929

42.4%

Peru

25,900

22,624

40,216

77.8%

Panama

65,553

13,240

10,065

-24%

DomRep

2,727

6,197

7,515

21.3%

El Salvador

96

487

1,930

 

TOTAL

4,639,444

4,863,741

4,899,187

0.70%

source: http://apps.fas.usda.gov/gats/ExpressQuery1.aspx

Guatemala, which has a competitive edge thanks to its proximity to the US, was the source of nearly 36% of total US banana imports, followed by Ecuador with 18.5% and Costa Rica with 16.9%.

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US imports of agricultural products from Guatemala totaled US$1.8 billion in 2013 with leading categories including bananas and plantains ($729 million), coffee (unroasted) ($411 million), fresh fruit (excluding bananas) ($182 million), and processed fruit and vegetables ($108 million).

US banana production is very limited, with Hawaii by far its largest banana producer.

 

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COUNTRY PROFILE: Japan

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Bananas, citrus and pineapples lead Japan’s fruit imports

Japan has always been very dependent on imports, especially for food and even more so for fresh produce. The total value of its fresh produce imports in 2012 was $2.5 billion, which included about 1.86 million tons of fruit and 862,082 tons of vegetables.

 

The leading imported fruits in Japan are bananas (59%), citrus (20%) and pineapples (9%). Most of the bananas are from the Philippines. Among citrus varieties, the leading import is the grapefruit, though Japanese people are increasingly preferring oranges. In 2013, 67% of imported citrus in Japan came from the US, 30% from Australia and 2.4% from South Africa, for a total volume of 30,745 tons.

 

The fastest growth in fresh produce imports in Japan is in avocados, which rose by 25% in 2012. Because it favours domestic produce, Japan imports only small amounts of products that it grows itself – such as stone fruit, apples and cherries.

 

Fruit imports in Japan, 2012 (tons)

Bananas 1,096,538, Pineapples 174,041, Grapefruit 151,413, Oranges 130,422, Kiwifruit 63,970, Avocados 58,555, Lemons & limes 55,895

 

 

Vegetables imports in Japan, 2012 (tons)

Onions 342,710, Pumpkin & squash  125,024, Cabbage 84,110, Carrots 82,051, Leeks 56,400

 

Exports

Due to its small land mass and high population density, Japan lacks an agricultural sector strong enough to export significant volumes. But of the fresh produce it does export, fruit is the leading type, especially apples, mandarins and pears. In 2012, it exported about 14,015 tons of fruit and just 956 tons of vegetables.
 

Japanese retailers undergoing concentration

Japan’s retail sector has been quite stable in the past few years, even if regional retailers, such as Universe and Hokkaido’s ARCS, have tended to merge to compete with national players such as AEON and Ito-Yokado, which both represent 40% of total Japanese retail. The top 5 national companies – AEON, Ito-Yokado, Uny, Daiei and Life Corp. – together woo 62% of food sales.

Nationwide retailers, including AEON and Ito-Yokado, generally source their foods through importers and wholesalers.

 

Consumption in Japan – elders are big spenders

 

Japanese Ministry of Internal Affairs figures show nearly a quarter of household spending in Japan is on food. Japanese people value local products and in particular high quality and premium produce. The recent ecological disasters there have also increased awareness of environmental issues and safe production standards.

Japanese consumers can be split into two main groups: young active people and elders. In the last few years, a big range of healthy and ready-to-eat fresh produce has been developed to cater for each of these segments.

AEON is particularly targeting elders by opening its stores two hours earlier and with special deals attracting more of them onsite.
 

This is an abbreviated version of an article that appeared on page 26 of our latest issue, available online here. Each edition of Eurofresh Distribution magazine features a country profile providing insights into the opportunities and trends in different world markets.

 

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Chiquita Confirms Merger with Cutrale-Safra

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In a historic deal for Latin America, Brazil’s Cutrale and Safra families have today succeeded in their acquisition of US banana firm Chiquita.

The announcement came after Chiquita’s shareholders voted on Friday against a proposed merger with Irish rival Fyffes which would have created the world’s largest banana company.

At US$14.50 a share, Cutrale-Safra will pay about US$1.3 billion for control of the company, including the assumption of Chiquita’s net debt.

Chiquita said in a statement that the deal “combines Chiquita, one of the leading fresh produce companies, with Cutrale Group, one of the world’s most highly regarded agribusiness and juice companies, and the Safra Group, a leading global financial services firm with a strong track record of successful investments.”

With annual revenues of more than $3 billion, Chiquita employs approximately 20,000 people and has operations in nearly 70 countries worldwide.

The Chiquita statement can be read here.

 
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11th International Banana Forum set to start in Ecuador

Banano foro

Concern over EU restrictions on organic banana imports

The 11th International Banana Forum begins tomorrow in Guayaquil, Ecuador, with the theme “Towards increased competitiveness and productivity.”
 

The three-day event will see evaluation of the outlook for the sector next year and options for eradication of the leaf-spot disease Black Sigatoka, among other key issues.
 

While it’s a generally a good moment for the banana sector, Eduardo Ledesma, executive director of the Association of Banana Exporters of Ecuador (AEBE), recently told the digital channel VITOTVO he sees two major challenges.
 

One is Fusarium wilt (Panama disease), which has decimated thousands of hectares in Asia, Africa and Australia, and the other is the EU restrictions on marketing of organic bananas treated with mineral oil, due to health concerns.
 

Ledesma said a big investment is needed to develop an oil that can be registered in export markets and used for both conventional and organic crops. Such an investment is unlikely to be made by the government but would be possible for the private sector, which could recoup its costs in countries such as Colombia and Costa Rica, which use more such oils than Ecuador, he said.

The banana forum, which runs from October 14-16, is set to receive more than 3,000 domestic and foreign visitors.
Click here for more information.

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French yet to compensate for loss of huge banana cargo

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France has yet to pay damages for the multi million dollar loss of a banana shipment in September last year in a bungled drug raid on the Swedish reefer Stina.

 

Nearly 216,000 boxes of Colombian bananas are said to have been aboard the vessel when it was allegedly intercepted by the French Navy in international waters and made to go to French outpost Martinique Island.

 

It’s been reported the French thought they were making a massive narcotics bust – after a tip-off by US authorities about cocaine being smuggled in the cargo – but no drugs were found. The fiasco saw the bananas, which had been destined for Algeria, unloaded in high heat for inspection and later destroyed, something now subject to a US $2.7 million damages claim.

 

According to banana news source Sopisco News, the MV Stina, flying a Barbados flag and belonging to the Stina Shipping Company, was represented by the agents Holy House Shipping of Stockholm-Sweden. Star Fruit Company based in Algeria, one of the largest fruit traders of the Northern African country, and Tagholm Overseas Company based in Tortola – British Virgin Islands had reached a commercial agreement with Banana International Corporation, a company represented by Banacol, a Colombian company based in Medellin, and for this they chartered the vessel to transport the cargo to Algeria,” Sopisco News reported.

 

“Almost a year since the unfortunate event, the French authorities which had informed the attorneys of the vessel and cargo owners that they wanted to liquidate damages amicably and without recourse to the ordinary courts, have not taken any steps to make the payments,” it claimed.

 

Source: Sopisco

http://sopisconews.com/french-customs-fiasco-go-banana-and-cause-millionaire-losses-to-reefer-vessel/