Del Monte sparks buzz with land purchase

10/04/2013 09:07:00 AM
Doug Ohlemeier

Doug Ohlemeier, Eastern EditorDoug Ohlemeier, Eastern EditorDel Monte Fresh Produce’s large purchase of land formerly owned by the bankrupt East Coast Brokers and Packers Inc. is the talk of the Sunshine State’s produce industry.

Up until early October, Coral Gables, Fla.-based Del Monte Fresh Produce NA Inc. declined to publicly comment on plans for the 3,370 acres it bought in central and south Florida.

Many speculated what could happen.

Del Monte was the high bidder in a series of bankruptcy auctions of Mulberry, Fla.-based East Coasts Brokers’ land and some packing operations.

In an Oct. 2 news release, Del Monte officials said the company plans to use the purchases to expand vertical integration of its North American tomato line.

The company also has production in Guatemala and Costa Rica.

Growers were talking about the purchase (which also includes 2,481 acres on Virginia’s Eastern Shore) during the Florida Fruit & Vegetable Association’s Sept. 23-25 convention in Amelia Island, Fla.

Some growers called me to inquire if I knew what Del Monte was planning after the purchase hit the news in August.

“I think most people are puzzled by the purchase and what it is they’re considering doing with it,” one told me. “I’m sure (that with) a company the size of Del Monte, there’s a something strategic that they’re planning.”

East Coast Brokers, which closed last fall, grew mature-greens, romas and grape tomatoes on the land.

A bankruptcy judge OK’d the purchase in early September.

Ordinarily, it would be doubtful a major player would want to enter Florida’s tomato deal, given the low returns in recent years. Plus, the company’s board of directors would insist on strong returns and tomatoes wouldn’t cut it.

According to its second-quarter financial report, however, Del Monte tomato net sales increased 9% to $24.7 million, but volumes decreased 6% for tomatoes in the second quarter this year.

Pricing was up 16% and unit costs were 10% higher than 2012’s second quarter.

One grower at the FFVA convention told me he thought Del Monte bought the land to “plant some roots” in U.S. farming.

The purchase gives Del Monte’s customers “locally grown produce” and strengthens its competitive position in the tomato industry, according to the Del Monte release.

John VanSickle, a University of Florida professor with the Food & Agricultural Sciences’ Food and Resource Economics Department, said Del Monte’s breadth of operations makes it better prepared to handle the risk.

VanSickle, an international trade and competition expert, said the purchase could affect other growers.

“All this has done is taken a weak player and replaced it with a strong player,” VanSickle said.

“It moves other players down the list as to who’s the next one that’s the most vulnerable. A few of our growers may lose some sleep over it for fear what it means to their operations because they can withstand the risk a lot better than them.”

The purchase comes as Florida growers are exposed to more risk to the markets than ever before, he said.

“This has always been a high-risk industry, but given the increases in costs that have taken place because of regulations, it’s like we’ve doubled the ante to go into this business,” VanSickle said.

“Any time there’s an increase in costs, even if they see revenues going up with them initially, it just exposes growers to more risk,” VanSickle said.

It’s been a tough decade for growers and the purchase represents just another piece of the puzzle in Florida’s produce industry that’s experienced so much bad news.

Del Monte’s gamble in Florida tomatoes will certainly affect Florida growers and fall, winter and spring supplies.

dohlemeier@thepacker.com

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