Chiquita's innovation planting seeds for growth

by Monica Watrous
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CHARLOTTE, N.C. — Tapping into top health trends helped Chiquita Brands International, Inc. narrow its loss in 2013.

“We introduced more new core salad products in 2013 than we had in the previous three years,” said Brian Kocher, chief operating officer, during a Feb. 27 call with financial analysts. “New products have been focused in hot consumer growth areas such as single-serve bowls, juicing and cooking greens, on-trend salad blends, enhanced kits, and in organics. Our core innovation is performing well, and we expect to see margin enhancement from an overall improvement in product mix within the Fresh Express brand over time.”

A full year’s focus on core businesses and benefits from restructuring initiatives led the company to improved results. During the year, the company grew sales volume in both its North American banana and retail packaged salad businesses, continued to leverage its premium brand in the European banana market and exited non-core, unprofitable businesses.

However, Chiquita faced continued headwinds from the consolidation of its Midwest salads plant, as well as challenges in the supply and pricing of raw products, including a banana surplus.

For the year ended Dec. 31, 2013, the company reported a net loss of $16 million, which compared with a loss of $405 million in fiscal 2012. Net sales for the year totaled $3,057 million, down from $3,078 million of the year before.

“In 2013, Chiquita delivered our promised value-chain cost savings and productivity initiatives,” said Ed Lonergan, president and chief executive officer. “We committed to reduce spending in our value chain by at least $35 million. We achieved these levels, and improved flexibility in our sourcing, shipping and logistics networks. We improved shipping efficiency, and increased productivity by more than 12% on owned farms.”

The company’s strategic sourcing initiatives, he added, have mitigated input cost increases across the portfolio.

For the salads and healthy snacks segment, the company reported an operating loss of $8 million for the year, compared with a loss of $218 million in 2012. Higher volume sales of retail value-added salads and higher prices of health snacks, partially offset by lower volume sales of processed fruit ingredients and the exit of non-core businesses, contributed to an increase in net sales to $967 million from $953 million in the year before.

Lower logistics costs, partially offset by geographic mix of sales volumes, lifted operating income for the bananas segment to $112 million for the year, compared with $77 million in the prior year. Net sales for the segment remained flat at $2 billion for the year, due to lower volumes in Europe and the Middle East, offset by higher banana sales volumes in North America and higher local pricing in Europe.

For the fourth quarter, Chiquita sustained a loss of $31 million, compared with a loss of $333 million in the prior-year period. Net sales for the quarter increased slightly to $748 million from $738 million in the fourth quarter of the previous year.

Chiquita’s goals for 2014 include a focus on disciplined contract renewals and acquisitions, accelerated innovation in salads and continued productivity enhancements to generate cost savings. Weather-related headwinds, including plant shutdowns and operational challenges, already have negatively affected first-quarter performance.

“In addition, cold weather has adversely impacted customer demand, in particular for salad products at retail and in food service,” Mr. Lonergan said. “While these challenges will negatively impact the first quarter, we believe our ongoing innovation and efficiency actions across both businesses, and the benefits of improved Midwest plant operations, will keep us on glide path over FY14 despite the headwinds we are experiencing in Q1.”
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