CHARLOTTE, N.C. — Chiquita Brands International, Inc. hopes to shake up the salad category with new value-added products and on-trend ingredients.
“Fact No. 1 is people in North America consume about 35 salads a year, which is woefully small,” said Ed Lonergan, president and chief executive officer, during a Nov. 7 earnings call with financial analysts. “Of that, about 11 salads a year are bag salads. So rather than try to convince all the people in the United States to eat more salads, we are really focused on converting commodity salads to value-added bag salads where we can.”
Chiquita’s recent innovations under its Fresh Express brand include chopped salad kits, a baby kale mix and bags of two single-serve packs designed to maintain freshness.
“We have a very strong plan that we have shared with our customers for next year,” Mr. Lonergan said. “And we are going to focus on driving value and volume through innovation.”
For the first time since 2007, Chiquita is leading retail value-added salad category growth, with volumes increasing 7.5% from the prior-year quarter. But setbacks from Midwest plant consolidation and raw product costs negatively impacted salad segment profitability.
“On the supply side, sourcing quality and yield has been impacted by adverse growing conditions throughout the year, most recently affecting iceberg lettuce,” Mr. Lonergan said. “We are deploying enhanced growing strategies in leafy greens to mitigate these kinds of agricultural risks. This, combined with a substantially improved apple crop, will provide benefits to the salad and healthy snack segment in 2014.”
For the quarter ended Sept. 30, the company reported a loss of $18 million, which compared with a loss of $67 million during the same period of the prior year. Net sales for the quarter increased to $723 million from $714 million.
“Chiquita is a different company today than it was a year ago,” Mr. Lonergan said. “Over the last 12 months we have revitalized our core brands, exited distractions, kept our promise to deliver a more efficient value chain and overhead cost structure and improved our debt position.”
Operating income for the banana segment increased to $20 million from a loss of $2 million during the third quarter last year. Segment sales rose to $458 million from $446 million, reflecting higher local pricing in Europe and higher banana sales volumes in North America.
For the salads and healthy snacks segment, the company sustained a loss in operating income of $5 million, down from operating income of $1 million last year, reflecting start-up costs related to the plant consolidation, as well as increased raw product costs caused by adverse growing conditions. Segment sales dipped to $239 million from $240 million, due to higher volume sales of retail value-added salads offset by lower processed fruit ingredient sales and the exit of a European healthy snacking business at the end of the second quarter.Operating income for the other produce segment increased to $1 million from a loss of $4 million last year. Segment sales stayed flat at $28 million.