Fresh Del Monte Produce, Inc. (FDP)

Fresh Del Monte Produce (FDP) are one of the world’s leading vertically integrated producers, marketers and distributors of high-quality fresh and fresh-cut fruit and vegetables, as well as a producer and distributor of prepared fruit and vegetables, juices, beverages, snacks and desserts in Europe, the Middle East and Africa. The company derives bulk of its revenues from North America (48%) followed by Europe (37%) and Asia-Pacific (12%).

The packaged food industry is extremely competitive and the company’s pricing is highly influenced by its major raw materials like pineapple and banana. The pineapple pricing has shot up over the past several years on account of severe supply disruption. As FDP is passing over the price to consumers, its volumes are getting affected. The company has already been struggling in the European banana market, which has further aggravated on the basis of EU regulatory changes, thereby intensifying price competition in that market.

On the operational front, gross margins have been under pressure as a result of inefficiencies due to employee turnover and the increasing production cost. Also the company’s net profit margins have been worsening for the past three years. Moreover, Fresh Del Monte’s canned pineapple products in certain European countries had to be withdrawn as a result of contamination, which confirmed through investigation. It has negatively impacted company’s gross margins. Future operations of the company in Europe may get affected as their reputation in this region has been tarnished.

The company, in order to reclaim normalcy over its margins has ceased its pineapple planting operations in Hawaii. But the quest for lower cost pineapple market would be a long-term concern for the firm. With two of its major raw material costs, pineapple and banana, eroding its profits, it looks Fresh Del Monte is a bitter dessert for its investors.