Chiquita restructures to improve profitability and accelerate strategy
Chiquita restructures to improve profitability and accelerate strategy
From global management to its product line, a wide set of changes will be implemented at Chiquita Brands International Inc.
The Cincinnati-based company announced Oct. 29 sweeping changes designed to accelerate its previously announced strategy to become the "global leader in healthy, fresh foods."
The company said that this business restructuring is designed to improve its profitability by consolidating operations and simplifying its overhead structure to improve efficiency, stimulate innovation and further enhance focus on customers and consumers.
The restructuring plan and management changes put a geographic, not product, alignment on management.
Beyond the previously announced downsizing of Chiquita's operations in Chile and its exit from unprofitable farm leases, the company is making several additional structural changes that will take place over the next several months.
Chiquita's recent acquisition of the Verdelli Farms production facility in Harrisburg, PA, will allow Fresh Express to rebalance its production and distribution network for value-added salads. To optimize network efficiency, the company has decided to close its distribution center in Greencastle, PA, and production facility in Carrollton, GA, over the next several months. Closing these two facilities will reduce operating costs while further improving product freshness, according to the company. Approximately 240 people are employed at Carrollton and another 40 work at Greencastle.
Also, Chiquita reviewed its fresh-cut fruit business and has decided to focus on its line of healthy snacks, such as "Chiquita Apple Bites," which have achieved market-share leadership and wide acceptance from customers and consumers. However, the company's line of fresh-cut fruit bowls will be discontinued over the next several months.
As a result, the company will convert facilities in Edgington, IL, and Salinas, CA, to focus on the production and distribution of value-added salads and healthy snacks. This change will eliminate approximately 130 full-time positions dedicated to fruit-bowl production.
To trim the banana business, in conjunction with the company's consolidation of its North American logistics operations, Chiquita said it will close its banana distribution facility in Bradenton, FL, by the end of the year, which will reduce operating costs. The move is not expected to affect current customers, who will continue to be served from the company's distribution center at Port Everglades, FL.
Chiquita employs 15 people at Bradenton.
In Europe, Chiquita acquired full ownership of Atlanta AG in 2003 and executed a successful three-year cost-saving turnaround plan for this unit. Atlanta AG, based in Bremen, Germany, has annual revenues in excess of $1 billion and the leading market share in the fruit and vegetable distribution sector in Germany and Austria.
During the past two years, however, various macro-level market influences, including changes in the EU banana-import regime, stiff price competition and consolidation of the retail sector, have combined to reduce Atlanta's profitability.
In addition, while Atlanta AG_has significant strengths, management has determined that its commodity distribution business is not a strong fit with Chiquita's long-term strategy. As a result, the company has launched a process to explore strategic alternatives for this unit, including a possible sale.
Among the newly announced management changes, Brian Kocher, president of Chiquita's North America operations, will be responsible for all aspects of the company's operations in North America, including value-added salads, bananas and other produce. Mr. Kocher joined Chiquita in 2005 and most recently served as vice president, controller and chief accounting officer.
Tanios Viviani is now president of global innovation and emerging markets and will serve as Chiquita's chief marketing officer. Mr. Viviani joined Chiquita in 2004 and has served since June 2005 as president of the Fresh Express Group. In his new role, he will be responsible for the company's consolidated innovation, research, quality and product development initiatives worldwide, as well as having profit-and-loss responsibilities over certain emerging markets such as Asia. He will also coordinate all marketing globally.
In conjunction with these organization changes, the president and chief operating officer roles at Chiquita Fresh Group have been eliminated. As a result, Bob Kistinger, who has served in those capacities, has been appointed president of special assignments. Mr. Kistinger will serve in that role until the end of the year, at which time he will be leaving the company to pursue new opportunities.
As a result of these changes, Chiquita expects to generate new, sustainable cost reductions of approximately $60 million to $80 million annually beginning in 2008 after a one-time charge of approximately $25 million in the fourth quarter of 2007 related to severance costs and certain asset write- downs. Realized savings should improve profitability, and resulting additional cash flow will be used primarily to reduce debt, consistent with the company's previously announced target to achieve a debt-to-capital ratio of 40 percent.
The Cincinnati-based company announced Oct. 29 sweeping changes designed to accelerate its previously announced strategy to become the "global leader in healthy, fresh foods."
The company said that this business restructuring is designed to improve its profitability by consolidating operations and simplifying its overhead structure to improve efficiency, stimulate innovation and further enhance focus on customers and consumers.
The restructuring plan and management changes put a geographic, not product, alignment on management.
Beyond the previously announced downsizing of Chiquita's operations in Chile and its exit from unprofitable farm leases, the company is making several additional structural changes that will take place over the next several months.
Chiquita's recent acquisition of the Verdelli Farms production facility in Harrisburg, PA, will allow Fresh Express to rebalance its production and distribution network for value-added salads. To optimize network efficiency, the company has decided to close its distribution center in Greencastle, PA, and production facility in Carrollton, GA, over the next several months. Closing these two facilities will reduce operating costs while further improving product freshness, according to the company. Approximately 240 people are employed at Carrollton and another 40 work at Greencastle.
Also, Chiquita reviewed its fresh-cut fruit business and has decided to focus on its line of healthy snacks, such as "Chiquita Apple Bites," which have achieved market-share leadership and wide acceptance from customers and consumers. However, the company's line of fresh-cut fruit bowls will be discontinued over the next several months.
As a result, the company will convert facilities in Edgington, IL, and Salinas, CA, to focus on the production and distribution of value-added salads and healthy snacks. This change will eliminate approximately 130 full-time positions dedicated to fruit-bowl production.
To trim the banana business, in conjunction with the company's consolidation of its North American logistics operations, Chiquita said it will close its banana distribution facility in Bradenton, FL, by the end of the year, which will reduce operating costs. The move is not expected to affect current customers, who will continue to be served from the company's distribution center at Port Everglades, FL.
Chiquita employs 15 people at Bradenton.
In Europe, Chiquita acquired full ownership of Atlanta AG in 2003 and executed a successful three-year cost-saving turnaround plan for this unit. Atlanta AG, based in Bremen, Germany, has annual revenues in excess of $1 billion and the leading market share in the fruit and vegetable distribution sector in Germany and Austria.
During the past two years, however, various macro-level market influences, including changes in the EU banana-import regime, stiff price competition and consolidation of the retail sector, have combined to reduce Atlanta's profitability.
In addition, while Atlanta AG_has significant strengths, management has determined that its commodity distribution business is not a strong fit with Chiquita's long-term strategy. As a result, the company has launched a process to explore strategic alternatives for this unit, including a possible sale.
Among the newly announced management changes, Brian Kocher, president of Chiquita's North America operations, will be responsible for all aspects of the company's operations in North America, including value-added salads, bananas and other produce. Mr. Kocher joined Chiquita in 2005 and most recently served as vice president, controller and chief accounting officer.
Tanios Viviani is now president of global innovation and emerging markets and will serve as Chiquita's chief marketing officer. Mr. Viviani joined Chiquita in 2004 and has served since June 2005 as president of the Fresh Express Group. In his new role, he will be responsible for the company's consolidated innovation, research, quality and product development initiatives worldwide, as well as having profit-and-loss responsibilities over certain emerging markets such as Asia. He will also coordinate all marketing globally.
In conjunction with these organization changes, the president and chief operating officer roles at Chiquita Fresh Group have been eliminated. As a result, Bob Kistinger, who has served in those capacities, has been appointed president of special assignments. Mr. Kistinger will serve in that role until the end of the year, at which time he will be leaving the company to pursue new opportunities.
As a result of these changes, Chiquita expects to generate new, sustainable cost reductions of approximately $60 million to $80 million annually beginning in 2008 after a one-time charge of approximately $25 million in the fourth quarter of 2007 related to severance costs and certain asset write- downs. Realized savings should improve profitability, and resulting additional cash flow will be used primarily to reduce debt, consistent with the company's previously announced target to achieve a debt-to-capital ratio of 40 percent.
