Costa Rica & Co. Strategic analysis of the global agricultural economy

Competitive Financial Landscape

Dole Food Co. & Competitors

"Costa Rica used to be known principally as a producer of bananas and coffee, but pineapples have surpassed coffee as the number two agricultural export. Manufacturing and industry's contribution to GDP overtook agriculture in the 1990s, led by foreign investment in Costa Rica's free trade zone. Well over half of that investment has come from the United States. Del Monte, Dole, and Chiquita have a large presence in the banana and pineapple industries" (U.S. Department of State, 2010).

In consideration of Costa Rica's booming agricultural industry, and its role in global supply of bananas and other tropical fruits as a target site for investors, strategic growth models should be designed to promote the expansion and sustainability of the nation's natural resource-based economy of scale. Selection of Costa Rica was based on the following priority infrastructural support factors in future prospectus of the countries capacity to advance in the international agricultural market shown in Table 1.

Table 1

Proximity to raw materials and/or markets

Availability of land, labor, or other resources

Quality of the local infrastructure

Availability and quality of suppliers

Availability and quality of third party service providers

Tax holidays or other incentives

Quality of life for employees

Table 1. Costa Rica's agricultural infrastructure

Costa Rica developed a National Biosafety Framework to agricultural activities and commerce in accordance with the UNEP-GEF and the Comision Tecnica Nacional de Bioseguridad in 2005 (UNEP, 2005). Where Costa Rica also shows strong consistency in its national agricultural growth strategy is adherence to labor laws, and repatriation strategies that combine local worker interests in land use and ownership, and seasonal travel schedules will have impact. Agricultural workers are likely to participate with global corporations, as well as serve as suppliers. How compatible Dole, Chiquita and Del Monte corporate human resource strategies are with local expectations about employee compensatory benefits, recruitment and training will obviously affect the overall scope of supplier to market relations. Due to the long-term presence of the three leaders in the national labor market of Costa Rica, and the nation's developed infrastructure, a high level of synergy exists where local employment contract standards are concerned. Planting to market performance is certain to follow.

Competitive performance analysis of Costa Rica's agricultural export industry is illustrated in comparative advantages reported in the three (3) financial statements of Dole Food Company, Chiquita Brands International, Inc. And the Del Monte Fresh Foods and Del Monte Produce Corporations, as shown in the Competitive Financial Landscape in Table 2.

Table 2

Key Numbers

Dole Food

Chiquita Brands

Del Monte Foods

Fresh Del Monte Produce

Annual Sales ($ mil.)

6,778.5

3,470.4

3,739.8

3,496.4

Employees

75,600

21,000

14,700

44,000

Market Cap ($ mil.)

3,347.3

1,308.2

Profitability

Dole Food

Chiquita Brands

Del Monte Foods

Fresh Del Monte Produce

Industry2

Market3

Gross Profit Margin

10.52%

14.69%

33.13%

8.31%

28.98%

28.77%

Pre-Tax Profit Margin

0.37%

1.54%

10.27%

2.89%

10.68%

8.48%

Net Profit Margin

0.23%

1.51%

6.57%

2.77%

2.36%

5.53%

Return on Equity

2.2%

7.2%

14.2%

6.1%

7.2%

10.1%

Return on Assets

0.4%

2.4%

5.6%

4.0%

2.4%

1.5%

Return on Invested Capital

0.6%

3.7%

7.7%

5.3%

3.7%

4.4%

Valuation

Dole Food

Chiquita Brands

Del Monte Foods

Fresh Del Monte Produce

Industry2

Market3

Price/Sales Ratio

0.11

0.17

0.94

0.38

1.38

3.67

Price/Earnings Ratio

43.67

10.26

14.49

13.79

18.21

26.95

Price/Book Ratio

1.00

0.75

1.88

0.80

4.04

7.12

Price/Cash Flow Ratio

4.64

9.49

9.23

5.68

11.24

22.78

Operations

Dole Food

Chiquita Brands

Del Monte Foods

Fresh Del Monte Produce

Industry2

Market3

Days of Sales Outstanding

43.27

32.02

18.12

34.18

31.19

34.66

Inventory Turnover

8.6

13.9

2.9

7.9

7.0

8.1

Days Cost of Goods Sold in Inventory

42

26

46

52

45

Asset Turnover

1.6

1.6

0.8

1.4

1.0

0.3

Net Receivables Turnover Flow

8.4

11.4

20.1

10.7

11.7

10.5

Effective Tax Rate

70.2%

36.6%

5.5%

37.9%

Financial

Dole Food

Chiquita Brands

Del Monte Foods

Fresh Del Monte Produce

Industry2

Market3

Current Ratio

1.81

1.75

2.17

2.52

1.22

1.33

Quick Ratio

0.9

1.2

0.5

1.1

0.7

1.2

Leverage Ratio

4.90

3.10

2.35

1.55

2.83

7.13

Total Debt/Equity

1.90

0.99

0.71

0.81

1.37

Interest Coverage

1.13

1.89

4.43

9.98

6.76

17.33

Per Share Data ($)

Dole Food

Chiquita Brands

Del Monte Foods

Fresh Del Monte Produce

Industry2

Market3

Revenue Per Share

88.91

73.14

18.29

57.68

24.35

7.60

Table 2. Competitive Financial Landscape, global fruit industry, 2009 (Hoovers, 2010).

From performance reporting in the competitive financial landscape, analysis of the 'total' market picture for each of the three competitors may be evaluated for competitive advantages. A number of competitive advantages are seen in both internal and external operations control and management. Marketing (i.e. advertising media) analysis does not figure into the foregoing assessment of the three competitor's channel of operations and value chain composites, yet acknowledgement of the force of building "consumer equity" into the asset basis of the larger scope of strategic planning and long-term...

How lean and agile local to global systems management of company channel operations is designed and managed has much to do with the capacity of each of the competitors to meet demand with "zero" losses sustained to perishable inventory levels. Product life cycle in this segment is short lived, and even accelerated by conditions once the fruit and other agricultural products hit the retail, distribution to consumer decoupling point.
In the last 2-3 decades, the advancement of technological innovation in logistics management systems through IT infrastructural integration of internal and external (i.e. supplier and distributor) control and database reporting activities has streamlined Costa Rica's agricultural market and its dominance in the international fruit market. From national regulatory compliance and tracking of production to distribution product down the market chain to the various subsidiaries, the three major fruit and produce conglomerates have benefitted from new industry standardized SAP interfaced logistics platforms; enabling monitoring and data reporting performance capabilities.

The speed by which agricultural exportation now takes place is largely in response to the implementation of these new IT network systems to operations management. Frequency and speed in inbound and outbound transportation is the other half of this story, and the facilitation of this relationship from the export site warehouses of the various distributor companies in Costa Rica would not be made possible without the highly systematized inventory management strategies of those distribution centers. Forecasting based on market demand and current output is made possible through the connectivity of database analysis derived from the activities of the corporation's Costa Rica based, enhanced high level logistics, and careful attention to supply chain metrics.

The front end investment in systems integration in the operations in Central American supplier locations has certainly assisted the U.S. fruit and produce companies to increase sales. Costa Rica has faired, of course, well in this circumstance, as the comparative economic and political stability of the country in the Central American region stands to reinforce its leadership in the market. In sum, sourcing and procurement strategies attendant to planning and forecasting market impact are more reliable where Costa Rica is concerned, as even outsourced supplier relationships are likely to go more smoothly where there is less corruption and a higher level of technical capacity to track and facilitate operations.

Investigation into how and to what extent the three competitor corporations, Dole Food Company, Inc., Chiquita Brands International, Inc. And the Del Monte Fresh Foods and Del Monte Produce Corporation have chosen to participate in Costa Rica's agricultural economy of scale as plantation investors, supplier, and also buyers for export to the global food market constitutes the remainder of the study.

DOLE FOOD COMPANY, INC. & Competitors

Founded in Hawaii in 1851, by James Dole, the Dole Food Company began as a pineapple growing and canning company. Today, some two hundred products are sourced, grown, processed, marketed, and distributed to more than ninety countries, and the brand is found worldwide in supermarkets, mass merchandisers, wholesalers, and foodservice operators (Hoovers, 2010). With an established lead market position, Dole focuses primarily on retention of its position through dominance of major rivals through exploitation of its channel of operations capabilities to deliver produce at lower cost. Company Financial performance is detailed in Table 3.

Table 3

Dole Company: Financial Overview, 2009

Company Type (www.hoovers.com)

Public - NYSE: DOLE

Headquarters

Fiscal Year-End

December

Financial Filings

SEC

2009 Sales (mil.)

$6,778.5

1-Year Sales Growth

(11.0%)

2009 Net Income (mil.)

$88.0

1-Year Net Income Growth

(28.3%)

Annual Income Statement

All amounts in millions of U.S. Dollars unless otherwise noted.

Dec 09

Dec 08

Dec 07

Revenue

6,778.5

7,620.0

6,931.0

Cost of Goods Sold

6,008.8

6,862.9

6,307.9

Gross Profit

Gross Profit Margin

11.4%

9.9%

9.0%

SG&A Expense

Depreciation & Amortization

Operating Income

Operating Margin

5.2%

3.6%

1.9%

Nonoperating Income

(55.3)

(14.1)

1.8

Nonoperating Expenses

(198.8)

(168.0)

(187.3)

Income Before Taxes

97.7

92.5

(55.3)

Income Taxes

22.7

(48.0)

1.1

Net Income After Taxes

75.0

(56.4)

Continuing Operations

85.1

(57.9)

Discontinued Operations

2.9

(24.1)

0.4

Total Operations

88.0

(57.5)

Total Net Income

88.0

(57.5)

Net Profit Margin

1.3%

1.6%

Table 3. Dole Food Company Financial Performance (Hoovers, 2010).

Costa Rica is one of quite a few sites of Doles private 122,000 acres in agricultural holds, which also include acreage in Hawaii in California. Dole also operates the largest brand dedicated, refrigerated, containerized fleet that involves 14,800 refrigerated containers and 11 owned and 14 chartered vessels (Hoovers, 2010). Bananas comprise a large portion of Dole's market share, and Costa Rica's bananas contribute to the approximately 165 million boxes shipped each year, at 35% of the total global market share in the single fruit. Where Dole has accelerated growth is in its emergence as a "powerhouse" in result to "its large-scale sourcing and distribution operation, which allows the company to offer a greater variety of products;" guarding against regional risks and poor growing seasons (Hoovers, 2010). Dole subsidiaries are mentioned in Table 4.

Table 4

Agrondustrial Pinas del Bosque S.A. (Costa Rica)

Bananapuerto Puerto Bananero S.A. (Ecuador)

Bananera La Paz, S.A. (Costa Rica)

Coastal Berry Company, LLC

Dole Chile S.A.

Dole Comercializacion, S.A. (Spain)

Dole Dried Fruit and Nut Company, a California general partnership

Dole Foods of Canada Ltd.

Dole Fresh Fruit Company

Dole Fresh Fruit Europe OHG (Germany)

Dole Fresh Vegetables, Inc.

Dole Italia s.p.a.

Dole Japan, Ltd.

Dole Korea Limited

Dole Packaged Foods Europe (France)

Dole Packaged Foods, LLC

Dole Philippines, Inc.

Dole South Africa (Pty), Ltd.

Dole Thailand Limited (64%)

Dole U.K. Limited

Saba Fresh Cuts AB (Sweden)

Shanghai Dole Food Company, Ltd. (China)

Standard Fruit Company (Bermuda) Ltd.

Standard Fruit Company de Costa Rica, S.A.

Standard Fruit De Honduras, S.A.

Union de Bananeros Ecuatorianos, S.A. (Ecuador)

Table 4. Dole Subsidiaries

In response to the global economic crisis in 2008, the Dole Food Company went public in 2009 in a move to further…