You are here
CINCINNATI -- In a deal likely to give the fresh-cut salad market a toss, produce powerhouse Chiquita Brands International Inc. said yesterday it is plunging head first into packaged salads with the acquisition of leading marketer Fresh Express from Performance Food Group Co. (PFG), for $855 million in cash.
"I believe this is the most important strategic and transformational move the company has made in decades," Fernando Aguirre, chairman and c.e.o. of the world's leading grower of bananas, said in a statement.
Already in the fresh-cut fruit business, Chiquita revealed the Fresh Express acquisition a day after it reported that profits more than tripled in the fourth quarter. The deal between two of the most recognized names in the produce business is expected to close in the second quarter 2005, subject to satisfaction of customary closing conditions, including completion of the Fresh Express 2004 annual audit.
Already a hotly contested market that has seen Fresh Express and Dole in pitch battle for market share of the last few years, the packaged salads business is likely to heat up even more once Chiquita dives in.
As for how the two produce brands will be marketed at retail, Mike Mitchell, director of corporate communications for Chiquita, told Progressive Grocer that Fresh Express' fresh-cut fruit line will be converted to the Chiquita brand, "which has more equity for fresh fruit products. As for salads, the established Fresh Express brand already commands a premium, and we see no need to mess with a good thing."
When asked what the deal will mean for supermarket operators, Mitchell said, "We certainly see it as an opportunity to combine and leverage the good customer relations" both organizations currently have with customers. "We also anticipate cross-selling opportunities with retail and foodservice accounts, as well as balancing our respective geographical strengths in ways to make both brands stronger throughout the U.S."
Banana sales now account for 56 percent of Chiquita's revenues, but that will drop to 42 percent after the Fresh Express acquisition, Aguirre said, adding that while bananas will continue to be Chiquita's signature product, the transaction will enable it to reduce its reliance on a single product and a single region.
"Fresh Express fits seamlessly into our sustainable growth strategy to become a world-class, consumer-driven leader of branded produce by building a high-performance organization, strengthening our core business and, most importantly, pursuing profitable growth. We continue to focus on satisfying the primary consumer needs of health, taste, freshness and convenience, and Fresh Express' products are a perfect fit," Aguirre said. "The acquisition announced today will combine two great companies and allow us to leverage our complementary strengths and experience in selling value-added fresh produce."
Fresh Express, which pioneered the bagged salad category, has roughly $1 billion in annual revenues and an estimated 40 percent share of the packaged salad segment, according to Chiquita. Richmond, Va.-based Performance Food Group, a leading U.S. foodservice distributor, acquired Fresh Express in Oct. 2001 and said last Sept. that it had had retained Goldman, Sachs & Co. to assist in the process of exploring strategic alternatives, including divestiture. With the transaction tendered, PFG says it will now concentrate on its broadline and customized foodservice distribution businesses.
Chiquita estimates the fresh-cut salad market at $2.7 billion annually and growing, as health- and convenience-minded consumers more frequently buy pre-washed and prepackaged salads. The company launched a fresh-cut fruit line under its own brand in the fourth quarter of 2003.
Chiquita said it intends to keep the management of Fresh Express intact. "I've been extremely impressed with the experience and depth of the Fresh Express management team, including many who helped invent the value-added salad category," said Aguirre, adding that Chiquita further expects Salinas to remain the home base of Fresh Express.
Chiquita said the acquisition will make not only make it the leader in the value-added category, but will also enable it to gain access to Fresh Express' restaurant customers including McDonald's Corp. and Yum Brands Inc.'s Taco Bell and KFC chains. The deal should also save the acquirer about $20 million annually, through the consolidation of facilities and other cost-saving measures.
"I'm excited about the opportunity we have to learn from one another and build on each company's strengths to deliver innovative, value-added products," added Aguirre. "Successful acquisitions often hinge on complementary corporate cultures, and so I'm thrilled that we share the same values and the same commitment to quality and to meeting consumer needs."
-- Meg Major