Damage to banana crops in Latin America from flooding and cold temperatures could cause Dole Food Co. to continue to pass on higher costs to customers through the spring, the company’s chief executive said.
Faced with escalating costs in the field and logistical challenges, Dole declared force majeure and is requiring U.S. customers to pay an average surcharge of $1.43 on each box of bananas, Chief Executive David DeLorenzo said in an interview.
The tight banana supplies could last for three to six months until crop yields return to normal as the weather improves. The per-box charge will be eliminated once costs and production return to normal levels, he said.
“At the moment there has been quite a shortage developing in Latin America,” DeLorenzo said. “We have seen a decrease in (banana) volumes because of weather over the last eight weeks or so, and generally we see a strong pick up in demand” as soon as the new year starts.
He said Dole executives are closely watching the impact Latin America weather conditions are having in Europe, where price increases are much larger.
While the inclement weather has mostly affected banana crops, DeLorenzo said unfavorable conditions on the U.S. west coast have started to have an impact on salad crops. The Westlake Village, Calif.-based company generates about 70% of its revenue from selling fresh fruit. The remainder comes from sales of fresh vegetables and packaged foods.
Overall, DeLorenzo said it is too early to tell what impact the weather will have on Dole’s revenue and earnings.
Dole executives expect overall sales to grow this year amid a modest economic recovery. DeLorenzo said there could be an upside for the company as markets rebound in Eastern Europe and Russia. A stronger U.S. dollar could bolster results as well, helping to reduce costs in countries where Dole grows its fruit.
The packaged-foods business hasn’t been affected by weather conditions, said Brad Bartlett, president of Dole’s packaged foods division in North America. The unit doesn’t include any banana products and relies on sources from around the world to avoid weather-related problems.
Dole plans to launch a number of products this year after scaling back such efforts during the recession. One of the products is what the company describes as the first unrefrigerated fruit bowl using 100% juice, thus eliminating the need for sugary syrup. The fruit bowl will be priced around $2 a cup, in line with similar Dole products.
Dow Jones Newswires
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