Dive Brief:
- Dole Food continues to pull back from the California strawberry market with its recent announcement that 402 workers would be laid off in October from its operations in the Pajaro Valley near Santa Cruz. Of the total, 268 are unionized pickers, but the move will also impact laborers, drivers and supervisors from the company's harvesting and cooling operations in Watsonville.
- In August, the company laid off 172 unionized strawberry workers in the Oxnard area of Southern California, although a spokesman said Dole had no plans to move out of that area. Dole will also close its strawberry growing operations in Santa Maria, California, and Sweetwater, Florida.
- The world's largest fresh fruit and vegetable company filed for a IPO back in April but is also exploring a private sale, according to The Wall Street Journal. The first round of bids were reportedly due earlier this month and have attracted interest from private-equity firms.
Dive Insight:
Dole is owned by Los Angeles billionaire David Murdock, 94, who bought the company in 2014 for $1.2 billion — the second time he has taken it over.
Despite Dole's prominent position in the desirable fresh produce space, the company is not profitable. It generated $4.51 billion in net revenues during the fiscal year ending Dec. 31, 2016 — a 3% drop from the previous year — and posted a net loss of $23.7 million during the period.
Dole is also nearly $1.3 billion in debt and operates with low margins and declining revenue. It has put its 10-acre Westland Village, California, headquarters up for sale and plans to shed about 15,000 acres in Hawaii, where it first began pineapple and banana operations in 1851 as Castle & Cooke.
In the recent past, the company has implemented significant cost savings measures, divested non-core assets and improved its supply chain. Following these efforts, it's possible that a leaner and meaner Dole could be valued in the $2 billion range.
Profitably raising commercial strawberries in California has become more difficult in recent years because of record-breaking drought, chronic labor shortages and higher minimum-age laws, plus overtime restrictions, state limitations on fumigant applications and the sensitivity of strawberries to increasing soil salinity.
Consumer demand for strawberries remains high, but production has started to decline as planted acreage drops. According to the California Strawberry Commission, growers planted 32,515 acres in 2016 — down from the 37,438 estimated acres in 2015 and the 40,816 acres planted in 2013. California is the top strawberry producer in the country and harvests about 88% of the total fresh and frozen product, with a crop value of about $2.6 billion.
Given these ongoing challenges to the strawberry market, it's not surprising that Dole is refocusing on other operations, slimming down its real estate holdings and doing whatever it can to enhance value prior to either another IPO or an eventual acquisition. It will be interesting to see which direction it takes and at what price.