Campos family-led food and beverage conglomerate Del Monte Pacific Ltd. (DMPL) is set to give up four of its 10 factories in the United States as part of the streamlining strategy amid a challenging US business.
Citing a shift to an “asset-light” strategy, DMPL disclosed to the Philippine Stock Exchange on Thursday the closure of its production facilities in Sleepy Eye, Minnesota and Mendota, Illinois at the end of the current pack season.
Del Monte’s Cambria, Wisconsin facility will be sold as an operating plant after completion of the pack season. It will also sell manufacturing assets at its Crystal City, Texas facility and intends to transfer production at this site to other location later this year.
The closures are seen to enable Del Monte to fully utilize the capacity of other existing production facilities and increase its focus on branded growth and innovation.
“This restructuring is a necessary step for us to remain competitive in a rapidly changing marketplace. Our asset-light strategy will lead to more efficient and lower cost operations,” said Joselito Campos Jr., DMPL managing director and CEO.
“We are committed to doing all we can to provide the affected employees with resources and support.”
After the announced closure and divestment, DMPL’s US subsidiary will still operate six plants in the United States and two in Mexico. Its Philippine subsidiary, on the other hand, operates the world’s largest fully integrated pineapple operation with its 26,000-hectare pineapple plantation in the country and a factory. It also operates a beverage bottling plant and a frozen fruit processing facility in the Philippines.
In 2014, DMPL made the bold move of acquiring the US consumer food business of Del Monte Foods for $1.675 billion, thereby breaking into the US market and reuniting with its US mother brand. This transformed DMPL into a bigger multinational corporation but because it bought a company much bigger than itself, the company incurred more debt.
DMPL, which is listed both on the PSE and the Singapore Exchange, has returned to profitability in fiscal year ending April 2019, but the US business remains challenging to date.
The group reported net income of $20.3 million for the year that ended in April, a turnaround from the $36.5 million loss in the previous year. Excluding extraordinary items, full-year net profit would have been $15.8 million.
For the full year, the group generated $2 billion in sales, down by 11 percent versus the same period last year mainly due to the divestiture of Sager Creek and lower sales in the United States.
Its other heritage brands include S&W, Contadina and College Inn, most of which originated in the United States as premium packaged food products. It has exclusive rights to use the Del Monte trademarks for packaged products in the United States, South America, the Philippines, Indian subcontinent and Myanmar.