Chiquita addresses challenges with organizational revamp

By Lorraine Heller

- Last updated on GMT

Related tags Chief executive officer

Chiquita, a major supplier of bananas to the food industry, today
outlined a restructuring plan that includes consolidating
operations and slashing jobs in order to improve efficiency and

The company said it expects these changes will lead to annual cost reductions of $60m to $80m, as of 2008.

The move comes as the latest step in the Chiquita's attempts strengthen its flagging business, which has taken some severe hits recently from a new EU banana import regime, an e-coli contamination in the US, a terrorist funding scandal, and overall increased industry costs.

Last October the company had announced a number of organizational changes and new appointments, including the naming of newly appointed global product leaders, a chief information officer and a new president of its Fresh North America business.

Just weeks earlier, Chiquita had embarked on a number of debt-reducing initiatives, including the prospective sale of its shipping fleet, the suspension of its quarterly cash dividend, and requesting a temporary waiver from its lenders.

The firm today said that its "strategic growth plan" has been significantly slowed down by the challenges it has faced recently.

"Reaching our goals will take us longer than we originally estimated," said Fernando Aguirre, chairman and chief executive officer.

"Since 2005, market dynamics and the competitive landscape have been rapidly changing, which has limited our profitability and slowed the execution of our strategy," he said.

"While we have already taken various actions to strengthen our balance sheet, improve our risk profile, and diversify the company, we continue to endure rising industry costs, punitive European banana import regulations, and a slower-than-expected recovery in the value-added salads category."

"We began a major analysis in the summer when we realized the effects of these negative forces were impacting our profit plans longer than originally anticipated.

As a result of this analysis, we are taking several significant broad-based actions across the business, which are designed to improve our performance in areas we can more directly influence and control."

Chiquita said it plans to achieve its cost-saving targets by eliminating more than 160 management positions worldwide and exiting from nonstrategic and unprofitable businesses.

In addition, the firm said it has simplified its organizational structure and realigned it by geography rather than product line.

It also said its product supply has been consolidated worldwide to drive greater network efficiency, prioritize the development of higher-margin, value-added products, and improve its market competitiveness.

As well as its previously-announced move to downsize operations in Chile, the company will also be making a number of structural changes to its finished goods businesses over the next few months.

It will also close a banana distribution facility in Bradenton, Florida.

Aguirre said he expects these actions to result in fewer layers of management, better and faster decisions and improved accountability.

"We will drive greater integration and efficiency across business units and geographies, resulting in one face to customers, one global supply chain from seed to shelf, and one global innovation program with targeted priorities and better execution."

Taken together, I am confident these actions will strengthen our long-term market position and enhance our ability to achieve sustainable, profitable growth."

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