Global Dole cherishes Dole Food Co. is no longer based in Hawaii, but look around the state and its legacy is virtually everywhere.
Hawaii heritage
The company, despite reducing
its presence in the state, still plays
a big part in the islandsBy Dave Segal
dsegal@starbulletin.comThere's the Dole Cannery retail and commercial complex in Iwilei, which includes Signature Theatres' 18-screen movie house.
In Wahiawa, there's the Dole Plantation, home of the world's largest garden maze, as well as a large gift shop and thousands of acres of nearby pineapple land.
And, in supermarkets around the state, shelves and bins are chock full of Dole fruit and vegetable products.
No question, Dole and Hawaii are synonymous.
But looks can be deceiving. Dole, founded in Hawaii in 1851, today is a publicly traded global powerhouse which operates just a fraction of its business in the Aloha State.
Two months ago, Dole quietly divested its papaya, coffee, orchards (avocado, lychee, mango, citrus) and floral trees (fresh-cut flowers) operations in Waialua, reducing its Hawaii agricultural operations to about 4,000 acres of 7,000 acres it has available for pineapple production in Wahiawa. About that same time, Dole announced the reincorporation of the company from Hawaii to business-friendly Delaware.
And the Dole Plantation and Dole Cannery, which bear the historic name, actually are owned and operated by Castle & Cooke Properties Inc., a subsidiary of Castle & Cooke Inc., the residential and commercial real estate arm that was spun off from Dole in 1995. Castle & Cooke, which is a separate company, went private in September 2000 when Dole Chairman and Chief Executive Officer David Murdock completed a buyout.Today, Dole Plantation pays a licensing fee to Dole Food for the use of the name while Dole Cannery, which doesn't pay any fee, continues to use the name as part of the agreement made when the two companies were separated.
Despite Dole's diminishing physical presence in Hawaii, however, the company still considers itself very much a part of the state.
"Hawaii always has been important to Dole because it's part of our heritage," said Kenneth Kay, the company's vice president and chief financial officer. "We respect that and want to maintain that part of our heritage. So we see Hawaii as an important part of Dole in general."
Likewise, Dole is important to Hawaii as well.
"(Dole's name) is probably the single biggest thing going for us from a sales and marketing standpoint," said Michael Conway, agriculture manager of Dole Food Co. Hawaii, a division of Dole Fresh Fruit. "Dole is clearly recognized (by people) and it's the single-biggest reason for keeping and maintaining an operation in Hawaii despite the fact that not only Dole, but other companies like Del Monte and Maui (Land & Pineapple), have operations in foreign countries like Latin America and Asia. The synonymous nature of Hawaii and Dole is a real important part of the sales and marketing effort to put products in the marketplace with the Hawaii label on it."
Dole, now based in Westlake Village, Calif., does business in more than 90 countries and employs about 60,000 people. It is the world's largest producer and marketer of fresh fruit, fresh vegetables and fresh-cut flowers, and markets a growing line of packaged foods.
In past years, the company has seen its business struggle with a banana glut, a U.S.-European Union trade dispute, a weakened euro, high fuel costs, crop damage from Hurricane Mitch and a citrus freeze. Today, the banana business has stabilized, demand is strong for its new sweet pineapple, the eight-year trade dispute has ended, the euro has strengthened and the company has escaped weather-related catas- trophes.
Consequently, Dole's stock, which closed Friday at $21.40, has risen 30.7 percent this year and 46.3 percent over the past 52 weeks.
Its shares have offered a refuge during the economic downturn of the past 18 months as investors have migrated to the food, drug and tobacco sectors.
Despite the rise, Dole shares still are far off their all-time high of $57.13 on March 11, 1998. The company's shares had fallen as low as $11.94 on Nov. 7, 2000, before beginning to rebound.
Kay points to the strengthening fundamentals of the company for the stock's resurgence.
"The oversupply of bananas has gotten much better and the banana market in North America and Europe have strengthened," Kay said.
"We've had higher volumes of our new pineapple variety. Generally, we've improved operating results as a result of the business restructuring (layoffs, plant closures and asset sales) that's taken place in the company, and in the strengthening in marketplaces where we function. I think the stock market is recognizing that we've turned the corner and that we've improved from the standpoint of operating results and performance."
Dole, whose fiscal second-quarter profit rose 11 percent for the period ending June 16, said in July that third-quarter results are expected to be better than the year-earlier 2-cent-a-share loss. The company, whose current quarter ends Oct. 6, is expected to announce its earnings in late October or early November.
Bear, Stearns & Co.'s Terry Bivens, one of two analysts listed by Bloomberg News as covering the company, has had a "buy" rating on the stock since upgrading it from "neutral" on June 19. The other analyst covering the company, U.S. Bancorp Piper Jaffray's George Dahlman, has had a "buy" rating on the company for at least two years.
"We're still recommending people buy the stock for a couple reasons," said the New York-based Bivens. "One, the banana cycle has improved considerably in 2001.
"The other reason is that they've had a change of management there (Lawrence Kern was promoted to president and chief operating officer in February and Scott Greenwood was promoted to president of Dole Fresh Flowers in June). I think the new management will be a bit more aggressive in increasing shareholder value than the old management.
"They've made continuing progress in the agricultural salad line. It's a nice value-added line to the Dole lineup. And, as we move into the new year, it looks to me like the banana prices will still be pretty firm. I think they should benefit from lower fuel costs, and liner-board costs also should be down vs. a year ago. If you add it all up, there should be a pretty significant earnings improvement at Dole."
Dole, which had 2000 revenues of $4.8 billion, saw a trade dispute with the European Union end earlier this year when the United States lifted $191 million in sanctions in exchange for U.S. banana distributors' increased access to the European market. The new import-licensing rules phases back preferences to former European colonies in favor of Latin America bananas, where Dole and Chiquita Brands International Inc. grow the fruit. The World Trade Organization, which establishes global trade guidelines, had ruled that the European Union was breaking trade laws by giving special treatment to African and Caribbean banana producers.
"Certainly, Dole would have favored more of a free-trade open competition approach to the European banana regime," Kay said. "But given the fact that they decided to utilize a historical reference period (prior trading patterns) for the continuation of the license regime, it's not all negative. It certainly limits our ability to profitably grow our banana business in Europe. But, by the same token, by going back through our supply chain to get the right-sized distribution activities to be more in line with the updated volumes of bananas shipped into the European Union in the future, it has afforded us the opportunity to position the business to be more profitable going forward."
Dahlman, the Minneapolis-based U.S. Bancorp Piper Jaffray analyst, also likes the company's prospects.
"I think they are more diversified than some of the other major producers and distri- butors," he said. "They have a pretty decent fresh-cut flower business and I think over time the banana business will stabilize and the pineapple business will do OK and some of the restructuring will position it better for the long term."
Meanwhile, Conway said Dole Hawaii began phasing out its non-pineapple operations over the past two years. At its peak, there were about 100 workers in those industries, he said. Conway said the remaining 50 were laid off a couple months ago, with about 40 of them hired by the new independent growers. Dole, which has about 29,000 acres of Oahu farmland under its umbrella, leases about 4,000 to 5,000 acres to independent growers while the remainder remains uncultivated.
"The Dole Hawaii division has gone the full circle," Conway said. "We had big pineapple operations in years past, including the cannery, and we've now tapered it down to a fresh-fruit operation. We tried the diversified route by closing our sugar operations (in Waialua in 1996) and trying (to grow) everything under the sun, and now we've moved away from that. Our focus now is on pineapples, really the low-acid variety that seems to be gaining in popularity. It's a very sweet pineapple with beautiful yellow flesh but low on the acid side. There's a good market for it and we're trying to ramp up our efforts to put as much in the ground as we can."
While there's a myriad reasons why Dole Hawaii left the coffee, papaya, orchards and floral trees markets, Conway cited cost structure, ineffective marketing, the desire to focus on pineapples, and vandalism as some of the main factors.
"We were a more expensive producer with our organized labor and infrastructure and our cost to produce coffee or papaya was much more expensive than a small-time grower doing the same thing," Conway said. "We've easily saved ourselves a couple million dollars a year by moving away from that."