Dole Moves Up : Food: Analysts say the Westlake Village-based company remains an enigma because of its uncommunicative chairman, David Murdock.
Dole Food Co. was on the brink of bankruptcy in 1985 when billionaire developer David Murdock took control of the banana, pineapple and real estate concern.
Since then, Dole’s revenue has soared from $1.8 billion in 1986 to $3.2 billion last year, while its profits tripled, to $134 million. In the same period, the total assets and net worth of the Westlake Village company have each more than doubled.
Analysts and investors praise Dole’s many strengths. Bananas are Americans’ favorite fruit and Dole sells more of them here than any other company. With an estimated 28% market share, it edges out archrival Chiquita Brands International’s 24% of the U.S. market, and is well ahead of No. 3 PPI Del Monte Tropical Fruit Co., with its 16%. Internationally, Chiquita is top banana, but Dole has been expanding aggressively and now sells bananas in more than 50 countries.
Dole also now grows dozens of other fresh fruits and vegetables in 15 countries, and it’s in the top three in U.S. market share in most varieties. It has branched into packaged goods, including frozen desserts, juices and pre-cut salad makings--a successful strategy that capitalizes on the famous Dole brand name.
And while the company’s two new luxury resorts on the Dole-owned Hawaiian island of Lanai have been hurt by the weak economy, income from residential developments in California and Hawaii has held steady despite the housing slump. Murdock has also been applauded for plowing more than $700 million back into Dole’s food operations, modernizing farming methods and investing in a fleet of 43 refrigerated container ships.
Why then does Dole’s stock now trade at $31.50 a share, as of Monday’s close, about the same price as three years ago? And why is Chiquita followed by three times as many analysts?
The answer, some observers say, is Murdock, 69, who is Dole’s chairman and its biggest shareholder with 23% of the stock. Murdock is also one of the nation’s richest businessmen, with a personal net worth of at least $1.35 billion, according to Forbes magazine. But Murdock’s detractors, while praising him for his empire building, also deride him for being notoriously uncommunicative.
“I can’t say there’s very little communication. Basically, there’s no communication,” said New York-based Prudential Securities Research analyst John M. McMillin, in explaining why he follows Chiquita but not Dole. “I think they’re doing a disservice to their minority shareholders.”
Nonetheless, Murdock, who rarely grants interviews, defended his penchant for secrecy. “I don’t believe in going back to Wall Street and shooting my mouth off,” he said.
Murdock said he sees no need to disclose information not contained in Dole’s annual report and other regulatory filings, and doesn’t break down results by product for competitive reasons. He’s also not interested in helping analysts make earnings projections, he said. “I’m building a company for the long range.”
The few analysts who do follow Dole say they don’t know how much of Dole’s operating profit comes from, say, lettuce or grapes, or even pineapple. They don’t know how badly Dole was hurt by last fall’s white fly infestation, which devastated Southern California crops. Murdock declines even to reveal occupancy rates at the Hawaiian resorts, saying only that the levels are increasing more slowly than he had hoped because the resorts opened when the Persian Gulf War depressed travel and they continue to suffer from the slow economy.
Analyst Craig Silvers at Crowell, Weedon & Co. in Los Angeles estimates that Dole generates 30% of its revenues and 40% of its profits from bananas--but that’s just a guess based on interviews with grocers, trade reports and government data. Silvers also predicts that Dole’s profits will rise 12% to $150 million for all of 1992, but “that’s obviously subject to change.”
But if investors don’t like Murdock’s silence, they shouldn’t expect any changes soon. Murdock said he plans to continue running Dole “for a considerable while.”
A large Dole investor, who declined to be identified, said he’s putting his faith in Murdock’s ability “to build a business that goes well beyond bananas and pineapples.” Part of Murdock’s genius, the investor said, is that he hasn’t engaged Chiquita in a head-to-head battle for market share. Before Murdock took over Dole, shortly after fellow tycoon Carl Lindner gained control of Chiquita, the two companies had been “fighting each other for market share and killing each other,” the investor said.
Instead, Murdock has acquired many small fruit and vegetable producers and put pressure on others by installing a technologically advanced farming and delivery system that smaller players can’t compete with. That has worked in the banana business, where Dole, Chiquita and Del Monte now have a virtual lock on the market. Many observers believe that Dole is poised to do the same thing with other fruits and vegetables.
“When we get that infrastructure put together around the world, we will have one powerful company,” Murdock said.
Another factor in Dole’s favor, said Michael Branca, an analyst at Mabon Securities Corp. in New York, is demographics: As baby boomers age, they eat more fresh fruits and vegetables.
But many investors remain skittish about Dole, not just because of Murdock’s reticence, but also because the company is vulnerable to wild supply-and-demand-driven commodity price swings. Just last week, the stocks of Dole and Chiquita fell when the European Community proposed setting quotas on banana imports.
The EC proposal is potentially more damaging to Chiquita, which has a bigger presence in Europe. But it could affect prices in the United States, depending on how Dole and Chiquita respond to the threat of the impending quotas. “These guys are gamblers,” said Kathy Means, spokeswoman for the Produce Marketing Assn., a Newark, Del., trade group.
It was a gamble that led to the banana oversupply that has plagued suppliers since last fall, said Harold Schenker, executive vice president at PPI Del Monte. “Everyone has expanded greatly in anticipation of Eastern Europe opening up, and the opening of some of the Far East,” he said. “Those markets haven’t really opened up as quickly as everyone expected.”
The usually conservative Murdock also rolled the dice last year when he announced that Dole’s 1991 profit would surpass 1990. A few months later, Dole reported that its third-quarter earnings declined 41% to $25.8 million, a result of the banana glut.
Dole’s stock went into a slide that took it from $48 a share in September to the low $30s. Dole and Murdock were slapped with a shareholder lawsuit that accused them of artificially inflating Dole’s stock.
In the fourth quarter, however, Dole’s profit surged 50% to $29.1 million, and 1991 earnings were up 12%, to $134 million (though operating profits fell slightly for the year, due mainly to a $39-million operating loss on the Lanai resorts). The shareholder suit was dropped, but Murdock now says he will never again publicly forecast earnings.
If Murdock fails in the public relations department, it’s tough to argue with his golden touch when it comes to his investments, whether in real estate or in buying and selling stakes in corporations such as textile manufacturer Cannon Mills, Occidental Petroleum and Continental Group. He gained control of Dole--then named Castle & Cooke--by merging it with another company he controlled, Flexi-Van.
But Murdock’s plans for Dole are far from complete. In 1989, he tried to spin off Dole’s food operations; that fell through due to tax reasons and because real estate financing was drying up. The following year, he put the food business up for sale, but nixed that idea when offers were too low.
He now says he has “zero intent of selling” Dole. But he still believes that food and real estate “don’t really belong together,” and said an eventual split-up of the operations into separate companies is likely.
In the meantime, he said, Dole’s earnings might continue to fluctuate quarter by quarter. “I’m interested in what my earnings are going to be next year, and what my earnings are going to be the year after that . . . and how can I make the company grow.”
Dole Food Co. at a Glance
Dole Food is a producer and marketer of fresh fruits and vegetables and packaged food. Formerly named Castle & Cooke Inc., Dole is controlled by its chariman David Murdock, who owns 23% of the company’s stock. The Westlake Village concern’s biggest source of revenues and profits is bananas, and its chief rival is Chiquita Brands International. Dole also sells citrus fruits, lettuce, celery, carrots, sugar, nuts, canned fruits, bottled juices and frozen concentrates. It also has major real estate holdings in California, Arizona and Hawaii.
