Dole Foods Retrenches Amid State’s Fruit Production Woes

Tough times in the California fruit business have caused the world’s largest fruit and vegetable producer to sell off a large piece of its farming operations in the state and focus instead on marketing imported fruit.

Westlake Village-based Dole Foods Co. will stop growing table grapes, peaches, plums and nectarines on four Central Valley ranches that employ 1,200 seasonal workers.

Dole hopes to sell the 5,000 acres by the end of the year and will use the proceeds to pay down debt.

“This is an under-performing business for us,” said Al Bates, who heads Dole’s North American Fruit division. “It’s not very profitable.”

Consolidation on the processing side, changing eating habits and competition from imports have resulted in a glut of many types of fruit, economists say, including apricots, peaches, pears and grapes, the bulk of which are grown in California.

Trade groups have tried to ease the situation in the last year by paying some of their members to pull up some of their trees. But prices remain low enough, economists say, to push some out of the business, even big operators such as Dole.

“It’s a very clear indication that they see [California production] as high risk and low margin,” said Desmond Jolly, an agricultural economist at UC Davis.

“Even people with deep pockets and marketing power do not want to undertake the risk of producing here,” he said.

Dole’s loss widened in the fourth quarter to $7.4 million on $1.06 billion in revenue, from a $2.1-million loss in the same period the previous year, largely as a result of banana trade disputes and a weak foreign exchange rate between the euro and the dollar. However, it ended the year with a profit of $67.7 million, mostly because of a $55-million gain posted from the sale of its California and Arizona citrus properties to Paramount Citrus.

Dole will keep its California vegetable operations, a market where it has a dominant position. It is one of the top producers of bagged salads and pre-cut vegetables, which supermarkets and consumers are willing to pay more for.

“They are trying to get into more value-added products,” said John McMillin, a food industry analyst with Prudential Securities in New York. “Just stamping the Dole name on bananas and other fruit hasn’t been the most successful strategy.”

Dole will continue to market imported tree fruit and grapes from less-expensive growing areas in Chile.

“We are one of the market leaders in Chile,” Bates said. “We ship more product worldwide from there than we do from California.”

Although farm prices for many types of fruit have dropped in the wake of a round of consolidation in the supermarket business, prices at the supermarket for the most part have remained relatively flat, allowing the chain stores to pocket more profit.

“Retail prices have stayed the same or gone up,” said Bill Ferriera, president of the Apricot Producers of California. But, he added, “We are getting paid less [net] than we did 10 years ago for our fruit.”

Ferriera said many of California’s 300 apricot growers, which account for virtually all of the U.S. production, may exit the business in the next year if demand and prices do not pick up for their fruit.

One of the state’s largest canneries, San Ramon-based Tri Valley Growers, recently went through a bankruptcy and restructuring, which will result in its buying only about half the amount of apricots, peaches and pears from growers that it has in the past.

“This wave [of depressed prices] is washing over one commodity after another,” said Jolly of UC Davis.

“Either we genuinely have excess capacity and are producing too much for the market, with the competition from imports, or consolidation has made it a real buyer’s market.”