Dole1998 annual


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Dole1998 annual

  1. 1. Dole Food Company, Inc. Annual Report 1998 Dole Food Company Inc. Annual Report 1998 ,
  2. 2. DOLE WORLDWIDE OPERATIONS Q Sourcing Ripening/Distribution Markets Q Corporate FOOD OPERATING DIVISIONS AND LOCATIONS EUROPE AND AFRICA • Belgium • Cameroon • Canary Islands • France • Germany • Ghana • Greece • Italy Ivory Coast • Kenya • Namibia • Netherlands • South Africa • Spain • Tunisia • Turkey • United Kingdom • Zimbabwe LATIN AMERICA AND CARIBBEAN • Argentina • Brazil • Chile • Colombia • Costa Rica • Ecuador Guadeloupe • Guatemala • Honduras • Jamaica • Martinique • Mexico • Nicaragua • Peru • Venezuela • Windward Islands ASIA • Australia • China • Japan • New Zealand • Philippines • Thailand NORTH AMERICA • Canada • United States: Arizona, California, Florida, Hawaii, Ohio, Washington FOOD MARKETING DIVISIONS AND LOCATIONS EUROPE AND MIDDLE EAST • Albania • Algeria • Austria • Azerbaijan • Bahrain • Belarus • Belgium Bosnia • Bulgaria • Croatia • Czech Republic • Denmark • Estonia • Egypt • Finland • France • Georgia • Germany Greece • Hungary • Iceland • India • Ireland • Israel • Italy • Jordan • Kazakhstan • Kuwait • Latvia • Lebanon • Lithuania Luxembourg • Malta • Morocco • Netherlands • Norway • Oman • Poland • Portugal • Qatar • Romania • Russia Saudia Arabia • Senegal • Slovakia • Spain • Sweden • Switzerland • Syria • Tajikistan • Tunisia • Turkey • Ukraine United Arab Emirates • United Kingdom • Uzbekistan • LATIN AMERICA AND CARIBBEAN • Argentina • Bahamas • Barbados Bermuda • Bolivia • Brazil • Chile • Colombia • Costa Rica • Dominican Republic • Ecuador • Guadeloupe • Guatemala Honduras • Jamaica • Martinique • Mexico • Netherlands-Antilles • Peru • Puerto Rico • Trinidad & Tobago Uruguay • Venezuela • ASIA • Australia • China • Cambodia • Hong Kong • Indonesia • Japan • Malaysia New Zealand • Philippines • Singapore • South Korea • Taiwan • Thailand NORTH AMERICA • Canada • United States 2 D O L E F O O D C O M PA N Y, I N C . A N N U A L R E P O R T 1 9 9 8
  3. 3. Financial Highlights Dole Financial Highlights 1998 1997 1996 1995 1994 (in millions, except per share data) Revenue $ 4,336 $ 3,840 $ 3,804 $ 3,499 $ 4,424 Income from continuing operations $ 160 $ 89 $ 120 $ 58 $ 12 Income (loss) from discontinued operations – – (97) 10 – Net income $ 160 $ 89 $ 23 $ 68 $ 12 Diluted net income (loss) per common share Continuing operations $ 2.65 $ 1.47 $ 2.00 $ 0.98 $ 0.20 Discontinued operations – – (1.61) 0.16 – Net income $ 2.65 $ 1.47 $ 0.39 $ 1.14 $ 0.20 Diluted average common shares outstanding 60 60 60 60 60 Total assets $ 2,464 $ 2,487 $ 2,442 $ 3,685 $ 2,915 Capitalization Short-term debt $ 14 $ 22 $ 24 $ 54 $ 36 Long-term debt 755 904 896 1,555 1,116 Minority interests 38 30 26 25 57 Common shareholders’ equity 666 550 508 1,081 622 Total $ 1,473 $ 1,506 $ 1,454 $ 2,715 $ 1,831 Book value per common share $ 11.10 $ 9.18 $ 8.49 $ 18.17 $ 10.49 45 3/4 Common stock price at year-end $ $ 34 $ 35 $ 23 $ 30 Market price range 49 5/8 431/2 351/2 57 1/8 High $ $ $ 38 $ $ 33 3/8 32 7/8 221/2 285/16 Low $ $ $ 24 $ $ Annual cash dividends per common share $ 0.40 $ 0.40 $ 0.40 $ 0.40 $ 0.40 Note: Income from continuing operations for 1998 and 1996 includes pre-tax charges of $120 million and $50 million, respectively. Income from continuing operations for 1995 includes a pre-tax gain of $62 million related to assets sold or held for sale. The real estate and resorts business distributed to shareholders in 1995 has been presented throughout this report as discontinued operations. GROWTH CASH FLOW CAPITALIZATION RETURN 26.3% 4,424 4,336 1,081 24.6% 372 3,840 3,804 338 328 3,499 308 17.5% 265 16.0% 666 622 550 508 6.4% 94 96 98 97 95 94 94 96 98 97 95 96 98 97 95 94 98 96 97 95 Revenue Shareholder Equity Return on Equity** EBITDA* (in millions) (in millions) (in millions) (in percent) Depreciation & Amortization EBIT * Before special charges in 1998 and 1996 and net gain on asset dispositions in 1995. 1 ** Before special charges in 1998 and 1996 and asset impairment in 1995. D O L E F O O D C O M PA N Y, I N C . A N N U A L R E P O R T 1 9 9 8
  4. 4. To Our Shareholders 1998 was a difficult and challeng- bananas, 10,000 acres of sugar cane, 2,000 acres of ing year for Dole Food Company. African palm, as well as roads, bridges, employee hous- We entered the year coping with ing, packing plants, irrigation systems, river dikes, ware- the Asian economic crisis, which houses, trucks, trailers, and other equipment, all of slowed growth in one of our most which were virtually destroyed. Fortunately, due to ini- dynamic markets. The El Niño tial preparations and a rapid response to the crisis, no weather phenomenon adversely employee lives were lost. I would like to personally affected the agricultural produc- acknowledge and thank the thousands of employees, David H. Murdock tion in virtually every area in friends and associates from around the world that Chairman and Chief Executive Officer which Dole operates. Late in the responded immediately to the relief and rehabilitation year, the collapse of the Russian effort. The heroic efforts of so many are too great to list, economy in essence destroyed an important market for but their actions and deeds will always be gratefully Dole products. During the last week of October, Hurri- remembered by all of us at Dole and the entire populace cane Mitch, perhaps the worst hurricane of the century, we serve in these areas. made a direct hit on the country of Honduras and Dole operations in that country, leaving destruction in its OPERATIONS wake. Finally, in late December, the California citrus Dole’s worldwide operations were severely tested in industry suffered a devastating freeze, which essentially 1998 by the weather disruptions in all of its growing areas. destroyed most of the orange crop in the state. While it The El Niño weather pattern caused severe flooding is saddening to recall such a litany of difficulties, it is in Ecuador, extremely heavy rains in California, and gratifying to remember the response of the Dole team drought in Thailand and the Philippines. The year throughout the world to each adversity. ended with Hurricane Mitch in Honduras and the freeze in California. In turn, these weather anomalies caused production shortages and logistical disruptions through- FINANCIAL RESULTS In the 4th Quarter of 1998, Dole took two special out the year in our banana, pineapple, vegetable and cit- charges. The first charge of $100 million reflected the rus businesses. Despite these issues, most of our core $160 million in damages caused by Hurricane Mitch. The businesses performed well and are indeed well posi- second charge of $20 million was primarily due to the tioned for a more normal 1999. damage caused by a major freeze to the California citrus The financial crisis in Russia, which began in crop just prior to harvest. After these charges, Dole’s net September 1998, had a significant negative effect on income was $12.1 million in 1998 on revenues of $4.4 bil- demand for bananas in that country. In recent years, the lion. Before the special charges, operating earnings totaled Russian market had grown to consume approximately $206.2 million and EBITDA totaled $328.3 million. eight percent of the world banana supply, so the loss of this market will be an ongoing concern for the banana industry in general. HURRICANE MITCH Hurricane Mitch, one of the strongest hurricanes in recorded history, with sustained winds up to 180 MANAGEMENT CHANGES/ENVIRONMENTAL mph, had a devastating effect on the country of In May 1998, Sharon Hayes joined Dole as its new Honduras, as well as caused severe damage to Director of Environmental Affairs. Having spent over Nicaragua and Guatemala. Dole has a 100-year history thirteen years with the Environmental Protection of investments in Honduras, which were severely dam- Agency, including working for the Agency’s administra- aged or destroyed by winds and floods. Operations tor on pesticide and toxic chemical issues, Ms. Hayes’ affected included growing crops of over 20,000 acres of background and expertise are assets for Dole. 2 D O L E F O O D C O M PA N Y, I N C . A N N U A L R E P O R T 1 9 9 8
  5. 5. Dole Food Company Board of Directors (Seated): David H. Murdock (Standing, left to right): David A. DeLorenzo, James F. Gary, Richard M. Ferry, Elaine L. Chao, Mike Curb, Zoltan Merszei Dole strives to lead in environmental protection and growing business. First year revenues from these over the last decade has reduced its reliance on tradi- acquisitions are expected to exceed $200 million. The tional crop protection products by integrating cultural flower business offers many parallels to existing and biological controls into its pest management strate- core businesses. For example, flowers are perishable, gies. Dole standards of environmental excellence in its imported, and industry growth comes through the worldwide operations intend to meet standards held in same supermarket channel of distribution as other Dole the United States and European Union. products. We are very pleased with the acquisitions of Sunburst Farms, Four Farmers, Finesse, CCI and their affiliated companies. The combination of these premier ACQUISITIONS Flowers In 1998, Dole made a strategic move into companies, their assets and employees into the Dole the fresh-cut flower industry with the acquisition of Flower Division, is an exciting first step in building a several of the largest companies in the floral and flower global flower network. 3 D O L E F O O D C O M PA N Y, I N C . A N N U A L R E P O R T 1 9 9 8
  6. 6. SABA Trading AB During 1998, Dole also purchased the Company is positioning the unit to be a leading sixty percent of SABA Trading AB, the leading importer deciduous fruit exporter as well. Dole South Africa ser- and distributor of fresh fruit, vegetables, and flowers in vices the winter fruit market needs of Dole’s global dis- Sweden. Dole purchased its position from Axel Johnson tribution system, complementing the leading export AB and the Swedish Cooperative Society, each of which position it already maintains in Chile. will remain as minority shareholders. Annual sales total These strategic moves, combined with the 1998 approximately $500 million, with 950 employees. SABA acquisitions and a return to normality of our base busi- adds another strong company to Dole’s distribution sys- nesses, gives us every reason to be optimistic for a year tem, which continues to grow throughout the world. of profitability in 1999. Dole’s new headquarters facility in Westlake Village, a suburb of Los Angeles, will be completed in the latter FINANCING ACTIVITIES Dole strengthened its financial infrastructure in 1998 part of 1999. We are looking forward to combining our with a highly successful $300 million public bond issue. current offices into one building. The efficiency of prox- Additionally, the five-year revolving $400 million credit imity for management and staff will materially enhance facility continues to provide strong operational flexibili- operations and eliminate duplication of efforts. ty. Agents in the facility are Chase Manhattan Bank, Throughout the 14 years that I have been chief exec- Bank of America and Citibank. utive officer of Dole, we have consistently built upon and, I believe, attained the strongest management team in Dole’s history. Throughout the world we have excellent OUTLOOK In a year filled with adversity, Dole continued to senior management as well as creative, well-trained and demonstrate the strength of its worldwide sourcing and dedicated day-to-day managers and employees. Through distribution network. The Dole® brand and quality con- the combined efforts of our workforce, Dole’s fresh fruit, tinued to flourish on supermarket and foodservice vegetable and flower products are grown with respect shelves around the globe. In addition to its acquisitions, for the environment and with a genuine interest in the Dole took a number of steps to ensure continued, accel- health and welfare of our people and the consumer. erated growth of the Dole® brand. We begin 1999 with renewed spirit and commitment In the United States, our value-added salads had to rebuild and rehabilitate, and to accelerate our growth another spectacular year of growth. In Springfield, Ohio, and profitability. We would like to express our apprecia- Dole opened its first processing plant to meet the tion and gratitude to our employees, shareholders and demands for these safe, convenient, ready to eat salads customers for their continued support and confidence. in the Midwestern and Eastern states. New salad prod- Once again, we offer our support and sympathy to the ucts, ready for introduction in early 1999, should con- many thousands of people in Honduras, Nicaragua, tinue to spur demand for Dole salads into the year 2000. Guatemala, and Ecuador where lives were lost and Dole also built and opened its first salad plant in economies affected by this year’s weather disruptions. Japan in 1998, and gained excellent distribution on its first product introduction. Fresh-cut salads are a natural Sincerely, extension to Dole’s powerful perishable distribution network in Japan, and are expected to be a significant growth vehicle in that market. Dole also established itself firmly in South Africa in 1998, following that country’s deregulation of its fresh fruit industry. In South Africa, Dole was the second David H. Murdock largest citrus exporter in its first year of operation, and Chairman and Chief Executive Officer 4 D O L E F O O D C O M PA N Y, I N C . A N N U A L R E P O R T 1 9 9 8
  7. 7. Dole Food Products Worldwide Dole Fresh Fruit Dole Fresh Dole Pineapple Strawberry Dole Fruit Bowls – Diced Peaches Dole Pitted Prunes in Flowers Dole Apples Juice Drink Dole Fruit Bowls – Mixed Fruit Reclosable Bags Agapanthus Dole Apricots Dole Pineapple Tidbits for Pizza Dole Fruit Bowls – Pineapple Dole Seedless Raisins Canister Alstroemeria Dole Bananas Dole Pineapple Tidbits in Juice Tidbits Dole Seedless Raisins Carton Aster Butterfly Dole Blueberries or Syrup Dole Fruit Bowls – Tropical Fruit Dole Seedless Raisins in Aster Mini Rainbow Dole Cantaloupe Dole Pine Orange Banana Juice in Blended Juice Reclosable Bags Aster Montecasino Dole Cherries Dole Rambutan in Syrup Dole Fruit Festival Snack Cup Dole Seedless Raisins Mini Snacks Bells of Ireland Dole Clementines Dole Rambutan Snack Cup Dole Fruit Mix, Easy Open Dole Seedless Raisins Six Packs Bouvardia Dole Coconuts Dole Red Papaya Chunks in Dole Guava in Syrup Dole Sliced Natural Almonds Byplurem Dole Cranberries Light Syrup Dole Guava Halves in Reclosable Bags Calla Lillies Dole Grapefruit Dole Tropical Fruit Cocktail in Dole Ketchup (Regular and Dole Whole Natural Almonds Carnations Dole Grapes Juice and Syrup Hot Spice) in Reclosable Bags Chinese Carnations Dole Honeydew Melon Dole Tropical Fruit Cocktail in Dole Longans in Syrup Saman Delphinium Dole Kiddie Pack (bananas) Syrup with Passion Fruit Juice Dole Mandarin Orange Fruit Cups Dole Soelia Pistachios Eremurus Dole Kiwi Dole Tropical Fruit Juice Box Dole Mandarin Orange Segments Guyennoise Prunor Pitted Prunes Farm Bouquets Dole Lemons Dole Tropical Fruit Salad, Dole Mandarin Orange Segments, Guyennoise Prunor Whole Prunes Freesia Dole Lychees Easy Open Easy Open JA Whole Dates Gerbera Dole Mangos Dole Yellow Papaya Chunks Dole Mango Cubes Snack Cup JA Whole Prunes Gerspider Dole Morado Banana in Syrup Dole Mango Juice Drink Soelia Blanched Whole Almonds Gipsy Dole Native Banana Dole White Asparagus Dole Mango Slices in Blended Soelia Dried Apricots Godetia Dole Nectarines Seasons Pineapple Juice Juice or Syrup Soelia Dried Figs Gypsophilia Dole Oranges Seasons Tropical Fruit Mix Dole Mushroom Soelia Pitted Prunes Kangaroo Paws Dole Papayas Dole Nata de Coco in Syrup Dole Fresh-Cut Soelia Sliced Thin Almonds Leatherleaf Dole Peaches Dole Papaya in Syrup Vegetables Soelia Whole Peanuts Liatris Dole Pears Dole Peach Halves in Syrup Dole American Special Blend Salad Soelia Whole Prunes Lillies Dole Persimmons Dole Peach Snack Cup Dole Caesar Lunch For One™ Whole Deglet Nour Dates Limonium Dole Fresh-Cut Pineapple Dole Peaches in Juice and Syrup Dole Chopped Romaine Salad Lisianthus Dole Pineapple Dole Sliced Peaches, Easy Open Dole Fresh Vegetables Dole Classic Cole Slaw Mini Carnations Dole Plantains Dole Pear Snack Cup Dole Artichokes Dole Classic Iceberg Salad Monk’s Hood Dole Plums Dole Pears in Juice and Syrup Dole Asparagus Dole Classic Romaine Salad Mums Dole Pomegranates Dole Pineapple Chunks in Juice Dole Bell Peppers Dole Complete Caesar Salad Orchidiola Dole Raspberries or Syrup Dole Broccoli Dole Complete Caesar Salad Pompons Dole Satsumas Dole Pineapple Concentrate Dole Brussels Sprouts with Fat Free Dressing Queen Anne’s Lace Dole Strawberries Dole Pineapple Cubes in Syrup Dole Butter Lettuce Dole Complete Creamy Garlic Roses (Hybrid Tea) Dole Super Sweet Pine Dole Pineapple Fun Shapes – Dole Carrots Caesar Salad Rover Mums Dole Sweet Banana Cosmic Dole Cauliflower Dole Complete Oriental Salad Snapdragons Dole Tangelos Dole Pineapple Fun Shapes – Dole Celery Dole Complete Roasted Garlic Solidago Dole Tangerines Sea Creatures Dole Green Leaf Lettuce Caesar Salad with Fat Free Dressing Solidaster Dole Yucca Dole Pineapple Grapefruit Juice Dole Green Onions Dole Complete Romano Salad Spider Mums Dole Pineapple Grapefruit Dole Iceberg Lettuce Dole Complete Sunflower Dole Dried Fruit Spray Roses Juice Drink & Nuts Dole Idaho Potatoes Ranch Salad Star of Bethlehem Dole Pineapple Juice Dole Blanched Slivered Dole Radishes Dole Complete Zesty Italian Statice Dole Pineapple Juice Drink Almonds in Recloseable Bags Dole Red Leaf Lettuce Salad with Fat Free Dressing Stock Dole Pineapple Lychee Juice Drink Dole Blanched Whole Almonds Dole Romaine Lettuce Dole European Special Blend Salad Strawflower Dole Pineapple Orange Juice in Reclosable Bags Dole Sugar Peas Dole French Special Blend Salad Sunflowers Dole Pineapple Orange Juice Box Dole Chopped Dates in Dole Taro Dole Greener Selection™ Salad Sweetheart Roses Dole Pineapple Orange Juice Drink Reclosable Bags Dole Italian Special Blend Salad Treefern Dole Pineapple Orange Raspberry Dole Packaged Foods Dole Chopped Natural Dole Mediterranean Special Waxflower Juice Box Dole Aloe Vera (Solid) Almonds in Reclosable Bags Blend Salad Yarrow Dole Pineapple Pink Grapefruit Dole Apricot Halves Dole CinnaRaisins in Dole Peeled-Mini Carrots Drink Dole Apricot Snack Cup Reclosable Bags Dole Ranch Lunch For One™ Dole Pineapple Slices in Juice Dole Apricots in Juice or Syrup Dole Golden Seedless Raisins Dole Romaine Special Blend Salad or Syrup Dole Crushed Pineapple in Dole Pitted Dates in Dole Shredded Carrots Dole Pineapple Snack Cup Juice or Syrup Reclosable Bags Dole Shredded Lettuce Dole Pineapple Snack Wedges, Dole Deciduous Fruit Cocktail Dole Pitted Prunes Canister Dole Shredded Red Cabbage Easy Open in Juice and Syrup Dole Pitted Prunes Carton Dole Spring Mix Special Blend Salad Dole Fruit Bowls – Cherry Dole Tuscany Special Blend Salad Flavored Mixed Fruit Dole Verona Special Blend Salad 5 D O L E F O O D C O M PA N Y, I N C . A N N U A L R E P O R T 1 9 9 8
  8. 8. Operational Review Dole Food Company is the largest This is true of all of our regions and thus creates an producer of fresh fruits, vegetables international web of Dole trade, tied together by Dole’s and flowers in the world. Dole shipping services and its experienced management employs over 53,500 people who group who work together as a cross-cultural global team. are dedicated to the production, Proprietary agricultural practices, customized sys- handling, and distribution of per- tems, worldwide refrigerated shipping capability, and ishable products throughout the specialized customer service and distribution allow globe. Its products are shipped on Dole to properly handle over five million perishable David A. DeLorenzo Dole vessels which continually cartons per week in over 90 countries of the world. President and Chief Operating Officer cross all of the world’s seaways. Despite the weather, 1998 was a very significant year Dole is organized on both a for the Dole environmental management program. In product and a regional basis. Regions are divided into July 1998, Dole’s banana operations in Costa Rica both sources and markets, and products are produced became the first agricultural producer in the world to both for local regional markets as well as for export to receive certification that its operations conform to the other regions of the world. For example, our Asian environmental management system requirements of region produces both for its own market demand within ISO 14001 (the International Standard Organization’s Asia as well as exports to Dole markets in North environmental management standard). Certification to America, Europe and Latin America. the standard means that Standard Fruit de Costa Rica, a wholly-owned Dole company, has the systems in place to manage its environmental obligations responsibly, The nutritional facts, presented in this report by some of minimizing risks to the environment while maximizing the Dole 5 A Day Fruit and Vegetable Friends, are taken from the quality and safety of its products. Later in 1998, Dole’s subsidiaries in Thailand and Ecuador became the This website, developed along with next operations to be ISO 14001 certified. Other Dole other interactive materials, is part of Dole’s commitment operations around the world are soon to demonstrate to the nutritional education of children and their that they also deserve ISO 14001 certification. Certifica- tion to the ISO 14001 standard is just one more indicator families. Another educational project, scheduled for release that, for Dole, excellence in product quality and excel- in 1999, is THE ENCYCLOPEDIA OF FOODS: lence in environmental protection go hand in hand. THE HOW AND WHY OF HEALTHY NUTRITION, a comprehensive publication authored by nutrition experts at the Mayo Clinic, the University of California, Los Angeles, and Dole Food Company. The beautifully illustrated book will provide healthful dietary guidelines for nutrition and fitness as well as teach the connection between food and nutrients. The recently acquired fresh-cut flower businesses Flower Division Management will integrate well into Dole’s established distribution (Seated): Geno Valdes network and customer base. (Standing, left to right): Lorenzo de la Torre, Lourdes Espinoza, Evelyn Macia, Josefina de Zuluaga 6 D O L E F O O D C O M PA N Y, I N C . A N N U A L R E P O R T 1 9 9 8
  9. 9. To further diversify its wide range of products, Dole acquired several large fresh-cut flower companies in 1998. These acquisitions afford the opportunity of supplying flowers to the supermarket customers that already purchase the Company’s other perishable products.
  10. 10. Innovative field harvesting and packing ensures better quality produce and fast, fresh delivery from field to supermarket.
  11. 11. Dole North America The North American consumer demand for fresh, healthy products allowed Dole to once again reach record market shares in its leading products, such as bananas, packaged salads and canned pineapple. DOLE FRESH VEGETABLES levels, affecting the citrus, deciduous and Dole Fresh Vegetables achieved record sales and earn- almond operations. The Washington apple ings in 1998. The commodity business was the one seg- operations were impacted by hail-related ment that capitalized upon favorable market conditions problems in key orchards. associated with El Niño rains. Additionally, investment in Foremost among the year’s weather- Dole’s state-of-the-art manufacturing plants, customer related events was the freeze that hit service and new products drove fresh-cut salads to new California’s San Joaquin Valley during sales, earnings and market share records. The retail fresh- Christmas week. The extremely low tem- cut salad category continued to exhibit strong growth, peratures associated with this freeze severe- with an eighteen percent increase in sales for 1998. Dole’s ly damaged the Company’s citrus crops growth outpaced the category posting a thirty-five per- that are located throughout the Valley. As cent increase in retail sales for the same period. previously announced, Dole took a charge Based upon strong customer demand, Dole expand- (from top) Lawrence A. Kern, of $20 million, which consists primarily of ed its asparagus operations to provide year-round sup- President, plies. Sales to the food service trade grew significantly as Dole Fresh Vegetables Gregory L. Costley, food service operators turned to Dole for reliable sup- President, plies of consistently high quality and safe vegetable Dole North American Fruit Peter M. Nolan, products. Dole Fresh Vegetables leads the industry in President, food safety. Dole Packaged Foods After extensive research, Dole will introduce an exciting new line of gourmet salads called “Great Restaurant Salads” in early 1999. New products contin- ue to energize the fresh-cut category and Dole is com- mitted to introducing marketing programs and new products that will continue to attract consumers to the Dole franchise. FRUIT OPERATIONS Adverse weather conditions in 1998 affect- ed Dole North American fruit opera- tions. Due to El Niño, rainfall in California and Florida hit record 9 D O L E F O O D C O M PA N Y, I N C . A N N U A L R E P O R T 1 9 9 8
  12. 12. Barney Broccoli says, “Eating cruciferous vegetables such as broccoli, Brussels sprouts, cabbage, cauliflower, and turnips may guard against cancer. Broccoli is an excellent source of vitamin C and a good source of vitamin A and fiber.” crop inventory losses and reductions in grower receiv- Apple operations in Washington State were signifi- able recovery estimates. In addition to that charge, three cantly enhanced by the acquisition of a third packing of five California citrus packing houses have been facility. This purchase, done in conjunction with an closed, and will remain closed for most of 1999. The acreage acquisition by Prudential Insurance Company, major thrust of the California citrus operation in 1999 has resulted in Dole packing facilities operating at near will be to rehabilitate properties in anticipation of the capacity. It has also positioned the Company to better next season. In addition to the charge taken in 1998, handle the increasing varieties of specialty apples, Dole currently estimates that the freeze will negatively including the Cameo apple. impact 1999 operating earnings by approximately $10 The Cameo apple has enjoyed great success and pro- million to $15 million. duction is rapidly increasing. Dole markets the vast Major changes have been made which will position majority of the available Cameo crop, and its market Dole for greater success in the future. The Florida citrus leadership has led to strong acceptance of this product operation entered into a joint venture with Metropolitan and has enhanced returns to Dole Cameo growers. Life Insurance Company. This venture brings together Dole’s farming, packing and selling expertise, with PACKAGED FOODS MetLife’s citrus production properties. The alliance has Dole’s market shares in canned pineapple and canned resulted in one of the strongest operations in the state pineapple juice reached new highs for the 1990 decade of Florida. In California, Dole will be reformatting its of forty-five percent and forty-two percent, respectively. fresh cherry business, which will involve relocating This growth was achieved in spite of significant El Niño- assets to match the growth of the early-season California related supply disruptions from Thailand and the cherry crop. Philippines in 1998. New products continue to play a large role in the growth of Dole Packaged Foods. Two new fruit items, Dole peaches and Dole mixed fruit, were successfully introduced in Atlanta and Jacksonville in early 1998. The expanded line will be introduced to additional mar- kets in 1999. Dole’s cinnamon covered raisins, Cinnaraisins TM, the first new item in the dried fruit category in years, has been successfully introduced in selected markets. The food service division posted its second year of record earnings. Pineapple as a pizza topping has become extremely popular. Dominos Pizza ® named Dole as its “Pizza Topping Supplier of the Year.” In the new product area, mangoes have been added to the “salad bar” line-up to complement tropical fruit salad. Automation is the key to improving the commodity vegetable segment. Also, Dole has been a leader in developing and expanding the value-added pre-cut salad and vegetable segment, investing in production capacity to satisfy growing demand. 10 D O L E F O O D C O M PA N Y, I N C . A N N U A L R E P O R T 1 9 9 8
  13. 13. The fresh vegetable business achieved record sales and earnings in 1998 as the business transitions from commodity to value-added. The highly profitable fresh-cut salad business continues to benefit from strong demand, and the 1998 opening of the Springfield, Ohio plant has helped gain market share, particularly in East Coast markets.
  14. 14. Dole packs fruit in more than 1,000 packing houses throughout Latin America and controls over 135,000 acres of banana producing land.
  15. 15. Dole Latin America Hurricane Mitch wrought devastation to over 30,000 acres of Dole agricultural plantings and infrastructure in Honduras, Guatemala and Nicaragua. Thankfully, no employee lives were lost in the hurricane or its aftermath due to a tremendous out- pouring of assistance and relief aid from Dole’s worldwide family. houses throughout Latin America and controls over 135,000 acres of banana producing land. Dole supplements Company produc- tion and reduces risk by purchasing a significant portion of product needs from independent growers throughout Latin America. Dole assists over 350 growers to BANANA PRODUCTION AND HURRICANE MITCH successfully grow and pack Dole quality bananas. Dole’s team of highly skilled In October of 1998, Hurricane Mitch struck Honduras, (from top) Juergen Schumacher agronomists and technical staff train Guatemala and Nicaragua. This devastating event dam- President, growers about Dole’s environmental pro- aged eighty-two percent of Dole’s producing acres in Dole Latin America cedures and standards. Roberto Zacarias Honduras. The Dole team immediately mobilized to President, assist with relief efforts in the region. Dole employees Dole Honduran Beverage worked around-the-clock to provide emergency rescue BEVERAGES Dole’s majority-owned beverage operation is the domi- services, food, clothing, shelter and medical supplies to nant supplier of carbonated beverages in Honduras, the recovering populations. After extensive review, with commanding market shares of approximately Dole has started to rehabilitate selected parts of the lost seventy-five percent in soft drinks and ninety-nine per- production areas and a recovery program is under way. cent in beer. The operation exclusively represents Looking to the future, Dole expects to recover the Coca-Cola® and Canada Dry® products, and has its own production losses of 1998 and has implemented plans to brand of fruit-flavored soft drinks, Tropical ®, which replace the lost volume related to Hurricane Mitch with accounts for twenty percent of its soft drink sales vol- its Ecuadorian and Colombian sources. ume in Honduras. Soft drink consumption per capita in The past year has been one of the most challenging Honduras is one of the highest in Latin America. The production years in recent history for Dole’s banana division also produces and/or distributes four leading operations. Extreme flooding from the El Niño weather domestic brands of beer, along with the internationally phenomenon reduced overall banana industry produc- recognized brands of Holsten ® tion by eighteen percent in Ecuador, and drought condi- and Budweiser ®. Vertical tions caused by El Niño reduced industry production by seven percent in Colombia. Despite extremely adverse weather effects, total Dole production decreased only seven percent from the record year in 1997. Over 22,000 employees are part of the Dole Latin America team which strives to bring to market the quality, safest fresh produce possible. Dole highest quality, safest fresh produce possible. Dole p a c k fruit i n more h a n 1,000 a c k i n g packs s f r u i t in m o r e t than 1, 0 0 0 ppacking 13 D O L E F O O D C O M PA N Y, I N C . A N N U A L R E P O R T 1 9 9 8
  16. 16. “Just one-half of a grapefruit contains all of the vitamin C your body needs for the day,” proclaims Gretta Grapefruit. Vitamin C heals cuts and scrapes, helps teeth and gums stay healthy, bones stay strong, and may also reduce the risk of heart disease and some types of cancer. operations include a sugar mill, a plastic case and bottle JOINT VENTURES/NEW BUSINESS business, and bottle cap manufacturing. The division OPPORTUNITIES Proban Alliance At the close of 1998, Dole entered into a also operates an edible oil and soap operation with well- strategic alliance with Proban, a well-established promi- established local brands. nent grower group in Colombia. As a result of this During the year, a new soft drink bottling line was alliance, Dole will ship approximately twenty-eight per- installed. State-of-the-art technology is used for the pro- cent of total Colombian banana exports. This addition duction of the family-size returnable plastic bottle that will yield greater efficiencies and lower production and Coca-Cola® has strategically positioned in Latin Ameri- shipping costs. ca to expand sales. Additionally, eight new beer tanks for fermentation and maturation were added to Dole’s exist- Value-Added Dole Latin America continues to focus on ing facility. These and other plant upgrades are being its core products and markets and evaluate opportuni- made to fulfill projected growth in product demand. ties to build earnings and expand the Dole® brand name Dole’s efforts to expand its responsibility for product throughout Latin and South America. Dole expanded distribution in Honduras’ rural regions continue and its local Chilean distribution business by opening a new, Dole now handles approximately eighty percent of these state-of-the-art distribution center. Additionally, Dole sales. This strategic move has rendered outstanding constructed a new salad processing facility at this site results as new routes and distribution centers are added. that marks Dole Latin America’s entry into the fresh Damage by Hurricane Mitch, particularly in the rural vegetable value-added business. regions of Honduras, continues to affect Dole’s distribu- Dole also completed a state-of-the art fruit processing tion in this market but it is expected that this situation facility in Honduras and plans to launch fresh, processed will significantly improve in the forthcoming months. products into the North American market in 1999. CHILE Today, Dole Chile exports to over fifty countries world- wide. Dole Chile had another record year of export vol- umeswith the exportation of 18 million packagesof grapes, stonefruit, apples, pears and kiwis. Dole continues to be Chile's largest fruit exporter and the volumes in 1998 further established Dole’s position as the premier Chilean exporter. Throughout the world, the diversification of markets gives Dole great flexibility in maximizing sales and directing product volumes when facing challenges in certain markets. In 1998, this allowed Dole to success- fully send fruit to different markets after the virtual eco- nomic collapse of several Asian nations as well as Russia. Great care goes into the packing of Dole bananas by thousands of dedicated employees throughout the world. 14 D O L E F O O D C O M PA N Y, I N C . A N N U A L R E P O R T 1 9 9 8
  17. 17. Dole has the world’s largest dedicated refrigerated containerized shipping fleet, which will be strengthened in 1999 with the addition of two new state-of-the-art vessels.
  18. 18. Increased automated field harvesting and packing at Pascual Hermanos in Spain has assisted in expanding the division to be a year-round, rather than seasonal producer of fresh vegetables.
  19. 19. Dole Europe Dole Europe sales were $1.2 billion in 1998. Dole Europe continued to concentrate on building retail relationships through service. The essence of the Dole ® brand is William F. Feeney, consistency in both product quality and President, Dole Europe condition, on-time delivery, innovation, range of product line, and an assurance of agricultural and distribution practices that meet the highest criteria of food safety and environmental protection. FORWARD INTEGRATION SOUTH AFRICA Dole Europe completed the acquisition of sixty percent The new South African government deregulated fresh of SABA Trading AB during the fall of 1998. SABA is fruit exports at the end of 1997. Previously, growers Scandinavia’s largest fruit and vegetable importer and were required to export through export boards, which distributor with over $500 million in sales. Headquar- controlled distribution through European panelists. tered in Stockholm, Sweden, SABA has banana ripen- South Africa is a major supplier of citrus, apples, grapes, ing facilities, produce distribution centers and flower pears and stonefruits to Europe. Dole founded Dole distribution facilities throughout Sweden. Dole is the South Africa in March 1998, at the beginning of the cit- majority shareholder while two of Sweden’s largest rus export season, establishing it as the second largest retail groups each hold minority shares. SABA provides citrus exporter behind the South African Citrus Board. Dole with an opportunity, in joint venture with retailers, to develop retail service centers and add value to Dole’s produce imports. SABA owns one of Europe’s largest exotic fruit import and distribution companies, FTK Netherlands. Together with Dole’s exotic fruit importer VBH, Belgium, Dole has added leading lines of exotic fruits, such as mango, avocado, passion fruit and lychee to its expanding product range. 17 D O L E F O O D C O M PA N Y, I N C . A N N U A L R E P O R T 1 9 9 8
  20. 20. Kevin Kiwi is proud of the fact that two kiwifruit provide 240% of your body’s daily requirement for vitamin C, and one serving provides 16%, 14% and 10% of your daily requirements for fiber, potassium and vitamin E, respectively. First season citrus exports exceeded $25 million. Dole ducer. Dole looks forward to a large contribution from South Africa began stonefruit and grape exports in Pascual Hermanos through expanded produce volume, November while the main export season of grapes, distribution range and profit growth. apples and pears is early 1999. Dole South Africa will have nearly $100 million in sales for 1999, supplying RUSSIA southern hemisphere fruits to Asia, North America, and The collapse of the Russian economy during the sum- Europe, fully complementing the Dole Chile export and mer of 1998, resulted in drastically reduced banana and marketing programs. other fresh fruit sales to that market. The Russian prob- lem also had short-term effects on adjacent markets such as the Ukraine, Poland and the Balkan states. SPAIN Dole’s Spanish citrus and vegetable business, Pascual Dole’s St. Petersburg office has reduced receivables and Hermanos, greatly improved performance during 1998. selected only sound and reliable distributors that can Management was changed and the citrus operation withstand the pressures of uncertain economic policy. downsized. Citrus programs focused on supermarket Dole continues to cautiously supply the Russian market requirements. The iceberg lettuce operation was which represents over 150 million consumers. The improved with increased drip irrigation and expanded reduction in Russian imports puts considerable pressure field packing. Production was increased in specialty sal- on other Eastern European markets which made pricing ads such as baby lettuce and leafy salads. Specialty in the second half of the year very challenging. tomato production, especially cherry tomatoes, was increased with expanded green housing. Pascual Her- NEW EUROPEAN UNION QUOTA manos is now a year-round, rather than a seasonal pro- The European Union has changed the E.U. banana regime, commencing January 1999, due to a ruling by the World Trade Organization (“WTO”) subsequent to complaints from the United States, Ecuador, Guatemala, Honduras, Panama and Mexico. There will continue to be a Latin American Quota and an ACP Quota (i.e., former European colonies in Africa, and the Caribbean) as well as licenses and tariffs on Latin American production. The new regime is still being challenged by the United States and Latin American banana producers and will be subject to new WTO panel findings early in 1999. SABA, the recently acquired Scandinavian fruit and vegetable distribution business, is a significant step in Dole’s strategy to be the dominant supplier of fresh produce in Europe. 18 D O L E F O O D C O M PA N Y, I N C . A N N U A L R E P O R T 1 9 9 8
  21. 21. Dole’s acquisitions of SABA Trading AB of Sweden and Pascual Hermanos of Spain have increased the Company’s European growing and packing capacity and added strength to Dole’s transportation and distribution network.
  22. 22. In Asia, Dole has the broadest product mix of any region in the world. In Japan, Dole is developing partnerships with local retailers and distributors to jointly establish ripening facilities and distribution centers.
  23. 23. Dole Asia Despite the 1998 El Niño weather pattern, Dole Asia achieved sales of approximately $800 million by the maximum utilization of its production resources in Asia and its sourcing capability with affiliated Paul Cuyegkeng companies and strategic partners around the world. President, Dole Asia Dole Asia sales in Japan, its flagship market, operation in 1998. This year, Stanfilco shipped increased seventeen percent in local currency more than twenty-three million boxes of fruit to compared to 1997. This increase was achieved by Japan, Korea, China, New Zealand and the Mid- continued consumer confidence in Dole’s high dle East, while Dolefil, Dole’s pineapple produc- quality banana and pineapple products, and the tion division also located on Mindanao, produced successful new product introduction of locally 414,000 tons of fresh and processed pineapple. processed, fresh-cut vegetables and salads. In early 1998, Dole Asia’s key divisions in the Dole’s new product line of fruits packed in Philippines and Thailand embarked upon a cost clear plastic cups continues to enjoy brisk sales in reduction program designed to counter the Asia and Europe. Manufactured primarily by expected negative effects of El Niño. Tropifresh, Dole Philippines and Dole Thailand, these conve- Dole Asia’s diversified fruit, vegetable and cut nient fruit cup products provide Dole’s customers flower producer located in the Philippines, sig- with an excellent alternative to conventional, nificantly reduced its farm maintenance costs. canned fruit packaging. The addition of Dole’s high quality, value- DISTRIBUTION added pre-cut vegetables and fruit cups further Despite the economic recession in Asia, demand expanded consumer awareness of the Dole brand remains high for Dole ® products in Japan. in Asia where Dole enjoys a ninety-two percent Dole currently markets more than 100 consumer brand recognition. products in Japan, the broadest product LOW COST PRODUCER Devaluation of currencies in Asia contributed favorably to reducing the cost of Dole Asia key operations from production to marketing. As expected, Dole Asia experienced downturns in its pineapple, banana, asparagus and papaya opera- tions due, in part, to the El Niño-related drought in Thailand and the Philippines. Stanfilco, Dole Asia’s producer of high quality bananas located on Mindanao in the Philippines, celebrated its 30th year of 21 D O L E F O O D C O M PA N Y, I N C . A N N U A L R E P O R T 1 9 9 8
  24. 24. Bananas are a good source of fiber, vitamin C, and potassium. One Bobby Banana has 16% of the fiber, 15% of vitamin C, and 11% of the potassium we need every day for good health. mix of any region in the world. Following Dole Asia’s By early 1999, Dole Asia’s largest corrugated box strategy of forward integration, nine Dole distribution manufacturing plant, Carmen Corrugated Containers centers were fully operational in 1998, which allows (“CCC”), will be in full operation. CCC will service the Dole to service its customers more efficiently with the increased packaging requirements of Dole Asia’s divi- optimal product quality control. Dole Asia opened its sions in the Philippines as the new century begins. latest Dole Distribution Center in Manila, again affirm- ing Dole Asia’s commitment to deliver the freshest, PARTNERSHIP WITH GROWERS highest-quality products possible to all of its customers. Following its successful partnering with growers in the Philippines, Dole Asia expanded its contract-grower program to other parts of the region, creating revolution- MAJOR INVESTMENTS Dole Asia pursued an aggressive strategy of infra- ary changes in the Asian agribusiness structure. From an structure development during 1998. In September, initial base of 1,200 Japanese farmers in 1997, Dole’s net- Dole opened a Vapor Heat Treatment Plant in the work of contract growers has rapidly expanded, giving Philippines, the first plant of its kind in the Southern Dole a larger source of domestically grown products, Philippines. The Vapor Heat Treatment Plant is particu- such as broccoli, tomatoes, cherry tomatoes, cabbage, larly important to the efficient, high-quality production radishes, carrots, lettuce and melons for distribution to of mango and papaya and is enabling Dole Asia to forge Dole Distribution Centers throughout Japan. Dole Asia new partnerships with mango and papaya growers hopes to enlist 20,000 Japanese farmers by the year located on Mindanao. 2002. Dole Asia’s contract-grower program is being expanded to include local farmers in Thailand, for pineapple, papaya, guava and passion fruit. GROWTH OPPORTUNITIES As the effects of 1998’s long drought diminish, Dole looks forward to opportunities for growth in the Asia- Pacific region. In New Zealand, the newest and largest supermarket, Pak ’N Save, opened for business during 1998 carrying Dole products as its preferred fresh produce brand. In Japan, increased demand for value-added products will provide further opportunities for growth into the future. Economic resurgence in the Philippines, increased demand in Japan and New Zealand, and decreased trade restrictions in China, Taiwan and Korea offer growth opportunities for Dole Asia. Dole Asia’s Philippine banana division has begun phasing in a new cropping technology. This new process is designed to augment productivity by as much as thir- ty-five percent, and enable Dole to match high yield periods to seasons of high market demand. The system, One of the keys to delivering the freshest, highest quality produce throughout the world is developed by Dole scientists based in Mindanao, Dole’s substantial investment in refrigerated containerized shipping. assures lower chemical usage, consistent with Dole’s commitment to establishing ways to provide high-quality products while protecting the environment. 22 D O L E F O O D C O M PA N Y, I N C . A N N U A L R E P O R T 1 9 9 8
  25. 25. Dole canneries processed and shipped over 648,000 tons of fresh and packaged pineapples in 1998.