Dole Foods Transitions to Packaged Goods; Do they Have the Brains?

George is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Dole Food Co (NYSE: DOLE) reported great numbers and the market bid up the price of the stock. Yeah for the investors. In reading the annual report and reading the conference call transcript one cannot but help be struck about the transition Dole is experiencing. As a food company dealing with the ultimate perishable fresh fruit with the financial complication of foreign currency and energy costs, Dole was all about commodities and execution. High wire acts within high wire acts.

The company is moving toward more value added higher margin brand driven offerings. Packaged salads, smoothies and other packaged offerings are still being discussed clinically in the context of operations and financial impact. Management did not provide a context from a consumer perspective and discuss say nutritional aspects, trends in consumption, household spending, convenience for the family unit. Something along the lines that a grocery store would pursue trying to engage the consumer.

So the question becomes can Dole continue to transition to higher margin value added package goods products? Or will they always be beholden to the market price of iceberg lettuce? Looking at the board there is no marketing end customer expertise. As a matter of fact the board is skimpy and does not have depth so management is probably keeping the board at bay and running matters the way they want to.

Looking at the packaged goods industry, Sara Lee (NYSE: SLE) comes to mind. They are almost entirely packaged goods of one variety or another. They are attempting to unlock shareholder value by triggering a few divestitures, while at the same time splitting the company into several segments which are more pure play. Essentially this is code for establishing channels or silos based on core commmodities. Dole already has some of the high ground in commodity channels and can develop strength as a higher margin packaged goods marketer.

The key executives listed on Morningstar do not show any marketing or packaged goods expertise. So you have the inexperienced leading the unknowing. Somewhere you have the potential for an expensive learning experience that shareholders may not appreciate. Food at the consumer level has a high degree of faddish and branding. Why do people buy one brand of frozen pizza vs another? The packaged goods professionals know the customer mindset better than the commodity purveyors. Dole Food needs to acquire this intellectual property immediately if not sooner.

George Gutowski writes from a caveat emptor perspective.


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