Del Monte says Trump’s protectionist policies may lift sluggish US sales

DEL MONTE Pacific, Ltd. is looking to hike its exposure to China, while the protectionist policies of President Donald J. Trump are seen giving a lift to sluggish sales in the United States.

Del Monte Chief Operating Officer Luis F. Alejandro told reporters that China will play a big role in Del Monte’s global expansion, eventually accounting for a third of revenues from operations in Asia.

The company currently sells fresh pineapples in China under the S&W brand and contributes less than 10% to sales in Asia.

“We have a long way to go in penetrating China, which is the biggest of them all. We are not even where we want to start in China,” Mr. Alejandro said during a road show to kick off the sale of the company’s dollar-denominated securities amounting to up to $250 million on Wednesday.

Aside from China, Del Monte Pacific has identified South Korea, Japan and Indonesia as “priority” areas for expansion in line with a multi-year goal to jack up the share of the non-US businesses to 40% of total revenues from 20%, and reduce the contribution of the US to 60% from 80%.

“That will be a better balance but we will grow the whole business in five years,” Mr. Alejandro said. The details of the five-year program will be released in June.

Despite its shrinking contribution, the US will continue to have a huge share in the total portfolio, with Mr. Trump’s policy of protectionism expected to boost revenues in the world’s biggest economy.

“The branded business for vegetables, that is really growing... but the core fruit, particularly peaches and pears, that one is pretty much challenged. That’s where we love President Trump because a lot of peaches in the US are coming from China. That in itself is a threat,” Mr. Alejandro said.

Mr. Trump had earlier threatened to slap a 45% tariff on imported goods from China.

“I don’t know to what extent ( will be Mr. Trump’s impact). Whatever way we have been able to grow our international business, we will use whatever experience we have to help the US,” Mr. Alejandro said.

Turnover of US unit Del Monte Foods, Inc. fell by an annual 3% in the third quarter of its fiscal year ending in April amid lingering weakness in the canned fruit industry, supplyrelated issues that dampened the sales of regional brands in the packaged vegetable category, and lower sales of the private label business.

“We will drive growth and we are doing significant work in our cost structure in the US to improve margins because only in improving margins will you have the oxygen for innovation and marketing activity to stimulate consumption in the US,” Mr. Alejandro said.

Del Monte intends to downsize its low-margin private label business, which accounts for a fifth of US sales, and instead focus its resources on sustaining the growth of its bigger branded business.

For fiscal year 2018, Del Monte is allocating as much as $80 million — within the vicinity of the planned $70-million spending for the fiscal year 2017 — for its US and Asian operations, its Chief Financial Officer Parag Sachdeva said.

Shares in Del Monte were unchanged at P12.20 each on Thursday.