Chiquita Brands International has boosted its investment in marketing in a bid to counter the growing pressure it is coming under from private label.
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Speaking after the company booked a return to profits in the third quarter, chairman and CEO Fernando Aguirre admitted that sales volumes had been hit as Chiquita adjusted its product mix to exclude unprofitable contracts.
Stripping out the impact of those contracts, Aguirre said that volumes would have increased by “about 1%”.
However, Aguirre admitted that Chiquita’s businesses – particularly the group’s US prepared salad unit – are facing increased competition from private label, which has gained traction during the economic downturn.
“The current economic recession has surfaced new challenges such as the temptation of customers to try private-label products,” he said.
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By GlobalData“While we see some United States grocery retailers moving increasingly towards private label, especially in lower-priced items, our focus remains on generating profitability on our high-quality premium brands, rather than just gaining volume, even if that entails giving up additional share points to achieve our target profit margins,” he insisted.
Aguirre said that Chiquita was successfully fending off this threat because it benefited from its position as market leader, having the “awareness that we have” and “spending in consumer marketing”.
He suggested that this investment, coupled with retailer’s efforts to grow the prepared salad category, would allow Chiquita to continue to see sales gains at its fresh salad business.
“We’re pretty confident that we’re going to be able to convince the great majority of our consumers to continue buying Fresh Express,” Aguirre said.
I think frankly, also from some of that effort from our customers, there will be some new consumers that will come into the category. This is a very, very underdeveloped category, with people buying Fresh Express salads every other month, and we believe there could be tremendous opportunity for growth.”
