Against the odds: Days at sea with Fresh Del Monte
With all the talk of retailers and forwarders launching their own shipping lines, it is easy to forget that for decades in one sector, a vertically integrated supply chain, including owning and operating a fleet of ships, was the norm.
The banana business was, and to a lesser extent still is, dominated by a handful of household names and, while Lidl’s creation, Tailwind Shipping, may not be a deliberate imitation of the shipping traditions of firms such as Geest, Dole, Fyffes, Chiquita and Del Monte, it does come from the same desire to take greater control over its supply chain.
There is, thus, some irony in the fact that Del Monte’s shipping arm, Network Shipping (NWS), recently began seriously marketing space on vessels to third-party shippers exhausted by high freight rates, space shortages and irregular schedules.
Those same high freight rates induced Del Monte to invest in a whole image rebrand for NWS, in part because its surging revenues offset disappointing banana and fresh fruit sales.
“We have been running a shipping operation for the past 30 years and the team that does it has an average of 20 years’ experience,” NWS commercial manager Francis McCawley (pictured below) tells The Loadstar when asked what advice he might have for other shippers setting up shipping lines.
“That has been key – I would say you need to be careful; people can lose a lot of money in shipping, but if you want to invest in ships you must have the experience in your team.”
NWS operates four main routes, from Guatemala, Costa Rica, Ecuador and Peru into the US ports of Hueneme (near San Diego), Galveston, Manatee in Florida and Gloucester in New Jersey, which are mostly operated by port authorities.
“These are multipurpose facilities in niche ports, and in each of them we have a partnership with the cargo handlers. We don’t operate the terminals but do have cold storage facilities close by, which are in some cases operated by the port and sometimes by ourselves.
“The key for us is smaller ports that are multipurpose and where we are the biggest customers,” he says, since its fully cellular ships, as well as the remaining breakbulk vessels in its fleet, are geared “to give us the loading flexibility we need”.
The 1,300 teu vessels are equipped with 634 plugs, every 40ft slot has a plug, and how much capacity it can offer third-party shippers depends on the season and the trade, as well as Del Monte’s own cargo forecasts.
“Sometimes it is 30% of vessel and sometimes it is as much as 50%,” says Mr McCawley.
“We have pretty good forecasts from Del Monte, which we treat as our biggest customer, and with these in mind we can then go and sell capacity and make a commitment to other shippers – but the really important thing for us is that we stick to those commitments.
“The higher demand for our services has been triggered by a couple of things: one is the well-known difficulties the global carriers have having; the second is the internal change we made with this new idea of exploiting our value proposition.
“It has always been a reactive service – we offered it to people who knew we existed and understood we had spare capacity, but now we have a new platform and, in the last year, we have tripled our customer profile.”
One crucial difference was a change in sales strategy – whereas previously there was a mixture of staff and agencies, NWS embarked on a full agency model and signed a partnership with Inchcape,
“The reality is that shippers are very unhappy with the solutions they currently have. When we began talking to local exporters in Latin America we found they were craving an alternative, a boutique service built for perishable cargo, and our schedule reliability is near 100%.”
However, there are also considerable volumes for the southbound US-Latin America leg.
“There is also a big pool of cargo southbound, both dry and reefer, including paper, used cars, resin and meat, and there are big-name shippers on our customer list, including Walmart and Pepsi,” Mr McCawley says, with some 8,000 leased reefer containers available to be employed as reefer or dry units.
NWS will also offer hinterland logistics services, particularly to Latin American perishables exporters, especially given the infrastructure that the parent company already has in place.
“We began with the shipping line, but Del Monte as a group is vertically integrated, so there are a lot of assets we can provide because its logistics network in the US is huge – there are distribution centres, cold storage facilities, fresh cut processing facilities, trucks and chassis, and we have already started selling end-to-end services.
“We are mix between cargo owner and logistics provider and the network has enough capacity for smaller exporters to tap into it; let’s say I am moving 18 pallets from Manatee to Miami and you are an SME who moves two: I can take those on my truck. Or maybe your fruit was rejected by a wholesaler, well I may be able to take that fruit into a fresh cut facility and use it that way.”
But that does raise the question of whether smaller shippers are comfortable entrusting their logistics to such a heavyweight competitor. Is NWS subject to a conflict of interest?
Mr McCawley: “It was a sensitive topic at first, but we regularly carry shipments for our main competitors such as Geest, Fyffes and Dole.
“However, the fact is that today SMEs don’t have many alternatives, and for us this is a statement of a new era – we survive together,” he says, using the sort of language favoured by Silicon Valley start-ups
“Look at shipping alliances, they are a ‘new normal’ today compared with a few years ago. There is a new economic ecosystem; a sharing economy and we see it everywhere.
“The fact is that the fruit is going to arrive in the US anyway… it’s a change in mindset for the industry, we think in terms of fruit and not in terms of boxes.”
The arrival of containerisation to the fruit shipping business opened up international markets, that had once been the sole preserve of the majors, to small and medium producers, and NWS is now committed to deploying reefer-special container vessels. This is a strategy most of the main reefer operators are adopting, as per yesterday’s order from Belgian operator Seatrade for four 1,800teu containerships from the Huanghai Shipyard in China for delivery in late 2023.
“We have tested empirically that container is better than breakbulk, but at the moment new vessels are very expensive and the lead times are very long. Our ambition is to grow organically and keep offering a boutique service,” Mr McCawley concludes.