News / Fruit ships and trucks steer clear of Del Monte bankruptcy

Del Monte Spirit Photo: VesselFinder

News that Del Monte Foods yesterday filed Chapter 11 bankruptcy proceedings should not concern fruit producers using the 12 vessels owned by Fresh Del Monte Produce, or its trucking network. 

The shipping and logistics arms, called Network Shipping, and Tricont Trucking & Logistics respectively, the capacity of both of which are available to third parties, are not related to the various Del Monte companies which are undergoing financial restructuring. 

Fresh Del Monte is an unaffiliated, publicly listed company, which has an exclusive, free license to use the Del Monte trademark for processed foods in Europe, Africa and the Middle East, and a worldwide exclusive license to use the trademark in connection with fresh fruit and vegetables. 

Fresh Del Monte is in fact the far bigger company, with nearly 34,000 staff, as opposed to less than 3,000 in the Foods company. 

Del Monte Foods ran into trouble when high demand and “strong performance” in 2022 led it to commit to high production volumes for the 2023 ‘pack season’, June to October, when it purchases inventory and packs the products. 

A forecast of higher orders led Del Monte to increase its debt facilities to provide the necessary liquidity for the pack season. While 2023 again saw strong demand, leading Del Monte to boost orders again, demand fell in 2024. 

“The company’s outsized production commitments caused it to incur increased promotional spend to move excess inventory, as well as incremental warehousing and logistics costs to manage the surplus inventory,” notes the bankruptcy court filing. 

“On top of these market-driven pressures, the company has been highly leveraged for a number of years, with an average balance sheet always exceeding $1bn in funded debt. The sharp rise in interest rates in 2023 and 2024 increased the company’s annual cash interest expense to approximately $125m, which materially exceeds the company’s current projected annual EBITDA.” 

In fact, it made an $118m loss in the year ending April 28, 2024. 

The business, which claims to be one of the US’s largest producers, distributors and marketers of quality food, is expected to continue operations as it pursues a “value-maximising sales process as part of an overall strategic balance-sheet restructuring”, together with support of its lenders. 

Meanwhile, the Network Shipping vessels, owned by Fresh Del Monte, continue to ply the waters around central and North America.  

During the pandemic, it offered up capacity for other shippers, which due to high freight rates in part offset a poor banana season. But speaking to The Loadstar at the time, NWS commercial manager Francis McCawley warned that shippers investing in ships should be wary. 

“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.” 

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 the vessel and sometimes it is as much as 50%,” said 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.” 

Tricont Trucking & Logistics, which has more than 350 trucks and trailers, moves products from farms and packaging facilities to the ports, and from the ports to the distribution centres within three days. It also offers space to third parties.