Ed Lonergan has been chief executive at Charlotte-based Chiquita Brands International for eight months. At the company’s annual meeting Thursday, held in Charlotte for the first time, he emphasized a break with the past.
While outlining the company’s strategy to reverse years of declining revenue and profits, Lonergan also faced shareholder questions about Chiquita’s role in Colombia and past payments to guerilla organizations.
On the 11th floor of the NASCAR Plaza office tower, where Chiquita is headquartered, Lonergan addressed the company’s financial picture, saying it was his predecessor’s strategy that left the company in a place where it had to restructure. Former CEO Fernando Aguirre left Chiquita last year.
“We ended up in a situation in the middle of last year where we had to look at restructuring,” said Lonergan. Without mentioning Aguirre by name, he said that from 2004 to 2012 – the years Aguirre headed Chiquita – the company focused too much on new products and diversifying away from bananas.
“We devoted significant invested capital, R&D and people to make that happen,” said Lonergan. But he said Aguirre’s “center store strategy” – selling packaged products in the middle grocery store aisles instead of fresh produce around the edges – never paid off.
“We were not able to turn that into revenue in the store,” said Lonergan.
Part of the problem, he said, was that packaged food companies like Procter & Gamble – where Aguirre and Lonergan both previously worked – have deeper pockets to promote their goods.
As a result, Lonergan said, selling and administrative expenses at Chiquita rose to 11 percent of revenue, above the industry average of about 7 percent. Now, the company must “focus on the core” – bananas and salads – and “eliminate distractions,” such as the grapes, avocados, smoothies and fruit cups that Aguirre championed.
“All those diversions of spending and effort, we don’t do those anymore,” said Lonergan, a turnaround specialist who previously oversaw a restructuring at industrial cleaning products company Diversey Holdings.
Last year, Chiquita was one of the few companies to fail a nonbinding “say-on-pay” shareholder vote on executive compensation. As a result, Chiquita added more conditions to its pay packages and sought to tie payouts more closely to the company’s performance. The board of directors awarded Lonergan just under $6.2 million for 2012, $5.6 million of which is in stock and options.
At Thursday’s meeting, shareholders voted to approve pay packages for the top executives this year. Chiquita said it would release the exact vote totals within a week.
Chiquita was lured to Charlotte from Cincinnati in part with more than $22 million worth of state and local incentives, contingent on bringing jobs. Lonergan said Thursday that the company has about 300 employees in Charlotte, half hired locally, and is ahead of its job creation targets for the incentives.
Colombia still an issue
About 10 activists stood outside Chiquita’s headquarters on Stonewall Street holding signs with slogans such as “No Blood for Profit.” The group Witness for Peace is calling on Chiquita to make reparations for payments to Colombian paramilitary groups, which Witness said caused around 14,000 deaths in Chiquita’s banana-producing lands.
Chiquita claims it was extorted and paid off the guerrillas to keep employees safe. The company paid $25 million worth of fines to the U.S. Justice Department for the payments in 2007.
Jeanine Legato works in Colombia and flew to Charlotte for the annual meeting. She read a statement to Lonergan and other top executives.
“There has been no reconciliation in Colombia with victims of these payments,” said Legato. “Twenty-five million (dollars) paid to the government is a slap on the corporate wrist.”
She asked Chiquita to set up a compensation fund for victims, release more documents related to the payments, publicly apologize and fire any employees who were involved with the guerrilla payments.
Chiquita executives met with Legato to discuss the group’s concerns after the meeting.
Shares of Chiquita rose 29 cents, or 3 percent, to $10.12 a share on Thursday.
Portillo: 704-358-5041 On Twitter @ESPortillo
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