Low banana prices "can't go on forever" - Del Monte CEO
Retailers will have to increase banana prices in the future with the industry facing ongoing challenges and rising costs, according to Fresh Del Monte (NYSE: FDP) CEO Mohammad Abu-Ghazaleh
He said that the global banana business structure is unsustainable and would inevitably see adjustments.
"The banana business has been, you know, in turmoil for the last -- I would say 10, 15 years. And I think that this cannot hold forever," he said on an earnings call.
He explained that costs are going up in "every respect" - including production and transportation.
There would like "come a point" where retailers would have to rethink their systems on keeping banana prices low, he said.
"The buyers have to understand that unless the prices are adjusted going forward there will be a time when there will be issues in this industry," he said. "And I believe it will adjust by itself as we go forward."
"Aside from the disease, I mean, I don't want even to mention the disease, but actual situation the structure of this business cannot be sustained forever."
Abu-Ghazaleh noted that many produce companies - not just those that work with bananas - have been going through "severe financial difficulties".
"And it's just because of not coping with the cost increase and rationalizing their business," he said.
"So I think as Fresh Del Monte ... in my opinion, we are a pioneer into this area and we know how to take care of the future. I believe that we can see the future in a clear way."
In addition, he noted that banana demand was in Europe is currently better than normal for this time of year. North America and Asia are in line with normal trends, he said.
Abu-Ghazaleh's comments came on an earnings call on the company's financial results in the third quarter.
Fresh Del Monte enjoyed a "strong" performance over the three-month period ended Sept. 27. It swung to a profit, with net income of US$18.1m compared to a loss of US$21.5m the previous year.