DEL Monte Philippines Inc. (DMPI or the Company), the second largest and most profitable subsidiary of Del Monte Pacific Ltd., generated sales of P27.6 billion in the financial year ending April 2018 (FY2018).
About two-thirds of DMPI’s sales are in the core Philippine market, and the balance in exports which gives the Company a natural hedge against the US dollar. Sales in the Philippines expanded by 6.7 percent to P16.9 billion, offsetting the marginal 1.9 percent decline in export sales to P10.6 billion, resulting in a 3.4 percent growth in total DMPI sales.
DMPI has been in operation in the Philippines for over 90 years and is the market leader in the canned pineapple and mixed fruit, canned and Tetra ready-to-drink juices, tomato sauce and spaghetti sauce categories, under its iconic Del Monte brand. The Company is one of the largest food and beverage companies in the Philippines, which has one of the fastest growing economies with consumption driving over 70 percent of its economy.
In the past three years since DMPI generated sales of P22 billion in FY2015, sales have grown by P5.6 billion to P27.6 billion at a compounded annual growth rate of 7.9 percent, higher than GDP growth. The Company expanded sales in the Philippines across all categories led by culinary, followed by beverages and packaged fruits, as well as all channels led by foodservice, followed by modern trade and general trade.
DMPI exports under the S&W brand and private label. During the same period, exports grew albeit at a lower rate, as it changed its sales mix to focus on growing its branded business, from less than half to nearly two-thirds of total sales. The Company expanded its sales under S&W fresh and processed pineapple at a compounded annual growth rate of 28 percent to P3.7 billion in Asia and Middle East markets, while it reduced its private label and commodity business during this period. S&W fresh sales rose more than ten-fold in the past 10 years.
Philippine market sales in FY2018 were higher by 6.7 percent at P16.9 billion as foodservice sales grew by a robust 15 percent to P3 billion, riding on the rapid expansion of quick service restaurants and convenience stores as well as the Company’s growth of its juice dispensers, meal partnerships and customized products.
In retail, the packaged fruit and culinary categories also grew strongly by 7.9 percent and 7.7 percent, respectively. DMPI continued to invest in driving inclusion of Del Monte products in consumers’ weekly menu through its marketing campaigns.
DMPI’s innovation thrust was led by the launch of Del Monte 100 percent Pineapple Juice in Tetra Pak, the Company’s fastest growing beverage segment in FY2018. This product offers more convenience to consumers with its resealable cartons in four healthy variants (vitamin ACE for immunity, Fiber-Enriched for daily detoxification, Heartsmart for cholesterol management and Bonesmart for calcium enhancement).
The Company also made its initial foray into the juice with particulates market with the introduction of Del Monte Juice & Chews in bottles, a delicious snack-in-a-drink combining nata and pineapple bits, and entered the isotonic drinks market with Del Monte Fit ‘n Right Active, a refreshing sports drink with electrolytes and L-carnitine for rehydration and weight management.
Launched in FY2017, Del Monte Creamy and Cheesy Spaghetti Sauce continued to achieve strong double-digit sales in FY2018 as the only spaghetti sauce with added cream and cheese in the market, while Contadina, launched in the same year, also continued to post healthy double-digit growth and is now the market leader in imported pasta sauces in the Philippines.
Innovation anchored on health and wellness contributed to about 20 percent of the growth of the Company in the past 10 years with sales increasing more than three-fold to P16.9 billion. The most successful innovations have been Fit ‘n Right drinks, Pineapple Tidbits in pouches, Pineapple Juice Heartsmart and Juice Drinks in Tetra Pak.
Export sales of DMPI in FY2018 were driven by its S&W business, the fastest growing business of the Company in Asia and the Middle East, led by robust sales of fresh pineapple. Exports also included product launches in new packaging formats in North Asia, including 100 percent pineapple juice in Tetra Pak and pineapples in innovative Clear Can both under S&W, as well as tomato sauces in pouches under Contadina. Total export sales, however, were slightly down by 1.9 percent to P10.6 billion, due to lower sales of processed pineapple products to private label caused by excess supply from Thailand and Indonesia. DMPI operates a fully-integrated 25,000-hectare pineapple plantation in Bukidnon, one of the largest in the world.
In the past three years since DMPI generated a net income of P1.1 billion in FY2015, its earnings have significantly increased by P1.5 billion to P2.6 billion at a compounded annual growth rate of 31 percent. The Company achieved this through improvement in gross profit from higher sales volume, margin increase from the Philippine market, higher mix of fresh pineapple sales under S&W, aided by the weak peso versus the US dollar, revaluation of biological assets, improving operational efficiency and cost management.
In FY2018, DMPI’s operating income grew by two percent to P3.3 billion, but net income declined slightly to P2.6 billion due to higher interest expense by P0.1 billion. With better collection of its receivables, which already started towards the end of FY2018 and continued into the start of FY2019, the Company is well positioned to lower its borrowings and interest expense this coming year. While DMPI’s net debt to equity ratio is only 0.7x, the Company will reduce its gearing, strengthen its balance sheet further and improve its bottomline.
Del Monte Philippines is projecting higher net income in the financial year ending April 2019. The Philippine market with its key Del Monte brand is expected to continue to deliver higher profits. Meanwhile, exports profitability is expected to improve from better sales mix with higher fresh pineapple sales under S&W, and increased export margins from pricing, cost management and operational efficiencies. (PR)