205 North Wiget Lane
Walnut Creek, California 94598
Telephone: (925) 949-2772
Toll Free: (800) 543-3090
Web site: http://delmontefoods.com
Subsidiary of Del Monte Pacific Limited
Founded: 1916 as California Packing Corporation
Sales: $1.70 billion (2017)
NAICS: 311421 Fruit and Vegetable Canning; 311710 Seafood Product Preparation and Packaging; 424480 Fresh Fruit and Vegetable Merchant Wholesalers
Del Monte Foods, Inc., is a leading food products producer, distributor, and marketer. Its brands include Del Monte, Contadina, College Inn, and S&W. The company's operations include 10 production facilities and three distribution centers in the United States; a research center in Walnut Creek, California; and two production facilities in Mexico. The tangled history of Del Monte Foods has led to an equally tangled array of companies that have a stake in the Del Monte brand. Del Monte Foods, Inc., is not affiliated with some enterprises that include Del Monte in their name, including Fresh Del Monte Produce Inc., Del Monte Asia Pte. Ltd., Fresh Del Monte Produce Inc., and Del Monte Canada.
Del Monte traces its origins to the pioneering 19th-century figures in West Coast canning: Daniel Provost and Francis Cutting. Along with the influx of settlers from the California gold rush came a need for new regional food manufacturers, and these men led the way. Although Provost held the distinction of forming the first food packing operation there, Cutting became the first of a long line of entrepreneurs to manufacture metal and glass containers (rather than having them shipped from the East) and the first to export California-processed fruit back to the East Coast as well as Europe. As the California orchard industry grew, so did the canning industry. A virtual boom in agriculture came to the region during the 1800s, following construction of the first railroad networks, and dozens of canneries were established.
One such business, the Oakland Preserving Company, was launched in 1891. At that point uniformity in labeling and product quality, under the auspices of the recently established California Canned Goods Association, was becoming a marketing concern. The intent of this service organization was to ensure that the label “California grown” stood for an uncommonly high standard, and its efforts ultimately led to effective legislation that governed the canning industry. Oakland's own efforts in this area generated the Del Monte brand, a name that soon became synonymous with exceptional value.
After consolidation, the CFCA was so vast that it accounted for approximately half of the entire California canning industry and ranked, in effect, as the largest canner of fruits and vegetables in the world. There were several key promoters of the CFCA consolidation, including Frederick Tillman Jr. of Oakland Preserving; Sydney Smith of the Cutting Fruit Packing Company; Robert and Charles Bentley of Sacramento Packing; and Mark Fontana and William Fries of the Fontana & Co. By popular assent, Fries became the association's president.
Given the CFCA's wide area of operations and the strong wills of its various principals, true integration of the canneries never materialized. Furthermore, the retention of many name brands prevented the CFCA from developing a strong, cohesive marketing presence during its early years. Nonetheless, the multidimensional cannery prospered, spreading beyond the borders of California with the acquisitions of the Oregon Packing Company and the Hawaii Preserving Company.
Like the other canneries already within the fold, these continued to operate autonomously. However, as William Braznell pointed out in his California's Finest: The History of the Del Monte Corporation, “One notable concession made to corporate solidarity was the adoption of the Del Monte label as the association's premier brand.” The brand name, courtesy of Tillman and the Oakland Preserving Company, was derived from a coffee blend prepared by Tillman and a partner for the Hotel DelMonte in Monterey as early as 1886. (Del Monte is a Spanish phrase meaning “of the mountain.”) The Del Monte brand soon graced more than 50 products, including squash, sweet potatoes, peppers, berries, jams, jellies, cranberry sauce, and olives. The famous Del Monte shield made its first appearance on a food can label in 1909.
The CFCA's reliance on commission agents to sell most of its produce led to a curious chain of events and, ultimately, the formation of the California Packing Corporation (Calpak), the immediate ancestor of the Del Monte Corporation. For some time, the CFCA employed the San Francisco–based J. K. Armsby Co., the West Coast's largest wholesaler, as its exclusive agent. After the CFCA terminated the arrangement, Armsby sought out the region's second-largest manufacturer, Central California Canneries (CCC).
This new arrangement soured when the Armsby brothers, J. K. and George, began rapidly accumulating stock in the CCC. George, the more aggressive and visionary-minded of the two, had begun to conceive of a single, dominant food concern that would, at the very least, include the Armsby Co., the CCC, and the CFCA. Although the CCC president William Hotchkiss managed to repel the takeover attempt, he eventually proved amenable to the idea of such a merger.
In November 1916, after numerous meetings, disagreements, and compromises, George Armsby's dream was realized and the monolithic Calpak was formed. Joining the three major companies in the merger were the Alaska Packers Association and Griffin & Skelley. Save for Alaska Packers, all of the consolidated companies were headquartered in San Francisco within a short distance of each other. By 1917 a new headquarters had been established and a committee system of management adopted. J. K. Armsby and Fries were elected to serve as president and chair, respectively.
Like the CFCA merger, the Calpak merger presented a host of organizational problems for the new management, not the least of which was establishing production consistency within the 71 plants in California, Washington, Oregon, and Idaho, as well as the territories of Alaska and Hawaii. According to Braznell, what held everything together was the understanding by the owners that the “California Packing Corporation would present a solid front in the market place. There would be only one premium Calpak label—Del Monte. It would stand for products of uniformly high quality, and it would be promoted for all it was worth.”
The concept of brand loyalty was another potential stumbling block for the company, because most grocers at the time were “full service,” filling customers' orders themselves and paying little attention to manufacturers or labels. Piggly Wiggly was among the first grocery chains to alter this practice. By the 1920s the evolution toward self-service supermarkets in the grocery industry was well underway, and the success of the Del Monte marketing plan was ensured.
Calpak nevertheless entered the 1920s in a precarious situation. Although earnings were about $7 million on revenues of $85 million following record-high commodity prices, an agricultural depression loomed, made worse by the plight of many farmers who had heavily mortgaged their land to sink new capital into their operations. The company weathered the crisis better than many of its growers, strengthening itself through the establishment of a national sales network and the initiation of mass production, quality assurance, and other internal systems that improved efficiency and enhanced the Del Monte brand.
A major development came in 1925, when Calpak acquired Rochelle Canneries of Rochelle, Illinois. The purchase of this midwestern company signified Calpak's expansion into corn and pea packing, then the two most lucrative segments of the vegetable canning industry. Related acquisitions included plants in Wisconsin and Minnesota. Several overseas ventures in countries such as the Philippines and Haiti also highlighted the decade.
With the onset of the Great Depression, Calpak's earnings crumbled. From 1930 to 1931 they fell from $6.16 per share to just 9 cents per share. In 1932 the company posted the worst losses in its history. Nonetheless, within two years earnings began to rebound and, after one more unfavorable year, the company was firmly back in the black. Besides the poor economy and fierce competition from other major canners, Calpak also faced pressure at the time from a flurry of new canneries. Enormous changes within the industry also came about as a result of the agricultural labor movement. The International Longshoremen and Warehousemen's Union, after demonstrating its clout through well-planned strikes, eventually won the right to represent cannery workers in wage, plant safety, and benefit negotiations.
Having aided the Allied effort during World War II, while sustaining profit losses and the temporary closing of operations in the Philippines, Calpak emerged a much stronger company during the late 1940s because of the postwar expansion and rising per capita consumption of canned products. In 1948 the company acquired the East Coast producer Edgar H. Hurff Co. Two years later Calpak moved into new headquarters, and in 1951 the company named its seventh president, Roy Lucks. Braznell characterized him as “coolly logical, an avid student of management sciences … a leader who recognized no jurisdictional boundaries and no allegiances other than those owed to the corporation and its shareholders.” Under Lucks, wrote Braznell, “Calpak/Del Monte moved into the modern era.”
When Jack Countryman succeeded Lucks, he fortified Del Monte's competitive advantages by establishing a highly efficient warehouse distribution system. To heighten the company's profile and attract new management talent, he gave Calpak the name in 1967 it had come to prize above all others: Del Monte. After streamlining its famous shield logo, the Del Monte Corporation launched boldly into the new territory of soft drinks (which was abandoned after four years) as well as an entire line of canned fruit drinks (which survived until 1974). Other forays included potato chips, frozen french fries, fruit turnovers, frozen prepared entrees, and real estate. Only the last two held any real promise for the company.
Strong earnings growth typified the period not because of these attempts at diversification but because of Countryman's parallel commitment to international expansion. The president also proved astute in thwarting a potential takeover from United Fruit (later Chiquita Brands) by acquiring a Miami-based banana importer that, under a U.S. district court antitrust ruling, nullified any such attempt. United later sold its Guatemalan operations to Del Monte for $20 million, thus conferring status on the canner as a potentially major player in the fresh fruit market. Alfred W. Eames Jr. assumed the reins from Countryman in 1968, just prior to a “canner's recession.” Accordingly, profits in 1969 and 1970 dropped substantially. In 1971 Del Monte became the first major U.S. food processor to voluntarily place nutritional labeling on all its food products.
Profit Improvement Project teams dominated Del Monte corporate culture during the 1970s. U.S. Grocery Products, U.S. Subsidiaries, International Grocery Products, and Seafood were named as the company's major divisions and decentralization became the guiding management philosophy. By 1978 Del Monte had weathered several economic crises (the devaluation of the dollar, rising manufacturing costs, and price freezes) to emerge with record sales of $1.6 billion. Through conservative management of its assets, it was positioning itself for a pivotal acquisition of large proportions that might render it less vulnerable to downswings in its core industry.
The company's balance sheets were beginning to look so attractive, however, that its privately issued stock, which was once closely held but freely traded among a widening circle of private investors, began unexpectedly ratcheting upward. In August 1978 J. Paul Sticht and Joseph Abely Jr. of R. J. Reynolds Industries, Inc. (later RJR Nabisco, Inc.), arranged a meeting with Dick Landis, the new president of Del Monte. In a little over a month an agreement to merge, worth $618 million, was reached and then officially ratified in early 1979, with Del Monte becoming the acquired rather than the acquirer.
For the next 10 years Del Monte benefited from the addition of RJR Foods labels (such as Hawaiian Punch, Chun King, and Patio) but also suffered from RJR managerial impulses. The company underwent at least four reorganizations, as well as a succession of managers, and saw its longtime San Francisco headquarters moved to Miami. All of this ended abruptly in 1989, when Kohlberg Kravis Roberts & Co. L.P. (KKR) effected the largest leveraged buyout in U.S. history, purchasing RJR Nabisco for more than $24 billion. To reduce debt incurred by the transaction, substantial portions of Del Monte were auctioned off to overseas buyers, including its fresh fruits operations (purchased by the Britishbased Polly Peck International) and its processed foods and Japanese rights (purchased by the Kikkoman Corporation).
A new Del Monte management team, led by Ewan Macdonald, who had served as marketing vice president since 1985, salvaged the remainder of the business via another leveraged buyout in January 1990. The cost of this acquisition by an investor group led by Merrill Lynch & Co. was $1.5 billion, 80 percent of which was financed with outside capital. According to Fara Warner in Adweek's Marketing Week, “Del Monte is one of the success stories to come out of the RJR leveraged buyout, despite the heavy debt load the current owners incurred in buying Del Monte from RJR; sales have grown annually by 9 percent during Macdonald's tenure.”
Most attributed the success to Macdonald's strategy of advertising only in magazines. However, a $50 million campaign to introduce the failed Del Monte Vegetable Classics, a considerable portion of which was earmarked for television ads, belied this strategy. In addition, the debt load was reduced via the divestment of the Hawaiian Punch and the European canned food divisions.
Throughout all the turmoil, Del Monte maintained its good reputation. In 1992 it still ranked number one in brand preference in several categories and controlled 16 percent of the $3.5 billion canned vegetable market. However, a heavy debt load gave the company little flexibility. Necessary computer upgrades had to be done on the cheap, and advertising expenditures remained relatively low. To lighten the debt burden, the company sold more divisions during the mid-1990s. Its dried fruit division went to the Yorkshire Food Group in 1993 and its pudding division went to Kraft in 1995.
Moreover, demand for canned foods had been declining throughout the 1980s and 1990s, as Americans sought to increase their consumption of fresh fruits and vegetables. To combat this trend, Del Monte initiated an advertising campaign aimed at 18- to 34-year-olds. Using new print advertising, new packaging, and new products, the company appealed to young adult consumers, such as single parents and unmarried couples, who might not have time for preparing fresh fruits and vegetables.
Also during this time, the Federal Trade Commission ruled that a supply agreement Del Monte had with Pacific Coast Producers substantially reduced competition in the processed fruit market. The decision led Del Monte to pay out $4 million to settle an antitrust suit brought against it by Pacific Coast. To offset this large debt, Del Monte's owners sought a purchaser for the company, nearly closing a deal during the mid-1990s. Del Monte had agreed to a $1 billion takeover by Grupo Cabal, a group of investors led by Carlos Cabal, in 1994. The deal would have reunited some of the Del Monte brands because Cabal had already purchased Fresh Del Monte Produce from the liquidators of Polly Peck International in 1992. The deal fell through at the last minute, however, when Cabal disappeared after being charged with illegally transferring money from a trade finance firm to his personal accounts.
As the canned foods market continued to decline and as debts continued to burden the company, Del Monte sought another buyer. In the meantime, it announced in 1996 that it would reduce its workforce by 20 percent. The following year another suitor appeared. The private equity firm Texas Pacific Group had begun a food business shopping spree in 1995 and became known for buying up companies that most analysts regarded as trouble. Beginning with the purchase of Kraft Foods' marshmallow and confections operations, Texas Pacific was soon the fourth-largest U.S. candy and confections company. In April 1997 Texas Pacific acquired Del Monte in a deal valued at about $840 million. As part of the transition, Richard Wolford, previously the president of packaged foods for rival Dole Foods, was named CEO of Del Monte.
Wolford led a concerted effort to revitalize what had become a stagnant business during its two decades under a succession of indifferent owners. New products and packaging were introduced, including the Orchard Select line of premium fruit in glass jars. Additionally, the consumer promotions budget was nearly quadrupled to $46 million and the first Del Monte advertising campaign in eight years was launched during the spring of 1999 centering around the tagline “Add imagination and serve.” Another strategy involved broadening the company's channels of distribution, and in particular pushing the Del Monte brand into high-growth retail sectors such as supercenters and warehouse club stores. Cost-cutting was also on the agenda as Del Monte announced in early 1998 the closure of two of its six plants in California and the elimination of about 1,000 jobs.
Del Monte also bulked up during this period through two important acquisitions. In December 1997 the company purchased the Contadina brand of canned tomato products from the U.S. unit of Nestlé S.A. for $195 million (with Nestlé retaining the Contadina line of refrigerated pasta and sauces). Like Del Monte, Contadina was another venerable California brand with a history dating back to 1916. Adding Contadina provided Del Monte with a more extensive line of tomato products, including tomato puree, tomato paste, crushed tomatoes, and pizza sauce.
Adding value-added products such as these was a key goal for the company as it attempted to deemphasize the more moribund and commoditized area of simple canned vegetables, where branding had grown ever less important. In August 1998 Del Monte regained a portion of its former international business from Nabisco, Inc., when it reacquired the rights to the Del Monte brand in South America and bought Nabisco's canned vegetable and tomato business in Venezuela, which included a food processing plant. The purchase price was $32 million.
Del Monte began the 21st century with two more acquisitions of related brands. In September 2000 it bought the SunFresh brand from UniMark Group, Inc., for $12.7 million. The SunFresh line included premium tropical and citrus fruit in glass jars and cans and thus fit in well alongside the Orchard Select line.
Then, in March 2001 Del Monte purchased the S&W brand from Tri Valley Growers, a grower-owned cooperative that had filed for Chapter 11 bankruptcy protection the previous July. Gaining the S&W brand in a deal worth $35.4 million not only expanded Del Monte's presence in canned fruits and vegetables but also extended its line of products into canned baked beans as well as various flavored and unflavored beans, including kidney, black, garbanzo, and chili beans. Del Monte and S&W shared similar roots as the latter was founded in 1896 by three San Francisco grocery wholesalers.
During the 2001–02 fiscal year, when the company netted $38.5 million on revenues of $1.3 billion, Del Monte completed the integration of S&W into its existing operations and pared its debt by around $124 million, to $590.5 million. The reduction in debt helped lay the foundation for Del Monte's largest transaction to that time. In December 2002 the H. J. Heinz Company spun off to a separate company several sluggishly growing businesses that had collectively generated annual sales of $1.8 billion. These included its North American pet foods business, including the 9-Lives, Kibbles ‘n Bits, and Pup-Peroni brands, StarKist tuna, Nature's Goodness baby food, College Inn broths, and the firm's U.S. private-label soup and gravy products.
This spinoff was then merged into the Del Monte Foods Company, which subsequently commanded a much-enlarged presence in the center aisles of grocery stores and gained clout in its dealings with retailers. Although Heinz considered the brands it offloaded underperforming, Del Monte officials were attracted by the higher margins that the pet food and tuna products offered in comparison to its canned fruits and vegetables. Del Monte did, however, assume about $1.1 billion in debt from the businesses it swallowed, pushing its total long-term debt to $1.6 billion by the end of fiscal 2002–03.
Del Monte worked quickly to improve the fortunes of the long-neglected brands it had taken off Heinz's hands. Particularly, more resources were devoted to the pet food brands, with new products being developed and existing ones improved in quality. The early results were quite positive as the pet food brands during fiscal 2003–04 saw their sales and earnings increase for the first time in seven years. That year, which featured the first full year of results following the Heinz transaction, net income surged 23.3 percent to $164.6 million, while revenues jumped 49.6 percent to $3.1 billion.
The following year profits fell because of competitive pressures and increases in basic costs, such as steel, energy, and transportation. The company subsequently conducted a review of its product lines and elected to jettison its private-label soup and gravy businesses and its infant-feeding unit (but retain the College Inn broth brand). These former Heinz operations were sold to TreeHouse Foods, Inc., in April 2006 for approximately $275 million. The following month Del Monte gained added scale in the pet food sector by acquiring Meow Mix Holdings, Inc., from the private equity firm Cypress Group for roughly $705 million, thereby securing the Meow Mix and Alley Cat brands of cat food.
Del Monte further enlarged its position in pet products in July 2006, when it acquired the Milk-Bone line of dog treats from Kraft Foods Inc. for $580 million. These deals propelled Del Monte into second place in the North American pet food market, trailing only Nestlé, owner of the Purina brand. For fiscal 2006–07 Del Monte's pet products operations accounted for around 37 percent of overall sales, compared with 28 percent three years earlier. Even more important, the pet products brands generated more profits than Del Monte's core canned fruit and vegetables lines, as 2006–07 operating income for the former totaled $234 million, compared with $170.4 million for the latter.
In 2008 Del Monte elected to narrow its focus to two main areas: its founding fruit and vegetable business and its nascent pet food operations. Thus, in October it sold its seafood business, including the StarKist tuna brand, to the South Korean company Dongwon Enterprise Co., Ltd., for around $360 million. The seafood unit had generated sales of $560 million during fiscal 2007–08. Overall revenues that year totaled $3.7 billion, an increase of 9.4 percent over the previous year, while the net income amounted to $133.1 million, an increase of 18.2 percent.
In November 2010 KKR agreed to acquire Del Monte for $5.3 billion, in conjunction with Vestar Capital Partners and Centerview Capital L.P. The deal was completed in March 2011, at which time Del Monte once again became a privately held enterprise. Around the same time, the company hired David J. West, the former CEO of the Hershey Company, to serve as its new top executive.
Another pivotal development occurred in late 2013, when Del Monte Pacific Ltd. agreed to acquire Del Monte's consumer foods unit from KKR for $1.7 billion. The deal included the Contadina, Del Monte, S&W, and College Inn brands. Del Monte's canned food operations were generating annual revenues of $1.8 billion at the time of the sale.
Following the deal, which was completed in 2014, Del Monte Pacific renamed the consumer foods business Del Monte Foods, Inc. KKR's remaining Del Monte operations, which focused exclusively on the pet products market, were subsequently renamed BIG Heart Pet Brands. In 2015 the J.M. Smucker Company spent $5.8 billion to acquire BIG Heart Pet Brands from KKR.
Del Monte Foods' growth continued under Del Monte Pacific during the middle of the decade. In 2015 Del Monte acquired the Sager Creek Vegetable Company of Siloam Springs, Arkansas, for $75 million. This resulted in the addition of brands such as Veg-all, Allens, Princella, and Trappey's. A processing facility in Turkey, North Carolina, that was acquired as part of the deal was closed in early 2016.
In September 2017 Gregory N. Longstreet, an executive with more than 25 years of experience in the food industry, was named the new CEO of Del Monte Foods. Meanwhile, the company announced that it would relocate the operations at its tomato processing facility in Plymouth, Indiana, to Hanford, California. That same month Del Monte Foods struck a deal to sell Sager Creek to the canned vegetable company McCall Farms.
Del Monte Foods' operations were becoming increasingly sophisticated during the latter half of the second decade of the 21st century. In 2018 the company formed a relationship with Nielsen Holdings plc that enabled it to gain deeper insight into consumer preferences and make more data-driven decisions. Although it had experienced significant changes throughout more than a century of operations, Del Monte Foods remained a leader in its industry toward the end of the decade.
Jay P. Pederson
Updated, Susan Windisch Brown; David E. Salamie; Paul R. Greenland
Cento Fine Foods Inc.; Conagra Brands, Inc., Hirzel Canning Co. & Farms.
Berman, Dennis K. “Del Monte Nears $700 Million Deal for Meow Mix.” Wall Street Journal, March 2, 2006.
Braznell, William. California's Finest: The History of the Del Monte Corporation and the Del Monte Brand. San Francisco: Del Monte Corporation, 1982.
Coyne, Andy. “US Canned Vegetable Firm McCall Farms buys Rival Sager Creek from Del Monte Pacific.” just-food.com , September 21, 2017.
“Del Monte Foods and Nielsen Expand Relationship.” Wireless News, April 19, 2018.
“Del Monte Foods Inc., San Francisco, Acquired Sager Creek Vegetable Company.” Food Institute Report, March 23, 2015, 6.
“Del Monte Pacific Limited Completes Purchase of the Consumer Food Business of Del Monte Corporation for US$1.675 Billion.” China Weekly News, March 4, 2014, 143.
Dorman, Shirleen. “Del Monte Net Nearly Doubles amid Sale of Unit.” Wall Street Journal, December 4, 2008.
“KKR, Vestar and Centerview Complete Acquisition of Del Monte Foods.” Business Wire, March 8, 2011.
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———. “What's Happening at Del Monte Foods?” Adweek's Marketing Week, November 18, 1991, 4.