Yes, we have more than bananas

For many years, Lapanday Foods has been associated with Davao and with bananas. No longer.

Lapanday, this year’s Aurelio Periquet, Jr. awardee for corporate excellence given by the Philippine Chamber of Commerce and Industry, is a multi-source, multi-product, multi-market fresh produce company with a global perspective. On an annual basis, Lapanday rakes in a net profit of between $10 million and $50 million.

The man largely credited for Lapanday’s success is Luis Lorenzo, Jr., who also bagged for himself this year’s PCCI award for best entrepreneur in the over 35-year-old category.

The Lorenzos purchased Lapanday, which produces the high-end Cavendish bananas, from the Ayala-Aboitiz group in the 1980s. At the time of its purchase, the company was in the red. Aside from staggering debts, it was beset by a militant labor union and a raging political conflict in its area of operation.

"At that time, Lapanday was made up of a group of banana growers in Davao whose core business was selling bananas ex-farm gate to multinational companies, which then shipped our fruits under their own brands to Europe and other markets overseas," said Lorenzo.

Paradigm shift

Just out of Wharton Business School, University of Pennsylvania, Lorenzo knew what he had to do. His formula was to involve–every step of the way–employees and those in the immediate environs in the company’s plans to improve productivity. "By empowering them, they helped ensure the company would succeed," he said.

Lapanday also shifted from production-driven to market-oriented agriculture. By diversifying its products and markets, the company likewise diversified its risks.

Today, Lapanday has plantations not only in the Philippines but also in Thailand, Hawaii and in South America. These plantations produce Cavendish, organic and exotic bananas such as the senorita as well as pineapples, mangoes and asparagus. Buyers have been expanded to include wholesalers and distributors in East and Southeast Asia, the Middle East and Canada.

Lapanday has also diversified its growing and packing operation to a "from seed to shelf" set-up that includes putting up sister companies involved in research, quality control, cold storage and export marketing.

Bananas, of course, still account for a large portion of Lapanday’s bottomline. As the country’s second largest exporter of bananas, it accounts for 24% or 929,000 metric tons of total exports. The company sells bananas under the Del Monte and Chiquita brands as well as brands such as Estrella, Aloha and Elena from other banana producers in Latin America.

"It’s important to benchmark not only cost–though this consideration has become even more sensitive in these times of difficulties–but also quality, supply reliability and flexibility," Lorenzo said.

In Lapanday’s case, it is currently looking into biotechnology, biodegradable plastics and using nature instead of chemicals to handle pests. "When we do something different, we always ask ourselves if it makes us more cost competitive or if it improves quality or if it differentiates our product so we can derive a better margin or if it makes us more reliable as a supplier to our customer," Lorenzo said.

Call of government

In recent months, government has been trying to utilize Lorenzo’s management skills. He is now Presidenital adviser for jobs creation with an annual salary of P1.

Since his appointment, Lorenzo has divested from Lapanday and its sister companies. There is talk that Lorenzo is in the short list of candidates to replace Agriculture Secretary Leonardo Montemayor. "I have not been offered the post," Lorenzo said. "But if offered, who am I to decline the offer of the President?"

As Presidential adviser, Lorenzo’s main job is to make sure the one million jobs promised by the Arroyo administration becomes a reality. This is, of course, not entirely new for Lorenzo, who has generated 14,000 direct jobs at Lapanday and its sister company, Singapore-listed Del Monte Pacific.

"The million jobs will come from the modernization of agriculture farms, improving productivity and finding a niche market for each output from the farm. The jobs need not be overseas," he said.

Lorenzo’s plan to improve productivity in the farm is similar to the one-job-per-hectare program proposed by former Agriculture Secretary Edgardo Angara. Lorenzo’s plan, however, goes one step further than improving output. Like Lapanday, he wants government to orient agricultural production to its intended and actual markets.

Successes and failures

Lorenzo has not always been right. He has make costly mistakes here and abroad. For example, it was Lorenzo who tried to sell the Cavendish in the local market where it lost out on pricing and on the sheer variety of available bananas. "We lost because we were not prepared to address the difficulties nor to micro-manage concerns such as collections," he said.

In China, Lapanday’s initial shipment had been equally dismal. Unlike the Cavendish experience in the Philippines, however, the company’s Mabuhay brand now controls 36% of the Chinese market.

Lapanday’s greatest source of pride is penetrating the tough Japanese market, where its brand, Estrella, has a market share of eight to 10%. Part of the company’s success could be traced to market innovations such as the introduction of the consumer pack or a cluster of four to six fingers instead of selling by the more plentiful and, therefore, more expensive hands.

In May this year, Lapanday began exporting Philippine carabao mangoes to Australia with an initial shipment of 1,200 kilos, of which only 490 kilos was finally accepted. The company is also exporting, on a trial basis, seafood to Hong Kong.

"To succeed, you need to integrate forward in a focused manner with a strong market orientation as close to the point of purchase by the the final consumer in whichever market," said Lorenzo.

He could easily be talking about Lapanday as well as about his new job.–RGC