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Puerto Rico: Government has sold Lotus trademark, plant
The Packer / February 19, 1996

By Larry Luxner

The Puerto Rican government has sold its Lotus pineapple trademark and fruit-processing equipment to Procesadora Campofresco Inc. of Santa Isabel for $4.1 million.

The transaction, announced Dec. 29, is the latest in a series of privatizations pursued by Puerto Rico's pro-statehood governor, Pedro Rossello. Last year, government-owned Puerto Rico Mango Orchards was sold to Fruits International for $4.7 million. A third company, the island's state-owned sugar entity, is still on the auction block.

Julio Mendez, president of Campofresco, said the Lotus deal is an "asset-purchase agreement" in which his company agrees to buy $19.6 million worth of Lotus pineapple juice production during a 12-to-17-month transition period expected to end in May 1997.

Mendez said that for the time being, his company will focus on juice and pineapple solids rather than whole fresh-fruit exports.

"Fresh-fruit exports can be quite lucrative, if it's well-managed," Mendez told The Packer in a phone interview from Puerto Rico. "Nevertheless, we're not even considering fresh fruits for the next three years. We are, however, planning to get into the jet-fresh pineapple market. This is a 100% natural technology, in which pineapples are vacuum-packed without the rinds, and just a little bit of the crown. Its shelf life is six months."

Lotus has been in government hands since 1968. Its pineapple fields and processing plant in the town of Barceloneta employ more than 1,100 people. In fiscal 1993, Lotus reported sales of $20 million, including $18.6 million in processed products -- juices, nectars, solids and concentrates -- and $1.3 million in whole fresh pineapple (of which $457,000 was exported).

The company annually produces 50,000 tons of pineapples from 1,150 acres scattered over five farms in the Barceloneta area along Puerto Rico's north coast. Several hundred workers will be dismissed as a result of the privatization, though the Puerto Rican government has agreed to give each laid-off worker up to $12,000 in compensation depending on years of service.

"The unions realize that the plant in Barceloneta is very old and has many EPA and OSHA violations," Mendez said. "It's very expensive to upgrade the facilities. We have a new, very modern facility in Santa Isabel," said Mendez, adding that his company, whose 54,000-square-foot plant was built in 1990 at a cost of $10 million, is expecting $40 million in 1996 sales.

Despite a reputation for quality, Lotus has accumulated $60 million in losses since 1986 -- losses attributed largely to mismanagement and poor marketing of the Lotus trademark. Those problems were what led the Rossello administration in 1993 to include the pineapple processor on a list of money-losing government entities earmarked for privatization.

Puerto Rico Mango Orchards is a different story. The operation, scattered among three non-contiguous parcels of land along the island's south coast, was taken over by the Puerto Rican government only after its Israeli owners -- doing business under the name Huertos del Caribe -- defaulted on a $10 million loan several years ago.

Last year, the government -- with the help of Ernst & Young Corporate Finance in New York -- sold PRMO for $4.7 million. The sale included a packing facility with an estimated capacity of 17,000 boxes of fruit a day.The buyer, Fruits International, is a major mango exporter with 1995 revenues of around $7.5 million.

Fruits International was founded by Ehud Peikes, a former director of Israel's Citrus Marketing Board who began his company in 1981 and is today Puerto Rico's largest mango exporter. With this latest acquisition, Fruits International increases its share of Puerto Rico's mango exports from 50% to more than 90%; it now has around 100,000 mango trees, according to company vice-president Steve Segal. In 1995, the company exported 350 trailerloads of fresh mangoes, with about two-thirds of that going to Europe and the remainder to the U.S. mainland.

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