Mitch Pinheiro

Mitchell Pinheiro with Sturdivant & Co. inquired about the sustainability of Fresh Del Monte's Fresh and Value-Added segment gross margins, particularly the 14.8% adjusted gross margin in the fourth quarter versus the 2026 guidance of 12%-14%. He also sought details on Fresh Cut product line trends and geographical demand, updates on pineapple supply constraints and premium varieties like Honeyglow and Pinkglow, and the regional performance of the banana segment. Additionally, Pinheiro asked about 2026 capital expenditure estimates and the potential sales growth and margin accretion from the pending Del Monte Foods acquisition, as well as the strategic rationale behind the acquisition.

Answer

SVP and CFO Monica Vicente confirmed comfort with the 12%-14% gross margin guidance for the Fresh and Value-Added segment, noting it represents a 100 basis point increase. She reported strong performance for the Fresh Cut line with robust demand, increased volumes, and good pricing, primarily driven by the U.S. and U.K. Chairman and CEO Mohammad Abu-Ghazaleh addressed pineapple supply, confirming demand exceeds current supply and outlining plans for production expansion in Costa Rica and Brazil, while acknowledging land and regulatory restrictions. He noted stable Pinkglow and growing Honeyglow categories, both achieving premium pricing. For the banana segment, Mr. Abu-Ghazaleh stated a focus on profitability over volume, with North America performing reasonably well, while Ms. Vicente highlighted Asia as the primary drag on banana margins. Regarding capital expenditures, Mr. Abu-Ghazaleh indicated they would be relatively normal, similar to past years, with specific estimates to be provided next quarter after the Del Monte Foods acquisition closes. Both executives deferred detailed financial guidance on the Del Monte Foods acquisition until the first quarter 2026 earnings call due to the court-supervised process. Mr. Abu-Ghazaleh reiterated his conviction for the acquisition is rooted in accelerating profitability for shareholders, emphasizing the unique strategic advantage of uniting fresh and packaged food divisions under one multinational company.

Inquired about the path to achieving the full-year revenue growth target, the strategy behind the new retail partnerships with Sprouts and Vitamin Shoppe, the expected pricing and margins in these new channels, and whether a recent supplement certification was a major R&D expense.

Answer

The company reiterated its full-year growth guidance, stating that revenue will ramp in the second half driven by new products and partnerships. The new retail partners are a better fit than Walmart as they are specialty retailers requiring less marketing support. Margins in retail will be lower than e-commerce, with comparable pricing. The certification cost was part of COGS, not R&D; the R&D increase was for new vertical and product development.

Mitch Pinheiro questioned the reasoning for near-term avocado volume challenges despite strong Mexican imports. He also asked for the retail versus foodservice mix in the Grown segment, demand differences in those channels, the drivers of RFG sales growth, and the path to achieving double-digit gross margins in that business.

Answer

CFO Shawn Munsell and President and CEO Brian Kocher explained that near-term volume challenges relate to managing margins as prices stabilize and the need to ramp up retail promotions that were paused during peak pricing. Munsell stated the Grown segment is about 60% retail and 40% foodservice, with volume declines seen slightly more on the retail side. For the RFG business, they confirmed sales growth was mostly price-driven, and the path from 8% to 10-12% gross margin will come from continued P&L-wide operational improvements rather than just volume leverage.

Mitch Pinheiro of Sturdivant and Company asked for a cost breakdown in the RFG segment, inquiring about the drivers for future volume growth, and the potential risk of consumer trade-downs due to inflation. He also questioned if there were notable differences in volume between retail and foodservice channels for the avocado business.

Answer

President and CEO Brian Kocher provided a qualitative cost update for RFG, highlighting a 9% sequential improvement in labor productivity and tempered material cost inflation due to sourcing and yield initiatives. He stated that future growth will be driven by winning customers on service, evidenced by a 99% fill rate, rather than by buying market share. Kocher believes the fresh-cut category remains strong despite inflation, supported by convenience and health trends. Regarding avocados, he noted that severe supply constraints made it difficult to compare channel performance, but emphasized that overall market share remained stable.