Advice For New Parents

At the recent PMA convention in Reno, a lot of the talk was about the mergers and acquisitions which seem to be sweeping the produce trade. From Polly Peck’s Del Monte stunner to Dole’s acquisitions in the Washington Apple business, to continued acquisitions by the Albert Fisher Group and Dalgety Produce, it seems that the new corporate “parents” in the produce industry are growing by leaps and bounds.

But buying companies is easier than running them, and the multinational produce conglomerate is still something of an unproven concept. Only the banana giants have managed to develop integrated multi-national sourcing and marketing organizations.

Others are trying, however, and as they are spending a lot of money and bringing new capital and ideas to the industry, we should wish their efforts good luck. Meanwhile, here is my list of seven key concepts that hopefully will be kept in mind by the “parents” of newly acquired companies.

  1. Maintain the image of your brand. Be it a trade or consumer brand, respected produce names are valued today in the millions of dollars. Some key consumer brands are valued in the hundreds of millions. The temptation is enormous to gain a return on this value by branding large quantities of many items. Be cautious. Defining and enforcing fresh produce quality standards are exceptionally difficult jobs, and introducing new products and new sources of existing products must be done with great care. Remember, the equity built up in a brand over generations can be significantly reduced by one season of lousy produce.
  2. Give your subsidiaries the freedom to deal with whom they choose. If your company has acquired various types of firms, such as wholesalers, exporters, and packers, an almost certain way to kill your companies is to make them deal with each other. Your wholesale subsidiary knows what type and brands of the product its market demands; same with your export subsidiary. If your packing houses can’t compete on their merits for these customers, it’s better to allow your wholesale and export subsidiaries to best serve their own clientele by finding the best packing houses for the job, regardless of whether they are subsidiaries. Otherwise, they will have dissatisfied customers, lose business and become but shadows of the company you paid good money to purchase.
  3. Keep local management in place. This is a good idea in almost every business. After all, cultures are different all over the world, and local people are most likely to understand the market’s needs as well as the methods of doing business. Even within the U.S., regional differences can make a great management style in New York fail miserably in rural Mississippi. For produce, knowledgeable local people are vital. How else will your company know who to call for handling that rejected load or just who to call when your warehouse is overflowing with 100 size navels?
  4. Maintain a system of accountability. Make sure each subsidiary has enough autonomy in purchasing, selling, hiring and other functions so that the subsidiary’s management can legitimately be held accountable for performance. If you direct all policies, your subsidiary’s management is likely to become disenchanted as it realizes it no longer can really control the company but is likely to be blamed whenever anything goes wrong.
  5. Keep the former owners interested. If you bought a company from a private individual or family and if you are relying on them to run the company you purchased, you better make sure they like their jobs and have sufficient inducements to stay heavily involved. This isn’t always easy. After all, most people who sell their businesses are a little tired of them, to begin with. In addition, if the purchasing company just put a big chunk of change in their pocket, the desire to work hard in a business they don’t own can be further reduced. What you have to try to do is two-fold: First, keep things interesting for the former owners by giving the company an opportunity to grow into new areas. Second, put up a great incentive plan for the former owners, plus all other key company executives. One note here: Forget about what plan you may have negotiated during the buyout. The purchase is done; you own the company and you have to motivate your key people. And after all, a properly designed incentive plan pays for itself. So don’t be afraid to offer your key people better plans than what may have been negotiated during the buyout.
  6. Keep financial control tight, but sensible. Insisting on timely and accurate financial information is essential. And indeed, if done properly, requiring good financial information will help your subsidiaries run better, as well as protect the parent company through timely notice of any problems. However, caution must be observed. Produce is often a low margin business. It doesn’t take that large of an increase in expenditure on legal and accounting to bust the margins. The best approach is that the home office shouldn’t ask for more information from the subsidiary that the subsidiary should already have for itself.
  7. Build pride and corporate loyalty to the parent firm. When you have bought up many different companies, each with different traditions and modes of operation, you run the risk that employees will start wondering who they are working so hard for. Company newsletters, advertising, picnics, etc. all can serve to help build employee identity with a parent company.