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May 2014

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4 THE JOURNAL OF COMMERCE EDITORIAL JOC GROUP INC. CHIEF EXECUTIVE OFFICER GAVIN CARTER Cool Cargoes Editor STEPHANIE NALL Chief Operating Officer, JOC Group RHIANNON JAMES Executive Vice President/Chief Content Officer, JOC Group PETER TIRSCHWELL JOC Executive Editor CHRIS BROOKS Managing Editor BARBARA WYKER Senior Designer SUE ABT PUBLISHER TONY STEIN California, Minnesota, Georgia sales 678.456.8530 SALES CINDY CRONIN, Senior Account Manager Pacific Northwest, Midwest, Gulf and Canada sales 954.551.8305 ZACHARY GORMAN, Account Executive Northeast sales, Classifieds/Reprints/Copyrights 973.776.7820 GREG MARCH, Asia Director Asia, Europe sales 852.2585.6119 For Customer Service, or to Become a Member: Domestic: 877.675.4761 International: 847.763.4932 2 Penn Plaza East, 12th Floor Newark, N.J. 07105 973.776.8660 • 800.952.3839 MAY 2014 GOING BANANAS "A warehouse is nothing but a place to put expense." THAT GREAT, PITHY quote is from logistics legend Fred Smith, founder of FedEx. During a March interview with a group of JOC editors, he said: "People want to get rid of inventory. They don't want big warehouses, because a warehouse is nothing but a place to put expense." Fred Smith created an industry. Who would question him on the cost and value of carrying inventory? Perhaps a few businessmen running and using refrigerated warehouses. Apple growers, for instance; without temperature- and atmosphere-controlled storage, growers would have to dump their entire crop immediately after a harvest. With such a flood of product on the market, prices would be low and most of the crop would end up as low-value apple juice or applesauce. Instead, with proper storage, apple growers have become apple marketers and exporters. The flow of inventory is spread out evenly through the year domestically, maintaining a fairly stable price, and there is enough shelf life for the produce to be shipped to lucrative foreign markets. Maine lobstermen say more warehouse space would allow them to better market their catch and boost prices. Throughout the food supply chain, a recurring and growing theme is that a well-thought-out supply chain can boost revenue, cut costs and make a business more competitive. Fruit importers are enthusiastic about the trial year of bringing fruit from Latin America into South Florida for distribution to much of the U.S., instead of shipping it by ocean to the Northeast and trucking it back south again. The logistical change is possible because of new developments in cold treatment of the fruit, and the required investment by cold chain operators in Florida. Chiquita, one of the big three banana and fruit companies in the U.S., is acquiring Fyffes, one of Europe's biggest fruit companies. Together Chiquita-Fyffes (Fyffes also owns 50 percent of Turbana) will be the largest banana company in the world. But the merger is about far more than selling bright yellow fruit. In filings at the Securities and Exchange Commission, the companies made it clear that the deal has more to do with supply chain efficiencies than with cornering the tropical fruit market. Each of the companies has saved tens of millions in the last year after sup- ply chain streamlining, and they say reconfiguring the ocean shipping network and port operations of the combined firm should yield tens of millions more in savings. That streamlining has some ports on edge. Chiquita's lease with the Port of Gulfport will expire this summer, and there is no indication if it will continue to call there or move to Freeport, Texas, where Turbana bases most of its U.S. distribution. Last year, Chiquita signed a new multiyear lease with the Port of Hueneme, California. Fyffes and Turbana currently have no distribution set up on the West Coast, so Hueneme could see some new business. It will be interesting to see who ends up with all the bananas. CC

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