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Fresh Express Inc.

Fresh Express Inc.

1020 Merrill Street
Salinas, California 93901
U.S.A.
Telephone: (831) 424-2921
Toll Free: (800) 242-5472
Web site: http://www.freshexpress.com

Wholly Owned Subsidiary of Chiquita Brands International Inc.
Incorporated: 1978 as Red Coach Foods
Employees: 2,500
Sales: $900 million (2006 est.)
NAIC: 311423 Dried and Dehydrated Food Manufacturing

A subsidiary of Chiquita Brands International, Inc., Fresh Express Inc. is the market leader in the consumer packaged salad business. The Salinas, California-based company essentially invented the category, and today produces 40 million pounds of salad each month. Every week more than 20 million bags of Fresh Express salads are eaten by consumers. Product categories include Crispy Lettuces, featuring several ready-to-eat salad mixes using blends of iceberg, romaine, and green leaf lettuce along with carrots and red cabbage; Tender Lettuce Mixes, which include other types of lettuce and spinach leaves mixed with such ingredients as red cabbage, radishes, and carrots; Flavorful Whole Baby Blends, using baby leaves of various types of lettuce and spinach and other ingredients; organic mixes; complete salad kits that come with dressings, croutons, bacon crumbles, and other ingredients; and specialty salads, including a variety of cole slaws.

PIONEERING REFRIGERATED LETTUCE SHIPPING: 1926

Fresh Express was established by Bruce Church Inc., a company founded by Bruce Church in Salinas, California. Originally from Ireland, Churchs family had come to California by way of Canada and New York in 1875 and was originally involved in timber before turning to stock raising. Born in 1900, Church studied business economics at the University of California at Berkeley and then went to work for a produce shipper. In 1926 he found a financial backer in Whitney Knowlton, who provided $3,000 to buy a field of head lettuce, which Church packed in ice and shipped to the eastern markets. The shipment garnered $100,000 for the two men from enthusiastic customers. One company legend holds that the term iceberg lettuce originated with these deliveries, as children in Maine greeted the arrival of the vegetable shipments with shouts of The icebergs are coming! In any event, Churchs idea paid off, leading to the creation of Bruce Church, Inc., and turning its founder into one of the valleys largest produce growers and shippers.

Church died in 1958 and son-in-law Edward Ted Taylor took charge and proved to be an innovator in his own right. Because produce was a commodity and subject to low profits, it was natural that shippers like Bruce Church Inc. would look to increase margins by adding value to their products. In the mid-1960s California lettuce growers introduced packaged shredded lettuce, an idea well ahead of its time. Although consumers were resistant, some fast-food restaurants embraced the idea because of the convenience, but by 1980, according to the New York Times, it still only accounted for about 5 percent of all lettuce sales. The biggest obstacle to gaining acceptance in the market was the products short shelf life. According to Forbes, Once its cut, lettuce, like any plant, breathes in, or respires, oxygen while giving off carbon dioxide, water and heat. Left in the open air, the lettuce will respire as much oxygen as it can get, speeding up its own decomposition. Placing the shredded lettuce in a simple plastic bag did nothing to control the lettuces intake of oxygen, however.

To solve the respiration problem, a Whirlpool subsidiary called TransFresh Corporation, began experimenting with controlled- and modifiedatmosphere packaging. Taylor bought the company for Bruce Church Inc. in 1966 and two years later formed a venture called Trim Fresh to develop a packaged salad for the foodservice channel. The technology failed to measure up to the potential of the concept, however, and eventually Trim Fresh was shut down. However, company researchers continued to further the technology, so that in 1978 Taylor revived the packaged salad idea as Red Coach Foods (drawing its name from the companys popular Red Coach lettuce). The company was able to drum up some foodservice business, selling packaged shredded lettuce and other raw produce to the likes of McDonalds and Burger King.

In 1981 Ted Taylor asked his son Steve to spearhead an effort to sell packaged salads to the retail market. However, the requirements of foodservice customers were not the same as retailers, who needed a much longer shelf life. Once again the film available for packaging was not up to the task and after two years Steve Taylor left. He had never intended to become involved in the family business, having earned a degree in psychology from the University of California at Berkeley, and for a time he pursued a career in social work. He traveled east to earn a Harvard University M.B.A. After a stint running a Los Angeles restaurant, he returned to the family business in 1987, but while he was away film suppliers had made significant progress on meeting the needs of TransFresh. With a viable retail product in sight, Taylor again devoted himself to the effort, working closely with TransFresh and the film manufacturers to develop a bag capable of breathing, allowing oxygen in and carbon dioxide out. In addition, researchers learned to introduce nitrogen into the bag to lower oxygen levels in order to extend shelf life.

FRESH EXPRESS NAME TAKEN: 1987

Red Coach was renamed Fresh Express in 1987, and two years later company representatives were dispatched to trade shows and to visit buyers with hand-packed bags of garden salad to make their pitch for a consumer packaged salad product. It was an opportune time to launch such a product, given the emphasis two-income households were placing on convenience and the health benefits of salad. Receiving a positive reception in the market place, Fresh Express acquired a modified fill and seal system and began packaging garden salad, which was initially distributed on the West Coast. Foodservice quickly became a major market, but on the consumer side the early months were challenging, as retailers needed time to fully embrace the new category, as well as time for consumers to discover the product. After several months, sales increased significantly and Fresh Express began to introduce the product across the country. Rather than rely on the accepted way of selling produce to retailers, Fresh Express created a national network of food brokers, overseen by regional managers, to provide help to produce managers in marketing and managing this new value-added category. Very quickly Fresh Express penetrated markets as it spread eastward, along the way establishing regional processing plants in Colorado Springs, Dallas, Chicago, Atlanta, and Greencastle, Pennsylvania.

Once established across the country, Fresh Express began introducing new salad varieties. In 1991 European Salad was launched, adding such ingredients to the mix as romaine lettuce, radicchio, endive, and escarole. The following year, the company offered its first salad kit, a Caesar salad that included dressing and Parmesan croutons. All three of the Fresh Express products proved popular, forming the basis for three lines of salad mixes: Family Classics, World Blends, and The Works. Extensions to those lines were added later.

COMPANY PERSPECTIVES

Fresh is our first name, and our first priority. Were dedicated to providing the freshest, ready-to-eat products available. Everything we do from growing, harvesting, washing, packaging and delivering is designed to give you the freshest, best tasting products possible.

Fresh Express increased revenues almost sixfold between 1991 and 1994, with the retail business leading the way. Foodservice sales, while still accounting for 40 percent of sales, grew at a less robust rate. To take advantage of the companys Bruce Church heritage and reinforce the message of freshness, the company augmented its name, becoming Fresh Express Farms. In addition the package design was upgraded. In 1995 Fresh Express was contributing about $350 million of the $450 million taken in by Fresh International (a parent holding company formed in 1975 to house Bruce Church Inc. and the other Church family interests). But a major reason for a sharp spike in sales was flooding that crippled its competitors that year.

Just as Fresh Express was beginning to take off, Ted Taylor, who had championed the idea of packaged salad for a quarter-century, died in 1991. Steve Taylor took steps to replace his father, first becoming president of Fresh Express retail marketing in 1992, then becoming the companys chief executive officer two years later when he also took on the chairmanship of Fresh International. Under his leadership, Fresh International was finally able to reach a settlement in an epic conflict with the United Farm Workers of America (UFW). Since 1978 the two sides had been fighting in the courts of law as well as in the court of public opinion over a contract to pick Red Coach lettuce. Led by Caesar Chavez, the UFW had organized a boycott of Red Coach lettuce and ten supermarket chains ceased carrying their products. In 1996 a new five-year labor contract was finally reached, both sides no longer willing to spend further time and resources on the struggle. Perhaps just as importantly, both Ted Taylor and Chavez, who had each brought personal animosity to the bargaining table, had died.

To grow the brand in the second half of the 1990s, Fresh Express continued to add new products, some of which were tied to other well-known brands. It launched a promotion with Little Caesars Pizza, combining Fresh Express salad with takeout pizza orders. Other ventures were formed with Hidden Valley Ranch and Perdue Farms to include dressings and chicken in some of the Fresh Express salad kits. In 1996 the company introduced Ready-To-Go Entrée Salads, single-serve Chicken Caesar, Fat Free Chicken Caesar, and Chef salads that came with eating utensils and bread options. Fresh Express also began pursuing the idea of packaging fresh fruit in single-serve sizes.

As Fresh Express entered the new century it generated $509 million in sales in fiscal 2000 and controlled the leading share of the bagged salad market, nearly 38 percent compared to Doles 35.7 percent. Yet while supermarket prepared foods in general were increasing in popularity, bagged salad sales were leveling off. Interested in pursuing a number of other categories of prepared foods, Taylor sought a new source of capital and hired the investment firm of Morgan Stanley Dean Witter in February 2001 to provide some guidance.

Several months later Fresh Express was sold to Performance Food Group for approximately $300 million. Based in Virginia, Performance Food Group was a major food service distributor, serving such major restaurant chains as McDonalds, Burger King, Wendys, and Outback Steakhouse. Fresh Express was tucked into the companys Fresh Cut unit, which supplied fresh-cut fruits and vegetables to restaurants. In addition to branching into retail channels, the acquisition of Fresh Express provided Performance Food Group with valuable packaging and controlled-atmosphere technology. The transaction was completed in October 2001. Steve Taylor stayed on briefly as CEO before being replaced by longtime Fresh Express executive Mark Drever.

In 2002 Fresh Express began to move beyond salad by testing a new fresh-cut product, called Real Fresh Fruit, using its proprietary film to produce 3.5-ounce single-serve cups in three varieties: Sweet Melon Medley, Crisp Apple Orange, and Cool Watermelon. At the same time, the company continued to roll out new combinations of salad ingredients and convenient packages, such as a twin-pack which divided the salad into two portions, allowing half of the salad to remain fresh for use in a second meal.

KEY DATES

1978:
Red Coach Foods is formed to market bagged salad to institutional customers.
1987:
Red Coach changes name to Fresh Express.
1989:
First bagged salad for individual consumers is sold under Fresh Express label.
1991:
European Salad is introduced.
2001:
Company is sold to Performance Food Group.
2005:
Chiquita acquires the company.

CHIQUITA BUYS COMPANY: 2005

Although Fresh Express posted sales of $933 million in 2003, its performance did not live up to the expectations of its parent company. Sales began to fall off and earnings proved to be less predictable than Performance Food Group, a public company, desired. In the autumn of 2004, Goldman, Sachs & Co. was retained to review all options and suitors wasted little time in lining up to make bids for the bagged salad category leader, including Fresh Del Monte Produce Inc. and a number of major private equity firms, such as Apollo Management LP, Cypress Group, and Kohlberg Kravis Roberts & Co. Several months later, in February 2005, it was Chiquita Brands International Inc. that made the winning bid, agreeing to pay $855 million for Fresh Express. For Chiquita the acquisition helped it to diversify beyond bananas to value-added products with higher profits. Moreover, Chiquita, which generated almost threequarters of its revenues in Europe, was looking to increase its North American business, in large part because it was expensive to sell fruit in Europe. As a result of the Fresh Express deal, Chiquita would be able to strike a better balance, drawing about 55 percent of its revenues from Europe and 44 percent from North America.

Because of an inquiry conducted by the European Commission related to the possibility that Chiquita employees had violated certain trade laws, the acquisition was not completed until July 2005. Chiquita then wasted little time in removing Drever and other top executives in favor of their own handpicked people. Chiquita was content to continue selling bagged salad under the Fresh Express banner, but because Chiquita was a well-established fruit brand, Fresh Express precut fruits took on the Chiquita label. The new parent company soon found Fresh Express causing a drag on earnings, when in the fall of 2006 Fresh Express found itself a victim of guilt by association. Despite never having issued a recall in its history, Fresh Express was hurt by the impact of an outbreak of illnesses caused by a strain of E. coli that contaminated some packaged spinach sold by another company. As a result, sales of packaged salads in general plummeted and it took time to rebuild consumer trust. To help in this effort, in January 2007 Fresh Express announced that it would provide up to $2 million to conduct research to help the fresh-cut produce industry prevent future E. coli outbreaks.

Ed Dinger

PRINCIPAL COMPETITORS

Dole Food Company, Inc.; Ready Pac Produce, Inc.; River Ranch Fresh foods LLC.

FURTHER READING

Adamy, Janet, Chiquita Will Buy Maker of Salads for $855 Million, Wall Street Journal, February 23, 2005, p. B2.

Akkad, Diana, and Victoria Manley, Shakeup at Fresh Express, Monterey Count Herald (Monterey, Calif.), July 15, 2005.

Biswas, Soma, Fresh Express in Bag for Auction, Daily Deal, December 17, 2004.

Crittenden, Ann, The Big Business of Lettuce, New York Times, November 27, 1980.

Duman, Jill, Salinas, Calif.-based Packaged Salad Company Plans to Expand Market Presence, Monterey Count Herald (Monterey, Calif.), February 2, 2001.

Fusaro, Dave, Lettuce for the 90sFresh Express Farms, Prepared Foods, October 1995.

Interview: Fresh Expresss Steve Taylor, Supermarket Business, September 15, 2000, p. 161.

Livernois, Joe, Distributor Purchases Salinas, Calif-based Bagged Salad Pioneer, Monterey County Herald (Monterey, Calif.), October 18, 2001.

Lubove, Seth, Salad in a Bag, Forbes, October 23, 1995, p. 201.

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