TOUGH MARKET PREDICTED

TONY SPLEEN

SAN DIEGO -- "A lot of companies are jumping into the [precut] arena without thinking it through. There is going to be a tremendous bloodbath coming up," warned Ernie Townsend, president, Dole Food Co., North America, WestLake Village, Calif. "It's going to be brutal," he said.

Townsend was speaking as a panelist at the "Produce Outlook '94" session during the United Fresh Fruit and Vegetable Association's annual convention earlier this month.

Many companies are getting into precuts now because they see the category poised for tremendous growth, Townsend said. But they are going to have a tough time because they haven't made the investment into equipment, research and human resources as some of the more established precut companies have, he said.

"We know from a production standpoint that this is a lot more complex than most people realize," he said. Dole -- one of the largest producers of precut produce -- has invested $75 million in its precut programs, he pointed out.

"I really caution the ones who are just jumping in because it's easy growth now," he said. "It will not be easy in the future. It's going to get crowded."

He predicted a period of price cutting that will lead to the demise of some of the less established upstarts.

Townsend's views were shared by other industry leaders -- who predicted a rash of mergers -- at the convention.

"Consolidation of customers and competitors will certainly be the most challenging aspect in the next two to four years," said Robert Castellini, president and chief executive officer of Castellini Co., Cincinnati, Ohio, a major produce distributor and a speaker on the same panel.

As the fresh-cut industry matures, processors will consolidate and merge, creating "three or four key players," said Chris Nelson, chief operating officer of Ready Pac Produce, Irwindale, Calif., a major producer of precuts who spoke on fresh-cut trends during another convention workshop.

Smiling with the confidence of a key player, Dole's Townsend summed up his thoughts: "The ones who have set up the factories and the consumer base correctly will be the ones that survive."