Del Monte says might offload StarKist
23 May 2008
Del Monte Foods Co is looking at all possible options for its StarKist seafood business, which could also include the possibility of a sale.
Del Monte also sells its Del Monte canned fruits and vegetables, Meow Mix cat food, and Kibbles 'n Bits dog food. StarKist is famous for its iconic "Charlie the Tuna" cartoon mascot, created by Tom Rogers of the Leo Burnett Agency when StarKist hired Leo Burnett in 1961. Del Monte had acquired StarKist in 2002 as part of a deal that saw it take over many businesses formerly belonging tto H.J. Heinz Co.
StarKist has been a drag on Del Monte's profits during recent quarters, given the soaring costs of skip jack tuna, which haven't eased up despite raising prices charged to customers.
Analysts predict a financial hit for Del Monte on the sale. However, in a statement the company's board said that it has not approved a transaction, and therefore a sale may not be in the offing. Del Monte's admission of seeking alternatives for StarKist was in response to reports published, and it said it will not disclose any more details.
Skip jack tuna costs were higher by around 70 per cent during the three months through January as compared to a year ago, according to a statement in February by Del Monte chief executive officer Richard Wolford.
Though StarKist has increased prices to offset increased skip jack tuna costs, consumers have been unwilling to pay them, since canned tuna is widely perceived as a cheap commodity. Unable to sustain the higher costs, the past few quarters have seen StarKist become a drag on Del Monte.
10 per cent of Del Monte's revenues accrue from its StarKist division, say analysts. Del Monte had posted sales of $3.41 billion last year.
Del Monte, along with two other players makes up around 80 per cent of the canned tuna market, with StarKist commanding around 34 per cent of that market.
