Philippine Business Magazine: Volume 8 No.1 - CEO Interviews
Agree To Agri
Agriculture allows the country to rank among the best in the world, just like Lapanday's bananas and Del Monte Philippines' pineapples. Luis Lorenzo Jr. tells us how
Interview by Felicidad Tan-Co

At 42, Luis P. Lorenzo, Jr. is a veteran CEO. Since graduating from Wharton in 1982, he took on the chairmanship of Lapanday Foods Corporation, which currently produces four percent of the world's bananas. Taking over the helm of Lapanday Holdings Corporation as Chairman and CEO four years ago, Lorenzo continued aggressively marketing tropical fruits and turned the Lapanday Group into a multi-billion empire with brands recognized worldwide. His "Mabuhay" bananas had captured 36% of China's banana market, while "Estella" and "Aloha" brands penetrated strategic markets throughout Asia, Australia, and the Middle East. Lorenzo is also currently chairman of Del Monte Philippines, Inc., the country's largest exporter of pineapples.

Lorenzo shared with Philippine Business his vision for increasing the competitive edge of his company, the industry, and the country. Excerpts:

Do you feel government has really been supportive of agriculture?
Yes, though only in the recent past has it been supportive of the agricultural industry. Where land reform was extensively implemented during President Aquino's administration in the late 1980s, the general sentiment was that the concept was noble but the implementation poor. Land was indeed distributed, but landowners were believed to have not been paid fairly for their land and the land recipients were not provided support services to help ensure the success of the program.

We have spent the last 12 years trying to survive in this globally competitive environment while trying to explain to government the need to see themselves as our partners and become more customer-oriented - meaning, treating the farmer as the customer, instead of government being bureaucratic and regulatory. I believe this view has started to be understood and government is not merely holding dialogues but is now actually listening to the farming sector.

At the end of the day, we have come to grips that as a country, both private and government sector have to work together on a common strategy with regards to improving trade relations with a lot of trading partners. Agriculture happens to be a very sensitive area, where WTO (World Trade Organization) conditions one's trading relationship to be more friendly with regards to all matters. Particularly, there is sensitivity in the agri-sector in most countries due to the political implications on the farming sectors.

So the government is beginning to recognize that they have a role to play because they are the officials negotiating bilateral and multilateral trade. Government must be our partners in securing access to international markets. It doesn't cost any money. It requires prudence, focus, and deliberate negotiating skills to seek particular results - without giving up our position.

Do you think the policies of the new Agriculture Secretary will benefit the industry?
This government recognizes the role of agriculture as a partner in economic development and nation-building. More specifically, it appreciates the fact that, since we are still basically an agriculture-dependent society, more so in the rural sector, we cannot have true economic development unless the agriculture sector grows and the overall quality of life of the farmers is improved.

Inasmuch as we acknowledge the importance of the service economy, to include IT and the electronics industry as twin engines for growth, agriculture provides the third leg in development. It minimizes the migration to urban centers of rural folks who don't have opportunities in the rural areas and allows for this large sector of society some level of purchasing power to help consume products built by the industrial sector.

I am appreciative of the Secretary's having requested me to be a part of a panel that he will convene regularly to discuss pro-active ways to spur economic development through agriculture. I hope to be able to share my thoughts in these venues, which will hopefully benefit the various agriculture sectors.

How do you foresee the prospects of the banana industry?
The banana industry continues to be very challenging because of competition, but not impossible to overcome. At the moment, the world cavendish banana supply already matches demand. However, other fruits which used to be seasonal are now more available on a year-round basis because of technology. This affects traditional cavendish banana demand.

To keep pace with the demands of world markets, we have to be focused and deliberate in addressing what the banana market wants. It has also required us to benchmark ourselves against the best in the world in cost, quality, and reliability; from seed development, farming practices, and logistics, to servicing the ultimate customer. One also needs to be flexible in addressing niche opportunities within the international markets by product variety, packaging, and quality.

The banana export industry remains a major sector, of vital importance to the national economy; the fruit is available 52 weeks of the year and can be produced in substantial quantities to fill the reefer ships that call to ports abroad; seasonal fruits can be put on deck to optimize efficiency of logistics.

Recent reports say that you are putting on hold industrial estate projects in Mindanao. Please comment.
We are delaying our industrial estate projects not so much because of cost, shipping, logistics, and peace and order concerns, but because the market is weak. Further, the level of sophistication of Mindanao workers as regards manufacturing and industry is not yet at par with Luzon and Manila standards so the traditional type of industrial park may not be competitive in Mindanao.

However, we are looking at agri-industrial establishments in support of globally competitive agricultural systems, with facilities for manufacturing materials which agriculture may need. We might even get involved in the processing of raw agriculture products and development of agri-technologies. The concern for the long-term welfare of our agricultural workers and their families remains unwavering.

What are your objectives for Lapanday in the next five to ten years in terms of profits, social commitments, and industry standing?
We aim to be a multi-source, multi-product, multi-market fresh produce company with a global perspective. This means that, even as we strengthen our agri-base in Mindanao (being flexible enough to relate to big and small farmers), we are also continuing to develop an international and regional marketing network (comprising of suppliers as well as buyers of top-quality fresh produce). We also continue to expand our expertise beyond bananas to other tropical fruits, vegetables, and seafood which we can source principally from Mindanao, and elsewhere in the world if market demand dictates it.

We were into many things in the past but we learned through the financial crisis that we were strongest and could be globally competitive in our agriculture expertise. Basically, focusing on high-value tropical fruit products which therefore gravitated into two focal points. One is the pineapple business located in Bukidnon in Cagayan de Oro which basically grows pineapple. Another is southern Mindanao-based Lapanday Foods - we are expanding beyond bananas.

In terms of financial bottomline, to increase profits and net US$10-50 million per year.

In terms of social objectives, we have always had a very strong social orientation, as evidenced by the efforts to help the communities where we operate with water systems, health programs, and livelihood projects. Moreover we built and support a trade school in Lapanday to provide skills training particularly to the youth in our farms who are seeking employment opportunities but whom we cannot accommodate.

We will continue to put a strong emphasis on education, employment-generation, and middle-class development. Social commitment makes good business sense; it helps promote peace and prosperity because if our workers feel content and cared for, they develop "malasakit," concern for the company, and they work better to strengthen the business and strengthen the community we operate in. I strongly believe that these comprise our contribution not only to the progress of Mindanao but also to national development.

Among your investments, where do you feel you had reached the peak and which are still gearing for more expansion?
We will concentrate on the core industries of Lapanday such as niche marketing for perishable products and establishing strategic alliances with fresh food retailers in the region.

Our sister-company, Macondray & Co., Inc., continues to focus on synergies with the Del Monte Pacific business; pursue packaging innovations which are necessary for our own products; divest from consumer products distribution; and scale down consumer finance.

How does a conglomerate like Lapanday tightly manage expansion yet be supportive and give autonomy to subsidiaries?
Lapanday management keeps a close watch on budgets, financials, and cash flow. While we have diversified, we take care to focus on businesses where we perceive high growth potentials and great opportunities to further development, particularly in Mindanao, because we want to decongest Metro Manila and help bring progress to other parts of the country.

How different is your management style from your father's? Can you pinpoint a specific philosophy that had driven the company to continuously enjoy growth?
Compared with my father, I have a more hands-on management style, with equal passion for the business and the development of our people. Perhaps the difference between this generation and the last one is the keener competitive environment today. We therefore need to be more focused, deliberate, and decisive because quicker response time is required and because of the stiff competition we have today.

We are more involved, even work longer hours, and develop a deeper understanding of and passion for details. The markets are more dynamic, the trends change at a faster pace, so we have to make every effort to stay at the forefront of the industry - even be a step ahead of everyone else. The key is to identify where we can be globally competitive, benchmark against the best in the world, and - with focus and passion - endeavor to be the best and remain the best in what we do.