Vertical Integration in Ecuador: The Case of Fresh-Cut Pineapples

Abstract

Telesignos, a fruit producer and exporter in Guayaquil, Ecuador, was considering vertical integration into pre-cut pineapple production. Fruit processing skills, favorable image/reputation, as well as access to a new market could be obtained by linking with a company like Del Monte to produce fresh-cut fruit products under the Del Monte brand. The decision is whether it would make sense for Telesignos to invest in a fresh fruit processing facility in Ecuador to export fresh-cut pineapple to the United States. C arlos was relax ig in a chair while staring out at the Pacific Ocean. His home on the beach provided a breeze but humidity was a way of life in coastal cities like Guayaquil in Ecuador. He had a cold glass of Quito Orange drink made from naranjilla fruit that helped keep him refreshed. For a long time, he had dreamed about vertically integrating his mango and pineapple fruit plantation and export business into further processing of pre-cut fruit. He was thirty-eight years old with five children and had a degree in mechanical engineering from the University of Hartford and a master's degree in agribusiness from Kansas State University. As CEO of Telesignos, he was constantly looking for new business opportunities. His business sold fresh fruit to brokers in various Caribbean countries and the United States. Moving into the pre-cut fruit market would require all of the company's capital and management expertise. It offered a great deal of potential because of the added value but there were risks involved in such a venture. Telesignos was owned by four Ecuadorian investors. The company had acquired a plantation in 1993 and planted mangoes and pineapples. It owned about $1 million in assets and exported fresh mangoes to the United States, Canada, and the European Union. The pineapples were nearly ready to produce their first crop and Telesignos wanted to decide how to market the fruit.