(Aug. 13) Admitting Dole Food Co. Inc. made costly mistakes in anticipating consumers’ return to the bagged salad category after the September E. coli outbreak, president and chief executive officer David DeLorenzo said the company is making changes in the category.

Those changes include cutting acreage, selling land, raising prices and bringing all salad production in-house. DeLorenzo detailed some of the changes during an Aug. 3 conference call, in which he said the Westlake Village, Calif.-based company experienced a $15 million loss in the vegetable sector during the second quarter.

He said $5 million in iceberg and romaine had to be plowed under and that he was particularly concerned about the future of the company’s bagged salad business. Restructuring has already begun, including the acreage reduction and doing its own salad production.

Eric Schwartz, president of Dole Fresh Vegetables Inc., Monterey, Calif., on Aug. 8 confirmed the cutback in acreage. He said he couldn’t say exactly how many were acres were involved but indicated it could be 8% to 10% of normal plantings.

“At the end of the Salinas season, we have ground that is fallow because the value-added category is still so far off it didn’t make sense to plant product we didn’t need,” he said. “And we can’t get out of the land leases, so it’s cheaper just to leave the ground fallow.”

Schwartz said the company plans to scale back on acreage for the Yuma, Ariz., season, which typically starts in November. He said all tender leaf processing will be in-house by the end of the Yuma season.

“Right now, our spinach is coming from NewStar (Fresh Foods LLC, Salinas, Calif.) and River Ranch (Fresh Foods LLC, Salinas),” he said. “That will be coming in-house early to mid-December. The last bit (of spring mix) that’s still at Natural Selection (Foods LLC, San Juan Bautista, Calif.) will also be in-house.”

Schwartz said the company had severed its spinach processing relationship with Natural Selection Foods after it was determined that Dole-brand baby spinach bagged at one of Natural Selection’s facilities was linked to the E. coli outbreak.

DeLorenzo said total year-to-date losses related to the outbreak are $12 million. Dole also lost $5 million in strawberry sales because of weather issues.

Schwartz said Dole, unlike some of its competitors, has both value-added and commodity lettuce programs and that problems began when too much product was grown for the value-added side while sales remained depressed.

“Through June, it was still off almost 5%,” he said Aug. 8.

He said the company had expected marginal growth of 2% to 3%.

“We overplanted in value-added, and it ended up in the commodity market (head lettuce and romaine) because we were just trying to get rid of product rather than walk away from it in the fields,” he said. “But there was just so much product (that) there wasn’t a market for commodities either, so it was a double whammy in that our commodity business was impacted because a lot of the other processors also put their excess acreage on the commodity market.”

DeLorenzo said Dole would increase production at its North Carolina facility as well as improve costs and efficiencies on the West Coast.

“Our whole system now has excess capacity since we opened up the North Carolina facility, so bringing all the spinach and spring mix in-house helps utilize that capacity and allows us to react a little faster to customers,” Schwartz said.