(May 13) CINCINNATI — Fresh-cut fruit is still a major part of the marketing strategy of Chiquita Brands International Inc., even though the new category cut into company profits after its launch.

Startup of the segment in August caused $3 million in losses for Chiquita and resulted in first-quarter operating income of $3 million for its fresh produce categories excluding bananas in the first quarter of 2004, Chiquita reported May 10.

That compared to an operating income of $2 million in the category for the first quarter of 2003.

Chiquita said net sales for nonbanana fresh-produce business were $360 million, compared to $81 million the previous year. The company said its March 2003 acquisition of Germany-based distributor Atlanta AG accounted for $247 million of the 2004 increase.

“It’s a startup business, and there are anticipated losses in startup businesses,” Chiquita spokesman Mike Mitchell said of the fresh-cut fruit category. “It’s on plan. We’ve received excellent feedback on it.”

Eric Larson, senior research analyst with Piper Jaffray Cos., Minneapolis, concurred that such a loss should be no surprise.

“I suspect that it’s probably very similar to Performance Food Group’s experience starting their fresh-cut (segment),” Larson said. “At least your first year is going to riddled with some losses. It’s a typical startup of a new business.”

Chiquita processes fresh-cut fruit products at its Chicago-area facility and markets the items within a 500-mile radius of Chicago.

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In fact, Mitchell said, the company is going to launch a television advertising campaign for its fresh-cut line in selected Midwest markets later in May. He declined to identify the markets or when the campaign would begin.

Net sales for bananas totaled $419.3 million for the quarter, compared to $378.4 million a year ago.

]The company also said its first-quarter net income fell to $20 million, or 46 cents per share, from $25 million, or 62 cents per share, for the same period in 2003.

Chiquita also reported that banana prices in the first quarter fell 6% from a year earlier, when flooding in Costa Rica and Panama shortened supplies.

The company’s net sales for the first quarter rose to $793 million from $471 million a year earlier, the acquisition of Atlanta having figured into that difference.

Chiquita shares closed at $16.13 May 12 on the New York Stock Exchange, having fallen from the $20 level a week earlier. The stock had a 52-week range of $13.44-24.40.