Brazil Orange Baron Buying Chiquita Revealed as BillionaireBlake Schmidt and Juan Pablo Spinetto
The tang of Jose Luis Cutrale’s orange juice factory permeates the air in the Brazilian town of Araraquara.
For visitors who make the 173-mile trek northwest from Sao Paulo, the aroma is a welcome respite from the stench that normally emanates from the city’s sewage-choked Tiete river. For local inhabitants, the Sucocitrico Cutrale Ltda plant reminds them of home.
“I don’t even like the taste of oranges, but I love the smell of Cutrale,” said Andrea Savia, an aide for an Araraquara city council member. Returning recently after a year away, Savia broke down in tears when she took her first whiff of the company’s pungent by-product.
Sucocitrico Cutrale has grown under Chief Executive Officer Cutrale, according to filings for its international operations. The closely held business has defied declining global demand for orange juice, a decade-long scourge of crop disease in Sao Paulo and allegations that the executive heads a cartel of orange exporters.
Cutrale, 68, is head of a third-generation fruit empire that began with his family’s orange groves and grew into Minute Maid’s largest supplier. He’s also a shareholder of Brazilian Coca-Cola distributor Spaal and has interests in commercial real estate, commodities trading firms and a U.S.-based aircraft operator.
His fortune, valued at $2.6 billion, according to the Bloomberg Billionaires Index, makes him the 26th-richest person in Brazil. He doesn’t appear on an international wealth ranking and declined to comment for this story.
Sales have increased at Sucocitrico Cutrale as orange output from Florida heads toward a 25-year low. Worldwide consumption of orange juice in the top 40 markets dropped 11 percent in the past decade, with demand in the U.S. dropping by 27 percent, according to data from Brazil’s association of citrus juice exporters.
To diversify, Cutrale began growing soy to export to Asia, and joined with Brazilian banking billionaire Joseph Safra in a $1.3 billion buyout of Charlotte, North Carolina-based Chiquita Brands International Inc., which was completed in January. In the Chiquita bid, Cutrale revealed that his family’s empire controls more than 33 percent of the $5 billion global orange juice industry.
Chiquita’s pineapples, fruit chips and salad products have reduced Cutrale’s exposure to oranges as flavored water and single-serve coffee cut into demand for orange juice, said Brett Hundley, analyst at BB&T Capital Markets, which has offered investment banking services to Chiquita.
“Diversification, when done well, is a blessed strategy,” Marcos Fava Neves, professor of strategy at University of Sao Paulo’s economic school, said in an e-mail. “The world’s orange juice market is in decline. So maintaining its leadership in juice, but also looking after soy and fruits, is a good route if Cutrale wants to keep growing.”
Cutrale’s buyout came after the U.S. Court of Appeals in Atlanta dismissed a case in July by thousands of Colombians who contend Chiquita financed paramilitaries. Plaintiffs say they are seeking further review, including in the Supreme Court if necessary. The company pleaded guilty in 2007 to U.S. criminal charges stemming from the payments at issue in the Atlanta case and paid a $25 million fine. Cutrale and Chiquita declined to comment further.
Cutrale will contribute cash equal to 50 percent of either $1 billion or the sum of the cost of shares and stock options, share rights, senior notes due 2016 and other fees for the Chiquita acquisition, according to a filing.
Ukraine’s antitrust authorities approved the deal and Cutrale and Safra said they notified authorities in Honduras and “entered into arrangements” to address the exercise of control of Chiquita’s Ecuador operations, pending approval by Ecuadorean authorities, according to a Jan. 2 statement.
Sucocitrico Cutrale doesn’t publish its financial results. According to annual reports filed by London-based Burlingtown LLP, a U.K. holding company that oversees Cutrale’s operations outside of Brazil, annual revenue doubled to $1.3 billion between 2007 and 2013.
The holding company has 10 subsidiaries spread across the U.S., the U.K., Netherlands and Portugal, with stakes in Zurich-based Grove2Glass Trading GmbH, Nippon Juice Terminal KK in Japan, and Orlando-based General Avileasing Inc., which owns the company’s jets. It lists Cutrale’s wife, Rosana, and their children Jose Enrique, Jose Luis Junior and Graziela as directors.
The family’s fruit business was started by the billionaire’s grandfather, Guiseppe Cutrale, an Italian immigrant who sold oranges in Sao Paulo’s municipal market, according to Eliseu Nonino, a family friend and former director at the company.
The elder Cutrale purchased an orange grove and began exporting the fruit to Europe and the Middle East in 1956. His son, Jose Cutrale Jr., bought a juice plant in 1967 and changed the firm’s name to Sucocitrico Cutrale. He acquired five industrial complexes in Sao Paulo state and two former Minute Maid plants in Florida.
“Jose was an entrepreneur with a grand vision,” Nonino said in a phone interview from Araraquara.
The company that Jose Luis Cutrale oversees today looks nothing like his grandfather’s orange business. Employees use satellite imaging of Brazilian groves to ensure the fruit is picked at the right time. A pipeline sends juice from silos in Auburndale, Florida, to a Coca-Cola bottling plant. Blend technicians control acidity levels by following algorithms known internally as “the Black Book.”
Cutrale executives fly in and out of Araraquara using a helipad atop a high-rise building next to its plant, which produces orange concentrate all night. They live in company-built homes within a heart-shaped clearing protected by armed security. A swimming pool and tennis court in the compound is surrounded by orange groves.
The company’s reach spans the global supply chain, from about 400,000 acres of Brazilian groves to a fleet of vessels that ship his commodities to at least three continents. Trucks with the logo of a dripping orange slice are a fixture on Sao Paulo highways as they haul juice to Santos, Latin America’s biggest port, where the company rents a private-use terminal.
To meet demand in Asia, Cutrale invested in a commodities trading company and soy plantations near Brazil’s Amazon in
2012. Soy exports from Araraquara spiked fourfold in 2013 to $777 million, though they tapered off in 2014, according to Brazil’s trade ministry.
Trade data shows Cutrale’s exports surged 62 percent to $1.7 billion in 2013 from a year earlier, and reached at least $1.4 billion in 2014. Coca-Cola and Cutrale buy about 30 percent of all oranges grown in Florida.
The USDA estimates Florida produced 125 million boxes of oranges in the 2013-2014 crop year, about half its peak in the late 1990s, when output was 244 million boxes. Brazil’s Conab said production in Sao Paulo and Minas Gerais states remained stable over the past 15 years, at about 340 million boxes.
Brazil was more prepared than Florida for greening, an insect-borne bacterial disease discovered in the state’s orange groves in 2005, because it had put systems in place after outbreaks of a bacteria known as canker, said Juliano Ayres, director of Cutrale-funded Fundecitrus in Araraquara, which releases alerts as diseases spread.
Cutrale’s rise in the orange business has attracted scrutiny. In the 1980s, the company was among Brazilian producers accused by the U.S. Commerce Department of selling juice in the U.S. at prices deemed too low by Florida growers, though he had the U.S. anti-dumping measures removed in a World Trade Organization case that closed in 2013.
Brazil’s citrus growers’ association accused Sucocitrico Cutrale, Citrosuco and a unit of Louis Dreyfus of forming a cartel to keep prices for oranges they were buying artificially lower since the 1990s. A ruling by Brazilian antitrust authorities is pending. The companies have denied the claim for decades, and declined to provide further comment.
“Cutrale manipulates the market and creates a barrier to entry from competition,” said Flavio Viegas, head of the association, who supplied Cutrale for more than four years from
Dino Tofini, a juice maker who died in 2013, told Sao Paulo state legislators at a 2010 hearing that he was forced to participate in weekly price-fixing meetings orchestrated by Cutrale. Police rounded up 30 bags of documents and computers from orange exporters in a 2006 operation known as “Fanta.”
The stash of goods, which included an Uzi submachine gun seized from a Cutrale director’s office, according to the daily paper Folha de Sao Paulo, was blocked for four years before investigators were granted access since exporters said the evidence was obtained illegally. Companies involved in cartels can be fined as much as 20 percent of annual sales in Brazil.
Sucocitrico Cutrale denies any wrongdoing and said in an e-mail that it’s cooperating with investigators. The company said it created 20,000 jobs globally and “contributes positively” to its communities, citing donations of robotics to a local hospital and daily servings of orange juice for 2,000 schoolchildren.
Cutrale also has faced inquiries into its labor practices. Prosecutors in Sao Paulo state say they’ve investigated the company’s labor practices 286 times over the past decade, compared to 50 times for Citrosuco and 71 for Louis Dreyfus Commodities. Some probes have resulted in lawsuits and others in settlements.
In March 2014, a tribunal ordered Cutrale and two other companies to pay 113 million reais ($43 million) and to stop irregular sub-contracting of orange pickers. Cutrale denied any wrongdoing and declined to comment on active cases.
Politicians covet Cutrale’s support despite the accusations. The billionaire pledged 21 million reais in last year’s election, including 6 million reais to President Dilma Rousseff’s re-election campaign and 9.8 million to members of the opposition party that governs Sao Paulo state.
In “Entreatos,” a documentary directed by fellow billionaire Joao Moreira Salles on Luiz Lula da Silva’s 2002 campaign, the future president orders an aide to write a declaration of support and ask Cutrale to read it on TV.
“I had dinner yesterday with Cutrale,” Lula told a campaign ally in the film. “I said ‘you’re really my friend, this is the third time we meet. So, when are you going to declare your support?’ I want you to say you are the biggest exporter in this country.”
To continue reading this article you must be a Bloomberg Professional Service Subscriber.
If you believe that you may have received this message in error please let us know.
- In One Tweet, Kylie Jenner Wiped Out $1.3 Billion of Snap’s Market Value
- U.S. Companies Abandon the NRA as Boycott Call Grows
- China Regulator Seizes Anbang, Chairman Faces Fraud Prosecution
- Prime-Age Men May Never Return to U.S. Workforce, Fed Paper Says
- The Two Words That Will Help Get an Airline Upgrade Over the Phone