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Fresh From Latin America [U.S.-Latin Trade magazine]

by Hope Katz Gibbs
Washington Correspondent
U.S.-Latin Trade magazine
February 1994
Design by Kevin Jolliffe

CARLOS AGUDELO IS THE MIAMI technical service manager at Turbana, one of the biggest importers of bananas to the United States. It’s important that the bananas at Turbana’s farm in Costa Rica get to U.S. distributors fast—and fresh. So, Agudelo leases refrigerated containers from San Francisco-based Genstar Container Corporation.

Turbana employees take the containers into the fields where the bananas are picked. The fruit is put into boxes in the refrigerated containers and within 24 hours is on its way to U.S. supermarkets.

“We ship 28 refrigerated containers per week of bananas from Costa Rica, Colombia, and Ecuador to four U.S. ports including Texas, Connecticut, and Tampa,” explains Agudelo. So last summer, Turbana leased 140 refrigerated containers from Genstar.

Shipping produce between Latin America and the United States has become big business. And Genstar, the largest container lessor in the world, has accordingly beefed up its marketing in the region, winning customers in Mexico, Chile, Argentina, Brazil, Venezuela and Colombia.

“We see Latin America, especially Mexico, as one of the biggest growth areas for our company,” says Raphael Che, company president and CEO.

THE BIG ONE

Genstar, with US$3.4 billion in assets, has approximately 1.2 million TEUs—which stands for Twenty-Foot Equivalent Units. The 20-foot-long containers stack on ships and hitch to trucks. Within this enormous fleet are 58,000 refrigerated TEUs, valued at approximately $450 million. The remainder is “dry vans”-simple boxes with no temperature control.

According to estimates compiled by the Institute of International Container Lessors, while ocean carriers own 51% of the world’s outstanding supply of 6.2 million TEUs, U.S. leasing firms such as Genstar own 45%, with the remaining 4% owned by railways and European companies. Genstar alone controls approximately 36% of the world supply of leased TEUs.

By sheer force of numbers, Genstar’s dry-van business remains its largest source of revenue. But refrigerated units, say company officials, represent the future. In 1993 alone, Genstar invested over $200 million in refrigerated containers (reefers), and expects its reefer-leasing business to grow by 30% in 1994.

QUICK TRAJECTORY

Genstar was founded in 1981 by a team of entrepreneurs who put $13 million into the business, thanks to investors in the dry van containers business in Japan. By 1986, the business had grown to the point where GE Capital Corporation saw the potential of the industry and acquired the fledgling firm.

CEO Che was one of the original founders. In the late 1980s, he was vice president of the company’s Pacific operations in Hong Kong. By 1988, Che was transferred to San Francisco to head the firm. He became president and CEO overseeing 300 employees in 22 offices around the world.

“Once Che took his seat at the top of the firm, we jumped in and started ordering the refrigerated containers, and the company took off from there,” says Allan Wieman, vice president of business development at Genstar. “We have been in a rapid growth rate since then.”

LOOKING SOUTH

The company also shifted attention away from the traditional East-West, Asia / U. S. / Europe routes. “What’s happening now is that it’s pretty much a mature industry,” says Wieman. “The big growth areas now are Latin America and Eastern Europe.”

Despite the high cost of staying on the cutting edge of reefer technology, Wieman says the “new technology allows things that have never been shipped before to be shipped-things like fruits and vegetables that need to be kept at a specific temperature that can be controlled.”

Not all container companies marketing to Latin America are getting into the “reefer” business. John Maccarone, president of the Textainer Group in San Francisco (which owns 200,000 containers) is keeping his company focused on dry-van shipping, leasing 3,000 units per year in Latin America.

“Our sources of funding are not suited to finance leases,” Maccarone says. “It is best to leave such business to competitors that are backed by large corporate parents with access to sizeable internal funds.”

In the case of Genstar, that backing comes from parent company GE Capital, with $80 billion in assets.

SYMBIOSIS WITH SHIPPERS

Traditionally, shipping lines have been the container-leasing industry’s biggest customers. The two work together because shippers can avoid investing in containers that may sit idle during slow seasons while lessors can move units in volume.
“During peak periods such as the Christmas season, we often lease additional containers in order to meet our customers needs,” says Bill Summers, manager of corporate communications for Sea-Land, the largest U.S.-based ocean carrier ($3.2 billion in annual revenue). “We’re impacted by everything that hap pens around the world. The key is to be flexible and agile so we can take advantage of opportunities as they arise.”

One of those opportunities has been the recent expansion of fresh fruit shipments from Latin America, especially in winter months. Last year alone, Chile exported $1.4 billion in fruit. Ecuador exported $700 million in bananas and Brazil, which has just entered the market, exported $100 million in fruit.

Genstar serves about 25% of the Latin American market, and its containers are now used to transport everything from Chilean grapes to Uruguayan citrus. According to Jim McAtee, director of special equipment, the refrigerated units—which use micro-compressors and a nitrogen/oxygen cooling system—can extend fruit life as much as six weeks to nine months.

CONTINUAL COOL

It’s just a matter of time, according to McAtee, before the containers will actually be used as warehouses.

“You don’t want to break refrigeration,” he says. “You don’t want to bring cargo to a source then load it into a
ship then discharge it from the ship and load it into a truck and unload from the truck to the retailer. You break refrigeration and effect quality of the product. The whole idea is to maintain the product’s temperature, then deliver it at the temperature.”

McAtee says Latin American entrepreneurs should take note: “In China, there is a huge market. Same with Europe and Eastern Europe, for all the stuff that’s used year-round. What will happen is the entrepreneurs will see this opportunity and take it up in Brazil, for example. All they have to do is hook into the distribution network.”

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"I get by with a little help from my friends," says Hope, who gives special thanks to:

• MICHAEL GIBBS, website illustration and design: www.michaelgibbs.com
• MAX KUKOY, website development: www.maxwebworks.com
• STEVE BARRETT, portrait of Hope on Bio page: www.stevebarrettphotography.com

Contact HOPE KATZ GIBBS by phone [703-346-6975] or email.

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