Florida Crystals Inc.

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Florida Crystals Inc.

316 Royal Poinciana Plaza
Palm Beach, Florida 33480
U.S.A.
Telephone: (561) 655-6303
Fax: (561) 659-3206
Web site: http://www.floridacrystals.com

Private Company
Incorporated: 1962
Employees: 3,000
Sales: $89.4 million (1999)
NAIC: 11193 Sugarcane Farming; 11116 Rice Farming; 311311 Sugarcane Mills; 311312 Cane Sugar Refining; 311212 Rice Milling

Florida Crystals Inc. is the umbrella company for the various businesses operated and owned by the Fanjul family of Palm Beach, Florida. In addition to holding about 190,000 acres of land in Florida, the Fanjul family has another 240,000 acres in the Dominican Republic, where it also owns and operates the Casa de Campo, a luxury hotel. Although diversified in its operations, the principal business of Florida Crystals is the production and sale of sugar. It operates three sugar mills, a sugar refinery, and a packaging and distribution facility, making it one of the principal sugar producers in the United States. On a more limited scale, the company also grows, mills, and markets rice, primarily in the southern part of Florida. It sells packaged sugar and rice under the Sem-Chi Rice, Flo-Sun Sugar, and Natural Sugars brand names. Although the Fanjuls have been subjected to much adverse criticism for their labor practices, influence peddling, and Florida Crystals’ alleged environmental damage to Florida’s Everglades, they have worked hard to convince critics that theirs is an environmentally-sound operation. The company stresses its pioneering of the organic farming of both rice and sugar, its crop-rotation practices, and its use of renewable resources to power its mills. It also takes pride in its support of community projects and charities, to which Florida Crystals has donated extensive funds, time, and energy.

1910-59: Fanjul Family Roots and the Loss of Family Holdings in Cuba

The roots of Florida Crystals Inc. go back over a century to Andres Gomez-Mena’s arrival in Cuba from his native Spain. Andres made his fortune by milling sugar cane, the main crop of that island country. At the time of his death in 1910, his family owned four sugar mills and held significant properties in the capital city of Havana. Andres’son, Jose “Pepe” Gomez-Mena, reorganized the family holdings under the New Gomez Mena Sugar Company name. Pepe became a leading figure in sugar production, both in Cuba and abroad. During the 1930s, he served as Cuba’s secretary of agriculture and was president of both the National Association of Sugar Mill Owners and the Cuban Institute for Sugar Stabilization. In 1936, his family formed an alliance with another Cuban family when Pepe’s daughter Lillian married Alfonso Fanjul, Sr.

Alfonso was the great nephew of Manuel Rionda, who had founded the Czarnikow-Rionda Company in New York and the Cuban Trading Company in Cuba. These organizations operated six Cuban sugar mills in a family business that was carried on, first by Manuel’s nephew Higinio Fanjul Rionda, and then by Alfonso. The combined holdings of the two family businesses included interest in ten sugar mills, three alcohol distilleries, and large real estate properties in Cuba, plus the Czarnikow-Riona Company.

Under the rule of Cuban strong man Fulgencio Batista y Zaldivar, the joint-family ventures fared well, growing in size and wealth throughout the 1940s and 1950s. However, when Fidel Castro seized power in 1959, the two families lost all their Cuban properties. The communist dictator’s government confiscated the Fanjul and Gomez-Mena holdings and forced Alfonso Fanjul and his family to seek political asylum in the United States.

1960-69: Starting over in the United States

Settling in Palm Beach, Florida, Fanjul began working to restore his family’s fortunes. In 1960, he and some associates, also Cuban refugees, raised $640,000 to buy Osceola Farms, consisting of 4,000 acres of land located near Lake Okeechobee. The investors paid $160 per acre for the property. They also bought sections of three Louisiana sugar mills, which were dismantled, barged to Florida, and there reassembled. Fanjul and his oldest son, Alfonso “Alfy” Fanjul, Jr., managed the earliest operations, including the land clearing and soil preparation as well as the building of the Osceola sugar mill constructed using the mill sections imported from Louisiana.

Initially, the sole focus of the business was its cane growing and milling. Osceola, with its daily grinding capacity of 13,500 tons, was more than adequate to handle the sugar cane harvested from the original acreage controlled by the Fanjuls.

In their early years, the Fanjuls and other sugar growers were helped by the U.S. government, which, taking punitive aim at Castro, was determined to destroy the Cuban sugar industry. U.S. trade officials embargoed all Cuban sugar and, through major incentives, encouraged the growth of the industry in the United States. In South Florida, as engineers drained swamps, the U.S. Sugar Corporation and its rivals, including the forerunner of Florida Crystals, quickly bought the available acreage for cane farming. By the middle of the 1960s, Florida’s cane acreage was 10 times what it had been when the Fanjuls first started their Floridian operation.

1970-89: Expansion, Problems, Industry Stagnation

After the death of Alfonso Fanjul, Sr., in 1980, managerial control passed to his two eldest sons, Alfonso Fanjul, Jr., and Jose Pepe Fanjul. The latter became the company’s chairman and CEO, the former, its president. The company then had reached $30 million in sales, and it was looking for new expansion opportunities.

A major one came in 1985. In that year, the Fanjuls increased their holdings when, leading a group of allied investors, they completed the purchase of Gulf + Western Industries Inc.’s sugar and tourist operations in the Dominican Republic and Florida. The founder and former CEO of Gulf + Western, Charles G. Bluhdorn, who had died two years earlier, had been deeply committed to the social and cultural development of the Dominican Republic, putting over $25 million into programs designed to improve the health, nutrition, agricultural skills and working conditions of that country’s sugar cane harvesters. Although many Dominicans feared the new owners would not support Bluhdorn’s social programs, the Fanjuls left the Dominican operations intact, including its management team. The purchase increased the cane acreage of Florida Crystals by about 90,000 acres, bringing its total to about 180,000 acres.

Expansion of its operations in the 1970s and 1980s brought Florida Crystals many problems, including legal entanglements and some adverse and at times excoriating press coverage. The whole sugar industry in Florida came under the scrutiny of environmentalists concerned with the destruction of wetlands and the threat of cane farming to the water supply of the state’s southern counties. Although hotly disputed by Florida’s cane growers, the environmentalists’ claims resulted in serious scrutiny of the industry. Matters would come to a head in the mid-1990s.

The industry was also the subject of attacks from labor activists and consumer groups. These often singled out Florida Crystals because, in its labor-intensive operations, the Fanjuls continued to hire migrant cane cutters to harvest their sugar crop by hand. The company thus bore the brunt of the criticism and resulting legal action. In 1989, arguing that sugar companies failed to pay agreed upon wages, cane cutters brought a major suit against the industry in an attempt to gain unpaid money. Because the Fanjuls then employed about 6,500 of the 8,000 Caribbean cane cutters who migrated to Florida each year, they were the principal target of the $136 million suit.

Added to these problems was the fact that during the 1980s and early 1990s sugar farmers and millers were not faring well. Sugar consumption in the United States was increasing at the comparatively low rate of two percent per year. A major factor keeping the growth flat was the health-fad promotion of sugar substitutes. Nevertheless, by 1990, the company had beaten out U.S. Sugar as the nation’s biggest cane grower. It had also become the most powerful force in sugar politics.

1991-2000: Bitter Fight to Survive and Sugar Industry Resurgence

In 1991, the Wilderness Society reported that Florida’s sugar farms used two-thirds of their region’s water to achieve a paltry one-fiftieth of its economic output while paying less than one-fiftieth of its property taxes, a claim that the industry energetically disputed. By then, too, a $400 million Save-the-Everglades cleanup plan, which would restore almost 70,000 acres of farm land to wilderness, worked to exact much of its cost from Florida’s sugar industry. Under duress, but after much resistance, the industry finally agreed to put over $300 million into the Everglades’ restoration project, with much of the cost being borne by Florida Crystals.

Company Perspectives:

The people at Florida Crystals share a proud heritage of farming that is vitally linked to the environment We act as stewards of the land, balancing our natural resources and protecting surrounding ecosystems to ensure a healthy and sustainable future.

In the 1990s, the Fanjul family itself came under hostile scrutiny in the media, partly because of the way they managed their business and partly because of their bald political leveraging. In 1995 they were branded as “greedy and ruthless” in articles in Forbes and lambasted for their alleged violation of Rule G-37 of the Securities & Exchange Commission. Under that regulation, companies underwriting minority municipal bonds, such as the Fanjuls’ faic Securities, were barred from making political contributions. The Fanjuls were in fact trying to defend their economic turf and survive, mustering all the political clout they could in a particularly bitter fight that pitted Florida’s cane farmers and processors against fervid environmentalists and their odd bedfellows—corporate sugar-using giants such as Coca-Cola and Hershey. At issue was the price support program of the federal government, then under review by Congress. In 1996, legislators in the House of Representatives and Senate debated a farm bill measure that would have phased price supports out completely. Corporate interests wanted the program killed, thereby driving the price of sugar down and their profits up. For their part, the environmentalists were simply trying to make sure that sugar cane farming did not “turn the Everglades into a lifeless cesspool.” In the end, the price support program remained, at least for the time being.

The acridness of both environmentalists and media watchdogs made the Fanjuls mindful of a need to improve both their family and their company image. They mounted a campaign to convince the public that Florida Crystals was both a good steward of its land and its natural resources and a good neighbor. The company began stressing the idea that it continually sought new ways “to farm in harmony with the environment” and that in such practices as crop rotation it worked diligently to conserve the soil’s fertility and to guard against erosion. It also put a 4,000 acre parcel of land aside for growing organic rice and cane, meeting the strict standards required by Organic Crop Improvement Association.

Through its “Florida Crystals Cares” initiatives, the company has also worked diligently to enhance its good-neighbor image. Among other things, it funded the startup of New Hope, a grassroots, not-for-profit agency serving needy families in the Florida Glades and surrounding regions. It has also funded scholarships for Glades-area students at Florida Atlantic University in Boca Raton and has helped fund grants through SUGARCANE (Statewide Urban Grants and Rural Community Assistance Effort), which primarily benefits African-American communities throughout Florida.

Apart from improving its image, Florida Crystals had to cope with the aforementioned industry-wide problem of flat sugar sales. What saved the Florida sugar industry in general and Florida Crystals in particular from taking a fatal blow was the industry’s partial resurgence from its 1980s doldrums. Among other things, throughout the 1990s, health addicts leveled their heaviest guns at the consumption of fat, taking some of the heat off sugar. With profits again on the rise, and government price supports still in place, the company again turned to expansion moves and further diversification.

In July 1997, Florida Crystals and Savannah Foods & Industries Inc. announced plans to merge. The Georgia-based company, a public entity, in addition to refining sugar cane, manufactured other food products, including beet sugar. As Alfonso Fanjul noted, if the merger had been completed, it would have made the combined companies “the premier sugar company in the country;” but three months later the deal floundered when a rival bid by Texas-based Imperial Holly Corp. forced Florida Crystals, unwilling to counter Imperial’s $18.75 per share offer, to withdraw from the merger.

In 1998, Florida Crystals and the Sugar Cane Growers Cooperative of Florida jointly bought Refined Sugars Inc., a refinery located in Yonkers, New York. The move put the two Florida concerns in the business of making white table sugar. The $65 million cost was shared equally by the Florida companies, giving each a 50 percent share in the plant. What the purchase meant for Florida Crystals was that it finally had a stake in the final stage of sugar production, the packaging and distribution of refined sugar for home consumption.

In 1999, Florida Crystals began growing cane on an additional 25,000 acres in western Palm Beach County, with plans to increase its total annual production of sugar from 750,000 to 800,000 tons. The land was part of a 50,000 acre plantation owned by the Talisman Sugar Corporation, which had earlier agreed to sell it to the federal government for future Everglades restoration. In the meantime, the acreage was leased to Florida’s remaining sugar growers.

In order to store the additional sugar cane, Florida Crystals purchased a 92,000 square-foot warehouse in Riviera Beach once used by Curtis Mathes, an appliance and electronics retailer. The selling price was $2.65 million. Clearly, Florida Crystals and the Fanjuls planned to weather whatever environmental, political, or economic storms they encountered and continue to grow.

Principal Subsidiaries

Okeelanta Corp.

Principal Competitors

Imperial Sugar Co.; Tate & Lyle Inc.; United States Sugar Corporation.

Key Dates:

1936:: The Gomez-Mena and Fanjul families are allied through the marriage of Alfonso Fanjul, Sr., and Lillian Gomez-Mena.
1959:: The Fanjul family takes political refuge in America.
1960:: Alfonso Fanjul, Sr., and associates purchase acreage near Lake Okeechobee in Palm Beach County, Florida, and barge in sections of three Louisiana sugar mills.
1962:: Florida Crystals Inc. begins as a sugar cane farming operation.
1980:: Alfonso Fanjul, Sr., dies; Alfonso, Jr., becomes company CEO.
1985:: Fanjuls purchase Gulf and Western Industries’ holdings in the Dominican Republic and Florida.
1997:: Company’s planned merger with Savannah Foods & Industries Inc. collapses.
1998:: Company acquires 50 percent interest in Refined Sugars Inc.