Three companies, Chiquita Brands, Dole Foods and Fresh Del Monte Produce, dominate world trade with over 100 years’ presence in banana plantation production in Central America and Colombia, and together controlling 65% of world exports. They are followed by Noboa, which controls another 10%, and the European company Fyffes, which controls some 6-7%.

Main companies, results and market shares 1992-97

 

Sales

($ in millions)

Profit/(loss)
($ in millions)

World Share

(%)

1992

Chiquita

2,723

16

34

Dole

3,120

(63)

20

Del Monte

900

47

15

1995

Chiquita

3,804

89

>25

Dole

1,068

(72)

22-23

Del Monte

1,700

65

15-16

1997

Chiquita

2,434

100

24-25

Dole

4,336

0

25-26

Del Monte

1,200

54

16 %

 

 

CHIQUITA BRANDS INTERNATIONAL Inc.

Cincinnati, Ohio, USA

Chairman and CEO: Carl H. Lindner

Financial Results 1991-1997 ($ in millions)

 

1998

1997

1996

1995

1994

1993

1992

1991

Net sales

2,720

2,434

2,435

2,566

2,506

2,533

2,723

2,604

Operating income

78.6

 100

84

176

71

103

(97)

198

Net income (loss)

(18.4)

0.3

(51)

9

(72)

(51)

(284)

128

Chiquita Brands was, for decades, the world's largest banana producer and distributor, and still claims to be premier in bananas. The company also markets other fruits and vegetables. Less well known are its processed foods. These activities accounted for 64% of its revenues before it sold its main meat business (North America) in 1995 after severe losses. Bananas are still said to account for 60% of its sales. The net sales of Chiquita Brands have diminished since 1991, mainly due to lower banana volumes. High net annual-interest expenses of around $165 million in 1993-95 aggravated Chiquita’s losses. In 1995, sales were up again and, for the first time in years, the company made a profit. However, in 1996, due to considerable farm damages in Latin America after record floods caused damages of around $70 million, it showed losses again.

Continuous losses

One of the main problems for Chiquita has been the European nightmare. Focusing on a formal stance from which to attack the EU banana regime through the GATT/WTO, has caused it to make severe political and economical miscalculations:

Firstly, the regime seems to have turned out to be much more long lasting than Chiquita had ever imagined, holding it back from the necessary counter-attack. Unlike the other big fruit companies, it did not invest effectively in ACP countries and was less active on the European market.

Secondly, it chose a quite passive market position and trusted to its brand strength. But, although it has repeatedly been trying to prove in several market studies that consumer loyalty to Chiquita is very high, and that consumers are prepared to pay a premium and even go to other shops if they cannot find Chiquita, the contrary has been proven. It has faced ongoing lower European banana volumes, and, in particular, it has lost market share in Germany. In addition, it reduced the number of ripening and distribution companies it worked with in Germany, importing exclusively through Atlanta-Scipio, based in Hamburg since 1993. According to the marketing institute, Nielsen, Chiquita had an estimated 18% market share in Germany in 1996, down from nearly 40% in 1993. Even if it has been able to maintain its share in the other European markets, losing more than half of the German market means that its total market share in Europe has fallen below 15%.

Main acquisitions and divestments since 1993:

Bananas

Chiquita expanded banana production in 1990-1991, expecting worldwide growth in the banana trade. It was one of the first banana companies to invest in Eastern Europe in representation and storage houses. Chiquita directly blames the EU regime for its losses and is the driving force behind the US inquiry, under US trade Law 301, and the WTO dispute demand.

It not only lost market share in Europe, but it withdrew from the Philippines after the land reform process, and had to reduce its Japanese green-banana trading. Over the last few years, it has tried to recover its position in the Far East, in Japan and in new trade with China.

Given its position, brand promotion is essential to Chiquita. It claims to deliver the highest quality and prices its bananas far higher than others. The difference was often over 50% per box. Its policy has made it lose supermarket contracts to Dole and other companies, and not only in Germany. In recent years, Chiquita has developed retailer- and consumer-oriented advertising campaigns (especially in Germany and France) to restore the market share of its high-priced Chiquita label, attempting to convince the public that quality is more important than price.

But its main goal is to establish itself as the environmental leader of the banana companies. In 1995, Chiquita started the ECO-OK program with the Rainforest Alliance, an international NGO dedicated to the conservation of tropical forest. The program is directed at achieving ‘sound, safe, and environmentally improved agricultural practices’ (Annual Report 1996) in all its plantations, and at the start of 1997, 25,600 acres had been certified in Costa Rica and Panama. One of the main criticisms of the program has been the lack of effective restriction of the use of agro-chemicals as an ECO-label should demand. Especially as Chiquita, together with Dole and the main Chemical companies, are involved in lawsuits with some 11,000 workers in different countries over the harmful effects of the highly toxic DBCP. Meanwhile, the certification is intended to reinforce Chiquita's market strategy.

Chiquita sold Fyffes to Fruit Importers of Ireland in 1986, considering it no longer part of its core business. In 1995, Chiquita approached Geest to buy its banana operations. However being deeply in debt, it was unable to find the cash for the deal. The losses in the European market have also made Chiquita lose market share on a world level. Currently, the company is estimated to have revenues of over $1,3 billion dollars coming from its banana activities, and to control around 24-25% of world trade.

 

 

DOLE FOOD COMPANY INC.

Westlake Village, California, USA

Chairman and CEO: David H. Murdock

Financial Results 1991-1997 ($ in millions)

 

1998

1997

1996

1995

1994

1993

1992

1991

Net sales

4,424

4,336

3,840

3,804

3,499

3,108

3,120

2,964

Operating income

 

 

164

193

138

123

133

223

Net income (loss)

12

160

89

23

68

78

16

134

Source: Annual Reports, Hoover estimate (1997)

Dole Food Company, formerly known as Standard Fruit in Latin America, is the world’s leading producer and marketer of fresh fruits and vegetables. It seems to be successfully challenging Chiquita’s leading position even in bananas. It also deals in canned fruits and juices. Dole Food is active in more than ninety countries, and has around 47,000 employees worldwide (1996). Dole revenues have been increasing steadily from $2.9 billion in 1991 to $3.8 billion in 1996. But their operating income has gone down in the food business from $223 million to $123 million in 1993, clawing back to $164 million in 1996. In 1992, the company blamed the world recession and lower prices for their fall in operating income and spent $89 million in a two-year cost-reduction program. The low results in the Pacific Rim and Europe, and a further 1994 loss in the USA reduced income, but they are compensated for this by increasing results in Latin America however. Net income was down in 1995 due to losses in the discontinued operations.

Main acquisitions and divestments since 1993:

To improve their results, the company resolved to further identify their most profitable business units and to concentrate on those activities. For that reason, Dole decided to sell the major part of its juice business and dried-fruit business in the USA. To conform with general developments in the food sector, Dole shifted its management attention from the supply to the market side of the business, paying much more attention to strengthening its distribution network and supply partnerships with the retail sector. Moreover, unlike Chiquita, Dole has followed a pragmatic market approach since the introduction of the EU banana regime. It invested in production and distribution in the ACP countries and Europe to obtain maximum access to banana import licenses.

This approach has not been without success. In Germany where Chiquita lost half of its market share, Dole is estimated to have doubled its share from around 13% in 1992. Also, in Asia Dole left Chiquita behind. In the growing Middle and East-European market, both are present. However, no data about market shares are available. The conclusion is that Dole has clearly won the market battle with Chiquita, and even if Dole has not yet taken the lead in the world banana business, the day does not seem far off when they will.

Bananas

As stated above, Dole’s worldwide banana volumes have steadily been increasing. Together with Chiquita, Dole controls the North American market with an estimated market share of around 35% (1994). Chiquita reduced its presence in Japan in 1994, but Dole had severe problems with Del Monte, which was seeking a distribution system into the Japanese market through price-cutting. Using investments in fresh and packaged food, the company has tried to guarantee itself a share in the vast and growing Asian market. In December 1996, it opened the largest distribution facility in Japan.

Dole has had a very pragmatic approach to the European market. Specializing in Dollar bananas, it had to provide itself with access to ACP countries’ bananas to maximize its access to import licenses. It began by marketing ventures with European producers in the Canary Islands and former European colonies in Africa and the Caribbean. In 1993, it tried to get hold of Fyffes, but failed in the attempt. The 35% acquisition in 1994 of Jamaica Producers Fruit Distributors Ltd., a leading distributor of bananas and other fruits in the United Kingdom, allowed Dole access to around 20% of the UK banana market.

The joint venture with Compagnie Fruitiere resulted in access to production in Cameroon and the Ivory Coast, but it also permits Dole to use the Compagnie Fruitiere’s distribution networks in France and Spain for its bananas and other fruits and vegetables. In 1997, the takeover of 67% of the SCB plantations in the Ivory Coast provided Compagnie Fruitiere with modern plantations, and packinghouses capable of serving the traditional Dollar markets. SCB control some 100,000 tonnes of bananas. Once again, this is bad news for Chiquita, which had a sourcing deal with SCB.

Previously mentioned arrangements have substantially increased Dole's banana sales in Europe. Total sales of Dole Food Europe were over $1b. in 1996, up from around $570m. in 1993. Meanwhile, Dole has developed a modern fruit terminal in Italy (Livorno). In 1996, it had a network of twelve facilities in France, seven in Spain, four in Italy and one in Germany. It also has a large distribution centre near Istanbul, and is expanding into St. Petersburg.

 

FRESH DEL MONTE PRODUCE

Coral Gables, Florida, USA

Chairman and CEO: Mohammad Abu-Ghazaleh

Financial Results 1992-1997 ($ in millions)

 

1997 (3Q)

1996

1995

1994

1993

1992

Revenue

937

1,189

1,068

992

880

± 900

Income (loss)

121

(134)

(72)

(64)

(58)

(63)

Fresh Del Monte Produce grows, transports and markets fresh fruit worldwide. It is the third largest banana company, and the biggest in pineapples. In 1996, the company had 14,600 employees world--wide. The Abu-Ghazaleh family, of the United Arab Emirates, owns about two-thirds of the firm through a holding company, the IAT Group. Since late 1997, Fresh Del Monte Produce shares have been traded on the New York Stock Exchange. In 1996, bananas accounted for 61% of Del Monte’s gross profit and pineapples for 36%.

No longer part of Del Monte Foods

The 1995 ownership structure is basically a product of the break up of RJR Nabisco in 1989. Del Monte was split into three units: processed foods, fresh fruit, and international food and beverages.

The processed-food arm, Del Monte Foods USA (San Francisco), was bought by Merrill Lynch Investment Funds (1994 sales: $1.6 billion). It owns the Del Monte brand and has stuck to the company’s core business of canned fruit and vegetables. Del Monte International was taken over by a management buy-out and sold to Royal Foods of South Africa. It has had problems ever since its start.

Del Monte Fresh Produce was sold to Polly Peck, which went bankrupt in 1992, after which the division was sold to the Mexican investor group, GEAM, headed by Mr. Cabal, for $525 million. In July 1994, it was announced that Del Monte Foods of San Francisco had agreed to a $1 billion take-over by GEAM. Mr. Cabal’s intention was to re-merge Del Monte Foods with Del Monte Fresh Produce, thus obtaining full rights over the Del Monte brand.

However, in September 1995 Cabal was discovered to have made illegal loans to himself, and his associates, worth US $1 billion The government moved against Cabal, in part to prevent the purchase of Del Monte USA as it would be financed illegally. Cabal disappeared. The company came under state administration and the government put pressure on GEAM (Grupo Empresarial Agricola Mexicano) to sell-off Del Monte Fresh Produce. The big companies, as well as Ecuador’s premier exporter Noboa (Bonita label), were all mentioned as interested parties although, after all the financial problems were taken into account, the real worth of Del Monte Fresh Produce was unclear. In 1996, 80% of the shares were sold for US$534m. to Grupo IAT, owned by the Abu-Ghazaleh family, with administrative headquarters in the United Arab Emirates. Grupo IAT owns Chile's fourth-largest fruit exporter, United Trade Company UTC. The other 20% stayed in the hands of GEAM.

Notwithstanding the financial and ownership problems, Del Monte Fresh Produce had been growing as well in bananas as in other fruits, and sales passed $1 billion in 1995. Del Monte has been active in the Pacific Market, where it lowered prices considerably to get access to the distributor network in Japan. Since Del Monte was acquired by the Abu-Ghazaleh family, the company’s financial profile has improved significantly. New capital and cost-cutting measures have enabled the company to invest and expand aggressively in production and marketing world-wide. Late in 1997, Del Monte made a public equity offering, of which it received net proceeds of around $177m.

The company is making a profit again; its share in total banana trade has grown, as have its market shares in Europe and North America. Besides bananas and pineapples, Fresh Del Monte also intends to expand the exports of fresh fruit from its Chilean operation UTC.

Main acquisitions after 1993:

Bananas

In 1996, Del Monte claimed to have passed sales of 100 million boxes of bananas worldwide, which reflect 15% of total banana exports. Like Dole, Del Monte has been investing in ACP countries, it has invested in Cameroon, to spread it’s sourcing between Dollar and ACP banana countries. Its joint venture in 1997 in Indonesia with Umas Java Agro Industry was to set up Cavendish Banana production for export to East Asia.

Recently it has been far more aggressive on the European market. Its intensified market orientation makes it, like the other fruit companies, more alert to consumer response. The combined banana campaign from the Costa Rican trade union SITRAP, UK Bananalink/WDM and the IUF, led to faster results than had been expected, and Del Monte (Bandeco) was the first company to sign an agreement with the SITRAP in December 1997.

 

FYFFES

Dublin, Ireland

CEO: David McCann

Financial Results 1991-1995 ($ in millions)

 

1997

1996

1995

1994

1993

1992

1991

Revenue

1,460

1,430

1,118

897

623

524

608

Income

54

48

42

36

32

28

27

(I£1,460ml,n = US$2,040m.)

Fyffes is the main European banana company, and it also deals in other fruits and vegetables. It has been expanding enormously since the introduction of the EU Regime through takeovers and joint ventures all over Europe. It has nearly tripled sales since 1992, and has become the fifth most important banana company on a world level.

The foundation for Fyffes was laid in 1882 by Edward Wathen Fyffe. In 1913 United Fruit took over, but after more than a hundred years of family involvement, Neil McCann, who retired as chairman in December 1995 and whose great-grandfather was the first Fyffes agent in Dublin, bought the business in 1986 from Chiquita, which did not consider it part of its core business, through the Fruit Importers of Ireland (then renamed Fyffes). The McCanns had 9% of Fyffes, but have been expanding their share. Late in 1997, a US Chicago-based fund manager, David Herrero, acquired 3%, considering the company undervalued.

The agreement under which Chiquita sold Fyffes gave Chiquita the rights to the Fyffes trademark for three years and a 'non-use' clause prevented Fyffes from using the trademark outside the UK and Ireland until 2006. In 1989, Chiquita stopped using the trademark but invoked the clause to prevent Fyffes from using it to sell into the European market. However, in 1992 after a complaint with the European Commission, Fyffes won the worldwide rights to the Fyffes trademark.

Fyffes has been working hard on its expansion through marketing contracts and takeovers in ACP, as well as in Dollar countries. It sees no problem in challenging the bigger companies and entered into different countries with contracts with independent growers. In 1992, Fyffes placed a bid for Del Monte but was denied, and in 1993 Dole offered £420 million for Fyffes, but was turned down at the last moment.

After getting the trademark rights in 1992, Fyffes started its expansion onto the European market, which - in its own words - has not yet come to an end. It mainly invests in joint ventures wherein it obtains controlling stakes. In 1993, it abandoned its plans to purchase Saba, the largest Swedish fruit distributor, but is has a supply contract with them. Following more then ten acquisitions in two years, Fyffes has obtained a foothold in all of Europe's main markets.

In December 1995, the take-over of Geest Bananas became a fact after months of rumors. In a 50-50 joint venture (Wibco) between Fyffes and WIBDECO, Geest Bananas was bought for £147 million. Fyffes beat the Ecuadorian Noboa, because its attack on the EU trade regime made it an unreliable partner for WIBDECO.

Late in 1996, Fyffes announced its intention to upgrade and expand seven Geest Bananas ripening centers, and to retain the Geest Banana name because of its brand value.

Banana production

Fyffes has tried to move into Central America since 1990 to establish itself in Dollar banana production. Until then it was only present in Belize, one of its original ACP sources. In 1990, Fyffes played a role in breaking the market power of Chiquita and Dole in Honduras, but not without violent problems which further destroyed the already poor relation between Fyffes and Chiquita. In 1992, it also became involved in COBSA, Guatemala, bringing an area of over 3,500ha under production.

However, the lack of experience in production and banana sourcing within these countries broke Fyffes up. It retired from Honduras, and in Guatemala sold its operations off to Dole. In addition, Fyffes has set up a long-term shipping agreement with Dole to transport bananas from Latin America.