Chiquita & Fyffe Merger

The Chiquita & Fyffe merger has the banana world humming. What would possess an Irish produce company which had its origin in importing bananas from the Canary Islands to be joined by the hips with the successors of the banana barons who gave the world Miss Chiquita and coined the phrase "banana wars"?

Well, I can think of two jolly good reasons beyond what I have read elsewhere in the last couple of weeks.

Economies of Scale

Bananas are consumed seven days a week, fifty two weeks a year. This is reflected in the shipping schedules.  There are always banana boats being loaded or unloaded somewhere in the world which leads to a heavy commitment to infrastructure being required by anyone wanting to be active in the banana game.

Ships for starters, but also port discharging facilities, cool storage and ripening rooms. And that's before anyone starts talking about the marketing effort.

Yes, bananas more or less sell themselves; consumers tend to have a pretty good idea what a banana is when compared to Broccolini, Radiccio or Kiwanos.  Retailers in general and supermarkets in particular do have an expectation though about the degree of cooperation they wish to see banana companies to display in terms of promotional activity.

Risk Mitigation

All that requires money and investing money comes with a fair amount of risk. Produce companies know how to handle risk alright, that is just part of being in the industry - but the risk build up in the banana trade is moving rapidly and the trend is going in the wrong direction for banana traders to sleep well at night.

Supermarket chains are getting larger and going global which means deeper discounts being demanded. The main banana variety, Cavendish, is increasing in vulnerability with no light in sight at the end of the tunnel. Fair trade bananas are carving out market shares that begin to matter. Global warming means rising sea levels will have the potential to impact in some banana economies. The rivalry between "Dollar bananas" and those from the former French and English colonies in the Caribbean and elsewhere showed little sign of abating and needed a drastic solution dealing with the Gordian Knot that situation represented.  

Chiquita & Fyffe Merger

The Chiquita & Fyffe merger therefore represents an elegant industry solution, bringing together two leading complementary banana brands who have been competing in some markets but are apart enough to ensure value is added through merging their respective institutional memories, competencies and strategic leverage .

When Bananas ruled the world

Stanford University

Australian Banana Industry


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