Chiquita Banana Overview Essay
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Chiquita Brands International, Inc. is one of the most important international marketers and distributors of food products derived from bananas, as well as other fruits and healthy snack products. Chiquita Banana revenues for about $3 billion dollars a year and employs more than 21,000 people and operates in about 70 countries worldwide. Chiquita Banana together with Dole, Del Monte and Fyffes control about 80% of the global banana market. In 1993 the EU created the Common Organization of the Market in Bananas (COMB) to deal with the harsh competition between these companies.
They would allow duty free access to the EU but subject to quotas to bananas from the Africa’s, Caribbean and Pacific, while bananas from Latin America were subject to an import tax of 176 Euros per ton and a quota of 2533 t. As an American company we have decided to take advantage of the new treaty restricting Latin American and ACP countries from exporting bananas to the EU. It will not be an easy task because we still have to compete against European banana producers, but we are an established company and we are determined to benefit from this event and gain market share in the European Union.
PESTEL analysis for the European Union
•The European Union is composed of 28 member states.
•The EU has created a single market by standardizing laws within the member states.
•Some of the objectives of creating this union is to create a better flow on the circulation of goods, capital, people and services within the union. Once a good or service is accepted within the union it is protected from customs, taxes and import quotas as long as they remain within the union.
•Free movement of capital is intended to allow investment of properties between countries, something that could help banana growers since they can look for more fertile land in neighboring countries.
•The monetary policy is the Eurozone and is governed by the European Central Bank.
•The European Union’s GDP is ranked as number one in the world accounting for $16.58 trillion dollars.
•Export goods account for $1.687 trillion, some of the main export partners of the European union are: oUS 17.3%
Turkey 4.5 %
•Food, drinks and tobacco account for 5.9%
•Import of goods account for $2.302 trillion dollars and the main import partners are:
•Food, drinks and tobacco account for 5.2% of import goods.
•The service sector is the most important one in the EU making up 69% of the GDP followed by the manufacturing industry with 28.4% GDP and agriculture for only 2.3% of GDP
•The agricultural sector is supported by subsidies from the EU and currently represents 40-50% of the EU’s total spending.
•There is limited data on European children’s fruit intake, but the data shows that the average fruit intake is about 141 g per day. Fruit intake is highest in Austria and Portugal and is the lowest in Iceland and Spain.
•Girls and women consume more fruits and vegetables and boys and men do, there is no simple explanation to this but it’s believed to be because women in general are more concerned about their weight and keeping a slim fit figure.
•Children tend to eat less fruit as they age, but it’s the exact opposite with adults. Intake levels increase with age, possibly because income and knowledge increases and one becomes more aware of the benefits of good eating habits. •Men once they are married have an increase in fruit intake. Women seem to have an impact on their husband’s fruit intake as well as the variety of fruits eaten. Women tend to handle ‘health-related’ issues more commonly than men so they tend to buy and cook more food than men.
•Children’s fruit intake levels directly correlate with how much their parents consume. But pressure to eat fruit does not positively affect children’s intake, but it is enhanced when parents are good role-models and encourage them to eat fruits and vegetables.
•People with self-efficacy tendencies have a higher fruit intake in adults, also people with a high self-esteem tend to eat more fruits and vegetables because they take their health into account. TECHNOLOGICAL:
•The EU is funding a project for pesticide free fruits and vegetables by removing the threat of fruit flies. Helping farmers meet customers’ demands for safe fruits while being environmentally conscious. oThe project pretend to use an insect attractant to draw insects and pathogens such as: infectious micro-organisms, virus, fungus that cause diseases in fungus. oThis attractant will be applied in the form of an insect trap near plantations to take bugs away from plantations, this will be a long-lasting and biodegradable baiting station. •Europe is becoming more conscious about maintaining a cleaner environment, the EU is committed to providing a better future for the next generations. So they specialize on clean energy, from turbines in Germany to solar panels in Spain, and countries across the EU are using natural resources of sustainable energy bringing investment to businesses and citizens.
•With the birth of the Single European Market in 1993 the Common Market Organization for Bananas was put into effect (COMB). COMB is concerned on the importation, sale and distribution of bananas. •A policy was set in motion allowing EU suppliers to export duty free bananas to all EU states. Also quotas were set for African, Caribbean and Pacific countries (ACP) imposing import licenses for a fixed rate of volume of bananas, and limited imports through excessively high tariffs. oA quota of 857,000 tons for duty free access from ACP countries •Three types of licenses were issued in order to regulate this quota to ACP countries •Third countries that were not considered in the quota are subject to a tariff of Ecu 850 per ton. •In order to prevent any loss of income by EU banana producers a compensation of payments for 850,000 tons were granted in case the prices fell below the production costs. ENVIRONMENTAL:
•Flat-free water chargers are common in some countries in Europe. This does not encourage efficient behavior to households and agriculture according to a report from the European Environment Agency (EEA). •The EEA is considering water pricing in the following countries: Croatia, England and wales, France, Germany, Netherlands, Scotland, Serbia, Slovenia and Spain. •In most countries, farmers are allowed to use as much water as they want for a flat rate. By charging the amount of water used in Europe it prognosticated to cut down on water used by agriculture for about 10 – 20 %. This will push farmers to not only cut down on their water consumption but to invest on better irrigation system as well as fixing water leaks. •The general population in the European Union seem to support this motion to cut down water overuse, about 84% of the population agree with this principle.
In order to better penetrate the European market we have to better understand our own products, so a marketing mix was created to see what we can offer to the market and this will help us to better oversee our operations in the European market. PRODUCT:
Chiquita banana takes pride in their first class bananas. But banana consumption vary from country to country so they have other products to fulfill the change in each countries demand. They always keep in mind the environment and consumer’s health, so they have products that meet these two qualifications, products such as: readymade salads, fruit snacks. An independent survey was conducted about people’s preferences and attitudes about bananas, and the poll indicated that the taste of Chiquita bananas was better than competing brands and people preferred it 2 to 1 to the leading brand. The bananas by Chiquita banana are 100% organic approved and certified by the USDA which means that they adhere to the requirements and meet the organic standards of growing bananas.
These are the prices for bananas per metric ton for the last few months. Bananas prices vary depending on the location where they are being sold. In France the average price for a kg is about $2.00 dollars. In Spain is about $1.00 per kg. But these prices tend to fluctuate with the seasons as well, and some variables take place to why this happens. One of the reasons is that bananas grow in tropical areas so they need hot weather to grow, but it’s harder to maintain them fresh during summer. PLACE:
Chiquita banana sells its products internationally to about 70 countries worldwide. The majority of the products grown come from South America and the Caribbean which are then sent to distribution centers. Europe is the largest consumer and importer of bananas in the world, so this would be the best place for the largest banana producer in the world to invest and tap into this gold mine. In the year 2011 people living in the European Union consumed an estimate of 5 million tons of bananas and about 4.6 million tons were imported. Europe would be the best market to try to penetrate and take market share from. Sweden, UK, Denmark, Finland and Portugal are the main consumers of bananas in Europe (see Appendix A). These are the countries within the EU for Chiquita banana to penetrate first. PROMOTION:
The way that Chiquita banana promotes their product is very innovative. They have sticker contests and they encourage people to send drawings for possible logos for their stickers. But their latest promotion is endorsing the charismatic minion characters from the movie Despicable Me, they have even worked on an app game available for apple and droid. The point of this game is to run and get as many bananas as possible without running into any obstacles. There is no record for the increase in sales of Chiquita bananas yet because the game is recent, but it’s safe to say that this gamification strategy will work well for the company. Also, as a part of their promotion they attend school lunches, celebrate major anniversaries and sponsor Olympics. They use the slogan “quite possibly, The World’s Perfect Food” SWOT Analysis
•Chiquita Banana is number one in the fruit market in the world and sells its products to more than 70 countries worldwide.
•The company had a $3 billion dollar revenue last year.
•Its net income is about $405 million dollars.
•The company is committed to being socially responsible
A decade ago they implemented social accountability 8000 which has helped improve their practices to better serve the community.
“SA 8000 provides standards based on national laws, international human rights norms and the conventions of the International Labor Organization. Management system requirements ensure that these standards are consistently implemented over time, and independent audits and certification help measure progress and identify areas for improvement.”
•The company has not been able to reach out to consumers in Europe, they had a $2 million profit during the last quarter, better compared to the previews year where there was an $11 million loss. •Sales fell 2% from $793 million to $774 million in one year. •There was an 18 an article was published of ‘Chiquita secrets revealed’ by the enquirer, where the company had been accused of mistreating workers in Central America, polluting the environment and allowing cocaine to be brought to the US in its ships.
•With the new regulations from 1993 the European market has opened for banana companies that do not belong to the ACP countries and Latin America. •Our opportunities go hand in hand with the highest consumers of bananas in the EU. According to appendix A, they are: oSweden
•These are the first countries that we must try to focus our internationalization efforts into, since they are the highest consumers of our product. •Even with the new regulations by COMB Chiquita banana has no real competition from European banana growers, European countries are not optimal for banana growth. Chiquita banana can bring larger quantities at competing prices. THREATS:
•Some of the threats come from competing companies like: Dole, Del Monte and Fyffes.
•The analysis of this figure shows Chiquita’s market share shrinking from 1966 to 1995 and then remaining constant at 25% market share. •We can also observe that for the year 2007 Dole Company had a bigger market share than
Chiquita. •Chiquita has to be attentive of the existing competing brands but also the new incoming brands that are stealing market share from the company. Internationalization Strategy and Viability
As already stated before, the European Market is the biggest consumer and importer of bananas. Which is why we are interested in creating an internationalization strategy in order to visualize which cities in the European market target more specifically. There is a map in appendix A portraying the European Countries and an estimate of banana consumption, we can see that the northern countries together with Portugal enjoy eating bananas the most. Then we can see a ranking list with the countries that consume the most bananas in Europe, with Sweden being on top of the list. Chiquita banana Co. gets their product from the countries with a yellow dot. Since these are countries that have hot and humid temperature, adequate for banana growth. This map shows us that that in order for the bananas to be shipped from this countries to the EU they have to be shipped in a boat that has to travel the Atlantic for about 6,000 miles. These bananas are stored and refrigerated. This crossing of the Atlantic takes an average of 5 days and the bananas are refrigerated to a temperature between 13.5 and 15 C stalling ripening.
Even though flavor and consistency remain virtually intact, this voyage shortens the shelf life to be 7-10 days. Portugal would be a strategic point for the company’s internationalization strategy. A logistics platform could be set up in Porto, a northern city in Portugal, this way we can kill two birds with one rock. We re-fuel the ships and get them ready for their journey to Sweden (our top priority in terms of distribution) and unload some containers to distribute Portugal’s banana demand. Aside from Portugal the countries with the highest consumption of bananas per capita is in Northern Europe, so another logistic platform would be convenient as a final stop before the final destination in each country. Le Havre, France would be a convenient location since it is south of the UK and it is cheaper to have a distribution center there because the euro is not as strong as the sterling pound. Once we have our logistics platform set up in Le Havre we can make accommodations and agreements with companies and retailers that handle fruits and vegetables belonging to the countries that have the highest banana consumption. We would deliver to the following terminal or ports:
•Finland is a little more inaccessible through the Baltic Sea, so we would ship Finland’s required bananas to Gothenburg, Sweden as well. From Sweden we could work another logistic route to get to Finland by truck.
•Le Havre, France
Iceland is Europe’s top producer of bananas with their world of the art greenhouse installations, even though they rely on their technology they have to constantly monitor their products and create the proper environment for the bananas. This is where Chiquita banana has an opportunity since they don’t have to worry about creating the right conditions for banana growth, the company looks for a convenient location for banana growth and plants the fruit. This enables the company to worry solely on cropping and shipping. Another advantage that the company has over the biggest European banana producer is that, Chiquita banana can acquire bananas in massive quantities while Iceland’s producers have to create the environment to grow more bananas. This is unless the COMB sets a tighter quota.
An incoterm is a made up word composed of three words. ‘in’ means international, ‘co’ commerce and ‘term’ means term. Incoterms are used to describe the type of relationship between buyer and supplier and they type of contract they use to deliver and receive a product. POSSIBLE INCOTERMS FOR THE COMPANY
As a seller the most optimal incoterm for the company would be to agree with the buyer of working with ‘Ex Works’ since the buyer would have to assume the transportation costs and the risks of brining the goods to their stores. I believe this to be very one sided and not efficient, since in order to maximize profits a business deal has to be long-term. Sooner or later one of the competing brands could offer our buyers a better agreement and we would be out of business, so I would call this a ‘lose-lose situation’. Another option would be the exact opposite from ‘Ex works’ where the seller mantains most of the obligations and expenses while there is minimum for the buyere. This would be a DDP, here the “seller is responsible for delivering the goods to the named place in the country of the buyer, and pas all costs in bringing the goods to the destination including import duties and taxes. Seller is not responsible for unloading.” this is also very one sided. My belief is that if we are going to have a long lasting relationship with our business partner we have to compromise, and here we would be taking all most of the bourden of the business deal. Solution
As already stated before, in order to create a long lasting relationship with our business partners and maximize profits we have to compromize. Chiquita Banana is trying to gain marketshare in Europe, so the best thing we can do with our business partners is to share the transportation burden and costs. Deliverd at Terminal (DAT) incoterm would be the best viable solution for Chiquita and our buyers. We can promise to deliver the product fresh, safe and sound to the following city ports: Gothenburg, Brighton, Skagen, Porto and Le Havre. We can accept all costs and risks (except for import clearance costs) and from each terminal they can send the bananas to their respective distribution centers or directly to the retailers. That is up to our business partners to decide. It is safe to say that we are taking most of the costs, since it is expensive to cross the atlantic with ships and maintain the fruit at a certain temperature to keep it fresh. But in order to have our buyers support, we have to go the extra mile. This strategy at the same time will speed up the process of internationalization and market share gain for Chiquita Banana.
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