Chiquita-Fyffes merger sparks fears for banana workers
Giant deal comes on top of cost-cutting in the sector
Tuesday 11 March 2014
A banana exporter that has previously been fined for paying off Colombian terrorist paramilitary groups and once admitted to price fixing has just agreed a $1bn (£600m) deal with Fyffes, the world’s oldest fruit brand, to create the largest banana exporter globally.
When the deal between Ireland’s Fyffes and the US giant Chiquita is completed, it will create a $4.6bn banana behemoth, based in Dublin and listed in New York. It will operate across 70 countries, selling more than 180 million boxes of bananas a year, employing 32,000 staff and will own or lease 24,000 hectares of land across Central America.
But questions have arisen over what the deal means for workers, smaller producers and the price of the humble banana on the supermarket shelf.
Chiquita is already the largest exporter in the Americas and Fyffes the biggest exporter in Europe; the mega-merger is regarded as good news for shareholders on both sides. When the merger is completed the combined group could save more than $40m over three years and Chiquita will be able to reduce some of its large debts. The merger is not a surprise to an industry that has seen consistent consolidation in the quest to slash costs.
Alistair Smith, international co-ordinator for Banana Link, an NGO supporting a fair and sustainable banana industry, said: “The news is doubtless a reflection of the way the banana market has been going for the last 15 to 20 years. Two big fruit companies have felt the downward pressure of the big retail buyers on their margins and consolidation appears to them to be a strategy for survival.”
When the 20-year banana trade war between the EU and Latin America finally ended in 2012, prices plummeted. The trade row centred on Latin American banana exporters protesting against EU tariffs, which were put in place to protect small growers in former European colonies in Africa and the Caribbean.
The truce saw prices fall further – the supermarket price of bananas in the UK has halved in the past 10 years. Grocers have used the fruit to lure in customers with a consistently cheaply priced product – a loss leader. But production costs have increased and banana production costs have doubled over the same period. The cost of a banana is now roughly half the price of an apple grown in the UK, despite the bananas having travelled thousands of miles to get here.
The food expert and writer Joanna Blythman argues that British supermarkets have forced suppliers to provide bananas at a price so “unfeasibly low that they cannot possibly be grown in a decent” way. This has forced consolidation and cost-cutting in the sector.
The banana industry has also been hit by disease and fungus. Black sigatoka (a leaf spot disease) and Panama disease (a disease of the root) have damaged crops.
The entire banana export industry globally is valued at around $7bn, with South and Central America the largest producers, and smaller quantities being produced in Asia and Africa.
Exports from the Americas to EU countries have fallen recently as production in French Caribbean islands and the Canary Islands has risen, according to the UN. In the UK, via tie-ups with the retailers Sainsbury’s, Waitrose and the Co-operative, an increase in the consumption of fairtrade bananas has meant that now one in three bananas sold in the UK is fairtrade.
The reason for the consolidation in the industry, like the Chiquita-Fyffes mega-merger, has been laid at the door of grocers forcing producers to cut costs, but some argue that the $1bn deal will make the group so powerful it will become too large to control.
Andrew Simms, chief analyst at Global Witness, said: “This is all about big dollar banana producers versus small trade producers. As with any major commodity market, too few have too much control. The question with this deal is will the group become too big to regulate?
“This deal is not healthy for the market, for the small producers, or the workers.”
Chiquita-Fyffes, along with the number two and three exporters in the world – Fresh Del Monte and Hawaii-founded Dole Food Company – have around 80 per cent market share of the global banana export industry, according to the UN, while Fyffes had the largest market share in exports in Europe.
The Chiquita-Fyffes deal still needs competition approval, including the go-ahead from regulators under US antitrust laws, and it is likely that the merger will mean some job losses.
The outlook for banana plantation workers and producers still doesn’t look great, but the 75-year-old Fyffes brand has ripened up to become a global player in the face of continued pressure from the powerful supermarkets.
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