The Development Of Chiquita Brands And The Banana Market In General
Introduction
While sailing across the world, the idea of introducing Jamaican bananas to people in New Jersey by Captain Lorenzo Dow Baker commenced the establishment of the future multinational company ("The Chiquita Story", 2018). Starting with 160 bunches, Captain Lorenzo Dow Bakers quickly acknowledged the rising demand and his idea of converting 1 shilling to 2 dollars laid the foundation of idea that turned out to be one of the most profitable banana distributors in United States 15 years later ("The Chiquita Story", 2018). From being a local business to the second most powerful business after coffee, Chiquita Brands International outpaced most of the rivals within the international market but 120 years of growth of the company was sedated down by the protectionist barriers by European Council in 1990’s ("CHIQUITA BRANDS INTERNATIONAL Inc", 2018).
What role has politics played in the history of Chiquita Brands, and its predecessor, the United Fruit Company?
Politics played a prominent role throughout the history of Chiquita Brands, its predecessor, and the United Fruit Company (UFC), particularly in garnering worldwide fame as “Banana Republics” or "El Pulpo (the octopus)" (Spar, 2017, p. 2). As these sobriquets demonstrate, UFC had spread out its political connections across the immense track of land in Jamaica, Cuba, Costa Rica, Panama, Colombia, and Nicaragua, not only for the broad transportation networks but also for the benefits from each government (Spar, 2017, p. 2). One of the historical records, for instance, depicts that the U. S president dispatched the marines to safeguard UFC and its investments against Honduran government in 1911 and 1912 (May and Plaza, p. 117). The growing political power all over the nations made people to call the president of UFC as “the uncrowned king of Central America," “the Green Pope,” and “Cecil Rhodes of Central America” (Spar, 2017, p. 2).
In comparison to UFC’s dauntless political maneuvers in Central America, UFC’s political presence in Europe was insignificant. When the EU implemented a series of protectionist measures that included preferential treatment and additional charges in 1990, the UFC had to suffer an enormous loss reaching $1. 3 billion value. The power of politics and how it turned around a very profitable giant business enterprise like Chiquita into crashing down and falling into debt represents clearly the European Union foreign trade policy and what has happened. They implemented taxes “imposed on imported goods and services, and are used to restrict trade as they increase the price of imported goods and services, making them more expensive to consumers. ” (Staff, 2017) Without any doubt, EU caused the downfall to Chiquita financially.
To regulate “Europe’s banana trade”, till this day, new EU trade policies are implemented such that company’s like Chiquita, supply wise are restricted to enter the profitable European market. (Spar, 2007 p. 7).
What role has protectionism played in the global banana market?
Is the role defensible? Chiquita has been a one of the major Banana providers since 20th century. By 1993, EC came up with the set of regulations that included tariffs on importing bananas within European Union area. This policy of protectionism played major role in global banana market. There were four major titles within protectionist policy: ” Latin American and non-ACP (African, Caribbean and Pacific Group of States) sources, called “third country imports”; “traditional” ACP imports; “non-traditional” ACP imports (ACP imports exceeding the “traditional quota amounts”); and EC imports. ” (Spar, 2017, p. 9). ACP and EC countries had duty free access to European market, unlike the Latin American countries, that were restricted under 2 million tons quota and “Imports that had surplus over quota were dutiable at 850 ECU/mt (approximately 250% a. v. )” (Spar, 2017, p. 9). By setting quotas EC tried to eliminate big players from Latin America. " The EC was the largest of these markets, accounting for roughly 40% of world imports by volume, 60% of which came from Latin America” ("Bananas", 2018).
Sudden constraints on major suppliers lead to the “artificial shortage” of Bananas and concluded in deterioration of the quality of product. The defensibility of protectionism has been a theme of dispute through the recent decades and standpoint play a critical role here. From the European nations' perspective, the enforcement of protectionist policies was favorable as it provided security to the marketers at home.
On the other hand, from the Chiquita's perspective, protectionism would be something that hampers further extension by, and to, considerable extents and provokes revenues to fall at prodigious rates. Hence, whether the role of the protectionism is defensible or not is an ambivalent matter and can be determined differently when viewing divergent areas of its impact. 3. What should Lindner do about the EU’s banana policy? How should Bob Dole respond to Lindner’s request? Heavily jolted by EU trade policies and tariffs, Chiquita was facing a hard time surviving the substantial loss of sales. With the loss of Chiquita’s hold over market, local companies like Geest and Fyffes acquired the larger market share and worsen the condition for Chiquita. Linder had to call for crucial decisions ("Fyffes faces challenge from Chiquita", 2018). Joining hands with Hawaii Industry Associations, Chiquita filled a petition under the section 301 realizing it being the only chance of survival for a longer period (Spar, 2007 p. 11, p. 12).
Increasing the time of survival would only be relevant if Chiquita is able to find an instant solution to overturn the numbers from negative to positive. Using the SWOT analysis, Lindner tried to understand strengths, weaknesses, opportunities and threats of survivals ("SWOT Analysis", 2018). One option being, firm incorporating local companies in countries promoted or favored by European Council. For example, acquiring companies in ACP would have opened a door for Chiquita to penetrate the EU and beyond.
Following the other option, Lindner pulled in political help which landed them in a bigger unexpected problem. Lindner approached Senator Bob Dole to put “pressure directly on the Latin American Government involved in the Framework Agreement” (Spar, 2007 p. 11). Instead of helping, this measure brought considerable amount of unwanted attention on both company and Senator Dole (Spar, 2007 p. 12). Being a political figure and considering its integrity, it should have been avoided by Senator Dole but he “went to bat vigorously for Lindner and Chiquita, attempting on several occasions to sway the Latin governments most actively involved in implementing the Framework Agreement” (Spar D, 2007, p. 11).
This corrupt involvement of company and Senator himself had great consequences on the companies fortune and senator’s political career. ConclusionChiquita case highlights the protectionist policies and political influence in the business market. The end of Chiquita was market with Lindner standing powerless and drowned in heavy debts. Series of unprofessional decisions ultimately left Lindner bankrupt and on the top of losing the legal battles turned the fate of Chiquita’s stocks falling from $40 to $13. 63 by mid 1990s (Spar, 2007 p. 1). Will Chiquita be able rise to the undisputed position of “Banana Republic”? It all depends on every small decision made by company to recover the losses.
