Good afternoon. Wishing you a beautiful midweek.

Today we will continue with what I promised to you a few days ago. We will put you in the context of my strategic analysis about the last banana trade war of Chiquita Brands International (formerly called United Fruit Company). This happened at the end of the 1990s.

The facts by chronology order:

How this company evolved to switch its name from UFCo to Chiquita Brands International?. Let me give you a brief background.  Alors,  I invite you to inspect the UFCo chronology written beautifully by Marcelo Bucheli in collaboration with Ian William Read. Please click here and learn as I also did it before writing this post: http://www.unitedfruit.org/chron.htm

An insight during the evolution of the United Fruit Company to Chiquita:

Once we read the Chronology of the United Fruit Company and assuming that it sticks closer to reality, the first thing that comes into my mind is: what a mess! How messy it was for these guys (UFCo´s leaders and its competitors- Hubbard-Zemurray, Atlantic Fruit Company, Elders-Fyffes, Standard Fruit Vaccaro Brothers company, etc) to do business in Central America, Caribbean, and Colombia.

If you interpret the facts prepared by Bucheli-Read, it is simply a mess.  Since the first year of operations as UFCo, there was no year in which the US American Troops were not sent to this region. The US troops intervened to calm down conflicts, general strikes, revolts, or simply to control the territories elections in which the UFCo and its competitors were operating. This happened in Honduras, Dominican Republic, Guatemala, Cuba, Nicaragua, Panamá, Haiti, Colombia, and even in my country El Salvador.

What a mess!

Since the conception of UFCo in 1899, it took to this company more than 40 years of several strikes and rebellions,  just to finally get written contracts, 8 hours-day, 6 days a week for its workers. Can you believe it? It took them half a century to arrive at a decent working system in which employers and workers could be comfortable.

Then, between 1940 up to the 1980´s decade, the UFCo, did not have a year of peace to accomplish a clear long term vision on how to help the banana republic lands to develop. The story doesn´t end in the unfair banana value chain, which also experienced a major shift in the concept of its product, from Gross Michel type to a Cavendish-more resistant type of banana. The mess continued with the non-ending strikes from the workers, change of concessions terms, fights over tax exports exemptions or briberies paid to the dictators or local presidents. Even the Che Guevara danced in these lands. Can you believe it?  The communist flag was also attending the region as a perfect toolkit manipulated by some to counterbalance the abuse of power and lack of a legal equitable structure to protect the interests of the banana nations´ populations. Climate change and diseases were also in attendance: the plantations classroom received the visit of the Panama disease, the Sigatoka fungus, (a fungus that attacks the leaves of the banana plant and causes the fruit to ripen prematurely), hurricanes,  and other side effects from the usage of incorrect pesticides  such as the DBCP and Aldicarb (which harmed the workers health reproduction system). This bananas business classroom was full of loathsome students, natural disasters and skanky chemical substances. What a mess!  

At the corporate level, the idea of dominating the American food industry (included the bananas) was so appealing that by the decade of the ’70s, the branding of UFCo switched to a new name United Brands, and its leadership changed to Eli Black, someone who later on committed suicide. Oops!

How hard is to wash a messy banana age?

It wasn´t until the decade of the 1980s, that the company rechanged its name to Chiquita Brands. It used the name of its figure logo, which was extremely popular between the youth. Under a new CEO, Carl Lindner, the US Government decided to observe the company closely.  Can you believe the order of magnitude of the mess? “A federal judge granted an SEC permanent access to United Brands records to avoid further violations of the law”. As a result, the company eroded its market share to one third, losing its leading competitive position not just in profits or operating cashflows but also in terms of its reputational allure.

Under Lindner leadership, the firm started some divestments plan and a restructuring phase. Kind of a new look makeover. Nevertheless, The UFCo burden reputational legacy on Chiquita was too heavy to clean automatically. And that is how we arrive at the third banana war context, under Clinton´s presidency and his impeachment trial season. This is the context of my strategic analysis.

What was happening with Chiquita Brands International in the years 1998-1999?

Competitive Export Map-Bananas, Source: Diercke Weltatlas. Braunschweig: Westermann, 1989, p. 203. Exports data previous to the EU-US Banana War 

What was the issue between the European Union and Chiquita? What was the cause of the banana tit for tat commercial war?

• In 1993, the European Union (“EU”) implemented a regulatory system which reduced the volume of Latin American bananas to enter into the European Union countries. Chiquita was not happy, because it significantly decreased the company´s sales and market share there.
• Chiquita was not a producer within the EU or former EU colonies, in consequence, Chiquita couldn´t offer its production there. The EU  imposed restrictive quotas, licenses, and tariffs on Chiquita banana republics.
• According to Chiquita, the EU quota regime was determined to be in violation of a number of international trade obligations by both the World Trade Organization (“WTO”) and its predecessor the General Agreement on Tariffs and Trade (“GATT”).
• After the Berlin´s wall collapse, between 1992 and 1993, in two separate rulings, GATT panels found the EU banana policies to be illegal.
• In 1994, Chiquita made a filing move with the Office of the U.S. Trade Representative (“USTR”) accrediting that the EU quota and licensing regime was unreasonable, discriminatory, and a burden and restriction on U.S.commerce.
• In 1995, the USTR determined that the EU regime violated the Trade Act. Subsequently, the United States, Guatemala, Honduras, and Mexico commenced a challenge against the regime using the procedures of the newly created WTO.
• In 1996 Ecuador, the world’s largest exporter of bananas joined these countries in the WTO action.
• By 1997 A WTO panel ruled that the EU banana regulation violated numerous international trade obligations to the detriment of Latin American supplying countries and U.S. marketing firms such as Chiquita. The WTO Appellate Body upheld the panel’s ruling.
• By 1998, the EU adopted a revised quota and licensing regime for implementation in January 1999. The five governments that filed the WTO complaint, in addition to Panama, which became a WTO member after the initial complaint was filed, opposed the revised EU regime for not complying with the WTO rulings.
• Where is the tit for tat strategy? Here we go: Finally, in 1999,  the United States requested the WTO an authorization to impose punitive duties on selected EU products exported to the United States in retaliation for the harm to the United States caused by the failure of the revised EU banana regime to be WTO consistent.
• In April 1999, a WTO arbitration panel revised EU banana import regime. The WTO arbitrators conclude that the United States was being harmed in the amount of approximately $190 million annually and was entitled to suspend EU trade concessions in that amount.
• Accordingly, the United States imposed prohibitive (100% of value) duties on selected EU products (particularly luxury ones) accounting for $190 million of annual exports to the United States. Shortly thereafter, the EU indicated that it was going to modify its banana import regime to be consistent with its international trade obligations.

Chiquita Strategic Analysis: 

Now that we are on the same page, the same context and with the facts over the table, let´s proceed to the core of my post. The strategic analysis which will be delivered on my next publication. I will leave you here for the time being. I can´t extend longer for your brain workout of today.

Stay tuned with me please, the core most important section is coming.  Thank you!

The bibliography will be shared at the end of my next post. Don´t worry.

Disclaimer: Illustrations in Watercolor are painted by Eleonora Escalante. All the presentation slides shown on this blog are prepared by Eleonora Escalante. Nevertheless, all the pictures or videos shown on this blog are not mine.  I do not own any of the lovely photos or images posted unless otherwise stated.

Published by eleonoraescalantestrategy

Corporate Strategy Artist, San Salvador, El Salvador View all posts by eleonoraescalantestrategy