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News : Global Economy Last Updated: Apr 27, 2014 - 3:16 PM

The changing face of global banana trade
By Finfacts Team
Apr 24, 2014 - 11:00 AM

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Last March, Chiquita of the US, the largest banana trading company in the world and a successor company to the United Fruit Company of Banana Republic fame, and Fyffes of Ireland, one of the main suppliers to the European market, announced a merger, making the new company ChiquitaFyffes, an undisputed leader in the banana market.

According to the United Nations Food and Agriculture Organisation (FAO) together the two companies control 18.7% of global banana exports, substantially more than its closest competitors, del Monte (12.2%) and Dole (11.4%). Chiquita supplies mostly the US (61% of the company’s banana sales), while Fyffes supplies primarily Europe (81% of banana operations). As a result of the merger, 47% of the operations will take place in the US, 46% in Europe, with the remaining 7% accruing to other markets.

Despite the continued importance of multinational companies in the global trade of bananas, their involvement in banana production has fallen dramatically over the past three decades, shifting their sphere of action to favor other areas in the sector and opening the door to opportunities for other companies.

This view of the changing nature of the global banana trade is captured in a new FAO information note [pdf] and based on analysis of information gathered from the annual reports of the largest multinational banana trading companies.

FAO's review of the three largest banana traders (Chiquita, Dole and Del Monte), shows that the combined market share of the top three companies was at its highest the 1980's, when they controlled almost two-thirds (65.3%) of global banana exports, while in 2013, their market share was slightly over one-third (36.6%).

In 2013, the market share of the top five companies was 44.4%, down from 70% in 2002.

"The competition among banana producing countries is fierce and many have struggled to remain competitive, but there are also new opportunities, as the market is no longer dominated by big players - and new buyers are entering the market," says Ekaterina Krivonos, an economist at the Trade and Markets Division of FAO. 

Trading places

The information note shows that the scope of operations of the big multinationals has also undergone a significant shift, away from plantation ownership and production, and more towards post-production logistics, including purchasing from producers, transportation, facilities to ripen the fruit, and marketing.

Major supermarket chains in the United States and the European Union, meanwhile, have become "important players in the global banana trade as they dominate the retail market in the main banana-consuming countries and are also increasingly purchasing from smaller wholesalers or directly from growers," the note underscores.

This shift of market power away from the major banana brands towards retailers was facilitated by the establishment of direct container liner services from banana producing regions to the main destination markets. Moreover, there is a parallel trend towards less concentration among the exporting firms in the major banana producing countries, for example in Ecuador.

In the information note, FAO points out that while the merger that formed ChiquitaFyffes made the new company an undisputed leader in the banana market, with 18.7% control of global banana exports, "it is unlikely that the merger will give the new company sufficient market power to exert pressure over the banana market and influence either producer prices or import/wholesale prices, given the importance of other market actors, in particular in Europe and Russia."

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