Chiquita Banana Case Review

Topics: European Union, Europe, Banana Pages: 4 (1119 words) Published: September 29, 2010
Peeling Away The Problem

Chiquita dramatically lost profits in the early 1990’s and while the EU’s new policies played a role in contributing to those losses they were not ultimately the cause. After eight years of solid performance Chiquita faltered in 1992, reporting a $284 million net loss. This loss was due to many factors, including but not limited to, the EU’s new policies. In the new regime the European Union enacted quotas on bananas that favored the former island colonies of European countries to the detriment of bananas originating in Central and South America, the source for most of Chiquita's bananas. The company, which previously held 40% of the European banana market, saw its sales in Europe cut in half. Bananas that were turned away from Europe then flooded the U.S. market, driving prices down and delivering another blow to Chiquita. The framework agreement signed by four Latin American countries still lowered the quantity of Chiquita’s banana imports to the EU.

As the EU was the largest consumer market for bananas, roughly accounting for 40% of world imports by volume with 60% of that from Latin America, the EU’s new policies were a huge issue for Chiquita and other US multinationals. Chiquita’s farms were located in Guatemala, Honduras, Costa Rica, Panama, Colombia and Ecuador and due to high transportation costs most of the Latin American exports went to the EU and North America as opposed to other markets such as Japan. On July 1, 1993 the common banana import policy, the Council Regulation (EEC) 404/93, was passed. Within this policy importers were divided up into categories. “Third country" imports, Chiquita and all Latin American companies, were only allowed to bring in 2,000,000 metric tons of bananas per year and of that 2,000,000, US multinationals could bring in 66.5% - 1,330,000. Only making matters worse was when the Framework Agreement was established Chiquita's share dropped to 699,580 metric tons (47.4% of the 65% of...
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