Merger of Banana Companies: Flight or Fight?

Chiquita and Fyffes announced today that they will merge their companies into one. The agreement creates a global banana company with approximately $4.6 billion in annual revenues.

The press release focuses conveniently on the combined strengths of ChiquitaFyffes. It should generate more profits for the shareholders, but it will also create ‘more opportunities and capitalize on both the growing fresh food business and health and wellness trends by more effectively utilizing its geographical footprint and expanded distribution channels.’ Yes, it's all good news. ChiquitaFyffes will become the largest global entity in the banana category with sales of more than 160 million boxes annually.

The problem is, of course, that the banana itself is under threat and both companies will undoubtedly envisage huge problems in the forseeable future. If the dreaded Panama Disease spreads to the Americas – and it eventually will do so – the banana itself may be doomed if a replacement variety is not available in time.

If harvests collapse, then prices of bananas will soar and there might not be a single banana to sell by these companies. Then then may be forced to focus more on having even stronger positions in the melon and pineapple market segments. At present ChiquitaFyffes is the number one importer in the U.S. and number three distributor globally.

Which means that a merger is effectively the only way to survive. Unless they forgot to mention to their shareholders that pineapples might have the same problem as the bananas have: one variety, the Smooth Cayenne, is extensively cultivated in Hawaii, Philippines, Australia, South Africa, Puerto Rico, Kenya, Mexico, Cuba and Formosa. It takes only one dieseas causing agent...