As one of the world's top banana producers, Chiquita Brands deals in big bunches. The company grows, procures, markets, and sells bananas and other fresh fruits and vegetables under the Chiquita name and several others. Bananas account for about 60% of Chiquita's sales. Its other offerings include whole citrus fruits, melons, grapes, apples, and tomatoes, as well as packaged fresh-cut items, processed fruit ingredients, and juices. The company's Fresh Express unit generates about a third of sales and is the leading US seller of packaged ready-to-eat salads. Chiquita's products are sold in nearly 70 countries, mainly in North America and Europe. Lesser markets include the Middle East, Japan, and South Korea.
The Chiquita business requires a global reach. Company-owned farms produce one-third of Chiquita's bananas. To satisfy demand, however, the company looks to third-party growers in Colombia, Costa Rica, Ecuador, Guatemala, Honduras, Mexico, Nicaragua, Panama, and the Philippines for the balance of its bananas. Chiquita, which relies on third parties worldwide for all of its lettuce and other fresh produce, primarily serves the global retail and foodservice sectors.
North America accounts for almost 60% of Chiquita's business. Within this segment, 90% of the volume for bananas and related services is sold under one-year contracts to national and regional grocery retailers. While this allows Chiquita to enjoy and bank on stable pricing, the move also makes the produce supplier shoulder unexpected cost increases or unable to pocket rises in market-driven prices.
While the company has not been able to return to its pre-recession revenue, the banana business was relatively good in 2011, particularly in North America where pricing and volumes were higher. Chiquita's business in Europe and the Mediterranean consists of sales to large grocery stores, ripeners, and wholesalers who ink annual or multiyear contracts that have flexible pricing based on market conditions. Chiquita's bottom line has fluctuated in Europe due to weekly local currency pricing based on the market's supply and demand. This typically makes prices stronger during the first half of the year, weakening during the third and fourth quarters.
Chiquita fared well in salads in 2011, but the company expects an increasingly difficult selling environment in 2012. It anticipates more of its retail customers trading in nationally branded salads and produce to sell their own private labels. Faced with rising product costs, Chiquita in 2011 restructured its value-added salads business and integrated its global innovation and marketing functions into the business units, saving some $15 million.
The company's salads and healthy snacks business, which accounts for $1 billion in net sales and 30% of revenue overall, supports Chiquita's strategy of providing more convenient, healthy-food options to meet the needs of consumers. The company ships Fresh Express ready-made salads that enjoy the #1 position in the US with a 36% retail market share. One-fifth of this segment's sales come from foodservice customers (mostly quick-service restaurants). While Chiquita provides the foodservice industry with lettuce, tomatoes, spinach, cabbage, and onions, what's purchased most often by customers in this niche is shredded lettuce.
Concerned with consumer safety and to safeguard its bottom line for fear of potentially tainted products, Chiquita by mid-2011 had fully incorporated Fresh Rinse technology into its salad manufacturing lines. Rather than clean its produce with a traditional chlorine sanitizer, the company has transitioned to the new produce wash, which has been found to be particularly useful in significantly reducing microorganisms on leafy greens. Another motivation for rolling out the new technology is that the produce company plans to license the technology to others as a way to diversify its revenue.
Chiquita is also focused on expanding its product range and brands to new segments, categories, and geographies. To that end, it has introduced Gourmet Café, Chiquita to Go, Just Fruit in a Bottle, and Pineapple Bites to non-grocery venues, including convenience outlets, gas stations, club stores, and coffee shops. To expand its menu of healthier products and boost its European presence, Chiquita formed a joint venture in 2010 with France's Groupe Danone to market fruit beverages based on Chiquita's Just Fruit in a Bottle business in Europe. As part of the agreement, Chiquita sold 51% of its European smoothie business to Danone for €15 million ($18 million) and deconsolidated it. The venture is managed by Danone and headquartered in Paris. Chiquita provides local sales, marketing, and supply-chain services. The joint venture leverages the strengths of both companies: Chiquita brings the equity of its iconic brand, along with its sales expertise and strong supply-chain management, while Danone contributes its longtime European presence and its research and development capabilities.
FMR owns about 14% of the company. – less
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