Firms to join forces to create distance from global rivals Dole and Del Monte, but oversight is needed before they do so
When four plan to become three, alarm bells should sound at the competition authorities. The plan by Chiquita and Fyffes to become top bananas in their world, creating distance from global rivals Dole and Del Monte, is no exception.
A combined ChiquitaFyffes might control only about 15% of the global banana market but that could still be enough to change the structure of the market. True, Chiquita serves mostly the US market, whereas Irish-based Fyffes concentrates on Europe, but there is some crossover that can't be ignored. Nor, too, can the impact on smaller producers' attempts to find a viable foothold in a tough market where the pressures at the growers' end of the chain are notoriously intense.
ChiquitaFyffes' best argument is that nobody in the banana-distribution game is making fat profit margins and that supermarkets everywhere are quite capable of protecting consumers' interests. It's not an unreasonable argument – but it should be tested.
As for the deal itself, the financial logic is obvious. Chiquita and Fyffes say they could save $40m a year from "efficiencies in the areas of logistics and procurement". That's a chunky sum in the context of current aggregate top-line earnings of $175m – thus the strong share price reaction, particularly at Fyffes, whose owners would get 49.3% of the combo. The bigger question, though, is whether there's also something in this deal for consumers and banana-growers. The merger will probably happen but let's see it examined properly. Reported by guardian.co.uk 3 hours ago.
When four plan to become three, alarm bells should sound at the competition authorities. The plan by Chiquita and Fyffes to become top bananas in their world, creating distance from global rivals Dole and Del Monte, is no exception.
A combined ChiquitaFyffes might control only about 15% of the global banana market but that could still be enough to change the structure of the market. True, Chiquita serves mostly the US market, whereas Irish-based Fyffes concentrates on Europe, but there is some crossover that can't be ignored. Nor, too, can the impact on smaller producers' attempts to find a viable foothold in a tough market where the pressures at the growers' end of the chain are notoriously intense.
ChiquitaFyffes' best argument is that nobody in the banana-distribution game is making fat profit margins and that supermarkets everywhere are quite capable of protecting consumers' interests. It's not an unreasonable argument – but it should be tested.
As for the deal itself, the financial logic is obvious. Chiquita and Fyffes say they could save $40m a year from "efficiencies in the areas of logistics and procurement". That's a chunky sum in the context of current aggregate top-line earnings of $175m – thus the strong share price reaction, particularly at Fyffes, whose owners would get 49.3% of the combo. The bigger question, though, is whether there's also something in this deal for consumers and banana-growers. The merger will probably happen but let's see it examined properly. Reported by guardian.co.uk 3 hours ago.