Chiquita’s auditors, Ernst & Young, have questioned the group’s continued viability.
The EU’s introduction of new banana import restrictions, after a WTO ruling that its previous regime was illegal, forced an adjustment from big US producers. Chiquita’s decision to defy this ruling has cost it dear and may well lead the company into financial ruin.
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Bananas are the fifth most traded agricultural commodity after cereals, sugar, coffee and cocoa. When the EU drew up new banana import restrictions to help small producers in ex-African and Caribbean colonies, the big three US producers adopted very different tactics to develop their businesses. Realizing that the EU regime would reduce demand for their bananas, Dole and Del Monte chose to buy African and Caribbean producers to give them access to the EU market. Dole also bought Saba, a Swedish fruit importer to strengthen its European credentials, while Del Monte diversified into other fruits. Neither company challenged the EU ‘s ruling and both are calling for a quick resolution to the dispute.
Chiquita, by contrast, has been conducting a determined lobbying campaign in the US to dismantle the EU restrictions. Its European market share collapsed during the process, from 40% to 20%. Still determined to dismantle the regime, the producer has filed a lawsuit for $525 million against the EU, claiming compensation for losses over the last eight years as a result of the EU’s banana import policy. The WTO has ruled that the regime is illegal, but whether compensation will be paid is still undecided.
Chiquita’s insistence on solving the problem using political muscle rather than adapting to the regime may prove to be its downfall. Recent efforts to restructure publicly held debt and a missed interest payment are being interpreted as a sign of impending bankruptcy. Meanwhile, its rivals have adapted to the situation diversifying into new markets and regaining control of the situation. Adapting to a changing environment can often be more fruitful than trying to control it.
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