Chiquita Banana Case Review

1106 Words Sep 16th, 2010 5 Pages
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
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They instead further invested in banana production.

Based on Chiquita’s financial statements, they thought that increasing their investments on assets, like banana farmland and ships, would help them in the future. This was not the case. Starting in 1991, when the new aggressive strategy began, the long-term debt rose by over 15% in just one year. Subsequently, the current portion of long-term debt also rose by over 100% in the same time span.

Chiquita Sales/Revenue (millions) Chiquita Profits (millions)
1991- 2,604,128 128,495
1992- 2,723,250 (284,040)
1993- 2,532,925 (51,081)
1994- 3,961,720 (71,540)

The following can be viewed as some of the errors in Chiquita’s business strategy during 1990’s.

• Lindner’s decision to sell off under performing assets was a good move but by not continuing to invest in the fresh foods sector he undermined that good.
• Heavy debt load and the resulting hefty interest expenses.
• Purchasing farms that were earlier operated by independent farmers therefore increasing the liabilities associated with it.
• Increasing banana acreage rather than diversifying land to cultivate other fruits.
• Buying new ships for transportation of bananas while the demand seemed to be flat
• Not viewing investment opportunities in other countries apart from Latin America as a long-term profitable option.
• Selling Fyffes, the third

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