Chinas banana Industry

Analysis of Chinas banana Industry
Marketing strategy of a foreign Company in China

Marketing Strategy
Prof. Shui

This essay describes the current situation of the banana Industry in China, as well as the factors which influences the change of the National and International market situation based on latest examples. As the Chinese Market supplied an enormous amount of bananas every year, numerous importers need to comply with the demand. How the situation in China has changed in recent years, what role plays Chiquita in this strongly growing industry and which marketing strategies are being implemented. All of the mentioned before will be analysed and evaluated on the following pages.

Bananas are the most traded fruit worldwide and the fifth most traded agricultural product. In China bananas are the fourth fruit listed as the most important in the tropical corps industry.

The Banana is a perennial plant that replaces itself. Bananas do not grow from a seed but from a bulb or rhizome. The time between planting a banana plant and the harvest of the banana bunch is from 9 to 12 months. The flower appears in the sixth or seventh month. Bananas are available throughout the year, they do not have a growing season.
Bananas are grown in tropical regions where the average temperature is 80 F and the yearly rainfall is between 78 and 98 inches.
In fact , most bananas exported are grown within 30 degrees either side of the equator.
Plantations are predominant in Latin America and they require huge investment in infrastructure and technology for transport, irrigation and packing facilities. Smallholder production is less capital intensive and more labour intensive. High present is this system mainly in the Eastern Caribbean because, due to some factors, it is not possible to use the plantation system.
Banana growing is very labour intensive, involving clearing of jungle growth, propping of the plants to counter bending from the weight of the growing fruit. As well as an intensive use of pesticides , the product process involves covering banana bunches with polyethylene bags to protect them from wind and to maintain optimum temperatures.
After nine months the bananas are still green. The bananas are inspected and sorted at the packhorse. The standards, quality and maturity are dependent on the country their exported too. If bananas do not meet these standards they are usually sold locally at a much lower price.

China is the second larges producer of Bananas. The worlds leader in producing bananas is India. Around 413,000 hectares of land were cultivates with bananas in 2010. The productions was about 9.885 MT, according to FAO provider by the Hainan Institute of tropical Agriculture.
This number is every year differently to regarded, because of the natural causes (frost, cyclones and disease). The banana production in China has grown rapidly since the 1980s with the area cultivated more than tripling 1990 to 2012 and production more than quadrupling in the same period.
In China are five provinces account for the vast majority of production with:

Guangdong producing 2.8 MT
Guangxi 1.9 MT islands of Hainan 1.5 MT
Yunnan 1.2 MT
Fujian 0.7 MT

The perennial danger of damage from low temperatures means that producers on the mainland have to time their crops to minimize the risk of damage. this means that, although there is some variation , different regions aim to harvest at particular times to meet seasonal markets.
Through the large consumption of bananas and the restive increasing population, China hast to import bananas from other countries. The main importing countries to China are> Ecuador, Costa Rica, Philippines.
The majority of imported goods arrive at the port of Shanghai. From there the bananas are transported to many other areas of the country. Not only big markets and bulk purchaser but also small shops and privet purchaser obtain the goods from the Shanghai port. The fact that Shanghai has an enormous number of residents ,over 20 Million people, makes the city itself becomes a main consumer of the imported bananas.
In cities like Shanghai there are many ways to sell bananas. There are the Wholesalers which supply restaurants, supermarkets and shops. There are also the private supplier which purvey small shops and private customers and there are the small street vendors, which also take their bananas even direct from the port from Shanghai or from private dealers. The Quality depends from where you buy the bananas. However the quality of bananas in China are very high. This is based on the high demands of costumers. Chinese people insist on good looking and perfect tasting vegetables and fruits.

Chinese imports of Ecuadorian bananas surged by 541% in the first five months of 2014, and the supplier continues to gain momentum in the wake of typhoons that have hit the key southern growing regions. Domestic prices have shot up, leading to favourable conditions for the South American fruit. local banana prices have been spiking since March 2014, as a result of adverse weather conditions and lower production in Hainan and Yunnan, the two of China’s major growing regions. In addition, Philippine banana production has also been hit by typhoons.
All these factors have contributed to the rise in banana imports from Ecuador.

The Philippines exports a stable amount of bananas to Korea, Japan and the Middle East annually. This is because importers in these countries have all signed long-term agreements with Philippine exporters.
However, this is not the case with Chinese private importers, who have only signed short-term agreements. So there’s a degree of volatility with Sino-Philippine banana trade. Short-term agreements create more risk for private importers.
As soon as the bananas arrive at the shore, they can only stay in cold storage for a maximum of a month. So the ordering and pricing of Philippine bananas in China are done on a weekly basis, which further introduces fluctuations into the market.
Although it takes 30 to 40 days to ship bananas from Ecuador to China, the Ecuadorian bananas’ competitive pricing versus Philippine bananas has led many importers to make the switch.
Another important reason for understanding the high decrease of bananas from the Philippines are the dispute between Philippines over the resource rich Scarborough Shoal, which is claimed by both countries. The two countries are in a standoff over some contested territory of the South China Sea. They have been locked in a standoff since April, 2012 after a Philippine warship confronted Chinese fishermen near the Shoal.
As a result, China has refused to import bananas and other fruits from the Philippines, claiming to find bugs in shipments. The Philippines, relies on exports to China, has much to lose if its relations with China go sour. The Philippine government has been hesitant to link growing military tensions in the South Sea to the freeze on exports.
A large number of workers have to suffer now by these disputes and enormous amounts of crop have to be destroyed or otherwise sold.

Chiquita:
Chiquita Brands International Inc. is an American producer and distributor of bananas and other produce. The company operates under a number of subsidiary brand names, including the flagship Chiquita brand and Fresh Express salads. Chiquita is the leading distributor of bananas in the United States.
Chiquita Brands International's history began in 1870 when ship's captain Lorenzo Dow Baker purchased 160 bunches of bananas in Jamaica and resold them in Jersey City eleven days later. In 1873 Central American railroad developer Minor C. Keith began to experiment with banana production in Costa Rica. Later, he planted bananas alongside a Costa Rican railroad track to provide revenue for the railroad. Since he needed cargo and passengers for the railroad, he planted bananas alongside the tracks to provide paying fares both inland and back to the sea.
In 1899 Keith and his railroad companies merged with the Boston Fruit Company to create the United Fruit Company on March 30, 1899.
Also in 1988 the Fruit Dispatch Company was formed to distribute bananas throughout the United States.
By using refrigerated vessels the United Fruit Company revolutionized ocean transportation in 1903. The food was also kept longer fresh and a longer transportation time was possible. In the further course the Company initiated the first banana research in Latin America to develop new disease-resistant varieties.
The Second World War brought the Industry to a virtual standstill. Many oft he Company ships were requisitioned by British and American governments to aid in the war effort.
In 1944 was the name Chiquita and the Miss Chiquita character , Jingle introduced.
Also three years later „Chiquita“ was registered as a trademark in the United States.
The largest branding program ever began in 1963 undertaken by a produce marketer, accompanied by record-breaking ad campaign which included affixing the trademark blue sticker to bananas „ This seal outside means the best inside“. Three years later the Chiquita brand was introduced in Europe. In the next years Chiquita shipped more then 4 billion pounds of bananas every year worldwide. They also improved their packaging methods for a better product transfer.
As sponsor and supplier of bananas to the Winter Olympic Games in Lake Placid, New York, Chiquita used for he first time this type of marketing strategy.
In 1989 th Company established another slogan: „ Chiquita. Quite Possibly, The World´s Perfect food.“ With this new Marketing slogan the company tried to highlight the quality and the brand strength.
The Company changed officially ist name in 1990 to Chiquita Brands International, Inc. To take advantage of global brand name recognition. Furthermore, we must not forget that Chiquita improved perennially their shipping and packaging methods.
In the last 15 years Chiquita has closed numerous alliances with many partners so that they could established itself successfully in numerous countries.

Chiquita Brands International operates in 70 countries and employs approximately 20,000 people until 2014. The company sells a variety of fresh products, including bananas, ready-made salads, and healthy foods. The company's Fresh Express brand has approximately $1 billion of annual sales and a 40% market share in the United States.

Chiquita entered the Chinese market in … Aug. 26. They entered into a joint venture with Haitong Food Group Co. Ltd. for the processing, sale and marketing of value-added fresh produce in China, marking the companies initial entry into an important emerging market. This strategic step was very important in order to become a global leader in branded, healthy, fresh food. The Haitong Food Group Co. Ltd. is also known for high quality, fresh food. This opportunity to work together enables the two companies to forge a common vision.
The agreement contains that Chiquita will provide limited capital investment and the majority ownership of the joint venture company.
“Zheijiang Chiquita-Haitong Food Company Limited” which operate processing operations in Cixi, China.
The aim of this company is, to market and sell value/added products, such as fresh packaged salads, fresh cut fruits and vegetables and fresh chilled beverages in China.

At this point I will talk about Chiquita’s Marketing strategies and how this company has entered successfully the Chinese market. Chiquita Brands International Inc.’s ability to find and reach their target market has never been a difficult feat. They were the first fruit company to successfully bring bananas from the Caribbean and South America region. Thus the coupling of both longevity and innovation has provided them a heavy presence in the minds of their target consumers.
It was in the 1940 and all over again in the late 1980's that they cemented their position as Banana Kings when they chose to place the yellow silhouette of a woman against a blue backdrop in sticker form on their bananas. Chiquita provides its customers two forms of utility: both Form and Time. With their products (bananas and ready to eat salads) in grocery stores which buyers have ready and easy access. Furthermore, the growing health consciences of people in the world enables Chiquita to continue its success in providing a good that promotes such a lifestyle. For this reason Chiquita satisfies form utility. While they are not transforming their main products into something different, their salads and juices are changed and manipulated into ready to use food and drink.
The marketing mix of Product Strategy, Pricing Strategy, Promotion Strategy and Distribution Strategy for Chiquita Banana has mainly focused on keeping their image fresh and new in the minds of their market base and expanding where possible. Their Product Strategy includes their branching out and creating readymade salads, fruit snacks and juice products. Chiquita sells these products where there is not a great demand for their bananas as well, as where there is a great demand. In focusing their efforts however on the former rather than the latter.
Their pricing strategy differs depending on the good being sold and the location. Bananas in China is one of the most sold grocery store food item and one of the cheapest. Their readymade products however (along with the higher cost of production) are priced higher. The challenge of entering the Chinese market has made pricing difficult. China uses only import duties on bananas, 25-40 %. That fact is important fort he price definition. The Promotion Strategy for the company is changing! They hold sticker competitions around the globe. Involving children and adults alike to send in new and creative designs to be used on their bananas. They also take part in community based health awareness programs that promote good health and their products alike. One of the Distribution Strategy for Chiquita Brands International Inc.is the currently selling of their goods in approximately seventy different countries. They grow and produce these products and distribute them world wide. The majority of their food products are grown in the Caribbean and South America and sent out from their own distribution centres.

The Chinese banana import market was dominated by three major importers- Chiquita, Del Monte and Dole. There was almost no room for small players

The Chiquita company has the challenge to continuously offer a good looking and perfect tasting products for the Chinese market as the demand has been increasing in the last years. They need to evaluate and analyse the trends and changes in the market as well as their competitors in order to maintain a successful and higher profit in the emerging market. As suggestion for a better performance of Chiquita in the Chinese market, I would create a marketing strategy to reach more people and especially target groups such as sporty people who place their value on healthy and protein rich diet. Outpointing the best nutrients and recipe suggestions. They also can create a complete package of fresh food, where are combined the most popular goods to satisfy nearly all the need of Chinese costumers.