...britain ’s bruisin g banana wars Why ch threat eap bananas Policy en farmers’ report future s A Fairtrade Foundation Report February 2014 When I sell a box of bananas it’s a product with quality, with incredible taste, so it should be fair that you pay a fair price for it. Horatio Hernandez Coobafrio Co-operative, Magdalena, Colombia January 2014 contents 1 Introduction 4 2 6 Executive Summary Britain’s Bruising Banana Wars 16 16 20 21 4 The banana value chain 4.1 The UK banana market 4.2 The retail price of bananas in Britain 4.3 UK banana imports 2002 – 2013 4.4 Changes in banana supply chain operations 4.5 The impact of supermarket price wars on producers 4.6 Producer prices vs costs of sustainable production 22 22 23 5 The market environment for bananas 5.1 Evolution of the global banana trade 5.2 Consolidation of retailer power and UK price wars 5.3 The impact of competition law on banana prices 38 6 Fairtrade’s alternative approach 6.1 General background to the Fairtrade system 6.2 Fairtrade bananas – scope and scale 6.3 airtrade: the benefits and F constraints for farmers and workers 2 3 About this report 3.1 Fairtrade’s involvement in bananas 3.2 Research objectives and approach 3.3 Methodological note 7 Achieving a sustainable banana industry 7.1 inclusive market An ...
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...Australia the banana industry is heavily protected by a "zero import" ban on imports of banana, creating a condition that benefits the producers more than the consumers. Producer surplus is defined as the minimum amount that they are willing to accept for a good, the difference between the actual and minimum they receive is the benefit the producer receives. On the other hand consumer surplus is the minimum amount they are willing to pay for a good or service relative to the market price, the difference between the what the consumer is willing to pay and the market price is how it occurs (Hubbard et al. 2010, 131-133). The figure below (Fig 1) illustrates the Australian banana market in autarky and free trade positions and show how an increase in consumer surplus occurs under free trade position and how producer surplus decreases. Price of bananas ($/kg) Domestic Supply, DS e a b World Price QS QA QD d A P 1 f P 2 D B Imports Domestic Demand, DD 0 Quantity of bananas (kg) Fig 1: Supply-demand diagram in autarky and free-trade positions Exposing the Australian banana industry to free trade economy will mean a lift on the ban for banana imports. Under autarky the economy is at equilibrium point A with price P1 and quantity Qs. At point A, consumer surplus is equivalent to a+d=$585m while producer surplus is b+e+f=$135. Under free trade price of bananas moves from P1 to P2 and the quantity supplied by the banana producers reduces...
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...proved using the HHI as shown below. (Considering the banana sales of 1994 as given in the case) Brand Banana Sales Market Share % Chiquita 2,377,032 48 Dole 960,400 19 Fyffes 563,324 11 Geest 528,719 11 Noboa 280,000 6 Del Monte Produce 240,000 5 TOTAL 4,949,475 100 Because there are few players in the industry, comparatively less competition and high concentration in the market, we consider the banana industry to be an Oligopoly market, which has high barriers to entry. The barriers to entry are: • High start up cost: A new firm entering the banana market will need to have huge capital to make banana production feasible. Banana production requires vast amounts of lands to grow the banana trees. Bananas are also a perishable item which increases their maintenance cost. • Economies of scale: Banana Industries have significant economies of scale where minimum efficient scales occur at high input levels. Thus a new entrant must produce high volume to reduce the cost and make profits. If a new entrant with vast land produces fewer bananas then it will be very costly to maintain the banana production. • Licenses: The government regulations may be very stringent requiring various licenses to trade banana in the world market. The licenses would be very expensive to own which is a barrier to new entrants. • Distribution channels: It is required to have a strong distribution system globally to distribute bananas in the world market. This is developed through years...
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...supply adjusts the price to the point at which the quantities demanded and supplied are equal” (McConnell, Brue, & Flynn, 2009). Many factors go into market equilibration process such as the law of demand and determinants of demand and the law of supply and the determinants of supply. Understanding these laws will enable the market to become an efficient market. Market Equilibration is easily understood with the example of bananas. Let’s say this week the market is selling bananas for $1.00 / lb and at that rate consumers purchase 5000 lbs of bananas but really want to purchase 20000 lbs of bananas at that price creating a shortage of bananas because everyone is rushing out to get bananas. This will cause the market to increase the price of bananas and produce more bananas. Let’s say next week the market raises the price of bananas to $3.00 / lb and increases the supply of bananas to 15000 bananas when consumers were only going to purchase 10000 bananas at that price creating a surplus of bananas. At the end of the week the market takes a close look at how much bananas are being sold for and how many are being bought, to find the efficient market. The efficient market is where supply equals $4.00 $3.00 $2.00 Week 1 $1.00 5 10 15 20 Bananas (thousands) demand. When the amount of bananas in the market doesn’t meet the demand, this is called a shortage. When the amount of bananas in the market surpasses...
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...matters is not absolute production ability but ability in producing one good relative to another. Reckoned in physical output—for example, bunches of bananas produced per day—a producer’s efficiency at growing bananas depends on the amounts of other goods and services he sacrifices by producing bananas (instead of other goods and services) compared with the amounts of other goods and services sacrificed by others who do, or who might, grow bananas. Here is a straightforward example. Ann and Bob are the only two people on an island. They use only two goods: bananas and fish. (The assumption of two persons and two goods is made only to make the example as clear as possible; it is not essential to the outcome. The same holds for all subsequent assumptions that I make using this example.) If Ann spends all of her working time gathering bananas, she gathers one hundred bunches per month but catches no fish. If, instead, she spends all of her working time fishing, she catches two hundred fish per month and gathers no bananas. If she divides her work time evenly between these two tasks, each month she gathers fifty bananas and catches one hundred fish. If Bob spends all of his working time gathering bananas, he gathers fifty bunches. If he spends all of his time fishing, he catches fifty fish. Table 1 shows the maximum quantities of bananas and fish that each can produce. If Ann and Bob do not trade, then the amounts that each can consume are strictly limited to the amounts that each...
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...Economics 101 Summer 2012 Answers to Homework #2 Due 6/5/12 Directions: The homework will be collected in a box before the lecture. Please place your name, TA name and section number on top of the homework (legibly). Make sure you write your name as it appears on your ID so that you can receive the correct grade. Late homework will not be accepted so make plans ahead of time. Please show your work. Good luck! Please realize that you are essentially creating “your brand” when you submit this homework. Do you want your homework to convey that you are competent, careful, professional? Or, do you want to convey the image that you are careless, sloppy, and less than professional. For the rest of your life you will be creating your brand: please think about what you are saying about yourself when you do any work for someone else! 1. George and Martha both make meatloaf and bake bread. It takes George three hours to bake six loaves of bread and two hours to make three meatloaves. It takes Martha three hours to bake eight loaves of bread and two hours to make three meatloaves. Currently George and Martha do not trade with one another. For this problem assume that George and Martha have linear production possibility frontiers and that they do not trade with anyone else. a. Suppose George and Martha each have 60 hours this week that they can devote to bread baking and meatloaf cooking. Construct graphs depicting the production possibility frontiers for George and Martha....
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...fines banana suppliers € 60.3 million for running price cartel, EC IP/08/1509, October 2008, http://europa.eu/rapid/press-release_IP-08-1509_en.htm 2) COMMISSION DECISION of 15 X 2008 relating to a proceeding under Article 81 of the EC Treaty Case COMP/39188 – Bananas, COMMISSION OF THE EUROPEAN COMMUNITIES, Brussels, 15 X 2008, http://ec.europa.eu/competition/antitrust/cases/dec_docs/39188/39188_2291_2.pdf In 2008, the European Commission, found that the banana importers Dole, Chiquita, Weichert and Del Monte involved in a cartel between 2000 and 2002. The allegation was on the basis of secret bilateral pre-pricing communications. The cartel affected the North European region specifically Austria, Belgium, Denmark, Finland, Germany, Luxembourg, Netherlands and Sweden with banana consumption estimated to 1.6 million tones and a shared retail value of sales amounted to €2.5 billion in 2002. How was the collusion achieved? The banana business is organised in weekly cycles. During the relevant period the importers of leading brands of bananas into the eight European countries served by North European ports set and then announced every Thursday morning their reference price (their “quotation price”) for the following week. On numerous occasions over the three year period there were bilateral phone calls among the companies, usually the day before they set their price. During these calls the companies discussed or disclosed their pricing intentions: how they saw the price evolving...
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...Fyffes merger Master in Management Thomas Diwo Rick Geurten Ma. Camila Gutiérrez Philipp Seifert Armand Taherí Table of content 1. Banana market 3 1.1 Chiquita Brands 3 1.2 Fyffes 3 1.3 The Cutrale Group 4 1.4 The Safra Group 4 2. Merger Chiquita and Fyffes 5 3. Benefits of the merger Chiquita and Fyffes 7 3.1 The perfect match 7 3.2 Vertical integration 8 3.3 Horizontal integration 8 4. Future markets 11 5. Recommendations and conclusions 12 5.1 Recommendations 12 5.2 Conclusions 12 6. References 13 7. Appendix 16 1. Banana market 1.1 Chiquita Brands Chiquita, incorporated 1899 and based in the United States of America, is an international marketer and distributor of bananas and other fresh products, sold in 70 countries. It is the main banana distributor in the U.S. The company operates in three business segments: Bananas, Salads and Healthy Snacks, and other fresh fruits and vegetables. Bananas include the sourcing (purchase and production), transportation, marketing and distribution of bananas. Salads and Healthy Snacks include ready-to-eat, packaged salads, such as healthy snacking products, fresh vegetable and Chiquita-branded fruit smoothies in Europe. Banana sales amounted to 64% of its consolidated net sales in 2011. In North America, it often sells bananas and related services under one-year contracts to national and regional grocery retailers. In Europe and the Mediterranean, its customers are grocery...
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... Coursework for EU Law and Institutions Winter Semester 2013 Lecturer: Dr. Anke Steinhoff Tobias Wilms BA International Business Table of contents Introduction 1. 1.1 1.2 2. 2.1 2.1.1 2.2 2.2.1 2.2.2 3. F The Existence of a dominant market position The relevant market UBC´s position on the relevant market Abuse of the dominant position Behavior vis-à-vis the ripeners The clause prohibiting the resale of bananas while still green Price policy Discriminatory prices Unfair Prices urther Submissions 4. 5. 6. Relevance of Case 27/76 Reference List Affidavit Introduction History of the United Brands Corporation In the year 1970 the United Brands Company (UBC) was established and registrated in New York after the merger of the United Fruit Company and the American Seal Kap Corporation. In 1974 the multinational corporation became the most powerful corporative actor on the worldmarket of bananas, which accounted for 35% of the worlds export. Its European Subsidiary, United Brands Continentaal B. V. (UBCBV) registered in Rotterdam, was responsible for the distribution of bananas inseveral european countries, with an accumulated market share of 45% in the European Economic Community (EEC). Background of the Case 27/76 Several corporations from different european countries filed a complaint concerning the dominant market position and its abusement of UBCBV to the European Commission. One year later the Comission intituted proceedings (pursuant to Article 3 (1) of Regulation No...
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...2. Diversify Production 3. Expand to Europe More Aggressively 4. Diversify Product Line 1.Concentrate on the Americas Based on our analysis of Chiquita Banana’s financial struggles we have a number of possible solutions for improving the company. Chiquita Bananas had no way of predicting that the European Union would favour its former colonies over Chiquita’s locations in Latin America. After the European Union put quotas and tariffs on Chiquita’s products, Chiquita should have re-evaluated whether or not to continue to export to Europe. Although they would lose a significant amount of business if they stopped exporting to Europe, the reason they were in debt in the first place was because Europe restricted import of their products and this was a problem since Europe was Chiquita’s main market. If the company had concentrated within the Americas then they would not have been forced into so much debt. 2. Diversify Production In order to limit the amount they were affected by natural disasters, the company could have grown bananas in other parts of the world. This would be better for the company because if natural disasters did strike in an area where they grow their products then it would not be such a financial blow as they would have more sources to receive their product. The only problem with this solution would be that it may cost more to be located...
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...October 24, 2002 G302 Breakout Session 9: International: Chiquita Banana Case Goal of this session: To appreciate the importance of government trade policy to a company’s profits, and thus the importance to the company of trying to figure out why protectionism happens and how to counteract it. Handouts for students: none. Handouts for TA's: Nov. 29, 2001, Seattle Times article "Chiquita Files for Chapter 11". Overheads: Exhibit 1, income statement. Chiquita Brands Case Write-up Questions: 1. What is the European Union's past and present policy on banana imports? How would you defend their 1993 policy? 2. What problems does Chiquita have in this case? Look carefully at the numbers in the exhibits. 3. What did Mr. Lindner do about the EU's banana policy? What should he have done? The Chiquita case teaching notes are quite good. All of the questions I have below are important. Chiquita’s appropriate response is perhaps the least important, since it isn’t clear there is much they could do. Be sure and save time for your wrap-up at the end. (5 minutes) Administration We will post the midterm scores on Oncourse when they are available. That could be as early as Friday, but since they are machine-graded, there is always a chance of a glitch. (20 mins) Chiquita's Problems Q. In 1994, Keith Lindner has lots of problem. What are they? A. Here you want to put a list up on the board. The Harvard teaching note has a good...
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...[Name] | International Marketing Cases | October 20, 2013 [Name] | International Marketing Cases | October 20, 2013 Chiquita Banana Chiquita Banana Contents Chiquita Banana Overview 2 PESTEL analysis for the European Union 2 Political: 2 Economic: 3 Sociocultural Factors: 3 Technological: 4 Legal: 4 Environmental: 5 Marketing Mix 6 Product: 6 Price: 6 Place: 7 Promotion: 7 SWOT Analysis 8 Strengths: 8 Weaknesses: 8 Opportunities: 9 Threats: 9 Internationalization Strategy and Viability 10 Chance: 11 Incoterm 12 Possible incoterms for the company 12 Solution 12 Appendix A 14 Works Cited 15 Chiquita Banana Overview Chiquita Brands International, Inc. is one of the most important international marketers and distributors of food products derived from bananas, as well as other fruits and healthy snack products. Chiquita Banana revenues for about $3 billion dollars a year and employs more than 21,000 people and operates in about 70 countries worldwide. Chiquita Banana together with Dole, Del Monte and Fyffes control about 80% of the global banana market. In 1993 the EU created the Common Organization of the Market in Bananas (COMB) to deal with the harsh competition between these companies. They would allow duty free access to the EU but subject to quotas to bananas from the Africa’s, Caribbean and Pacific, while bananas from Latin America were subject to an import tax of 176 Euros per ton and a quota of 2533 t. As an American...
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...Dowling October 20, 2012 100 100 Price ($) Price ($) Indifference Map: Bananas vs. Everything Else Indifference Map: Bananas vs. Everything Else Qev Qev Demand Graph: Bananas Demand Graph: Bananas Qb Qb 60 60 50 50 40 40 20 20 12 12 5 5 2 2 Units Units 12 12 2 2 5 5 5 5 10 10 20 20 In order to understand and create a Giffen Good indifference curve, one first must examine the elements Relating a Demand Schedule to an Indifference Curve This demand graph depicts a survey relating the price of Bananas to the number of Bananas the sample would be willing to buy at that price. From this demand curve, we are able to create an indifference curve showing the maximizing relationships between the quantity of bananas we could buy (Qb) and the quantity of everything else we could buy (Qev), assuming one unit of everything else costs $1 and the budget is $100. How does this happen? When Qb = 2, the consumer would be willing to pay $20 for each banana, according to the demand curve. That means that $60 will be left over for everything else. Hence, a coordinate on the curve A of (2, 60) is formed as a point which maximized utility within the budget constraint. If the price of bananas were to be reduced to $10, then according to the demand curve, the consumer would be willing to buy 5, or $50 worth of bananas, and therefore $50 of everything else. This creates a new indifference curve, B, because the price change in bananas has caused your relative income...
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...Mr. X Head of the SME division, Brac Bank Limited Dhaka, Bangladesh Dear Mr. X: In order to seek finance for my business, I am writing to you. For my new business which involves producing and selling banana-fiber related products, I need you to join hands with me with some cash from your bank. I have the confidence to state that my newly-established company has the potential to maintain your interest. BestFiber Bangladesh, a company intending to become born- global right from the start, is designed to take advantage of the market opportunities present throughout the world with high quality and diversified product portfolio produced from fiber extracted from banana stem. This business being relatively new has the potential to become a high- growth yielding one as there is no such domineering firms with similar businesses as is found in other industries. I strongly believe that, of course I have the necessary backing tools here, Bestfiber with its professional approach to branding and marketing and high- quality machines for production can leverage the opportunities present for this industry. Though starting with small- scale manufacturing, the company has the plan to grow big and enter into associated businesses with strength gained from the earlier operation. We currently require8,500,000taka that will be used to finance the purchasing of infrastructure like land at Bonpara,Natore, office space at Dhaka, machineries import, worker recruitment and training and other...
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...act of viewing the leaked data of the competitors would give Bananas! a great advantage in the industry. Which in the business world, isn’t viewed as such a terrible thing. Actually using the data would be very useful to Bananas! as well. Any company who is behind in any industry is going to be looking for anyway to get ahead. The fact that none of the information they will be using is illegal is just another incentive to go ahead and use the data for their own advantage. On the other hand, there is the deontological theory. This theory applies to a more personal level. Jennifer could feel guilt about using the data, knowing that the competitors do not know about the leak of their data. The universal rule would be to tell the competitors about this, and let them get their data protected. Of course, she wouldn’t let her employees use the information either. Even though there is no law saying Jennifer’s company couldn’t look at the data, the ethics behind it would be violated. It is like finding someone’s money they dropped, you could take it but you know the right thing to do is give it back. It is a matter of is Jennifer wants to put her company first, or her morals. 2. The resolution chosen would affect both Bananas!, and their competitors. Bananas! would be able to gain a big advantage in the industry. They would be able to have the newest features, and they could put them at a lower price. Bananas! would also be able to gain a lot of their customers back,...
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