Chiquita Environmental Issues

I. Company Profile

Description of Type of Business

Chiquita Brands International, Inc. is a Cincinnati, Ohio-based producer and distributor of fresh produce most widely recognized for its famed Chiquita banana. The company has been marketing and distributing bananas since 1899. In 1903, Chiquita debuted on the NYSE and has remained listed under various ticker symbols for over 100 years. Fernando Aguirre is current Chairman, President and Chief Executive Officer of Chiquita.3

Chiquita is a conglomerate of a variety of international subsidiaries. A few examples are the company’s namesake, Ohio-based Chiquita Fresh Group, which is responsible for marketing and distribution of fresh produce in North America, Asia, and the Middle East. German-based Atlanta AG, acquired in 2003, is responsible for marketing and distribution of fresh produce in Europe. California-based Fresh Express, which was recently acquired in 2005, is the #1 fresh salad producer in the United States. Additionally, the Belgium-based Great White Fleet provides worldwide logistical support for all of Chiquita Brands with state-of-the-art refrigerated seagoing vessels.3

Chiquita is synonymous with bananas worldwide and is the world’s most recognized brand of banana in Europe and North America.6 Consumers worldwide recognize a Chiquita banana by the unique branding label that has been a part of Chiquita since 1944 (see Exhibit D). Also well known to consumers are “Miss Chiquita” (see Exhibit A) and the original “Chiquita Jingle” (see Exhibit B). Keeping with times and consumers, Chiquita continually updates its branding stickers and the “Miss Chiquita” image. The Chiquita jingle is no exception as it was recently updated (see Exhibit C).3

Size

The self-proclaimed “international marketer and distributor of high-quality fresh produce,” Chiquita is one of the largest banana producers in the world and a major supplier of bananas in Europe and North America.3 At year-end 2005, the company employed approximately 25,000 people, including 17,000 in Central and South America.6 The Chiquita brand name is sold on over 150 different types of fresh produce in 70 countries worldwide.3

Growth/Profitability

In 2005, Chiquita generated approximately $3.9 billion in net sales up from $3.1 billion in 2004 Due to strong banana sales and the Fresh Express acquisition net operating income was up 60% from $113 million in 2004 to $188 million in 2005. Forty-four percent of sales were from the Banana segment, 31 percent from Fresh Select and 24 percent from the Fresh Cut segment. Fresh Cut sales are primarily driven from Fresh Express. The acquisition of Fresh Express increased net sales for this segment from $10 million to $539 million in just six months. While still operating at a loss of $3 million in 2005, this segment is expected to be profitable for 2006 fiscal year.3

Chiquita emerged from Chapter 11 bankruptcy in 2002 and has experienced an increase in net sales for all three-core segments each year. Net sales have increased almost 50% since 2003. Total operating income has been over $100 million each fiscal year since filing bankruptcy. Profitability is expected to increase in fiscal year 2006 due a full year of sales with Fresh Express as well as Chiquita’s adaptive efforts to circumvent the EU importing tariff by sourcing bananas for Europe from Asia rather than South America.3

Market Share

As of 2005, the company has the largest market share for bananas in the European Union with 27%, and is a close second to Dole Food Company in banana market share in North America with 33%. The Fresh Express brand garnered a 45% retail market share of value-added salads in the US. Chiquita’s operations are divided among three core segments: Bananas, Fresh Select, and Fresh Cut.6 The Banana segment contains all products related to the whole banana fruit. The Fresh Select segment is made up of all fresh whole produce (fruits & vegetables) except for bananas. The Fresh Cut segment is all packaged produce including the entire salad division from Fresh Express. Chiquita expects market share to increase in all three segments for fiscal 2006 with its recent manufacturing and distribution acquisitions mentioned above.3

II. Situation Analysis

After completing a situational analysis of Chiquita Brands International, Inc., the following key environmental factors were identified:

• Legal

• Political

• Economic

• Social

After recent events, the topic of Chiquita’s “legal environment” became a media spectacle and was broadcast on the national evening news with headlines similar to the following: “Chiquita Banana Company Admits Paying Colombian Terror Groups over $1 Million to Protect Farms” 2.

On March 14, 2007, Chiquita Brands International, Inc. released a press statement from the Chairman and Chief Executive Officer, Fernando Aguirre. The statement announced the company had paid paramilitary groups in Columbia to protect the lives of its employees. Only after these organizations were classified as terrorists under United States statute (September 2001), were senior management officials aware of the significance of their actions. Under United States law it is illegal to make payments to such organizations. Currently, Chiquita Brands International, Inc. is voluntarily working in conjunction with the Department of Justice in their investigation. The implications of Chiquita’s actions has resulted in a $25 million fine for Chiquita with potential criminal charges against those involved and could lead to a negative affect on the credibility and public opinion of the entire Chiquita corporation 7.

Another “legal environmental” factor involves the implementation of new banana plantations on Africa’s Ivory Coast which will aim to export fruit to Europe. This strategic move would have significant implications, which would benefit Chiquita because of the preferential tariffs that the European Union has on bananas grown in its former colonies. Bananas grown in a former European colony won't be subject to a tariff of €3.19 (approx $4.14) per 40-pound box of imported bananas which was imposed by