Bananas V1

‘Yes we have no bananas’

Yes we have no bananas

Here in Ireland the business news of the last couple of days has been dominated by bananas: the Chiquita/Fyffes deal, the takeover by the US giant Chiquita of its Irish rival although governance of the combined business will be in Irish hands. The enlarged company will reportedly pip Dole for the number one spot in selling bananas to developed import markets such as Europe and the US. In such markets – whether in the US or in Ireland or Germany (or New Zealand) – the banana is the number one selling fruit. It is a very big business. This has long been the situation.

Every business has its own history with unique twists and aspects, and so it is with bananas.

What also has long been an issue in bananas is the ethics of the business, particularly as conducted since the late nineteenth century by the big US-based companies in their Latin American farming or growing operations. The history of the precursors to the likes of Chiquita and Dole is blood-soaked.

The modern industry (with coffee production and tropical fruits generally) remains the focus of concentrated attention, again from the ethical perspective but this time under the ‘fair trade’ slogan.

In Ireland Fyffes is famous – as well as for bananas, of course, for its pursuit of a tax status claim: that ripening of bananas in specialised atmosphere controlled storage buildings constituted manufacturing. As such Fyffes claimed access to the (low rate) manufacturing profit tax. It won its case.

The precursors to our modern EU (the EEC and the EC) were also famous for an attempt by Brussels to balance free market sourcing of banana imports (favoured by Germany) with the post-colonial guilt of former imperial powers and a desire to favour (expensive) banana imports from the Caribbean in particular. Thus Brussels developed a complex and controversial banana policy regime intended to accommodate an insatiable German demand for cheap (Latin American) bananas with initiatives such as the Lome conventions aiming to support economic development through trade. It all came unstuck with the WTO and free trade rules.

Historically importation and wholesaling of the fruit was dominated by slightly more than a handful of companies that have now evolved into the current oligopolistic structure, four companies, Dole, Chiquita, Del Monte and Fyffes. To an extent this is changing. The buying power of big retail groups is shifting the balance between such chains and even the integrated global giants of the supply chain. In Germany for example Aldi and Lidl have opted to source directly from producers.

The approach to cultivation is controversial. Over time it has become dominated by a monoculture and one highly modified genetically variety, the Cavendish. It is a form of production that achieves vast economies of scale, standardisation of the fruit, consistency and visual appeal but is susceptible to disease, in particular Panama disease (think potato blight). And sometimes the banana boat may not berth on time (at present in the New Zealand capital Wellington there is a banana shortage. A banana boat has not arrived. So in New Zealand bananas reportedly will be hard come by for a week or so).

In many ways so much of our modern-day business issues agenda is so evident in this one business. Whether it is the issue of sustainability, that of fair trade, issues around tax planning, genetic modification of produce, fair trade (a ‘fair go’ for growers) and competition and concentration it is all there in the business history of the banana and how it gets to the shop shelf and fruit bowl.

About the Author

Mark Kennedy

Mark KennedyMark Kennedy is the Managing Partner in Mazars Ireland. He plays an important role in guiding and leading the firm and is helping to transform our partnership into one of the strongest, most innovative professional services firms in Ireland. Mazars is passionate about the success of our clients and helps to ensure that we keep our clients at the heart of our business and at the heart of everything we do. Mark blogs about governance and economic issues.View all posts by Mark Kennedy

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