Organizational Overview
Chiquita is a global company that deals with large bunches of fruit processing and selling of finished products. For a considerably long period of time now, the company has been processing bananas as one of its core products although it has recently diversified its product portfolio to include other types of fruits as well.
The company has already been listed in the New York stock exchange market and has recorded impressive growth both in terms of expansion and revenue accumulation. In addition, there are quite a number of subsidiary brand names that the company has been operating in.
This was found to be necessary as part and parcel of the process of seeking strategic growth and development. The various subsidiaries operate under the umbrella name of Chiquita. In 2005, the company bought Fresh Express Salads in order to expand its operations. Downtown Cincinnati in Ohio.
Currently, the company has remained as the top producer and supplier of fresh bananas in U.S having taken over from United Fruit Company sometimes back. In other words, the latter used to be leading player in the production of bananas but it lost this outstanding market performance to Chiquita.
In Germany, Chiquita owns Atlanta AG, a company that deals with the distributor of fruit products. It has been operating this subsidiary for slightly over seven years since its acquisition in 2003.
In its earlier years of operation, Carl Lindner, Jr. was the leading controller of the company. However, his control of the organization later weakened following the bankruptcy of the company bearing in mind that he was one of the major shareholders at that time.
Chiquita was declared bankrupt in mid March, 2002. Thereafter, Chiquita Brands was adopted as the new name of the company from Chiquita Brands International.
As already mentioned, Chiquita Brands is keen in the provision of fresh fruit products to its consumers located around major world markets.
In order to satisfy the rising demand for fruit produce, the company has taken the initiative of not only processing these products in bulk but also engaging in real growing of the desired fruits as well as developing better distribution networks across the target markets.
To date, the company is still handling more bananas than any other fruit. For instance, over 60% of the total income derived from sales is obtained from bananas.
Other product offerings at Chiquita Brands include fruit juices, processed fruit ingredients, packed fresh-cut items, tomatoes, apple, grapes, melons as well as whole citrus fruits. As can be observed, bananas still account for a very big percentage of the firm’s operation.
About one third of the total sales is generated by Fresh Express unit. This subsidiary is the leading plant in the processing of ready-to-eat salads especially in the United States markets.
Other target marketing points for Chiquita’s products include Europe and the large part of North America. Other upcoming markets include Korea, Japan and the Middle East region.
The brand name of the company has a global presence not just within the regions within which its products are sold. For instance, the company has several growing points for its fruit products. Most of these fruit farms are owned by Chiquita and maily deals with the growing of bananas to suffice the high demand for the product.
The Chiquita’s bananas account for about 33% of the company-owned farms. However, the company farms have not adequately catered for the demand of fruit products both in the local and foreign markets.
As a result, countries like Philippines, Nicaragua, Mexico, Honduras, Panama, Columbia, Guatemala, Costa Rica and Ecuador has been contracted by the company as third-party growers in order to boost production and meet demand. In particular, the demand for bananas has been critical bearing in mind that it is heavily consumed in all the major and minor marketing regions.
Moreover, the food service sectors and the global retail of fruit produce are mainly supplied with third-party growers of fruits all over the world since Chiquita can hardly possess the capacity to grow as well as process fruit products to suffice the global demand.
As it stands now, North America remains to be the major point of operation for Chiquita with over 60% of its activities concentrated in this region.
The regional and national groceries retailers in this region buy Chiquita produce under the one year contract terms. This is mainly banana products in terms of volume of sales. As a result, the company has been in a position to benefit from stable pricing mechanism due to contact form of selling.
On the same note, price increases occasioned by unexpected costs is comfortably shouldered by the produce supplier since all such eventualities are factored in when setting up selling terms in the contract. Additionally, increases in market driven prices is also pocketed very easily by the supplier without the fear of running into losses in due time.
Most recipients of Chiquita products especially in the Mediterranean region and continental Europe are the wholesalers, ripeners and large grocery stores.
These large scale buyers are in a position of linking multiyear or annual sale agreements that are usually negotiable in terms of pricing since they are easily affected by the dynamic and prevailing marketing conditions.
Strategic Assessment
For Chiquita Brand, the business portfolio under healthy snacks and company’s salads has been a major driver of revenue growth over the past few years. This business segment generates over one billion dollars in terms of net sales.
Revenue-wise, the healthy snacks business and salads processed by the company are responsible for about 33 percent generation. Hence, the company has devised better strategies that will see into it that snacks and salads are not only produced in high volume but also meet the desires, preferences and tastes of consumers.
In fact, the company has been keen on obtaining the feedback of consumers in line with what they really desire when purchasing fruit and vegetable products from Chiquita Brands. Indeed, the management at Chiquita clearly understands that its consumers are the greatest asset it can possess at any given time in the life of the company.
External Analysis
As part of strategic growth and development of Chiquita Brands, the company has embarked on quality improvement program especially in its high-end products such as snacks and salads. In addition, the mode of distribution of its finished products has gone a notch higher.
In 2010 alone, the Fresh Express unit managed to ship an estimated 13 million ready-made salads. This very product has remained competitive for long in the North American market. For example, the retail market share for ready-made salads is 36 percent in the United States markets.
If this is anything to go by, then it implies that the company is strategically positioned to remain viable as well as competitive in the dynamic fruit and vegetable market. The quick service restaurants have also contributed immensely to the U.S markets for Chiquita products.
This consists mostly of the food service customers. They contribute about 20% of the total sales generated courtesy of this segment. Onions, cabbage spinach, tomatoes and lettuce are often some of the products bought by the food service industry although shredded lettuce remains to be a darling to many customers.
Hence, the company has strategically positioned itself to process both high quality and variety of brands of products processed in this segment since it has a niche in this area.
The company has taken the advantage of early market entry as well as thorough knowledge of its products and consumers’ tastes and preferences in engaging major competitors and other market rivals towards growth in revenue.
Innovation and use of modern technology in processing and storage of its products has also been a major turning point in the operations of Chiquita Brands. In spite of the public health regulations on food safety procedures, the company has put in place a state of the art technology platform dubbed FreshRinse.
The main purpose for incorporating this latest technology in its processing of fruit products is to alleviate the chances of potentially tainted products that may be detrimental to the health of consumers.
This technology was adopted in 2010 with the aim of not merely observing safety standards when handling fruit products but also increasing the quality and shelf life of the same. In this regard, the company was and has been targeting the production line that deals with salads due to its high demand.
Traditionally, the company has been cleaning its products with a sanitizer made from chlorine. Although the latter method was in use for long, the company devised a better cleaning technique that would significantly reduce the level of micro-organisms load in the fresh and processed produce.
The leafy greens in particular are known to provide a thriving ground for the breeding and multiplication of micro-organisms.
Corporate Level Strategy
The corporate level strategy for Chiquita Brands was to grow its revenue base through diversifying its business platform. The company is keen on innovating better and diversified brands of its products. This is evident when the company stamped its foot in the European markets and opted to enter a joint venture with Groupe Danone, a French-based company.
In addition, it has also been a corporate level strategy for the company to have a global reach for its consumers. For instance, Chiquita is currently operating in about 70 countries, a strategy that is in line with the company’s mission to secure a larger share of the available market.
The strategy to be a global company as part of expanding marketing portfolio has also been witnessed when Chiquita Brands went online. The fruit products can now be ordered and bought online other than the use of physical stores located in various geographical locations.
Business Level Strategy
The strategy adopted by Chiquita at the business level is that which mainly targets other rivals and countering market competition. For instance, the company has for quite a while, applied differentiation strategy in the processing, manufacturing and marketing of its line of fruit products.
One of the rationales for adopting this type of strategy at the business level is to truncate operational costs that are usually associated with intensive marketing especially in advertising.
The management at Chiquita believes that by producing products that are superior or unique to those of the competitors, it will stand out as among the rest of its competitors. In fact, the company is already in the process of covering more geographical locations alongside offering a variety of fruit products that are more appealing to consumers than before.
At this point, it is imperative to note that Chiquita Brands had been using the traditional cleaning methods for its raw products from farms. However, the company has so far developed a modern cleaning technique by embracing contemporary technology. Indeed, such use of differentiation strategy at the business level has greatly improved revenue generation for the company
Financial Analysis
The growth in revenue at Chiquita for the past three years has not been impressive. As can be observed from appendix A, the income statement covering the time period between December 2008 and 2010 shows a declining trend in total revenue accumulated in one financial year.
The 2007/2008 fiscal year witnessed the total revenue accumulation amounting to 3,609.4 million dollars while by the close of December 2010; this value had subsequently dropped to 3,227.4.
Due to such poor growth in revenue, the dividends per share were null and void since the company did not make expected returns. However, the company managed to sustain itself with a decreasing operating income, a scenario which also affected gross and net profit margins.
In the balance sheet statement comparing the performance of the company for the three consecutive years (2008-2010), it is worth to note that the Chiquita Brands managed to shed off unnecessary liabilities in succeeding years and therefore reducing the value of net loss (appendix B).
In the cash flow statement, Chiquita Brands’ net operating cash flow was at its peak in 2009 with a slight drop in 2010 to stand at 98 units of billion dollars (Appendix C). Depreciation and Amortization was also lowest in 2010 (61.0) and highest in 2008 (448.0).
Corporate Forecast
Judging from the above financial analysis, it is highly likely that Chiquita Brands may not make any impressive growth in the financial year ending December 2011 as the company will be releasing its final quarter annual results.
However, recent developments as observed in the business and corporate level strategies may jumpstart the performance of the company in the 2010/2011 financial year.
Moreover, it is also evident that the company was adversely affected during the 2007-2008 recession, a situation that jeopardized its strengths and opportunities in the wake of weaknesses and threats it had to go through.
In one of the most versatile ways to boost its revenue base, Chiquita Brands is planning to license this new state-of-the-art technology to other interested users.
Although this may be viewed in bad light especially if other competitors in the fresh fruit market gain control of this technology, the management of the company feels that Chiquita Brands is already ahead of the competition and such a move may not jeopardize its market share and stability both in the short and long run.
Hence, rolling out the technology has been a real motivation for the organization bearing in mind that its revenue growth targets fell short of the expectations following the 2007-2008 global economic meltdowns.
Another future prospect for Chiquita Brands is expansion of its range of products to meet the diverse needs of all and sundry in the consumption market. For instance, the growing markets in terms of geographical coverage has been challenged by lack of adequate choices for consumers who sometimes end up buying fruit produce from other market rivals.
As such, the company has found it necessary to diversify its categories of products alongside developing new segments and brands. As an initiative step towards achieving this, Chiquita Brands has already supplied coffee shops, club stores, gas stations and convenience outlets with Pineapple Bites, Just Fruit in a Bottle, Chiquita to Go and Gourmet Café.
These are all new brands being sold in non-grocery venues that were earlier not known for such stuff. Indeed, this can best be referred to as innovative marketing, a feature that will definitely offer a better competitive advantage to Chiquita.
The European market, though a major intake of Chiquita products, is still underutilized. The company plans to heighten its European presence by introducing new brands and categories as well as seeking possible acquisitions, mergers and joint ventures with like-minded partners.
A case is the recent merger between Groupe Danone, a France-based fruit processing company and Chiquita Brands.
The main purpose for this merger is to facilitate quick and successful marketing of Just Fruit in a Bottle brand in the European market. 51 % of the smoothie business owned by Chiquita Brands was then sold to Danone for fifteen million Euros, an equivalent of eighteen million U.S dollars.
The subsidiary was then deconsolidated. The new venture is centered in Paris, France and is managed by the Groupe Danone. Currently, it is upon Chiquita Brands to take care of supply chain services, marketing of new brands as well as laying a firm base for undertaking local sales.
The future prospect for this joint venture is seemingly good since both companies are in a vantage position to leverage on the strength leashed by each other.
In other words, it is a win-win situation for both players in the sense that the strong supply chain management, sales expertise and the equity of Chiquita’s iconic brand is perfectly and passionately brought into the merger.
On the other hand, the long time European presence of Danone alongside the immense capabilities of the French company in conducting Research and Development (R&D) is indeed an invisible asset for Chiquita Brands.
Risk Assessment
Currently, there are quite a number of risks facing Chiquita Brands. Top in the list is the threat posed by competitors in the fresh and processed grocery market. While competition is a key ingredient for growth, the company is yet to face the glaring reality of beating market competition amidst the hard economic times.
Nonetheless, the organization is working towards reducing the risk of losing profits and reduced returns on investment. For instance, it has embarked on a diversification of its brand and line of products in order to retain and attract a wide base of consumers.
Recommendations
Chiquita Brands can improve its profitability and growth in revenue by adopting innovative ways of marketing of its line of products. Currently, the company is faced with myriad of market rivals who are competing for the same market portfolio. One way of reducing the risk of competition is by undertaking geographic expansion in locations where its products can be consumed.
Secondly, the company should adopt and enhance differentiation strategy in order to stand out among other players. For instance, it may consider offering its products at a slightly lower market price compared to those of the immediate competitors.
Bibliography
Chiquita International. Looking for a healthy snack? 2011. Web.
Hoovers. Key Chiquita Brands International, Inc. Financials. 2010. Web.
Yahoo finance. Chiquita Brands International Inc. (CQB), 2011. Web.
Appendices
Appendix A: Chiquita Brands International, Inc. Income Statement
Source: Yahoo Finance.
Appendix B: Chiquita Brands International, Inc. Balance Sheet
All amounts in millions of US Dollars except per share amounts. Source: Hoover’s financials.
Appendix C: Chiquita Brands International, Inc. Cash Flow Statement
Source: Hoover’s financials