Chiquita slips as banana market loses its appeal

July 08, 1992|By New York Times News Service

Call it the great banana war of 1992. It broke out when the European market did not open as expected, saddling the big growers, newly expanded for the cause, with surpluses.

Prices in Europe -- and to a lesser degree in the United States -- dropped along with the profits of the big brand companies like Del Monte, Dole and Chiquita. Investors have stampeded out of fruit stocks.

As the world's biggest banana marketer and the only one of the Big Three that relies on bananas for its fortunes, Chiquita Brands International has been kicked hardest.

While shares of Dole Foods, the other large public company with banana operations, dropped to $27.75 yesterday, from a high of $48 last year, Chiquita's stock price has plunged to $15.75 from a high of $50.75 last year. That brings the company's stock price below its year-end book value of $19.39 a share.

Chiquita's hard knocks show the difficulty of dressing up what is essentially a commodity food as a premium brand. The Cincinnati-based company spends about $20 million a year on ** television and magazine advertising to convince shoppers, grocers and its stockholders that bananas blessed with the Chiquita seal are somehow worth more than the others.

But a banana is just a banana. "Nobody has been successful at putting a brand name on a perishable commodity," said Michael Kennedy, an analyst at IDS Financial Services Inc. in Minneapolis. "They always say, 'This time it's going to be different.' "

Not even the company's Carmen Miranda-esque logo protected Chiquita from having to sell its bananas at prices within pennies of the lowest on the pier.

"Sometimes the premium is pretty narrow," said David Diver, vice president for produce at Hannaford Brothers, a supermarket chain in Portland, Maine.

Industry executives disagree somewhat about the reason for the weak prices. Dole, which is somewhat cushioned because of its operations in other fresh fruits and in real estate and packaged goods, blamed the "high volumes of shipments in the banana industry, which have depressed prices worldwide" for a 25 percent decline in second-quarter profits.

Yet Keith Lindner, Chiquita's 32-year-old president and son of the financier Carl H. Lindner, attributes falling prices -- and Chiquita's own 89 percent plunge in profits in the first quarter -- to an industrywide crop of poor-quality fruit as well as to fierce competition in Europe this year.

He rejected the criticism by some analysts on Wall Street that the company, which is 46 percent owned by the Lindners' American Financial Corp., was too aggressive in expanding banana production.

Nevertheless, Chiquita, at least temporarily, plans to stop planting more banana trees this year after spending heavily in the previous two years to expand.

Financed in part with the proceeds from public offerings that raised $474 million, Chiquita aggressively stepped up spending on land, production operations and freighters a few years ago, investing $282 million in 1990 and more than $400 million last year.

In the 1980s, it typically spent between $30 million to $78 million ,, a year.

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