Part I
Can you give us a short description of the company Fyffes?
"Fyffes is a leading producer, importer and distributor of bananas, pineapples and melons. Besides production we also take care of buying, shipping, ripening, marketing and distribution. The company has locations in Europe, the United States, Central and South America and now in China. The main office is located in Ireland. The origins of the company go back to 1880. Over the course of time the company has gone through important developments and has grown into a multinational."
What is the position of Fyffes in Europe compared to other banana producers such as Chiquita, Dole and Del Monte? "When you look at the market share in Europe, Fyffes is the largest in the area of bananas at the moment. After that it is, I think, Chiquita, followed by Dole then Del Monte. Chiquita has lost a lot of market share in recent years, especially in Europe. But also in America. The current management seems to be focussing on bananas more again, which may lead to improvement of the market share. Del Monte is a reasonably steady company and is clearly running it's own fully integrated course. The strength of this company is probably still the large pineapple business, which makes this company efficient. Our strength is probably the size of the scale in Europe, as well as the quite flat organisation, which can respond to various developments quickly. I also think we work with a relatively low overhead compared to other parties."
How is transport organised?
"In the past we shipped everything with our own charter ships, but a few years ago we completely overturned our shipping. We continued with the four largest reeferships, which sail extremely efficiently and can transport around 9000 pallets. We also have a contract with Maersk, who do the ports we can’t reach with our large ships. We unload our own ships in Antwerp and Portsmouth, and load in two harbours in Colombia. Maersk picks up our loads in Belize, Costa Rica, Santa Marta and Ecuador and takes it to various destinations in Europe.
The banana market used to be controlled by trade. You could both make and lose a huge amount of money. Nowadays there is a lot of contract work. Is it still a trading company or have you become more of a service provider?
"I think we've become more of a service provider than we used to be. Whereas prices and amounts used to be set by week, now more work is done through set contracts, which secures prices and volumes for the entire year. This development started in England and you can see it spreading throughout Europe. Due to the increase in sales through retail, the segment in which prices and amounts are still negotiated weekly is growing increasingly smaller. It's moving towards Eastern Europe and the countries around the Mediterranean, where free trade is still bigger than retail. This is the same for a country like Spain, where the retail is perhaps 30% of the banana consumption, whereas it's roughly 70% here. This means there is still relatively a lot of trading there.
I think that in Germany a lot of people still look at the Aldi price. Aldi is working more with long term price agreements now too, so the 'week effect' has decreased a little."
Is it true that the real trade is disappearing more and more?
"Yes, the sale of bananas used to be a lot livelier. Everyone just let it all happen. I'm not sure whether it has become more fun or not. It's more efficient if you know what you're selling. It means you can agree on more efficient contracts with producers and shipping companies. I think it's good for all parties in the end."
Are you affected by the fact that it's easier for companies to have a container come over?
We are affected by companies who have a container come over themselves. But I think there is less speculation due to the price increases caused by the more expensive shipping and the higher prices of bananas in their countries of origin. The retail wants more certainty. The number of players who have one or two containers come in, has gone down hugely. The margins on bananas are also very small and everything has to be financed beforehand. That isn't easy in the current crisis."
There are supermarkets nowadays that ripening themselves. Is this a trend? "A small percentage of the supermarkets in Europe ripen themselves. This is a strategic decision made by the individual chain. There are also chains who (partially) buy their bananas themselves and have them ripened and distributed by third parties. I don't think ripening them yourself is a trend, partially because there are good ripeners in the market, who often work very efficiently. The margins on ripening and distribution are also low, whereas the investments are often considerable. There is the tendency for retailers to want to be closer to the production and have contact with the producers. This isn't always easy, as retailers, especially in England, work with very different packaging. This isn't always possible for one or two producers. We often deliver these specific packagings to dozens of growers to make sure there is enough to guarantee the weekly supply to the retailer. Because the retailer usually needs a set weekly amount and a farmer's production fluctuates with the climate, the farmer often has fruit left over right when his production is at its peak. This means they have to sell at relatively low price. As both producers and retailers still want to have more or less direct communication, we often look for methods to facilitate this and guarantee supply for a retailer and at the same time, as well as buying the farmer's peak volumes."
Is it easy for supermarkets to organise the packaging themselves?
"It remains difficult, especially for retailers who want more than one packaging. In practice there is often too much or not enough of one of the packaging. This causes problems for the retailer."
Click here for part two
Click here for part three
cbos@fyffes.com