Mark O'Sullivan, BanaBay comments on Chiquita and Fyffes merger
"Less competition often means price rises in any marketplace"
"Obviously this merger is going to create the biggest banana brand in the world, however we don’t see that the UK would be too affected by this change as Chiquita already work with Total Produce and have done for a number of years in the UK marketplace. Other than a small amount of ripening in Sheerness and in Dewsbury, Chiquita is not really evident in the UK.
"We understand that the service contract for Asda at Dewsbury will be terminated by the end of the year as Asda will be direct sourcing from their own ripening facility by that time.
"As Dewsbury is quite an old facility, we believe it would require serious investment by Chiquita to convert to the cleaner, more environmentally friendly refrigeration systems more modern facilities use and as Fyffes already has four facilities in the UK, we can’t see the gain for Chiquita in making such an investment, particularly as the facility would potentially be competing against those of Fyffes. Therefore we believe Dewsbury is likely to close, so that existing resource for Chiquita in this country will disappear, reducing competition in the marketplace.
"Because ripening and refrigeration are critical to quality of bananas, it underpins the competitive nature of the market in the UK. Less ripening capacity means less competition.
"How long will any changes take to come into effect? We are unlikely to see major changes within the first six months as merging companies of this size is immensely complex, we would expect consolidation to occur and effective restructuring globally to allow synergies to emerge.
"How will prices be affected by this? Less competition often means price rises in any marketplace. However, there are many more factors at play influencing banana prices, not least growing conditions.
Currently, in our view consumers are often ‘fobbed off’ with lower quality bananas so that the larger retailers can meet demand for lower prices. However, in our experience, once consumers are offered choice, they are often prepared to pay a higher price for premium products. This is where we believe BanaBay can compete – our focus is on quality of fruit - we have recently appointed a new ripening partner, SH Pratt, to maintain that quality – and also on customer service. Big is not always beautiful, we believe we can take advantage of this merger to differentiate BanaBay as a new brand that is agile and responsive, deliver outstanding quality of produce and excellent customer service.
"Will this impact negatively on growers? Potentially yes. This merger clearly both increases buying power for the new brand and also reduces the number of customers in the marketplace for growers, so we can envisage more of an impact at this end of the supply chain than for end consumers. However, this may work to the advantage of other companies prepared to pay higher prices for premium fruit.