Competitiveness is key in Chiquita-Fyffes deal, says Colombian banana rep

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Competitiveness is key in Chiquita-Fyffes deal, says Colombian banana rep

Earlier this week we covered Ecuadorian banana industry leader Eduardo' Ledesma's positive reaction to the proposed merger between two of the world's major buyers of the fruit, Chiquita Brands International (NYSE: CQB) and Fyffes Plc (ESM: FFY). Ledesma's sentiments are shared by his competitors to the north in Colombia, who believe ChiquitaFyffes will offer benefits in terms of supply, logistics, transportation, costs and competitiveness.

Urabá Banana Growers' Union (Unibán) president, Dr. Luis Fernando Arango, told his country's industry would make the most of the merger, building improvements made throughout the course of 2013.

"According to preliminary figures provided by Augura, the Banana Growers' Association of Colombia, our country exported 94.8 million cartons of bananas in 2013, which is 6% more than in 2012," Arango said.

Green bananas on plant bunch panorama

"Some 72% of this fruit was sent from the zone of Urabá and the rest from the department of Magdalena. The banana export activity in Colombia generated sales of US$809,236,327 in 2013, or in other words some 6.85% more than in 2012.

"Colombia currently sits within the five main banana exporting countries in the world, and the main market for Colombian fruit is Europe."

Arango attributed this increase in volume and value to improved average productivity, the devaluation of the national currency, and low domestic inflation.

"The devaluation of the Colombian peso in 2013 marks an apparent change in the trend of revaluation over previous years, which was affecting the competitiveness of Colombian bananas," he said.

On that note of a positive path, he says the news of the proposed Chiquita-Fyffes merger was met with joy by the Colombian industry.

"Today Fyffes buys more than 20 million cartons of bananas in Colombia each year, all exported to Europe, and Chiquita buys some 500,000 cartons per year in Colombia - from this I want to say that between the two companies, they currently acquire around 22% of Colombian export bananas.

"The fusion of these two companies represents an opportunity for the sector, as it opens doors to grow the supply of more fruit to these multinationals, who value the volume, quality, and regularity of Colombia as a banana provider for the international market.

"Additionally, it would have the opportunity to make the most of synergies, basically with logistics and transport, which could help lower costs and make Colombian bananas more competitive."

The Unibán president also emphasized the buying power the new banana trading company would obtain.

"A company of such magnitude, which initially would manage some 160 million boxes of bananas per year, would have a significant negotiating power with clients and also with its providers.

"Additionally, the synergies achieved with the unification of supply operations, logistics, distributions and sales will generate significant cost savings, which would increase their margins, and so, their ability to maneuver in negotiations.

"In this way, the new company that comes from this fusion would have tools to influence the prices of fruit acquisition in production zones, and also in sales prices in different markets."

He added that as the initial fusion would not give ChiquitaFyffes more than a 30% share of the market, it was expected that it would be approved by the authorities who regulate competition in different markets.



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