It's "prudent" to plan for life after Cavendish, says Chiquita CEO
The head of Chiquita Brands International (NYSE: CQB) has congratulated the global banana industry for its efforts to contain the deadly Tropical Race 4 (TR4) strain of Panama Disease, but says it would be wise to prepare for the possibility of a world without the staple Cavendish variety.
The variety itself was introduced as a replacement for the previous mainstay banana Gros Michel, which was almost completely wiped out by the first outbreak of Panama Disease. By the time a disease-resistant Gros Michel hybrid was bred, Cavendish had long been the default variety on supermarket shelves.
During an earnings conference call last week, Chiquita CEO Ed Lonergan said it was interesting to see the issue had been picked up by the mainstream media in the last few months.
"Clearly the industy's been talking about this for a long time and the World Banana Forum has a working group made up of many many players that are working through alternatives to [sic] current Cavendish product that’s out there," he said.
"We know Tropical Race 4 has migrated to Africa and we would be silly to think that it isn’t moving across the world over the course of the coming years."
He added the industry had done a "fine job" of containing the disease, which would minimize impacts over the short term.
"But it's prudent to be planning for a life after the current product...we are accelerating our investment and our R&D. We’ve been working on Sigatoka-resistant and Race 4-resistant product for quite some time now.
"It’s not a simple process and getting a banana to taste good with the right brix, that’s the right shape and the right productivity is not simple. But we see promise in the work that’s happening at Chiquita but also in the broader groups that are working collaboratively.
"This is not an issue where you have competitive advantage – we need to solve this for the world, it’s the most important food crop globally."
The executive was asked about his opinions on the possible effects of El Niño on Latin American banana supply, particularly in light of the effects of lower rainfall in some growing regions which affected first quarter results.
"It's clear there's change happening. You can decide to believe whatever you want to believe about climate change, El Niño…but the reality is there is less rainfall in Panama and Costa Rica today and over the last five years than there has been traditionally," Lonergan said.
"So certainly in our our business where we have a substantial presence in those countries, we are changing the way we farm, and that includes irrigating in places we haven’t irrigated before.
"I think it’s hard to figure out the long term impacts of weather changes in the Pacific but our job is to mitigate whatever comes at us by rethinking where we grow, what we grow and how we do it, and I think that’s where we’ve made the most substantial progress over the last couple of years."
Chief operating officer (COO) Brian Kocher added the best way to mitigate the impacts of weather was to diversify supply.
"So you have seen us over the course of the year expand our supply base into southern Mexico," Kocher said.
"You’ve seen us change around in between Guatemala, Ecuador and some of the other places, so we are very conscious of the value of having a diversified supply chain."
Lonergan mentioned this was a key drawcard of the proposed merger with Fyffes Plc (ESM: FFY).
"It’s probably one of the most attractive aspects of the ChiquitaFyffes business because we will have the most diverse supply and shipping environment in the industry, and as we think about what we went through in the first quarter, if we had been combined there would have been many more alternatives to move fruit than we had," he said.
Related stories: U.S.: Chiquita results fall short of expectations in Q1