Will Chiquita Merger Affect Fruit Prices?
(NEW YORK) -- What does the merger of two giant banana producers -- Chiquita Brands in the U.S. and Ireland's Fyffes Plc -- mean for U.S. consumers and the prices that they pay for fruit?
With $4.6 billion in sales, the combined company, ChiquitaFyffes, Plc, will be by far the world's biggest banana producer and a major player in melons, pineapples and packaged salads.
David Holohan, head of research for Merrion Stockbrokers in Dublin, calls the Chiquita-Fyffes combo a good deal for both companies. "It's a consolidating market, fragmented between four players," he says of bananas.
Before the merger, Chiquita already had the biggest market share of the banana market, he says, with 125 million cases sold globally, followed by Del Monte (117 million) and Dole (110 million). Fyffes had been a distant fourth with 55 million. In the U.S., says Holohan, Chiquita ranks No. 1 in supermarket sales of bananas and No. 2 in sales overall.
Referring to ChiquitaFyffes, Holohan tells ABC News, "Now there's a clear No. 1 market leader. They'll be able to achieve significant synergies going forward."
That's important, he says, because bananas are a low-margin business: "It's a case of 2 plus 2 equals 5."
What effect will the merger have on the prices consumers pay for fruit? Little, if any, Holohan thinks.
In the banana business, he says, even the biggest producers and distributors are not in a position to set the price. Rather, he says, "They must take the price," which is dictated by seasonality and by supply and demand.
"It isn't likely to add or remove any pricing pressure," he says of the merger. It will, however, "benefit shareholders and the management of these two companies, because they can now increase profit by avoiding duplication."
On news of the deal, Chiquita's shares rose a little over 12 percent to $12.15.
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