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Monday, November 27, 2006

Brand Extension Failures: Chiquita

Is there life beyond bananas?

Chiquita has been associated with bananas since 1944, the year the fruit supplier was founded. Indeed, this was the brand’s original intention. Not only to get the public to eat more bananas, but to get them to want to buy only those with the Chiquita sticker on them.

However, in recent times the banana association has been something of a mixed blessing, to say the least. After all, bananas represent only a tiny fraction of the entire fresh produce market (less than one per cent). Furthermore, Chiquita has witnessed rival brands successfully make the transition from one type of fruit into other areas. For instance, after years of careful marketing the Dole brand has managed to shift its core identity away from the product category ‘pineapple’ towards the more general attribute ‘delicious and healthy’. This has meant Dole has achieved equal success with other categories of fruit and vegetables.

In recent years, Chiquita has also tried to move away from its core association, by moving into related categories. For instance, in 1987 the company launched Chiquita frozen juice bars. The experiment was a complete disaster, and according to Business Week magazine cost the company over US $30 million.

However, Chiquita hasn’t stopped trying. A decade later it launched a range of ‘exotic juices’ which fared only marginally better. The company has also invested heavily in TV ad campaigns across the United States to inform people that it sells more than just bananas. Indeed, the Chiquita range of fresh produce includes pears, peaches, plums, grapefruits, green vegetables, grapes and cantaloupe. But even after the campaign most consumers and retailers still firmly associated the brand with bananas.

This wouldn’t be so bad, if the company’s banana sales were booming. But Chiquita was badly hurt towards the end of the 1990s with a number of banana-related problems. Quite simply, there were too many of the damn things. Banana production in Ecuador, the world’s leading banana producing nation, more than doubled from 1990 to 1999. This increased supply forced Chiquita to charge lower prices. As a result, the margin of profit diminished and debts mounted.

There were also other problems over which Chiquita had no control. For instance, Hurricane Mitch devastated Chiquita’s banana plantations in Honduras and Guatemala in 1998, forcing the company to spend more than US $75 million rebuilding them.

Chiquita has also accused the European Union of favouritism towards Caribbean bananas grown in former European colonies. The long-running dispute hit Chiquita hard and according to Stephen G Warshaw, president and chief operating officer of Chiquita, the company had about a 40 per cent share of the European market before 1993, but that dwindled to 20 per cent.

Although the EU banana trade policies were changed in 2001, Warshaw is sceptical that the company will be able to regain the dominant market position it once held.

The problems affecting the banana industry, combined with unpaid debts resulting from expansion and its many attempts to broaden its product offering, means the Chiquita brand is now in deep trouble. Whether the brand’s fortunes will be able to curve back up, banana-style, remains to be seen.

Lessons from Chiquita

  • ‘Catch-22’ situations should be avoided. Chiquita tried to stretch its brand when banana sales were slipping. This led the company into debt, because it wasn’t selling enough bananas to cover costs. It needed to move beyond bananas to bring in more money, but more money was needed to move beyond bananas. A classic ‘catch-22’.
  • Historical identities are hard to shake off. The company has been linked with bananas since the 1940s and that association has been difficult to undo.
  • A brand is never under total control. The development of a brand is only ever predictable to a certain extent. Some factors will always be beyond control. Chiquita’s expensive attempts at diversification left the brand illprepared to cope with unavoidable situations such as Hurricane Mitch, the excessive production of bananas from Ecuador and the Euro’s weakness against the dollar.

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