In-Depth Integrative Case 4.2
Chiquita's Global Turnaround
On January 12, 2004. Chiquita named Fernando Aguirre Yet despite Chiquita's apparent turnaround, lingering
as the company's new president and CEO, replacing Cyrus problems remained in financial performance, organiza-
Freidhem, who had held the position since the company's tional efficiency, and a strategy for the future. How could
emergence from bankruptcy in March 2002. In his 23 years Chiquita sustain the positive momentum from its turn-
with Cincinnati-based Procter & Gamble (P&G). Aguirre around in reputation and employee relations to deliver
served in a variety of positions, including president of improved and sustainable business performance in a
P&G Brazil and president of P&G Mexico. In his first global industry environment plagued by low margins and
remarks to Chiquita employees and investors, Aguirre reit- intense competition?
erated the importance of corporate responsibility: "In
terms of managing businesses and people, while I am Chiquita's Background
profit-conscious, I make decisions first and foremost based
on values and principles. In that respect, I'm proud to be Chiquita Brands International Inc. is a multinational pro-
joining a company with Core Values that guide day-to-day ducer, distributor, and marketer of bananas and other
operations and one where corporate responsibility is an
fresh produce. The company also distributes and markets
important part of our company culture."
fresh-cut fruit and other branded, value-added fruit prod-
Over the past several years, social responsibility has ucts. Approximately 6) percent of its 2003 revenues of
become the watchword of this traditional company with
$2.6 billion came from bananas. Since adding new prod-
midwestern roots but a checkered history. In 2004,
ucts and acquiring Fresh Express, the U.S. market leader
Chiquita scarcely resembled the company that once held in fresh salads, in 2005, bananas have totaled 43 percent
a reputation as cold, uncaring, and indifferent, frustrated of Chiquita's net sales. In 2003, the banana division con-
with mediocre returns, a lack of innovation, and a demor-
sisted of 19,000 employees, mainly working on more
alized workforce. Throughout the 20th century, hostile
than 100 banana farms in countries throughout Latin
relationships with its labor unions and employees and a America, including Guatemala Honduras, Nicaragua,
reputation for immorality solidified by the actions of Ecuador. Costa Rica, Panama, and Colombia. Approxi-
its predecessor company, United Fruit, helped to slow mately 45 percent of all bananas sold by Chiquita are
Chiquita's growth. In addition, by the late 1990s, con from Chiquita-owned farms independent suppliers in
sumption of bananas had declined in major markets, and Latin America produce the remainder. Chiquita is one of
Chiquita's position in Europe had been compromised by the the global
market leaders in banana supply and produc-
European Union's preferential import relationships with its tion (see Table 1). Because Chiquita's exports are often
members' former colonies in the Caribbean, Africa, and a substantial part of the foreign trade of the Latin Amer-
the Pacific. These factors helped push Chiquita to seek
ican countries in which the company operates, relation-
Chapter 11 bankruptcy protection in November 2001.
ships with suppliers, workers' unions, and communities
Through a serious and dedicated internal analysis, a thor-
are critical elements for success,
ough reevaluation of its core mission and business princi-
Chiquita sources bananas from many developing Latin
ples, and a concerted effort to reach out to some of its
count
that histor
strug
primary stakeholders--such as employees--who had gled with poverty, literacy, access to affordable health care,
become disenchanted and alienated, by early 2003, Chiquita
hud engineered the beginnings of a turnaround. One of the
most impressive aspects of this recovery was Chiquita's suc-
Table Banana World Market Share Leaders, 1999, 2002,
and 2005
cess in redirecting and redefining its reputation through a
2005
2002
1999
more open and transparent approach to its global operations
and to the various stakeholder groups with which it inter- Chiquita
25%
23%
25%
Dole
acted. In addition, Chiquita had substantially reformed
25
Del Monte
15
labor practices and relations and initiated a set of projects
Fyless
in sustainable development and community action in its
Nobo
11
various locations around the world. Both labor unions and
nongovernmental organizations (NGOs) lauded these steps.
25
25
15
8
1
8
8
11
Source Banana un
575
In-Depth integrative Care 4.2 Chiquito's Global Turnaround
581
2011
Table 5 Chiquita Brands Balance Sheet as of December 21, 2014, 2013, 2012, 2011 (In thousands)
2014
2013
2012
Assets
Cash and equivalents
$ 47,160 $ 54,017
$ 2,601
Other current assets
535,904
575,178
987
Total current assets
583,064
629.195
3,588
Investments in and accounts with subsidiaries
110.220
108077
647421
Other assets
918.754 921866
18.919
Total assets
$1.612.038 $1.659,138
$669,978
Liabilities and Shareholders' Equity
Accounts payable and accrued liabilities
$ 374.241
$ 406,307
$ 15,363
Total current liabilities
408,578
15.363
Long-term debt
637,518
629,353
259,520
Total abilities
1.288,704
1,284,700
299,576
Shareholders' equity
323 334
374438
370 402
Total abilities and shareholders' equity
$1.612.038 $1.659138 $669978
$
266
266
1,071,132
23,332
$1.094.730
378,944
$ 15,354
15.354
249,805
294,660
B00070
$1,094.730
Source Company reports
Year Ended
12/31/2012
$3,078,337
2,743,040
275.231
33433
Table 6 Chiquita Brands Interational Income Statement, 2012-2014 (in thousands)
Year Ended
Year Ended
12/31/2014
12/31/2013
Net Sales
$3,090.224
$3.057.482
Cost of sales
2,735,117
2,708,428
SG&A
218,061
233,706
Equity in earnings of subsidiaries doss)
(2.750)
(258)
Operating income (los)
27,404
49.845
Interest expense
161 896)
161,144
Interest income
2.715
2.856
Lost on debt extinguishment
(521)
16.275
Other income expense), net
(9.906)
3,522
Income (los) before income taxes
(42,204)
(11.196)
Income tax (expense) benefit
(20,332)
14,619)
Net income foss)
162,536
(15.815
(253,834)
(45.299)
3,131
(1.793)
(297,795)
(105 239)
(405,017)
Source Comedy reports
year in bananas driven by higher pricing and volume in In early 2014, Chiquita reached a preliminary merger
North America, and initial recovery in Europe. Our salads agreement with Ireland-based fruit and produce company
business did not perform as well as expected and we've Fyffes. The deal would have created the largest banana
taken a number of corrective actions and adapted our struc- distributor in the world, with an estimated 160 million
ture and strategy to be more successful and profitable." boxes of bananas sold annually. Around the same time,
Beginning in 2012, however, Chiquita's sales and prof- Brazilian holding company Cutrale-Safra offered Chiquita
itability began to stall. With global banana sales decreas- shareholders a buyout deal worth around US$14 per
ing. Chiquita's revenue fell to US$3 billion, and the share. In October 2014, shareholders for Chiquita unex-
company posted losses for three consecutive years (see pectedly rejected the merger with Fyffes and accepted a
Tables 5 and 6). In 2014, following three years of flat slightly revised takeover bid by Cutrale-Safra. With the
sales, Chiquita's management began looking externally close of the deal, Chiquita became a privately held Brazilian
for new solutions for cutting costs and increasing revenue. company.
580
Part 4 Organizational Behavior and Human Resource Management
After much deliberation, management concluded that reluctant to promote its achievements through the typical
adopting the SA8000 standard would yield the most cred- mass communication vehicles. Indeed, when Chiquita
ibility with external stakeholders because SA8000 gives attempted to advertise its certification process with com-
detailed requirements for adequacy of management sys- mercials in Denmark that equated its Central American
tems for implementation. Having an external standard banana farms with a "glorious rainforest," the ads were met
forces Chiquita to push CR change down through cach with skepticism and thought to be unrealistic,
organizational level so that the firm is able to meet third- Instead of mass advertising, the firm has opted for a
party requirements.
longer-term marketing strategy based on educating lead-
In May 2000 Chiquita expanded its code of conduct to ing opinion makers and critics alike. According to Dennis
include SA8000. Standards now included areas such as Christou, vice president of marketing-Europe, there is a
food safety, labor standards, employee health and safety, natural suspicion among consumers about commercially
environmental protection, and legal compliance. Recoge driven messages, He believes that customers feel more
nizing the importance of labor support and its resounding trust in the message if it's delivered by an external body
effect on corporate image. Chiquita began an open dia- rather than by the company or by a paid advocate of the
logue with the International Union of Food Workers and business. That is a main reason why the firm is relying
the Coalition of Latin American Banana Workers' Unions on viral marketing tactics and third-party testimonials as
(COL SIBA), By June 2001, the firm had reached an the means of spreading its message. Retailers are treated
agreement with both organizations, pledging to respect differently: They must be exposed to improvements at
worker rights as elaborated in ILO conventions, address Chiquita because they determine which exclusive brand to
long-standing health and safety concerns for workers, and carry on an annual basis. However, Christou believes that
ensure that its independent suppliers did likewise. This creating brand recognition with consumers is possible
made Chiquita the first multinational corporation in the through nonobtrusive, reputable means.
agricultural sector to sign a worker rights agreement. Defining and conveying a brand's differences in a com-
Management credits this agreement as having helped to modities marketplace is difficult. Nevertheless, Chiquita
build a positive image, improving relations with both believes it can carve out its own niche by distinguishing
internal and external stakeholders. In mid-2001, Chiquita itself as a leader in corporate responsibility. Instead of
published its first corporate responsibility report detailing positioning itself solely on the basis of price, Chiquita is
the firm's future CR strategies and goals. Both stakehold- hoping that its distinctive competency in CR will help it
ers and media outlets have been impressed with the com- stand out from the pack. The company got a boost in this
plete turnaround in the transparency of Chiquita's regard in April 2003, when Chiquita, along with Ben and
corporate agenda, which has led to a much more favorable Jerry's, received the first Award for Outstanding Sustain-
impression of the company.
ability Reporting presented by the Coalition for Environ-
In order to adhere to the organization's own core values mentally Responsible Economies (CERES) and the
and to the SA 8000 labor standard, Chiquita routinely per- Association of Chartered Certified Accountants. In 2006,
forms internal audits in all of its Latin American opera- Chiquita won Costa Rica's Contribution to the Commu-
tions. NGOs also conduct external audits. After the audits nity Award for its Nature and Community Project, which
are completed, each local management team plans correc preserves biodiversity and promotes nature conservation
tive actions using the firm's code of conduct and core awareness
values as decision-making guides. At year-end 2003, inde
pendent auditors certified Chiquita's operations in Costa
Rica, Colombia, and Panama to the SA8000 standard,
Recent Performance, Acquisition,
Chiquita's operations were the first ever to earn SA8000 and Future Path
certification each of these countries. In its 2006 corpo- Chiquita drastically shifted its strategic decision-making
rate responsibility report, Chiquita announced that it has models and broader corporate operating principles in the
maintained 100 percent certification of its banana farms wake of its reorganization. Debt repayments and other
in Latin America in accordance with the Rainforest reorganization costs resulted in significant losses. Chiquita
Alliance, Social Accountability 8000, and EurepGAP stan-made great strides in improving its financial performance
dards (environmental, labor, and human rights and food by cutting costs and streamlining its local and global
safety standards, respectively).
operations. In 2003, the year after it filed for bankruptcy,
Chiquita's net sales were $2.6 billion, up from $1.6 billion
the year before. In 2006, net sales reached a record
Marketing the Message
$4.5 billion (due in part to the acquisition of Fresh Express)
Although it would seem advantageous for Chiquitato com. In 2011 the Chiquita Company celebrated its fourth con-
municate and leverage the great strides it has made through secutive year of increasing profitability. Chair and CEO
its corporate responsibility effort, management seems Fernando Aguirre stated that Chiquita "had a much better
In-Depth integrative Care 4.2 Chiquitin's Global Turnaround
579
Table 4 Better Banana Project Principles
Award for Chiquita's Nuevo San Juan Home-Ownership
1. Ecosystem Conservation Protect existing ecosystems, recovery Project in Honduras. Also in 2004, Chiquita earned the
of damaged ecosystems in plantation area
Ethic Award from the AGEPE Editorial Group and KPMG
2. Wildlife Conservation. Protect biodiversity, especially in Italy for its initiatives in the field of ethics, environ
endangered species
mental protection, and workplace improvements.
3. Fair Treatment and Good Conditions for Workers. Comply One recent set back for Chiquita's corporate responsi-
with local and international labor laws/norms, maintain policy
bility profile involved its banana-producing subsidiary in
of nondiscrimination, support freedom of association
Colombia. After a 2003 probe into the company's finances,
4. Community Relations. Be a "good neighbor' contributing to
the social and economic development of local communities
Chiquita self-reported to the U.S. Department of Justice
5. Integrated Pest Management. Reduction in use of pesticides,
(DOJ) that it had made payments to left and right-wing
training for workers in pesticide use/managementrisks. paramilitary groups in Colombia such as the AUC, ELN,
6. Integrated Waste Management. Reduction of the production and FARC. These payments, beginning in 1997, were
of wastes that contaminate the environment and harm human made in order to protect the lives of its employees.
health institute recycling
Colombia has one of the highest kidnapping rates in the
7. Conservation of Water Resources. Reduce and reuse the
world and a murder rate 11 times that of the United States.
water used in production, establish butter zones of vegetation
around waterways:protect water from contamination
"It's certainly a common understanding that in order to
do business in Colombia, payments have to be made for
8. Soil Conservation Control erosion, promote soil conservation
and replenishment
at best security, or at worst extortion explained Ron
9. Planning and Monitoring. Plan and monitor banana cultivation
Oswald, general secretary of the International Union of
activities according to environmental social and economic Foodworkers, which represents Chiquita workers in Latin
measures
America (including many in Colombia).
The U.S. 1996 Anti-Terrorism Act makes it illegal to
Source Adapted from interest Alliance Nomos sporo i Coco
au Cuno Bore May 2002 www.dando.org
support any organizations identified as a terrorist threat
As of September 2001, the list of terrorist threats included
the Colombian paramilitary groups. In a company press
release, Chiquita chairman and CEO Fernando Aguirre
and farms certified through June 2003 brought the total to explained, "The payments were always motivated by
65 percent. As of August 2006, all of the farms owned by our good faith concern for the safety of our employees.
the Chiquita Company are certified by the Rainforest Alli- Nevertheless, we recognized and acted upon our legal
ance. Along with all of Chiquita's farms, the Rainforest obligation to inform the DOJ of this admittedly difficult
Alliance has also certified the majority of the independent situation." Officially announced in 2007. Chiquita faced
farms connected to Chiquita. Treehugger.com also con- a $25 million fine for the payments it made in Colombia.
tends that "Chiquita now recycles 100 percent of its plas- in anticipation of the decision, the company set aside
tic bags into paving stones and has reduced pesticide use funds in 2006 to pay the fine. Chiquita does not believe
by 26 percent." Table 4 presents the nine principles of the the fines will hurt its operations. Perhaps as a result of
Better Banana Project. According to insiders, the adoption the pending DOJ investigation and decision, Chiquita sold
of third-party standards has helped Chiquita drive a stron its Colombian subsidiary in 2004.
ger internal commitment to achieving excellence and to
cut costs. In 2003, the Rainforest Alliance estimated that
Chiquita reduced production spending by S100 million as
Global Codes of Conduct, Standards,
a result of a $20 million investment to reduce agrochemi-
and Labor Practices
cal use. In a more recent effort to increase its corporate In late 2001, Ron Oswald, general secretary of the Inter-
responsibility profile, Chiquita Bananas pledged to boycott national Union of Food Workers, was asked
if he had seen
oil from Canada's tar sands in November 2011,
improvements in Chiquita's internal and external corpo
Chiquita is receiving increasing recognition for its rate policies. He responded. "Yes. It is a company that is
efforts. In 2005, SustainableBusiness.com, publisher of totally unrecognizable from five years ago." Clearly
The Progressive Investor newsletter, named Chiquita to its Chiquita had come a long way.
list of the world's top 20 sustainable stock picks, known Traditionally, relations between Chiquita and labor
as the SB20, for the fourth year in a row. SustainableBusi- unions in Latin America were mired in conflict and mis-
ness.com identifies its picks by asking leading investment trust. In 1998, after recognizing the need for change in
advisers to recommend companies that stand out as world the way it deals with its line, Chiquita began striving to
leaders in both sustainability and financial strength. In adhere to SA8000, the widely accepted international labor
April 2004, the Trust for the Americas, a division of the rights standard. Management struggled with the decision
Organization of Americas, selected Chiquita Brands as whether to adopt an outside standard or to develop an
the winner of the 2004 Corporate Citizen of the Americas internal measurement gauge for corporate responsibility.
582
Part 4 Organizational Behavior and Human Resource Management
declared bankruptcy.
Chiquita's new ownership faces a challenging task of the media? If not, what does this say about
bringing financial success back to the company. Future Chiquita's old management style?
financial stability depends, in part, on external market 6. What challenges does Chiquita's new ownership
factors such as steady or rising international banana
face in continuing to turn the company around and
prices and consumer demand, Internally, the company's bring profitability back to its operations?
performance will result from the effectiveness of finan-
cial controls on the cost side, and successful marketing, Exercise
emphasizing differentiation and value-added produc- Chiquita's management, represented by the CEO, is con-
tion, on the revenge side. Although Chiquita has gone sidering input from various groups about its strategic
to impressive lengths to turn around its reputation direction and continued reorganization. Your group repre-
and performance, it continues to face a challenging and
sents one of the following interests:
competitive international business environment and must
make continuous progress in its management and oper-
1. Shareholders of the previous company who lost
ations in order to achieve a healthy and sustainable
most of the value of the shares after the company
financial future.
2. Shareholders in the Safra Group
Questions for Review
3. Employees and union representatives of North
1. How would you characterize Chiquita's historical American operations.
approach to global management?
4. Employees and union representatives of South
2. Describe Chiquita's approach to human resource
American operations.
management in its global supply chain. What partic- 5. Representatives of the nongovernmental organiza
ular human resource challenges does Chiquita face as tion Rainforest Action Network
the purchaser, producer, and supplier of a commodity?
Spend five minutes preparing two or three requests to the
3. Does Chiquita's global corporate responsibility (CR)
management team about your group's interests and priorities
program create a conflict between owners and other
for the company. Then conduct an open forum in which you
stakeholders? Who are Chiquita's main stakeholders
discuss these requests among the different groups.
in the United States and around the world, and how
are they affected by Chiquita's CR program?
4. How would you characterize Chiquita's past and
Source: The case was prepared by Professor Jonathan Doh and Hot at
Vilanova Uwer as the basis for a discussion Addison research stance
present leadership? How does leadership affect a was provided by Cory A and B Litino intended to late
company's overall reputation?
other tective or infective manager capabiy radiative responsity
We appreciate tance from Shore Tory and Michal Mechel Coute
5. Do you believe Chiquita would have changed its International. Any aron main those of the authors
policies without the presence of damaging stories in
ENDNOTES
1. "Chiquita Names New CEO," Cincinnati Business
Courier, January 12, 2004
2. Geert de Lombaerde. "Chiquita Outlook Improves
owing EU eal." Cinco
Business Courier,
April 20, 2001.
3. Nicholas Stein. "Yes, We Have No Profits." Fortune.
November 26, 2001. pp. 182–196.
4. Ibid.
5. Chiquita Brands International, Inc., 2006 Annual
Report, http://investors chiquita.com/phoenix.
zhtml?c=119836&p=irol-reports Annual
6. "Ethics & Code of Conduct," Chiquita, www.
chiquita.com/ The Chiquita-Difference/Ethics
Codes-of-Conduct.aspx
7. Marco Werre, "Implementing Corporate
Responsibility: The Chiquita Case." Journal
of Business Ethics 44, no. 2 (May 2003).
pp. 247-260
8. Collin Dunn. "Chiquita Cleans Up Its Act."
Tree Hugger.com. August 10, www.treehugger.
com/green-food/chiquita-cleans-up-its-act.html,
9. Chiquita Brands International, Inc., "Chiquita
Statement on Agreement with U.S. Department
of Justice," press release, March 14, 2007. http://
investors.chiquita.com/phoenix.zhtml?c=219836&p
=irol-news Article&ID=-974081.
10. Stein. "Yes, We Have No Profits."
11. "Chiquita Brands International, Inc.: Chiquita
Reports Fourth Quarter and Full-Year 2011
Results." Chiquita, February 21, 2012, http://
investors.chiquita.com/phoenix zhtml?c=119836&p
=irol-news Article&id=1663424.
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