Chiquita raises banana prices in response to higher tariffs

By Lorraine Heller

- Last updated on GMT

Leading banana supplier Chiquita has increased its prices in Europe
and the US, in a move designed to offset the negative impact of
higher tariffs.

The company this week announced that its banana prices in North America rose by 1 percent during the first two months of the year, compared to prices in January and February of 2005.

Average prices in the European Union, Switzerland, Norway and Iceland also rose 5 percent on a local currency basis.

According to the company, the higher prices have resulted from "a strategic shift in sales to more premium Chiquita-label fruit, which sells at significantly higher prices than the company's second-label fruit, in addition to the impact of higher tariffs and other industry costs."

Indeed, in February 2005 pricing in North America included surcharges of $1 per box implemented to offset flooding in Panama and Costa Rica a year ago. However, these price hikes were only in place for several months.

In contrast, the 2006 surcharge is expected to "continue indefinitely"​ , with quarterly adjustments designed to reflect changes in the market price of fuel and related products.

The company also noted that it had renewed certain fixed-price contracts at higher prices, which either went into effect in February 2006 or are due to go into effect over the next few weeks.

One of the primary challenges faced by Chiquita involves its ongoing banana battle with the EU.

In January 2006, the European Commission implemented a new regulation for the import of bananas into the European Union. This imposed a higher tariff on bananas imported form Latin America, while allowing a duty-free annual import quota of 775,000 tons for bananas from certain African, Caribbean and Pacific countries.

And with Latin America being Chiquita's primary source of bananas, the company is not happy.

The new banana tariff, which increased to €176 from €75 per ton, results in an increase in cost of around €1.84 ($2.20) for each box of bananas imported by Chiquita into the EU form Latin America, said the company.

Based on its 2005 volumes, the company this year expects to incur tariff costs of around $110m.

Chiquita also announced this week that the overall volume of bananas the company sold in North America fell 7 percent in the two-month period due primarily to the disruptive impact of recent storms.

Banana volume in Chiquita's core European markets fell 7 percent in January and February, something the company puts down to its "strategic focus on premium-quality fruit".

In contrast, the volume of bananas the company sold in Asia Pacific and the Middle East rose 39 percent year-over-year in the two-month period. Prices in the region also fell one percent on a US dollar basis.

In February the company had announced that 2005 was a "terrific"​ year, in which it recorded $3.9bn in net sales, a 27 percent increase from last year's $3.1bn.

"We realized the best annual financial results in more than a decade in spite of fourth quarter challenges of flooding in Honduras, the impact of a lower year-over-year euro-dollar exchange rate and continuing high costs for fuel and ship charters,"​ Fernando Aguirre, chairman and chief executive officer had said at the time.

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