It is easy to see the battle currently enveloping Chiquita, the world’s biggest banana manufacturer, as no more than a story that allows headline writers some fun. It might well be that. But it also symbolises a shift in global economic power towards business families.
Earlier this year Fyffes, a 130-year-old fruit company famous for its bananas, launched a bid for the Chiquita banana business. The deal was scuppered earlier this month when two of Brazil’s most powerful families, the Safra banking dynasty and the Cutrale orange juice clan, put a huge counter-deal on the table for Chiquita (in cash, no less) and rubbished Fyffes’ offer, which Fyffes have subsequently raised.
This might seem like no more than a great, knock-about business yarn, but it is indicative of a huge geo-economic shift in power. Chiquita grew out of the old United Fruit Company, an American firm which during the Cold War was held responsible for taking land from poor farmers in various Latin American countries, and exercised huge power over governments – this gave rise to the phrase “banana republics”.
Most notoriously, in 1954 when the left-wing government of Guatemala threatened to expropriate much of UFC’s land the CIA led a coup d’etat and installed a military regime. In Honduras, the UFC was once said to control so much of society that it was known as “el pulpo” – octopus in Spanish.
It is barely possible to imagine a state-run firm with so much power these days (outside China, anyway). The Fyffes story is a sign of a shift in power away from governments and towards family dynasties.
If the Safra-Cutrale deal does go through, it will form a powerful family bloc. In fact even if it doesn’t happen, a family will still be a powerful player in the new Chiquita-Fyffes. It is widely thought that its CEO would be David McCann, the current chairman of Fyffes, whose family have been closely involved with the firm since 1902, and which owns 12.5% of it.
There is a wide body of academic research concentrating on how family businesses make bad decisions, and undoubtedly some do. But when it comes to big, bold ones they have a tremendous advantage: they can act swiftly. (Just as governments could, when they were interested in running vast multinationals.)
In a family-controlled firms the owners’ interests are more likely to be aligned, meaning that executives are better able to make decisions than in classic shareholder-controlled businesses, whose owners can be a motley collection of individuals, institutions and short-term profit-seekers with a rag-bag of non-aligned interests.
When it comes to bold decisions, family firms have a huge advantage, and it would not be surprising if they become more powerful in the coming years. The banana wars are just the start.