The Global Fresh Fruit and Vegetable System: An Industrial Organization Analysis William H. Friedland

1. Food, Culture and Agriculture The Global Fresh Fruit and Vegetable System: An Industrial Organization AnalysisWilliam H. Friedland Ms. Rachel Karsenty

2. The Global Fresh Fruit and Vegetable System: An Industrial Organization Analysis • The restructuring of an industry as it globalizes • The process by which firms become transnational in character

3. Introduction ●1960s: start of the studies about the phenomenon of the multinational and transnational corporation ● Analyse of corporations’ general effects on society (eg Third World nations) Analyse in terms of their organization and operation ●They rarely provide access to independent investigators → concerns that trade secrets will be reveald and will help their competitors

4. The basic argument: • As the globalization of the FFV industry has begun, a handful of firms have emerged that have become transnational • Even if many of them still have a national base, various firms within the industry are themself global in character

5. 3 basic segments in the market of FFV: • Producers • Marketers • Distributors It is the distribution segment that is globalizing with the increased of production of FFV for long-distance and intercontinental distribution and marketing.

6. Change and its Causes in the FFV System • Industrial Revolution + urbanization = problem of provision of food for newly urban populations • Before Industrial Revolution most people produced their own food • Industrial Revolution→lenght of the working day + unavailability of land→preclude self-production of food Results: • food had to be brought from rural agricultural settings to the new urban locations • Rise of specialized production of foods: sugar in the Caribbean, wheat in eastern Europe

7. Change and its Causes in the FFV System • As urban population grew, new production locations entered into grain productionfor the export market: • California • The U.S. Midwest • Argentina • Canada • Australia →For the first time in world history a truly globalized food system began to emerge. →Transnational firms specializing in the distribution of grains (Cargill, Dreyfus and Bunge) began to emerge as well.

8. Change and its Causes in the FFV System • Processing of food importantly grew + technology of food preservation improved (particularly canning) → emergence of transnational food-processing firms (Nestlé, Heinz, and Campbell) When frozen food technology appeared the canning industry withered.

9. Change and its Causes in the FFV System • The most recent stage in food consumption is the increase in the demand for FFV. • Before the 20th century urban population ate fresh produce only seasonally. • The major change began with bananas because it’s a tropical fruit that can withstand a long transportation link between producer and consumer.

10. Change and its Causes in the FFV System • In the U.S. since the 1920s, commodity after commodity began to be available on a year-round basis: • Lettuce by coordinating production in different locations • Tomatoes: grown in different locations, harvested when « mature green ,» and shipped to local ripeners (heat and gaz the tomatoes with ethylene gas, a natural plant ripener)

11. Change and its Causes in the FFV System • In the 1980s two major developments have created a fundamental change: • The extension of the production season through plant-breeding programs, changes in horticultural practices, and the development of many production locations. • The expansion of varieties of fruits and vegetables, particularly tropicals. During the 1980s a lot of tropical exotic fruits and vegetables were introduced on the international market (guava, kiwano, lychee, passionfruit, chicory)

12. Change and its Causes in the FFV System • The developement in the FFV system have been driven by: • The health-food movement and concerns about food safety, • The developement of production capacity through the export of capital and technological expertise, • The establishment of capital-intensive « cool-chains, » which maintain chilled temperatures from origin to consumer.

13. Change and its Causes in the FFV System • Creation of a transnational industry: products are grown on 5 continents for distribution and sale on 3 continents (North America, Europe, and Japan and Hong Kong in Asia). • Fresh produce is consumed worldwide, but in countries, with large populations, such as China, India, and Nigeria, there is only local production for local consumption.

14. Industrial Organization • 3 distinct elements characterize the FFV industry: • There are 3 separate segments, only one, the distribution segment, is truly transnationalized, • The distribution segment of the industry is probably (few data available) highly concentrated→only a handful of firms have established a global presence, • There is significant variation in history, size, and internal structure of the firms involved in FFV distribution.

15. Industrial Organization • Presentation of the major players in distribution: • Dole: U.S.-based transnational (known until 1991 as Castle and Cook), involved in food processing, real estate, and FFV activities, • Chiquita: U.S.-based, was known as United Brands,and before that as the United Fruit Company, • Albert Fisher: British-based firm, extensive holdings in North America (Florida and California), Great Britain, and the European Community (Netherlands and Germany), • Polly Peck International: British-based transnational conglomerate, currently in bankruptcy proceedings and being dismantled, • The Del Monte Fresh Produce Company: U.S.-based company, was known as Del Monte Tropical Products until late 1992. • Dole, Chiquita, and Del Monte Tropical Products have histories in banana production. • Albert Fisher and Polly Peck International are new firms.

16. Industrial Organization

17. Structure • The FFV industry can be conceptualized in the shape of a dumbbell: production and marketing being the two large weights on each connected by the narrow channel of distribution. Production Distribution Marketing • The meaning of the metaphor: • Production and marketing are much larger than distribution in terms of the numbers of people involved. • Distribution, in contrast, is very capital and energy intensive (trucks, airplanes, ships, refrigeration capacity). • The metaphor also illustrates the articulation between the 3 segments: most distributors are involved in some degree with production, but impinge on marketing only to a limited degree.

18. Structure • Examples of partial involvement in production by distribution firms: • Contracting: distribution firms contract with production firms, cooperatives, or individuals for delivery of commodities, usually with specifications as to timing, quality of product, and price. • Joint ventures: distribution firms may engage in practices in which all or part of the capital requirements may be provided by the distribution firm, with some specifications on some aspects of production, quality, and the division of income from the sale of the commodities.

19. Transnational Firm Organization • Two basic types of strategies to meet the new transnationalized markets for FFV have been followed: • To build from an established commodity base, primarily bananas, into other commodities, most frequently through acquisitions. • To assemble capital resources to acquire significant numbers of small firms (Albert Fisher) or important firms (Polly Peck) withestablished records in importing or distributing fresh produce from a variety of locations to provide broad geographical and commodity availability.

20. Conclusion • The analysis of the FFV industrial sector needs considerable broadening if we want fully to understand the process of transnationalization: • many additional research are required, • some points as the methods of internal organization used by the firms to implement their strategies needs to be clarified.

21. Fin(The End) Questions ?