The Global Fresh Fruit and Vegetable System: An Industrial Organization AnalysisGoalsHistoryFood Processing, Packaging& PreservationChange in Eating FoodYear-Round FoodYear-Round Food Cont.…Food MilesFood Miles Cont.…Industrial Organization StructureDistributionConnectionsChiquitaPolly Peck/ DMTAlbert Fisher GroupPowerPoint PresentationWilliam H. Friedland1. Restructuring of an industry as it globalize2. To understand the process in which firms, originally local, regional, nation in scope, become transnational in character•Before the Industrial Revolution-Most people produce their own food-Population increase in urban areaLimited amount of landFood had to be brought in from rural agricultureNew production locations- California, the U.S. Midwest, Argentina, Canada and AustraliaGlobalized food system appear•Technology improve food preservation-Canning•Development of frozen food technology-Taste more like fresh food -Canning industry declined•19th century-Urban population ate fresh food seasonally only until the turn of the 20th century•Started with bananas and tropical fruits that could withstand long transportation~ the idea of “good-looking” fruits-Banana industry grew•Population of urban cities grew-Started with lettuce~ producing in different location-Later tomatoes also became part of the year-round line•Produce in different location•Harvest when it turn “mature green” •Heat tomatoes& gas it with ethylene gas, which is a natural •Fruits turn red and look ripe•Supermarket demand steady and predictable stream of fresh produce-Possible because lengthen production season through plant-breeding program-Change in agriculture -Produce in different location1. The health-food movement and concern about food safety2. The development of production capacity through the export of capital and technological expertise3. The establishment of capital-intensive “cool chain”•Maintain a certain temperature from origin to consumer•Distance in which food travel stretch over thousands of miles and across continents-South America, Africa and Asia transporting food to North America, Europe and Japan and Hong Kong in Asia•“Fresh food is consume worldwide, but in countries, with large population, such as China, India, and Nigeria, there is only local production for local consumption.”•Three segments of the fresh fruit and vegetable industry-Marketing-Production•Both lean towards transnationalization but, more towards localized, regional, or national character•Transnational-Advertising and news report in trade publications-News reports on financial pages-Word-of-mouth of individuals involve in the industry•Dumbbell metaphor 1. Production and marketing involve more people2. Distributors are involve in both in production and marketing to some degree DistributionProductionMarketing•Banana history•1969-Bought seven lettuce producing firm in California- combine into one, Interharvest-Single largest firm in U.S. lettuce production and - distribution-Fail~ close down in 1983•Competition -Dole and DMT•Some banana history-Started as small firm in British “rag trade” in clothing-1980, Asil Nadir took over and change it to Polly Peck International•1989-DMT (Del Monte Tropical) and Sansui moved Polly Peck to top hundred British corporation-Flourish•Citrus base unlike Chiquita and Dole•Started off as small operation in Great Britain•1982-Bought by Tony Millar-Expand in least than a decade•How is this possible?1. Bring in capital, one’s own and other investors2. New capital are needed continuously so that firm grow3. Target firms that have established earnings pattern and potential for improvementChiquita Dole Polly Peck/DMT Albert Fisher GroupNational base USA USA UK, North Cypress, Turkey, USAUKCommodity Base Bananas Pineapples, bananas Citrus (PP), bananas (DMT)None# of Countries 14+ 15 10+ 10# of Subsidiaries 240+ 37 45 71Conglomerate No Yes, Hawaii real estate Yes, electronics, recreationNoVertical integration Growing Yes Yes Yes No Transport Ships Ships Ships, air Minor road Retail Labeling Labeling Labeling (DMT) NoneValue Adding Yes Yes Yes