BMI's Executive Summary

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Over the last three years, Chiquita Brands International (Chiquita) was subject to an investigation by the US Department of Justice into the company's dealings with right-wing paramilitary groups and leftist rebels in Colombia, which have been designated under US Law as foreign terrorist organisations since 2001. In March 2007 Chiquita agreed to pay a US$25mn fine, following the admission that it paid US$1.7mn between 1997 and 2004 to several terrorist groups, including the United Self-Defense Forces of Colombia (AUC), the National Liberation Army (ELN), and the Revolutionary Armed Forces of Colombia (FARC), to 'protect the lives of its employees'. Meanwhile, Colombian authorities demanded the extradition of company executives to face criminal charges.

In September 2007, the US Department of Justice formally recommended that the District Court of Colombia approve the March settlement, thus denying these demands. Under the terms of the settlement, Chiquita will have to pay the US$25mn in five equal annual instalments, with interest. CEO Fernando Aguirre expressed satisfaction with the decision not to charge former and current executives over the protection payments, stating 'Chiquita looks forward to putting this difficult chapter behind it. We believe this is the right decision and one that reflects the good faith efforts of the company, and its officers, directors and employees, to address a very difficult situation involving the lives and safety of our employees'. Company representatives also stated that they did not expect the fine to impact Chiquita's ability to operate its business, with a reserve of US$25mn having been recorded in anticipation of the fine.

The US$25mn fine, which also includes a five-year probation period, is the largest so far imposed under US counter-terrorism laws. Nevertheless, the US court's decision was criticised by Colombian officials and representatives of the National Commission for Reconciliation and Reparation, which overseas victim compensation. They demanded that the US Department of Justice hand over the US$25mn fine for it to be passed on to the victims of Colombia's paramilitary groups via a victims' fund. The Commission furthermore announced that it would ask the Trade and Commerce Ministry to withdraw all commercial licenses from Chiquita to stop the company from ever operating in Colombia again. Chiquita sold its Colombian banana operations in 2004 but continues to purchase Colombian bananas through a third party. Colombia's interior minister expressed his outrage at the fact that Chiquita was able to 'purchase impunity' for payments to a drug-funded militia responsible for the deaths of thousands of Colombians.

Over recent months, President Uribe has negotiated the demobilisation of the country's paramilitaries, and the situation has been slowly improving. However, Chiquita's case serves to highlight the challenges involved in operating in the Colombian market which, despite rising disposable incomes and a growing processed food sector, is still suffering from a fragile domestic security situation, especially in the country's more peripheral areas.

Contents

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Chapter 1 – Business Environment

Retail Business Environment Rankings

Table: Latin America Business Environment Rankings

SWOTs

Colombia Food & Drink Industry SWOT Analysis

Macroeconomic Outlook

Table: Colombia – Economic Activity

Chapter 2 – Retail

Regional Overview

Trending Towards Hypermarkets in Latin America

Rise Of Hypermarkets

Table: Number Of Supermarkets/Hypermarkets, 2005

Table: Top Five Mergers & Acquisitions In The Latin American Retail Sector, 2005

Share Of MGR Sales In Total Sales

Industry Forecast Scenario

Table: Colombia MGR Value Sales by Format – Historical Data & Forecasts

Industry Developments

Company Developments

Market Overview

Table: Structure Of Colombia’s MGR Market By Number Of Outlets

Table: Colombia MGR Value Sales by Format – Historical Data & Forecasts

Chapter 3 – Food & Drink

Regional Overview

The Growing Market for Wine Sales and Production in Latin America

Table: Per-Capita Consumption Of Wine (litres)

Table: Wine Production Estimates By Country 2005

Industry Forecast Scenario

Table: Value/Volume Sales Of Selected Food Sub-Sectors – Historical Data & Forecasts

Industry Developments

Company Developments

Market Overview

Table: Colombia Agricultural Sub-Sector Volume Production – Historical Data

Chapter 4 – Tobacco

Industry Forecast Scenario

Table: Cigarette Value/Volume Sales – Historical Data & Forecasts

Industry Developments

Company Developments

Market Overview

Chapter 5 – Competitive Landscape

Key Players

Table: Key Players In Colombia’s MGR Market

Table: Key Players In Colombia’s Food & Drink Sector

Regional Company Case Studies

Company Case Study – Organization Soriana

Table: Organizacion Soriana: Stores By Format, June 2006

Table: Organizacion Soriana, S.A. – Income Statement, January-June 2005 & 2006

Table: Organizacion Soriana: New Store Openings, April-June 2006

Table: Market Shares Of The Four Largest MGRs In Mexico, 2005

Company Case Study – SABMiller

Table: Top Five M&As In Latin America In 2005

Table: SABMiller In Colombia, As At June 2006

Table: SABMiller In Peru, As At June 2006

Wal-Mart In Latin America

Table: Wal-Mart Latin America Regional Operations

Table: Wal-Mart de Mexico (Walmex)

Table: Wal-Mart Brazil

Nestlé In Latin America

Table: Nestlé Operations In Latin America

Company Analysis

C.I. Unión de Bananeros de Urabá, S.A. (Uniban)

Alianza Team (Tecnologia Empresarial de Alimentos S.A.)

Nacional de Chocolates

Postobon

Almacenes Exito

Olimpica

Grupo Empresarial Bavaria

BMI Forecast Modelling

How We Generate Our Industry Forecasts

Retail Industry

Sources

Competitive Landscape for Latin America Food & Drink Reports: Sample of  
Companies Ranked

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At-a-glance perspective on the strengths, weaknesses, opportunities and threats facing each market’s food & drink industry. BMI also provides similar economic and business environment studies. Company SWOTs (Strengths, Weaknesses, Opportunities, Threats) covering all leading food and drink companies operating in each market, including competitive intelligence on geographic presence and competitive positioning of multinationals against local companies; leading products, services and brands; sales and local market share; foreign direct investment, projects, partners and acquisition strategy. Illustration of the industry via rankings tables comparing revenues, number of outlets, number of employees and registration dates. BMI analyses each company’s performance, market position, strategy and investment potential.

Network of Latin American Food Sources

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BMI's Latin American Food Reports are based on an extensive network of multilateral organisations, government departments, food industry associations, chambers of commerce and company reports. Information sources include: