The Most Powerful Company You've Never Heard Of

On this day in economic and financial history ...

The United Fruit Company was formed on March 30, 1899, the result of a merger between the nearly bankrupt Tropical Trading and Transport Company and Boston Fruit. On its formation, United Fruit was already a giant in its field, with railroads, steamships, and plantations spread across the tropics. It would grow into an enterprise that clashed with governments. The phrase "banana republic" arose from United Fruit's efforts to bend entire Central American nations to its purposes, particularly in the growing of bananas, which are notoriously quick to rot and thus require greater control over their production to ensure a uniform -- and profitable -- product.

In Reason, Ira Stoll recently recounted the company's sheer size:

It seems almost quaint to think that a company specializing in bananas might have once been considered a capitalist giant on the level of today's firms, but so it was -- at its height in the first half of the last century, United Fruit owned one of the largest private navies in the world. It owned 50% of the private land in Honduras and 70% of all private land and every mile of railroad in Guatemala.

The company's transformation of the banana trade was a key element of Peter Chapman's Bananas, which a New York Times article on United Fruit covered in 2008:

"[United Fruit was] more powerful than many nation states ... a law unto itself and accustomed to regarding the republics as its private fiefdom." United Fruit essentially invented not only "the concept and reality of the banana republic," but also, as Chapman shows, the concept and reality of the modern banana. "If it weren't for United Fruit," he observes, "the banana would never have emerged from the dark, then arrived in such quantities as to bring prices that made it available to all."

Today, "the banana is the world's fourth major food, after rice, wheat, and milk." But when a Brooklyn-born twentysomething named Minor Keith planted a few banana cuttings next to a railroad track in Costa Rica in the early 1870s, it was virtually unknown outside its native environs. ... Until its demise a hundred years later, United Fruit controlled as much as 90 percent of the market.

United Fruit was fictionalized in Gabriel Garcia Marquez's One Hundred Years of Solitude and managed to take part in multiple political uprisings and fiascos, including the "banana massacre" in 1928 Colombia and the 1954 Guatemalan coup d'etat. On both occasions, U.S. military forces intervened in Central America on the company's behalf. United reached its apex in the years bookending World War II, after Sam "Banana Man" Zemurray took the reins -- United Fruit's overextension before the Great Depression had jeopardized the wealth he'd gained from selling United his competing fruit company, prompting a takeover bid.

United Fruit became United Brands in 1970 and is now Chiquita Brands (NYSE: CQB  ) . The modern successor to the creator of banana republics is no corporate saint, either. Chiquita admitted to paying Colombian death squads nearly $2 million after its scheme was discovered in 2004. In some ways, the payoffs are United's fault -- its neocolonial policies helped engender the lawlessness and violence of many Central American nations in which bananas grow.

The Philip Morris empire splinters
The Altria (NYSE: MO  ) consumer empire began to break itself apart on March 30, 2007, when it spun off food giant Kraft (NASDAQ: KRFT  ) in a divestiture valued at roughly $46.1 billion. Each Altria shareholder received about 0.7 of a Kraft share for every Altria share they owned, which left Altria with a mere 11% stake in a grocery empire it had been building since 1985, when it acquired General Foods. Kraft itself has been around since 1903, but it wasn't until 1988 that it would become part of Altria (then known as Philip Morris), and ultimately combine with General Foods to create one unified supermarket titan with products ranging from Velveeta cheese to Maxwell House coffee.

With its spinoff, Altria set in motion a chain of events that would lead to its removal from the Dow Jones Industrial Average (DJINDICES: ^DJI  ) a year later, after which Kraft replaced it for a period of four years. The Dow actually traded down  in this instance -- over the five years that followed its divestiture, Kraft would gain 60%, but Altria grew 106%. The Dow, on the other hand, gained only 7% in that time frame, hampered by a deep crash that began later in the year of the Kraft spinoff. Kraft continued the chain of divestiture when it renamed itself Mondelez (NASDAQ: MDLZ  ) and spun off a new Kraft Foods Group to serve the U.S. grocery market. Mondelez retained the rights to international operations and to the company's more lucrative brands, such as Oreo, the world's most popular cookie.

Shares of Mondelez International fell immediately after it separated from its parent company, Kraft. Is this an indictment of the idea, or a buying opportunity today? Our top consumer-goods analyst will give you the scoop in our new premium research report on Mondelez. Just click here now for instant access.


Read/Post Comments (5) | Recommend This Article (17)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 30, 2013, at 11:55 AM, KevinniveK wrote:

    I've heard of them before

  • Report this Comment On April 02, 2013, at 6:12 PM, dennyinusa wrote:

    And yet we wonder why people in other countries hate us.

    How many people were killed, maimed or lives ruined in our name for these corporations.

    Yet we still allow corporations to rule our lives today, with their refusal to pay their share of taxes, their meddling in elections, social issues and their purchase of our government officials who are suppose to represent the people of this once great nation.

  • Report this Comment On April 02, 2013, at 6:55 PM, nerd51 wrote:

    Back in the early 1980s I worked on Telex networks which were used for international communications before the FAX machine or the Internet. One of our customers was Tropical Radio Telecommunications or TRT. They were a large international Telex carrier owned by United Fruit Company. They used communications as a competitive advantage. They had the best knowledge of banana prices.

    I have to agree with the last post though. It's horrible to think of the number of people killed to control fruit and sugar in Latin America. Now we just go to war, rig elections, etc.

    for oil mostly.

  • Report this Comment On April 02, 2013, at 11:37 PM, tomd728 wrote:

    There are many great enterprises in both Mexico and SA but one always has to be wary of currency adjustments which can seriously hurt the stocks price.

    If the prior posters are looking to pin terrible human abuse on the U.S. try going back to The Congo under the Belgian rule for criminality on a scale never seen since. This fact however does not mitigate human abuse by U.S. corporations in any fashion.

    "Heart of Darkness" Josef Conrad.

  • Report this Comment On April 03, 2013, at 3:11 AM, dennyinusa wrote:

    tomd728

    I did not claim the USA is responsible for all the human abuse in history; there are many countries in the race to see who can abuse and/or bully others for their benefits.

    What I was hoping was that stories such as this, help people understand why there need too many rules and regulations on corporations. They have proven time after time they cannot be trusted to do the right thing.

    If individual kills another human, normally someone goes to jail, when corporations kill people nobody is punished yet we all know someone made the call.

    I believe BP killed 11 people in the Gulf and the year before that I think there was 25 people at a refinery killed. Yet no one at BP has been charged with anything. Somebody made the calls that lead to these deaths. If you want to be paid 20 to 30 million dollars a year, I believe that person is where the “Buck” is supposed to stop. They set the tone of what is acceptable. If you want to be paid like all the success is because of yourself you must also accept responsibility when something goes wrong.

    I also believe many Americans never give much thought to the fact that their bellies are full, their car has gas or that their house is warm in winter and cool in the summer has had an adverse affect on many people’s lives around the globe.

    Do they really believe the Iranians just woke up one day and decided to take Americans hostage? Or do they dig deeper to find out that UK and USA governments at the request of oil companies interfere with who was in power in Iran. The operation saw the transition of the Mohammad-Reza Shah Pahlavi from a constitutional monarch to an authoritarian monarch who relied on USA support to maintain power. This was done because others in the government wanted to nationalize oil industry because UK oil companies were vastly under paying for rights to oil.

    So basically anyone killed or tortured at the hands of the Shan is the direct results of actions taken by our governments. That means their blood is on our hands whether we want to admit this or not. Many people turn a blinds eye to actions of our government, but I do not think people in other countries see us as innocent in our government’s actions. We did elect them. .If you want to read what happened search Operation TPAJAX.

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