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 . 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 consumer empire began to break itself apart on March 30, 2007, when it spun off food giant Kraft 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 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 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.

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The article The Most Powerful Company You've Never Heard Of originally appeared on Fool.com.

Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter, @TMFBiggles, for more insight into markets, history, and technology. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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