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Banana Wars Shift from Fruit Multinationals to Big Retail |
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April 2007
UK subsidiary of Walmart has done it again! For the fourth time in as many years, the world's biggest company has launched a retail price war over the humble banana, in a bid to get its competitors' customers through it doors. In the space of a week in mid-April they cut a full 20% off retail prices, indefinitely according to some sources.
Just when we thought that the world's biggest retailer had finally understood that cutting banana prices in their stores is bad news for plantation workers. As on every other occasion, Tesco and Sainsbury followed suit the next morning. "The banana is too important to us not to follow them down", said one buyer. According to the big retailers it's one of those KVIs - a Known Value Item - a basic everyday product to which the consumer is very price-sensitive... supposedly. Last time a survey was conducted in the UK, two shoppers in three could not quote the price they'd just paid for the bananas in their trolley!
Despite Asda/Walmart's reassurances that the price cut will come out of their margin this time, what happens next time they and their competitors who've been forced to slash their margins go to negotiate the price with their banana suppliers. Between 2002 and 2003, as a result of the first Asda-Walmart-led banana price war, Tesco - the main competitor and No.1 in the market by a long way - cut the price it paid suppliers by over 30%, exactly in line with the retail price cut. Banana Link research with plantation workers and their unions at the beginning of the UK's banana supply chain shows that the series of price cuts have coincided with reduced real wages, longer working days and more insecure employment. Even before these wars, workers had to put up with harsh conditions, non-living wages and heavy pressure not to join a union or have even their most basic rights respected. Since, things have got worse. The link is confirmed by one supplier plantation: "At least 40% of our financial troubles can be attributed directly to lower prices from our UK buyer"; another stated "we - our company and our workers - are the ones paying the cost of your price wars".
"We're outraged," said Mireya Rodriguez, a trade unionist who met with company buyers and technicians a month before the cuts to discuss measures to improve wages and working conditions for the plantation workers she represents in Costa Rica. "I really thought they'd understood the link between their price wars and our working lives, but it seems it went in one ear and straight out the other! Another big price cut like this is bound to affect us."
However, there's another side which may help to explain why Asda/Walmart was prepared to sacrifice its own margin this time, explains Alistair Smith, International Coordinator of Banana Link, which has kept the profile of these price wars and their consequences for workers in the media: "The success of Fairtrade bananas shows that British consumers do not want workers in producer countries paying the cost of our cheap food. The Asda move can be seen as a vindictive response to its competitor Sainsbury who announced a shift to 100% Fairtrade bananas in December, taking a margin hit on the way. Knowing that their competitors would feel obliged to follow, Asda calculated that it makes business sense to provoke a slashing of a competitor's margins and hope that this will stop Sainsbury reaping the benefits of a popular move with consumers by converting 16% of the UK banana market to Fairtrade."
Whatever the case, it's retail suppliers and their employees who are paying the price of cheap bananas, even when those retailers are major agribusinesses.
Article by Banana Link. For a copy of detailed study of the impact of retail buying power on Costa Rican banana workers, read Action Aid's latest report, 'Who Pays? How British Supermarkets are Keeping Women Workers in Poverty '
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Bulletin |
Banana Trade News Bulletin
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The new issue of Banana Trade News Bulletin provides a comprehensive guide to the latest developments in the international banana trade.
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Current Campaign |
Decent Work, Decent Life
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The Decent Work, Decent Life campaign aims to build an international system of employment policy, based on solidarity and respect for people’s rights. Click on the image to read more on the Decent Work, Decent Life website.
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