26 May 2008, The Guardian

A supermarket banana price war has broken out and been widely condemned by overseas aid charities. Asda triggered the battle when it cut the cost of a kilo of the fruit from 77p to 72p last Wednesday. Tesco and Morrisons followed suit the next day and Sainsbury's, which sells only Fairtrade bananas, matched the 5p reduction 24 hours later.

'The volume of bananas on the market tends to increase at this time of year as growing conditions are at their best,' Simon Jackson, assistant manager of banana importer Nicholas Smyth told trade magazine The Grocer. 'With the start of the British soft fruit season and the arrival of Italian stone fruit, bananas come under a lot more competition than in winter. So supermarkets bring down the prices to keep them competitive.'

Prices of a typical basket of food have risen by 6.6 per cent over the past year according to the Office for National Statistics, the highest rate since 1997. Mysupermarket.co.uk, which analysed a different basket of goods, puts the rises at nearer 20 per cent. The cost of staples such as pasta and rice have risen most sharply, by as much as 80 per cent, while wholesale banana prices are 20p more a kilo than a year ago.

However, aid charities are concerned that overseas workers are losing out. A spokeswoman for the Fairtrade Foundation said that the banana price wars would 'have a devastating effect down the supply chain, putting pressure on suppliers and ultimately contributing to the poor treatment of plantation workers in the developing world'. Jenny Ricks, a campaigner for Action Aid, agreed, adding that the price war could be the beginning of a dangerous spiral of cost-cutting on the price of bananas.

'The issue of rising food prices is a concern for consumers but if a supermarket drives its supply base into the ground it is not providing a sustainable food source for its customers,' she said. 'There is a limit to how hard they [the supermarkets] can drive these bargains.' Asda was quick to defend its price cuts, saying that its growers were 'absolutely not missing out.'

'With the credit crunch starting to hit people in the pocket, we're bending over backwards to keep our customers' weekly shopping bill as low as possible,' said an Asda spokesman. Bananas are not the only product being targeted by supermarkets in a bid to reduce prices. Tesco recently announced that it was adding another 1,000 promotions, reduced prices, 'extra free' deals and bogofs (buy one, get one free), in store, claiming that takes the number of its current promotions to 9,000, the most in its history.

Marks & Spencer, meanwhile, launched a 'dine in for two for £10' advertising campaign last week in a bid to address the squeeze on its customers' pockets. The supermarkets' tactics come amid increasing evidence that rising food prices and other household costs are causing householders to change their shopping habits.

Discount supermarkets Aldi and Netto are both attracting more affluent shoppers who may previously have overlooked such stores.

Aldi says the number of people through its doors has increased by 25 per cent in the last three months compared with a year ago, while Netto tripled its operating profit last year. Both stores say the most dramatic change has been the increase in affluent, or ABC1 profile, customers. The Observer revealed last week how middle-class Britain is suffering under the strain of debt. Community Money Advice, a charity that helps establish and support money-advice services across England and Wales in affluent areas where there are no Citizens Advice bureaux, revealed an 85 per cent increase in people seeking help in the last year, with big increases in Tunbridge Wells (up 234 per cent), Cambridge (55 per cent) and Horsham (48 per cent).

Further evidence of this 'middle-class squeeze' emerged yesterday as research from the Financial Times showed that the number of people searching for camping holidays has trebled since the beginning of the year, while searches for 'villas' has halved. This is an exact reversal of the popularity of the two searches at the beginning of the year, when price rises had not been fully felt. Gumtree, the classified advertising site, also said it has noted a 300 per cent increase of postings of people buying, selling and renting out caravans and camper vans on the site since last summer, while further data obtained from internet trawls on behalf of the FT showed a sharp jump in the number of searches for money-off vouchers.

Source: guardian.co.uk