Fresh Fruit Portal publish opinion piece by Banana Link's International Coordinator, Alistair Smith: 'Since the declaration of ‘war’ on U.K. banana prices by Walmart subsidiary Asda 10 years ago, very low banana pricing has become a feature of the British market – a very unwelcome feature indeed for all those involved in supplying the U.K. market. But most of the 60 million consumers who buy bananas every week cannot even quote the price they have paid for their bananas as they walk out the store. This is just one of the paradoxes posed by Britain’s favorite fruit.
That the price of loose bananas in the big four U.K. supermarket chains has been at just US$1 per kilo almost all year and that Fairtrade labeled fruit from the highest cost producing countries are sold at this same ‘everyday low price’, are facts that simply pass most consumers by.
The Colombian and Panamanian workers earn close to a living wage because of good industrial relations between trade unions and employers in the industry, and that such decent work has now come under threat because costs have risen and prices paid to growers haven’t matched the rise is simply not well known, other than to the ethical trading managers of a couple of retailers.
Bananas stripped of value
Almost nobody along the chain is making money on bananas sold in the U.K. The one exception that proves the rule seems to be the biggest banana importer and ripener, Fyffes, which just recently declared another set of profitable results. The Irish fruit trader has not only managed to remain consistently in profit, against the industry trend, but has also secured over a third of one of the largest – and fastest growing – banana markets in Europe.
The other multinational fruit companies meanwhile, have reduced their activity: Chiquita even exited the U.K. completely a few years back, although the company is now back but with lower volumes.
In Germany, the only banana market in Europe that is bigger than the U.K., prices in the major supermarket chains have been consistently 25-30% higher than in the U.K. in 2012. The same is true in the big U.S. chains, whilst in France, banana prices are 40-50% higher on average than across the channel. In both the U.S. and France, retail margins remain very substantial; CIF and green wholesale banana prices are also much higher than in Britain.
The trend of the last three years amongst big U.K. retailers has been to bring banana sourcing ‘in-house’ so as to take as much control as possible of all costs back down the chain: Tesco’s Global Food Sourcing, Asda’s wholly owned International Produce and Morrison’s Global Pacific are now sourcing directly a very substantial proportion of their volumes from ‘cheaper’ nationally owned banana producing companies in South and Central America and the Caribbean.
This trend, similar to the trend Stateside, has had a considerable impact on the oligopoly of the big five international banana companies, who now account for less than 70% of the global trade, compared to over 85% in the 1990s.
In short, as consumption has continued to rise steadily, big retail, led by Asda/Walmart, has completely stripped almost all value out of the one million ton U.K. banana market. The danger is that this decidedly suicidal model could spready to other European markets. Is it desirable that only the big and ruthless producer companies operating with the most productive soils and exploited workers will survive?
The consequences of a decade of futile price wars on producers and their employees in the plantations and packhouses have been a major bone of contention in the industry, regularly making news in the trade media and national newspapers. Costa Rican workers and their unions, for example, have been given air-time to explain why they see themselves as the prime casualties in the U.K. tropical fruit price wars: the ‘weakest link’ in the chain that takes much of the heat from the top back to the bottom of the chain.
Despite denials from retailers that such radical cost-cutting reaches back to workers’ wages and everybody’s margins, there can be no doubt that ‘everyday low prices’ have kept down prices paid to growers and therefore wages to their workers. Meanwhile, the higher social and environmental standards to which almost all U.K. retailers are committed have become an absolute requirement for all suppliers to the U.K. Improvements are meant to be paid from prices which, in the main, simply do not reflect the costs of sustainable production, living wages and low environmental impacts.
So what does the future hold as the U.K. market reachers breaking point? A fortnight ago, Colombian Fairtrade-certified growers, who provide nearly one in 10 bananas eaten in Britain today, told their upstream trading partners that if there was no price increase in line with rising costs of production and the cost of meeting high Fairtrade standards, they would be forced to cease selling as Fairtrade from the new year.
Something – or somebody – has to give, otherwise the geese that laid the golden eggs will simply find themselves strangled by anti-human, and ultimately anti-economic marketing practices.
Opportunity to tip the balance
At the nexus of every crisis though is both danger and opportunity, as the Chinese symbol for ‘crisis’ reminds us. The potential for rapid change exists, especially as annual price negotiations are taking place at a time when some of the country’s leading grocers have just led prices back up to nearer U.S. and German levels and have not deterred – at least not at the time of going to press – by leading price warrior failing to follow their lead.
A look at the U.K. government’s latest banana import statistics suggests some fascinating trends, referring to table published below as attachment:
1 – In 2012, Dominican Republic exports were affected by a major outbreak of black leafspot disease and alleged pesticide residue problems. German authorities stopped shipping of organic fruit, but the alleged problems were proven to be false.
2 – This represents Cameroon, the Ivory Coast and Ghana taken together
3 – This positioning includes an estimate of the indirect imports via Benelux ports into the U.K.
4 – This represents Saint Lucia, Dominica and Saint Vincent & The Grenadines taken together. The volumes exported in 2011 were the smallest ever and were greatly affected by the devastation of Hurricane Thomas in late 2010.
Could it just be that a combination of the consumer pressure that has created the world’s leading Fairtrade and Organic banana market, and the genuine efforts to source more ethically by some British retailers, leave the market poised to take a quantum leap from value-stripping to value enhancement?
Are we about to see the emergence of a more equitable distribution of the benefits along the chain, starting with the plantation and packhouse workers themselves? Can it be a complete coincidence that the source that now supply less than last year are those where the wages and standards of worker protection are some of the lowest? And that the producing countries where the industry is closest to providing decent work and where a Fairtrade minimum price prevails for many of the suppliers to the U.K. market are among those whose sales in Britain have increased substantially?
Tipping the balance may yet leave struggling Caribbean banana farmers on the sideline, or completely put off the market as they battle with climatic injustice and the arrival of the dreaded black sigatoka disease. Britain’s historic banana trading partners, who supplied two bananas in every three consumed in the U.K. just over a generation ago and now barely one in a hundred, should seize the opportunity inherent in the paradoxes that have plagued this very particular market.
Other considerations aside, if only large-scale monoculture plantations end up supplying the U.K. market, the chances of the trade surviving a new disease wipe-out of commercial bananas are pretty close to zero'.
Read article on Fresh Fruit Portal.