Dutch chain Jumbo joins banana price wars

e-mail icon

The damaging British banana price war has spread, as Banana Link predicted, to continental Europe. Although the second biggest supermarket chain in the Netherlands refuses to accept that it started a price ‘war’ on bananas, all the signs are there. When Jumbo cut the retail price of its conventional bananas late last year to 99 euro cents per kilo, fears that generalised price-cutting could start destroying the value of this already cheap product were confirmed. Other chains like the No.1 Albert Heijn reacted by matching the Jumbo price on part of their range. Other chains also followed suit.
Jumbo defends itself in the face of criticism by claiming that this is a fair price and that producers are not receiving any less. Although the chain did not cut the price it paid to suppliers when it cut the retail price, the fact remains that its suppliers will not be in a position to raise the price they receive when contracts are renegotiated. The British supermarkets have always claimed that their low retail prices for loose bananas are not at the expense of producers or workers, but they have never satisfactorily answered the key question about the power imbalance in price negotiations with suppliers. The power of a company buying tens or even hundreds of thousands of boxes per week to keep the price it pays down is, of course, very substantial indeed. Even a multinational company finds itself in weak bargaining position with a customer of this size. Workers at the beginning of the chain, who tend to be the ones who pay the price of cheap bananas, have no say in such negotiations.
The fact that most consumers do not buy more bananas because they are cheaper is another argument that the retailers have never answered. A recent survey commissioned by Fairtrade Foundation reveals that only 7% of shoppers realised that banana prices had fallen. The vast majority thought that prices had risen, or simply didn’t know. The Foundation notes:

We found that consumers overwhelmingly want those who produce our bananas to be treated fairly. 84% said that they would pay more for their bananas if they knew the extra money would benefit farmers.  Of course, UK consumers want a good deal. But they don’t want this at the expense of producers, and they want bananas to be grown in an environmentally sustainable way.

According to Hans Maagendans, owner  of Netherlands ripening company, Banafood Services, "the fierce competition is affecting everyone in the sector. The price fixes introduced last year have had a huge impact on free-market trading. The first six months of the year are generally a good time for bananas; they’re sold at a good price. So if a supermarket still offers them for 99 cents, it offsets the market tremendously....Over here, things are crazy. Nobody is making any money. The only winner is the consumer.”

Are Dutch consumers so price-conscious that they will notice?  To make matters worse, Jumbo has stated that it put the price down for good and will even give consumers bananas for free if they find them cheaper elsewhere. This is one step further even than the UK’s price-matching gridlock.

Until such time as retailers realise that destroying value in the banana chain makes it impossible to deliver real sustainability and customer satisfaction, how much more downward pressure are producers and workers going to have to put with? And how many more livelihoods are going to be undermined?