Aldi extends new sourcing model to pineapples

Franka, it’s been just over a year since Aldi announced its new banana sourcing strategy and its commitment to building a fairer and more transparent banana supply chain by connecting buying and corporate responsibility. Now, you are doing the same with pineapples, where workers face a similar plight to those in bananas. Has your banana strategy served as a template for pineapples? Or have you had to make many modifications based on the differences in that supply chain?

Franka Rodriguez: A major factor for the success of our new banana sourcing approach has been the involvement of our business partners in the design and implementation process from the very beginning. This meant that we searched what is most needed by suppliers and producers to support sustainable banana production, listened to their concerns, and took into account the proposed measures.

Ultimately, the key ingredient as to why this approach has been so successful and well received is the fact that this is not just a sustainability concept or a commercial initiative – it is an approach that has been developed jointly by our buying and sustainability experts to make sure we are implementing a lasting, sustainable and effective solution to help address the key issue in the banana supply chain as reported in the media, the negative price pressure we have seen in the past years. From our perspective, the critical issue in the past was a lack of cooperation and transparency, which are issues we successfully overcame in our best practice sourcing model.

Our new banana sourcing approach clearly showed us the possibilities that are created when incorporating more responsible purchasing practices into our sourcing. This is why we believe it can serve as a template not just for other Aldi supply chains but also for other retailers to follow.

Similar to the process of designing the banana sourcing approach, we collaborated with our key partners to understand what was most needed to promote sustainable production of pineapples. Once again, we used a multi-departmental approach to implement the most impactful responsible purchasing practices. We also realised that a deeper understanding of the value chain steps and costs of production were keys to mitigating a negative price pressure. This clarity enabled Aldi to develop deeper partnerships and collaboratively work on high-priority sustainability objectives.

However, there are some differences between both fresh produce products. In the banana sourcing approach, we had the Fairtrade index to provide industry-wide best practice costs to produce the product sustainably. For pineapples, there is no public index available. It was, therefore, even more important to work with industry partners to design an annually adjusted cost of production index. We brought in an external service provider, who was instrumental in the creation of the Fairtrade banana index, to facilitate the creation of a new index which would enable the new pricing mechanism of the new pineapple sourcing strategy.

What would you say have been the biggest challenges you have encountered so far?

FR: A key challenge we faced at the very beginning was the need to establish trust between all supply chain stakeholders involved. Engaging with all of our strategic suppliers and further actors in the banana supply chain was essential, and we used organisations like the World Banana Forum to do this. Building a direct relationship with producers in Latin America was vital to address this challenge in a way that enabled us to devise an approach that was truly sustainable. Through this engagement, we were able to establish such an approach, and to financially invest in our commitment for the creation of a real and positive impact in the banana supply chain.

With the internal business buy-in and full support for this new approach by our management, we provided credible solutions to these concerns, which enabled us to address these challenges head-on. Now, it is our responsibility to continue listening to our partners, to keep making sure the approach is providing them with the support needed for a sustainable production, and to assess how we can best scale this positive impact.

It is also essential to mention that our efforts are not enough if suppliers and local governments do not fully commit to and support sustainable food production and workers’ rights.

Most of Europe’s pineapples come from Costa Rica, where there have been a number of well documented cases of worker abuse. Are you sourcing bigger volumes from other suppliers since switching to your new policy?

FR: Aldi always takes its sourcing decisions carefully and considers a variety of factors to strengthen the resilience and sustainability performance of our value chains. In the fresh pineapple supply chain, Aldi is currently working on the implementation of responsible sourcing practices. We are monitoring the market to ensure that supply chain resilience and risk diversification are maximised.

Costa Rica is one of the largest pineapple growing countries in the world, and many players in the industry have invested heavily to strengthen the country’s competitiveness. We only source our products from our strategic partners, with whom we have long-standing relationships and who are able to meet our highest sustainability standards. We want to increase transparency in the supply chain and work systematically with these partners to mitigate potential sustainability concerns.

Greater transparency is a key objective of Aldi’s new strategy. Can you provide examples of how you are applying this in the case of pineapples?

FR: There are no better examples than cost transparency and supply chain transparency.

Regarding cost transparency, at Aldi, we seek clarity on the true cost of production of its fresh pineapple product. To achieve this, we are working with our partners to get transparency on the costs involved in each part of the pineapple production process. Like the banana model, regular price reviews in collaboration with our partners will be conducted to ensure the costs adequately reflect changes in market and value chain conditions.

Supply chain transparency lies at the heart of our approach to due diligence. Aldi is working with key stakeholders to map the pineapple supply chain to better understand the route taken for the product to arrive at our stores. Armed with this information, we will be working to build stronger partnerships with supply chain partners and promote industry-wide sustainability changes.

What progress have you made in the last year with the implementation of your banana sourcing strategy?

FR: A lot has happened in the last year. We went from months of developing a blueprint for our new sourcing model to putting it into action at the start of 2023. When making our commitment public during 2022, we received a lot of praise from stakeholders who have been among our harshest critics in the past. This was reassuring and motivated us even more because we are aware that the Aldi banana price is often viewed as a reference in the industry. Now, almost one year into implementation, we receive feedback in global forums that our pricing model can be viewed as best practice.

We see stakeholders across the banana world experiencing first-hand the tangible benefits of our approach and asking other retailers to follow Aldi’s positive steps.

For our strategic partners as well as producers, the longer-term partnership we offered has provided them with increased sourcing and planning stability. This enables more investments in activities that benefit workers and the environment. After a successful implementation in 2023, preparations are taking place to ensure we can soon buy all internationally purchased bananas using this best practice model, and I am happy to report that we are on a good track here.

When you spoke to us last year, you highlighted the need for all stakeholders in the industry to work together to make the banana supply chain more sustainable. Would you say things have moved on in a meaningful way since then?

FR: What we have seen in the banana supply chain is indeed a closer, more effective collaboration among key stakeholders. The World Banana Forum has been instrumental in bringing all relevant stakeholders to the table, and organisations such as IDH and GIZ have not only brought retailers from different countries together in groups to join forces. These groups are also collaborating internationally towards more sustainability in the banana supply chain, first and foremost on the topic of living wages.

In addition, we have received interest from multiple groups, including competitors, on how we are implementing more responsible purchasing practices. These are generally seen as enablers for sustainability in the supply chain, and we hope that we can support other retailers in adopting these or similar measures in their banana supply chain.

Supermarkets continue to use bananas as loss leaders ­– just a few weeks ago, Aldi UK announced that it was cutting the price of a Nature’s pick pack of seven bananas from £0.92 to £0.88. How do you square that with arguing against a so-called “race to the bottom”? Doesn’t this make it less likely, rather than more likely, that other retailers will follow your lead in adopting a fairer pricing strategy?

FR: One of Aldi’s goals is to offer a large option of sustainable products at an affordable price. Currently, our customers are facing a challenging financial situation due to inflation, political issues and more. We always strive to absorb higher costs in the supply chain through more efficient operations and supply chain management to be able to offer the best prices to our customers.

In April of 2023, Aldi announced the successful completion of a pilot project to understand worker-led living wage verification. Why was this project important, and what has it taught you?

FR: On our journey towards living wage bananas, we soon realised that this is only feasible when there is accurate data, both for determining potential gaps in living wages for workers as well as for verifying those payments. In our efforts to understand how living wage verification can be incorporated into existing auditing processes, we also wanted to assess additional options.

As a result, we discovered that directly affected workers, as well as worker representatives, were insufficiently involved. We, therefore, partnered with Banana Link and key strategic suppliers to develop and implement a pilot to link both these efforts. On three different banana farms in Latin America, we supported capacity building and training pilots for all local stakeholders so that worker representatives, together with farm management, could assess and verify any living wage gaps.

This was a very successful joint effort, which clearly showed the value of involving workers in this process and highlighted the key benefits of establishing such a local verification method.

What products are next in your sights?

FR: After our most recent successes, we feel confident that we will be able to roll out sustainable purchasing practices to other fresh produce categories in different continents, and we are currently evaluating our next steps.

Unfortunately, I can’t tell you more details since we are in the very early stages of the process. Hopefully, I will be able to share a positive update regarding our new commodities next year.

Are there any other developments in your sustainability strategy relating to fresh produce that you’d like to share?

FR: We are continuously working to strengthen environmental and human rights in our supply chains. Together with our partners, we are addressing key issues across fruit and vegetable supply chains, and our buying and sustainability teams are cooperating closely to ensure a joined-up approach on all these aspects.

In the future, we want to go beyond our current efforts and address topics related to human rights, the environment, agriculture, food waste and packaging within our fresh produce supply chains.