With the European banana market arguably at its lowest ebb for decades in terms of demand, it came as a surprise to find a 1.9 per cent increase in shopper purchasing frequency (Kantar Worldpanel, 52 w/e 3 October 2010) evident.
Insiders in the banana trade have always been adamant that ongoing banana price wars do little to tempt consumers to buy bananas and simply put pressure on the supply chain.
But before we stick “press gang” tickets in our hats and declare a success for the price war-mongering slashes seen at retail level of late, a closer inspection of the figures tells a different story.
Kantar figures for the 12 weeks ending 3 October 2010 compared to the corresponding 2009 period reveal that bananas’ share of fruit expenditure actually fell from 14.5 per cent to 13.9 per cent, losing out to top fruit in particular.
Significantly, market penetration has actually fallen by 1.2 per cent to 88.2 per cent, meaning fewer people today are buying into the category.
When penetration falls backwards, analysis has shown that it is typically the less frequent buyers leaving the category and this subsequently has the impact of lifting the average frequency of purchase, hence the increase that Kantar has shown. The low prices are not driving new customers to the fixture, the numbers suggest the reverse.
One insider tells FPJ: “In the past two years, we have started to see a pattern emerge - in the run up to Christmas, the price will increase as retailers look to protect their sales and like-for-like numbers as demand drops off. Post-Christmas, one chain will announce a roll back and we’ll go back to the usual round of price cuts.”
The figures would certainly bear this out with a considerable drop in expenditure in December 2009 before a pick up the following spring.
Dole Fresh UK marketing director Giles Shapley says: “You are seeing purchasing frequency increases in the banana sector but it’s not just about banana pricing, it’s a reflection of all fruit pricing. Other sectors have seen significant increases so bananas have become more attractive.
“Bananas are incredibly cheap at the moment, even with lower prices on the shelf you would not see any increase in take up. The truth is, the vast majority of consumers do not know the price of the product.
“Where you have a market that is smaller like, say, blueberries then supply can really dictate price and subsequently purchasing patterns. But in bananas, there will always be sufficient volume. The UK is an incredibly rich market and the retailers will always make sure the shelves are full.”
Shapley believes developments in the make up the banana offer on shelf are intriguing. He says: “It is interesting that the share of loose and pre-pack levels have flattened and there’s a shift from the standard pre-packs to higher value, smaller products and lower value economy packs. In truth, many of these are significantly more expensive than the benchmarked loose price, further reinforcing the fact that the number of consumers who know the true price of bananas is negligible.
On the international market, times remain tough. Fresh Del Monte Produce has reported a difficult third quarter of 2009, with net income falling to $14.5 million from the $28.6m recorded in the same period last year. However, there was good news for its UK operation last month as the company posted a pre-tax profit turnaround, recording a figure of £2.9m in the 53-week period to 1 January 2010, as opposed to a loss of £1.3m for the 52 weeks to 26 December 2008, according to accounts filed at Companies House.
Chiquita has struggled of late, slipping to a net loss of $8m in the third quarter of the year, down from the $5m profit recorded in the same period of 2009. Net sales for the three-month period fell eight per cent to $730m, mainly due to lower volumes in retail value-added salads and bananas. Fyffes’ last report, in early September, revealed that pre-tax profit fell 28 per cent through the first six months of 2010, down to €13.1m from the €18.1m recorded last year.
Further worrying signs were manifest for Dole and Del Monte’s operations in Costa Rica. Both have closed facilities recently as a result of higher operational costs caused by the drop in value of the dollar.
There is no mistaking it is a tough banana game at the moment at all levels of the supply chain.
SUPPLIES UNDER PRESSURE AFTER CARIBBEAN HURRICANE WREAKS HAVOC
Last week Hurricane Tomas swept through the Caribbean, tearing apart banana farms in the region. Alex Lawson looks at the short- and long-term prognosis following the natural disaster.
The devastating effects of Hurricane Tomas are wide ranging and could see large UK retailers struggling to fill shelves with Fairtrade bananas.
Sainsbury’s, Waitrose and The Co-operative all trade heavily in Fairtrade bananas and the natural disaster - which wiped out banana production in St Lucia and St Vincent after the hurricane swept the islands - could well affect supplies.
It is thought that production will be at zero for at least six months and problems with infrastructure mean it is more likely to be around nine months.
British authorities out there are helping with the relief efforts, however, problems on the roads with telecommunications and with water damage have severely hindered trade in the region. Ports on the islands have been relatively unaffected by the disaster.
Most suppliers have comfortably been able to make up for the shortfall in the short term, however, there are fears that the deficit could be felt in the new year.
The prime minister of St Vincent and the Grenadines, Dr Ralph Gonsalves, put total damage in agriculture at an estimated EC$67 million (£15.4m). He said 2,180 acres of bananas, with a value of EC$22.2m and EC$14.4m-worth of plantains on 1,242 acres have been wiped out and promised to support producers’ incomes as well as replanting for the next seven months at least.
The government of St Lucia has declared a general state of emergency for the entire island as all water lines have been ruptured and main water pipes are broken.
The Windward Islands Farmers’ Association has been unable to have a board meeting due to access damage but early assessments concur that production has been all but wiped out.
Bernard Cornibert of Winfresh said: “We have been able to secure supplies from other areas so it has not hit us a great deal as a business but the problem is that the rest of the infrastructure is so damaged, not just the banana producers, so it will take some time for them to get back up and running.”
Supplies have been sourced from the Dominican Republic and it was not badly hit by the storms but there are fears the source could see further effects in future. One exporter in the country reported last Friday: “Volume has dropped as a result of sporadic showers and cloudiness throughout week 44. Yesterday and today, some farms stopped harvest because of heavy rains and lack of access to fields while others are packing at a very slow pace.”
Last week, loading of a Geest vessel was completed with difficulty and rain interruptions, while NYK Cool’s ship was delayed by a day due to the weather.
Long term, fears that the leafy spot disease Black Sigatoka could take hold are spreading. One exporter said: “Looking ahead, we have concerns that these constant weather conditions will seriously be aggravating the Sigatoka problem, which has already been present in the Dominican Republic for the last couple of months.”
A large UK supplier told FPJ: “The problem is that there has already been torrential rain in the Dominican Republic so this extra rain really creates an issue with Sigatoka. It is already a seasonal problem there and is really hard to get under control because of the infrastructure. There has been rapid growth in the Dominican Republic’s exports in the last two years but, because they have so many small farms that are now closer together, problems with airborne spores are very real. They do not have the same number of spray planes as, say, Colombia and even if they spray, the heavy rain washes the fungicide away and the humidity encourages the proliferation of Sigatoka.”
Early reports from the Faitrade Foundation suggest it will be some time before supplies from the region will be back up and running for some of the world’s poorest banana producers.
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