Only last week, Fyffes warned that consumers should expect to pay more for their banana for the foreseeable future. Try telling that to the UK supermarket chains, who continue to maintain their prices at around 77p a kilo, come hurricane or high water.
When unveiling his group’s latest financial results, Fyffes chairman David McCann admitted he could see no short-term end to the need for price increases. He also said that pricing discussions with retailers have become a “permanent dynamic”, which could be seen as a diplomatic way of saying we keep asking for more money and they keep wanting to pay less.
But the discounters are eating into the market, bananas are under constant scrutiny from price-watchers keen to jump on perceived supermarket greed, and the big chains’ bosses keep telling their customers not to worry - prices will continue to fall. So, no pressure then.
The halcyon days of £1.08 a kilo are seven years ago and, while suppliers might have got the itch to see them magically re-appear, the big four are about as likely to budge from their common stance as that US bulldog in lipstick Sarah Palin when faced with a Russian invasion. As one British insider says: “Anyone who says this is not the behaviour of a cartel is kidding themselves.”
More than one counterpart is happy to anonymously accuse the supermarkets of dropping quality specs significantly, to hit the price points they deem competitive and necessary. “Second-class fruit is becoming the norm, both loose and in value packs,” said one. “If consumers were canny and shopped the banana category properly at the moment, they would definitely see that there is more value in loose than in pre-packs at the moment.”
The 15 per cent price differential that existed between loose and pre-packed fruit not that long ago has virtually disappeared - with one company’s figures showing bananas at 12p a finger in both sub-categories. “If you’re in this category at the moment, you have got to fight your corner,” said one source. “But the reality is, you’re going to have to take a big hit. We all are.”
Another adds: “Everyone is trying as hard as they can to pump cheap fruit through the market, and is being asked to do so by their customers. We are returning to the old days of supermarkets trading product without worrying too much if it is gold plated.”
The reality, as the trade has said for years, is that since the category began to devalue itself, sales have plateaued. “The category is so fragmented; everyone plays around with their offer, but it makes no difference. There is some substitution between segments, but overall, sales are more or less static.”
Marks & Spencer has long since abandoned its attempts to show the ethical way with a 100 per cent organic banana offer. The consistent weather issues in the Dominican Republic, and a lack of sufficient availability from elsewhere, made the choice to backtrack from the initial ideology inevitable. Sainsbury’s may not be outwardly regretting its move down the Fairtrade route, but it is not hard to envisage how much additional cash is being spent in pursuing that particular channel this year.
Supplier-wise, the changing of the guard continued as Del Monte lost another chunk of its banana business, with Morrisons. It is not officially known who will take that business on, but the rumours suggest Fyffes and Chiquita might have a say. Fyffes, after a few difficult years, is building up a considerable position of banana strength again in Britain, with one industry veteran venturing that the Fyffes share of the retail cake would sit at close to 40 per cent if the business has gone its way. The demise of Del Monte, whether enforced or strategic, has been a rapid affair. Another development to watch is the proposed Dole sale of JP Fresh to Compagnie Fruitière, which theoretically should considerably strengthen the two companies’ banana businesses.
And Mack has made a major sourcing move into Colombia, from Costa Rica and the Caribbean islands, to increase its Fairtrade capacity and spread some of the risk of Hurricane induced shortages.
Supply-wise, the quarter has of course been dominated by the three stooges, Gustav, Hannah and Ike, the tropical storms of varying severity that have raged through parts of Central America and the Caribbean islands, wreaking a depressing amount of havoc as they went.
Jamaica Producers Group, which accounts for the large majority of the Caribbean island’s banana exports, said Gustav destroyed more than 70 per cent of farms in Portland, St Mary, and St Thomas - three parishes producing the crop. And the Dominican Republic has been badly hit by flooding brought on by Hurricane Ike, with an estimated 628 hectares of bananas wiped out in the San Cristòbal and Cambita regions.
“Everyone is looking at the Dom Rep and Jamaica and wondering what’s going to happen next,” said an importer. “There is no shortage on the UK market for bananas per sé, but the major issues are with Fairtrade and organic availability, as all other sources are pretty much on track. There is a 40-50 per cent shortfall from Jamaica already, and that can only get more pronounced in the next few months.”
DUQUE CHAMPIONS ORGANIC CAUSE
After six years working in the Proexport Colombia London office, I have got to know all of the fresh food sectors very well, writes Astrid Duque, who this month became the UK representative for Colombian organic banana exporter Daabon Organic.
As a consumer, I believe strongly in the organic industry and when I talked with Daabon, I realised that their way of doing business is very attractive to me. The company is owned by the Davila family, and Alberto Davila, who is in his 70s, was voted personality of the year in Colombia this year, for his commitment to sustainability and social responsibility. He is a truly inspirational man.
Daabon Organic is based in La Samaria, near Santa Marta at the north-west tip of Colombia. We are the leading grower of organic products in South America and already export more than one million boxes of organic bananas to Europe each year. We have 670 hectares under production this year, and our expansion programme will see that extend to beyond 1,000ha in 2009.
Strategically, Daabon’s growers are extremely well placed. The Sierra Nevada de Santa Marta provides a unique ecosystem rich in fauna and flora. The mountains offer our plantations good protection and we are not subjected to extreme weather patterns. Our volumes have been affected by rain in the last month, but not to the extent that the hurricanes have affected Jamaica, Honduras and the Dominican Republic in the last few weeks. We also don’t have the logistical issues that affect banana exporters in Ecuador, for instance. For these reasons, we are beginning to see a switch in attitudes, and more buyers are looking at Colombia as an opportunity to reduce the risk factor in their supply base.
We have all read in the UK media over the last couple of weeks that consumers might move away from organic foods during the current phase of the economic cycle, but we are seeing a huge amount of interest from buyers, including from the UK - and we expect to continue to expand. Although we may sound quite big, 1,000ha is not that large in the banana industry and we want to develop our UK business through traditional importer channels.
Daabon Organic has already had a phenomenal social impact on the region of Colombia in which it operates. The philosophy of the Davila family is to farm in a socially responsible and environment-friendly way; not because the market demands it, but because that is the right way to do things. We strive to support our local communities in Colombia and allocate a percentage of our FOB export value to fund social projects in Santa Marta. This is one of the only sources of income for the local communities of the Sierra Nevada. All family members of these indigenous communities and local farmers participate in the harvest and therefore in the benefits produced, thus improving the social conditions of people in this region.
The group has also expanded into La Guajira, to the north east, and through the Fairtrade marque, we have begun to make a similar impact there. Many of the people of the region were previously growing illicit crops, and Daabon has given them the opportunity to farm in a sustainable and profitable manner. Fairtrade has been very positive for La Guajira and we hope to continue that well into the future.
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