They’re at it again. Prices on thousands of lines across the supermarkets have been slashed and there’s one item you can guarantee will be at cut price: bananas.
“Obviously Asda has pushed down the retail price to 52p. This has no bearing on sales whatsoever,” says one banana supplier. “The price could be 12p a kilo or £1.02 - shoppers do not look at the price of bananas. Sales have plateaued at around £610 million over the year but volume has been good in the last couple of months.”
“The supermarkets pick key staple products to fight it out on - they do the same on bread and milk. It’s tit for tat from the retailers, some of Asda’s cuts may be due to oversupply but mainly it’s because they just want to screw up Tesco’s figures.”
Insiders believe the price will rise by no more than 20p before Christmas, undermining the fact sales have been buoyant on both loose and pre-packed. It is likely sales could fall by five to ten per cent in the lead up to Christmas in keeping with seasonal demand.
Pre-pack sales are going up as all the retailers have both ‘Eat Me’ and ‘Keep Me’ ripe and unripe packs and signs are encouraging as these are in addition to, rather than instead of, loose product.
“At the end of January and into early February supplies will be fairly tight as South America slows down. Usually there’s no product or shipping in week one which would be due to arrive in week four,” a source says. “These shortages may push up the price. The thing is, growers will have agreed six month contracts so the supermarkets will take the hit short-term. The problem is they will then look and see they’ve lost money on bananas and the contracts will be poorer for growers when it comes to re-negotiating. At that point, from next June onwards, there will be more volume around anyway so fruit will be cheaper.”
Another source added: “The retail price cuts are ridiculous. If the supermarkets pay around £9 a box they are losing a minimum of £3-3.50 on each box they bring in. This has been reflected in the wholesale sector, as how can the independent retailers compete? We haven’t made any money at all in the wholesale market for bananas for months.”
The long-term future of the banana category at the forefront of produce sales is also in doubt. “There isn’t much innovation in the category. There’s only so much you can do,” says one insider.
“Del Monte tried something interesting with the single banana pack - it was a good product and it ate well - but it was overpackaged and with such a focus on the environment it just didn’t catch on. What they should focus on is using the CRT technology to create a five-finger pack.”
Away from retail, supplies to the UK remain very good with bananas from the Windward Islands coming back well and the Dominican Republic also enjoying a strong period.
But three nights of heavy winds and storms in Belize last month struck plantations. Authorities estimate volumes emanating from the country that ships all its bananas through Fyffes to the UK are down 15-25 per cent. The farm minister Rene Montero visited plantations and met with growers. He is seeking funding in the form of loans for producers to help them get back on their feet. The Banana Growers’ Association said losses could total $20m and replanting may take nine months.
The issue of price fixing in bananas was again brought into focus this month after the European Commission fined Pacific Fruit €8.92 million after discovering that Chiquita and the Belgian importer operated a price-fixing cartel in southern Europe between July 2004 and April 2005.
The cartel was said to have violated the EU antitrust rules’ ban on cartels and restrictive business practices. Chiquita was handed immunity for providing information.
“Companies need to be aware that the Commission takes its anti-cartel enforcement duties very seriously,” said Joaquín Almunia, the EU competition commissioner.
But some insiders question whether pricing will ever be completely transparent, not just in Europe but at source in key supply countries as well . “I think inevitably people will find a way around the law,” says one source. “You cannot replace the market position. With a minimum price, for instance, producers are not going to move the fruit when the market has been in oversupply for years. This has been the case for some time and the only way fruit has been moved is by using spot vessels and services.”
A fascinating issue then, and one that shows little sign of abating.
COLOMBIAN WOES SET TO PERSIST
Colombia’s banana sector is dealing with a difficult year with volume on course to swing from undersupply to oversupply. Gill McShane speaks to Banacol to find out more
Torrential rains left the banana-growing region of Urabá in Colombia saturated with water earlier this year, causing a reported 16 per cent reduction in productivity, a loss of planted area and difficulties in fulfilling international supply programmes. Here, María Lolita Uribe Jiménez of Banacol discusses the challenges facing the sector.
To what extent were Colombian bananas affected by the torrential rains and subsequent flooding?
MU: The heavy rainfall caused by La Niña brought flooding and disaster to the length and breadth of the nation at the beginning of the second half of 2010 until April 2011, particularly the Andean and Atlantic coastal regions. For obvious reasons, the banana-producing areas were affected and although the misfortune didn’t reach the level of other regions, the crop was affected in terms of availability.
Was the international market short of supply as a result?
MU: The production impact was quite significant and caused a substantial decline in export volume mainly during the first half of 2011. There were also some road infrastructure issues, which in some particular weeks made it difficult to deliver the fruit from the plantations to the ports.
Nevertheless, Banacol has made a tremendous effort in order to meet its contractual supply commitments with major customers. But the situation has still caused millions of losses for the Colombian banana sector as a whole.
How do you see the rest of the year panning out?
MU: It’s looking equally difficult, not because of weather conditions (which have seemingly improved) but because normally the production cycle for bananas increases in the second half of the year. This year we’re expecting an extremely high production peak, following the low productivity in the first half (due to La Niña).
This will create an excess of fruit which will be impossible to market adequately in the traditional export destinations (Europe and the US) without damaging prices. For that reason, Colombian suppliers will have to sell on alternative markets (such as Russia, the Mediterranean region, the Middle East and Asia) at spot prices.
How has Banacol coped? Has your Costa Rican farm compensated the reduction from Colombia?
MU: Banana production in Costa Rica has been good in general which has allowed us to offset some of the losses in Colombia. However, the bulk of our volume is exported from Urabá in Colombia, which means our Costa Rican volume wasn’t enough to mitigate all of the shortfall.
We understand there was also heavy rainfall in Costa Rica at the beginning of the year. What impact has this had?
MU: In the first three months of 2011 there were heavy rains in Costa Rica but on the whole the weather has been good so it’s not affected production at all. In fact, productivity has been quite satisfactory.
Where does Banacol go from here?
MU: The company hopes to end the year with a positive result around the world despite the numerous difficulties. Volume-wise, we expect to export around 26m boxes of bananas in 2011. From here, we plan to further consolidate our operations on our traditional markets and continue positioning our brand within the fresh produce business.
No comments yet