It has been an eventful quarter for the banana sector, though most of the action has taken place away from the major sales points in the UK.
But let’s get the sharp end out of the way first. After a concerted period of the big four maintaining their loose prices at around 69p a kilo, Asda broke the equilibrium immediately post-Christmas and pushed its price up to 77p/kg. Inevitably, the rest followed suit, and were all matching Asda within 48 hours. Equally as inevitable, however, was the consumer response. Sales volumes continue to show little correlation with price fluctuation; in fact, loose sales dropped 3.6 per cent in the 12 weeks to the beginning of December, when prices were at rock bottom.
The words of one importer are not exactly ground-breaking, but the sentiment always bears repeating, if only in case one day someone starts to listen. “Price rises are good news, of course, but don’t expect it to signal any great change in sales patterns. Sales are static when prices go down, and they remain static when they go back up again. The strategy comes from a different planet - it’s a game and we, as crucial players, cannot do all that much to affect the outcome.”
The trends that are now set in stone show no signs of crumbling. The pre-pack sub-category, driven largely by value and kids’ packs, continues to gambol along, now representing around 46 per cent of the total category in retailers, while Fairtrade and organic increase their small share gradually. M&S has performed reasonably well in the quarter, despite problems in the Dominican Republic, which was to be the cornerstone of its organic-only sales pitch, and Sainsbury’s Fairtrade focus is now fully embedded, lifting its share of the Fairtrade deal to nearly 50 per cent. Tesco dominates the pre-pack and organic segments, but has faced sterner competition from Morrisons in the former and Asda in the latter in recent months.
It is the tendering process that has caused most talking points in the last few months, though. Asda has switched its banana business away from Del Monte, as from March, and split the business between Fyffes, Chiquita and Mack. While Fyffes is believed to be supplying only yellow fruit, insiders tell FPJ that Chiquita will supply yellow bananas to two depots, but will also supply green bananas into International Produce (IP) for ripening, while Mack will continue a similar arrangement with IP to that which was already in place before the tender.
Insiders tell FPJ this is representative of a taste forming amongst retailers for direct sourcing, and using banana companies in the UK for contract ripening. “More than one retailer is looking to buy fruit green to bring into the UK, then to sub-contract a ripener which then delivers to the RDC,” says one. “The underlying trend is worrying for UK suppliers - although at the moment they are happy to pinch business off each other that way, if it becomes the norm it will severely destabilise the structure of the whole sector. The obvious extreme, which happens in the US and in parts of Europe, is that the retailer will invest in its own ripening rooms, cutting out the middleman.”
For those “middlemen”, there has been a fair degree of to-ing and fro-ing across the category as the major multiples all have tenders at various stages of negotiation and implementation. The implications for the banana landscape are fairly dramatic. Fyffes, the biggest apparent winner, has re-established itself a huge lead in the category, having gained a swathe of new business in 2007. Del Monte gained some new business, but also lost a significant chunk of its pre-existing work; it remains a powerful player, and its movements in the next few months will be interesting to watch.
According to sources, Mack also emerged a winner in the last 12 months, as did Chiquita, and these firms maintain their spot in the top five, alongside JP Fresh and Pratt’s.
During the last quarter, the EU signed an Economic Partnership Agreement with Caricom, which grants quota-free access to bananas from the Caribbean for another 10 years. As the article reveals on p14, it has not pleased everybody, and the dollar banana suppliers in particular are engaged in a new round of lobbying against the EU stance.
In the Caribbean though, the Dom Rep, and to a lesser extent, the Windward Islands, have been hit by a disastrous double whammy in the last quarter. In late October, Tropical Storm Noel ripped through plantations and took its toll on production and producers in both areas. They were still coming to terms with the devastation when an even more vicious tropical storm, Olga, blazed a trail through plantations in mid-December.
The storm destroyed thousands of banana and plantain fields across the Dom Rep, after the Yaque river flooded more than 3,700 hectares of banana fields in the northern part of the country, leading to an estimated £20 million in lost exports, according to banana producers.
Producers were entitled to believe that the storms had passed when Olga hit, as it was only the 10th named storm to develop in December since record-keeping began, and passed through the Dom Rep two weeks after the Atlantic hurricane season officially ended.
CONTINENTAL SHIFT FOR DOVER
After a record year in 2007, when we handled more than 300,000 pallets due to changes, principally in the banana business, 2008 looks far from predictable, writes Brian Madderson, managing director of George Hammond plc, at the port of Dover. However, we remain positive, with new business on the horizon including heavier volumes of fruit coming through the port for onward supply to the near continent and a number of new enquiries pending.
Our throughput last year, which represented a 35 per cent uplift on 2006, was underpinned both by the security given to us and our customers on completing a new 10-year agreement with the Port Authority on our involvement at Dover’s deep-sea cargo terminal and by a £multi-million investment in the quay-side handling and storage facilities.
That has certainly demonstrated to the market our commitment to the specialised reefer trade but, as we enter 2008, it is not easy to accurately assess the likely fruit volumes through Dover in the next 12 months. We have been advised by our principal customer, Del Monte, that it will lose its Asda banana contract from March. This may reduce its volumes in the short term, although Del Monte has substantial banana business remaining and is intent on continuing to be a significant force in the UK market. Its weekly ship, the Horn Line from Costa Rica, will continue to call at Dover each Thursday and will also discharge plantains and pineapples, together with seasonal melons.
In fact, the number of services arriving at Dover is unchanged year on year, with the Africa Express Line service now scheduled to discharge each Monday with fruit for Compagnie Fruitiere and Del Monte, and Seatrade’s ColRica service (which is replacing its Seaban service) docking on Sundays.
All three weekly services will carry bananas; what is less certain at the moment is the volume projection. Nothing will change significantly until the Asda tender kicks in, by which time it is not inconceivable that we will have got more business to replace any lost volume. There is also some uncertainty at Portsmouth, possibly still the UK’s largest banana-handling port, as MMD Shipping Services is up for sale again.
However, one area of our business that will definitely expand in 2008 is onward supply from quay-side in Dover direct to the continent. Due to our geographical position, Dover tends to be the first port of call on the north European rotation for bananas before ships call, typically, at either Antwerp or Hamburg. Ninety per cent of refrigerated trucks coming into the UK from the continent are returning empty, and a large proportion of them are returning through the port of Dover’s ferry terminal. So it is very easy for them to take the 100-metre detour to our fruit terminal to load up with bananas for continental customers.
This has a number of benefits for the European customer. In France, in particular, retailers will receive the fruit at least a day earlier than if it was discharged on the continent. The exchange rate also has a large part to play. The pound sterling is 10 per cent down against the euro, compared to the beginning of 2007, and as we charge in sterling, as do many of the hauliers, this can make a big difference to the final price. Dover is also a relatively small port, and as such we are able to provide a highly personalised service to customers. Undoubtedly, there are backhaul efficiencies for the hauliers and all of this has to have a positive impact on the carbon footprint, which is greatly valued by the multiple retailers.
We have done bits and pieces of this type of work in the past, but only seriously began trialling it in 2007. We now know how well it works and feel sure the quality of the service will encourage the fruit volumes to match our capacities in 2008.
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