When the likes of Northern Rock, Lehman Brothers and AIG were seen to be failing, there was widespread surprise throughout the general public. For such established organisations and brands to be so publicly beleaguered was stunning and caused the public to re-evaluate their view of the banking sector.
It is not too big a stretch to suggest the current struggle in the banana market, epitomised by Fyffes’ downbeat stock exchange note in late April, could provide a serious long-term warning to those dealing with the fruit.
At the heart of the matter is European consumption, thought by many to be seriously on the wane. Long-standing competition with top fruit and citrus has been added to by the proliferation of soft-fruit and stonefruit offers in the major multiples, fighting for market share by presenting a value offer.
In Fyffes’ note, it highlighted difficult trading conditions through March and April and warned that it will only hit its full-year earnings target of €14-18 million (£9.7-12.5m) if the anticipated reduction in EU import duties - as per the landmark agreement reach in December for a reduction from €176 a tonne to €114 - is implemented, a situation that seems unlikely to move at the speed Fyffes would hope.
Elsewhere, Fresh Del Monte reported a slight net income increase of $36.2m - representing a seven per cent rise to $943.1m for the first quarter. Tellingly, the company’s banana category slumped by 58 per cent during the period with “significantly lower” selling prices in Europe proving part of the problem. Likewise, Chiquita reported an unexpected $9m quarterly loss in late April, with cold weather and a weak economy said to have hurt banana sales in Europe.
For UK companies, the weakening of sterling against the dollar has proved an extra challenge as importers from Central America face an uphill struggle to attain a healthy margin.
Oil prices have stabilised somewhat with prices of $476 per tonne for IFO oil proving the average for the past few weeks.
One insider tells FPJ: “All the major banana players have been hurting in the first quarter and its no surprise when there is a reduction in demand across Europe as a whole, but they have brought in more fruit - it’s a recipe for disaster.”
Cynics could call it more than a happy coincidence then that supplies have tightened up around Europe in recent weeks, creating prices up to 1500-1600p on the wholesale markets and a very strong market all round.
The insider says: “There are natural peaks and troughs in supply although we didn’t see a huge increase in volumes before this shortage. Overall, there has certainly been an increase in volumes across Europe in the last year.” Perhaps this should be seen as no surprise when new farms and sources are producing and exporting all the time.
Another issue hitting the UK is the “bureaucratic nonsense” of EC Regulation 669/2009, introduced in January, which has seen banana players importing from the Dominican Republic having to put “high-risk” produce through residue testing.
One source says: “We do our own residue analysis and so does SAVID so why can’t they look at our results? It’s costing up to £1,000 a week for is entirely unnecessary.”
Fresh Produce Consortium ceo Nigel Jenney was forthright on the issue: “This poorly thought-out regulation fails to meet standards for effective, risk-based and proportionate regulation. Increased checks, delays in clearance, additional storage costs, damage and loss of products and their disposal have devastated many importers and suppliers of highly perishable products. The full impact of the regulation must be put in front of the Food Standards Agency and the European Commission to influence its review.”
Climatically, sources have been stable, with conjecture over whether this could be an El Niño year remaining just that at the moment. But with the hurricane season approaching, importers will be getting nervy that sources could hit strife and fingers remain tightly crossed.
On a lighter note, Dole Fresh UK came out in support of Fruity Friday this month, backing the Beat the Banana! fun run in Hyde Park and encouraging the industry to wear yellow to promote healthy eating and banana consumption. And it seems with consumer backing for the fruit waning, it may provide just the impetus that is needed.
Banana workers’ rights offer challenges and opportunities
It has been said that corporate social responsibility is merely used as a buzz term to attract consumers. Alex Lawson takes a look at the thorny issue for businesses in the banana trade as they balance the books and consumer opinion.
From a business angle, it is lamentable but understandable that some large international banana businesses have been seen to be merely paying lip service to worries over workers’ rights in the last decade. Margins remain at the bottom line throughout international trade and, as we have seen on home soil, some big players show scant regard for the earnings of those below them in the supply chain time and again - so why should they when the product is grown elsewhere in the world?
From a human point of view, the issue remains far less clear cut. Putting aside the implicit desire to help fellow human beings, decisions on where to offer aid as an international business remain difficult. Afterall, few will have wished the Jamaicans to stop exporting after a series of climatic problems but who is to say supporting that island community is of any more value than that of the source that gained the business Jamaica lost?
Turning to the workers themselves, there are undoubtedly various levels of aid to be given within the countries that export to the UK. For example, helping workers in Ghana, which sits at number 102 in the world in terms of GDP, is likely to be achieved on a smaller budget than Costa Rica, which is ranked 85th in the world and has a much higher living wage. Moreover, there’s an argument that the modern consumer has become so cynical that even genuine aid from international companies and the reporting of it is treated with skepticism.
At farm management level, there are also key decisions to be made. Some large plantations across Latin American see their workers live on-farm with housing, schools and even medical facilities on site, but it is not always as simple as “do you care about your workers?”.
Since the creation of the Ethical Trading Initiative (ETI), the notion of a ‘living wage’ for workers in banana supply chains has entered the vocabulary of multi-stakeholder efforts to secure better labour standards.
However, even though the ETI Base Code refers to living wages as an aspiration, it is not until very recently that serious initiatives have got underway to try to deliver progress towards decent remuneration. Because of the sensitivity of wage costs at the beginning of the value chain and the downward pressure on prices coming from retailers at the top of the chain, the issue has been “parked to focus on easier goals”, according to the latest BananaTrade compiled by BananaLink. The charitable organisation has therefore set up permanent working groups within the World Banana Forum on labour rights and distribution of value along the chain to be undertaken by Masters students studying at the Paris 12 Institute of Business Administration.
Of course, organisations such as the Fairtrade Foundation have made rapid and admirable inroads into the issues discussed but there will doubtless be a long way to go to find a balance between workers’ right, adequate margins and the public perception of the industry.
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