The summer months are a difficult time for the banana sector with the battle against soft- and stonefruit a tough one to deal with. Add to this a market where retails remain low - 68p a kilo across the multiples at the moment - and consumption fell 1.1 per cent in the last year, and it paints an intimidating picture.
But below the surface, things are far more difficult. Challenging conditions to source volumes, shipping issues and rising input costs across the board are putting a squeeze on importers, exporters and growers alike.
One piece of good news is that the Windward Islands has returned to the exporting fold, with volumes from St Lucia arriving in Waitrose and St Vincent product to follow into all the retailers imminently. Interestingly, Waitrose is to stock St Lucia-labelled packs, highlighting the hurricane that devastated production last year after concerned customers wrote to the ethically minded supermarket. Sainsbury’s was the first to re-stock the line, with fruit on shelf five weeks ago while Asda is still a few weeks away.
But banana importers are watching the weather closely as hurricane season kicks off in the Americas. Fears the unthinkable could happen and the Windwards could be hit again were mounting as FPJ went to press. The National Hurricane Center reports that Tropical Storm Eugene had a 90 per cent chance of becoming a cyclone, putting the northern Windwards and the Leeward Islands at risk. “It would be a disaster if the Windwards were hit again. It would be terrible if it were like Jamaica when hurricanes hit several years in a row and they had to take the decision not to export,” one importer said.
Hurricane threats are adding to quality issues on the fruit, with volumes emanating from South America, Central America and West Africa all slightly below par. The Dominican Republic experienced some heavy rain at the end of June and start of July, which is beginning to have an effect on the market after increased humidity led to fungal infection. Ecuador has seen unusually poor weather and the introduction of a fixed price on banana exports has created controversy. In March, Ecuadorean president Rafael Correa threatened to throw exporters who do not respect the $5.50 per 18.64kg box price in prison, but fruit is still available at lower prices. One source said: “This issue is a big one. The banana industry has said it will not move any more bananas below the fixed price but produce is still available. There will be real penalties for those discovered to be breaking it.” Ecuador is also facing considerable problems with banana growers’ arch nemesis, Black Sigatoka. Unusually low temperatures due to a lack of sunshine in banana producing areas added to unexpected rains in a situation which is likely to lead to shortages in volumes.
In shipping, Maersk has moved its Costa Rican CRX service from a direct line from Puerto Moin to Tilbury to a transhipping option via Rotterdam. The move, made in early July, has slowed supplies to the UK and proved a difficulty for some importers.
Elsewhere, a formal Fairtrade Foundation consultation and a review of the Fairtrade premium ended last week. The study, which kicked off on 28 June, captured a mix of prices that will help to reset minimum prices from the beginning of next year. The initial recommendations are that most origins put their minimum prices up by 2-2.5 per cent, but others will be looking at a reduction.
Mark Varney, head of product strategy for bananas at the foundation, admits that it is “unusual” to be consulting on a reduction in prices given that the cost of production is increasing but he maintains that “it’s just the recommendations” and the process is not yet finished. The consultation will now turn to some key stakeholders and the results will be published in a couple of months.
The banana multinationals are varying in performance. Del Monte UK has seen profits in the UK fall 96 per cent as it reduced imports of fresh fruit while its umbrella company and Chiquita were due to report this week. Dole Food Company saw revenue growth in the second quarter but predicts lower banana prices in Europe this summer will affect third quarter earnings.
Next quarter, whole market prospects are stronger. The start of Ramadan heralds a pick-up in northern hemisphere demand while the schools returning should also offer an injection of pace.
MACK ENTERS PREMIUM LEAGUE
Sourcing largely from Colombia and the Dominican Republic, with some increasing volumes from Ghana, Panama, Costa Rica and Brazil, Mack Multiples is one of the strongest UK banana players, particularly in wholesale. Elliot Mantle, commercial director for bananas and pineapples at the company, gives Alex Lawson an insight into its approach
Can you tell us more about your different banana offers?
We launched Mack Premium bananas back in 2007 to meet the needs of our Mack wholesale branches around the country. This has since grown and we now continue to supply Mack wholesale branches, other wholesale businesses, catering companies, Spar and other independent outlets.
Do you have any marketing plans for bananas?
We have recently started offering a pre-packed Mack Premium banana, which fills a gap in the wholesale side as they continue to find ways of increasing sales and help customers by offering a finished retail article. We can use modified atmosphere packaging technology here, which increases shelf life from three to six days.
How accountable should supermarkets and suppliers be for the practices that happen in their supply chain?
In the UK, consumers are historically very brand loyal to their chosen retailer, and they place a strong trust in them. Legislation, farm assurance schemes and Fairtrade certification act as reassurance, and companies such as Mack make it part of the day job to ensure compliance in growing methods and worker conditions at farm level. We’re very proud of our strong support for Fairtrade and have worked with our growers to help them embrace what being Fairtrade certified can offer them. It’s fair to say that in the 10 years since we began with the scheme - most notably in Colombia and Dominican Republic - we’ve seen dramatic improvements in conditions at farm level. While there are many people in the chain between farm and retailer, it’s the retailer’s reputation that’s ultimately on the line if bad practice is uncovered, so they do, understandably, take a keen interest in making sure the relevant safeguards are in place.
What are the main issues affecting banana supply?
We have to remember that bananas are susceptible to the effects of nature and weather. Just last year in late November and through December, Colombia suffered very heavy and sustained rains that caused the flooding and loss of many thousands of hectares of bananas, to be followed in January, February and early March this year by a severe drought. This caused a major shortage of fruit being harvested in the first three to four months of this year. This was compounded by other supply issues from other major exporting countries - Costa Rica, Windward Islands and Dominican Republic in the main, and led to a Europe-wide shortage of bananas. We saw the wholesale market price in the UK hit £19 to £20 for 18kg for a few weeks. What will follow for the second half of 2011 is an oversupply of bananas as all these countries recover exportable volumes at the same time.
We have worked relentlessly over the past decade to remove all unnecessary costs in the supply chain to make it much more efficient. But over the past 12 months, we have experienced some of the largest increases in fuel prices and this is really impacting many aspects of the supply chain. Input increases have upped grower costs. Shipping, road haulage and ripening has increased exporter and importer costs, all due to the increase in the price of oil and fuel. To remain a sustainable business, this needs to be paid for somehow.
Where do you see opportunities in the banana category?
We have to continue to be innovative and take the category forward. Packaging innovation, and in particular the modified atmosphere packaging techniques available to us, are our focus.
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