An information note from FAO, ‘The changing role of multinational companies in the global banana trade’, produced by the FAO’s Intergovernmental Group on Bananas and Tropical Fruits, has been published, and shows that the combined market share of the top three global banana trading companies fell from 65.3% in the 1980s to 36.6% in 2013. Similarly, the share of the top five companies fell from 70% in 2002 to 44.4% in 2013. According to FAO economists, while “competition among banana producing countries is fierce,” with many struggling to remain competitive, “there are also new opportunities, as the market is no longer dominated by big players – and new buyers are entering the market.”
The FAO information note notes that “the scope of operations of the big multinationals has… undergone a significant shift, away from plantation ownership and production, and more towards post-production logistics, including purchasing from producers, transportation, facilities to ripen the fruit, and marketing.” One illustration of this is Fyffes, which used to “own plantations in Jamaica, Belize and the Windward islands, but withdrew from production and switched to purchasing its bananas through contracts with producers”.
In recent years, supermarket chains have played an increasingly important role in the international banana trade: the FAO note comments that they “dominate the retail market in the main banana-consuming countries and are also increasingly purchasing from smaller wholesalers or directly from growers”. Direct purchasing by supermarkets has been greatly facilitated by “the establishment of direct container liner services from banana-producing regions to the main destination markets.” This has served to reduce the costs of entry into the international banana trade. This has led to the banana markets “becoming more fragmented as new players are entering the market”. More fundamentally, according to FAO, it has also seen a “shift of market power away from the major banana brands towards retailers”.
Regarding the recent merger of Fyffes and Chiquita, the FAO information note considers it “unlikely that the merger will give the new company sufficient market power to exert pressure over the banana market and influence either producer prices or import/wholesale prices”, but that it is unclear at present whether the merger will “imply any changes to the structure of banana trade”.
According to the Secretary of the FAO Intergovernmental Group, Mr. K. Chang, “in order to seize opportunities in an increasingly competitive market, banana producers need to be better informed and better prepared, including smallholder producers and any cooperatives or other organizations that represent them.” In the context of the changing market structure, Mr Chang considered it “vital that smallholders, as well as producer organizations, receive support” in “maintaining good cultivation practices, preventing and fighting plant diseases, strengthening producer organizations and developing both domestic and international marketing strategies”.
With the FAO highlighting the importance of both assisting smallholder farmers to organise themselves to “seize opportunities” in evolving markets and establishing effective extension support systems that encourage good cultivation practices and prevent and contain the spread of diseases, the question arises as to what role ACP governments should play in these efforts.
In an ACP–EU context, a related question arises as to whether EU Banana Sector Accompanying Measures support could not be better targeted at assisting smallholder farmers in meeting these pressing challenges.
A further area for possible joint ACP action arises relates to the scope for supporting recent calls from the Fairtrade Foundation for the launching of an EU investigation into retail pricing tactics in the banana sector across Europe and the creation of an ombudsman (similar to the UK Groceries Code Adjudicator) to regulate buyer power in the banana sector and other sectors of interest to ACP exporters, where scope for abuse of a dominant market position exists (see Agritrade article ‘Fairtrade Foundation calls for regulatory action to promote more sustainable banana production’, forthcoming 2014).