Banana Link has reported that supermarket banana price wars have spread to the Netherlands, with Albert Heijn, the country’s number 1 retailer, following the supermarket Jumbo in pricing its bananas at €0.99/kg. Banana Link, a UK-based not-for-profit cooperative, suggests that other Dutch supermarket chains could follow suit.
Banana Link notes that although Jumbo “did not cut the price it paid to suppliers when it cut the retail price, the fact remains that its suppliers will not be in a position to raise the price they receive when contracts are renegotiated”. According to a representative of a Dutch banana ripening company, “the fierce competition is affecting everyone in the sector,” with the supermarket pricing policy of €0.99/kg meaning that “nobody is making any money.”
In the report, Banana Link notes that in the UK, “the key question about the power imbalance in price negotiations” between buyers and suppliers has never been addressed. Analysis by the Fairtrade Foundation suggests that “most consumers do not buy more bananas because they are cheaper”, with surveys finding that 84% of consumers said they would be willing to “pay more for bananas if they knew the extra money would benefit farmers” and that bananas would be “grown in an environmentally sustainable way”.
Banana Link claims that it is time for retailers to “realise that destroying value in the banana chain makes it impossible to deliver real sustainability and customer satisfaction”.
In the Dominican Republic (DR), the EU has recently awarded €12.5 million under its Banana Accompanying Measures programme to support investment in improving the competitiveness and productivity of banana producers in the DR. Some 50% of this funding will directly deployed to assist banana producers, and a further US$10. million will be mobilised from the DR government. The aim of the programme is to increase national exports by 10%, reduce chemical usage by 50%, and boost employment by 20%.
The retailer Albert Heijn is present in not just in the Netherlands, but has 23 stores in Belgium and 6 in Germany. This means that its pricing policy for bananas could spread to other EU member states, exerting pressure on local discount retailers to introduce permanent discounts on banana prices.
It is important, therefore, to consider policy initiatives to strengthen the functioning of ACP–EU banana supply chains as a necessary complement to current EU banana accompanying measures financial assistance programmes. Without steps to halt the spread of retailer pricing policies that are stripping value out of the banana sector, it is unclear how even the most competitive ACP banana producers can attain a basis for production that is sustainable in the long term.
Since June 2012, consumer organisations and development NGOs have been campaigning for elements of the EU policy on strengthening the functioning of supply chains to be applied to international supply chains (see Agritrade article ‘ Sustainability concerns go mainstream in Dutch fruit and vegetable sector’, 29 July 2012).
More recently, NGOs have called for regulatory action to create “an ombudsman similar to the UK Groceries Code Adjudicator in order to regulate buyer power in the retail industry, starting with bananas” (see Agritrade article, ‘ Fairtrade Foundation calls for regulatory action to promote more sustain...’, 2 June 2014).
ACP governments with interests in the functioning of banana, sugar and horticulture supply chains may need to consider whether this constitutes an area for collective ACP dialogue with the EU within existing institutional mechanisms for consultation on trade issues.