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Trends in the UK and European banana markets

11 February 2013

In December 2012 it was suggested in an article on Freshplaza.com that supermarkets are having a growing influence on banana sales, as they increasingly import directly rather than via intermediaries. According to Banana Link, a not-for-profit cooperative based in the UK, supermarkets are bringing the sourcing of bananas in-house, ‘so as to take as much control as possible of all costs back down the chain’. Tesco, Asda and Morrisons are all now ‘sourcing directly a very substantial proportion of their volumes from cheaper nationally owned banana producing companies’. This has seen the market share of the traditional five big banana companies fall from over 85% in the 1990s to 70% in 2012.

In Eastern Europe, supermarket own-label banana sales are becoming increasingly common. Apart from France, the UK and Spain, all of which have traditional ties to ACP suppliers, Latin American suppliers are playing an increasingly important role.

There is seen as being little scope for price negotiations, given the growing power of retailers in banana supply chains. While Fresh Plaza’s analysis maintains that ‘the Fair Trade prices are sound and producers no longer put up with unreasonable prices,’ this analysis is questioned by Banana Link.

Banana Link points out that in the UK, ‘since the declaration of “war” on UK banana prices by Walmart subsidiary Asda 10 years ago, very low banana pricing has become a feature of the British market,’ stripping value out of the banana value chain.

This situation is being compounded at the producer level by retailers setting higher social and environmental standards. These standards are increasingly an ‘absolute requirement for all suppliers to the UK’. However, the costs of standards compliance are not being reflected in UK banana prices. This is threatening to create a crisis: in December 2012, a group of major Fairtrade-certified growers announced that ‘if there was no price increase in line with rising costs of production and the cost of meeting high Fairtrade standards, they would be forced to cease selling as Fairtrade from the new year.’

This pessimistic view is reflected in analysis by Renwick Rose, the former coordinator of WINFA, the Windward Islands Farmers Association, and published in December 2012 by Banana Link. In 2012, banana exports from the Windward Islands were estimated to be under 15,000 tonnes, less than 60% of the level of exports attained in 2010. There are now less than 1,000 Fairtrade-registered banana farmers in the Windward Islands, down from 25,000 in 1991. In the face of escalating input costs and stagnant prices, producers are encountering increasing difficulties in meeting quality standards.

Mr Rose sees increased support from European retailers in meeting quality standards and remunerative prices as essential. He also considers that effective deployment of assistance under the EU banana accompanying measures programme in support of ‘a farmer-led comprehensive agricultural revival programme’ is necessary. He notes that the arrival of Black Sigatoka disease and ‘storm devastation’ have cast a further shadow over the future of Caribbean banana production.

The Banana Link analysis notes that in Germany, ‘prices in the major supermarkets chains have been consistently 25-30% higher than in the UK in 2012’, and in France ‘40-50% higher on average’, while in the US prices are on average 30-40% higher than in the UK. Banana Link is fearful that trends in the UK market could spread to other EU markets.

Balancing these concerns, however, are indications that some UK retailers, as part of annual price negotiations, are offering prices closer to those of German supermarkets. For Banana Link this raises the question: is the UK banana market ‘poised to take a quantum leap from value-stripping to value enhancement?’ 

Editorial comment

Given the increasingly complex nature of the banana trade and the huge discrepancies between banana prices on the UK market and those in Germany and France, there would appear to be a need for a detailed investigation into the functioning of ACP–EU banana supply chains, to identify how their functioning can be improved by addressing power imbalances along the supply chain. This would effectively extend the policy approach developed by the EU in the dairy sector to the international level, and would constitute an important area for EU’s policy coherence.

Such a move would be in line with the calls in June 2012 from, among others, Renwick Rose, for the EC to extend the proposed code of practice for food retailers to cover overseas suppliers, including ACP banana exporters (see Agritrade article ‘ Sustainability concerns go mainstream in Dutch fruit and vegetable sector’, 29 July 2012). 

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