After 2009‘s brutal price wars, bananas are again at the heart of the hositilities. As prices again head south, asks Rob Brown, have no lessons been learned?
They're at it again. Last Friday, Asda slashed the price of bananas to 67p/kg, a nine-month low. By Monday, Sainsbury's had matched it and the following day Waitrose had cut its own to 74p/kg.
"A pointless game" was how Waitrose MD Mark Price described the deep discounting last autumn, when the price of bananas hit a 14-year low of 47p/kg. Claiming Waitrose had no option but to follow Asda, Price estimated the cuts had cost Waitrose £100,000 a week.
And it's no doubt already counting the cost again. But just why is it that in the same breath as trumpeting tip-top ethics (Sainsbury's and Waitrose only stock Fairtrade bananas), the multiples announce cut-price deals that not only cost them dearly but threaten the businesses of growers? Has the time come for these so-called "ethical" retailers to begin practicing what they preach?
"That's the message we'll be giving Sainsbury's when we meet in two weeks," says Alistair Smith, international co-ordinator for non-profit organisation Banana Link, adding the discounting will only serve to devalue the fruit in consumers' minds and bring volitility to the market.
"Sixty-seven pence per kg is not a fair price for bananas at retail level. We believe consumers will understand that bananas should be sold at a more sustainable price."
Of course, suppliers have no power over supermarket prices. "I really didn't think they would go this low at this time," says one, noting the pound's current weakness and its impact on import costs. "The climate is certainly not conducive to lowering the prices."
And the suggestion that such discounting will shift extra bunches of bananas is absurd to suppliers. "Banana sales are inelastic" says one. "I could tell you what our orders will be for 52 weeks. Marketing is what this is all about."
Another supplier agrees. "This has nothing to do with what's happening in the trade, it's all about Asda's grand perception plan the image that they're cheaper than everyone else," he says.
"The margins they're making on other products give them a fighting fund to keep the image going. They know other supermarkets are selling more than them so they know this will hurt them more."
The official line from Asda is that the rock-bottom prices on items such as milk, bread, sugar and bananas funded by its refusal to sell alcohol at below cost plus duty and VAT are part of its commitment to offer lower prices on everyday items.
"We've reduced prices following price cuts in the market, but this is at no cost to our growers," says a Waitrose spokeswoman, adding that "providing fair and sustainable returns to our growers is at the heart of how we do business".
Sainsbury's says its bananas will always be both Fairtrade and competitively priced, adding that last year it paid Fairtrade social premiums of nearly £4m to grower communities.
Regardless, the supply-side consensus is that deep discounting squeezes the supply chain and inevitably leads to losses for growers when contracts are renegotiated. "This fits uneasily with the supermarkets' objective of ethical trading," says the boss of one major fruit supplier.
A Fairtrade Foundation spokeswoman adds: "Price cuts serve only to devalue bananas yet further, creating an illusion among shoppers that they can be sustainably produced for such giveaway prices. This is highly irresponsible when food costs are spiralling in developing countries, and workers are facing their own economic crisis, as well as battling climate change."
Despite the criticisms, there's no sign that a truce is on its way.
They're at it again. Last Friday, Asda slashed the price of bananas to 67p/kg, a nine-month low. By Monday, Sainsbury's had matched it and the following day Waitrose had cut its own to 74p/kg.
"A pointless game" was how Waitrose MD Mark Price described the deep discounting last autumn, when the price of bananas hit a 14-year low of 47p/kg. Claiming Waitrose had no option but to follow Asda, Price estimated the cuts had cost Waitrose £100,000 a week.
And it's no doubt already counting the cost again. But just why is it that in the same breath as trumpeting tip-top ethics (Sainsbury's and Waitrose only stock Fairtrade bananas), the multiples announce cut-price deals that not only cost them dearly but threaten the businesses of growers? Has the time come for these so-called "ethical" retailers to begin practicing what they preach?
"That's the message we'll be giving Sainsbury's when we meet in two weeks," says Alistair Smith, international co-ordinator for non-profit organisation Banana Link, adding the discounting will only serve to devalue the fruit in consumers' minds and bring volitility to the market.
"Sixty-seven pence per kg is not a fair price for bananas at retail level. We believe consumers will understand that bananas should be sold at a more sustainable price."
Of course, suppliers have no power over supermarket prices. "I really didn't think they would go this low at this time," says one, noting the pound's current weakness and its impact on import costs. "The climate is certainly not conducive to lowering the prices."
And the suggestion that such discounting will shift extra bunches of bananas is absurd to suppliers. "Banana sales are inelastic" says one. "I could tell you what our orders will be for 52 weeks. Marketing is what this is all about."
Another supplier agrees. "This has nothing to do with what's happening in the trade, it's all about Asda's grand perception plan the image that they're cheaper than everyone else," he says.
"The margins they're making on other products give them a fighting fund to keep the image going. They know other supermarkets are selling more than them so they know this will hurt them more."
The official line from Asda is that the rock-bottom prices on items such as milk, bread, sugar and bananas funded by its refusal to sell alcohol at below cost plus duty and VAT are part of its commitment to offer lower prices on everyday items.
"We've reduced prices following price cuts in the market, but this is at no cost to our growers," says a Waitrose spokeswoman, adding that "providing fair and sustainable returns to our growers is at the heart of how we do business".
Sainsbury's says its bananas will always be both Fairtrade and competitively priced, adding that last year it paid Fairtrade social premiums of nearly £4m to grower communities.
Regardless, the supply-side consensus is that deep discounting squeezes the supply chain and inevitably leads to losses for growers when contracts are renegotiated. "This fits uneasily with the supermarkets' objective of ethical trading," says the boss of one major fruit supplier.
A Fairtrade Foundation spokeswoman adds: "Price cuts serve only to devalue bananas yet further, creating an illusion among shoppers that they can be sustainably produced for such giveaway prices. This is highly irresponsible when food costs are spiralling in developing countries, and workers are facing their own economic crisis, as well as battling climate change."
Despite the criticisms, there's no sign that a truce is on its way.
No comments yet