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Fairtrade banana

Published on 31/03/2014 - Published by BRIGHT Richard
FruiTrop n°220 , Page From 19 to 21
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Right message, wrong targets?

The start of Fairtrade fortnight in the United Kingdom generally coincides with an NGO condemning the retail sector for its pricing policy on bananas. This year was no exception. In fact the Fairtrade Foundation went one step further than criticism when it called on the British government to intervene in a price war that it says could possibly lead to shortages in the longer term.

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Product(s) : Banana
Rubrique / Thématique : Economic analyses
Country : World
Keywords : Price

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FruitTrop Magazine n°220

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Publication date : 31/03/2014
Price : Free
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In its analysis the Foundation, which aims to protect farmers in developing countries, says the price of bananas in UK retailers has nearly halved in the past 10 years. It points out that the fall in the price of bananas comes despite a rise in the price of ‘other’ staple foods such as bread, eggs, milk and sugar, of 79% on average. The foundation’s CEO, Michael Gidney, said that its research is showing that this squeeze is disabling farmers, making it impossible to build up resilient businesses and to trade out of poverty.

In response the British Retail Consortium denied that farmers were being squeezed. “The fact that supermarkets are choosing to sell bananas at below margin cost has no relationship to what they are paying producers. Producers are getting a good price and customers are getting a good price as well. Supermarkets sell such an enormous range of products that they can choose to sell particular products at a loss,” it said.

In the dairy market, prices for milk have improved after high-profile action by farmers and concern from shoppers forced individual supermarkets to agree deals with their suppliers to pay at least the cost of production. Mr Gidney said banana farmers had suffered because they were less able to publicise their plight from far overseas.

Unsurprisingly the British Government has little appetite for an intervention. “It is not our policy to get involved in price-setting. The price that people pay at the checkout is down to the supermarkets,” said a spokesman for the Business Secretary.

It is reasonable to argue that the Foundation is largely squandering its hard-earned equity by making such a plea. This is not to say that the points it raises are not justifiable – they are just targeted at the wrong audience. Firstly, the British Government is never likely to intervene in a commercial transaction unless it is illegal or there is a threat to national (food) security, no matter how legitimate the complaint: in the UK the banana is not a staple, unlike bread and dairy.

Retailers meanwhile have every right to price as they please, and the banana is and will remain by far the biggest loss leader in the fresh produce section as long as the supply is plentiful. Retail is not driven by conscience: retailers will only take the fair trade moral high ground if there is a trading justification - anything else would be commercial suicide.

banana import prices

Thirdly, consumers are motivated almost exclusively by price. If a consumer could distinguish one banana from another in the way that a New Zealand kiwifruit can be identified from a Chilean, or a Jazz apple from a Braeburn, then there would be an argument for differentiation. But they can’t. The banana multi-nationals might disagree but to the retailer a Fairtrade banana is no different from a no-name or branded piece of fruit. This is because bananas have essentially lost their exotic identity – they are now nothing more than a commodity. This is why the big banana brands spend so little on above-the-line advertising: unfortunately fruit in general and bananas in particular fall into the same retail category as cat litter. When a product has been commoditized to such an extent that there is no longer a brand to build, the corporate focus shifts instead to cost reduction.

This argument, if sound, brings other so-called ‘value adders’ into the firing line. Although they make great PR what value, for example, does Rainforest Alliance or SA8000 certification add to the banana? Do retailers use the certifications as criteria for procurement? Do either certifications influence consumers’ purchasing behaviour? Err, no and no. Should they? Yes, absolutely! And if they and other certifications added value and not just cost, there would arguably be no need for the Fairtrade movement, which to be brutal, trades on the conscience and/or pity of consumers in the developed world. To be fair, it has little choice: the farmers on whose behalf the Foundation campaigns are little more than victims in the chain: they are wholly dependent on variables outside their control for their survival.

In a commercial environment such as the UK that strongly favours the consumer over the supplier, it will always be the head of the chain that bears the brunt of any pricing pressure. Even if current WTO rules and regulations are amended, the real solution to the fair trade conundrum lies at the source, not the destination. In order to trade out of poverty, you need to be able to take control of your destiny.

banana average price

Realistically there are only two ways to increase the rate paid to the banana producer - either by State decree or by restricting market supply. However inherent in these solutions is an additional problem: unless the supplier nations act in concert, those that legislate or deliberately cut supply will lose out to those who do neither - to which Ecuador will testify.

If the Fairtrade Foundation is seeking a universal solution, it should focus on addressing the cause of the iniquity rather than trying to treat symptoms that are untreatable. The Foundation could do this by taking the ‘market forces’ case to the Governments of the worst affected countries by the banana price wars in the UK and Northern Europe and encourage them to take responsibility for the plight of their own citizens. Unfortunately the Foundation would likely get a similar response in Latin America to that given in the UK, albeit for a different reason – too many vested interests! And anyway this work is already taking place under the auspices and guidance of the World Banana Forum .