Industry | 2009.10.19
Asda slips up on banana price war | Felicity Lawrence
A vicious supermarket price war has broken out over bananas, but the people who really foot the bill are the plantation workers
Bananas down to 38p per kilo in Asda, 35p per kilo in Tesco this week. A supermarket price war over a fruit with as much comic potential as the banana ought to be funny. Asda has said that it will take the cost of slashing the retail price from its own margins and not pass the pain on down the supply chain, so surely consumers can only benefit as the big four rivals slug it out for market share. Except, of course, we know that\'s not how the script usually runs when UK supermarkets start price wars.
If anyone thinks supermarkets are in the business of simply handing cash back to customers, they are being naive. I\'ve been analysing data on price rises in Asda on some of the biggest-selling brands between 8 July this year and last week – when the banana wars got heavy. There\'s been a 72% increase in PG Tips tea, a 45% rise on some Colgate top-selling toothpastes, a more than 100% increase on some Pringles crisps, 38% on Rich Tea biscuits, and 85% on single cream. These are steep rises, not on goods that were previously on promotion, but on the usual price.
That looks to me remarkably like a supermarket increasing its margin to build a war chest of cash. Can I be sure? No. Like most shoppers, I find it impossible to keep track of supermarket pricing because it is so variable and opaque. Even the competition authorities have admitted they do not have the resources to monitor what the big picture is. But it\'s a fair bet that what supermarkets give back to us with one hand, they are taking, or have already taken, with the other. In the short term, cutting the price of bananas and selling them below the cost of production is a game for them, a paper exercise in shifting profits around, designed to grab publicity, pull shoppers in to spend on other highly profitable goods, and squeeze their competitors.
But in the medium and long term, it\'s no game for the rest of the banana industry. A phony supermarket price war is a real war for them – one in which they tend to suffer the collateral damage. We know from the bitter history of such price wars that the costs have been passed down the chain, if not immediately, then over the subsequent months.
Asda/Wal-Mart was able to fund its early banana war in 2002 on the back of a global deal with Del Monte, which gave the transnational retailer an extraordinarily low price. Fair trade campaign groups have documented the conditions that were behind that price. In 1999, Del Monte sacked all 4,300 of its workers on one of its biggest plantations in Costa Rica, the country that supplies much of UK demand. They re-employed them on wages reduced by 30-50%, on longer hours, with fewer benefits.
This model was subsequently rolled out across the industrial banana sector. Aid organisations say that a deterioration in conditions has accompanied each banana war. That around 50% of workers on these plantations are now migrants within Latin America is a reflection of how poor pay and conditions became. For all their protestations that the cuts are not passed on, the fact remains that the world price of bananas has been driven down relentlessly since the 1970s. On the ground, fair trade campaigners say they still find evidence of poverty wages, excessive hours, poor health and safety standards, intimidation of union members and environmental degradation.
Under pressure from bad publicity about these conditions, the big global banana traders – Del Monte, Chiquita and Dole – were actually pushed into working with aid organisations and local unions to do something about them. They have seemed concerned to distance themselves from the trade\'s banana republic legacy. All that work, however, may be put at risk by Asda\'s gaming.
Most British shoppers do not want to be part of the exploitation that has historically been associated with the fruit. One third of banana sales are now fair trade, helped by Sainsbury\'s and Waitrose making the commitment to buy all their bananas from fair trade sources in 2007. But the current race to the bottom will put enormous pressure on them as they subsidise the difference. The smaller farmers, many of them in the Windward Islands, who produce that fair trade fruit fear the downward pressure on their prices the price war will build.
At some point, Asda will decide that the benefit of this particular loss leader has run its course. It will move on. But by then the damage to other people\'s livelihoods may have been done.
It\'s a zero-sum game, and if you want to know what happens when they play it, you need only look at the fate of British dairy farmers. Squeezed by the supermarkets over many years, the British dairy sector has been brought to the brink of collapse . We now cannot even meet demand for fresh milk, but have to import millions of litres each day from mainland Europe.
Did consumers benefit from this assault on sustainable farming and our long-term food security? The office of fair trading thought not , finding Asda, among others, guilty two years ago of price-fixing. So, please, don\'t fall for their bananas.
For more information, please visit
http://www.guardian.co.uk/commentisfree/[...]as-supermarkets-asda-price-war
