Banana pricing: the unsustainable nature of the UK's favourite fruit

Britain is a nation of banana lovers. On average, UK consumers eat 10kg of the energy-rich, nutritious fruit every year – equivalent to about 100 bananas per person. But our passion for bananas could be imperilling the very industry responsible for the bendy yellow fruit.

For the best part of a decade, UK supermarkets have been locked in a price war over banana sales, which account for about 7% of the world export market. As a result, the price at the till has gradually reduced, squeezing the margins for all those throughout the banana industry.

"There's no way this can continue much longer, says Alistair Smith, international coordinator for consumer group Banana Link. "It's just not sustainable for anyone in the supply chain. We've now got a price that is half what it was in real terms 15 years ago."

Race to the bottom

The cost of loose bananas at Tesco, Asda, Sainsbury's and the majority of other UK supermarket chains stands at 68p a kilo, down from 108p/kg in 2001. The only exception is the Co-op, where the price is 31% higher, at 99p/kg. By comparison, a cox apple in Tesco costs £1.75/kg and a conference pear £2/kg. It's little wonder bananas are so popular.

"British retailers have led the race to the bottom in the world banana market," says Smith, who alleges that UK supermarkets now frequently sell loose bananas for less than they buy them. He is calling for European regulators to crack down on the practice, which is illegal in many EU states.

"Competition law so far deals only with cartels of suppliers, not with cartels of buyers. But we're in a new world where cartels of buyers can force down prices, whatever the sector," he argues.

The big losers in this battle are banana growers and their workers, most of whom are in poor countries in the Caribbean, South and Central America, and Africa. For farmers in former British colonies such as the Windward Islands, today's lower prices are compounding the effects of gradual trade deregulation, which has opened the European market to large-scale Latin American producers over recent years.

"If we look at the root causes of the lack of sustainability in the banana sector, it's mostly linked to very low producer prices, which are mainly due to low consumer prices. Producers do not get paid enough for their bananas so that they can invest in sustainable production methods," says Pascal Liu, senior economist at the UN-based FAO and manager of the World Banana Forum, a multi-sector group.

"Producers are not able to invest in, for example, an integrated pest management system if the price is really too low. They are likely to use whatever pesticides they have, even if they are low quality or dangerous.

"If retailers raise the price, it becomes easier for producers to invest in sustainable production methods."

The situation in banana producing countries has now reached "such a bad level" that retailers are beginning to take note of such warnings. If farmers aren't able to make ends meet, the bananas on the shelves of UK supermarkets will either drop in quality or become increasingly scarce.

Such a scenario is a lose-lose for everyone, including supermarkets and their banana-loving customers.

Fair prices

However, a breakthrough could be in the offing. At the end of November, under the umbrella of the World Banana Forum, global retailers are to meet banana traders, importers, distributors and others in the supply chain. It is understood that a possible price rise of a few cents per kilo will be under discussion.

Even a small rise could make a huge difference at the beginning of chain, says Smith. For that to be true, producers and their workers need to see the results of any price increase. Collective bargaining is critical in this respect. In countries such as Costa Rica, where trade unions face substantial opposition, the ability of banana growers to negotiate is sketchy at best.

Producer rights for those trading under the Fairtrade label are far more secure. Guidelines set by the Fairtrade Foundation, which now covers 35% of all banana sales in the UK, are designed to guarantee safe worker conditions as well a fair minimum wage. The current minimum price for producers of unpacked Fairtrade bananas ranges from $6.1 (£3.77) to $8.15 (£5.03) a box (equivalent to 18.14kg). Each box commands an additional $1 premium.

In the UK, Waitrose and Sainsbury's commit to selling 100% Fairtrade bananas. They are the only supermarkets that do so. Alistair Swan, a fruit buyer for Waitrose, says the retailer wants to help growers build secure and viable businesses for the future. In addition to paying a premium, the company also pays for agronomists to advise farmers on agricultural best practices, such as the reduction of pesticide use.

Yet the fact that retailers selling Fairtrade bananas keep to the current 68p/kg price is worrying. Why?

First, it defies basic economics. Ultimately, someone has to pay the Fairtrade premium. If retailers refuse to pass it on to their consumers, their shareholders will have to pick up the bill. Few will be happy doing so for ever.

Second, it sends out the wrong message to the banana-eating public, who see the Fairtrade label and presume 68p/kg is a fair price. It's not. Tesco, which has a seat on the steering committee of the World Banana Forum, refutes claims that current prices are endangering banana production.

The UK retailer insists that it works directly with banana farmers and has "ethical plans" in place that guarantee a viable livelihood for producers. "We believe banana sourcing conducted responsibly is viable [and] we would never compromise on these issues to achieve a better price," says a Tesco spokesperson.

Tim Aldred, head of policy and research at the Fairtrade Foundation, queries the level to which production and logistical efficiencies can offset the effects on farmers of long-term price reductions.

"We estimate that farm level production costs have probably doubled over the course of a decade … which results in very severe pressure on banana farmers, especially those unable to sell on Fairtrade terms," he says.

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