In search of a fair price
Heather Webb asks whether we will ever be able to find a fair price for bananas?
According to Banana Link, in 2010 banana workers received on average just 4 per cent of money made from the sale of bananas in British supermarkets. Considering bananas are the third most profitable item sold in UK supermarkets, the fact that workers receive such a low proportion appears deeply unfair.
This report looks at how the banana industry has created such low wages and been able to maintain them; the role of UK supermarkets; and Best Buys for ethical consumers..
In the early 1900s several American companies started growing bananas on plantations in Central America. It was not long before these companies controlled huge areas of Central America, building schools and infrastructure to support their workers and shipping millions of tonnes of bananas back to North America.
At the time, government corruption was rife in many Central American countries, which enabled companies to take advantage and buy the most fertile land for growing bananas. Moreover, the governments welcomed the investment which would provide jobs and money for stagnant economies. However, the investments were frequently problematic with most of the money leaving the country while companies polluted the environment and took advantage of workers.
Outside the plantations they were able to keep the cost of production down through the creation of vast networks built to supply, pack, transport, ripen and sell bananas into the markets of Europe and North America. This oligopolistic structure left little room for small scale producers to join the market as they were unable to compete with the economies of scale that the large plantations enjoyed.
In 1930 United Fruit Company (now Chiquita) was the sole supplier of around 63 per cent of the 103 million bunches of bananas imported into America.(1) Today just five companies – Dole, Chiquita, Fresh Del Monte, Fyffes, and Noboa – control around 75 per cent of the total banana exports into Europe and the US.(2)
While the profits of these companies have kept rising, the wages of the banana workers have fallen dramatically. A report by the Fairtrade Foundation found that in Costa Rica a worker working eight hour days would earn just $250 per month in 1993. Four years later that same worker earned just $187, and by 2003 the minimum agricultural wage had remained the same but the cost of living had doubled.(3)
While it’s easy to place the blame of poor wages with the companies producing bananas, the supermarkets within Europe have also played a major part in the fall of wages.
Over the past few decades the big UK supermarkets – Asda, Tesco, Sainsbury’s and Morrisons – have been accused of slashing prices of bananas in efforts to compete for customers. The supermarkets have been accused of pricing bananas as loss leaders which is where a product is sold at a low cost to pull in customers who will buy other, more profitable, lines.
As 80 per cent of bananas sold in the UK are through supermarkets, the supermarkets hold considerable power over their suppliers. In December 2008 Action Aid criticised all UK supermarkets for pressurising suppliers. Not only were they accused of demanding low prices but also discounts, delays in payments and threats to delist (stop buying from) suppliers occurred if they did not agree to the terms.(4) Banana Link explains, “As grocery market shares become concentrated in the hands of fewer retailers, suppliers have little option but to accept such conditions.”
What about Fairtrade?
Since we last did a full buyers’ guide on bananas in 1999 (Issue 61) the banana industry has changed dramatically, especially with regards to the amount of Fairtrade bananas now sold and consumed within the UK. In 2007, Waitrose and Sainsbury’s both committed to only selling Fairtrade bananas, which was a massive boost to the Fairtrade movement and the banana industry.
In 2009 Fairtrade bananas accounted for 20.2 per cent of UK total banana sales by volume.(5) Fairtrade sales will now be further boosted in the UK by the Co-operative’s switch to selling 100 per cent Fairtrade bananas. According to the Fairtrade Foundation this will increase the market share of Fairtrade bananas to around 36 per cent.(6)
In particular, Fairtrade has allowed many small-scale producers – who were priced out of the market, and unable to compete with the large companies – to gain certification, improve production, gain access to premium markets and accumulate capital for reinvestment. In 2008 over 68 per cent of Fairtrade bananas were sourced from small-scale farmers.
In Ecuador, Fairtrade has helped people who were once seasonal migrant labourers to become full time farmers on their own land, and in the Windward Islands, Fairtrade has prevented farmers from losing their livelihoods and falling into poverty. In particular, Fairtrade has rescued the banana industry in the Caribbean by providing Fairtrade premium prices which have allowed producers to continue supplying European markets.
However, while farmers’ livelihoods have been stabilised through Fairtrade, the actions by supermarkets to continue to price match Fairtrade bananas to conventional bananas, has been cautioned in a report by the University of West Sussex which claims that they may be doing more harm than good.(6)
The report suggested that by continuing to price match, the supermarkets are:
- Creating pressures on suppliers of Fairtrade bananas
- Limiting possibilities for substantial increases in the Fairtrade minimum price
- Discouraging other retailers from converting to Fairtrade due to the high costs of price matching being incurred by the supermarkets
- Limiting possibilities to contribute to the development of true social, economic, environmental sustainability in the banana trade
While the commitment by major supermarkets to sell Fairtrade has been hailed as a major achievement, it would appear that supermarkets’ own agenda to sell produce cheaply in order to attract customers is still the prevailing objective. Many of the supermarkets selling Fairtrade bananas have chosen to incur the extra costs rather then pass it on to the consumer.
A quick glance at the online prices of the major supermarkets show bananas are being sold loose at 68p per kilo including Fairtrade bananas sold by Sainsbury’s and Waitrose.(7) This would suggest that the supermarkets are making a slim profit margin on Fairtrade bananas.
The actions of the supermarkets is in contradiction to market research which would suggest that bananas have an inelastic demand: meaning consumers would pay a higher price for a bunch of bananas.
What’s the solution?
Sometimes as responsible consumers we have to question how and why a product is priced so low and who truly pays the cost. Obviously, buying Fairtrade bananas is better than not, but supermarkets need to ensure they are truly committed to making a difference to workers’ lives and not just getting brownie points.
Action Aid currently has a campaign called ‘Who pays’ which is demanding a better deal for workers who grow and make the produce we buy. It has called for the establishment of an independent supermarkets adjudicator that would pro-actively monitor supermarket compliance with the Groceries Supply Code of Practice. See Action Aid's website for further information.
MakeFruitFair, which includes Banana Link, are also calling for more regulation around the buying power of supermarkets.
Stop supermarkets abusing their buyer power
Jacqui Mackay from Banana Link talks about supermarkets’ influence on the banana industry.
‘Stop supermarkets abusing their buyer power’ is the demand of the Make Fruit Fair! consortium to which British based NGO, Banana Link, belongs. Bananas cost consumers less now than they did 20 years ago because supermarkets have been able to consistently force down the price that they pay to suppliers. One of the major fruit multinationals, Chiquita, even stopped selling bananas to British supermarkets a few years ago, unable to make any profits. Unsurprisingly however there is no such thing as ‘cheap’ fruit – someone has to pay the cost – and in the case of bananas it is small farmers and plantation workers in Latin America, the Caribbean and Africa.
Supermarkets are the most powerful actors along tropical fruit supply chains and their subsequent buyer power means that in some countries, bananas are among the most valuable products they sell. They can achieve substantial profits by squeezing suppliers and paying unsustainably low prices for fruit. Other abusive practices can include demanding retrospective discounts, delaying payments and threatening to delist suppliers. As the grocery market share becomes concentrated in the hands of fewer retailers, suppliers have little option but to accept such conditions.
This behaviour is driving the continued exploitation of workers and destruction of the natural environment in exporting communities. Research demonstrates that in many instances there is simply not enough money passing down the supply chain for workers to earn a ‘living’ wage that covers basic household needs. Less money encourages suppliers to externalise costs, for example, taking less responsibility for how agrochemicals are stored and applied, polluting air and water in the surrounding environment. Pressure from suppliers has a negative impact on industrial relations too. Workers are increasingly sub contracted in – often at lower rates and with worse conditions – as companies seek to avoid direct responsibility for their employees. The rights of workers to organise freely in unions and collectively bargain for better working and living conditions with employers are also repressed.
This unprecedented inbalance of power between suppliers and supermarkets can only be redressed by legislation. The experience of the UK Supplier Code of Practice introduced in 2001 has shown that retailers will not voluntarily abide by a code.
Existing competition policy at EU level does not cover abuses of buying power and the impact that purchasing practices can have in exporting regions throughout the developing world. In 2008 MEPs signed a Written Declaration asking the European Commission to investigate the negative impacts of supermarket buyer power. As a result members of the Business to Business Platform of the High Level Forum for a Better Functioning Food Supply Chain have developed a Code of Practice that could encourage supermarkets to improve buying practices. It is therefore a crucial time to lobby the European Comission to ensure that the Code applies to overseas and indirect suppliers and could therefore address how abuses of buyer power negatively affect conditions for plantation workers and small farmers. To be effective a Code of Practice also needs enforcing and monitoring by an independent body that can accept anonymous complaints and thus overcome the current climate of fear amongst those supplying goods to supermarkets.
A Code of Practice and enforcement body would represent some progress but Make Fruit Fair! is also asking for a rethinking of competition law to ensure that the people producing the goods on our supermarket shelves are treated justly and rewarded fairly for their work.
Download our new research paper ‘Competition and the New Slavery’.
Sign the petition and find out more.
As a result of sustained campaigning in the UK, our government has committed itself to creating a watchdog that will prevent British supermarkets from bullying suppliers. Lobby your MP to press the government to include the draft Bill to create this watchdog (called the Groceries Code Adjudicator) in the Queen’s Speech in May.
The struggle to gain fairer wages and conditions for workers has not been just restricted to the multinational companies. The formation of the Single European Market in 1993 created a banana market which was more a harmonised regime and introduced a system of quotas and tariffs to give privileged access to exports from African, Caribbean and Pacific (ACP) countries. In order to protect the ACP suppliers, Latin American plantations – who could produce bananas cheaply – were restricted by the EU by limiting the volume imported into Europe.
Unsurprisingly, the big American multinationals which ran the Latin American plantations were unhappy with this regime and lodged a series of challenges at the World Trade Organisation (WTO).
The WTO found in favour of the multinationals and, as a result, the EU ended the quota system and introduced a single tariff for all banana imports. However, it was also agreed by the WTO that a waiver could be applied to the ACP countries to honour long term commitments to the region. Many European countries had long-standing agreements with banana producing countries and suppliers, in particular the UK market which mainly imported bananas from the Windward Islands due to previous colonial agreements.
The University of West Sussex summarised the EU decision in a report in 2010: the goal of the Latin American multinationals was to set lower tariffs which were sufficient enough to support their growth and development. Meanwhile, the small farmers in the Windward Islands were worried about the sustainability of their livelihoods. Removing quotas would cause banana prices to hit record lows, which in turn would damage their livelihoods. Countries would henceforth search for cheaper imports, mainly from large scale plantations where the cost of production was low. The topography of the Windward Islands with its associated higher production costs meant that they could not compete.
In 2006, the ACP producers suffered as a result of the EU single tariff on Latin American imports, which meant that cheaper bananas flooded the market plus there were major price cuts by European retailers.
Despite a system that decidedly favoured them, some Latin American countries were still not satisfied with the changes, and in 2007 Ecuador and Colombia lodged complaints, again on discriminatory grounds.
According to Banana Link, following a WTO ruling in 2009, the tariff level for non-ACP bananas is to be reduced over the next few years making it ever harder for Caribbean bananas to compete. Several supermarkets have pledged their support to continue buying bananas from the Caribbean, and Fairtrade certification has enabled producers to compete in European markets.
Stephanie Williamson from PAN UK talks about the use of pesticides in the banana industry.
Bananas grown in large-scale plantations for the export sector continue to rely on heavy and very frequent applications of a number of hazardous pesticides. In Ecuador, plantations apply between 44-65kg of pesticides per hectare per year (compared with an average of 2.7kg in European or US agriculture). At least 22 aerial applications are made per year, mainly of fungicides to control Black Sigatoka disease. In Costa Rica, another major producing country, plantations may be sprayed weekly, often contaminating watercourses, livestock and neighbouring small farms.
The main concern about pesticides in banana cultivation is not the residues which may end up on the fruit but the health of farm workers and local residents. Pesticides used to combat nematode worms, such as aldicarb and carbofuran, are among the most toxic known, with severe risk of inhalation poisoning for those handling them if not properly protected. Banana workers have been reported as suffering high levels of acute dermatitis, linked to several of the fungicides applied to the harvested bunches to prevent rotting.
An estimated half a million people live on or next to Ecuador’s banana plantations and their living and working areas are continually exposed to many of the pesticides used, especially in aerial spraying. In 2011, 150 children suffered poisoning symptoms when a spray plane operated by Aerovic company (a subsidiary of Favorita Fruit holding company) overflew their school during spraying of a plantation belonging to Amalita Farms in Pueblo Viejo district. The long-term effects of exposure to the fungicide mancozeb are of considerable concern. While not acutely toxic to humans, mancozeb’s breakdown product, ETU, is considered a probable carcinogen and shown to result in a range of anomalies in many animals tests, possibly disrupting the hormonal system. Children living near to Costa Rican plantations were found to contain high levels of ETU in their urine, posing an unacceptably high cancer risk. Mancozeb and ETU drift into the village and persist for several days. Parents who work in the plantation may also bring contamination into their homes.
Progress has been made in changing several of the most hazardous pesticide practices formerly common in large-scale banana production, mainly thanks to food sustainability standards such as Rainforest Alliance and individual company schemes, such as those of Chiquita.
In general, Fairtrade Label Organisation-certified producer groups are not allowed to use certain pesticides classified as dangerous by the UN or PAN.
However, there is still a long way to go in eliminating health and environmental harm. The scale of monoculture (growing bananas year after year in huge blocks without rotating with other types of crops or vegetation) makes plantations far more prone to attack by pests and diseases, leading to heavy pesticide use. The low prices paid by supermarkets to banana growers makes it difficult for them to invest in safer and more sustainable practices or increase the diversity of crops grown on the farms. As consumers, we need to pay more for our bananas if we want to stop the social and environmental damage that current large-scale production too often entails.
Alistair Smith – a life in bananas
Rob Harrison talks to Alistair Smith, a man whose dogged pursuit of social justice around a single commodity provides inspiration for budding change-agents everywhere.
Alistair, just back from the World Banana Forum (WBF) held in February in Guatemala, sounds optimistic.
“Seven out of ten of the world’s biggest banana companies have been talking seriously about reducing pesticide use. They’re also putting money into work on ‘living wage’ and discrimination. The level of investment shows that they’re serious. There’s a recognition that they’re in it for the long term. They also know that consumers, especially in Europe, show every sign of keeping up demand for ethical practice.”
We discuss recent figures for sales of Fairtrade bananas. It’s over 30% in the UK now but over 50% in Switzerland. He is “confident that, in ten years’ time, all European banana sales will be the product of a decent working environment.”
Where it all started
Alistair arguably knows more than anyone else in the world about the world banana trade. This is what makes him such a formidable opponent. It is a direct result of studying the same subject for more than 25 years. How did it all begin?
“My background was as a linguist. I did an MA in Development Studies at the University of East Anglia in 1983-4. With some friends we set up NEAD [a development education centre in Norwich] in 1985.
We used bananas as a classic example of post-colonialism and TNC [transnational corporation] dominance of world trade. We were involved in the launch of Green Gold [a book published by the Latin America Bureau in 1987 looking at bananas and exploitation in the east Caribbean]. We took the discussion to primaries, secondaries, teacher training, church groups and the farming community.
In 1991 we set up another NGO called FarmersLink with EU funding to look at the ‘hidden costs of food production’. We set up exchanges between farmers in Norfolk, Africa, Poland, France and elsewhere. Even the NFU were involved, and supermarket dominance was a common concern.
As part of the process we met the Windward Farmers’ Association and other banana producers and in 1992 we were involved in setting up EUROBAN.”
This Europe-wide network drew in other campaigners working on the banana industry including Oxfam Belgium, BanaFair in Germany and Gebana in Switzerland. Some of the other groups in EUROBAN had also been involved in trading ‘solidarity bananas’ with Nicaragua.
“In 1996, the Directors of FarmersLink were concerned that some of our work on bananas was becoming too confrontational and so we set up BananaLink. British Development NGOs were very interested and supportive.
Looking at the lessons of the last 15 years, we’ve learned that engaging other players and conferences and campaigns are vital. We’ve always had the idea that we could affect change best by focussing on one industry and using it as an example of how progress can be made.”
Where do the problems still lie?
“Although small farmers now have a market and now offer a good product, some pretty fundamental issues are unresolved. For plantation workers not much has changed. We’ve barely had any effect on the ‘race to the bottom’. Our work with unions has probably prevented them from disappearing, but proper collective bargaining and a living wage is still a long way away.
One of a few issues that banana multinationals and campaigners agreed on at the WBF was that the ‘distribution of value’ was wrong and that supermarket buyers have too much power. The lowest retail prices for bananas in the world are in the UK, mainly led by ASDA, In some cases even the Fairtrade minimum price has fallen below the cost of production.”
What about the labels?
For us ordinary consumers, the ethical labels on bananas are often the first thing we come across. What’s Alistair’s perspective?
Fairtrade: “The best of the private labels. The minimum price is fundamental. I should declare that I’m a member of the FLO workers’ rights advisory council.”
Rainforest Alliance: “A less demanding standard whose strength is in environmental areas. Much better than nothing. Freedom of association [although part of the standard] is not their expertise, and some plantations have been certified which shouldn’t be.
Organic: “A force for good in the sector. Organic is not technically possible in large monoculture plantations. Doesn’t say anything about labour conditions and needs to be combined with freedom of association.”
SA8000: “Hasn’t proved to be up to the challenge where freedom of association is systematically violated (e.g Costa Rica).
Alistair explains how the women behind the Swiss NGO Gebana have now decided to move onto other campaign areas since the market share of Fairtrade bananas has become dominant in Switzerland. Does he feel that it’s also time for him to move onto something else?
“Not yet. We’re working on spreading the word in business schools with lessons on how commodity chains work. There’s also a need for governments in producer countries to play a role in the abusive practices of big retail, and BananaLink are working on that. Everyone needs to play a role in innovating generally sustainable systems. And we need to extend Fairtrade beyond the export level to cover producers and the rest of the chain.”
And does he have a sense of his own personal impact? He talks of the many other people who have been involved naming Chris Jones at FarmersLink and Liz Parker now at EUROBAN particularly. “The two countries where the process of campaigning and education have gone on the longest are Switzerland and the UK. These two countries have the biggest presence of Fairtrade.”
Has he ever thought of writing a book on the subject? “Funny you should say that. ‘The Banana Saga’ was published in French in 2010 and an English translation is due out in 2012. That’s exclusive news for Ethical Consumer, I think.
Oh yes, and do check out the film just produced called ‘Top Banana’ (see trailer). Very important and accessible for ethical – or any – consumers!”
AgroFair was the first company to bring Fairtrade bananas to Europe in 1996 and now only supplies Fairtrade fruit to Europe. Based in the Netherlands, the company has an innovative company structure which reflects its Fairtrade principles and commitment to fruit producers in developing countries. Half of the company is owned by fruit producers in developing countries and the remaining 50% of share capital is held by European development organisations such as Solidaridad in the Netherlands, the alternative trading company Twin in the UK, and CTM. You can find Agrofair fruit by looking for the labels Oké and Eko-Oké.
Winfresh, (previously Wibdeco) brings Fairtrade bananas from the Windward Islands in the Caribbean into the UK. In recent years the company has had to source from other Fairtrade sources due to hurricanes destroying most of the crops. Recent reports from St Lucia also suggest that the disease black sigatoka has been found which will also have an impact on banana supplies.
Fyffes, is a company based in Ireland, which has joint ventures with Winfresh and Uniban, and has also moved into exporting Fairtrade organic bananas.
Grupo Noboa, is an Ecuadorian company which owns the fifth largest brand of bananas, Bonita, and belongs to Alvari Noboa, Ecuador’s richest man and also five times presidential candidate. Alvari Noboa is known to be anti-unions. In a recent act of pure disregard for workers’ rights and the right to associate, Alvari Noboa declared openly “I don’t like unions, and will fight them”. It’s not surprising then that at the company’s Los Alamos banana plantation, there have been constant reports of union leaders and members being intimidated, fired, harassed, and attacked over the years. Out of the top five companies Grupo Noboa does not have any input from workers’ rights organisations. However it is listed as a member of World Banana Forum steering committee.
Dole and Chiquita have both committed themselves to removing the banned pesticide Paraquat from their plantations. This has been welcomed by a number of environmental groups. Both have banana plantations certified to Standards Accountability 8000. However, even with SA800 certifications problems have still occurred around the right to associate.
In 2010 and 2011, Dole was named as one of the worst companies to work for in a document by International Labour Rights Forum (ILRF), called Working for Scrooge: Worst Companies for the Right to Associate. In particular Dole prevented workers in the Philippines from freely choosing a union to elect. According to the report, SA8000 auditors confirmed that the violations of the right to organise had occurred. However, in response Dole filed a complaint against the auditors. After more than a year looking into the issue the auditors let Dole’s certification stand – effectively dismissing the Philippine workers’ union complaint.
References: 1 Cohen, R (2011) Global Issues for Breakfast: The Banana Industry and its Problems 2 Cohen, R (2011) Global Issues for Breakfast: The Banana Industry and its Problems 3 Fairtrade Foundation, (2009) Unpeeling the bananas trade 4 ActionAid, (2008), Supermarket League Table 5 TNS Data cited by the Grocer 6 University of West Sussex (2010), Fairtrade in the banana industry 7 Price comparison between Asda, Tesco, Sainsburys, Waitrose. Prices as of March 2012.