UK Supermarkets waging war

[NOTE: I take a break from the series on the Constitution this week , given the situation with bananas and next week for a comment on Independence]

The actions of leading British supermarkets in engaging in a disastrous price war on bananas has come under fire in sections of the British press. For seven straight weeks now, some of the largest supermarket chains, led by ASDA, a subsidiary of the giant American company WALMART have been engaging in a vicious price-cutting which has carried the price of bananas below rock-bottom level.{{more}} Two weeks ago, ASDA’s bananas reached 46p a kilo (equivalent to just over 30 cents EC per pound). Rock-bottom? Not at all, for last week ASDA went deeper, dropping to 38p/kilo only for the German cut-price stores ALDI and LIDL to slash to 37p. And this week? TESCO not only matched ASDA’s 38p, they dived to 35p!

In a Britain reeling from the economic crisis, the prices sound like a boon to cash-starved consumers and the supermarkets are trying to convince them that it is really so. Moreso, they claim that banana farmers will not be affected. According to a report in the GUARDIAN (Tues. 13th) , “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 consumers can only benefit as the big four rivals slug it out for market share”. More on that later, but it is interesting to compare these retail prices with what obtained seven years ago, when the cost of production was nothing like today, not with fertiliser now selling for well over $100 a bag. In 2002, retail prices were at the level of 110p per kilo while four years ago we were bawling when prices fell first to 84p, then 79p, and later as low as 67p per kilo.

So back to the supermarkets’ claims. These have not duped discerning journalists in the British media. Jamie Doward, in a full-page article on Sunday in the OBSERVER, wrote under the banner “BANANA PRICE WAR IN SUPERMARKETS BRINGS FEAR TO THE DEVELOPING WORLD”, and two days later, Felicity Lawrence in the GUARDIAN (also on the war, sating its “…COLLATERAL DAMAGE IS MANY MILES AWAY”),both expose the true nature of the supermarket actions. Doward, who conducted extensive interviews with persons in the banana world, including yours truly, used quotes from some of those interviewed to bring out the truth.

He quoted Renwick Rose of WINFA as saying that the price war is “a scandalous way of doing business at the expense of the farmers” which “will plunge banana growers in another race to the bottom that will benefit no one in the long term”. “The prices are ridiculous; it almost makes nonsense of the concept of trade. I don’t know if that price( ASDA’s) can cover even the cost of transportation”. This concern is shared by Barbara Crowther of the FAIRTRADE FOUNDATION. She told Doward: “Price cuts serve only to devalue the bananas yet further, creating a false illusion among shoppers that they can be sustainably produced for such give-away prices.”

It is not only farmers who will suffer as a result. A spokesman for the Coordinating Body of Latin American Banana Workers Unions (most of the “cheap” bananas are from Latin America) says that there are disastrous consequences for the workers. “Do these guys not realize what they are doing to us?”, he said. “they are putting all the costs of the ‘crisis’ in Britain on our backs”. Banana campaigner Alistair Smith of BANANALINK corroborates his story. “Prices to suppliers are one-third lower than seven years ago and few plantation workers earn anything like a living wage”, Smith comments.

What’s in it, therefore, for the supermarkets? Banana is really big business internationally with the total value of world trade well over EC$40 billion. In the UK, more than 140 million bananas are eaten each week, bananas being the best sellers after lottery tickets and petrol. For this reason, consumers notice any price cut and are attracted to the supermarkets offering them (or so goes the supermarket theory).In the interview with Doward, I was particularly incensed by this cynical action of using bananas to fatten corporate profits without any benefit going to the producers. It is like using a popular personality to advertise a product without paying that person. The farmers and workers who produced the bananas are entitled to a share of the profits the supermarkets make on the other products by using cheap bananas to attract them. THIS IS HIGHWAY ROBBERY.

“But don’t consumers benefit?” you may ask. Well, Felicity Lawrence has news for you:

“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 July 8 this year and last week, when the banana wars got heavy. There’s been a 72% increase in the price of PG Tips tea, a 45% rise on some Colgate top-selling toothpastes, a more than 100% increase on some Pringles chips, 38% on Rich Tea biscuits, and 85% on single cream. These are steep rises, not only on goods which were previously on promotion, but on the usual price”.

That then is the nefarious strategy, squeeze farmers, put pressure on workers and rip-off consumers. It underlines the need for an alliance between these groups to defend their collective interests. The schemes of the supermarkets have also given rise to calls in the UK for government intervention, in the form of an Ombudsman to oversee supermarket activities This, says Dominic Eagleton of ACTION AID, is supported by 8 out of every 10 consumers in a poll.

“The supermarkets have been found guilty of exploiting suppliers and the creation of an Ombudsman is a sensible solution which the public would welcome”, he said.

I conclude on that score.

Renwick Rose is a community activist and social commentator.