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World Banana Forum on a fair value division in the supply chain

“Give us 1.20 dollar more per box”

Poverty is an enduring phenomenon worldwide, which should be given more attention, said Deborah Greenfield, ILO, during the third World Banana Forum. During the large ‘round table discussion,’ when various interested parties from the banana sector came together, they talked about, among other things, how to realise a better division of value in the supply chain. The answer to that problem turned out to be not that simple .... or would 1.20 dollar more per box be sufficient?

During Deborah’s opening speech she mentioned the fact that many people living in poverty do have a job. “These people are working, but they cannot manage to get themselves out of poverty,” she says. “The majority of the working, extremely poor, people are active in agriculture.” This situation brings with it various challenges, which the banana sector, employing millions of people worldwide, should also be thinking about.

Denis Loeillet, of CIRAD / FruitTrop.

Race to the Bottom 
Denis Loeillet, of CIRAD / FruitTop, talked about the banana sector in figures. Globally, 134 million tonnes of bananas are grown, of which 62 million tonnes are of the Cavendish variety. Imports to the EU in particular have risen considerably in recent years, and were more than 6 million tonnes last year. The value in the supply chain is distributed differently in every country. Denis explains the distribution in Ecuador: The majority is taken up by retail, 33 per cent of the value. Trade and logistics also take up several per cent. The remainder for the producer is 17 per cent, and the employees get 6 per cent.

In recent years, not much has changed for growers and employees on plantations. Gilbert Bermudez, COLSIBA: “Most salaries have remained unchanged in recent years. The ‘banana war’ is still not over. This race to the bottom has to stop.” It’s not surprising that returns to retail, who started the price war, when it comes to a better division of value in the supply chain. “Consumers in Europe and the US see bananas as a cheap product. Supermarkets in Europe sell bananas at a loss,” he says. “We shouldn’t kid ourselves. When supermarkets sell bananas under cost price, that burden is carried by the salaries of the workers.”

According to him, the solution is in a control mechanism with which the FAO makes a serious analysis of the sales prices of fruit at supermarkets. “I’m not talking about small price differences between supermarkets, but there should be an end to the race to the bottom. In the end, no one profits.”

Retailers’ move?
Those pointing at supermarkets to pay a higher purchasing price and thus solve the problem are putting it too bluntly. Some years ago, Tesco promised to pay a minimum wage and a living wage to dedicated contract growers and they took several years to get this off the ground. Looking back, Edgar Monge of Tesco also has to admit that this didn’t succeed, for various reasons.

Edgar Monge of Tesco.

“We’re devoted to making the value chain as fair as possible. We’re truly dedicated to that,” he says. One of the reasons the project got stuck was a difference of opinion about what the minimum wage should be. “We have to work together more to take a step forward.” The other supermarket organisations should also take steps to make this improvement possible. What the British retailer did change was that they work with long-term contracts more often now. Because of that, growers have more security and salaries of the workers can be raised, there’s more room for permanent contracts, and there’s money for investments.

Someone from the audience added that supermarkets should invest more in the banana segment by, for example, offering more varieties. Someone else added that productivity should also be looked at. When productivity increases, it results in more room for salary increases.

The banana sector in the Philippines has been much affected by a hurricane and El Niño in recent years, so that production figures are disappointing. One problem affecting the group of islands is legislation for minimum wages. The government determines a minimum wage per region, but it continues to be a difficult debate. “Some growers pay their workers much less, but looking further into it, it’ll turn out to concern family members. Growers then say: I don’t pay minimum wage, but I am paying for education and clothes for my workers,” says Stephen Antig, PBGEA. “The small growers won’t survive in the end unless they join their ‘big brothers.’” Because of cooperation, there’s a chance for small banana growers on the Asian group of islands.

From left to right: Kozel Peters, WINFA (Windward Islands), Fernando Bolaños, Agroamerica (Guatemala), Gilbert Bermudez, COLSIBA (Honduras), Wilbert Flinterman, Fairtrade International (Germany), Edgar Monge, TESCO (United Kingdom), Patrick Belser, ILO, Stephen Antig, PBGEA (Philippines).

One dollar more
Kozel Peters, WINFA, points out the problems small growers face. Despite the small volumes, these growers have to compete on a global scale. “The problems surrounding small growers aren’t dealt with. They barely take part in the value chain. It is expected of them to innovate, but they aren’t paid for that.” She pleads for a better division of value, so that small growers can also profit and an even playing field is created.

Fernando Bolaños, Agroamericana, is also worried. “While other products have risen in value, prices for bananas have barely changed in the past 20 years,” he says. Besides, he has seen a large difference between minimum wage and living wage in different countries. Finally, because of that low price, there’s no money for growers to invest in new techniques. However, he has a very specific proposal to deal with these problems: “Give us 1.20 dollar more per box. The bananas would still be the cheapest product on the fruit shelves, but growers and distributors would have a better life.” Besides, a similar price increase would hardly be noticeable in supermarkets, he reassures trade: “Banana prices aren’t elastic, consumers would still buy bananas with a small price increase, it has been proven. It’s a small change, but it would have large results in the supply chain.”

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