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Part II: Coen Bos COO Fyffes talks to FreshPlaza

"Fyffes will start to invest more in production"

This week FreshPlaza is publishing a series of articles taken from an interview with Coen Bos, Chief Operating Officer at Fyffes as he speaks openly about the most important developments on the market, the chances and threats, new markets and the future of the company that reached a turnover of a billion Euro last year.

Click here to read part I

Which production countries are becoming the main players on the banana market?

"There are various countries, such as Colombia, where the economy has been booming for the last six or seven years, which has resulted in a decrease in focus on agriculture and export. These kinds of countries often have a very expensive local currency and high labour costs, which makes the fruit more expensive.
A country like Guatemala is on the rise. Every year the banana export grows by 10 to 20% there. Guatemala has a good climate and good agricultural ground, where high turnovers can be made with relatively low labour costs. So far there are also no problems with the revaluation of the currency. I don’t think there is much land left available for expansion though.

They are trying to regulate the banana export in Ecuador, but it's very difficult. I think it's going to be very hard for small producers in particular to stay afloat. The fruit is also becoming more expensive there. The Panama canal is also going to be widened, which will make travelling through channel more expensive again. Over the last few years we have seen the export go down, mainly due to unfavourable weather conditions. This production isn't expected to return, as many banana plantations are making way for the production of palm oil or other products. Some countries also have a free trade agreement with the European Union (EU) and some countries don't. For instance Colombia and Costa Rica do but Ecuador doesn't yet. This leads to differences in costs and they can run so high that it disadvantages the export for some countries."
There isn't a lot of land available for bananas in Costa Rica, as a lot of land is used for the pineapple production. There are also a lot of rules surrounding running a farm in Costa Rica. This is why I believe that Costa Rica will remain fairly static in the export of bananas."
What are the advantages and disadvantages of West Africa as a production company?
"Coincidently I was in Cameroon and Ivory Coast not that long ago, and saw that good bananas can be produced there. The politics are a little less stable and climate can also be rather violent to guarantee quality throughout the year. The main advantage is probably that no import rights have to be paid on these bananas. The distance in sea miles to Europe is also smaller than from Central America, which should result in a relatively cheaper seafreight."
Do the large banana companies have a lot of own production? And what about Fyffes?
"Yes, Dole has its own plantations in Costa Rica and Chiquita also has a number of own plantations. But the amount of own production varies per company. Dole and Del Monte have a relatively high amount of own production. Chiquita has a little less and at the moment Fyffes isn't producing a lot of bananas itself. Fyffes does see the importance of own production and so will start to invest more in production to obtain an even more fully integrated operation and to be able to tune the banana supply into the market even more efficiently. We already produce 100% of our melons ourselves and around half of our pineapple.”

Is the sector still worried by the disease Black Sigatoka?
“It is still a large problem in most producing countries and results in high combatting costs. Some countries have more bother from it than others, it is usually linked to the climate.”
Last year you made a turnover of around a billion Euro. At the same time the logistic costs have increased substantially. What are the prospects?
“It’s not just the logistic costs that have increased, the costs in general have increased. Of course, we try to shift these costs through to the consumer, which is a fight in its own right every year.
The producers have higher costs every year, for wages and raw materials, for instance. If we don’t calculate these increases into the consumer price, the quality of the fruit will deteriorate and the sales of bananas will decrease. It’s a process in which everyone has to take on responsibility. Bananas are still some of the cheapest fruits in the shop.”
The price of bananas has gone up by around 10% over the last five years. Is this in line with the increase in costs?
“I don’t think that this increase is quite in line with the increase in costs. The costs have gone up more than 10% over the last five years. And this is mainly the production and transport.”
You also carry fair trade products. Is there profit in this?
“Fair trade has done well in recent years. I think we’re the largest fair trade trader globally in the area of bananas. Around 10% of our banana volume is produced according to fair trade values. That’s five million boxes per year. That’s quite a lot, but it is in part due to some supermarkets in England, such as Sainsbury's and Waitrose completely switching from conventional to fair trade. Luckily, we could fill that demand straight away from Colombia.”
Why do supermarkets choose fair trade and is this cheaper for the producers?
“I think it’s a strategic choice for the retailer, a philosophy to gain a better image. It isn’t just bananas, but also products like coffee and sugar. Many supermarkets now have an entire fair trade corner. I don’t think more is made from the product itself, but I think it attracts a wider crowd to the shop. Now that fair trade is showing up in almost all supermarkets, you can see that supermarkets are looking for an alternative to fair trade. Something that differentiates them from other retailers, but doesn’t damage their image.
You might expect the fair trade volume to stagnate or even decline in some countries for this reason.
At the moment there are very large fair trade producers and a lot of smaller family companies, which is what fair trade is intended for, in my opinion. The premium for large producers usually goes straight to the employees, whereas the smaller family companies can often keep the premium, and probably need it. It differs per company whether or not it is an advantage to the farmer of his workers. It also seems like too much production is being certified as fair trade, which could put huge pressure on the price. This also means that a farmer can’t always sell his fair trade certified fruit as fair trade which forced him to sell the more expensive certified fruit as conventional fruit.”
Do the so called BRIC and MIST countries have influence on the demand for bananas?
“Countries like China, India and Brazil mainly produce for own consumption. The area in China where bananas grow has to deal with a lot of bad weather and plant diseases. China is also experiencing more demand for quality. A lot of attention is being paid to food safety. It’s a hot item. I see China as more of an import market for quality bananas, but I also think that the Chinese producer will improve their own quality in the future.
India could become an exporter, if they improved their quality, to for instance the Middle East.
Russia is, of course, a completely different story. It remains a market which gravitates towards Ecuador and is very dependent on that country as far as bananas are concerned. I predict that the banana consumption in Russia will rise over the next few years.”

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